VISION

LALBHAI GROUP

To Achieve Global Dominance In Select Business Built Around Our Core Competencies, Through Continuous Product And Technical Innovation, Customer Orientation And A Focus On Cost Effectiveness.

CORE VALUES

CORE VALUES >> OPENNESS AND TRANSPARENCY We are open and transparent in all that we do and say.This applies to all working relationships at every level.Involvement,trust and willingness to listen are the guiding principles for decision making. We believe in open communication,offer freedom to speak one's mind & act demonstrating openness & clarity in all our actions. >>DIGNITY OF THE INDIVIDUAL AND THE INSTITUTION Each individual is an integral part of the institution,and due diligence is core to both.The human dignity and worth of an individual is acknowledged and maintained at all times.Nothing shall impose upon the dignity and stature of the institution which has its roots in these articulated core values. >> INTEGRITY

This is cherished above all and whatever we say, do and the way we do it, will emphasize our integrity and dependability.Our employees, products and services will clearly communicate this strength to our suppliers,customers and all stakeholders.We will practice integrity in its real sense in all our personal and business actions. >> TRUSTEESHIP A strong sense of ownership and commitment towards the organization and the business as a whole,is the basic premise of all actions.We will manage our institution as a trust,as empowered leaders and do all that needs to be done ethically for the purpose of the institution for today.We will leave behind a vibrant institution for the future of this nation and the world at large.

THE LALBHAI GROUP OF COMPANIES

THE WAY WE WORK

THE WAY WE WORK >> CUSTOMER ORIENTATION The underlying principle being that progress can be mapped only in terms of customer orientation, both internal and external, in all its spheres of quality, service and reliability. Our 'Customer Processes' are proactive & relevant and are perceived as such by our customers. Customer satisfaction is the vital purpose of our business. This necessitates providing quality,reliability & a high level of service in all our business dealings. >>LEADERSHIP AND INNOVATION This stands firmly on a foundation of commitment and leadership in all that we do or say. Strong evidence is present in our actions, an emphasis laid on an opportunity to free fly and to set standards of excellence in performance. All this is manifest in an environment of innovation & leadership. >> ENTREPRENEURSHIP All tasks are tackled with a spirit of entrepreneurship, so as to contribute in a committed and holistic manner. Delegation of substantive control and decision making exploiting business opportunities globally giving meaning to the vision. Individually & collectively have the courage and conviction to pursue set goals to its logical achievement. >> GLOBAL MINDSET

This is a way of thinking that goes beyond geographical and cross cultural boundaries. Ensuing this, all decisions are made from a global perspective. We believe that the attainment of global leadership is core to our business mission and an attitude to make it happen is indeed in the mindset.

THE LALBHAI GROUP OF COMPANIES

Overviews
Venture into the world of RENOVISION Search any dictionary and you wont find the word. We had to coin it. It means a new way of looking at issues Of seeing more than the obvious. It is our corporate philosophy. The time - 1931, The event - the Swadeshi Movement ... The result - non availability of fine and superfine fabric in the Indian market. At this juncture, The Arvind Mills was set up with the pioneering effort of the Lalbhai brothers. With the best of technology and business acumen Arvind Mills became a true multinational. We chose to invest strategically, where demand was high and quality required was superlative. Since then, there has been no looking back. Arvind Mills the flagship company of the $ 498 million Lalbhai Group has now focused its attention on a few selected core product groups. Such a focus seemed pertinent to prepare the company for playing a dominant role in the global markets. Arvind today A one stop shop for all cotton fabric requirements Our product range spans the entire gamut of cotton fabric. We manufacture world class denim, high value shirtings, Bottomweights (gaberdines/chinos) and Knitfabics. Our new Multi Product Textile facility at Santhej, 30km from Ahmedabad is a testimony to our focus on value added Textiles. Spread over 430 acres and built with an investment of Rs.1200 crores, Santhej facility is a testimony to our focus on value added textiles. Widely regarded as one of the largest and most modern multi product textile facility, it has made Arvind a one-stop-shop for all Cotton fabric requirements. Arvind today is reinforcing its marketing efforts by focusing on brand led development. We expect to strengthen our existing relationship with global brands such as Marks & Spencer, V.F. Corporation, Calvin Klein, GAP, Benetton, Polo, Esprit, Tommy Hilfiger, Hugo Boss and Liz Clairborne to list a few by developing value added products and providing superior level of service. The complex has enhance Arvind's product range and made it more responsive to the changing requirements of some of the leading garment brands. We have already achieved accreditation from Marks & Spencer and GAP for all our mills and Laboratories. To turn our mission "TO ACHIEVE GLOBAL DOMINANCE IN SELECT BUSINESS SEGMENTS" into reality, our manufacturing and marketing operations are now spread across the globe. We have a presence in 70 countries across the world. Analyze any corporate house entering the consumer business and you will inevitably need to look closely at its brand building and marketing strategy. But consider Indias biggest textile house that has products tailored to fit virtually every segment of the consumer market. The brands fostered by Arvind include Lee & Arrow for the super premium segment, Flying Machine & Excalibur for the premium segment, Newport for the economy and innovative

