EXPORT OF GARMENTS TO AUSTRALIA BY

RAI INTERNATIONAL,JAIPUR

INTERNATIONAL MARKETING MIX

MANAGEMENT

To study the international

marketing function of Skon

International, Jaipur with specific

emphasis on:

To analyze the readymade garments (RMG) export

market from India.

To provide a vivid picture of Skon International, its

background, functions, market structure and potential.

To study the marketing program (including

organizational information and promotional

arrangements) of Skon International with specific

emphasis on its domestic and global competitive

situation.

To identify the challenges in internationally marketing its

products.

To make recommendations that could allow Skon

International to gain competitive advantage and be a

successful global player.

To understand the international marketing function of

Skon International in its entirety and learn how

theoretical concepts may be successfully applied to the

actual business.

METHODOLOGY

Data collected from the following primary sources:

The Managing Director and the employees of Skon

International.

The Buying Agents in New Delhi.

Deputy Director, AEPC

Additional data on the ready made garments exports was

collected from the following secondary sources:

Magazines: Clothesline, Garment Business Trader

Newspaper articles: From Economic Times, Business

Standard

Internet sites:

www.nrf.com

www.aepc.com

www.indiamart.com

Analysis of the information in relation to the international

marketing function at Skon International, factors

affecting the process and major challenges faced by the

firm.

On the basis of the above analysis, recommendations are

being made to the firm to successfully face the

challenges posed and improve its overall efficiency and

effectiveness.

PRODUCT OF STUDY

India has traditionally been a high volume exporter of

textiles. In the recent past the Indian government has

encouraged the export of readymade garments in an

attempt to move up the value chain by developing its

products and pursuing opening markets.

The readymade garment industry has three main segments

of users based on which the market is formed: Men’s wear,

Ladies garments and children’s clothes. This study is

dealing with Ladies garments. Within Ladies garments there

are two types based on the fabric: Woven and knit. As Skon

International deals exclusively with woven products the

scope of this study follows the same.

INDUSTRY NOTE

India has been exporting garments for a number of years

now and in the last few years has established a distinct

presence in the world of clothing market. From a country

traditionally known to be producing low cost products, it is

now being increasingly looked upon as a major supplier of

high quality fashion garments. Indian garments have now

reached all the leading markets in Europe, North America.

The Nordics, Australia, Japan to mention a few of them.

The garment industry has been evolving over the years. In

this process, its profile has undergone discernible changes.

Technology has been gradually upgraded and there is a

qualitative improvement in the garments produced in the

country. Many leading fashion labels are now being

associated with Indian products.

The product matrix today has a repertoire of synthetics,

cotton blends and knitwear items. The industry is shaping

itself to meet the demands of product specialization in a

highly segmented buyers market. Although our exports

continue to be directed towards the restricted markets,

there has been a steady growth in exports to non-restricted

countries and of non-restricted items.

Countries with which India has entered into bilateral

agreements under the Multi-Fibre Arrangement account for

a very sizeable portion of garment export from India. During

1998-99, U.S.A. the single largest market accounted for

28.47% of our total garment exports [i.e. 20.5% of total

exports]; E.U. the largest market block, accounted for

29.46% [i.e. 17.1% of total exports]. The other quota

countries (Norway and Canada) accounted for another

5.85% [i.e. 1% of total exports]. The countries covered by

the MFA, thus accounted for approximately 65% of the

garment exports, the rest being to non-quota countries.

The garment export industry in India witnessed a

phenomenal growth in a short span of time. Only a few

years ago in 1987, the industry had set for itself a self-

imposed target of Rs.1450 crores. Needless to mention, the

target was surpassed and export amounted to Rs. 1857

crores in that year. Since then the industry has continued to

exceed the targets fixed for all succeeding years. As per the

Apparel Export Promotion Council of India, that promotes

and regulates the growth of Readymade Garments in India,

the last published figures show exports reaching a figure of

US$ 5525.4 million (Rs.23983.39 crores) during the year

1999-2000. It has emerged as one of the most active

sectors of the Indian economy and is today the single

largest net foreign exchange earner for the country.

