StrategicManagementin

RecessionaryTimesfor
TextileIndustry

By:
AmitK.Srivastava
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StrategicManagementinRecessionaryTimes
forTextileIndustry

By:AmitK.Srivastava
Strategy is derived from the Greek word strategia which means generalship. In
military strategy refers to the deployment of troops in a planned manner to win over
enemy. Once the enemy is engaged the focus is on tactics and just as military forces
might take the high ground prior to engaging the enemy, might a business take the
positionoflowcostproviderormayprovideanyoneofthethree
(i)
(ii)
(iii)

operationalexcellence
customerintimacyor
productleadership.

Strategicmanagementisabroadbasedplanusingtheart,scienceandcraftofplanning,
implementingandevaluatingcrossfunctionaldecisionsthatwillenableanorganization
toachieveitsgoals.Itistheprocessoflayingdowntheobjectivesofacompanyandthen
allocating resources to implement the policies, plans, projects and programs. Strategic
managementseekstocoordinateandintegratetheactivitiesofvariousfunctionalareas
oforganizationsinordertoachievethebusinessobjectives.VariousmethodslikeSWOT
analysis,ProfitImpactofMarketingStrategy(PIMS)areusedtoevaluatetheprogressof
thebusinesstowardsitsobjective.

Effectsofrecessiononindustry

In recessionary times the most unavoidable effects come to play. These are 1) There is
incessant and fierce competition in terms of product quality and price 2) The price
whichthemarketiswillingtopayleaveslowmargin3)Themarketjeopardizesbusiness
of suppliers who dont perform according to expectations 4) Managers try and dabble
problems 5) Within the company various departments become incoherent and blame
eachotherforlackofperformance6)Thereisunprecedentedpressuretotakeactionsfor
boosting sales 7) There is a need to launch a new product at a unprecedented rate 8)
Mostnewproductseatintothesaleofexistingproducts9)Theconstantnewproducts
confuses and spoils the limping market 10) Sale force need to develop new strategies
andinnovativemethodstoboostsales11)Layoffsbecomerampantinindustries.

IsLayoffaSolution?

The times are not like 1929 when the recession was fierce .These days the market
fluctuateseveryweekifnoteveryday.Whenthemarketisbetter,theindustryshould
makeenoughmoneytocarrythroughthebadtimes.

Isretrenchingpeople,asolutioninrecessiontimesSomecompaniesevenafterbeing
cash rich have a tendency to layoff employee in bad times , they expect it to improve
theirbottomline.Thereareotherwaystocountertheproblem.Onceacompanyhasa
tendencytolayoffpeopletheycontinuedoingiteachyearofrecessionanditbecomesa
viciouscircle.Whatstrategycanacompanyadapttobeevergreeni.e.howcanithavea
continuousdemand,sothatitcanretainitspeopleandbeprofitable.Oneofthewaysof
defeatingthecycliceffectsistoserveseveralmarketsegments.Inthiswaythecompany
willhavedemandthroughouttheyear.Eachoftheemployeesshouldservenotjustone
segment of the market but many segments. Even when new products are being
developed one should make sure that, it requires similar resources. To accomplish
flexibility of workforce you have to segment the market not the workforce. The same
workforceshouldusesimilarresourcestocatertovarioussegmentsofmarket.Herethe
company should be careful that in its area of dominance where it has a competitive
edge,itshouldnottaketheentiresegment.

If a company has a choice between ten percentage wage cut and laying off ten
percentageofworkforce,whysomeoneonearthwillchoselater.Onrevivalcompany,
whichhasheldtheirworkerswoulddomuchbetter.Thisoptionoftenpercentwagecut
canactuallybuildsomemoraleandknitthecompanytogether.Iftheeconomicturmoil
ends faster than expected then the layoffs would prove a disaster. If not enough
employeesarelaidoffthenthebottomlinewillnotbeeffectedtoagreatextent.Inany
scenario the retained employees will have a low morale. They will also tend to loose
faith in the company. Alternate to layoff the companies can propose voluntary
retirementsorsalarycuts,hiringfreeze,reductioninworkinghoursorcutsinbusiness
travelsandcostlyperquisites.