Ruf & Tuf for the mass market. This is not all. We have recently made a foray into children segment by introducing Lee Youth, Ruggers Kids & Newport Kids. Best known for its global dominance of the denim market, Arvind Mills, with an annual turnover of $ 251 million FY 98 accounts for more than 75 % of the total denim manufactured in India. Today, we are world's third largest manufacturer of denim, rolling out 120 million meters every year and largest denim exporter. In India, we are the largest denim manufacturer, the largest garment manufacturer in the branded segment and the largest retailer of jeans. Arvinds other major presence includes Air Conditioning & Refrigeration, Telecom and Financial Services. Global Strategy and brand marketing apart, Arvinds key competitive edge comes from its technological innovation. With more than $ 130 million invested in technology over the last five years alone, Arvind has taken a quantum lead over its rivals. The company is in the process of expanding its existing garmenting production facilities in India, Mauritius and Madagascar and this will enable it to move up the value chain considerably. The most important factor in a competitive environment is something that has not been comprehended in India; the need for articulating a vision and then bolstering it by ironing out the glitches in the strategic focus. OUR VISION "To achieve global dominance in select business built around our core competencies, through continuous product and technical innovation, customer orientation and a focus on cost effectiveness" Our society is at the threshold of a paradigm shift with the rapidly expanding economy and the millions of opportunities it throws into the laps of men and women. All along Lalbhai Group has maintained a responsive yet level-headed attitude towards the society and its constituting individuals to create a corporate culture that fosters excellence. Working in this direction we have created a learning environment that nurtures individual talent and intellect. It provides a platform that challenges the individual capabilities urging him to constantly strive forward towards greater heights using development as the fundamental tool. We infuse in individuals a spirit of entrepreneurship which gives courage and conviction to pursue set goals towards logical achievement and a global mindset that transcends geographical and cultural boundaries evolving and organizing him to be a world leader. All this is manifest in an environment fostering innovation and leadership. Drawing from our Team based structure we encourage individuals to mesh up into cross cultural teams in all operational processes. This process provides opportunities for individuals to match their capabilities with organizational expectations creating a mechanism for updating the system. Coalescing corporate needs with the individual needs is crucial. These processes would articulate the connections between corporate success and individual behaviour, instill institutionalized processes to reinforce connections, and catalyze the chemistry that allows the connections to be translated into action which is beneficial for both the organization and the individual. A strong sense of ownership and commitment towards the organization and the business as a whole, is the basic premise of all our actions. We manage our institution as a trust, as empowered leaders and do all that needs to be done ethically for the purpose of the institution. We create a vibrant institution for the future of this nation and the world at large. We strive forward to be the best. Best is a matter of standards - and we set our own standards. We inherit nothing. We stand at the end of no tradition. We may perhaps, stand at the beginning of one...

The Lalbhai group, founded by the 3 Lalbhai brothers - Kasturbhai, Narottambhai and Chimanbhai - in 1908, has grown to become one of India's most diversified business houses,

GROUP OVERVIEWS

with a significant presence in the textiles, ready-to-wear, chemicals and telecom industries in India. Each company in the group, in its own way, pursues a single mission - to be the benchmark in its' industry. To achieve this, we have tied-up with a variety of companies ... all world leaders in their respective fields.

LALBHAI GROUP COMPANIES

TEXTILES THE ARVIND MILLS LTD. ARVIND PRODUCTS LTD. GARMENTS ARVIND CLOTHING LTD. ARVIND FASHIONS LTD. CHEMICALS ANIL STARCH PRODUCTS LTD. ATUL LTD. TELECOM ARVIND TELECOM OTHERS LALBHAI REALTY LTD. ANUP ENGINEERING LTD. TIED UP Industry Company Collaborator Chemicals Amol Dicalite Limited Grefco Inc., USA Chemicals Anil Starch Products Limited CPC International Inc., USA Garments Arvind Clothing Limited Cluett International, USA Garments Arvind Fashions Limited V.F. Corporation, USA Telecom Arvind Telecom E.F. Johnson, France Telecom, France Textiles The Arvind Mills Limited Alamac Knits Fabrics Inc., USA

The Arvind Mills Limited The flagship company of the Lalbhai group manufactures and exports denim (over 150 varieties) and shirting. Through its subsidiaries, it also manufactures and markets Arrow shirts and Flying Machine, Lee, Newport and Ruf and Tuf casual-wear for the domestic market. The company has a tie-up with Alamac Knits Fabrics Inc., USA, to manufacture knits. Arvind Products Limited Arvind Polycot Limited This company, formerly known as Saraspur Mills Ltd, was on the verge of liquidation following the textile industry recession during the late 1980s. In 1990, Arvind took it over, gave it a new name and a revamped product line and turned it around. The Ahmedabad-based unit makes cotton and blended fabrics for the Indian, as well as, export markets. The company is in the process of setting up a facility to manufacture bottom weight fabrics. Arvind Polycot is an associate company of The Arvind Mills Limited.

Arvind Intex Limited Ahmedabad-based Arvind Intex was a sick unit - The Nagri Mills Ltd - that Arvind took over in 1991-92, and rehabilitated since. The company produces cotton yarn for the Indian and international markets, and recently commissioned a completely modernized spinning unit to produce ring spun yarn for the Indian market. Arvind Intex is an associate company of The Arvind Mills Limited. Arvind Cotspin Limited Arvind Cotspin, located in Kolhapur, Maharahtra, is one of India's largest 100% export-oriented spinning mills. The company manufactures 100% cotton yarn and double yarn in a wide range of counts and varieties. It intends to expand into gabardines. Arvind Cotspin is an associate company of The Arvind Mills Limited. Arvind Clothing Limited Arvind Clothing, an ISO 9002 company, is a collaboration between The Arvind Mills Limited and Cluett International Ltd. (USA). The company manufactures and markets the well-known "Arrow" brand of shirts, currently a market leader in the premium shirts category in India. Arvind Clothing is a wholly-owned subsidiary of The Arvind Mills Limited. Arvind Fashions Limited Arvind Fashions is a tie-up between Arvind Mills and VF Corporation (USA). The company manufactures and markets "Lee" jeans and accessories in India. Arvind Fashions Limited is a wholly-owned subsidiary of The Arvind Mills Limited. Anil Starch Products Limited Anil Starch Products is a leading manufacturer of maize and modified starches and other starch based chemicals and intermediates to cater to the needs of the textile, pharmaceutical, chemical, paper and other industries in India. Its' product line also includes white and yellow dextrins, liquid glucose (corn syrup), dextrose monohydrate, anhydrous dextrose, gluconates, sorbitol, enzymes, sulfuric acid, activated carbon, pharmaceuticals, and fertilizers. Anil Starch Products has a collaboration with C.P.C. International Ltd, USA. Atul Limited The Rs 600 crore Atul Ltd., set up in 1947, is one of Asia's largest and greenest chemical complexes. The company has grown to become India's largest dyestuffs manufacturer, making and marketing over 250 varieties of chemicals and intermediates, from basic commodity chemicals to

specialty intermediates required for the agrochemical, defense, dyestuff, leather, paper, pharmaceutical and textile industries. Atul exports to more than 50 countries. Arvind Telecom Arvind Telecom manufactures C-DoT based RAX's. The company has tied up with E. F. Johnson (USA), Comdial (USA) and France Telecom to offer value-added telecom services, and is ideally poised to capitalize on the liberalization of India's telecom sector. Arvind Telecom is a division of The Arvind Mills Limited. Anup Engineering Limited. Anup Engineering manufactures equipment for the chemical, petrochemical, pharmaceutical, fertilizer, dairy and allied industries. The company is on the lookout for collaborations with international leaders, to strengthen its' technological base, and will welcome business inquiries in this regard. Anup Engineering is an associate company of The Arvind Mills Limited. Lalbhai Realty Limited Lalbhai Realty is Arvind's foray into the India's booming real estate business. The company intends to capitalize on the demand for housing and real estate in India, by setting up state-of-the-art office and residential complexes. Projects are already underway in Mumbai, Delhi, Bangalore and Ahmedabad. Lalbhai Realty is an associate company of The Arvind Mills Limited.