However with the burgeoning number of firms in the same

sector, the inevitable shakeout has begun. Readymade

garment manufacturers and exporters such as Skon

International are attempting to gain an edge and stay

competitive in global markets.

MARKET SIZE

Market size is the total volume of a product that would be

bought by a defined customer group in a defined

geographical are in a defined time period in a defined

marketing environment. The current market size of the

readymade garments exports is around 45.83 billion dollars.

MARKET POTENTIAL

Market potential is the limit approached by market demand

as industry marketing expenditures approach infinity for a

given marketing environment. Readymade garments are a

major item of the Indian textile exports. The cap of 24% on

FDI has been a big handicap till now. Now with 100% status

allowed, it is possible to install the state of the art

machinery and produce garments of high quality at

reasonable prices. Internationally reputed brands that could

be made in India can help make a big jump in the value

added garment export. India’s market potential is steadily

increasing due to the cheap labour, development and influx

of superior technology and the lowering to barriers to entry.

ACHIEVEMENTS OF THE READYMADE GARMENT

INDUSTRY

Sheer enterprenuership and booming world demand are the

key factors that have bought the Indian garment Industry

into the unique position it occupies today the top foreign

exchange earner for the country. The achievements of the

Indian garment industry over the past few years are many.

More notable one are:

There are relatively larger scale units today compared to

only small scale operations in earlier years.

Manufacturing methods have definitely improved over

the years and thus from the casuals, the industry is

moving into higher fashion. Many famous international

brand names are now associated with the Indian Apparel

Industry.

Export of garments have surged in both quality and

value terms, in both rupee and hard currency. The

average export prices have also gone up considerably

indicating the improvements in the quality of

merchandise.

Though cotton garments are India’s main forte, there has

been a distinct improvement in synthetic/ man made

fabric [MMF] base garment exports in recent years.

USAGE

In the case of readymade garments, the exporter’s

customers and the end user consumer are quite different.

The customer is the buying house, agent or retail store,

who in turn attempts to woo individual customers to buy

and consumers to wear the readymade garments for sale.

While it is consumer driven fashion trends that dictate what

the manufacturer must make for export, very often such

trends can only be understood with the help of the

customer [in this case the buying house, agent or retail

store]. Since markets are dynamic one must observe

market growth and population trends. In the case of

garment export, each market being exported to, has its own

demands, cultural and business nuances that must be

understood by the exporter in order to successfully transact

with them.

Women’s readymade garments are exported for sales in

various countries and Skon International attempts to target

the middle class woman through its clothing design. The

trends in fashion affecting such middle class women in

Skon’s current and target markets set the framework for

Skon to work within.

INTRODUCTION TO SKON INTERNATIONAL

Skon International is a 100% Export Oriented Unit (EOU)

with an annual turnover of Rs.5 crores. It is one the leading

manufacturers & exporters of ladies readymade garments.

It has an in-house designing, stitching and packaging

facility. The factory covers an area of 20,000 sq. ft. and has

a production capacity of 90,000 pieces a month. Skon's

products find ready markets in U.S.A., Japan, South America

and certain parts of Europe.

INCEPTION

Established in 1992, SKON International is a manufacturer

and exporter of a wide range of ladies readymade

garments. This move was made after careful deliberation.

EVALUATING PRODUCT GROUPS IN 1992-QUANTATIVE

ANALYSIS Criterion 1 Criterion 2 Criterion 3 CAPABILITY ENVIRONMENT EXPORT MARKET CONDITIONS CONDITIONS ATTRACTIVENESS

1. Level of technology required is low, labour intensive

2. Cost structure- availability of abundant cheap labour

3. Skilled manpower available

4. Easy access to Raw materials

1. Size of domestic market for export quality garments is low

2. Domestic competition - low

3. Fewer quality conscious mfrs.

4. High demand for Indian manufactured garments due to low cost

1. The average growth rate of garment exports from India was 20%.

2. Import restriction [quotas] in some countries

3. Cost of manufacturing is higher than importing in Indiacountries

4. China was the only major competitor

EXPORT POTENTIAL EVALUATION

Product Groups with Low Potential

Product Groups with High Potential

1. Incentives given by the income in the form of 100% tax exemption on export income

2. Indian Trade Promotion Organisation (ITPO) formed to promote exports3. Easy to set up manufacturing base in Jaipur as major centre for tie and dye and

other traditional products

DECISION TO ENTER

INTERNATIONAL ACTIVITY

The key factors that motivated Skon International’s decision

to enter into the readymade garment export sector were:

1. Background of trading

The entrepreneur concerned had an established background

in trading and was interested in seeking out new and

upcoming business opportunities to expand the existing

business.

2. Lucrative business with profitable margins

Based on research the entrepreneur found that ready made

garment exports was a lucrative business with substantial

profit margins based on volumes. Keeping in mind the

growth in the exports market the venture into the

readymade garments market seemed to be a well founded

decision.

3. Tax incentives in the form of complete exemption

In order to promote the readymade garment Industry, the

Government of India allowed for 100% tax exemption on

export income. This provided impetus to entrepreneur’s to

begin their own export oriented manufacturing units.

4. Availability of skilled and inexpensive labour

In the proposed area of operation Jaipur, the availability of

skilled and inexpensive labour was abundant. Additionally,

the area was known for tie dye and hand embroidery for

which there was a growing demand in foreign markets.

FIRST DEAL

Skon International initially began operations by tying up

with local suppliers, hiring a few experienced people and

creating some samples with the idea of gaining some export

orders. The company participated in India International

Garment Fair organized by AEPC in New Delhi 1992. The fair

served some main purposes for Skon International:

Able to meet a host of buyers from all over the globe

Able to understand the requirements of buyers more

accurately

Able to show its own sampling and designs to

prospective buyers

Able to understand the ferocity of competition.

Skon International was able to get its first order from a

buyer at the Fair. The order was for 5000 pieces of assorted

dresses, blouses and skirts from a Japanese company,

Rajko International.

INITIAL MARKETS

In the first year of operations Skon International was able to

garner buyers from new markets. The market that it

targeted successfully in its first year of operations was

Japan. In the subsequent years it enlarged its reach to

include the new markets of UK, Poland and the United

States.

VOLUMES AND SALES IN FIRST YEAR

In its first year of operations, 1992-93, Skon International

was able to garner sales worth Rs.0.81crores for a volume

of approximately 85000 pieces.

Besides its first deal for 5000 pieces of ladies garments for

Rajko International, Japan, other significant orders were

undertaken. These include 10000 bead work jackets for a

US buyer with a repeat order within the year for 25000

additional pieces. Another of the large orders came from a

Polish buyer for 20000 skirts & shirts.

GROWTH

After the establishment of SKON International in 1992, the

export market for readymade garments saw an initial

upswing allowing the business to burgeon.

Initially Skon International created sampling to show

potential clients at their own cost, keeping in mind the

fashion trends for the moment. To procure orders Skon

International participated in garment fairs and contacted

buying agents, paying them a commission as a percentage

[approximately 3%] of the order gained.

The above is a graph showing the growth pattern of Skon

International.

After a spurt in growth that saw the turnover increase by

almost 100% for the initial 4 years, Skon International faced

a slump in sales primarily due to a global recession in the

ready made export market. Additionally the South East

Asian crisis was responsible for certain problems in Skon’s

active markets.

PRODUCT MARKET MIX

With an increasing number of markets and companies

buying ready made garments from the company, Skon

International had to keep in mind the preferences of the

market in numerous ways. Some of the main differentiating

factors between requirements from markets was based on:

Kind of fabric preferred

Colours of fabric

Print of the fabric

Style of the garment

The following table shows the product market mix and the relative

importance of markets for the company:

Market Type of

cloth pref.

Design/

fabric colour

Styles Percentage

export of Skon

International

Japan Cotton Yarn dyed Wrap 55%

checks, tie-

die, prints

arounds,

aprons,

dresses

USA Rayon Yarn dyed

checks, tie-

die, prints –

pastels &

light shades

Blouses,

shorts, skirts

& dresses

20%

Italy Rayon &

Cotton

Prints & solids

– soft colours

Dresses 10%

Skon has chosen the women’s readymade garments market

as its field of operations and further segmented the market.