Howareloommanufacturersdealingwithslowdown?

For the loom manufacturers 1)when the looms sale are down 2) where capital
requirements are similar and 3) there is not much difference in resource. The loom
manufacturers have diverse strategy to lure customers to stay afloat. Some of the
manufacturers are using innovation as a strategy to boost sales, build a strong market
positionandhaveacompetitiveadvantage.

Quick Style Change Developed by various loom manufacturers in their own ways
ensuresstylechangeinthirtyminutes.Thisleadstoimprovedloomshedefficiency.The

knottingoperationsanddrawinofthewarpcanbedoneinthepreparationdepartment,
thusimprovingtheworkloadandavoidinglongerdowntime.

Leonardo is integrated with VQSC very quick style change, it ensures 1) Reduced
machinedowntime2)Timeneededtoadjustsettingontheloom3)Toloadnewstyle
change as far as possible 4) Also the warp stop motion, frame, reed and beam
unloading/ loading operations have been made easier with the help of rational and
reliabletechnicalsolution.

PicanolhasdevelopedanewtechniqueQSC,inwhichthestylechangeisachievedby
swapping whole back part of the split frame, with the warp beam, the backrest and
supportingwarpstopmotion,theharnessandthereed.Additionallythisuniquesystem
makesitpossibletocarryouttheentirearticlerelatedsettingonthewarpside,outside
theweavingshedbeforestylechange.Thisultimatelyreducesthelaborrequirementand
increasestheloomefficiency.

Picanolhasalsoincorporatedaninexpensivealternativetotuckedinselvedgethetwo
ends full turn leno type Moto leno with synchronous motor drive. Picanol has
developed unique ELSY full leno selvedge motion, electronically driven by individual
stepper motors. The selvedge crossing can be programmed independently of shed
crossingevenwhilethemachineisinoperation.Theearlierpositionofrethreadingcan
be set by a simple push of a button. This helps in better selvedge appearance lesser
selvedge breaks and easier and precise handling of selvedge mechanism. It helps to
reducethedowntimeofmachine.

LetusstudyBenettonindustryasanexamplewhichhasutilizeditscorecompetences
to wade through tough times. We will also find out how the company has used
flexibilityandresponsiveness,continuousupgradationtotheiradvantage.Benetton
hasalsoshownhowtomanagefashionwithentrepreneurialvision.

Product strategy: Benettons products are different from other products as the
company used bright unusual colors and aimed at youth market. Alongside this
marketing strategy the Benettons intention is to have a constant product renewal by
makingasmallchangeinolddesigns.

Luciano Benetton has said, I had enough sensitivity to guess that fashion is an
important component,but one that can be exploited in greater depth. In contrast one
competitorhasarguedthat,Benettondoesnotsellfashionhesellscolor.Foracquiring
industrialscaleproductionheadoptedfashionandforretailingtheaimwastoeliminate
themiddlemen.

SamplingForsamplethecompanycollectstwotimesayearoneforautumn/winter
season and the other for spring / summer season. The sample would be developed by

thedesigngroupincollaborationwithmarketingofficers.Themarketingofficerswould
performthetaskof1)preliminaryselection.communicationwithdifferentgroupssuch
assalesrepresentative,shopkeepersandcheckingpoints.

In general, a non hierarchical system exists at all stages in Benetton which allows a
continuousexchangeofinformation.Theydonotmissanyopportunitytobringanew
sampleintonoticeoftheentireteam.Ifagoodsampleismadeavailableatanypointitis
putasfashionflashandinsomecasesitistakenintoproductionimmediately.

Thecompanyhasmanyagentsworldwide.Eachagentisresponsibleforaregion.The
agent collects samples from the company and presents it to the Benetton shop owners
through fashion shows and video presentation. Within a month of fashion shows the
agentcollectsordersfromshops.Benettonsdiscardaboutonefifthsoftheorderasthe
quantitiesarenotenoughforaproductionrun.
Productionofgarments

Theproductionprogrammesforquantityandsequencearenowdecided.Theykeepin
mind the product mix and assortment that will go in each shop. The shopkeeper buys
garmentsintencolorsoutofwhichthecustomerspreferonlythreebutitisnotpossible
tofindout whichthreewouldsell.Keepinglargernumberofcolorshasacompetitive
advantage.Thesourceswhoindicatewinningcolorsare1)Pilotshops2)Marketingstaff
3)Agents

Benettonnowhasthethreewinning`colors,italsoadaptssomemorecolorsonthebasis
ofthesethree.Theseasonlastsforfourmonthsandnowtheymassproduceonthebasis
ofthethreecolorsandthisisvitallyimportantcompetitiveadvantage.

