Business Policies & Strategic Analysis

Group VIDebarghya Mukherjee (Roll-26)

Debjit Sengupta (Roll-27)Dibyajyoti Bhattacharji (Roll-28)

Harpreet Kaur (Roll-29)Dipro Sengupta (Roll-30)

The Fabric Of India

Philosophy

“FabIndia was founded with the strong belief that there was a need for a vehicle to market the vast and diverse craft traditions of India and thereby help fulfil the need to provide and sustain rural employment.”

“Our endeavour is to provide customers with hand crafted products which help support and encourage good craftsmanship.” John Bissell, Founder of FabIndia

Vision & Mission

Vision

Grow revenues of Rs 8.6

billion from 200 stores by

the end of 2011

Mission

Growth of company

along with growth of

suppliers. And to provide

more employment

opportunities.

Background

John Bissell established FabIndia in 1960. Primary aim was to fuse the best aspects of East & West

collaboration. Initially, FabIndia started as a wholesale export company,

concentrating on the export of upholstery fabrics, durries and rugs.

First retail store opened at Greater Kailash in New Delhi in 1976

In 1999, on John Bissell’s death, his son William aged 32,formally took over as the Managing Director of FabIndia

Presently, FabIndia has 128 retail stores across India.

Businesses

RetailThe retail channel is already developed within India with almost

128 stores in Tier 1 and Tier II cities. Fabindia also owns retail stores in Rome (Italy), Guangzhou

(China), Dubai (UAE), Kathmandu (Nepal) Manama (Bahrain) and Doha (Qatar).

The product range consists of: Garments for men, women, children and infants; garment,

accessories; Home furnishings – bed, bath, table and kitchen linen, upholstery

fabric, curtains, floor coverings Non textile products like furniture, lights, lamps and stationery. Fabindia’s product line also includes organic foods and body care

products. Fabindia Organics carries several types of cereals, grains, pulses,

spices, sugar, tea, coffee, honey, fruit preserves and herbs.

Wholesale exportsAs of today, Fabindia exports to more than 34 countries. The clients are wholesalers as well as secondary retailers. Products exported include home linens as well as garments. Fabindia develops a special collection for exports markets

twice every year.

Institutional SalesFabindia envisages to service high business

institutional segment especially the heritage hotels and multinational corporate houses.

It provides customization and interior designing consulting for clients like heritage hotels, resorts and corporate houses.

Internal Environmental Analysis

STRENGTHS

• Differentiable products• Brand recognition and

loyalty• Diverse product mix• Partnering with suppliers• In-house manufacturing• Price Trends Setter• Different categories of

stores• Customer Loyalty

• No specific promotions strategy

• Limited channels of business

• Sourcing strategy skewed towards suppliers

• Inconsistent quality of products

• Inconsistent service in stores

WEAKNESSES

OPPORTUNITIES

• In store merchandising & navigation

• Promoting e-business channel

• Organic foods market• Customer acquisition

Strategies

• Substitute producing competitors

• Not in touch with Fashion Trends THR

EATS

Resource Audit

OwnedNumber of employees: 850 on the rolls, 1,000

consultants and on contractNumber of craftspeople supplying products:

40,000Heavy Machinery owned: Hydro Extractors & Dry

Cleaning MachinesTrademarks owned: Fabindia® is a registered

trademark used for Decorative Pillows Natural Fiber Fabrics and Soft Furnishings In Cotton, Silk, Linen and Wool, Namely, Upholstery Fabric, Cotton Fabric, Spun Silk Fabric, Linen Fabric and Wool Spun Yarn Fabric and owned by Fabindia Overseas Pvt. Ltd., Fabindia, Incorporated.

Joint VenturesFabindia has around 35 joint venture

companies in different states, with weavers and craftsmen holding 51% stake in each of these companies. These joint ventures ensure investment back into the supply base, making it easier for weavers to access funds and design inputs.

In 2009, Fabindia has picked up a 25% stake in the UK-based womenswear retailer EAST for an undisclosed amount with an option to acquire the rest by 2012

Supplier Arrangement Fabindia links over 40,000 craft based rural producers to modern

urban markets, thereby creating a base for skilled, sustainable rural employment, and preserving India's traditional handicrafts in the process.

Fabindia promotes inclusive capitalism, through its unique COC (community owned companies) model. The COC model consists of companies, which act as value adding intermediaries, between rural producers and Fabindia.

Predominantly rural based suppliers Designers work with weavers. The artisans sometime suggest

designs. No written contracts for suppliers behavior New suppliers usually come with referrals of existing suppliers New suppliers are first given trial orders Bank loans are provided to weavers No goods are returned back to suppliers, even if they are defective

or late

Core Competency

Definition

To provide its customers with quality products which reflect the unique Indian culture and tradition

To deliver hand crafted products which help in the empowerment of rural craftsmen through the Community Owned Companies (COC) Model

Fabindia’s Core Competencies

Core competencies are those capabilities that are critical to a business achieving competitive advantage.

