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Marketing Strategy - Case Study on Indian Garments Industry

Analysis of a classic case on the Indian Garments Industry and its export scenario using marketing frameworks and data. The case is taken from Prof. R. Srinivasan's popular book, "Case Studies in Marketing-Indian Context": http://tinyurl.com/pjfmjau
by

Gaurav Khanna

on 13 October 2014

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Transcript of Marketing Strategy - Case Study on Indian Garments Industry

GATT ACCORD & THE MFA
HOLISTIC MARKETING
INTERNAL MARKETING
INTEGRATED MARKETING
RELATIONSHIP MARKETING
SOCIALLY RESPONSIBLE MARKETING
MARKETING DEPARTMENT
SENIOR MANAGEMENT
OTHER DEPARTMENT
COMMUNICATION
PRODUCTS & SERVICES
CHANNELS
CUSTOMERS
CHANNELS
PARTNERS
ETHICS
ENVIORNMENT
LEGAL
COMMUNICATION
Holistic Market Dimension
INDIA
IMPORTERS
Garments
Money (Sales)
Industrial Sector
COMMUNICATION
INFORMATION
Textile Industry
Indian Textile Industry - Transition
Hand Spinning
Hand Weaving
Mechanized Mill
Determinants of Customer Delivered Value
CUSTOMER DELIVERED VALUE
IMAGE VALUE
TOTAL CUSTOMER
COST
MONETARY COST
TIME COST
PERSONNEL VALUE
ENERGY COST
PRODUCT VALUE
Silk
SERVICES VALUE
TOTAL CUSTOMER VALUE
Cotton
Wool
Man-made Fibers
PSYCHIC COST
Indian Textile Industry - so far
Hand Spinning
Hand Weaving
Mechanized Mill
INCREASED COMPETITION FROM SOUTH ASIAN COUNTRIES
COST OF PRODUCTION
SUPPLIERS
INDIA
MARKETING MIDDLEMEN
CUSTOMER
USA
E.U.
NORWAY
CANADA
CUSTOMER
COMPETITORS
PUBLIC
ECONOMICS
DEMOGRAPHICS
CHINA
PHYSICAL
TECHNOLOGY
POLITICAL/ LEGAL
KOREA
SOCIAL/CULTURE
PHILIPPINES
THAILAND
INDONESIA
HONG KONG
BANGLADESH
In 1997, export to U.S. was $400 m
India
Whereas, India just exported goods worth $300 m
Reasons:
Cheap Labor
Non-enforcement of stringent Environmental laws.
BRAZIL
ITALY
$1.26/kg
$1.5/kg
THAILAND
$1.31/kg
$0.91/kg
Reasons:
Lack of Modernization
Predominant unorganized sector's presence; hence, no economies of scale to reduce cost
MARKETPLACE ISN'T WHAT IT USED TO BE
PRIVATISATION
CONVERGENCE
COMPETITION
GLOBALISATION
RETAIL TRANSFORMATION
INFORMATION
TECHNOLOGY
DEREGULATION
CONSUMER RESISTANCE
Positive
Negative
External Factors
Internal Factors
S
T
O
W
Cheap and abundant labour 
Handcrafting skills
Domestic market potential
Large cotton base 
Competition from China, Indonesia, Thailand
Rising cost of inputs 
Raw material exports instead of value-added products
Product and market diversification
Labeling and product upgradation
Strategic alliance with
South Asian countries
Low productivity, lack of technical manpower
Poor quality of fabric dyeing
Poor delivery systems
Uncompetitive man-made fibers
Strenghts
Weaknesses
Threats
Opportunities
Duty drawback rates for cotton garments.
Increase in number of days of preshipment credit.
Reduction in interest rates, to help textile exporters.
Aimed at improving quality, to compete internationally.
Permitted to use of foreign brand names in ready-made garments, if indigenous fabrics be used.
At least 75% of the production is to be exported; no royalties allowed on domestic sales.
Import of sophisticated garment manufacturing machines under the Open General License (OGL).
Assistance for sponsoring and funding promotional activities, such as market studies, buyer-seller meets, and participation in fairs and exhibitions
GOVERNMENT POLICIES TO INCREASE EXPORTS
Short-term measures
Preference should be given to value added exports.
Adequate raw materials should be supplied to manufacturers at reasonable prices
Deemed export treatment to be given for supply of fabrics to the garment industry
Low rate on interest to be levied for the imports of capital goods by Export-Oriented Units
Long-term measures
Response to policy issues
from export houses in Bangalore

