TEXTILE INDUSTRY DECLARATION
I hereby declare that the project work entitled “TEXTILE INDUSTRY” submitted in partial fulfilment of the requirements of the PGDM-F/T Program of Institute of Productivity & management is my original work and the project is not submitted as project previously to any institute for the award or any degree.
Place Date
Signature of the student
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TEXTILE INDUSTRY
TEXTILE INDUSTRY
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TEXTILE INDUSTRY TABLE OF CONTENT DECLARATION………………………………………………………………..….……………….1 HISTORY OF INDIAN TEXTILE INDUSTRY……………………………….………………..4 INDIAN TEXTILE INDUSTRY………………………………………………..…………………5 POSITION OF INDIAN TEXTILE INDUSTRY…………………………………………………6 INDIAS MAJOR COMPETITIORS IN THE WORLD…………………………………………6 MAJOR MANUFACTURERS AND THEIR MARKET SHARE………………………………7 INDUSTRY SUPPLY CHAIN……………………………………………………………………..8 INDIA’S COMPETITIVENESS…………………………………………………………………..9 NATIONAL TEXTILE POLICY 2000…………………………………………………………..13 TEXTILE COMPANIES IN INDIA ….…………………………………………………..……..16 BCG MATRIX……………………………………….……………………………………….……20 PORTERS FIVE FORCE MODEL……………….…………………………………………..….21 SEGMENT ANALYSIS…………………………….…………………………………………..…26 SWOT ANALYSIS OF TEXTILE INDUSTRY….….………………………………………..…28
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TEXTILE INDUSTRY HISTORY OF INDIAN TEXTILE INDUSTRY The history of textiles in India dates back to nearly five thousand years to the days of the Harappan civilization. Evidences that India has been trading silk in return for spices from the 2nd century have been found. This shows that textiles are an industry which has existed for centuries in our country. Recently there has been a sizeable increase in the demand for Indian textiles in the market. India is fast emerging as a competitor to China in textile exports. The Government of India has also realized this fact and lowered the customs duty and reduced the restrictions on the imported textile machinery. The intention of the government’s move is to enable the Indian producers to compete in the world market with high quality products. The results of the government’s move can be visible as Indian companies like Arvind Mills, Mafatlal, Grasim; Reliance Industries have become prominent players in the world. The Indian textile industry is the second largest in the world-second only to China. The other competing countries are Korea and Taiwan. Indian Textile constitutes 35% of the total exports of our country. The history of apparel and textiles in India dates back to the use of mordant dyes and printing blocks around 3000 BC. The foundations of the India's textile trade with other countries started as early as the second century BC. A hoard of block printed and resistdyed fabrics, primarily of Gujarati origin, discovered in the tombs of Fostat, Egypt, are the proof of large scale Indian export of cotton textiles to the Egypt in medieval periods. During the 13th century, Indian silk was used as barter for spices from the western countries. Towards the end of the 17th century, the British East India Company had begun exports of Indian silks and several other cotton fabrics to other economies. These included the famous fine Muslin cloth of Bengal, Orissa and Bihar. Painted and printed cottons or chintz was widely practiced between India, Java, China and the Philippines, long before the arrival of the Europeans. India Textile Industry is one of the largest textile industries in the world. Today, Indian economy is largely dependent on textile manufacturing and exports.
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TEXTILE INDUSTRY INDIAN TEXTILE INDUSTRY Textile Industry in India is the second largest employment generator after agriculture. It holds significant status in India as it provides one of the most fundamental necessities of the people. Textile industry was one of the earliest industries to come into existence in India and it accounts for more than 30% of the total exports. In fact Indian textile industry is the second largest in the world, second only to China. The Indian textile industry has a significant presence in the economy as well as in the international textile economy. Its contribution to the Indian economy is manifested in terms of its contribution to the industrial production, employment generation and foreign exchange earnings. It contributes 14 percent of industrial production, 9 percent of excise collections, 18 percent of employment in the industrial sector, nearly 20 percent to the country’s total export earning and 4 percent to the Gross Domestic Product. It is closely linked with the agricultural and rural economy. It is the single largest employer in the industrial sector employing about 35 million people. If the employment in allied sectors like ginning, agriculture, pressing, cotton trade, jute, etc. are added then the total employment is estimated at 93 million. The net foreign exchange earnings in this sector are one of the highest and, together with carpet and handicrafts, account for over 37 percent of total export earnings at over US $ 10 billion. Textiles, alone, account for about 25 percent of India’s total forex earnings. India’s textile industry since its beginning continues to be predominantly cotton based with about 65 percent of fabric consumption in the country being accounted for by cotton. The industry is highly localized in Ahmedabad and Bombay in the western part of the country though other centers exist including Kanpur, Calcutta, Indore, Coimbatore, and Sholapur. The structure of the textile industry is extremely complex with the modern, sophisticated and highly mechanized mill sector on the one hand and the hand spinning and hand weaving (handloom) sector on the other. Between the two falls the small-scale power loom sector. The latter two are together known as the decentralized sector. Over the years, the government has granted a whole range of concessions to the non-mill sector as a result of which the share of the decentralized sector has increased considerably in the total production. Of the two sub-sectors of the decentralized sector, the power loom sector has shown the faster rate of growth. In the production of fabrics the decentralized sector accounts for roughly 94 percent while the mill sector has a share of only 6 percent. Being an agro-based industry the production of raw material varies from year to year depending on weather and rainfall conditions. Accordingly the price fluctuates too.
