Idea Transcript
Indian textile industry can be divided into several segments, some of which can be listed as below: -Cotton Textiles -Silk Textiles -Woolen Textiles -Readymade Garments -Hand-crafted Textiles -Jute and Coir Some of the other important salient features are following:Textile industry contributes nearly 14 per cent of the total industrial production of the country. It also contributes around 3 per cent to the GDP of the country. This sector is the second largest employer after agriculture. India earns about 27 per cent of its total foreign exchange through textile exports. In the last three years, the sector has attracted a total investment of US$ 5,770 million. The major raw materials for the textile and apparel industry include cotton, jute, silk, wool and manmade fibre.
INDUSTRY TRENDS Indian Textile Market is growing at CAGR (Compounded Annual Growth Rate) of 10 per cent, is expected to reach $221 billion by 2021. Production of Raw cotton grew to 35.3 million bales (approx. 7700 Kg) in 2011-12 from 28 Million bales (approx. 6100 Kg) at a CAGR of 4.7per cent. The Fabric production has grown at a CAGR of 5 per cent over the last 10 years. Further, Cotton Fabric constituted 50 per cent of total fabric production. The strong performance of textile exports is reflected in the value of exports from the sector over the years, in FY12, textile exports jumped by 19.4 per cent to USD33.2 billion. MARKET SIZE The size of the Indian textile market (http://ideasmakemarket.com/bihari-education-project) in 2011 was US$ 89 billion which is expected to reach US$ 221 billion by 2021, according to FICCI and Technopak's report. The whole industry consists of two major sectors :Apparel and Textile In 2011, apparel had a major share of 69 percent of the overall market as disposable income and usage of credit card & debit card among middle-class people increased over the years. Government has established 75 Apparel training and design centers across India to increase technical skills in apparel industry. The apparel sector has over 25,000 domestic manufacturers, 48,000 fabricators and around 4,000 manufacturers/exporters. Over 80 percent of the total units are small operations (less than 20 machines) and are either proprietorship or partnership firms. Indian Textile industry is mostly unorganized and fragmented. The organized players being Welspun India Ltd, Alok industries and Arvind mills. Over the years India’s share in the world trade has increased from just $4.7 Billion in 1990 to $31 Billion in 2011 and is growing at an annual rate of 10 per cent since 2005. The major export commodities are readymade garments, cotton textiles, and man-made textiles. PORTER's DIAMOND 1. Factor Conditions Abundant availability of raw material: India has enough production of cotton, jute and other raw material necessary for textile industry. India has the largest area under cotton cultivation and also produces nearly twenty three types of cotton. Low cost and skilled labour: India has low labour cost and vast pool of skilled and unskilled labour. India has skilled manpower in both technical and management fields. The textile industry is the second-largest employment generating industry in both rural and urban areas, after the agriculture industry employing nearly 35 million employees. Lower lead time: Fully established textile value chain from fibre to cloth to garment exports in India, cuts down the lead time for production and reduces the shipping time. Flexibility and ability to produce customized apparel has been other important factors for textile industry. Support for technology upgradation and good quality are also the other important factors. Increasing Investments: Over US $ 35 billion of investments have been made in the textile and clothing sector during the last 4 years. Indian textile industry accounts for about 24 per cent of the world’s spindle capacity and eight per cent of global rotor capacity. India has the highest loom capacity (including hand looms) with 63 per cent of the world’s market share, making it an attractive industry to invest in future too. 2. Related and supporting industries: Textile machinery industry: This supporting industry helps in converting raw yarn into cloth, and India being a traditional textile industry has support of efficient machinery industry. Training: India has built the sufficient infrastructure in various textile departments like design, production, sourcing and merchandising. Various institutes like National Institute of Fashion Technology, Indian Institute of Technology and Apparel training Institutes offers many courses in Textile Engineering, 75 such apparel training and design centre have been established across India. IT industry: It would be supporting industry in terms of logistics, packaging, documentation. Leather Industry: It is a related industry to textile industry. Growth of one industry would definitely affect the other. 3. Firm strategy, structure and rivalry The textile industry is vertically-integrated across the value chain and extends from fibre to fabric to garments. Dominated by unorganized sector: The organized sector contributes more than 95 per cent of spinning, but hardly 5 per cent of weaving fabric. Small Scale Industry (SSI’s) performs the bulk of weaving and processing operations. The unorganized sector forms the bulk of the industry, comprising handlooms, power looms, hosiery and knitting, and also readymade garments, khadi and carpet manufacturing units. The organized sector contributes merely 3 per cent to the total fabric production of the country, rest by the unorganized sector. Highly competitive and fragmented: The existence of large number of small players makes the Indian textile industry extremely competitive. The textile segment is highly fragmented and many large textile companies are also conglomerates of medium-sized mills. Entry of foreign players: Many Multinational Companies like Banana republic, FCUK, GAP have entered Indian textile market (http://ideasmakemarket.com/bihari-education-project) in distinct areas. The intense competition within industry propels the firms to work in order to increase production. 