Implement quality systems in the industry
No differentiation to be shown between unorganized sectors.
Encourage the unorganized sector the organized
Worldwide shift from cotton to man-made fabrics
India:
Cotton preferred because of moisture absorption industry - tropical
Nearly 90% of India's textile exports included cotton based.
Tilt towards cotton is because of unfavorable fiscal policies for man-made fibres.
Regards cotton as a common man's fabric; synthetic fabric as a luxury good; where as the
World
considers cotton as a premium fabric.
Cotton yield 272 kg compared to 600 kg average worldwide.
Reasons for shift:
Properties imparted in man-made fibres, e.g. easy care, durability etc.
Low cost of production due to low cost of input
Changing trends of consumer tastes
Government regulations - favoring unorganized sector
Unorganized sector viewed as potential employment generation sector.
Textile policy till 1985 has given much weightage to workers' interest in this sector
It gets tax benefits, encouraging powerlooms over large mills .
Insistence by European community for ISO 9000 poses challenge to it.
German Ban on textiles
Germany
Textile dyed with Azo dyes, Benzidine and other similar amines considered carcinogenic, hence banned importing from India (1994)
On June 23, 1997 use of azo dyes was banned under clause (d), sub-section (2) of section six of the Environment (Protection) Act, 1986
Non environment-friendly garments
EXPORTER
IMPORTER
Environmental waste
Health of workers who produce textiles for export
Environment while dumping
Health of users of the textiles coming from export
Ready-made Garments
Source: GATT SECRETARIAT at Uruguay Round
The Multi Fibre Arrangement (MFA) governed the world trade in textiles and garments from 1974 through 2004, imposing quotas on the amount developing countries could export to developed countries. It expired on 1 January 2005.

The MFA was introduced in 1974 as a short-term measure intended to allow developed countries to adjust to imports from the developing world. Developing countries have an absolute advantage in textile production because it is labor-intensive and they have low labor costs. According to a World Bank/International Monetary Fund (IMF) study, the system has cost the developing world 27 million jobs and $40 billion a year in lost exports
Handicrafts & hand-embroidery
Zardosi
Ari Art
Kashida
Chikan
Kasuti
Phulkari
Bandhani
Kanjiwaram
Cultural Heritage
The General Agreement on Tariffs and Trade (GATT) was a multilateral agreement regulating international trade. According to its preamble, its purpose was the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis." It was negotiated during the United Nations Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). GATT was signed in 1947 and lasted until 1994, when it was replaced by the World Trade Organization in 1995.