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TEXTILE INDUSTRY POSITION OF INDIAN TEXTILE INDUSTRY The Indian textile industry contributes about 14 per cent to industrial production, 4 per cent to the country's gross domestic product (GDP) and 17 per cent to the country’s export earnings, according to the Annual Report 2009-10 of the Ministry of Textiles. It provides direct employment to over 35 million workers directly and it accounts for 21% of the total employment generated in the economy and is the second largest provider of employment after agriculture. Some of the textile clusters in which productions happens are very huge and significant for the overall industry, for example
Panipat produces 75% of all blankets produced in India Tirupur contributes 80% of the country’s cotton hosiery exports Ludhiana makes 95% of total woolen knitwear produced
According to the Ministry of Textiles, Export target in textiles in 2010 at USD is 50 billion. the cumulative production of cloth during April’09- March’10 has increased by 8.3 per cent as compared to the corresponding period of the previous year. Moreover, total textile exports have increased to US$ 18.6 billion during April’09- January’10, from US$ 17.7 billion during the corresponding period of the previous year, registering an increase of 4.95 per cent in rupee terms. Further, the share of textile exports in total exports has increased to 12.36 per cent during April’09January’10, according to the Ministry of Textiles. As per the Index of Industrial Production (IIP) data released by the Central Statistical Organisation (CSO), cotton textiles has registered a growth of 5.5 per cent during April March 2009-10, while wool, silk and man-made fibre textiles have registered a growth of 8.2 per cent while textile products including wearing apparel have registered a growth of 8.5 per cent. The textile sector has increased their investment in projects to upgrade their equipment amid fierce market competition and to meet the growing demand for more textile products. Total investment in the textile industry between 2004 and 2008 was around Rs.65,478 crore in India, which is expected to reach Rs.1,50,600 crore by 2012. This enhanced investment would generate 17.37 million jobs-12.02 million direct and 5.35 million indirect—by 2012.
INDIA’S MAJOR COMPETITIORS IN THE WORLD To understand Indias position among other textile producing the industry contributes 9% of GDP and 35% of foreign exchange earning, Indias share in global exports is only 3% compared to Chinas 13.75% percent. In addition to China, other developing countries are emerging as serious competitive threats to India. Looking at export shares, Korea (6%) and Taiwan (5.5%) are ahead of India, while Turkey (2.9%) has already caught up and others likeThailand (2.3%) and Indonesia (2%) are not much further behind. The reason for this development is the fact that India lags behind these countries in investment levels, technology, quality and logistics. If India were competitive in some key segments it could serve as a basis for building a modern industry, but there is no evidence of such signs, except to some extent in the spinning industry.
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MAJOR MANUFACTURERS AND THEIR MARKET SHARE In 2006, the largest apparel manufacturers and exporters were countries from the Asia-Pacific region which included countries like China, Hong Kong, Phillipines, Malaysia, Indonesia, Bangladesh, Srilanka, Pakistan, Thailand and India. The other major apparel manufacturing nations were USA, Italy, Germany and Mexico.
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INDUSTRY SUPPLY CHAIN The apparel industry supply chain can be broadly categorized into six major components - raw materials, textile plants, apparel plants, export chains, retail stores and customers.
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INDIA’S COMPETITIVENESS CONTRIBUTION TO ECONOMY: With 3.9 million handlooms, India is the highest handloom producing country in the World. 30% of the total export income is generated by textile alone, it is second largest Employer industry after agriculture. The textile industry constitutes approximately 14% of country's total industrial production.
THE WORLD MARKET SHARE: In spite of the Chinese dominance, India has a fair opportunity to grab a substantial stake in the projected garment market share. According to PHD Chamber of Commerce and Industry (PHDCCI), post-MFA, India's market share in the US is expected to go up to 15 per cent from the present 4 per cent. In the EU, the market share increase is expected to be 50 per cent from the current 6 per cent to 9 per cent .
TABLE SHOWING THE INDIA’S COMPETITIVENESS WITH OTHER COUNTRY: There is no denying India is competitive enough and will become even more competitive once its infrastructure issues are sorted out. China has probably already reached its peak and further improvements may not be as dramatic.
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Countries and their positive and negative aspects with regard to textiles KEY COUNTRIES / REGIONS
KEY POSITIVES
KEY NEGATIVES
China
Efficient, low cost, vertically integrated
Growth at the cost of profits
India, Pakistan
Vertically integrated, low cost
Lacks economies of scale and infrastructure support
Mexico (NAFTA), Turkey
Proximity to market, duty and quota free
Lack of China and Indias degree of competitiveness
ASEAN (Vietnam, Cambodia, Indonesia)
Cheap labor
No other cost or locational advantage
AGOA (African) countries, Bangladesh
Quota and tariff free, cheap labor
Lack of integration and China and Indias has degree of competitiveness
Hong Kong, Korea, Taiwan
Trading hubs proximity to China
No cost advantage, protected currently by quotas
USA and EU
Non-quota barriers likely to prove irritant to imports
Huge but choosy market
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Indian Textiles targets- 11th Five year Plan (2007-2012) Market size of US$ 115 Billion Export target US$ 55 Billion Domestic market US$ 60 Billion India’s market share in world textiles trade to grow from 3% to 8 % 12 Million additional jobs Investment Rs.150,600 Crs
TEXTILES EXPORT TARGET (IN BILLIONS) Year ( April March)
