Case analysis of Case analysis of ‘Arvind Mills’ ‘Arvind Mills’

Case analysis of Case analysis of ‘Arvind Mills’ ‘Arvind Mills’

Presented by:-

MD.Nazrul Islam

Introduction• Arvind Mills was incorporated on 12th December June

1931, by Sanjay Lalbhai's grandfather, Kasturbhai Lalbhai, and his two brothers, Narottam and Chimanbhai, in Ahmadabad. When Sanjay Lalbhai took over the reins in 1975, Arvind Mills was at the crossroads.

• By the late 1990s, Arvind Mills was the third largest manufacturer of denim in the world, with a capacity of 120 million meters. Therefore, in the early 1990s, Arvind Mills initiated massive expansion of its denim capacity. With the best of technology and business acumen, Arvind has become a true Indian multinational, having chosen to invest strategically, where demand has been high and quality required has been superlative.

• The case provides an overview of the Arvind Mills' expansion strategy, which resulted in the company's poor financial health. It also discusses the company’s political/legal, technological, future plans, especially international marketing strategies adopted by Arvind Mills

SWOT AnalysisSWOT Analysis

high production capabilities.

Presence across the textile value chain.

Established domestic brands and licensed international brands.

Inefficient production process.

Financial weakness.

Demand in domestic market

Value in industrial wear segment

Value in domestic garment retail market.

Competition fro countries like china.

Decline in Indian textile export.

Increasing raw material price.

Arvind Mills Strategies to convert threats to opportunities.

1. Competition from global players

It is largely believed that china will be the largest beneficiary of No Quota regime. China will garner maximum exports, which is a threat to Indian textile industry and arvind mills. To overcome this threat arvind mills has plans to export for industrial wear segment. This segment has a constant requirement.

2. Decline in exports There has been a decline in the exports to US and Europe

due to recession. This has an impact on the business of arvind mills. To overcome this threat arvind mills has started its retail chains in the domestic market (Mega mart) to capitalize the domestic market which has seen a better growth rate.

3. Increasing raw material prices To over come the increasing raw material prices

arvind mills has its presence across the textile value chain.

Arvind Mills Strategies to convert weakness to

strengths.

1. Inefficient production process.

The inefficient production process of arvind mills has put arvind mills in financial crises in the past hence the company has started working on stream lining the production process

2. Financial Weakness

Due to wrong strategic decisions the Arvind mills has suffered financial crises in the late 1990s.The liquidity ratio of the firm was high compared to industry standard ratio. Arvind mill promoters are increasing their investment, which make the firm financially stable

Strategies of Arvind Mills to become Market leader 

• The Arvind Mills franchise had formulated an aggressive strategy to streamline its current operations by setting up top scale garmenting facilities and providing services through a one-stop shop by offering garment packages to all its international and domestic customers. The textile business is likely to become one of the largest apparel brand in India, with its international licenses for Wrangler,¨ Lee, Tommy Hilfiger and Arrow along with its domestic brands. The domestic brands of the apparel franchise include Newport, Flying Machine, Excalibur and Ruf&Tuf. The Arvind Mills franchise has been a pioneer in changing customer demands for textiles across the globe and it has focused on selecting core products. This focus has enabled the textile business to play a dominant role in the world textile arena. With the presence of the Arvind Mills franchise across the textile value chain, it endeavors to be a one-stop shop for all the leading garment brands.

• Arvind mills have plans of catering to the industrial wear segment. The industrial wear segment is a US$ 3 billion dollars market globally. This diversification is beneficial as the demand for this segment is necessity and hence is not volatile like the retail market.

Our recommendation for arvind mills

• Based on the above discussion on the future strategy, we suggest arvind mills to follow defend, deepen and develop strategies. Arvind mills derive its competitive advantage by being an integrated manufacturer, so we recommend that it should leverage its competitive advantage by following a cost leadership strategy in fabric segment and differentiator strategy in garment segment.

• By following the discover strategy the investments in supply chain and retail network developments will be high whereas the rural offerings and products have low margins. But in case if other players move into the development of rural market we suggest that arvind mills should follow them. As this market does not provide significant first mover advantage, it’s better to follow wait and watch approach.

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• We also suggest arvind mills to go for product brand strategy instead of going for store brand in the domestic market. Due to new entrants in garment manufacturing, the price margins would be reduced for the store brands. In case of the Product brand, a single hit product will give them a significant advantage in the market. While we agree that a store brand will give a consistent source of revenue and ensure less risk, but the brand owners will capture the value. Arvind mills already have licensed brands from the global players, so it can leverage the existing retail and supply chain networks. It should launch its own brand in categories where there are no players, avoiding direct competition with the licensed brands.

• Arvind mills should continue to focus on product and process innovation. A fixed portion of the sales should be set-aside for R&D. it should develop design capabilities by tapping the talent pool from reputed institutes. It should also tie-up with fashion houses to keep pace with the fashion trends and developing its in- house design capabilities.

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