The Benetton mechanism works on the three winning colors. Although orders are
procured,themanufacturedarticlesforspecificcustomersarekeptundyedastheyare
givenanoptiontomodifycolorsbetweenplacingordersanddyeingprocess.Hencethe
clientsmaybenefitfromearlyindicationsofchangingcolors.Thepreparationofundyed
knitwear and the capacity to redefine the assortment just on the basis of color are
perhapsthemostimportantstrategiesintheBenettonformula.

BenettonworksinrealtimeManytimesreordersoccurduetounforeseendemandfor
certain articles that are introduced after sampling. These are produced after the
samplinginsmallnumbersandareintendedasacontingencystrategywhentrendsmay
change.ThismakesBenettonstoworkinrealtimeasmuchaspossibleandallowsthem
to be updated in fashion atall points in time till the lastminute before manufacturing
takesplace.ThisisafeatherinBenettonscapandithelpsinrapidturnoverofarticles.

TheBenettonspromotesamplesthatcanbemassproducedintheplants.Theyhavea
good system of distribution, and they can easily divert an order to a more or efficient

sellingshopordestinationatanypointoftime,thusimprovingturnover.Foranynew
sampletheymakesurethataminimumsizehasbeenreachedforeconomicproduction.

The company has upgraded its information networking system and collects all
importantinformationsfromkeypointsofthesystem.Theyhavelinkedallsalespoints
tothenetworkinacashregisterprojectthiskeepsallthedataofsales,andeverytwenty
fourhourstransmitsdatatoacentralcomputer.

TheManufacturingStrategiesatBenettons

TheBenettonsseethemselvesasmanufacturerswhohaveputfashiononanindustrial
level, when most of Italian fashions are still at the level of the artisan. Benettons use
subcontractors for various stages of manufacturing like other manufacturers. The
company designs, dyes and finishes fabrics but the hightech weaving have been
contractedout,thedistributionofgarmentsisdonebythecompany.

WhenBenettonsstartedproduction,theywerefirsttostartwithfullingprocessatleast
ten years before any one else in Italy. During the most rapid growth period, the
companyimplementedapolicyofdiversifyingthelocationsofmanufacturingunits.

IntheCosignanaplantswherejeansandcasualwearareproduced,CADsystemforthe
design and cutting of material has been installed. As the rest of the company, the
experimentalmentalityisdominantattheplantlevel.LucianoBenettonbelievesthatthe
mechanical plant should not should not create problems but resolve them. We have
neversurrenderedinthefaceoftechnicaldifficulties.

AsitisverypopularintextileindustryBenettonsalsopurchasedoldmachinerywhich
were then adapted to new uses by technically modifying them In the beginning for
hosiery machines they purchased old machinery on scrapmetal price and reutilized
after modification to produce knitwear this reduced the cost of manufacturing in the
initialperiod.

Theproductionrunofanyorderisstartedwhencompletenumbersareprocuredfora
particular article. This is needed for standardization in production. The system also
utilizestheplanttofullcapacityatallpointsoftime.Astheproductiontakesplaceonly
when orders are procured, there is no ware house for finished materials (excluding in
some minor cases) so here the production is pulled out from manufacturing and the
producedgoodsdonothavetowaittobepushedinthemarket.

Thesamplebasedproductionisabout80percentoftotalcapacity,balanceisforprnto
moda (updating current fashion) and reorders where a good relationship between
productionmarketingandstockcontrolisessential.