Target
Achievement
2008-09
24.18
24.16
2007-08
21.16
21.14
2006-07
19.73
19.62
2005-06
15.565
17.80
2004-05
15.16
13.04
2003-04
16.31
13.16
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2002-03
15.05
12.41
2001-02
13.72
10.76
TOP 10 EXPORTERS (TEXTILE) Country Billion US$
1990 % share
1997 % share
Billion US$
Hong Kong China South Korea Germany Italy
7.99 7.10 6.04 14.00 9.80
7.68 6.82 5.81 13.46 9.43
14.6 13.83 13.35 13.05 12.9
9.42 8.92 8.61 8.42 8.32
Taiwan
6.13
5.90
12.73
8.21
USA
5.03
4.83
9.19
5.93
France
7.21
4.65
5.86
5.64
Belgium-Luxembourg 6.54
6.29
7.01
4.52
Japan
5.65
6.75
4.35
5.88
TOP 10 EXPORTERS (APPAREL) Country
1990
1997
Billion US$
% share
Billion US$
% share
China
9.41
9.14
31.8
21.06
Hong Kong
15.37
14.92
23.11
15.30
Italy
12.07
11.72
14.85
9.83
USA
2.57
2.49
8.68
5.75
Germany
7.82
7.59
7.29
4.83
Turkey
3.44
3.34
6.7
4.44
France
4.65
4.51
5.34
3.54
UK
3.08
2.99
5.28
3.50
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TEXTILE INDUSTRY South Korea
8.11
7.87
4.19
2.77
Thailand
2.86
2.78
3.77
2.50
Total (top 10)
69.38
67.36
111.01
73.52
World
103.00
100.00
151.00
100.00
NATIONAL TEXTILE POLICY 2000 ON NOVEMBER 2, the Government announced the New Textile Policy (NTP), outlining measures to make India a global player in textiles and readymade garments by raising exports from $11 billion to $50 billion by 2010. Of this, the share of readymade garments will be half. The Government has decided to de reserve the garment industry from the SSI category to make the former internationally more competitive. Till now, the garment sector was under SSI reservation, with an investment ceiling of Rs 3 crore, and the maximum foreign direct investment limit of 24 per cent. There are two more modifications. First, the FDI limit of 24 per cent has been removed, and foreign companies will be able to make 100 per cent investments through the Foreign Investment Promotion Board (FIPB) route. Second, the 50 per cent export obligation on firms with foreign equity has been done away with. The Government intends to implement, in a time-bound manner, the Technology Upgradation Fund Scheme covering all manufacturing sectors of the industry. According to the Textiles Minister, Mr Kashiram Rana, response to this scheme is improving, and proposals worth Rs 11,000 crore were received. Acording to the RBI, exports of readymade garments in the 11 years from 1987-88 to 1998-99 rose from $1,430 million to $4,444 million -- more than threefold. The annual average growth rate readymade exports during this period were 10.9 percent, against the overall export growth rate of 9.7 percent. Exports of readymade to the developed countries are improving. Against exports of $427 million to the US, in 1987-88, they touched $1,503 million -- again, more than threefold-- in 1998-99. There have been similar increases in despatches to the UK, Germany, France, Canada, Italy, Japan and the
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TEXTILE INDUSTRY Netherlands. There was a decline in exports to the Commonwealth of Independent States (CIS) because of the unstable conditions. India was also able to capture markets in developing countries, especially the UAE. The rising trend of readymade garment exports, even to the most developed countries, proves beyond doubt the competitive ability of the small sector. TECHNOLOGY UPGRADATION FUND SCHEME (TUFS): Government of India, Ministry of Textiles has launched a Technology Upgradation Fund Scheme (TUFS) for the Textile and Jute Industries, which is in operation since 01.04.1999 for 5 years i.e. up to 31.03.2004. There is no cap on funding under this scheme. It is an open-ended scheme depending on the capacity of the industry to absorb funds in bankable and techno-economically feasible proposals. The main features of the TUFS are given below: I. The scheme provides a reimbursement of 5% point on the Interest charged by the lending agency on a project of Technology Up gradation in conformity with the scheme. II.
The identified sectors in the textile industry viz. Cotton ginning and pressing, spinning/silk reeling and twisting/wool scouring and combing/ synthetic filament yarn texturising, crimping and twisting, manufacturing of viscose filament yarn (VFY) / Viscose Staple Fiber (VSF), weaving/knitting including non woven and technical textiles, garments/made-ups, Jute industry are eligible to avail of these concessional loan for their technology up gradation requirements. Investments in common infrastructure or facilities owned by the association, trust or co-operative society of the units participating in the TUF Scheme and other investments specified are also eligible for funding under the scheme.
III.
Technology levels are benchmarked in terms of specified machinery for each sector of the textile industry. Machinery with technology levels lower than that specified will not be permitted for funding under the TUF Scheme.
IV.
General eligibility condition and sector specific eligibility conditions have also been specified in the scheme.
V.
Nodal agencies for the scheme are as follows: -
For the Textile Industry (excluding SSI sector) – IDBI For the SSI Textile Sector (Cotton Ginning & Pressing, Weaving, Knitting, Processing & Garmenting Manufacturing) - SIDBI For Jute Industry - IFCI VI.
The interest @5% would be reimbursed to the respective nodal agency through the budget (plan) provisions of the Ministry of Textiles.
VII.
The functioning of the scheme is being periodically monitored by TAMC Chaired by Textile Commissioner and Inter-Ministerial Steering Committee, Chaired by Secretary (Textiles).
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TEXTILE INDUSTRY VIII.
A special cell has been set up in the financing institutions for expeditiously processing loan application received under the scheme.
IX.
All the 18 SFCs, 17 SIDCs and 11 Twin function IDCs, EXIM Bank and NCDC have been co-opted by SIDBI and IDBI. Further SIDBI has co opted 81 commercial banks, coop. banks and NSIC and IDBI has co-opted 36 commercial banks, 1 co-operative bank and 4 AIFIs (IFCI, ICICI, IIBI and LIC) have also been co-opted by IDBI. IFCI has coopted 3 SFCs, 1 SIDC, 6 commercial banks, 3 AIFIs and Exim Bank for financing jute industry under the scheme.