The buying patterns show that segmentation and the share

they appropriate in Skon’s business are as follows:

Buying House 80%

Wholesaler/ Distributor 20%

Initially, Skon International also used to operate in the retail

chain market where chain stores and single outlets would

purchase garments directly from them. However, with a 30-

50% duty on imports the retailers shifted to using

wholesalers/ distributors who are in the business of

consolidating multiple orders and making such imports

more feasible. So, while Skon does not directly cater to the

retail segment, it continues to do so through alternate

channels.

MARKETING MIX

Marketing mix is the set of marketing tools that the firm

uses to pursue its marketing objectives in the target

market.

Too often, marketing mix is confused with marketing

principals. Even though certain principles may be universal,

the in no way implies a uniform marketing mix for all

markets. To be customer oriented for example, does not

mean that the same marketing strategy should be repeated

in a different environment. Sound marketing principles are

universal. One basic principle states that marketers should

adopt the marketing concept [i.e. using the integrated

marketing approach to satisfy both customers and

corporate goals]. Regardless of their nationalities marketers

everywhere should be customer oriented.

Traditionally, the four P’s of marketing approaches are

valid. However in the case of the garment industry, it could

be argued that service plays an important role in gaining a

competitive edge in the international marketing arena and

therefore we need to look into the other four p’s-

production, probe, power and people.

PRODUCT

Skon International manufactures and exports woven ladies

garments. The product range comprises of Ladies hi-fashion

dresses, blouses, trousers, skirts, ensembles, rompers,

overalls, sarongs (pareole), scarves of Sanganeri &, Bagru

pigment, tie-dyes, hand & machine embroidery in the latest

designs.

The company prides itself on innovation and attempts to

experiment on new garments using new fabrics. Some of

these fabrics are: cotton, flax/cotton, woven checks, stripes,

dobbies, twills, jaquards, piece dyed poplins. Additionally

they use 100% viscose, yarn dyed stripes, moss crepes,

polynosic, twill, georgette, blends of cotton/viscose and

polyviscose.

The procurement of raw materials and certain outsourcing

functions are done from different places depending on the

ease of availability and cost considerations. The table below

identifies the places of procurement and functions:

Raw materials and

functions

Place of procurement

Fabric Mumbai, Surat, Erode, Salem, Chennai,

Jodhpur and Tirupur

Labels and tags Jaipur and Delhi

Accessories [incl. Zips,

buttons]

Jaipur

Applique, embroidery and

lace work

Jaipur

Tie dye and Printing Ahmedabad, Jodhpur, Surat and Jaipur

PRICE

Skon International bases its pricing on three separate

platforms on the basis of the country to be exported to and

the buyer dynamics. The price is generally quoted in US $.

These three platforms are:

1. Free on board [FOB]

Under this method the duties of Skon International as the

seller, are as follows:

Make available at the port of loading and to ship free on

board good matching in all respects the description in

the contract of sale.

Pay all handling and transport charges in connection with

the above operation.

Complete declarations required by customs and excise in

case of goods from bond or under drawback.

Meet all charges arising in connection with the goods

upto the time of their passing over the ships rail at the

final destination port

2. Cost insurance and freight [CIF]

Under this contract it is the responsibility of Skon

International, as the seller, to complete the following:

Arrange shipping space

Pay freight charges

Bear all transportation charges upto the port of

departure

Bear loading charges at the ship

Bear charges for insurance.

3. Cost and Freight [C and F]

This contract is similar to the CIF contract except that in

this contract it is the buyer who arranges the cost of

insurance and bears the cost of it, as against Skon

International, the seller.

Using one of these methods mutually acceptable to Skon

International and the buyer, the price quotation is created.

On acceptance of the quotation, the order is executed and

then payments are made in accordance with the terms of

the platform agreed upon.

