A Case Study on:

Presented by:
Jay Shah,
FMS-B,
The M.S.U of Baroda.

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INDUSTRY ANALYSIS

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Industry Features:
• 1st in global jute production.

• 7 Million Tones of FBP in 2013-14.

• 63% of the world’s market share in textiles and garments.

• 2nd largest textile manufacturer in the world.

• 2nd largest producer of silk and cotton.

• 24% of the world’s spindles.

• 8% of the world’s rotors.

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Industry Boundaries:

Strengths

• Vast textile production capacity

• Large pool of skilled and cheap work force
• Entrepreneurial skills
• Efficient multi-fiber raw material manufacturing capacity
• Large domestic market
• Enormous export potential
• Very low import content
• Flexible textile manufacturing systems

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Weaknesses

• Increased global competition in the post 2005 trade regime

under WTO.

• Imports of cheap textiles from other Asian neighbors.

• Use of outdated manufacturing technology.

• Poor supply chain management.

• Huge unorganized and decentralized sector.

• High production cost with respect to other Asian competitors.

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Industry Environment:

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 The industry is fragmented.

 The industry is emerging as export business expands.

 Started to reach the stage of maturity.

 Global business scope increasing.

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Industry Structure:

 Around 5 major players dominating the industry.

 A market situation of perfect competition.

 Product differentiation strategy used to attract the

customers.

 Very little entry and exit barriers.

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Industry Performance:

• The sector contributes 14% to industrial production, 4% to India’s

GDP and constitutes 13% of the country’s export earnings.

• With over 45 Million people, employed directly, the industry is one

of the largest sources of employment generation in the country.

• The domestic textile and apparel industry in India is estimated to

reach USD 100 Billion by 2016-17 from USD 67 Billion in 2013-14.

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Jay Shah, FMS-B
• Exports in textiles and apparel from India are expected to increase
to USD 65 Billion by 2016-17 from USD 40 Billion in 2013-14.

• The total fabric production in India is expected to grow to 112

Billion square meters by 2016-17 from 64 Billion square meters in
2013-14.

• India’s fiber production in 2013-14 is 7 Million Tones and is

expected to reach 10 Million Tones in 2016-17.

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Jay Shah, FMS-B
Industry Attractiveness:
•The Indian textile industry accounts for about 24% of the world’s
spindle capacity and 8% of global rotor capacity.

•India has the highest loom capacity (including hand looms) with 63%
of the world’s market share.

•India accounts for about 14% of the world’s production of textile fiber
and yarn and is the largest producer of jute and the second largest
producer of silk and cotton.

•A strong production base of a wide range of fiber/yarn from natural

fibers like cotton/jute, silk and wool to synthetic/man-made fibers like
polyester, viscose, nylon and acrylic.
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• Increased penetration of organized retail, favorable demographics
and rising income levels to drive textile demand.

• India enjoys a comparative advantage in terms of skilled manpower

and cost of production over major textile producers.

• Abundant raw material and increasing demand for exports to boost

fiber production.

• Abundant availability of raw materials such as cotton, wool, silk

and jute.

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Jay Shah, FMS-B
Industry Prospects for future:

• Entire value chain of synthetics.

• Value added and specialty fabrics.

• Fabric processing set-ups for all kind of natural and synthetic textiles.

• Technical textiles.

• Garments.

• Retail brands.

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COMPETITIVE ANALYSIS

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Major Competitors of Arvind:

Raymond

Bombay
S.Kumar
Dyeing

Ashima
Welspun
Industries

Alok Mafatlal
Industries Industries
Aditya
Birla
Grasim
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5 Force Analysis:

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Threat of New Entrants- HIGH

a) Favorable policies by Govt.

b) Less entry & exit barriers.

c) Insignificant capital investment.

d) Unorganized and poor labor.

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Threat of Substitutes- LOW

a) No direct threat.

b) Competition with other semi-durable goods.

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Bargaining Power of Buyers- HIGH

a) Consumers demanding better quality fabric.

b) Sophistication and customization needed.

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Bargaining Power of Suppliers- HIGH

a) Powerful groups of cotton suppliers.

b) Cost of power, labor, and cost continues to increase.

c) Demand remunerative cotton prices.

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Competitive rivalry in an industry- HIGH

a) Strong competition from domestic players.

b) Gradual increase in competition from global players.

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Critical Success Factors For Arvind Mills:

Probability of Impact Impact on business

High Medium Low

Scale of Socio-cultural,
High
operations, brand International
strength and -
reach,
Economic.