ACCOMPLISHING CHANGE : ARVIND'S EXPERIENCE Sanjay Lalbhai REVIEW of STRATEGY & NEED TO CHANGE POWER - LOOMS THE NEW ENTRANTS SUPPLIERS to THE INDUSTRY FORCES RANGED AGAINST THE COMPOSITE MILLS OBJECTIVES of NEW STRATEGY FEASIBILITY of NEW STRATEGY AND IDENTIFYING NEW PRODUCT GROUPS NEW STRATEGY STRUCTURE, SYSTEM & SKILLS ACCOMPLISHMENT of NEW STRATEGY PLANS CONCLUDING REMARKS

HISTORY

At the close of the Year 1986, Arvind decided to change. We concluded that Arvind must change its strategy, structure, systems and infuse new skills in the organization. In our view, Arvind's experience attaining change would be of interest to a wider audience. We believe that many people would like to know about the events that triggered the decision to change, and the process that we followed to cause the change. We are, therefore taking the opportunity of sharing Arvind's experiences of effecting change. Towards the close of 1986, the chairman of the company, Arvind Lalbhai, and I decided to undertake a major review of the company's strategic posture. In that year, Arvind Mills earned the highest profit in its history of fifty-five years. Arvindbhai and I came to the conclusion that now was the time to change the strategy if there was a need to do so. REVIEW of STRATEGY & NEED TO CHANGE

In reviewing our strategy, following Michael Porter, we decided to examine the forces that shape the industry structure. These forces comprise the new entrants, the power of the suppliers, the emergence of substitutes, the power of customers and the rivalry among the firms in the industry. The government policies influence these five forces and indirectly shape the industry structure. As we began to examine the Indian textile industry through the lens of the theory developed by Michael Porter, some disturbing features of the industry began to emerge. Our discomfort stemmed from our analysis that the five forces were ranged against the composite mills. In addition, the government policies were tilting the balance of the five forces against the composite(Mills, Which under one roof spin yarn,weave fabrics and chemically process the woven fabrics are known as composite mills.)to mills.To support this assertion, let me summarize the salient features of our analysis. Top
POWER - LOOMS THE NEW ENTRANTS

Government of India has encouraged the power-looms ever since India became a sovereign nation.These small units, which operate in the unorganized sector, only weave fabrics. The prolonged strike by the workers in Bombay's textile industry, in 1981, helped the emergence of the power-loom sector. No barriers to entry in the industry or exit from the industry are the major competitive advantages of this sector. The power-looms, in 1986, were the new entrants.

Composite mills, in 1986, faced both the entry and the exit barriers. These mills could not expand capacities because of the licensing policies prevailing in 1986. Similarly the composite mills could not divest the unviable activities even if they wanted to do so. The new textile policy of 1985 promised to lift the exit barrier. We were almost certain that this part of the policy, could not, and would not be carried out. Emergence of the power-loom sector posed a serious threat to our well being. This was so because the power-looms could easily copy most of the products in our product portfolio. We had to keep in view, though still distant on the horizon, a potential new entrant, namely the overseas exporter. It was becoming increasingly clear that the Government of India could not isolate indefinitely, the Indian economy from the global economy. This potential new entrant was also a matter of great concern to us. Top
SUPPLIERS to THE INDUSTRY

Important suppliers to the industry include farmers, large chemical companies, State Electricity Boards, Coal India and the labour unions. Farmers supply, to the industry, cotton an important raw material used by the industry. In a composite mill, the cost of use will be about 40% of the fabric sales. Large chemical companies supply synthetic fibres and synthetic yarn, another important raw material used by the industry. State Electricity Boards supply electricity, an important input in the production processes of the mills. Similarly Coal India supplies coal another important input to the industry. Finally the labour unions control the work force employed in the mills. Beyond any doubt, all these suppliers are powerful groups and can influence the government policies to their advantage. The 1985 textile policy promised to supply, at prices near the international prices, all the inputs used by the industry We came to the conclusion that the Government of India couldn't carry out this parr of the policy. The pressure from the domestic suppliers of these inputs will prevent the government from doing so. Prices of cotton, we argued, would continue to rise. Reason leading to this conclusion was that, virtually no imports would be allowed during the years when cotton is scarce. Similarly Government of India would allow exports during the years in which there would be Excess supply of cotton. Import duties on synthetic fibres and yarn, according to our analysis, would remain high, to "protect" the domestic industry.The dearness

allowance, which forms a sizable portion of the wages, in our judgement, would continue to rise because of inflation. Also, a reduction of the labour force, through increased productivity, we reasoned, would be virtually impossible. Research highlighted the fact that the household sector, the major customers of the industry, wanted better quality of fabrics. Experience showed that the government of India, viewed better quality of fabrics as fabrics for "elitist consumption". Government of India, we argued, will tax these fabrics heavily. The elite in the society, after all, must pay for the government expenditure. The high incidence of taxes would have an adverse impact on the composite mills in two ways. First, the consumers would buy better quality of fabrics but would restrict their purchases because of the lack of purchasing power. Second, small units will gain a competitive edge over the mills through the evasion of taxes. As the Abid Hussain committee, was to confirm later, the small units in the unorganized sector, would evade these taxes on a large scale. Textile policy formulated by the government in 1985, proposed to make available the latest technologies to the industry, at prices close to the international prices. We concluded that the government would not carry out this policy. Import duties being a very important source of revenue to the government, and the government will not allow any decline in revenue from this source. Similarly the Government was keen on discouraging imports. To accomplish both these objectives, the government would continue to overvalue the Indian currency and impose high import duties to discourage imports not stopped by non tariff barriers. Top
FORCES RANGED AGAINST THE COMPOSITE MILLS