PLACE

Place includes the various activities Skon International

undertakes to make the product accessible and available to

target customers. Skon uses three channels of distribution

to the final consumers. Skon had to identify, recruit and link

various marketing facilitators to supply its products and

services efficiently to the target market. It must understand

the various types of retailers, wholesalers and physical

distribution firms and how they make their buying

decisions. These channels of distribution are agents, buying

houses or wholesalers and retail stores. The goods are

either shipped directly to the customers or they are sold

through the agents who act as an intermediary between the

exporter and the importer. Skon International charges a

commission as a percentage of the sales generated by the

intermediary. Now Skon has developed a well-established

customer base therefore the shipments are made directly to

the customer.

PROMOTION

The purpose of promotion at Skon International is to

communicate with potential and existing buyers and to

positively influencing them. Keeping in mind its target

market and customers, promotion at Skon International

mainly involves participation in various trade fairs and

exhibitions both in India and abroad.

Advertising is not a part of Skon’s promotional mix as

advertising in India does reach It targets buyers situated

abroad and advertising in the foreign media proves to be

exhorbitantly expensive. Instead, Skon International

displays the entire range of garments in the fashion shows

organized in exhibitions where they feel potential buyers

would be able to see their products. Some of the trade fairs

and exhibitions in which Skon participates are:

India International Garment Fair, New Delhi

Japan Creation, Tokyo

Buyer Seller Meet, Australia

Techtextile Asia, Osaka

International Fashion Fabric Expo, New York

Interstoff South America, Sao Paulo.

Besides the trade fairs Skon mainly relies on publicity

through word of mouth. Currently the company is

constructing its website so that prospective buyer’s abroad

can get information about the company and the products

offered by it. The link for this site would be provided in sites

like indiamart.com and other search engines.

To promote goodwill and reward repeat purchase Skon

International also gives certain off-season discounts to their

buyers.

PRODUCTION

The marketing concept relocated the emphasis from

product to customer and in the process the product which

had been the focus under the earlier production orientation

concept lost importance. Skon International emphasises the

importance of production and uses imported Juki Machines

[as shown below], thus ensuring that the essence of

production is quality as defined by international norms and

the customer.

PROBE

This stands for scanning or information acquisition of

market opportunities. It involves gathering information

about markets and competitors as a basis for formulating

the marketing plan and programme. The marketing plan

and strategy are based on the research results. Skon

International’s marketing programme is limited to

understanding the market from a layman’s point of view.

The company feels that market research about competitors

both domestic and global may not be of as much use as

understanding ones own customer and fulfilling his needs.

Opportunities for new business in the market is obtained by

word of mouth referrals and limited participation in garment

fairs, where there is a high and sometime concentrated

focus of buyers.

POWER

The concept of power is related to the ability of the firm to

make the external environment congenial to its operations.

Skon International, unlike larger firms, is able to leverage

its relatively smaller size, and faces fewer problems on

entry into new export markets, beginning with small orders

and moving on to prove their worth in the form of the

deliverables. Their size allows them to manage their

external relations with ease and on a one-to-one basis.

However, the power equation is not without pitfalls for Skon

International, as often their small size leaves them with

lower credibility and bargaining power in potential and

existing markets.

PEOPLE

A marketing mix’s probability of success depends largely on

its implementation in an industry such as garment export.

People involved in the process become key in the case of

Skon International, as all efforts made by the firm are

dependent on the efficiency of the staff at every stage of

the process. Skon International being a smaller operation is

able to maintain some control on the efficiency levels and

uses personal enhancement and monetary rewards as the

checks for level of people involvement.

UNIQUE SUCCESS FACTORS

The unique success factors are what have grown Skon

International in 8 short years from a Rs.0.81 crore company

in 1992 to a Rs.3.56 crore in 2000. These factors have a

great impact on the way Skon conducts its business and is

perceived in the market as a serious player in the garment

export industry.