4. Demand Conditions During 2012-13, the country's textiles exports stood at USD 34 billion. For the current fiscal, the ministry has set an ambitious exports target of USD-50 billion. The growth factors are Rising demand in exports: The sector has also witnessed increasing outsourcing over the years as Indian players moved up the value chain from being mere converters to vendor partners of global retail giants. The strong performance of textile exports is reflected in the value of exports from the sector over the years, in FY12, textile exports jumped by 19.4 per cent to USD33.2 billion. Increasing domestic consumption: Rising incomes has been a key determinant of domestic demand for the sector; with incomes rising in the rural economy as well, the upward push on demand from the income side is set to continue. Growing Population: By 2010, India’s population had close to doubled compared to figures 30 years before. India’s growing population has been a key driver of textile consumption growth in the country. It has been complemented by a young population which is growing and at the same time is exposed to changing tastes and fashion 5. Government One of the principal targets of the government policy is to enhance the quality and production of cotton and man-made fiber. Ministry of Agriculture, Ministry of Textiles, and cotton growing states are primarily responsible for implementing this target. Various Acts which are framed to help textile industry are Central Silk Board Act, 1948 The Textiles Committee Act, 1963 The Handlooms Act, 1985 Cotton Control Order, 1986 To continue with the success of the textile industry, the union government has come up with a National Textile Policy. The National Textile Policy was formulated keeping in mind the following objectives: Development of the textile sector in India in order to nurture and maintain its position in the global arena as the leading manufacturer and exporter of clothing. Maintenance of a leading position in the domestic market (http://ideasmakemarket.com/how-todeal-with-an-abusive-boss) by doing away with import penetration. Stressing on the diversification of production and its upgradation taking into consideration the environmental concerns. Development of a firm multi-fibre base along with the skill of the weavers and the craftsmen. 100 per cent FDI (automatic route) is allowed in the Indian textile sector. SITP was approved in July 2005 to facilitate setting up of textiles parks with world class infrastructure to promote apparel exports. 12 such locations have been approved. Free trade with ASEAN countries will boost exports. 6. Chance Rupee fluctuations have made export planning for long term difficult. As India is heavily dependent on monsoon for irrigation, it can affect textile industry if in case our country goes through lean phase of monsoon because in that case jute and cotton production will be seriously impacted upon. PORTER’S FIVE FORCES ANALYSIS 1. Threat of New Entrants: Effect (Positive if reduces the S.No.
Forces
threat, negative if increases
Overall
threat) Demand-side economies of scale being 1
enjoyed by large domestic retailers due to
Positive
distribution networks and customer base Supply-side economies of scale of large
2
retailers Low switching costs due to strength of
3
apparel manufacturers
Positive Negative
channels due to high cost of prime real
to
medium
Challenges in establishment of distribution 4
Low
Positive
estate Cost disadvantage to foreign players due to 5
knowledge and experience of established
Positive
local players 2. Bargaining Power of Buyers Effect (Positive if increases the S.No.
Forces
power, negative if decreases the
Overall
power) Buyer to supplier ratio is low. So, retailers 1
can leverage their size to source from
Positive
multiple suppliers Purchase volumes are large. So, retailers
2
have power over suppliers
Positive
High
Threat of backward integration is high 3
especially in case of foreign players as it
Positive
will help them cut costs 3. Bargaining Power of Suppliers Effect (Positive if increases the S.No.
Forces
power, negative if decreases the
Overall
power) Large number of small suppliers; Limited
1
number of large suppliers Low production volumes due to high
2
fragmentation Ambition of large suppliers of forward
3
integration into retail
Neutral Negative
Medium
Positive
4. Threat of substitutes Effect (Positive if reduces the S.No.
Forces
threat, negative if increases
Overall
threat) High availability of substitutes in various
1
forms (ex: low-cost custom made clothing)
2
Low switching costs to the consumer
Negative
High
Negative
5. Rivalry among existing competitors Effect (Positive if increases S.No.
Forces
rivalry, negative if decreases
Overall
rivalry) 1 2 3
Increased opportunities with rapid growth High concentration in unorganized sector; Growth in organized sector Limited product differences per segment but is increasing
Negative Positive
Medium
Positive
COMPETITOR ANALYSIS The following table shows the major players in the textile market (http://ideasmakemarket.com/biharieducation-project) in India:
fabric, garments and polyester yarn Arvind Mills Ltd.
Spinning, weaving, processing and garment Production
Bombay Dyeing
Bed linen, towels, furnishings, fabricator suits, shirts, dresses and saris in cotton and polyester blends
Garden Silk Mills Ltd.
Dyed and printed fabric
ITC Lifestyle
Lifestyle Market
Raymond Ltd.
