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Indian textile industry:

Brand strategy and export


competitiveness

BY:
Dr. M. Dhanabhakyam and M. Latha

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Indian textile Industry:
Brand Strategy and export competitiveness
Dr.M. Dhanabhakyam M.Latha
Lecturer in Commerce M.Phil Scholar
Department of Commerce Department of Commerce
Bharathiar University Bharathiar University
Coimbatore – 46 Coimbatore – 46
E mail: dhana_giri@rediffmail.com E mail: latha_wellcomesu@yahoo.co.in
Ph No: 09944900349, 09345163052 Ph No: 09994500266

ABSTRACT

In today’s market economy, which is characterized by a very changeable environment and strong, intense
competition caused mainly by enlarging globalization; it is becoming more and more difficult for an enterprise
to maintain long-term success. Using techniques such as simply maintaining low costs or innovative
solutions are losing their importance. That is why the significance and meaning of brands have been
growing recently. The brand is a strategic resource of every firm. Possessing a brand, and knowing how to
keep it and manage it well, are becoming keys to reaching success in the market, a source of competitive
advantage. “The dismantling of the quota regime represents both an opportunity as well as a threat. An
opportunity because markets will no longer be restricted; a threat because markets will no longer be
guaranteed by quotas, and even the domestic market will be open to competition”. From 1st January 2005,
therefore, all textile and clothing products would be traded internationally without quota-restrictions5. And
this impending reality brings the issue of competitiveness to the fore for all firms in the textile and clothing
sectors, including those in India. It is imperative to understand the true competitiveness of Indian textile and
clothing firms in order to make an assessment of what lies ahead in 2005 and beyond. The aim of this paper
is to show that a properly used brand strategy is the enterprise’s most valuable asset and to evaluate export-
competitiveness of the Indian textile and garment exports.

INTRODUCTION

Textiles account for 14 per cent of India’s industrial production and around 27 per cent of its export earnings.
From growing its own raw material (cotton, jute, silk and wool) to providing value added products to
consumers (fabrics and garments), the textile industry covers a wide range of economic activities, including
employment generation in both organised and unorganised sectors.

• Manmade fibres account for around 40 per cent share in a cotton-dominated Indian textile industry.
India accounts for 15% of world’s total cotton crop production and records largest producer of silk.
• It is the second largest employer after the agriculture sector in both rural and urban areas. India
has a large pool of skilled low-cost textile workers, experienced in technology skills.
• Almost all sectors of the textile industry have shown significant achievement. The sector has
shown a 3.66 per cent CAGR over the last five years.
• India’s cotton textile industry has a high export potential. Cost competitiveness is driving the
penetration of Indian basic yarns and grey fabrics in international commodity markets. Small and
flexible batches of apparels can be manufactured in India and can provide a larger variety of casual
wear and leisure garments at significantly lower costs.
• Besides natural fibres such as cotton, jute and silk, synthetic raw material products such as
polyester staple fibre, polyester filament yarn, acrylic fibre and viscose fibre are produced in India.

IMPORTANCE OF BRAND

The constantly changing market poses new challenges to clothing enterprises, and the clients’ demands are
also continually rising, and so it is necessary every now and again to offer them a higher added value. This
added value is a properly planned brand strategy, the so-called branding. Firms without any distinct
features, without a clear vision or specific mission, or without permanent values, will sink in the mass of
messages hitting the market.

A brand image is defined through its selected symbolic patterns. The most important among these are the
brand’s name, logo, and composition of graphic elements and colours all associated with the company. It is
crucial for a brand built on these elements to give a clear message to the customer about the kind of

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company he is dealing with, what its product is and who the clients are. All the elements comprising a brand
image have to be closely related to the idea and goals of the company. This certainly helps its positive
identification, and as a result a strong and distinct image is created in the customers’ mind. It is important
that the customer’s mind should absorb and retain as much information about a brand as possible; some
time later this is translated into the reconcilability and prestige of a brand on the market. A brand product
offers a sense of safety, and guarantees quality and reliability. Brand values are features that appeal to the
emotional sphere of human perception

Hence a brand is the most valuable asset of a company, and customer satisfaction is the key to a long-term
success. As consumers must have a reason for selecting this given brand from among many others, each
brand should have a motto apart from its distinctive usability. It is necessary to define why it is different and
what its position is. A brand is not an advertisement, but rather a whole philosophy underlying a set of
combined actions fixed on the company’s success. It is certainly an indispensable tool allowing effective
conquest of markets, retention of the market position, and international competition