X.
An option has also been provided to the Small Scale Textile and Jute Industries to avail of either 12% Credit Linked Capital Subsidy (CLCS) or the existing 5% interest reimbursement under the TUFS. CLCS-TUFS will be in operation from 1st Jan., 2002 to 31st March, 2004. There is no distinction between public sector, co-operative sector or private sector mills under the scheme, if project proposal is bankable and technoeconomically feasible. Indian textile industry should have focused on all major sectors right from fibre to fashion and planned for an organized growth across the supply chain so as to compete with China and even countries such as Pakistan, Vietnam and Thailand. Instead, the industry had put majority of its stock in the spinning sector. This is clearly evident in the utilization of Technology Upgradation Fund Scheme effectively by the spinning sector. Although it is a positive outcome, in my opinion, the industry turned a blind eye on value-adding sectors such as weaving and finishing.
TEXTILE WORKERS’ REHABILITATION FUND SCHEME (TWRFS): Textile Workers’ Rehabilitation Fund Scheme came into force with effect from 15th Sept. 1986.The objective of TWRFS is to give interim relief to the workers rendered jobless due to permanent closure of the mills. Another reason also was to curtail the widespread disguised employment in the textile industry. Relief under the scheme is available only for 3 years on a tapering basis, 75% of the wage equivalent in the first year, 50% in the second year and 25% in the third year. The government has established various research associations for the textile industry like Ahmedabad Textile Industry Research Association, Ahmedabad Bombay Textile Research Association, Mumbai South India Textile Research Association, Coimbatore Northern India Textile Research Association, Ghaziabad
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TEXTILE INDUSTRY Silk and Art Silk Mills Research Association, Mumbai It has a few export promotion councils also like
Handloom Export Promotion Council, Madras
Apparel Export Promotion Council, New Delhi
Cotton Textile Export Promotion council, Mumbai
The Synthetic and Rayon Textiles Export Promotion Council, Mumbai
Indian Silk Export Promotion Council, Mumbai
Wool and Woollens Export Promotion council, New Delhi
Carpet Export Promotion Council, New Delhi
Export Promotion Council for Handicrafts
Powerloom Development & Export Promotion Council
TEXTILE COMPANIES IN INDIA India being one of the fastest growing economies of the world, which has both positively and negatively, affected the Indian textile industry. On one hand it has become a major retailing hub and a host for various multinational companies on the other hand this has a negative effect on the domestic players. The emergence of mall, brand slavery, fashion awareness, rise in the income level has further reinforced the competition among the multinationals and the domestic players and has lead to opening of number of retail outlets in India. The introduction of VAT and the growth of organized retail industry are also likely to push up growth in the textiles and apparel sector domestically too. While the garments business will pose its own set of challenges in terms of providing flexibility in operations and dealing with labor productivity issues, an increasing contribution to revenues from the garments business, which is less capital-intensive and margins-accretive, would augur well for earnings growth.
GOKALDAS EXPORTS
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TEXTILE INDUSTRY Incorporated in 1979, based in Bangalore, it’s one of India's largest manufacturers and designer of garments for men, women and children and caters to the needs of several international fashion brands and retailers. Gokaldas Exports has been a major player in the readymade garment industry across the globe. In the present Indian fashion retailing, Gokaldas has grabbed a distinguished place for itself in the form of "The Wearhouse" catering to the specific fashion needs of the people. The Wearhouse has high profile outlets in Bangalore, Chennai, Hyderabad and Coimbatore. An ISO 9001:2000 Certified Company has a capacity to produce and export 2.5 million garments a month. The Group's products include coats, suits, jackets, parkas, windcheaters, ski wear; warmups, surf wear, swim wear; trousers, shorts; casual wear shirts, ladies blouses and dresses for customers in international market. It mainly operates in India but exports its products to countries like the United States of America, Canada, Mexico, United Kingdom, Germany, Austria, Spain, Italy, France, Netherlands, Middle East, South Africa, Japan, Denmark, Taiwan and Hong Kong. A few of the manufacturing units are 100% export units with capabilities of mass production. They have the license to import duty-free fabrics and accessories from all over the world for re-export. It has over 48,000 employees who work in around 48 fully equipped, modern, manufacturing factories.
ARVIND BRANDS Arvind Mills Ltd. was incorporated in 1931 with share capital Rs.2525000 ($55000) in Ahmedabad by the Lalbhai group. The Company's operations are divided into the Textile Division, telecom division and garments division. We will be majorly concentrating on the garments division. Products manufactured are dhoties, sarees, mulls, dorias, crepes, shirtings, coatings, printed lawns & voiles cambrics, twills gabardine etc. Arvind Brands is part of the Lalbhai Group, which holds licenses for leading international brands such as Arrow, Lee, Wrangler, Gant and Tommy Hilfiger for retail and wholesale sales in the local market. Its mainstream brands are Excalibur and Flying Machine. In addition, it owns an array of casual sportswear and denim brands marketed in India, including Flying Machine, Newport and Ruf & Tuf jeans and Excalibur shirts along with licensed relationship with various international brands like Nautica, Jansport, Kipling, Hero by Wrangler, Lee Riders and Tommy Hilfiger, and joint ventures with VF Corporation and Diesel. but the company is facing severe competition from major brands like Louis Philippe, Park Avenue and small brands like Trigger and Blackberrys. It produces about 110 million meters of denim every year and the garment section is doing extremely well because of the customer loyalty it enjoys. The demand for jeans, in particular, is expected to rise, as manufacturing companies in the US have shut operations.
