Arvind mills case study by jayshah316

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.

1. A Case Study on:
Presented by:
Jay Shah,
FMS-B,
The M.S.U of Baroda.
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2. INDUSTRY ANALYSIS
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3. Industry Features:
•1stinglobaljuteproduction.
•7MillionTonesofFBPin2013-14.
•63%oftheworld’smarketshareintextilesandgarments.
•2ndlargesttextilemanufacturerintheworld.
•2ndlargestproducerofsilkandcotton.
•24%oftheworld’sspindles.
•8%oftheworld’srotors.
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4. 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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5. Weaknesses
•Increasedglobalcompetitioninthepost2005traderegime
underWTO.
•ImportsofcheaptextilesfromotherAsianneighbors.
•Useofoutdatedmanufacturingtechnology.
•Poorsupplychainmanagement.
•Hugeunorganizedanddecentralizedsector.
•HighproductioncostwithrespecttootherAsiancompetitors.
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6. 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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8. Industry Structure:
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Around5majorplayersdominatingtheindustry.
Amarketsituationofperfectcompetition.
Productdifferentiationstrategyusedtoattractthe
customers.
Verylittleentryandexitbarriers.
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11. Industry Performance:
•Thesectorcontributes14%toindustrialproduction,4%toIndia’s
GDPandconstitutes13%ofthecountry’sexportearnings.
•Withover45Millionpeople,employeddirectly,theindustryisone
ofthelargestsourcesofemploymentgenerationinthecountry.
•ThedomestictextileandapparelindustryinIndiaisestimatedto
reachUSD100Billionby2016-17fromUSD67Billionin2013-14.
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12. •ExportsintextilesandapparelfromIndiaareexpectedtoincrease
toUSD65Billionby2016-17fromUSD40Billionin2013-14.
•ThetotalfabricproductioninIndiaisexpectedtogrowto112
Billionsquaremetersby2016-17from64Billionsquaremetersin
2013-14.
•India’sfiberproductionin2013-14is7MillionTonesandis
expectedtoreach10MillionTonesin2016-17.
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13. Industry Attractiveness:
•TheIndiantextileindustryaccountsforabout24%oftheworld’s
spindlecapacityand8%ofglobalrotorcapacity.
•Indiahasthehighestloomcapacity(includinghandlooms)with63%
oftheworld’smarketshare.
•Indiaaccountsforabout14%oftheworld’sproductionoftextilefiber
andyarnandisthelargestproducerofjuteandthesecondlargest
producerofsilkandcotton.
•Astrongproductionbaseofawiderangeoffiber/yarnfromnatural
fiberslikecotton/jute,silkandwooltosynthetic/man-madefiberslike
polyester,viscose,nylonandacrylic.
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14. •Increasedpenetrationoforganizedretail,favorabledemographics
andrisingincomelevelstodrivetextiledemand.
•Indiaenjoysacomparativeadvantageintermsofskilledmanpower
andcostofproductionovermajortextileproducers.
•Abundantrawmaterialandincreasingdemandforexportstoboost
fiberproduction.
•Abundantavailabilityofrawmaterialssuchascotton,wool,silk
andjute.
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15. •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.
Industry Prospects for future:
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16. COMPETITIVE ANALYSIS
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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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18. 5 Force Analysis:
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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)Powerfulgroupsofcottonsuppliers.
b)Costofpower,labor,andcostcontinuestoincrease.
c)Demandremunerativecottonprices.
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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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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:
‘ToAchieveGlobalDominanceinSelectBusinessBuiltAroundOur
CoreCompetencies,ThroughContinuousProductsandTechnical
Innovation,CustomerOrientation,andaFocusonCost
Effectiveness’
Now:
‘Wewillenablepeopletoexperienceabetterqualityoflifeby
providingenrichingandinspiringlifestylesolutions’
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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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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 AtulProducts
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
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 ‘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
•Cotton segment
•Natural fabrics
•Denims (less
dependant on
fashion changes)
Targeting
•Global
customers
•International
markets
Positioning
•High-quality
producer
•Premium
products
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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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a)Millswithobsoleteandoldmachinery.
b)Spinningandweavingbecametwodifferentsplitoperations
whichdisturbedtheintegratedplants.
c)Spinningbeingthecapitalintensivepartwashandledbythe
automaticmills.
d)Laborintensivecomponentoutsourcedbytextilecompanies.
e)Internationalmarketswithremarkable,sophisticated,
electronicallycontrolledtextilemachineries.
f)Thetechnologyensuredgoodqualityproductwithminimum
laborinput.
Technological Environment:
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Economic Environment:
a)Textilescomprised33%ofIndiaexports.
b)Indiahadthelargestareaundercottoncultivationi.e.24%.
c)Indiahadthelowesttextileyield(12%)ofglobalproduction.
d)Lowwagestructureprevailed
e)PoorI.Rrelationsresultingintolongstrikes
f)Mountingdeficitinbudget.
g)WeakerIndiancurrency.
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Regulatory Environment:
a)Governmentcontrolledinputslikepower,coal,freight,etc.‡
b)Highindirecttaxes,exciseduty.
c)Importofcapitalgoodswascontrolledbyrigidlicensing
andhighimporttariffs.
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Market Environment:
DOMESTIC MARKET ENVIRONMENT
•Protecteddomesticmarket.