In short. all the forces were ranged against the composite mills. The new entrants and the trade channels would exert pressure on prices. Suppliers, because of their power, would continue to raise prices of the goods and services they supplied to the composite mills. It was clear as crystal that the costs of the composite mills would rise unabated. In addition, the Government of India and many State governments either owned or managed loss making composite mills. Central and the Stare governments financed the operations of these loss making firms from the government resources. It is even customary today, in government circles, to say that the National Textile Corporation is the best employment guarantee sheme available in the nation. Rivalry among

the existing composite mills, we argued will take the form of price wars and competition for providing better and better "incentives" to the trade channels. As we completed our analysis and examined the grim scenario, we came to the conclusion that we must change our strategy and change quickly. Top
OBJECTIVES of NEW STRATEGY

We reasoned that the new strategy must allow us to achieve two objectives. First, it must help in protecting the company's fortunes by neutralizing the adverse impact of the five forces. Second it must put the company in a position from which, the company can alter the balance of the five forces in its favour. To achieve this purpose, we examined the demand structure of the industry and the government policy. In the demand structure, we stopped some promising trends. These were : The household sector, as stated earlier, was buying better quality of fabrics but curtailing quantities of purchases. The domestic readymade garments industry was growing rapidly and supplying products to both international and Indian markets. The International trade in yarn, fabrics, and clothing was large, growing and shifting in favour of the developing countries. Most of the government policies, as we have pointed out earlier, were not in favour of the composite mills. The government policies were extremely favourable towards all firms that were large exporters. Tilt of the government policies towards exporters stemmed from the chronic problems faced by the nation in managing its balance of payment. Considering the trends in the demand and the favourable policies of the government for large exporters, it was clear to us that we must redesign our product portfolio. We must design, we concluded, our product portfolio so that we can export most of our production to avoid competition from the power-looms. This, we concluded, must be the essence of our new strategy.

Top
FEASIBILITY of NEW STRATEGY AND IDENTIFYING NEW PRODUCT GROUPS

In giving this strategy a concrete shape, we had to answer two questions. Does the Indian textile industry have any competitive advantages ? This was the first question that we had to answer. In which product groups we should compete ? This was the second question that we needed to answer. Conventional wisdom told us that the Indian firms in the textile industry are not globally competitive. We decided to examine this question afresh. We began to examine the competitive advantages of the Indian textile industry, using the frame work developed by Michael Porter. Our analysis showed that the Indian textile industry has six intrinsic advantages. The six advantages are : Emergence of sophisticated Indian buyers who demand products of world standards. Emergence of an Indian garment industry that is a discerning buyers of fabric. Existence of world class textile training and textile research institutions in India. Availability of highly trained, experienced and skilled textile technologists in India. Availability of cottons suitable for spinning a wide range of yarns and Existence of a well-developed capital market in India allowing Indian firms to marshal risk capital for long term investments. These intrinsic advantages that the Indian nation offers to its firms, convinced us that Indian textile firms can compete in global markets. Pin pointing of these advantages also helped us in identifying the product groups in which we should compete. With these advantages, we argued, we must compete in product groups with high entry barriers. A product group will have high entry barriers for several reasons. One reason for the high entry barriers, is that, the firms wanting to manufacture the products in the product group, need to master difficult technologies. Another reason for the high entry barriers could be that firms have to make high capital investment to manufacture and market the products in the product group. Yet

another reason for the high entry barriers is that firms must establish their credentials with their buyers before they can market the products in the product group. We identified two product groups with high entry barriers and with large markets for the products within the product groups. The first product group was indigo dyed blue denim comprising denim fabrics predominantly used in producing jeans for men and women. High value cotton shirting used for making men's shirts and for producing women's outer wear garments was the second product group we identified. Indigo dyed denim, though a standard product, is extremely difficult to manufacture. Several factors contribute to the difficulties in manufacturing of denim. Difficulties involved in dyeing the yarn in the indigo dye, is one of them. Spinning yarn with a high degree of uniformity is another factor contributing to the difficulties in manufacturing. Finally difficulties involved in the weaving of "heavy denim" (We can get an idea about the heaviness of the denim fabric by comparing the weight of the fabrics used for making trousers and the weight of denim fabrics used for making jeans. The weight of the fabrics used for making trousers varies between 255 grams per square meter to 300 grams per square meter. Weight of the denim fabrics varies 430 grams per square meter 510 grams per square meter.) are another set of factors adding to the difficulties in the manufacturing process. Because of these difficulties in the manufacturing of the product, the manufacturing process is capital intensive. According to a thumb rule prevalent in the industry, a firm needs to invest about four US dollars for every meter of the fabric it wants to produce annually. Thus, for setting up a plant with a capacity to produce nine million meters of denim per annum, it will be necessary to invest thirty-six million US dollars. In Indian currency, this investment will be the equivalent of about one billion Rupees (A hundred crore Rupees). In 1986, industry sources placed the global demand for denim fabrics to be 1,600 million meter per annum, approximately. Denim was not produced in India in 1986 when we were planning our strategy. We judged that this product had a large latent demand in India. In case of high value cotton shirting, a similar situation prevailed. We do not report the details for want of space. Top
NEW STRATEGY