BRAND MANAGEMENT

Using a brand strategy is possible in two cases. The first is when a company or a product already exists on
the market; the second is when the company wants to enter the market and wishes to make it known to
potential clients. The actions carried out in the first case are surely much easier. If a product or a firm
already exists on the market, more or less clients have already encountered the brand and have their own
concept of it. In such a case, it is only necessary to look for solutions which would enable them to gain an
advantage over competitors by their action strategy, stressing the values expected by the targeted market
and received positively by them. Here we deal with the strategy of enhancing the existing brand. Naturally it
is necessary to analyse in detail whether or not the brand evokes any negative images, or whether or not
there have been any drastic crisis situations that would suggest rebuilding the brand under a completely new
name.
Although the strategy of enhancing an existing brand surely needs much less financial outlays, and requires
a shorter period of time than creating a new brand, it cannot be used in every case. Most of all, the company
should based its strategy on a great value added, included in the product, which leads to a high recognis-
ability of the already existing branch.
On the other hand, if we are just introducing a brand onto the market, we must propose some unique
solutions, as potential clients should be given the idea of the need which our company can fulfil, something
they need subconsciously, and which is different from everything on the market offered so far. Usually, to
build a new brand, a company is motivated by the following factors:

¾ growth of competition in the market where the company is active;


¾ the need to differ from its competitors;
¾ the entry of known, strong foreign brands on the market;
¾ unused financial resources, thanks to which a new brand can be built;
¾ lack of brands in the enterprise, allowing for a strategy of enhancement

Building a new brand is time-consuming, and needs great financial outlays, with no guarantee that the
enterprise will be successful. That is why it is important to create the action plan properly. In order to ensure
that the results meet our intentions, it is important to establish some stages which we must go through
before we are able to say that the new brand has been created. The stages are shown in Figure 1.

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Determine the needs of the customers

Determining the identity and building desirable


brand image

Testing the product

Choosing the best project

Law protection of brand

Introducing brand to the market by means of


marketing activity

Controlling introduced brand on the market

SWOT ANALYSIS IN BRAND BUILDING

Opportunities

Indian apparels accounted for a tiny fraction of less than 3 per cent of overall world export of apparel,
suggesting an opportunity for considerable growth. There is a very large domestic market for Indian apparel
manufactures. As per McKinsey study, the market size is of Rs 20,000 crore, out of which only Rs 4,000
crore is catered to by branded apparel. So there is still a Rs 16,000 crore market, which is catered by the
unorganised small size units. The developed nations, which are the destinations for Indian textile products,
use textiles in the form of apparel. Therefore, in order to improve the presence in these markets and capture
larger values of the chain the focus needs to be shifted towards the effective performance of the textile-
apparel supply chain network, rather than looking at textile industry in isolation.

Threats

Various regulatory, technological and marketing changes were expected to affect India’s textile industry over
the next few years. For a product line characterised by unpredictable demand pattern and seasonality on
one end and highly labour intensive on other, it is necessary to have flexibility to balance the labour force
employment from time to time. There are few factors such as infrastructure and government policies that
have caused wide gap in the economic development between India and other nations for textile industry in
particular, in spite of enjoying the benefits of abundant cheap labour, low manufacturing cost, available raw
materials and a large domestic market.

Strengths

The Indian textile industry is globally more competitive than other industries in the country on relative terms.
Most of the inputs required for this sector being available from domestic sources and there are very little
requirements of imports and precious foreign exchange. From middle of 1990s, manufacturing units of larger
capacity with upgraded technology, mostly in collaboration with a joint venture partner were established.
During the same period, Indian consumers could see availability of international brands in domestic market,
which were made by Indian garment manufacturers. This had raised the expectation level of discerning
consumers and apparel industry faced the challenge to improve its performance from this set of demanding
consumers. Importers of Indian apparels were generally satisfied with price and enthusiastic about the ability
to source small production quantities. With the entry of international garment companies into India, they

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bring in new designs, new craftsmanship, modern scientific management and also the marketing strategies.
These all can strengthen the competition mechanism so that the industry will gain more resources for
developing new products, new brand names, technology development and staff training in order to increase
the market competitiveness.