•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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CONSUMERDEMAND
Theconsumerinthehouseholdsectordemandedbetterquality
fabric.‡
TRADECHANNELS
Thetradechannelcomprisedofagentsandwholesalerswhich
wereveryslowtochangeandcontinuedtodemandconventional
products.
Thesetradechannelsheldaverypowerfulpositioninthetextile
distribution.
‡EMERGINGCOMPETITIVEDOMESTICMARKETS
Thepowerloomsectorhadlessentryandexitbarriers.
Verylesscapitalinvestment‡required.
Laborwasunorganizedandpoor.
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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:
VarietyofEconomiclevels,Socialstatus,Culturalgroup‡
Indiabeing2
nd
largestpopulatedcountry
Co-existenceofpoorandmiddleclass
‡Changeinconsumerstastesandpreferencestowardswestern
Largerportionisyoungpopulationsodenimisfavorable
‡
Increasingshoppinghabitsspeciallyofwomen
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STRATEGIC ADVANTAGE PROFILE (SAP)
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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
•Unisexleisure/fashionfabricbothforinternationalanddomestic
market
•Highqualityfabricformen’sformalshirtsandbottom
•Fashionfabricforwomenprimarilyfordomesticwomen
•Readymadegarmentsformen-shirtsandjeans
•Widerangeoftextileproductsandbrands
‡Price
•Lowerpricesincomparisontothecompetitorsduetothe
availabilityoflowcostdomesticcottonandlabor
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‡Place
•Enteredtheglobalmarket
•Sellingnowinbothlocalandglobalmarkets
Promotion
•Creatingawarenessandcreatingcustomerorientation
•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:
Majorchangesinfinancialstrategyfrom1987-88‡
FormodernizationCompanywentforlargeborrowingsin1988‡
Againin1991theCompanychangedtoequityfinancing‡
GrowthandpotentialofthecompanyattractedFIIs
Largefundmobilizationthroughcapitalmarket‡
Readinessofdomesticinvestortoinvestaswell
‡ReceivedlongtermloanfromICIC
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Operational Capability Factors:
1.Production System‡
2.Operation and Control System‡
3.R & D System
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ProductionSystem:
a)ThecapacityofArvindMillswas70millionmeters/annum.
b)FeaturesofProduction:
•Automaticspreadingandcutting.
•Automaticpatternssewingmachineforcuffsandcollars.
•Automaticcollarandcuffmakingmachine.
•Automatedconveyorsysteminfinishingareastominimizehandling
offinishinggarments.
ArvindMillsworksontechnologiessuchasOpen-endSpinning,
FoamFinishing,Mercerizing,Slasher-dyeing,Rope-dyeing,Air-Jet,
ProjectileandWetFinishing.
Tofurthermeetcustomerneeds,ArvindMillshasalsointroduceda
newdyeingandprocessingmethodfordenims.
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Operations and Control System:
•ArvindMillshasdonemanytechnicalcollaborations.
•Thecompanyhasfollowedadisciplinedstrategyofimproved
productandcustomermix.
•Increasedcapacityutilization.
•Controlonsourcingofcottonandotherrawmaterialstoreduce
procurementcosts.
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R & D System:
•ArvindMillshasastrongResearchandDevelopmentfocuson
processimprovement,costreductionandnewproduct
development.
•Introducedbrand“Ruf&Tuf”withtheconceptofreadytostitch
jeans.
•Newportbrandwasalsomadeavailableatlowprice.
•ArvindMillsproducesmorethan50varietiesofdenimsfor
internationalcustomers.
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Personal Capability Factors:
Recruitmentfrompremiermanagementandtechnological
institutes.
ArvindMillsresourcedmanagementtalentfromdiverse
backgrounds.
Thedelayerisationandflatteningofthemanagementstructure
hadbeencarriedouttoenableemployeesgetearlysubstantive
responsibility.
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Information Capability Factors:
AdvancedProductionManagementsoftwareandAdvanced
IndustrialEngineeringsoftware.
Eachsewingmachinewouldhaveadatacenterwhichwouldbe
usedtorecordcriticalparameterslikeOnlineproduction,machine
stoppagesduetoproblemsinsewing,problemsinmachinesetc.
Suchsystemensuresastrongcontroloverproductionandensuresa
quickturnaroundapartfromahighqualitylevel.
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General Management Capability Factors:
•Inspiringlifestylesolutions
•Successfultakeoveroffailedfirms(NagriMills)&rejuvenating
themwithanewpurpose
•Conversionofnonperformingassetsintoproductiveresources
•EstablishingArvindMillsasglobalcompany
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SWOT Analysis
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Strengths:
Strongportfolioofdomesticandinternationalbrands
Economiesofscalethroughcompleteintegration
Latestmanufacturingtoolsandtechnologies
Widegeographicalpresencearoundtheglobe
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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:
Changingretailscenario
Rapidgrowthinagegroupof15-44years
AbilityandwillingnesstospendinIndiaconsumers
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Threats:
CompetitorslikeRaymond,BombayDyeing,MaduraGarments,
Welspun,AdityaBirlaGrasim,etc
CheapimportsfromChina,Thailand,Bangladesh
Government’sregulatoryandbusinesspolicies
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Questions and Answers
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Thank You!
[email protected]