At the close of the year 1986, we decided to include in our product portfolio, the two product groups comprising blue indigo dyed denim and high value cottonshirting. In April 1987 we commissioned our first

denim plan producing denim fabrics at the rate of about four million meter per annum. We started producing high value cotton shirting at the end of the year 1987.Simultaneously we started divesting the product groups that the power-looms could easily manufacture. The six competitive advantages of the Indian textile firms we listed earlier, helped us to compete in the global markets for the product groups we identified. Technical skills available with Arvind, enabled the company to assimilate quickly the difficult technologies deployed in the manufacture of denim. As we gained experience, the company's technical staff, in collaboration with the leading textile machinery manufacturers, made revolutionary changes in the weaving of heavy denims. These changes enabled the company to lower the capital cost considerably. Lower capital cost gave the company a major advantage in competing with the giants in the industry. The demand for denim fabrics, from the domestic garment industry was extremely good. This gave us a market for our denim fabrics while we were establishing our credentials with the overseas garment producers. In the initial stages, the Industrial Credit and Investment Corporation of India,gave the financial support and the encouragement to set up the denim plant. It is this support and encouragement that made it possible for us to enter the denim market. Soon after getting a foothold in the new product groups, we made four strategic moves. First we began to divest from the product groups in which we were not globally competitive. Reduction of the debt component in our capital structure was the second strategic move we made. This move was made to reduce the financial risks the company was exposed to when it was making a radical change in its product portfolio and absorbing newer technologies. Besides, we intended this move to build the company's debt capacity for mobilizing funds at an appropriate time. The third strategic move we made was to set up wholly owned subsidiaries in selected parts of the globe for marketing the company's products. Finally the fourth strategic move was to set up manufacturing plants in different parts of the world. Because of these strategic moves, the company is steadily getting the characteristics of a global company. Top
STRUCTURE, SYSTEM & SKILLS

Arvind Mills is now focusing its attention on a few selected product groups. Such a focus is necessary to prepare the company for playing

a dominant role in the global markets for these product groups. For giving a concrete shape to this strategy, it is necessary to make appropriate changes in the company's structure, systems and skills. The company made most of these changes during the year 1994-95. Arvind has now adopted an organizational structure called the "Strategic Business Unit structure" Under this structure, a company groups under one business unit, distinct product groups comprise product groups targeted for distinct market segments and using distinctive technologies in the manufacturing process. A company puts each business unit under the command of a different person. The person heading a business unit is responsible for the effective and efficient operation of the unit. This pattern of organization allows the company to concentrate its energies on all the important business. All the systems used in the company, to get things done, also needed change to keep pace with the changes in strategy and structure. These systems comprise performance appraisal and counseling systems, compensation systems, other planning and monitoring systems. We have thoroughly revamped all these systems to meet the new organizational demands. Structures and systems by themselves are not adequate to give effect to the chosen strategy. The organization must have appropriate skills. The tasks demanded in the new structure require new skills. Similarly to operate the new systems effectively and efficiently the organization requires new skills. During the year 1994-95, Arvind's top management spent a great deal of time and energy on developing the required skills. The thrust on development of organizational skills, it is needless to add, will continue relentlessly. Top
ACCOMPLISHMENT of NEW STRATEGY

Our chosen strategy accomplished its purpose. Primarily, we eliminated the threat from the power-looms. Because of the entry barriers we highlighted earlier, power- looms could not compete in the product groups we had chosen. By concentrating on the garment producers, the discerning buyers, we neutralized the power that the trade channels were exercising over us. The strategy to export bulk of our production, gave us the flexibility to import cotton under the advance license scheme. As a result we could insure ourselves against the threat of an abnormal price increase in the domestic cotton market. Similarly the strategy to Export, allowed us to import the

"state of the art" machinery either without any import duty or by paying import duty at reduced rates. We carried out our strategy just in time. In 1987, the grim scenario our analysis had suggested,did materialize. Arvind's profit reached its nadir in that year. The company earned, in that year,a net profit of Rupees 7.8 millions and the sales of the company amounted to Rupees 1.13 billion. In the year 1987, the company's exports were negligible. From 1 January 1995, the Government of India has allowed imports of yarn, fabrics and garments in the Indian markets, though the tariff barriers are still high. Indian Government is committed to lower these barriers progressively. Indian textile industry will now be facing the "economic earthquake" described by Time Magazine. The 13 March 1995 issue of Time magazine aptly describes the global economic upheaval taking place around the globe. I will quote this excellent description. " As the millennium approaches, an economic earthquake is shaking the globe, producing an upheaval comparable to the Industrial Revolution that gave birth to the manufacturing age. The only certainty perhaps, is the size and speed of change. The globalize economy is one of 24-hour financial markets, huge split- second flows of international funds and intense competition as companies roam the worldfor capital, labor, technology raw materials and markets. More flexible production techniques are allowing giant global corporations to locate their activities wherever it is economically advantageous". Because of a radical change we made in Arvind's strategy, Arvind can now confidently face this earthquake. Arvind's product portfolio now comprises product groups in which the company is globally competitive. Judged by the financial yardsticks, the company is strong. It is profitable, has a net worth of Rupees ten billion and the debt component in the capital structure is negligible. For the readers to appreciate the effectiveness of the strategy we put in place, I would like to provide some data concerning the results we accomplished. In the year 1994-95, the company was producing denim at the rate of sixty-five million meters per annum. And ranked as the fifth largest denim producer in the world. We are all proud of the results we achieved in a short span of seven years. In 1987 we could not compete in the global markets and the value of our exports was negligible. Seven years later, about 40% of our total sales and business income earned is from fabric exports. Within a span of seven years, we have increased the denim manufacturing capacity from four million meters to sixty-five million metes per annum. Starting from scratch we have, within seven years, become the fifth largest denim producer in the world. During the financial year 1994- 95, Arvind's sales and other

business income were 5.42 billion Rupees. Net profits of the company during the year were 1.01 billion Rupees. During the same year, the revenue the company earned, from the exports of denim fabrics and high value cotton shirting, was about 2.11 billion Rupees. The net worth of the company, computed at market prices, increased about one hundred and five times within seven years. On 31 March 1988 the net worth of the company, computed at market prices was one hundred and twenty six million Rupees. Computed on the same basis, the company's net worth on 31 March 1995 was about thirteen and a half billion Rupees. In other words, during the sevenyear period, the compound growth rates in the company's net worth was 95% per annum. Top
PLANS

Forming strategic alliances with world leaders in the field, for competing globally, is the strategy that we will pursue vigorously in the future. Strategic alliances, as Michael Porter points out, are long-term arrangements between firms that go beyond normal market transactions but fall short of a merger. Strategic alliances are prominent tools in carrying out global strategies. Arvind will form strategic alliances with world leaders for competing globally in product groups comprising Swiss voile, Knitted fabrics, and High value cotton shirting. In addition, the company will also compete in the global markets for spun-yam and garments. Top
CONCLUDING REMARKS

Creating leaders of tomorrow is one of our major concerns. An eminent Indian jurist had said "First leaders create institutions and then institutions create leaders". How to begin this pious circle -in the organization, is the concern of Arvind's top management. In this endeavor, all of us in charge of corporate governance, are trying to imbibe the message given in the last verse of the Bhagavad Gita. The message is, "Unite vision (Yoga) with energy (Dhanu) without allowing the former to degenerate into madness and the latter into savagery. High thought and just action must ever be the aim of man."