KOUTONS The winner of “ best retailer leadership award 2008” organized by retail congress, Mumbai, Koutons Retail India Limited engages in the design, manufacture, and retail of men’s wear and integrated apparel in India. It currently sells its apparel using the “Koutons” and “Charlie Outlaw” brands. Mr. Kohli along with his brother in law Mr. Sawheny partnered to set up Charlie's Creation. In 1997 the Company diversified its business by introducing non-denim trousers in the existing product range of denim apparel. The company has inaugurated its 89th family Store in Hyderabad, which it claims to be its largest store in the country. Koutons India has an annual finishing and manufacturing capacity of 22.92 million pieces and 12.36 million pieces of apparel, respectively. The capacity utilization for the same was 41.21% and 21.99% respectively at the end of FY2007.Koutons has 18 manufacturing/finishing units and 14 warehouses spread across various locations in and around
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TEXTILE INDUSTRY Gurgaon. The company's strategy is to have small, but more stores. This helps to save costs and at the same increase reach of the company. The company has a phenomenal growth record.
ZODIAC Zodiac Clothing Company Ltd manufactures, exports and imports garments, textiles accessories etc. Zodiac has been in the apparel business for a period of 50 years by now and is known for its quality shirts. Zodiac, is today, the largest selling shirts & tie brand at Shopper's Stop according to Brand Equity (The Economic Times) The Company started business in 1954 and export of readymade garments to Europe started in early '60s, which included mainly ties and shirts. For many decades, Zodiac has been synonymous with ties. The business of ties is a high fashion business and Zodiac has taken this to new highs in India and across the globe. In fact, one can say that in India Zodiac is generically associated with ties. Following Zodiac's huge success with ties, the company entered the arena of men's accessories with Cuff links, Belts, Wallets and Handkerchiefs. In 1973, Zodiac had a stand-alone exclusive shirt shop in Hotel Taj in Mumbai. The company then entered the domestic shirt segment in late '80s.It employs around 3500 people in 7 manufacturing units in 16 offices located in UK, US, Germany, UAE etc.Each manufacturing unit is spread over 35000 sq.ft and has modern equipment to spread 60 yards of cloth at a time. All the manufacturing units are same in design and layout. Quality is maintained throughout the 40 stages of assembly line. All the units have their own power generating units in order to be efficient. It has its own 80 exclusive outlets and around 2000 multibranded outlets. Its continuously showing profit and has a consistently growing export business.
HOUSE OF PEARL House of Pearl Fashions Limited is a multinational ready to wear apparel manufacturing company. The company also provides supply chain solutions for the fashion industry globally along with warehousing & distribution networks in the UK & US. It operates in 11 strategic locations in six continents. It has two brands Kool hearts, DCC in the United States of America. The brand Kool hearts focuses on the young fashion, where as the focus of DCC is more towards the Missy segment It basically deals with 3 streams which are manufacturing to Retailers, souring solutions for retailers, Marketing, Distribution & Branding for Retailers. It takes care of the whole process from design & development, manufacturing or sourcing till offering a range of pre retailing services, warehousing to delivering at the door step on a call off basis. It manufactures a broad range of products comprising of knits, woven, sweaters and bottoms in basic as well as complex designs. It has a good manufacturing capacity; the present in-house manufacturing capacity of the company is twenty million pieces. Per annum spread over more than 725,000 sq feet of built up area with efficiently designed layouts to ensure smooth flow of materials. The company is planning to double the capacity by expanding the operations in Chennai, Bangladesh & Indonesia. It intends to have a capacity of 30million pieces by the end of 2009. The company adopts integrated marketing techniques and has merchandising teams in Canada, Europe, HK, UK, and US, closely interacting with existing and potential customers at their doorstep. The Company shares were listed on the stock exchanges first time in Feb, 07. It recently went for a joint venture with LERROS, a premium apparel brand from Germany.
HARIA EXPORTERS
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TEXTILE INDUSTRY Haria Exports Ltd. is a leading garment exporter in the country for the last twenty four years. It is a Star Trading Company and has won the golden status certificate in the year 1999. This company occupies a unique place in the industry of the by its contribution to Industrial output, employment generation and Foreign exchange earnings. Even though the textile industry has the distinctive advantage in respect of raw material and skilled labor, the industry is suffering from technology obsolescence which in turn affects the quality, productivity and cost effectiveness. The high capital cost is impeding the process of Hi-Tech up gradation. Therefore, the Government of India, Ministry of Textile has launched Technology Up gradation Fund Scheme for Textiles & Jute Industries of Rs.25000.00 crores at a concessional rate of interest of appx.5%. In order to compete with the outside world, the company is paying attention to the application of technology, closely following up the fashion trends and improved product quality. In order to be more cost efficient the company has acquired latest machinery which ascertained exact material consumption depending upon the style and pattern. The Government policies, interest rates, export incentives etc may also affect the overall performance of the company, but even then the company is optimistic about its revenue and growth.
EVINIX The company started in 1996 with the manufacture of headgears, baseball caps and high altitude jackets, using cotton textile and leather, mainly for exports. The company was incorporated on 1st May 1996 as Evinix Fashion Accessories Private Limited under the Companies Act, 1956. Mr. Sanjay Taneja, brother of Mr. Raujeev Taneja (the original promoter of the company) joined the Company as a Promoter replacing Mrs.Anuradha Taneja, who disassociated herself from the company. The name of the company was changed to Evinix Accessories Private Limited from Evinix Xsesryz and a fresh Certificate of Incorporation dated 20th March 2003 was taken. In March 2005, M/s Ambros Exports Private Limited took equity stake in the company. The apparel category constitutes men and women’s shirts, trousers, skirts and tops, kidswear and nightwear. Organic cotton wear for expecting mothers and infants is an additional strength. They use Organic cotton and its products through its brand name “Othentix”- Authentic Sustainable Textiles, lends a unique personality to each garment manufactured and supplied by Evinix. The company came out with a principle of Rapid Retail suggesting that every merchandise has a limited shelf life at CUT stores; CUT is an acronym for Comfortable, Urban and Trendy. Evinix is setting up CUT stores (averaging 4000-5000 sq feet) in fast urbanizing young Indian towns. It recently launched the CUT youth style store in Rajkot. The Rapid Retail business concept embraces the e.t.o.a.d concept i.e. the exact time of awaited departure when the product will move out to the next best price bracket.
