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By Group 2
Sangam (India) Limited
(SIL) Born of humble beginnings in the year 1984, Sangam (India)
Limited (SIL) today is a business giant with over 10,000employees.
The Group has more than 200,000 spindles and 3000 rotorsfor producing PV dyed yarn, cotton and OE yarn with anenviable reputation for quality, which is underlined by its ISO9001:2008 certification.
Sangam (India) Limited (SIL) is the largest producer of PVdyed yarn in Asia at single location.
The Group is a forerunner in manufacturing ready to stitchfabric with the annual capacity to produce 30 million metersof fabric and 40 million meters of denim.
Established all its spinning and weaving
facilities in Bhilwara.
Procured raw materials polyster
and viscose staple fiber from
Reliance Industries Limited
and Grasim Industries
respectively.
Cheap cost of labor in Bhilwara
town.
The Group's Spinning division is ranked amongst world's largest PV
Dyed yarn industry.
In 1995, the company undertook capacity
expansion increments.
First spinning mill with 17,280
spindles was established in
1995.
Added another 10,368 spindles to its capacity in 1998 followed
by 8,640 spindles in
2000.
In 2002 the total capacity of the spindles was increased to
36,288, in 2003 to 48,384 and in 2004 to 64,032.
50% of SIL’s produce was consumed by the many small and medium textile mills in
Bhilwara town.
Another 25 percent was sold to corporate clients like Grasim, Siyaram’s, Raymonds,
S.Kumar’s, BSL, Donear etc.
Around 13% of the produce was exported to countries like Egypt, South Africa,
Turkey, and the Gulf.
SIL used the remaining produce for captive purpose, i.e., it used this part of the
produce to manufacture fabrics under its own brand name.
SIL procured state-of-the-art
machinery to produce both yarn
and the fabric.
Since 1998, SIL replaced its ageing weaving machines
(nearly 60 in number) by new Sulzor machines
imported from Switzerland.
The modern machines gave SIL
the flexibility to shift from coarse count yarn to fine count yarn during production of P/V
dyed yarn.
SIL is an ISO 9002 certified company
and kept its product quality in
tune with the customers’
requirements.
SWOT ANALYSIS
Strengths
Domestic market
Skilled workforce
Barriers of market entry
Healthy relationships with world class suppliers
Location of industry
Latest technology
Pro-active management
Weakness
Investments in research and development
High debt burden
Opportunities
Dyed yarn market has a huge potential in textile industry
Availability of world class suppliers in vicinity
Huge scope of global expansion
Threats
Indian textile products were costlier
Increasing competition (specially from China)
Cost of raw materials was increasing
Performance of SIL
Polyester/Viscose dyed yarn was 5% of textile industry in 2005
SIL was market leader with 20% market share
Largest manufacturer of P/V dyed yarn in country
Achieved success in just 10 years
Capacity: 17280 spindles in 1995 to 64032 in 2004
Relation to BG Matrix
Future Position of SIL
Capacity expansion with investment of Rs.400 crores Decided to install 50,000 spindles more
Expansion of fabric capacity by another 100 looms
Plans to venture into production of quality cotton yarn
Hopes to achieve a turnover of over Rs.8 Billion by 2008
Expect Sales to grow at a CAGR of 37% 2005-08
Relation to BG Matrix
Relation to BG Matrix
Reasons for argument
For High Market Growth
Investment to match increased demand
For Low Market Share
Government’s Incompatible tax structure
Increasing competition from China
In 2006 China was biggest competitor
Discuss the changes in the export environment of
the Indian textile industry in general and that of
SIL in particular. What strategies can SIL adopt to
overcome the Chinese competition in the global
textile export market?
Changes in the export environment of Indian
textile Industry and initiatives by SIL
Textile industry was suffering from export restrictions or quota
by WTO
Quota regime was eliminated in January 2005 and presented
greater opportunities for textile manufacturers
SIL anticipated the change and increased production since
1990’s
SIL began targeting US and Europe and believed in
increasing volumes
SIL decided to venture into high quality cotton yarn
SIL decided to enhance capacity to meet existing and future
demands
Strategies SIL can adopt to overcome the Chinese
competition in the global textile export market
SIL spending more in infrastructure
SIL concentrating on high quality products
SIL investing in R&D to come out with value added
products
SIL initiating aggressive marketing and selling for brand
recall of its products
QUOTA ELIMINATION
Quota was a government-imposed trade restriction
Quota in all textile trading was abolished by WTO in
2005
All garments and fabrics are traded freely into
the European Union (EU)
Beneficial for fabric manufacturers because now there
are fewer restrictions
Most benefits to the SME’s of India and Pakistan
Developing a marketing strategy for a long run
competitive advantage.
Backward integration strategy to control costs and gain
economies of scale
Growth through phased capacity expansion and
introduction of higher value products
Importance of selecting a proper manufacturing
location
Systematic financing for the company's growth
The Polyester/Viscose dyed yarn market in India
The caselet focuses on the company's success story in the polyester/viscose (P/V) dyed yarn market in India.
It highlights the various growth strategies adopted by the company that led to economies of scale, increase in market share and profitability.
The caselet also focuses on the measures adopted by the company to manage the changes in the economic and legal environment and become a leader in the textile industry in India