To target Corporate barons, We used an ancient weapon.

OVERVIEWS

For well over a century now, one brand of clothing has lent us a touch of understated elegance to boardroom battles and power lunches the world over. Arrow. "America's shirtmaker since 1851" has by now come to be ranked among the better perks the corporate lifestyle affords. Arvind introduced India's movers and shakers to Arrow in 1993. We set up a 100% subsidiary to manufacture and market Arrow shirts locally. Exclusive outlets were opened in keeping with the brand's image. Positioned as top-of -the-line businesswear, Arrow quickly found a loyal following and is currently worth Rs. 45 crores. Arrow is just one of the instances where we brought an international brand down to India and created a market for it locally. Lee is another. Also, Our homegrown brands which we created by identifying and targeting markets that nobody else had looked at till then. All of which only goes to show that the best way to expand market share is to expand the market. Lee | Arrow | New Port | Flying Machine | Excalibur | Ruggers | Ruf & Tuf

OVERVIEWS
The Jeans that built America are now building market share for us!

In India, till a while ago, Lee used to be the brand of choice of those with kind uncles abroad. And much in demand among patrons of the neighborhood smuggler.

Now it's at the neighborhood store. Thanks to Arvind. We brought it down to India, positioned it at the upper end of the market. And put our marketing skills behind its formidable reputation. The payoff: Lee is now as big in India as it is worldwide. Lee is just one instance where we translated an international brand by creating a local market for it. Its the only brand in India to offer in-seam lengths in each waist-size in order to give consumer the 'Perfect Fit'. The Lee merchandise is the most comprehensive one -denim and gaberdine jeans, jackets, overalls, shorts, denim shirts, twill shirts, basic T-shirts, Pique polos, skirts, carpenter pants and accessories-belts, bags and caps. Lee also markets Sandblasted jeans, stretch denim, dark denims, Tencel denimwear, Corduroys, wide range of checks shirts and Pique Knit-shirts. We continue to innovate regularly, offering newer washes and colours in both denim jeans and cotton pants along with excellent quality products in tops and accessories. Lee was the first to introduce in India 100% Wrinkle-Free 100% Cotton Pants in mid-1997. It offers a range of 8 colours in a Relaxed Fit and the response has been overwhelming. Lee has a separate Wrinkle-free range of pants for men and women. LEE YOUTH We recently introduced the international range of Lee Youth, targeted at the 4-14 years age segment. The youthwear range consists of jeans, overalls, shorts, skirts and T-shirts, complimented by a range of fine accessories such as caps, belts, socks and bags. The fabric, fit and finish - hallmarks of $5billion VF Corporation's brand Lee have been carefully selected to offer maximum value to the consumer. Jeans are available at Rs.595, bib-overalls and denim jackets at Rs.695, shirts Rs.395 and T-shirts Rs.195. The fabric used are all 100 percent cotton-denim, twills, gaberdines, corduroy, yarn-dyed oxfords and knits. The brand is being marketed through 40 exclusive Lee Stores in 20 cities across the country. Lee | Arrow | New Port | Flying Machine | Excalibur | Ruggers | Ruf & Tuf

OVERVIEWS

There was a time when jeans used to cost big money. Which was strange, considering that most of them were aimed at teenagers. Who are forever broke. That was before we came along with Newport, our value for money brand which delivered on the promise of "good jeans for less". It was the first pair of jeans that a youngster could buy with his own pocket money. Naturally it found a whole lot of fans among those who were looking for maximum mileage from their cash. And ended up capturing a hefty chunk of the market. Today, Newport is by far, the largest selling jeans brand in India. The quality of the jeans has been consistently good, both in terms of 14.5oz. Arvind denim as well as the embellishments required for stitching the jeans. The customer believes that he truly gets the value for money at this quality and price. Newport is available in a Regular fit, which has satisfied millions of customers in India over the last two years. It was initially launched in three blue washes and black. Today, we have added 25 colours to the range (The OPTIONS range which are now available at an attractive price of 449). It is simplicity of the concept which has appealed to a large base of mass consumers who are price-conscious. The highly attractive price of Rs. 399/- has made it very accessible to many consumers who would like to buy into the core values of jeans wearers. Newport has increased its range of jeanswear to include overdyed jeans, gaberdine jeans, knitwear, woven shirts and socks, thus making Newport a lifestyle brand in the economy segment. Lee | Arrow | New Port | Flying Machine | Excalibur | Ruggers | Ruf & Tuf

Rock star apparel is now available for a song

OVERVIEWS

The story of how a megabrand got off the ground

Back in the mid-80s, "Indian jeans" was something of a contradiction in terms. Shoddy imitations and small-time regional brands ruled a tiny market. Which was when we stepped in with Flying Machine, the first Indian brand that measured up to international standards, and also one of the few that had a national presence. Flying Machine went on to become the number one brand in the country, in the process kickstarting the dormant market to life. The recently revamped range offers a fit to suit every need in a variety of fabrics and colours. Denim and gaberdine jeans; Regular, Comfort, Relaxed and Slim fits for Men; Regular, Slim and Tight fits for Women; jackets; T-shirts; shirts; overdyes; coordinated knits and attractive accessories like belts, bags and socks. Is contemporary with internationally styled features. Till early 1997, Flying Machine was marketed through 700 multi-brand outlets. However, our experience with other brands built conviction that a paradigm shift in distribution from multibrand outlets to Flying Machine exclusive terminals was absolutely necessary if we were to grow with a full range of jeanswear as well as Casual wear. Beginning 1997, the brand is being marketed only through 40 exclusive Flying Machine terminals. last year. Lee | Arrow | New Port | Flying Machine | Excalibur | Ruggers | Ruf & Tuf