PEARL GLOBAL Pearl Global Limited was incorporated on 23rd October, 1979 under the name Pearl Agencies Private Limited. The Company became a Deemed Public Company with effect from 1st July, 1991 The name of the Company was change to PEARL GLOBAL LIMITED (PGL) on 2nd September, 1993 in terms of Section 21 of the Companies Act, 1956 as per fresh Certificate of Incorporation issued by the Registrar of Companies, Delhi & Haryana. PGL manufactures, sells, and exports ready to wear apparel in India. The company primarily produces garments in woven and knitted fabrics. Its products include casual wear dresses, ladies’ blouses, and bottoms. The company is based in Gurgaon, India. PGL is a subsidiary of House of Pearl Fashions Limited.
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TEXTILE INDUSTRY BANG OVERSEAS LTD Bang Overseas limited’s principal activity is to manufacture and market textiles and apparels. The Group's textile includes readymade garments, under garments and hosiery.It markets with a brand name of Thomas Scott. The Group operates only in India. It was incorporated in the year 1992 and is presently providing fashion fabrics and meeting ready to wear requirements of the customers in apparel, textile and Retail segment. The company started the business from trading in textile and since 1998, they are conceptualizing and designing fashion fabrics and outsourcing the manufacturing process of the same from countries like Turkey, Portugal, Mauritius and other European Countries. In the same year, they launched our seasonal fabric collections in textile under the name "Bodywaves", marketed through their own distribution channel to different brands and retailers. They have ventured into ready-to-wear mens' segment in 2000 by outsourcing manufacturing process and in turn selling to various international brands. They launched ready-towear mens' garments under our brand name "Thomas Scott" in 2002. They started their own first apparels manufacturing unit in Bangalore in the year 2005 in the name of Reunion Clothing Company with an installed capacity of 350,000 pieces per annum and in the year 2006 then they started the second manufacturing unit in the name of Formal Clothing Company with an installed capacity of 360,000 pieces per annum. At present they have installed capacity of 720,000 and 540,000 pieces per annum at their Reunion Clothing Company and Formal Clothing Company. Their products are presently retailed through 157 point of sales comprises of our own Retail outlets, Large format stores (LFS) like Shoppers' Stop, Pyramid, Globus, the LOOT, SAGA and Multi Brand Outlets (MBO) spread all over India. They cater to the demand of various other apparel manufacturer and brands also. They have centralized warehousing and logistics centre at Kalher Village near Bhiwandi to facilitate our supply chain management as well.
BCG MATRIX BCG Matrix is also called the Boston Matrix because it was created by Bruce Hendeson for the company Boston Consulting Group in 1970. The BCG matrix method is based on the product life cycle theory that can be used to determine what priorities should be given in the product portfolio of a business unit. Star The high growth and high market share brands that exist in Indian market and are the market leaders. This category consists of the companies like Zodiac, Du Pont etc. These companies are regularly investing in R&D and gaining market share as time passes. These stars try to become the cash cows of the future and want to remain in the market. Cash Cows
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TEXTILE INDUSTRY The companies which have low business growth and high market share are the cash cows that generate milk continuously with the small investment to be as the mature company in the market. Question marks (also known as Problem Childs) The companies that have high growth rate and lower market share are the question mark as they could be new ventures started or they are companies that do not have liquidity enough to increase their share in the market. But these companies have potential to be the star in the market due to good growth rate and thus they could invest more into their business to expand as the star and then becoming the cash cows. Dogs The dogs are more charitable pets that exist in the market and have the low market share and low growth rate so these companies are better to get out of the market or much cash is required to set them up. These companies have the cash traps which ties up the money in a business with the lower potential.
GOKALDAS In the present Indian fashion retailing, Gokaldas has grabbed a distinguished place for itself in the form of "The Wearhouse" catering to the specific fashion needs of the people. It ainly operates in India but exports its products to countries like the United States of America, Canada, Mexico, United Kingdom, Germany, Austria, Spain, Italy, France, Netherlands, Middle East, South Africa, Japan, Denmark, Taiwan and Hong Kong. This means the company has a high growth rate since its inception.Therefore I put it in star.
PORTERS FIVE FORCE MODEL
I. RISK OF NEW ENTRY BY POTENTIAL COMPETITOR 1. Brand Loyalty The existing players have been in the industry for a long period of time and have established a good reputation with their customers in domestic as well as foreign market. This has resulted in the high
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TEXTILE INDUSTRY brand loyalty by customers. But this will not act as a potential barrier for other companies because most of the Indian textile companies operate in B-To-B segment and all the players keep competing among themselves for new consignments from the clients.