1. In-house design

Skon International has its own London-trained designer

from the London College of Fashion who constantly keeps

abreast with the fashion trends in both the existing and

potential markets. The designer attempts to understand the

middle class woman who is the main participant being

dressed by Skon International’s garments. So far the

designer has been applauded for her ingenuity and flair for

understanding the requirements and creating new designs

that have aesthetic beauty and functionality. This designer

can be attributed most of the acceptance of styles that

Skon International is able to find amongst its many buyers.

2. Deliverables

Skon International keeps clearly in its view the key

deliverables: quality products and timely delivery

schedules. Skon International, in gaining an order maintains

the shortest possible process time and has a 100% success

rate in delivering goods on or prior to the due date. In

addition they are able to maintain the highest level of

quality, thereby not compromising, but certainly

complementing the schedule they are keeping. The

combination of the deliverable’s time lines and quality has

found much appreciation in foreign markets where values

put on such services is often immeasurable.

3. Pricing strategy

Skon International believes in fostering long term

relationships with its buyers. Seeing the potential of

business with certain buyers, Skon International often

prices its readymade garments relatively lower than local

competitors. This pricing strategy calls for cutting margins

and making its pricing more attractive to the potential

buyer.

4. Family run enterprise

Skon International is a family ownership and its functioning

is completely in the hands of the family. This ensures that

there are strict checks on cost and quality control and that

the efficiency levels are high. Process efficiency is stressed

on and a family member oversees all functions from

procurement to packaging, marketing to designing at the

managerial level.

AWARDS AND RECOGNITION

Skon International has been exporting garments for a

number of years now. After having started as a small

player, it has slowly and steadily established a distinct

presence in the markets that it serves. Due to this

commendable performance it received a letter of

recognition from CII in 1996.

Skon International has also received a citation in 1998 from

the President of India’s offices to commend the export

performance.

COMPETITION

Manufacturers and exporters are moving towards

modernising their manufacturing facilities and employing

newer technologies to remain competitive.

DOMESTIC

The changes in the textile policy are attempting to organise

the entire garment export industry. The idea is to ensure

that once the quota system is phased out the assured

markets [comprising 75% of all export markets] for Indian

garments will not completely disappear. Self sustenance

and competitive edge is being encouraged by the policy and

the idea is two-fold:

To bring quality standards up to world class levels

To keep to timely delivery schedules

Under the earlier textile policy the garment industry as

reserved under the SSI, a limit of Rs.2 crores was imposed

on the purchase of plant and machinery for manufacturing

units. The new textile policy is encouraging foreign

investment for bigger units. This will give Indian industry a

boost by allowing it to gain some share of the volume

market that China is thus far catering to with such ease.

The smaller units/ players will continue to cater to the

smaller value business.

GLOBAL

The major partners for India in the trade in clothing are

USA, European Union, Japan, Australia, UAE, CIS and

Switzerland. Although some of them manufacture and

export garments, yet they offer potential markets for Indian

garment exporters as well. However, in view of the high

production cost they have increasingly turned towards

competitive sourcing overseas. Similarly in view of the

increased production cost in traditional supplying countries

like South Korea, Taiwan, Hong Kong etc., they are now

looking towards countries where the labour costs are

reasonably lower.

As per a 1991 study report published by Werner International, in India, the

labour cost is the cheapest at US$0.72 on an average per worker per

hour amongst most of the garment producing countries in the Asian

region. The table below gives labour cost comparisons for the Asian

region:

Country Average Cost per worker per hour

[in US$]

Hong Kong 3.05

India 0.72

Japan 13.96

South Korea 3.22

Additionally, India is facing competition from China where

the cost of production is lower than India due to the tax

structure, availability of cheap and skilled labour and

economies of scale. China’s garment manufacturing is

mainly based on volumes and machine work thereby giving

it a competitive edge where large orders are concerned.

However, India is competitive in the segment handwork

based garment industry. While China can concentrate on

the volume business India is able to sustain and grow its

ready made garment export market by concentrating on

value business.

REVENUE FIGURES

COMPETITIVE ANALYSIS

Global competitiveness is the ability of a company to

proportionately generate more wealth than its competitors

in the market.

