A case study on the strategic change of Arvind Mills- one of the biggest players in the Textile Industry around the globe.
Arvind Mills managed to stay afloat even during the recession of 1980s. Arvind is a tough competitor for players like Aditya Birla Grasim, Welspun, Alok Industries, S.Kumar's, Reliance Industries, and many more.
3. Industry Features:
âą 1st in global jute production.
âą 7 Million Tones of FBP in 2013-14.
âą 63% of the worldâs market share in textiles and garments.
âą 2nd largest textile manufacturer in the world.
âą 2nd largest producer of silk and cotton.
âą 24% of the worldâs spindles.
âą 8% of the worldâs rotors.
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4. Industry Boundaries:
Strengths
âą Vast textile production capacity
âą Large pool of skilled and cheap work force
âą Entrepreneurial skills
âą Efficient multi-fiber raw material manufacturing capacity
âą Large domestic market
âą Enormous export potential
âą Very low import content
âą Flexible textile manufacturing systems
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5. Weaknesses
âą Increased global competition in the post 2005 trade regime
under WTO.
âą Imports of cheap textiles from other Asian neighbors.
âą Use of outdated manufacturing technology.
âą Poor supply chain management.
âą Huge unorganized and decentralized sector.
âą High production cost with respect to other Asian competitors.
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ï¶ The industry is fragmented.
ï¶ The industry is emerging as export business expands.
ï¶ Started to reach the stage of maturity.
ï¶ Global business scope increasing.
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8. Industry Structure:
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ï Around 5 major players dominating the industry.
ï A market situation of perfect competition.
ï Product differentiation strategy used to attract the
customers.
ï Very little entry and exit barriers.
Jay Shah, FMS-B
11. Industry Performance:
âą The sector contributes 14% to industrial production, 4% to Indiaâs
GDP and constitutes 13% of the countryâs export earnings.
âą With over 45 Million people, employed directly, the industry is one
of the largest sources of employment generation in the country.
âą 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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12. âą 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.
âą 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.
âą Indiaâs fiber production in 2013-14 is 7 Million Tones and is
expected to reach 10 Million Tones in 2016-17.
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13. Industry Attractiveness:
âąThe Indian textile industry accounts for about 24% of the worldâs
spindle capacity and 8% of global rotor capacity.
âąIndia has the highest loom capacity (including hand looms) with 63%
of the worldâs market share.
âąIndia accounts for about 14% of the worldâs production of textile fiber
and yarn and is the largest producer of jute and the second largest
producer of silk and cotton.
âąA 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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14. âą Increased penetration of organized retail, favorable demographics
and rising income levels to drive textile demand.
âą India enjoys a comparative advantage in terms of skilled manpower
and cost of production over major textile producers.
âą Abundant raw material and increasing demand for exports to boost
fiber production.
âą Abundant availability of raw materials such as cotton, wool, silk
and jute.
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15. âą Entire value chain of synthetics.
âą Value added and specialty fabrics.
âą Fabric processing set-ups for all kind of natural and synthetic textiles.
âą Technical textiles.
âą Garments.
âą Retail brands.
Industry Prospects for future:
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17. Major Competitors of Arvind:
Raymond
S.Kumar
Welspun
Mafatlal
Industries
Aditya
Birla
Grasim
Alok
Industries
Ashima
Industries
Bombay
Dyeing
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19. 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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20. 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
High
Medium
Low
Scale of
operations, brand
strength and
reach,
Economic.
Socio-cultural,
International
Integrated supply chain,
Regulatory
Technological
-
- -
-
-
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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:
âTo Achieve Global Dominance in Select Business Built Around Our
Core Competencies, Through Continuous Products and Technical
Innovation, Customer Orientation, and a Focus on Cost
Effectivenessâ
Now:
âWe will enable people to experience a better quality of life by
providing enriching and inspiring lifestyle solutionsâ
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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.
Jay Shah, FMS-B
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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 âReno-visionâ Commission and implemented
first Denim plant and issued debentures
Milestones:
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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 âLifestyle Apparelsâ 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 â One of Indiaâs largest value retail chains.
2010
Launched The Arvind Store
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Reno-vision of 1980âs:
Segmentation
âą Cotton segment
âą Natural fabrics
âą Denims (less
dependant on
fashion changes)
Targeting
âą Global
customers
âą International
markets
Positioning
âą High-quality
producer
âą Premium
products
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Outcomes of Reno-vision:
ï A high quality product was created
ï Targeted both the genders
ï Tightened the entry barriers
ï Captured more market globally
ï Developed technical competence
ï Made competition irrelevant
ï Took advantage of availability of long-staple cotton fiber
ï Extension of its product-line
ï Captured rapidly emerging market
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Omni-channel retail brand: Creyate
ïŒ Omni-channel brand which means it is both online and offline
ïŒ Using E-commerce to sell personalized clothing
ïŒ 3D visualization software
ïŒ Delivers your garment in 12 days at your doorstep
ïŒ Products may be more expensive by 15-20 per cent
ïŒ Pilot the concept in the top 15-20 cities initially
ïŒ To enter US, UK, Germany and Japan
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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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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.