Worsted suiting, tailored clothing, denim, Shirting, woolen outerwear
Reliance Industries Ltd.
Fabric, formal menswear
Vardham Group
Yarn, fabric, sewing threads, acrylic fibre
Welspun India Ltd.
Home textiles, bathrobes, terry towels
Aditya Birla Nuvo It is the largest branded apparel player in India. It is also the largest manufacturer of linen fabric in India. It has a large retail presence through 1443 stores spanning across 3.7 million square feet. It has combined annual revenue of approximately 1 billion USD from the textile business. ABNL also acquired Pantaloons to further strengthen its retail portfolio. Madura Fashion and Lifestyle is the largest branded apparel player in India with strong brands such as Louis Phillipe, Allen Solly, Van Heusen, Peter England etc. in its ambit. Pantaloons: Customer reach stands at 69 Pantaloons stores and 26 factory outlets. Jayashree Textiles: It is the domestic market (http://ideasmakemarket.com/why-tech-mahindra-isthe-company-to-watch-out) leader in Linen segment. It brands and promotes linen fabric under the brand name “Linen Club”. It has revenues in excess of Rs. 1000 crore. Arvind Mills Ltd. It is one of the largest apparel brand and retail companies and a pioneer of denim in India. It has the largest portfolio of foreign licensed apparel brands like Arrow, US Polo, GANT, Nautica, Izod and Tommy Hilfiger. The company owns & operates India’s largest 225-outlet strong value retail chain under the brand name ‘Megamart’. It is setting-up exclusive stores across the country - ‘The Arvind Store’. Apart from this, company is present in Denim, Woven’s and Voiles Fabrics, Technical Textiles and Organic Cotton Production through cotton farming. The company achieved a revenue of Rs. 3720 crore from its textile business. Arvind mills is the largest producer of shirting’s and Khaki fabrics in the country. Their customers include Banana Republic, Brooks Brothers, Ann Taylor, Hugo Boss, Calvin Klein, Polo Ralph, Eddie Bauer, Express, J Crew, Louis Phillipe, Van Heusen, Arrow, Color Plus, Esprit, Paul Smith and Park Avenue. It is the fastest growing apparel brands and retail company in India. Bombay Dyeing It is one of the leading textile companies in India. It has helped India make a name for itself in the global textile market. The company exports to several nations across the world including USA, EU, Australia, New Zealand. Bombay Dyeing has a production level of nearly 300000 meters of fabric daily. It is the largest exporter of sophisticated made-up items and also of products made of cotton and poly-cotton. The consumer section of the company consists of bed linen, towels, furnishings, suiting and shirting fabrics and cotton and polyester blended dresses and saris. Bombay Dyeing employs some of the most advanced technology in the production process and this has helped the company maintain a dominant position in the sophisticated items market. It has a network of 600 franchise retail outlets in 300 towns and cities in the country. Raymond Ltd Raymond is one of India’s leading conglomerates operating in the Branded Lifestyle space. It has a strong portfolio of brands, both in fabric and apparel segments that make it best positioned to cater to the brand conscious customers in both these segments. The company has one of the largest exclusive retail networks spread across the country and the products are retailed through 20000+ touch points. It is one of the few companies that have integrated across the value chain. The company has state of the art manufacturing capabilities in all its businesses. Raymond is among the largest integrated manufacturers of worsted fabrics in the world. It owns some of the most notable brands such as Raymond Premium Apparel, Park Avenue, Parx, Notting Hill and Color Plus. It produces nearly 20000 designs and exports to 55 countries. INSIGHTS AND CONCLUSION Capacity built over years has led to low cost of production per unit in India’s textile industry; this has placed the country’s textile exporters in line with the key global peers. On the contrary this has led to a medium level of power with the suppliers. India has a fully established textile value chain from fibre to cloth to garment exports which cuts down the lead time for production and reduces the shipping time. With favouring conditions of labour, raw material, technology and high investments, the industry is well fed with the required inputs. The supportive infrastructure required for the industry is aptly been satisfied right from technological expertise to even the governments setting up of training institutes and policies. As the industry is predominantly unorganized, it has huge potential to be tapped into if it becomes more organised. The influence of buyer is pretty high considering the low buyer to supplier ratio, high volumes of trade and also because of the option of substitution. But the mounting demand conditions with growth in the potential buyer population ultimately support the industry’s overall performance. Boost in the consumption of both domestic and imported products due to the rise in the disposable income levels, consumer awareness and prosperity to spend, has created more growth opportunities for textile industry. The textile industry has been an attractive option for investments, with the cotton textile segment accounting for around 75 per cent. It has shown an increasing trend be it the market size, production or exports which makes investors further optimistic about it. Thus, looking at the present scenario it is evident that textile industry in India provides for promising growth prospects for the future. [The article has been written by Sobhit Agarwal & Abhinav Gupta. They have completed their MBA from IIFT Kolkata.]