OVERVIEWS

Few things fit the demanding lifestyle of those who live in the fast lane. So we came up with a wardrobe brand targeted at upwardly mobile executives including products such as shirts, trousers, blazers, ties, socks and belts in EASY CARE blends, all cut to the latest international styles and to the exacting international standards. Made from EASY CARE blends, EXCALIBUR shirts and trousers are highly Crease-Resistant and retain their flawless shape for hours on end to give a 'fresh' look through out the day. This provides the wearer with a winning edge. Excalibur is competitively priced. The shirts have a range of Solid colours in pastel and dark hues, Yarn dyed stripes and Checks and Micro-checks. The Trousers are offered in a palette of colours in both "Matte-weave' as well as 'Oxfords' and complemented by a range of 'Twills' in attractive colours. There is also an attractive range of Jacquard Ties, Belts and socks. It has also introduced a range of quality knitwear at an attractive price of Rs.445 onwards. Excalibur EASY CARE is available only through a chain of 40 exclusive stores across the country. All stores have a very contemporary look and offers an extremely pleasurable shopping ambience. There are currently no worthwhile wardrobe brand in the mid price segment in India. This market has a good potential and plans are being worked out to exploit the full potential of this segment. Launch of innovative products like Wrinkle Free Cotton Shirts and wrinkle Free Cotton Trousers have been planned during the current financial year. Lee | Arrow | New Port | Flying Machine | Excalibur | Ruggers | Ruf & Tuf

A Personal Invitation to the young determined winners to drop by..

OVERVIEWS
Drop all Formalities Be Casual

A golden opportunity to all the youngsters to get into Polo t-shirts, cotton trousers, twills, bermudas, belts and everything casual.. We have created Ruggers in order to offer the consumers a unique Casual wear product which will compliment the Jeanswear range in exclusive Flying Machine stores. The Ruggers product range for Men and Women is wide in strikingly casual designs and colours. The range for women is the finest with a tremendous content of creativity in both styles and colours. Ruggers is currently marketed through 50 exclusive stores of the Flying Machine. Ruggers for kids in the age group of 4-14 years is also available now. The Ruggers' for kids range consists of Jeans, shorts bib-overalls, knitwear, woven shirts and related accessories. The addition of the kids' range has made it even more appealing and offers the Indian consumers a complete range in Men, Women and Kids. Lee | Arrow | New Port | Flying Machine | Excalibur | Ruggers | Ruf & Tuf

Thanks to our success you can't tell the cowboys from the Indians!

OVERVIEWS

All over India, people who use to lounge around in lungies have been offered an opportunity to roam around in jeans ( Just like all those cowboys out west ). Thanks to our brand Ruf & Tuf , which has probably the worlds first ever brand..ready-tostitch jeans. With Ruf & Tuf, ready-to-stitch, we unearthed a whole market: millions of people all over the country who, till then had to make do with imitations because they could not afford the real thing. We gave them quality, the perfect fit and a brand they could relate to. All at the right price. And we went about it systematically, right down to organizing orienting tailors nation wide to rope them into the marketing process. Lee | Arrow | New Port | Flying Machine | Excalibur | Ruggers | Ruf & Tuf

OUR FABRICS
shirting.htmshirting.htm denim.htmdenim.htm

flats.htmflats.htm

knits.htmknits.htm

OUR FABRICS
Shirtings
Arvind was already making shirting for the Indian market. In 1990, we decided to focus on high value shirting, so that we could expand our markets beyond India's borders. As a part of our commitment to being a value-adding partner to each of our customers, Arvind Shirtings have invested US $ 100 million in Santej. This plant has an annual capacity of 34 million meters of 100% cotton woven. The new plant offers a comprehensive portfolio in 100% cotton fabric which includes Classical Colour Woven, Solids, Indigo Yarn-dyed, Coarse count Cottons, Yarn-Dyed Stripes, Checks, Fil-a-fils and Chambrays. The weaves are Plain, Twill, Oxford and Dobby, with counts including 20s, 24s, 30s, 40s, 50s, 2/30s, 2/50s, 2/80s, 2/100s. The finish is natural and easy to iron. Over and above our range of standard products, we also produce counts ranging from 16s to 2/140s. A variety of fancy weaves, dobbys and seer suckers are complemented by additional finishes in peach, sanded and bio-airoflex. An exclusive indigo plant with a five million meter capacity produces unique, high-value, finer counts in indigo and multi-colored, sulphur yarndyeds. Arvind's philosophy in manufacturing is 'Excellence in Quality and Flexibility in Production'. This is reflected in the state-of-the-art plant which houses the best technologies of the fabric manufacturing world, such as European & Japanese Continuous Process Machines, Two-for-one twisters & precision winders for spinning, Autodosing of dyes and chemical with precision controls yarn dyeing, Staublis for Automatic Drawing in, fast speed Picanol Airjets and Rapier Looms, Benninger Continuous Bleaching and Dyeing Range, Biancalani for Surface Finishing and Fully equipped Quality Assurance Laboratory. Design is a key element of operations at Arvind Shirtings. We now have a sophisticated CAD designing software link up and talented designers. This allows Arvind's design studio to provide clients with inputs rights from the pre-concept stage onwards. It also helps us to provide clients with customized collections (apart from our regular seasonal collections). In the entire process of operations, eco-friendliness is critically monitored and ensured. The plant is also configured to handle small order sizes as well as very long order lengths with consistent quality.