Technological Environment:
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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.âĄ
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
âą Protected domestic market.
âą The products of Arvind Mills were of local standards.
âą Lower end market was dominated by power looms.
âą 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.âĄ
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.
âĄEMERGING COMPETITIVE DOMESTIC MARKETS
The power loom sector had less entry and exit barriers.
Very less capital investmentâĄrequired.
Labor was unorganized and poor.
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International Environment:
ï§Third largest denim producer in the worldâĄ
ï§Low cost of domestically produced cottonâĄ
ï§Low cost of labor and weak currency
ï§Textile is an International or Global Industry
ï§âĄThe Company has got Global opportunitiesâĄ
ï§Mergers and Acquisitions abroadâĄ
ï§Produced high quality product
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Socio-Cultural Environment:
ï Variety of Economic levels, Social status, Cultural groupâĄ
ï India being 2nd largest populated country
ï Co-existence of poor and middle class
ïâĄChange in consumers tastes and preferences towards western
ï Larger portion is young population so denim is favorable
âĄ
ï Increasing shopping habits specially of women
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Marketing capability factors could be segregated into four basics
categories:
Marketing Capability Factors:
Price
PlacePromotion
Product
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Product
âą Unisex leisure/fashion fabric both for international and domestic
market
âą High quality fabric for menâs formal shirts and bottom
âą Fashion fabric for women primarily for domestic women
âą Readymade garments for men-shirts and jeans
âą Wide range of textile products and brands
âĄPrice
âą Lower prices in comparison to the competitors due to the
availability of low cost domestic cotton and labor
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âĄPlace
âąEntered the global market
âąSelling now in both local and global markets
Promotion
âąCreating awareness and creating customer orientation
âąFocused 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:
ï Major changes in financial strategy from 1987-88âĄ
ï For modernization Company went for large borrowings in 1988âĄ
ï Again in 1991 the Company changed to equity financingâĄ
ï Growth and potential of the company attracted FIIs
ï Large fund mobilization through capital marketâĄ
ï Readiness of domestic investor to invest as well
ïâĄReceived long term loan from ICIC
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Production System:
a) The capacity of Arvind Mills was 70 million meters/annum.
b) Features of Production:
âąAutomatic spreading and cutting.
âąAutomatic patterns sewing machine for cuffs and collars.
âąAutomatic collar and cuff making machine.
âąAutomated 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:
âą Arvind Mills has done many technical collaborations.
âą The company has followed a disciplined strategy of improved
product and customer mix.
âą Increased capacity utilization.
âą Control on sourcing of cotton and other raw materials to reduce
procurement costs.
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R & D System:
âą Arvind Mills has a strong Research and Development focus on
process improvement, cost reduction and new product
development.
âą Introduced brand âRuf & Tufâ with the concept of ready to stitch
jeans.
âą Newport brand was also made available at low price.
âą Arvind Mills produces more than 50 varieties of denims for
international customers.
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Personal Capability Factors:
ï§ Recruitment from premier management and technological
institutes.
ï§ Arvind Mills resourced management talent from diverse
backgrounds.
ï§ 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:
ï Advanced Production Management software and Advanced
Industrial Engineering software.
ï 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.
ï 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:
âą Inspiring lifestyle solutions
âą Successful takeover of failed firms (Nagri Mills) & rejuvenating
them with a new purpose
âą Conversion of non performing assets into productive resources
âą Establishing Arvind Mills as global company
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Strengths:
ï± Strong portfolio of domestic and international brands
ï± Economies of scale through complete integration
ï± Latest manufacturing tools and technologies
ï± Wide geographical presence around the globe
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Weaknesses:
ï± Lack of innovative and fresh ideas
ï± Presence spread in only big cities
ï± Not doing enough to build brand equity
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Opportunities:
ï± Changing retail scenario
ï± Rapid growth in age group of 15-44 years
ï± Ability and willingness to spend in India consumers
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Threats:
ï± Competitors like Raymond, Bombay Dyeing, Madura Garments,
Welspun, Aditya Birla Grasim, etc
ï± Cheap imports from China, Thailand, Bangladesh
ï± Governmentâs regulatory and business policies
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