Jobworkorsubcontracting

AtBenettonssubcontractingisrelieduponforareasthatareconsiderednonsensitive.
Forexampleintheproductionofjeans,cuttingisdoneinternally,finishingiscontracted
out,andqualitycontrolisinternal.Forknitting50percentofknittingiscontractedout
most of sophisticated knitting is done internally, cutting and assembling is done
externally,alldyeingisdoneinternallyandfinishing,ironingandpackagingaremainly
doneexternally.Mostofthesubcontractorsareusuallyspreadwithin50milesofthe
main factory. The units can have number of workers varying from ten to hundred
depending on the size the contractors are able to do a single or two stages of
manufacturing. As for the choice of contractors Benettons have better relationships
outsidetextileindustryastheysaythatthesepeoplecaneasilybemoldedinBenettons
system. They are also more trust worthy and ready to give first priority for their
production. It is not uncommon for Benettons to have equity in these factories. The
paymentismadeforpiecerateandthesystemreducesoverallcostofmanufacturing.
MarketingstrategiesatBenettons

Luciano Benetton says, I havent invented any thing: I listened to people, and I
understood them. In the marketing formula importance is given first to the
representative, then the shops personnel and finally to the clients. The company does
not use traditional franchising mechanism but has exclusive Benetton outlets for its
strongpresence.

TheBenettonoutletsareintheareawhicharemostfrequentedandareinthefrontline.
Themanagersarecarefullyselectedtomaintainagoodimage.InMilan,thereisonein
ViaMontenapolene,inNewYorktherearefiveinMadisonAvenue,andinLondonand
Paris the shops are located in key shopping centers. The concentration of outlets in
specific parts of the city is deliberate and this has contributed to the companys
image.Benettons did not bank on the traditional out let as they diffused the product
imageandwerenoteffectivetoconquerthecustomer.

The outlets are selected by sales representatives and they receive a commission on the
sales. As for the outlets they prudently recon that in fashion 75 percent of the
merchandise purchased by the outlet will be sold at a 85 percent mark up. The
remaining 25 percent will be sold at a losssay about 20 percent. Labor cost, rentand
utilities represent about 9.5 to 7 percent of the turnover respectively. An average
paybackperiodforashopisthreeyears.

The sample collection depends on the hunches of outlets after which some fine
adjustments are done to make a final sample. In the set of outlets if there is a very
intelligent owner he is called Top of the class they are better forecasters of fashion
trends at the outlets. At the headquarters they give special attention to the top of the
class and expect guidance from him for the latest fashion. There are some fixed

merchandizingpoliciesforallBenettonshops.Forendoftheseasonsaletheopeningof
shops, duration of three weeks and prices are all standardized after this the shops are
emptied and restocked. The restocking process takes some time as the fashion
componentchanges.

The shop manager and assistant also get involved in the choice of goods and it helps
themtoanswerclientsandaredeeplyinvolvedinsales.Theassistantshouldknowhow
todealwithpeopleandtodressthewindow.

TheBenettonhaveapartialequityinmostoftheshopsandownonlyafewcompletely,
though in these shops also they want to liquidate most of their holdings. They have a
clear understanding and argue, we are interested in manufacturing; we are not
interestedininvestinginoutlets.

LoudAdvertisements
As for grabbing the attention of potential buyers they have a strategy of loud and
controversial advertisement like in Italy. They showed a newborn baby with an uncut
umbilicalcord?AdyingAidspatientwasshowntoraiseaissue?Thebloodedshirtofa
deadCroatsoldier?Noneoftheimagesshownwereremotelylinkedtoanythingsoldby
the Benetton clothing chain. The photos had a fantastic effect on public opinion. The
Benettongroupwantedtoprobeemotionsandstirdebate,andsucceeded.Thecommon
themeamongsttheadvertisementwasthebattleagainstprejudiceandissuesofglobal
importance.

MarketShare
America
MistakesandRemediesinAmerica

Mistakes:

They encouraged retailers to open outlets very close .This led to self
cannibalizationalsoBenettonfailedtosupplythemadequately.
Therewasafashiondisasterastheytriedtoselltheirlargestsellingbrightcolor
sweaters (successful in Europe) these products were promoted as companies
signatureproductsthestylealsodidnotsuitAmericantaste.
The youth who were targeted for sales were habitual to lower GAP pricing
strategies. They found it hard to exceed their usual budgets. They were also
unawareofthefactthatBenettonsolddesignersuitsalso.