Weaknesses

The small manufacturing units lacked sophisticated planning and information system and failed to offer scale
economy. The present labour policy in a way discourages Indian apparel units to set up large size
manufacturing set up and achieve economies of scale. A large size unit, by Indian standard, could well be
the smallest in size in the competing countries like China, Indonesia, Thailand, Bangladesh, and Sri Lanka.
One major area of concern for the Indian apparel exporters is the declining average unit value realization,
which has dropped from $ 4.44 in 1994 to $ 3.70 in 2000. This clearly reflects the Indian exporters’ inability
to move up the value chain and the threats of being branded as supplier of low end products in the
international apparel market. This leads to the question of whether it makes sense to promote the brand
image that exists at present or improve all on the weaknesses substantially before we think of further
promotion.

Buyers were frustrated by delivery and production lead times, the absence of large capacity garment
manufacturers, and difficulties associated with freight handling. The long and uncertain lead times seem to
be the most serious problem, faced by the buyers of finished textile products and apparels. At times,
products are delayed by three months, missing a season totally. In such situation, buyers normally ask for
discounts, sharing of airfreight burden or full payment of the airfreight, and in worst case cancel the order.

TEXTILE EXPORT

The textile products continue to play an important role in the total export basket of the country. The data
about export targets for 2004-05 and the latest status of exports is given at Table 1.

Table 1
(Value: US $ in Million/Rs. In Crores)
Target % increase/ % target
2004 - April-Sep 2003 April-Sep 2004 decrease of achieved
S. Sector 05 2004 over 2003 (US$)
N US$ Rs. US$ Rs. US$ Rs. US$ US$
O
Readymade
1 6,000 11,591.5 2,491.2 12,652.4 2,779.1 9.2% 11.6% 46.3%
Garment
Cotton
2 14.6%
Textiles 4,200 6,604.7 1,419.5 7,568.9 1,662.5 17.1% 39.6%
Man-made
3 20.4%
textiles 2,200 3,745.8 805.1 4,509.0 990.4 23.0% 45.0%
Wool &
4 45.0% 48.2%
Woollen 400 725.3 155.9 1,051.5 231.0 57.7%

Silk 625 1059.6 227.7 1,269.1 278.8 19.8% 22.4% 44.6%


5
Total
13,425 23,726.9 5,099.4 27,050.9 5,941.6 14.0% 16.5% 44.3%
Handicrafts
1,400 2,245.1 482.5 1,945.5 427.3 -13.3% -11.4% 30.5%
(a+b)
a) Carpet
600 1122.7 241.3 1,237.8 271.9 10.3% 12.7% 45.3%
6
b) Other
-37.0%
Handicrafts 800 1122.4 241.2 707.6 155.4 -35.6% 19.4%

Coir 223.1 49.0 40.7% 57.6%


7 85 158.6 34.1 43.8%

Jute 568.6 124.9 50.0%


250 539.9 116.0 5.3% 7.6%
8
Total
15,160 26,670.5 5,732.0 29,788.1 6,542.8 11.7% 14.1% 43.2%

Source: Foreign Trade Statistics of India (PC&C), DGCIS, Kolkata.

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India’s textile exports is expected to grow from the current levels to US$ 50 bn by 2010, consequent to the
quota removal. Apparel is expected to be the key export driver, and is expected to reach US$ 25 bn by 2010

(Source: New Textile Policy,, 2000, Government of India).

COMPETITIVENESS

Competitiveness is about productivity, which in turn is a function of factors related to cost of products, as
well as those related to non-price factors such as delivery schedules, reliability of producers, and such
intangible factors like image of the country/company and brand equity. Together, they define the competitive
sinews of a product to compete under conditions of free market.

COMPETITIVENESS OF INDIAN TEXTILE INDUSTRY

India is one of the few countries that own the complete supply chain in close proximity from diverse fibres to
a large market. It is capable of delivering packaged products to customers comprising a variety of fibres,
diverse count sizes, cloths of different weight and weave, and panoply of finishes. This permits the supply
chain to mix and match variety in different segments to deliver new products and applications. This
advantage is further accentuated by cost based advantages and diverse traditions in textiles.