Competitor Analysis

Organized Retail: Retail Stores (Shopper’s Stop, Pantaloons, Globus, etc.)

Weaknesses:-

1. Product diversity lacking

2. Stock as per running

trends and serve to fads-

inconsistency towards

churning out quality

offerings in hand crafts

3. Authenticity of handcrafts-

No craftsmark present to

validate the crafts as

against the Fabindia

offerings which have the

same imprinted on them

Strengths:-

1. Strong Pan-India presence

and awareness

2. Man-power expertise

3. Competitive Pricing

4. Robust supply chains and

short product development

life cycles

5. High marketing

communications spend

6. Quality consciousness and

adherence to standards

Government Initiatives ( Cottage Industries Emporium, Khadi Gram Udyog, State Government Department)

Weaknesses:-

1. Ambience-non-attractive

to modern day shoppers

are fed on the excellent

ambiences of the retail

formats.

2. Standardization defeats

customization hands-

down.

Strengths:-

1. Source of finances is

fixed and subsidies boost

these initiatives over

time

2. Tie-ups with foreign

governments facilitating

permanent trade of

national handicrafts.

Designer Boutiques: (Ritu Kumar’s, Ritu Beri’s,

Rohit Bal, Manish Malhotra, Sabyasachi Mukherjee, etc.)

Weaknesses:-

1. Exorbitant prices-not

meant for masses

2. Not a robust supply

chain-not meant to be

a pan-India operation

Strengths:-

1. Product customization

facilities-extremely

high

2. Highest level of

customer intimacy-

Relationship

marketing

Unorganized Sector:-Single location stores and local tailoring

units:-

Weaknesses:-

1. Source of finance-not

secure

2. Next-to-nil brand equity

3. Customer loyalty-low

4. Scarcity of skilled

manpower-lack of ability

to employ the same-

critical for expansion.

Strengths:-

1. Effective in addressing

high geographical

dispersion

2. Customization facility

available

Non Government Organizations & Self Help Groups

Weaknesses:

1. Lack of expertise on

part of the manpower

2. Lack of ambition to

spread out on a pan-

India or even a regional

basis

3. Lack scales of economy

Strengths:-1. Strong commitment

towards local communities

2. Helps in making its clients self-reliant

3. Encourages women entrepreneurs and hence a women can supplement the male’s income towards a family

Financial Comparisons

Financial aspects of Fabindia have been compared with Pantaloons

Though not a direct competitor, it represents the Indian Retail Industry very well

Financials for its direct competitors such as Anokhi, Co-optex etc. were not available, restricting comparison

This assessment contrasts the performance of Fabindia with respect to the biggest retailer of India

The interest coverage ratio of Fabindia is far higher than that of Pantaloons. Hence, raising funds through debt is not a big challenge.

2002 2003 2004 2005 20060.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

17.35

8.419.27

10.75

16.54

FabIndia Interest Coverage Ratio

2005 2006 2007 20080.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

3.27

4.13

3.31

2.06

PantaloonsInterest Coverage Ratio

The interest cost as a percentage of sales for Fabindia is far lesser than that of Pantaloons. Hence, raising funds through debt is again not a big challenge.

2005 2006 2007 20080.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

2.14

1.49

2.25

3.67

PantaloonsInterest Cost as a

Percentage of Sales

2002 2003 2004 2005 20060.00

0.20

0.40

0.60

0.80

1.00

1.20

0.48

1.091.14

0.96

0.69

FabIndia Interest Cost as a Per-

centage of Sales

The PAT as a percentage of sales of Fabindia is higher than that of Pantaloons. Though retail industry works at low margins, Fabindia’s margins are quite high. Hence, raising funds through debt is not a big challenge.

2005 2006 2007 20080.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

3.413.27

3.63

2.71

PantaloonsPAT %

2002 2003 2004 2005 20060.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

4.79

5.66 5.78

6.306.02

FabIndiaPAT %

Recommendations

Heavy investments in back-end of value chainSupply chain development for efficiency and quality

managementExpansion aiding strong regional presence

Outlets to counter regional competitionSourcing from local suppliers for outlet and other regions

will be easierGrowth through harnessing new customers

Cannot depend on existing customers to counter competitionMust create new customers in all segments

Tie up with different types of graduate schools for talentRural management graduates for managing supply chain

and rural initiativesManagement graduates for helping growth in front-end and

retail arms

ReferencesCompetitive Strategy by Michael E. PorterPrinciples of Marketing by Philip KotlerConsumer Behavior & Marketing Strategy by

J.P Peter & J.C Olsonwww.fabindia.comen.wikipedia.org

Thank You