Skon’s overall competitive framework will include all ready

made garment manufacturers and exporters. This can be

narrowed down to those manufacturing women’s woven

garments targeted at the middle class consumer. Skon must

take note of its immediate competitive framework in order

to understand its competitive position. Skon international

must study its local and global competitors and identify and

understand the following:

Number of sellers, both local and global and the degree

of differentiation amongst them.

The ease of entry, mobility and exit barriers that Skon

will face while entering new markets, growing its share in

those markets and editing those markets, if need be.

Reaction patterns of competitors to certain situations.

Customer value analysis to reveal the company’s

strength’s and weaknesses relative to various

competitors.

Degree of globalisation of that industry within which the

company is operating.

Additionally, Skon International will be better able to analyse its competitive position by viewing

a SWOT analysis:

STRENGTHS

Location advantage [close to

textile, handwork experts,

cheap labour]

Capacity for production

In-house designer

Well established buyer base

Financial stability

Able to maintain low prices and

thus an attractive proposition

WEAKNESSES

No organised marketing

division or plan

Improper categorization of

the sales & marketing

functions

Lack of market intelligence

system and benchmarking

Outsourcing leads to quality

issues

OPPORTUNITIES

Growth in the readymade

garments exports

Infrastructure development with

liberalization & entrance of

MNC’s in this and related

industries

Development of knit wear

market

Ample scope of growth in world

readymade garment export

markets

Non-tariff barriers being

lowered

THREATS

Competition by other

manufacturing and export

oriented units operating in

the women’s readymade

garment segment

External infrastructure

blocks

Textile policy to bring in

larger players with deeper

pockets and better

technology

THREE Q’ s IN GARMENT INDUSTRY

In garment parlance, the three Qs have a special significance.

They stand for

1) Quota

2) Quality

3) Quantity

Apart from quantity and quality the quota factor is also very

important of India’s exports of garments is to countries with

which India has entered into bilateral agreements under an

arrangement known as Multi Fibre Arrangement or MFA.

The current pattern is that 75-80% of our garment export are to

the countries under MFA while the remainder that is 20-25% are

made to countries out side the bilateral agreements. Our Bulk of

MFA exports are made to the EU and the USA while the non- MFA

importing countries include Soviet Union. Switzerland.

Australia, Newzealand etc. Even in the case EU and USA free

export are allowed for categories/ items not mentioned in the

agreement.

With a view to distribute the quantities allotted under the

bilateral agreement, the government of India has laid down a

quota policy. The enables the exporters to know exactly how

much quota items they can export to a particular quota country.

Since the MFA and quota system are essential elements of

garment exports. It is necessary for an exporter to understand

these two terms properly.

The quantities allotted category wise, are not negotiated and

finalized with the importing countries under the bilateral

agreements. In order to allotted and distribute these quantities

amongst different exporters, the government lays down a quota

policy. This policy. This policy is enumerated and interpreted by

the Textile Commissioners office and administered by the

Apparel Export Promotion Council (AEPC). From time to

time, the quota policy has been modified keeping the following

objectives in the view.

Maximisation of net foreign exchange earnings.

A higher unit value realization.

Fuller quota realization

Optimum development of trade and industry.

Retail formulae in USA

TYPE OF

STRUCTURE

CHARACTERISTICS Retailers

1. Chain Stores Similar

merchandising

Similar store décor

and ambience

Department

store chains

e.g. Macy’s

Speciality

store chains

e.g. Gap, The

limited

Discount store

chains e.g.

Marshals

2. Speciality chain Consisting of tens or

even hundreds of

stores spread

through out the

country

The Limited

The Gap

3. Discount stores Every day low price

stores

Soft and hard goods

K-mart

Wal-mart

4. Department Large –scale Macy’s

stores organization

Wide variety of goods

Merchandise is

offered for sale in

separate units of

departments

Bloomingdale’

s

Saks Fifth

Avenue

Nordstrom

5. Hyper markets Combined

department store and

super market with

25,000 to 30,000

sq.m. area

Features a large

assortment of general

merchandise

6. Catalogue

retailing

Some mail-order

houses offer

exclusivity through

catalogues

Others

Lands End,

Spiegel, etc