2. Absolute cost Advantage Abundant availability of raw material is one of the key advantages of the Indian textile industry; this also gives a major opportunity to Indian textile industry and creates a barrier for foreign players to compete with Indian companies in cost advantage. India is more cost competitive vis-à-vis countries like Brazil, China and South Korea in manufacture of textiles Cost advantage arises mainly from the large pool of low cost but skilled manpower available in India In case of textured yarn and fabric, India is less competitive, which is a result of the higher tax burden (excise duty) on manmade textiles in the country India’s position is strong vis-à-vis other countries in most raw materials Largest producer of jute Second largest producer of silk Third largest producer of cotton, accounting for nearly 16% of global production Third largest producer of cellulosic fiber/yarn Fifth largest producer of synthetic fibers/yarn Eleventh largest producer of wool Cotton - Predominant fabric used in the industry With 4.13 million metric tons of production, country accounts for almost 16% of global production of cotton India also leads the world in cultivated area under cotton (roughly 8.82 million hectares in 2004-05) Jute - Occupies an important place in the Indian economy Has a strong contribution to direct employment as well livelihood in the tertiary sector and allied activities India leads globally in jute with its annual production of 7.5 million bales in 2004-05
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TEXTILE INDUSTRY Silk - Highly remunerative cash crop, with minimum investment and sustained attractive returns India accounts for 18% of world raw silk production (15.74 thousand tones production in 2003-04) India has the unique distinction of being endowed with all 4 varieties of silk Mulberry, Eri, Tasar, Muga Wool - With its annual production of 50.7 thousand tons of raw wool fiber, India accounts of roughly 2% of global production
3. Economies of Scale:
The textile industry across the value chain is largely decentralized
Units mostly independent and small scale in nature, rather than composite units undertaking all activities together
Large scope for entry of organised integrated textile manufacturers
4. Customer switching cost: As earlier mentioned that the existing players are operating in this industry for a long period and also have established long term relationship with their customers. Over a period of time these companies have customised their products as per the needs of the customers therefore customers also prefer to still to the existing suppliers rather than moving to others as there is a high switching cost involved here and if the customers switch to new suppliers than again he need to train the suppliers as per their requirements
5. Government Regulations: Historically the textile industry in India has been reserved for the small scale sector, which has been exempted from taxes, thus discouraging investments in increasing scale The government, through its various Budget announcements has sought to rationalize taxes Budget 2002-03: Textiles brought under the ambit of Cenvat (credit for duties paid
on inputs or capital goods) and introduced on all yarns Budget 2003-04: Cenvat extended across the entire textile chain to include fabrics,
made-ups and apparel; excise duty exemptions on many sectors and processes, specially SSI removed; excise duty rates reduced
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TEXTILE INDUSTRY Budget 2004-05: Cenvat made optional - every manufacturer allowed to choose
between a complete exemption from payment of excise duty or adopt the Cenvat route; excise duties lowered to 4% on cotton textiles and 8% on non cotton textiles (except man made fibers, polyester filament yarn, nylon filament yarn) for those claiming Cenvat credit Always government regulations aimed at improving competitiveness of industry to face a post quota regime Several government initiatives targeted to attract investments: Technology up gradation fund scheme: Scheme launched in 1999 to provide firms access low interest loans for technology up gradation and setting up new units with state-of-art technology Scheme has disbursed INR 91.61 bn till 31st December 2005 Policy related to foreign investment: Up to 100% foreign direct investment allowed in textile and apparel manufacturing industry, with approval of the Foreign Investment Promotion Board (FIPB)
USD 1.02 bn of FDI in the sector approved between 1991 and 2004
Companies free to set up fully-owned sourcing (liaison) offices, as well as marketing operations
Upgrading Infrastructure: “Scheme for Integrated Textile Parks” (SITP), based on public-private partnership model to build world class infrastructure facilities Product specific “Cluster Approach” targeting development of 100 additional clusters in textiles
Technology Mission on Cotton (TMC), focusing on cotton R&D, dissemination of technology to farmers, improvement of market infrastructure and modernization of ginning and pressing sector.
II. THE EXTENT OF RIVALRY AMONG ESTABLISHED FIRMS 1. Industry competitive structure:
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TEXTILE INDUSTRY Since this industry is highly fragmented there is always high probability during the boom phase that many new players could enter this industry which would lead to a price war and ultimately end up with the bankruptcy of some players or consolidation of industry. So, this is a treat to the existing players. But also the existing players work a lot on cost efficiencies therefore the treat of new entrant is negated by the cost efficiencies of existing players
2. Industry Demand: In the current scenario textile exports have declined drastically and even in domestic demand there is a little slowdown. Due to which textile companies are working on reducing cost by ways of reducing the work force, decrease in operation cost etc. Also this will evoke more rivalry among the existing players as they all will like to maintain their market share in spite of the slump in industry
3. Exit Barrier: This is not just a labour intensive industry but even the cost involved in plant setup is very high along with that with the invent of many new technologies many companies have adapted to modern techniques to remain competitive in industry as well as to produce better products for their customers in lesser time and with lesser cost. Therefore because of high involvement and emotional attachment with the business as it has been a traditional business for generations for many companies they still prefer to stick and continue with the business. But in the current scenario many textile mills have closed down because of deep cut in demand and high operational cost due to severe global crisis.
III. THE BARGAINING POWER OF BUYERS
Indian textile companies are facing a tough competition from Chinese, Brazilian and South Korean companies as they are able to produce at a lower cost compared to Indian companies This industry is fragmented and there are large number of players in the industry, therefore buyer get the option of choosing from many suppliers Indian textile industry is no more just a mass producer of textile rather it has moved into niece segment and has developed capability to produce finest quality of fabric which provides them distinctive competencies against other countries as well as small players who could cater to mass consumers only.
Therefore overall buying power of buyer will defer from company to company. Companies like Arvind mill, Raymond, aditya birla group have achieved certain degree of distinctive competencies therefore with them buying power of buyer is negated to large extent against their competencies. But many small companies who are mass producer of textile face a strong buying power of buyer.