Medium
-
Integrated supply chain,
Regulatory
-

Low - - Technological
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COMPANY ANALYSIS

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Name: Arvind Limited

Type: Public company (NSE, BSE 500101)

Industry: Textile

Founded: 1931

Headquarters: Ahmedabad

Products: Denims, Knits, Khakhis

Employees: 26000+

Website: www.arvindmills.com
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Corporate Mission & Values:

Then:
‘To Achieve Global Dominance in Select Business Built Around Our
Core Competencies, Through Continuous Products and Technical
Innovation, Customer Orientation, and a Focus on Cost
Effectiveness’

Now:
‘We will enable people to experience a better quality of life by
providing enriching and inspiring lifestyle solutions’

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WE BELIEVE
In people and their unlimited potential; in content and in focus on
problem solving; in teams for effective performance, in the power
of the intellect.

WE ENDEAVOUR
To select, train and coach people to obtain higher responsibilities;
to nurture talent, and to build leaders for the corporations of
tomorrow; to reward, celebrate and activate all intellectual
business contributions.

WE DREAM
Of excellence in all endeavors; of mutual benefit and prosperity; of
making the world a better place to live in.

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Domestic Brands

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International Brands

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Milestones:
1931
Laid the foundation of Arvind Mills raising a share capital of Rs. 25.25
lakh, Shri. Kasturbhai Lalbhai, Shri. Chimanbhai Lalbhai, and Shri.
Narottambhai Lalbhai

1939
Diversification with Anil Starch Limited followed by Atul Products
Limited in 1952 for producing textile-related chemicals and dyestuff

1985-86
Sanjay Lalbhai led the ‘Reno-vision’ Commission and implemented
first Denim plant and issued debentures

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1987-88
Arvind enters the export market for Denims with an export oriented
unit named Arvind Exports

1990
Nagri Mills acquired and renamed as Arvind Intex Ltd and Saraspur
Mills renamed as Arvind Poly coat

1996
Set up Arvind Cotspin Ltd., an export oriented unit at Kolhapur,
Maharashtra

2000
Garments Exports Division ‘Lifestyle Apparels’ established

2003-04
Arvind Brands Limited made subsidiary company of Arvind
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2007
Started Organic farming with Fairtrade Cotton Project

2008
Arvind expands its presence in the brands and retail segment by
establishing MegaMart – One of India’s largest value retail chains.

2010
Launched The Arvind Store

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Reno-vision of 1980’s:

Segmentation Targeting Positioning

• Cotton segment • Global • High-quality
• Natural fabrics customers producer
• Denims (less • International • Premium
dependant on markets products
fashion changes)

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Outcomes of Reno-vision:

 A high quality product was created

 Targeted both the genders
 Tightened the entry barriers
 Captured more market globally
 Developed technical competence
 Made competition irrelevant
 Took advantage of availability of long-staple cotton fiber
 Extension of its product-line
 Captured rapidly emerging market

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Omni-channel retail brand: Creyate

 Omni-channel brand which means it is both online and offline

 Using E-commerce to sell personalized clothing

 3D visualization software

 Delivers your garment in 12 days at your doorstep

 Products may be more expensive by 15-20 per cent

 Pilot the concept in the top 15-20 cities initially

 To enter US, UK, Germany and Japan

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Financial Performance

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 ENVIRONMENTAL THREATS
AND
OPPORTUNITY PROFILE (ETOP)

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Various facets of environment:

Technological Environment

Market Environment

Economic Environment

Regulatory Environment

International Environment

Socio-Cultural Environment

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Technological Environment:

a) Mills with obsolete and old machinery.

b) Spinning and weaving became two different split operations
which disturbed the integrated plants.
c) Spinning being the capital intensive part was handled by the
automatic mills.
d) Labor intensive component outsourced by textile companies.
e) International markets with remarkable, sophisticated ,
electronically controlled textile machineries.
f) The technology ensured good quality product with minimum
labor input.

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Economic Environment:

a) Textiles comprised 33% of India exports.

b) India had the largest area under cotton cultivation i.e. 24%.
c) India had the lowest textile yield (12%) of global production.
d) Low wage structure prevailed
e) Poor I.R relations resulting into long strikes
f) Mounting deficit in budget.
g) Weaker Indian currency.

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Regulatory Environment:

a) Government controlled inputs like power, coal, freight, etc.‡

b) High indirect taxes, excise duty.
c) Import of capital goods was controlled by rigid licensing
and high import tariffs.

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Market Environment:

DOMESTIC MARKET ENVIRONMENT

• Protected domestic market.

• The products of Arvind Mills were of local standards.
• Lower end market was dominated by power looms.
• While Upper end market was dominated by major mills and
spinning mills set up as 100% EOUs.

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CONSUMER DEMAND
The consumer in the household sector demanded better quality
fabric.‡

TRADE CHANNELS
The trade channel comprised of agents and wholesalers which
were very slow to change and continued to demand conventional
products.
These trade channels held a very powerful position in the textile
distribution.

