Arvind mill case analysis

1.

Case highlights:
First slide should list highlights of the case as given by Prof.

Highlights of the Case:

1. Arvind followed Industry Organisation model for strategy instead of Resource
based model.
2. Set-up large scale production facilities in a highly fragmented industry where size
does not matter.
3. Lack of external environment analysis in a volatile industry structure.
4. Total business model based on historical achievements
5. Overly leveraged
Please add more as you guys feel.
2.

Industry analysis
Tushar mentioned as below:

Increasing no of players increases bargaining power of the

suppliers.
In my view, increasing number of suppliers will increase competition and reduce
bargaining power of suppliers.
Group members comment please.

3.

My comments in red
SWOT analysis
Strengths:

One of the largest manufacturers of Denim in India and the

world.

Strong portfolio of domestic and international brands.

Economies of scale through complete integration.
Arvinds run Indias largest value-chain(Retail) MEGAMART
with over 200 stores.
Latest manufacturing tools in production of denim and
clothing.
Over 26000 employee from the work force for Aravind mills
CSR activities like- Education ( Sharda Trust), upgrading
slums etc enhance its brand value.
Operational efficiency and fast and latest machines.
Skilled and comparatively cheap labour.(This is an
opportunity for Indian companies and not only for Arvind)
Redefining product portfolio by increasing the no of brands
to 120.
Access to export market.( This is again an opportunity for
all companies and not only for Arvind)
Learning process from previous bad experience. Forward contracts for
naphtha and cotton.( this is a strategy which is a strength and not
an opportunity, so I moved from Opportunity to Strength)
Restructuring plan approved and leverage ratio has improved.
Going up the Value Chain developing styles/making garments for global players.
Redefining core competency large scale economies to Product Innovation. Differentiating itself
as a maker of value-added denim trade.
Going for Wet Leases instead of setting new capacity will provide flexibility.

Weakness:
Global penetration is limited compared to other few
brand. ( better to be specific in relation to which brands)
Presence of Indian and other international brands offers
more offering to customers therefore high brand switching. (This
is not weakness of Arvind but an Industry characteristic.)
Lack of fresh idea. ( as per case study, Arvind has already
started working in innovation/ developing designs for
international market).
Presence in big cities only.

Not doing enough to build their brand equity. (Arvind has

been carrying on basis brand strength, so its not a weakness)
Business concentration leading to increased risk (pls
explain)
Wrong assumption and forecasts. (Lack of external
environment scanning)
High capital investment in setting-up new plants.
Inability to retain skilled professional.
High Break Even Point/ Margin of Safety is zero. No scope for any error.
Complacency of management due to earlier success.

Opportunities :
Continuous Growth in the garment industry.
Global expansion and reach of brands to increase
sales. (This is not an opportunity but strategy to revive company)
Changing retail scenario. Rapid growth in target groups as
well as higher incomes.
Rapid growth in age group 15 to 44 years.
Skilled & Cheap labor available
Product diversification. ( this is not an opportunity but a
strength and already mentioned under strengths)
Threats:
Highly fragmented & volatile industry. Size does not allow to dominate.
Market is highly competitive and dynamic.Increasing competition from

Indian as well as international brands.

low market share due to competition. ( difficult to prove by
numbers, so not required)
Cheaper imports from other countries and pirated productsChina, Thailand , Bangladesh etc.
Excise duty ( is it mentioned any where in case study).
Decline in exports ( it is not a threat but weakness)

Rise in raw material price.

Complacency of management due to earlier success. (it is a
weakness, so I moved to Weakness section)
High employee iteration especially senior skilled
managers. (already mentioned in weakness)
Regional trade Agreements such as NAFTA

Opportunities

Threats

Denim prices are rising

Highly fragmented & volatile industry. Size

does not allow to dominate.

Skilled manpower is available

Market is highly competitive and dynamic.
RTA such as NAFTA

Strengths

Weakness

Large capacity to meet demand and compete

on price.

High Break Even Point/ Margin of Safety

is zero. No scope for any error.

Restructuring plan approved and leverage

ratio has improved.
Learning process from bad experience
Going up the Value Chain developing
styles/making garments for global players.