OUR FABRICS
Denim
In 1986, we looked for textiles that had global demand, high margins, high entry level barriers (either of technology, expertise or set-up costs), and, very importantly, low "fashion volatility". We wanted to focus on fabric that would never go out of style. Our analysis of potential products threw up denim as the answer. When we started making denim, we set ourselves three objectives: (a) Become the market leader in India (b) Join the ranks of the biggest denim manufacturers in the world in terms of volume and product range (c) Become the largest denim manufacturer in the world

We've achieved the first and second goals, and expect to touch the third by the turn of the century. With a production capacity of 120 million meter per annum, we are currently India's largest and the world's third largest producer of denim, as the following figures will show: The world's top denim manufacturers Cone Mills 200 million meter per annum Swift Textiles USA 138 million meter per annum * Arvind Mills India 120 million meter per annum Burlington USA 118 million meter per annum Santista/Alpargatas Brazil 107 million meter per annum
Source: Inhouse * Includes 10 mn meter produced at our subsidiary at Mauritius. Research

We manufacture denim at our state-of-the-art mills in India (110 mmpa) and Mauritius (10mmpa). Our latest Morrison Rope dyeing range corroborates our technology leadership in denim manufacturing. We make over 150 varieties of specialty denim - stretch, colored, faded, streaked, mercerized, striped, checked, ring, brushed, soft, speedwash, silver streak and overdyed. From small pieces to large 300 meter rolls, from 4.0 oz to 16.0 oz, from pink and purple, to good old classic, ever-popular indigo blue 14 1/2 oz. open end we can offer you denim in just about any colour, weight, weave and wash. We sell under the brand names "Arvind Denim" and "Big Mill Denim" (only in Europe). In India, we command a market share of approximately 64% - 5 times that of the next largest player. Our denim is used to make India's leading jeans brands - Flying Machine, Killer, Levi's, Numero Uno, Pepe, Texas Jeans, UFO and Wrangler. "Made from original Arvind denim" is used by all the leading local jeans manufacturers as an indicator of high quality and authenticity. We pioneered the extension of use of denim into non-traditional areas like Indian outfits, corporate gift articles, upholstery and furnishings, stationery and even briefcases. We also export denim to over sixty-six countries worldwide. The US forms 31% of our export market, while the EC and Hong Kong constitute 20% and 24% respectively. Denim exports constitute approximately 50% of our turnover, and Arvind Denim - which is sold as a brand and not a commodity - is used to make some of the most desired jeans brands around the world - Brittania, C & A, Federated, Jordache, Lee, Lee Cooper, Limited, No Excuses, Pepe, Tillis Pavely and Wrangler. Our denim is eco-friendly. And we convert our denim waste into "recycled denim paper" that is used as stationery. In April 1995, we obtained the Eco-tex certification which means that our denim is ecologically optimized based on audits which certify that the product and the process conform to stringent standards and specifications. This certification is awarded by the Germany-based Eco-tex Institute, which was founded in 1992 as a result of a growing awareness in the European Community regarding eco-friendly textiles. We are the first denim mill in the world to get this certification.

OUR FABRICS
Flats
Arvind has recently set up a dedicated bottomweights plant as part of Arvind Polycot Limited.

This new addition to the Arvind Textile Complex brings the total investment in the complex upto Rs.12000 million. The plant is an integrated facility that sources yarn from Arvind Mills at Ahmedabad. It has both weaving and processing infrastructure, captive power supply, steam generation and a waste water treatment plant. The latter makes it a zero discharge complex i.e. one that recycles all its waste water. The Product The new plant manufactures 100% cotton piece dyed fabric with weights upwards of 6.0 oz. Product varieties include twills, drills, gaberdines, chinos, canvas, tussore, bedfordcord, herringbone and other specialty weaves. The new bottomweights plant is perhaps the most modern vertically integrated plant of its kind in all aspects from spinning to finishing. The plant also houses a captive power supply, steam generation and waste water treatment plant. The latter makes it a zero discharge complex i.e. one that recycles all its waste water. A glimpse of the state-of-the-art-technology includes Tsudakoma airjet looms for weaving, Automatic regulation of flame intensity to ensure consistent & uniform singeing, PLC controlled accurately metered dosing of bleaching chemicals coupled with flexnip technology, facility for Wet on Wet mercerization, Computerized sueding from a scale of mild to harsh, Monforts-Continuous dyeing through Pad Dry and Pad Steam, a special 10 chamber stenter with automatic PLC control, MAHLO Weft Straightening unit and fully equipped Quality Assurance Laboratory. In terms of customer service all this translates into faster, more accurate shade matching, shorter lead times, consistent product quality (especially with regard to shades, shrinkage and finishes), large widths-upto 63" for better yield on the cutting table and wider variety of products overall with respect to weaves, colour and finishes.

OUR FABRICS
Knits
Today Arvind is making yet another foray- in the manufacture of the finest quality Cotton Knits in the world. This new venture features a technical collaboration with Alamac Knits inc; USA, to manufacture high value and high-fashion knits. With an investment of US $ 50 million, the plant will produce mercerized fabric in both tubular and open widths. The capacity is phenomenal: 16 tone per day of cotton knits, 11 tone per day of piece-dyed fabric and 5 tones per day of yarn-dyed fabric. Our product range aims to offer widest choice in both tubular and open widths in single (Jersey, Pique, Textures, Pointless, Fleece, French Terry, Jacquards in solids, feeds and automatics) and double (Interlocks, Needle-outs, ottomans, Pointless, Textures, Reversible, jacquards, Ribs in solids, feeds and automatics, Collars:Plains and Jacquards) knits. We will manufacture a knits range from casuals to formal, active wear to sleepwear, for diverse use in men's, women's and children's clothing. With the most sophisticated technology used in the plant, Arvind Knits are perfect from design to finish. Unmatched technology includes world class machinery such as Fukuhara Circular Knitting machines, Shima-Seiki Computerized Flatbed Knitting Machines, ThenComat Yarn Dyeing Machines, Sclavos Fabric Dyeing Machine, data Colour matching System, processing lab, Standardized Recipes and Process Cycles, Dornier Circular Singeing and Mercerizing machine, Santex Fabric Finishing Machines, Tubetex Fabric Finishing machines, Open width and Tubular Finishing. All this is backed by a hi-tech design centre. The innovative design centre is networked globally with designers to create a corpus of the finest international designs. With a computer-linked designing facility and an attached pilot mill- the designs created on screen are the designs you get on fabric, in a matter of hours. This means a quick turnaround time for designs that are exclusive and world-class. Our large colour and fabric library, stocking

samples and a well-equipped fabric resource centre facilitates our customers to access fabric that will enhance their capabilities. Moreover, all operations-spinning, knitting, dyeing, finishing-will be fully integrated to enable shorter lead times even for large orders and better co-ordination of the process, from design to production