E‡MERGING COMPETITIVE DOMESTIC MARKETS

The power loom sector had less entry and exit barriers.
Very less capital investment‡required.
Labor was unorganized and poor.
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International Environment:
Third largest denim producer in the world‡

Low cost of domestically produced cotton‡

Low cost of labor and weak currency

Textile is an International or Global Industry

‡The Company has got Global opportunities‡

Mergers and Acquisitions abroad‡

Produced high quality product

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Socio-Cultural Environment:
 Variety of Economic levels, Social status, Cultural group‡

 India being 2nd largest populated country

 Co-existence of poor and middle class

‡Change in consumers tastes and preferences towards western

 Larger portion is young population so denim is favorable

‡
 Increasing shopping habits specially of women

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STRATEGIC ADVANTAGE PROFILE (SAP)

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Marketing Capability Factors:
Marketing capability factors could be segregated into four basics
categories:

Product Price

Promotion Place

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Product

• Unisex leisure/fashion fabric both for international and domestic

market
• High quality fabric for men’s formal shirts and bottom
• Fashion fabric for women primarily for domestic women
• Readymade garments for men-shirts and jeans
• Wide range of textile products and brands

‡Price

• Lower prices in comparison to the competitors due to the

availability of low cost domestic cotton and labor

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‡Place

•Entered the global market

•Selling now in both local and global markets

Promotion

•Creating awareness and creating customer orientation

•Focused on encouraging awareness of denim and high premium
garments
Goal of developing long term trusting relationship with customers

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Financial Capability Factors:
 Major changes in financial strategy from 1987-88‡

 For modernization Company went for large borrowings in 1988‡

 Again in 1991 the Company changed to equity financing‡

 Growth and potential of the company attracted FIIs

 Large fund mobilization through capital market‡

 Readiness of domestic investor to invest as well

‡Received long term loan from ICIC

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Operational Capability Factors:

1. Production System‡
2. Operation and Control System‡
3. R & D System

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Production System:

a) The capacity of Arvind Mills was 70 million meters/annum.

b) Features of Production:
•Automatic spreading and cutting.
•Automatic patterns sewing machine for cuffs and collars.
•Automatic collar and cuff making machine.
•Automated conveyor system in finishing areas to minimize handling
of finishing garments.

Arvind Mills works on technologies such as Open-end Spinning,

Foam Finishing, Mercerizing, Slasher-dyeing, Rope-dyeing, Air-Jet,
Projectile and Wet Finishing.

To further meet customer needs, Arvind Mills has also introduced a

new dyeing and processing method for denims.
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Operations and Control System:

• Arvind Mills has done many technical collaborations.

• The company has followed a disciplined strategy of improved
product and customer mix.
• Increased capacity utilization.
• Control on sourcing of cotton and other raw materials to reduce
procurement costs.

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R & D System:

• Arvind Mills has a strong Research and Development focus on

process improvement, cost reduction and new product
development.

• Introduced brand “Ruf & Tuf” with the concept of ready to stitch
jeans.

• Newport brand was also made available at low price.

• Arvind Mills produces more than 50 varieties of denims for

international customers.

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Personal Capability Factors:

 Recruitment from premier management and technological

institutes.
 Arvind Mills resourced management talent from diverse
backgrounds.
 The delayerisation and flattening of the management structure
had been carried out to enable employees get early substantive
responsibility.

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Information Capability Factors:

 Advanced Production Management software and Advanced

Industrial Engineering software.

 Each sewing machine would have a data center which would be

used to record critical parameters like Online production, machine
stoppages due to problems in sewing, problems in machines etc.

 Such system ensures a strong control over production and ensures a

quick turn around apart from a high quality level.

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General Management Capability Factors:

• Inspiring lifestyle solutions

• Successful takeover of failed firms (Nagri Mills) & rejuvenating

them with a new purpose

• Conversion of non performing assets into productive resources

• Establishing Arvind Mills as global company

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SWOT Analysis

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Strengths:

 Strong portfolio of domestic and international brands

 Economies of scale through complete integration

 Latest manufacturing tools and technologies

 Wide geographical presence around the globe

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Weaknesses:

 Lack of innovative and fresh ideas

 Presence spread in only big cities

 Not doing enough to build brand equity

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Opportunities:

 Changing retail scenario

 Rapid growth in age group of 15-44 years

 Ability and willingness to spend in India consumers

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Threats:

 Competitors like Raymond, Bombay Dyeing, Madura Garments,

Welspun, Aditya Birla Grasim, etc

 Cheap imports from China, Thailand, Bangladesh

 Government’s regulatory and business policies

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Questions and Answers

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Jay Shah, FMS-B
 Thank You!
jayshah316@gmail.com

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