The original GATT text (GATT 1947) is still in effect under the WTO framework, subject to the modifications of GATT 1994
Cotton Fabric
"In India cotton is being considered as common man's cloth
BUT
in abroad it is valued as a premier fabric"
Product Concept
Consumers will respond favorably to good products
Reasonably price
Little marketing effort is required to achieve satisfactory sales and profits
Marketing Concept
Selling Concept
Oldest and most widely used organic fabric.
Cotton cultivation in India dates back to 5000 B.C.
Best for tropical weather as it absorbs body moisture.
Soft, versatile, strong and easy to care.
Product
Selling & Promotion
Sales Volumes
Customer need
Integrated Maketing
Customer satisfaction
Major actors & forces in Marketing Environment
Marketing System
Financial
Media
Government
Citizen-action
Local
General
Internal
Short-term measures
Long-term measures
Positioning should be done to target "cotton products" as premium fabric.
Targeting tropical countries for cotton garment trading.
Establish industrial cooperation with global firms that manufacture garments in India.
Modernization in infrastructure.
Government policies designed to be more exporter-friendly.
Implement quality systems in the industry.
R&D in high quality man-made fabrics.
Growth in the Indian Garment Industry by fully exploiting the situation
Incremental Export Incentivisation Scheme was announced on 26.12.12 for the
exports made during January 2013 to March 2013. This scheme is available for exports made
to USA, EU and Asia. This scheme has now been extended for the year 2013-14. Fifty three
countries of Latin America and Africa have been added with the objective to increase India’s
share in these markets.
Surplus value the foreign market will enjoy on the sale of "premier cotton garments" and ethnic embroidery.
Low cost, yet high quality ready-made garments because of cheap labor will pull the western market in favor of Indian goods.
E-commercialization will provide easy access between local indian suppliers and foreign markets with decreased transaction cost.
The literature suggests, countries need to
change their portfolio of exports as they move up the income ladder and only by such changes
fast moving low-income countries are increasing their share in global trade.
Government initiated financial assistance in putting up Effluent Treatment Plants in the existing Textiles Clusters.
Allocation for a ‘one time’ grant of Rs. 200 crore to 20 Common Effluent Treatment Plants (CETPs) installed by Dyeing Units in Tirupur in Tamil Nadu has been, for the first time, made to ensure zero liquid discharge.
Setting up similar CETPs in all the Integrated Textile Parks and Mega Clusters.
Carcinogenic formaldehyde is used in apparel for stiffening and permanent pressing of fabrics, which is yet to be restricted in India.
Initiatives to Boost Exports
● Jaipur, Srinagar and Anantnag have been
designated as Towns of Export Excellence.
● For the first time, a cluster level Reverse Buyer-
Seller Meet was organised at Jodhpur for woodware
in March 2010. Over 450 buyers visited and business
enquiries of Rs.120 crore were generated.
● Export Promotion Capital Goods at zero
percentage custom duty for technological
upgradation. 5% duty credit scrip extended to all
handicraft products and handmade carpets under
the Focus Product Scheme, including new and
innovative items under the “residual” category.
● Facilitated participation by craftpersons and
entrepreneurs in 65 international events, including
participation in the Shanghai World Expo.
E-Marketing platform has been developed and launched by the Central Cottage Industries Corporation of India Ltd. (CCIC) and the Handicraft and Handlooms Export Corporation of India Ltd. (HHEC).
CCIC and HHEC portals host more than 1,000 wide ranging handicraft and handloom products with specifications, including origin and place of production.
High quality graphical display
A single window gateway for procurement
Fast and easy navigation in a customized interface.
1,500 contemporary designs, freely downloadable.
Technical details and regional language interface have been hosted on the websites
Office of Development Commissioner (Handlooms) & National Institute of Fashion Technology (NIFT) are following trend.
COMPETITION IN MARKET
India operates in the low value segment in most cotton
apparels in the US and lies in high value segment in woven clothing.
India should not only upgrade its values, but also begin to find ways of competing increasingly on non-price
factors.
Labour standards, environmental friendliness, product safety standards must be implemented to ensure quality production.
The Indian textile and clothing industries have one of the longest and most complex supply chains in the world, with as many as 15 intermediaries between the farmer and the final consumer. Each contributes not only to lengthening of lead times, but also adding to
costs.The industries would need to develop this SCM perspective and rationalise costs at every stage in the entire supply chain, and not
only within their firms, or between themselves and their vendors and suppliers.
Management Practices and Organisational Skills Manufacturing management is a key link between technology adoption and competitiveness of firms

Productivity in Indian apparel sector is much lower than other countries.
Unsuccessful in technological up gradation of the garment manufacturing units.
TARGET COMPANIES
The report of the Working Group constituted by the Planning Commission on boosting India’s manufacturing exports during 12th Five Year Plan (2012-17), envisages India’s exports of Textiles and Clothing at USD 64.41 billion by the end of March, 2017.
Organic cotton and other natural fiber garments exported is a part of the growing design philosophy and trend of sustainability.
"Made in India" label will promote Indian garments with a distinct identity in international market
Accounts for 14% of industrial production 4% of GDP
Employs 45 million people
Accounts for nearly 11% share total exports basket.
Integrated Marketing : e-Marketing
US$ Billion
Making environment-friendly garments
MG : 241 MARKETING MANAGEMENT
Case Study Presentation
Submitted to:
Prof. R. Srinivasan
Presented by:
Abhinav Singh
Bandani Verma
Gaurav Khanna
Sowmiyan Mori
Indian Garments
Date:
24th February, 2014

Agenda
Case Study
Analysis
Issue highlights
Current Scenario
Recommendations through frameworks
MG : 241 MARKETING MANAGEMENT
Case Study Presentation
Submitted to:
Prof. R. Srinivasan
Presented by:
Abhinav Singh
Bandani Verma
Gaurav Khanna
Sowmiyan Mori
Indian Garments
Date:
24th February, 2014

Thank You
International Product Life Cycle
Indian garment industry
Importers of Indian Garments
Low developing countries
2014
Marketing Strategy
Trade:
Target Markets:
Competitors:
Production Cost locally:
Increasing Exports
Late developing & developed countries
Developing countries
Declining trend, due to economies of scale
Questions
Answers
Even though production is increasing, it is not up to the mark to compete globally.

Steps to be taken to mitigate this
1. No differentiation between organized and unorganized sectors should be practiced.
2. More encouragement should be provided to organized sector as well.
Drawbacks
Full transcript