No Chain, No Gain CASE STUDY SOLUTION

 No Chain, No Gain CASE STUDY SOLUTION

No Chain, No Gain

Textile industry is one of the oldest industries in India. Several business houses have their origin in this industry. In the mid-1980s, the powerloom sector in the unorganised sector started hurting badly the interests of the composite textile mills of the sector. Their cost structure, with lower overheads and no duties, was less than half of that of mills for equivalent production. While the powerlooms sold cloth as a commodity, the mills tried to establish their products as brands. The post-liberalisation period has seen a large number of foreign brands enter India. It is in this scenario that the Mayur brand of Rajasthan Spinning and Weaving Mills (RSWM) had to carve out a place for itself.

RSWM is the flagship company of the LNJ Bhilwara group. It has been the largest producer and trader of yarn in the country and caters to the large demands for blended yarns and grey cloth fabric used for children’s school uniform. In 1994, the yarn business faced a severe crunch owing to overcapacity. From 1995 onward, RSWM became a late follower of the industry trend as other competitors already moved up the value chain.

Textile manufacturing is basically constituted of the processes of spinning, weaving, processing, and marketing. More than 50 per cent of the value is concentrated in weaving and processing. Moving up the value chain from spinning involves large investments in machinery and labour. Graduating to marketing requires getting closer to the customers. This is the challenge that a traditional spinning mill like RSWM had to face if it was to sustain itself in a highly competitive market.

At another level, for RSWM, it was a matter of cultural transformation of the organisation long used to a conservative, trader mentality. Imagine a company whose main driving force, Shekhar Agarwal, Vice-Chairman and Managing Director having little interest in watching Hindi movies signing up Sharukh Khan at a considerable price for celebrity advertising. From the market side, it has long been troubled with its commitment to the loyal middle-class customers as it had to simultaneously pay attention to the upwardly mobile upper middle class customers. Then there was the dilemma of being too many things to a wide range of audience. RSWM wanted to have a stake in the export markets as well as keep its share in the rural markets. It perceived itself as an efficient producer and wished to become a flamboyant retailer. It excelled in basic textile processing yet dreamt of attaining sophistication in in-house production of readymade garments. And all this while it has been a late mover, losing out to early movers such as Raymonds. No wonder it virtually landed up on the fringes of the industry, far behind formidable competitors like Reliance, Grasim, and S. Kumar.

Question

Suggest how should RSWM manage its value chain effectively. Should it try to imitate