Indian strength in spinning is now well established – on unit costs on ring yarn, open-ended (OE) yarn as
well as textured yarn, Indian firms are ahead of their global competitors including China. Same is true on
some woven OE yarn fabric categories (especially grey fabrics) but is not true for other woven segments.
India contributes about 23 per cent of world spindles and 6 per cent of world rotors (second highest in the
world after China). Fifty five per cent of total investment in technology in the last decade has been made in
the spinning sector. Its share in global shuttleless loom, however, is only about 2.8 per cent of world looms
th
(and is ranked 9 in the world). The competitiveness in the weaving sector is adversely affected by low
penetration of shuttleless looms (i.e., 1.69 % of Indian looms), the unorganized nature of the sector (i.e.,
fragmented, small and, often, un-registered units, low investment in technology & practices especially in the
powerloom, processing, handloom and knits) and higher power tariffs. There is, however, a recent trend of
investment in setting up hi-tech, stand-alone mid-size weaving companies focusing on export markets. India
also has the highest deployment of handlooms in the world (handlooms are low on productivity but produce
specialized fabric). While production and export of man-made fibre (and filament yarn) has increased over
the years, Indian industry still lags significantly behind US, China, Europe, Taiwan etc. (Texmin, 2005.)

Indian textile industry has suffered in the past from low productivity at both ends of the supply chain – low
farm yields affecting cotton production and inefficiency in garment sector due to restriction of size and
reservation. Add to this, contamination of cotton with consequent increase in cost (as it affects quality and
requires installation of additional process to clean and open cotton fibres before carding operations), poor
ginning (most equipment dates back to 1940s), high average defect rates in production process (which also
leads to increase in effective labour and power costs), hank yarn requirement, etc. and its competitiveness
gets compromised severely. Similarly, processing technology is primarily manual and small batch oriented
with visual colour matching and sun drying. This leads to inconsistency in conformance quality. Lead times
across the sector continue to be affected by variability in the supply chain – defect rates average over 5%,
average % of orders on time is about 80%, variance in order size across firms is high (e.g., the coefficient of
variability of average order size for spinning firms is about 2.6), and on an average, 16 days of sales as
work-in-process inventory (the highest for garment firms) and an average of 30 days of sales in raw material
inventory (the highest for spinning firms) (Chandra 2004). Some of the hurdles (eg., reservation in the
garment sectors) including tariff distortions between the organized and unorganized sectors have now been
systematically removed by policy initiatives of Government of India and have opened avenues for firms to
compete on the basis of their capabilities.

CHALLENGES FACED BY INDIAN TEXTILE INDUSTRY

Textile supply chains compete on low cost, high quality, accurate delivery and flexibility in variety and
volume. Several challenges stand in the way of Indian firms before they can own a larger share of the global
market:

Scale: Except for spinning, all other sectors suffer from the problem of scale. Indian firms are typically
smaller than their Chinese or Thai counterparts and there are fewer large firms in India. Some of the
Chinese large firms have 1.5 times higher spinning capacity, 1.25 times denim (and 2 times gray fabric)

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capacity and about 6 times more revenue in garment than their counterparts in India thereby affecting the
cost structure as well as ability to attract customers with large orders. The central tendency is to add
capacity once the order has been won rather than ahead of the demand. Customers go where they see
both capacity and capabilities. Large capacity typically goes with standardized products. These firms need
to develop the managerial capabilities required to manage large work force and design an appropriate
supply chain. For the size of the Indian economy, it will have to have bigger firms producing standard
products in large volumes as well as small and mid size firms producing large variety in small to mid size
batches (the tension between the organized and un-organized sectors will have to be addressed first,
though). Then there is the need for emergence of specialist firms that will consolidate orders, book
capacities, manage warehouses and logistics of order delivery.

Skills : Three issues must be mentioned here : (a) there is a paucity of technical manpower – there exist
barely 30 programmes at graduate engineering (including diploma) levels graduating about 1000 students –
this is insufficient for bringing about technological change in the sector; (b) Indian firms invest very little in
training its existing workforce and the skills are limited to existing processes (Chandra 1998); (c) there is an
acute shortage of trained operators and supervisors in India. It is expected that Indian firms will have to
invest close to Rs. 1400 bn by year 2010 to increase its global trade to $ 50 bn. This kind of investment
would require, by our calculations, about 70,000 supervisors and 1.05mn operators in the textile sector and
at least 112,000 supervisors and 2.8mn operators in the apparel sector (assuming 80:20 ratio of investment
between textiles and apparel). The real bottleneck to growth is going to be availability of skilled manpower.

Cycle Time : Cycle time is the key to competitiveness of a firm as it affects both price and delivery schedule.
Cycle time reduction is strongly correlated with high first pass yield, high throughput times, and low variability
in process times, low WIP and consequently cost. Indian firms have to dramatically reduce cycle times
across the entire supply chains which are currently quite high (Chandra, 2004). Customs must provide a
turnaround time of ½ day for an order before Indian firms can they expect to become part of larger global
supply chains. Indian firms need a strong deployment of industrial engineering with particular emphasis on
cellular manufacturing, JIT and statistical process control to reduce lead times on shop floors. Penetration of
IT for improving productivity is particularly low in this sector.