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TEXTILE INDUSTRY
IV. THE BARGAINING POWER OF SUPPLIER Here again bargaining power of supplier dictated by the segment that they are targeting to, for a niece players and companies who have achieved operational excellence can dictate terms to buyers but for small players who just produce for mass consumption do not have much say in the business deal and the prices are mostly dictated by the buyer.
V. THE THREAT OF SUBSTITUTE PRODUCT Textile itself is a very broader term and is a solution to a very basic need of any human being therefore there is as such no substitute to this but within the textile industry there are many substitutes to different category of textiles. In India there are various types of textile produced from cotton, silk, synthetic etc. There is always a risk of substitution of one type with the other type also there is constant research carried out to develop new types of textiles but combining different textiles in different proportion. But in broader perspective there is no substitute to textile.
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TEXTILE INDUSTRY
SEGMENT ANALYSIS India’s textile industry comprises mostly small-scale, non-integrated spinning, weaving, finishing, and apparel-making enterprises. The figure below depicts the overall value chain and the number and type of units within the industry. Textile Sector – High Level Value Chain
Spinning mills With an installed capacity of 40 million spindles, India accounts for about 22 per cent of the world’s spindle capacity. In 2005, India’s spinning sector consisted of about 1,161 small-scale independent firms and 1,566 larger scale independent units. Independent spinning mills account for about 75 per cent of capacity and 92 per cent of production.
Knit/Weaving/Knitting Units
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TEXTILE INDUSTRY India’s weaving and knitting sector is highly fragmented, small-scale, and labour-intensive. The woven fabric production industry can be divided into three sectors: powerloom, handloom and mill sector. In 2005 it consisted of about 3.9 million handlooms, 1.8 million power looms, and 0.1 million looms in the organised sector. The decentralised power loom sector accounts for 95 per cent of the total cloth production. The knitted fabric forms 18 per cent of the total fabric production.
Processing Units The processing industry is largely decentralised and marked by hand processing units and independent processing units. Composite mill sectors are very few falling into the organized category. Overall, about 2,300 processors are operating in India, including about 2,100 independent units and 200 units that are integrated with spinning, weaving or knitting units.
Garment Manufacturing Units Small-scale fabricators dominate garment manufacturing. Most garment manufacturing units fare reasonably well on the technology count. The bulk of apparel is produced by about 77,000 smallscale units classified as domestic manufacturers, manufacturer exporters, and fabricators (subcontractors). The fragmented structure of the industry provides the advantage of a large pool of skilled workers in different areas of textile manufacturing, and also gives scope for entry of organized integrated textile manufacturers. Small scale units in different sectors can also be leveraged as a supply base for sourcing materials at low cost. Apart from these advantages, the industry has also been experiencing consistent growth across different sectors, making it one of the key potential sectors in India.
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SWOT ANALYSIS OF TEXTILE INDUSTRY
STRENGTHS Removal of quota restrictions to give a major boost to the exports.
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TEXTILE INDUSTRY India is one of the largest exporters of Yarn in international market and contributes around
25% share of the global trade in Cotton Yarn. Low per capita consumption of textiles in India as the world consumption is 6.8, India only consume 2.8 of it. That’s why there is large scope of manufacturing and exports. Availability of the cheap labour in India would help the development of the textiles at the lower cost. Cost competition is not much in India as majority of Indian population is not dependent on the big brands like Armani, United Colours of Beneton etc, so India itself does not hold much competition with these brands. The large cotton production in India would lead to the development of the textile mills in the better way, as India does not have to import the raw material from outside. There are well established production bases for made ups export as well as for domestic purpose.
WEAKNESS The most serious problem of the industry is the lack of adequateprocessing facilities; there is over-dependence on hand processors and traditional items. The Indian textile industry is fragmented. Most of the SMEs are tiny and cottage type units without sufficient capital back-up. The government policies in India for the textile industries are traditional as they are not upgraded like the up gradation of the policies for the IT industries. The quality of wider-width fabrics for meeting the export demand is lacking in many respects, which is acting as a disadvantage to the growth of the industry. The technology used in the most of the textile mills is old enough that they can’t be modified, but there have to be new machineries imported to give the edge in technological advancements in this sector.
OPPORTUNITIES As per available information, the market for processed cotton fabric will increase in the European and other markets and, therefore, the powerloom industry may benefit and expand substantially. Further the growth in the export segment will be mainly from cotton made-ups and garments along with processed fabrics. Grey fabric export is continuing to grow and will show increasing trends. Value added products will have greater demand and, therefore, processing will play an important role. India with traditional designs and craftsmanship can command a greater market share for niche products in made-ups and garments. Indian companies need to focus on the product development and this could easily be possible as there is the greater scope in the Indian Market. As the new generation is keen towards the western culture the training for specially textiles could be provided to them and they could be encouraged to develop the efficient sector of India.
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TEXTILE INDUSTRY Increased use of computer aided designing to develop the designing capabilities of the textile. Using new technologies and softwares ease the use of virtual design on the computer and then choosing from various alternatives.
THREATS Increased competition in the domestic market yield to the development of the more SMEs which invest more to survive in the market. The working area of most of the industries in the textile industries is not hygienic enough to give the workers more comfortable area to work in. so this condition has to be improved. Need to revamp consumer consciousness Chinese goods are cheap as well as the machinery provided by them is also cheap. So the threat for the export and designing is the Chinese Aggression over the International market. Continuously quality improvement is needed to make sure that people would rely on Indian goods not on the foreign goods. Traditional items like terry towels are manufactured in EOUs all over the country with superior quality. This has been eroding the traditional markets for powerloom and handloom products forcing them to go for product diversification.
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