They did not analyze American sentiments and failed to do any meaningful
advertisements as they entered US. One of their advertisement campaign
showedAmericanPresidentwithHIVlesions,thiscausedmanyloyalAmericans
toboycottBenettonstores.

Alltheabovefactorswereresponsiblefornegativesalesgrowthandledtoaclosureof
350shopsoutoffivehundredinthemidnineties
For cheaper goods sale Searss departmental store was chosen. Sears and Benetton
introduced new line of juniors, childrens and mens apparel. Unfortunately this fell
through due to a wrong advertisement given by Benetton which effected American
sentiments.SearshadtoremoveallBenettonarticlesfromshelvesduetoprotests.

Remedies
Benettonofferedamorediverseclothinglinetostores.
To initiate feed back information from stores they installed a point of sale
system. This was upgraded to give details of size and color. With this system
theywereabletorespondquicklytochangingmarketstrends.
EdizioneaSportsystemshopwasacquiredbyBenetton.Itinvested57percentin
theequity.Thisgaveagreatboostinsales.
WhenBenettonstartedsellingproductsonthe netitssalesimprovedasnowit
couldsellinplaceswhereitdidnothaveshopsandhadlowpenetration

Financeandcontrol

Benetton being a textile company has two seasonal peaks and a huge number of
accountsarereceivableinAprilandOctober,thedebtsarefinancedbybankoverdrafts.
The money is collected within ninety days. This is calculated from the day goods are
shippedoutofthemanufacturingplant.

AstheBenettonretailersarewillingtopayearlierthanthespecifiedtime,theyareable
tobypassbankersorfinancialinstitutionsinvolvementthishappenstobeafundamental
elementinthegrowth.

Thestrategyoforganization

In Benetton there is no organizational chart, it is not clear as to who does what. No

structure exists and it is not clear how every thing is held together. Yet they make a
goodprofit.

Benetton has always preferred to promote people within organization as the company
grows. The opinion is that induction of an outsider can demoralize middle level
managers.Somequestionsareaskedabouthowmuchcanaorganizationgrowbecause
there is a danger of reaching the threshold of ones own competence. According to the

foundersofBenettonAsagrowingentrepreneuronceabasicideahasworkedoutone
mustinvolveotherpeople.Itisessentialtotransmityouridea,getthegroupacceptit,in
ordertoworktogetherasateamsaysoneofthefounders.

Another strategy is to simplify relationship for example the franchise contracts are
simpleandtherelationshipwiththeclientsisalsothoughtforlongterm.
BenettonreapedbenefitsofproducinginIndiaandhadcutpricesover20percent.The
lower cost suppliers in India also supply the latest trends in India as well as in south
Asiancountries.WhenexportedfromIndiathetariffsarealsolowerandthisleadstoa
furthercostcuttingandhencehighersales.

Conclusion
Thuswehaveseenhowthroughstrategicinnovationsomemachinemanufacturersand
textile companies are competing in a shrinking market. The textile factories should
monitorthethreemeasurements(i)Throughput(ii)Inventory(iii)Operationalexpenses
and develop operational strategies for running the plant. When the markets are not
good, its the leadership that should device strategies to reverse the situation through
innovation.

References:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Strategy(1967).B.H.LiddellHart.BasicBooks.
StrategicPlanning(1979).GeorgeSteiner.FreePress.
TheRiseandFallofStrategicPlanning(1994).HenryMintzberg.BasicBooks.
TheConceptofCorporateStrategy,2ndEdition(1980).KennethAndrews.Dow
JonesIrwin.
WhatisStrategy?MichaelPorter.HarvardBusinessReview(NovDec1996).
CompetitiveStrategy(1986).MichaelPorter.HarvardBusinessSchoolPress.
StrategicinnovationCharlesBadenfullerandMartynpitt.
THEGOALbyEliyahuM.GoldrattandJeffCox
THEGOAL2byEliyahuM.Goldratt

AbouttheAuthor:
Theauthor;Mr.AmitK.SrivastavaistheCEOofNamoTextileCo.Pvt.Ltd.

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