Innovation & Technology: A review of the products imported from China to USA during January–April 2005
reveals that the top three products in terms of percentage increase in imports were Tire Cords & Tire Fabrics
(843.4% increase over the previous year), Non-woven fabrics (284.1% increase) and Textile/Fabric Finishing
Mill Products (197.2% increase) (FICCI, 2005). None of these items, however, figure in the list of imports
from India that have gained in these early days of post-MFA. Entry into newer application domains of
industrial textiles, nano-textiles, home furnishings etc. becomes imperative if we are to grow beyond 5–6% of
global market share as these are areas that are projected to grow significantly. Synthetic textiles comprise
about 50 per cent of the global textile market. Indian synthetic industry, however, is not well entrenched.
The Technology Upgradation Fund of the government is being used to stimulate investment in new
processes. However, there is little evidence that this deployment in technology has accompanied changes in
the managerial regimes – a necessary condition for increasing productivity and order winning ability.

Domestic Market : The Indian domestic market for all textile and apparel products is estimated at $26 bn
and growing. While the market is very competitive at the low end of the value chain, the mid or higher
ranges are over priced (i.e., ‘dollar pricing’). Firms are not taking advantage of the large domestic market in
generating economies of scale to deliver cost advantage in export markets. The Free Trade Agreement with
Singapore and Thailand will allow overseas producers to meet the aspirations of domestic buyers with
quality and prices that are competitive in the domestic market. Ignoring the domestic market, in the long run,
will peril the export markets for domestic producers. In addition, high retail property prices and high channel
margins in India will restrict growth of this market. Firms need to make their supply chain leaner in order to
overcome these disadvantages.

Institutional Support : Textile policy has come long ways in reducing impediments for the industry –
sometimes driven by global competition and, at other times, by international trade regulations. However, few
areas of policy weakness stand out – labour reforms (which is hindering movement towards higher scale of
operations by Indian firms), power availability and its quality, customs clearance and shipment operations
from ports, credit for large scale investments that are needed for up gradation of technology, and
development of manpower for the industry. These are problems facing several sectors of industry in India
and not by this sector alone.

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CONCLUSION

In conclusion enterprises can use various marketing instruments in their actions. Obviously, managing a
brand needs much talent and skill, but most of all some experience. In order to fully exploit the opportunities
given by the brand strategy, it needs constant work on the brand, investment in its development and
expansion of its capital. Therefore it is worth finding out precisely all the possible aspects of brand
managing, if we wish to achieve a position of the leader in a given sector. On the other hand competitive
strategies are developed by sector level firms and it’s their individual and collective initiatives that secure
higher market share in global trade. While one has to be ever vigilant of non-tariff barriers in the post MFA
world, the new market will be won on the basis of capabilities across the supply chain. Policy will need to
facilitate this building of capabilities at the firm level and the flexible strategies that firms will need to devise
periodically.

REFERENCE
™ ‘Branding - Optymalizacja strategii marki w kontekście celów przedsiębiorstwa’, www.cobra.pl
™ Budzanowska M., Marketing w praktyce, p. 10.
™ J.B., ‘Pokazać się w unikatowy sposób’, Rzeczpospolita, 03.06.1998, p. 48.
™ Aaker D.A., ‘Managing Brand Equity - Capitalizing on the Value of a Brand name, The Free Press,
New York, 1991.
™ Chandra, P., “Competitiveness of Indian Textiles & Garment Industry: Some Perspectives,” a
presentation, Indian Institute of Management, Ahmedabad, December 2004.
™ Chandra, P., “Technology, Practices, and Competitiveness: The Primary Textiles Industry in
Canada, China, and India,” ed. P. Chandra, Himalaya Publishing House, Mumbai, 1998.
™ FICCI, “Trends Analysis of India & China’s Textiles and Apparel Exports to USA Post MFA, FICCI,
New Delhi, July 2005.
™ Texmin, Official website of Ministry of Textiles, Government of Indian, http://texmin.nic.in, 2005.
™ OTC, “Compendium of Textile Statistics,” Office of Textile Commissioner, Minsitry of Textiles,
Government of India, Mumbai, 2004.

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