Note: Solve any 4 Cases Study’s
CASE: I ARROW AND THE APPAREL INDUSTRY
Ten years ago, Arvind Clothing Ltd., a
subsidiary of Arvind Brands Ltd., a member of the Ahmedabad based Lalbhai
Group, signed up with the 150- year old Arrow Company, a division of Cluett
Peabody & Co. Inc., US, for licensed manufacture of Arrow shirts in India.
What this brought to India was not just another premium dress shirt brand but a
new manufacturing philosophy to its garment industry which combined high
productivity, stringent in-line quality control, and a conducive factory
ambience.
Arrow’s first plant, with a 55,000
sq. ft. area and capacity to make 3,000 to 4,000 shirts a day, was established
at Bangalore in 1993 with an investment of Rs 18 crore. The conditions inside—with
good lighting on the workbenches, high ceilings, ample elbow room for each
worker, and plenty of ventilation, were a decided contrast to the poky,
crowded, and confined sweatshops characterising the usual Indian apparel
factory in those days. It employed a computer system for translating the
designed shirt’s dimensions to automatically mark the master pattern for
initial cutting of the fabric layers. This was installed, not to save labour
but to ensure cutting accuracy and low wastage of cloth.
The over two-dozen quality
checkpoints during the conversion of fabric to finished shirt was unique to the
industry. It is among the very few plants in the world that makes shirts with 2
ply 140s and 3 ply 100s cotton fabrics using 16 to 18 stitches per inch. In
March 2003, the Bangalore plant could produce stain-repellant shirts based on
nanotechnology.
The reputation of this plant has
spread far and wide and now it is loaded mostly with export orders from
renowned global brands such as GAP, Next, Espiri, and the like. Recently the
plant was identified by Tommy Hilfiger to make its brand of shirts for the
Indian market. As a result, Arvind Brands has had to take over four other
factories in Bangalore on wet lease to make the Arrow brand of garments for the
domestic market.
In fact, the demand pressure from
global brands which want to outsource form Arvind Brands is so great that the
company has had to set up another large factory for export jobs on the
outskirts of Bangalore. The new unit of 75,000 sq. ft. has cost Rs 16 crore and
can turn out 8,000 to 9,000 shirts per day. The technical collaborators are the
renowned C&F Italia of Italy.
Among the cutting edge
technologies deployed here are a Gerber make CNC fabric cutting machine,
automatic collar and cuff stitching machines, pneumatic holding for tasks like
shoulder joining, threat trimming and bottom hemming, a special machine to
attach and edge stitch the back yoke, foam finishers which use air and steam to
remove creases in the finished garment, and many others. The stitching machines
in this plant can deliver up to 25 stitches per inch. A continuous monitoring
of the production process in the entire factory is done through a computerised
apparel production management system, which is hooked to every machine. Because
of the use of such technology, this plant will need only 800 persons for a
capacity which is three times that of the first plant which employs 580
persons.
Exports of garments made for
global brands fetched Arvind Brands over Rs 60 crore in 2002, and this can
double in the next few years, when the new factory goes on full stream. In
fact, with the lifting of the country-wise quota regime in 2005, there will be
surge in demand for high quality garments from India and Arvind is already
considering setting up two more such high tech export-oriented factories.
It is not just in the area of
manufacture but also retailing that the Arrow brand brought a wind of change on
the Indian scene. Prior to its coming, the usual Indian shirt shop used to be a
clutter of racks with little by way of display. What Arvind Brands did was to
set up exclusive showrooms for Arrow shirts in which the functional was
combined with aesthetic. Stuffed racks and clutter eschewed. The product were
displayed in such a manner the customer could spot their qualities from a
distance. Of course, today this has become standard practice with many other
brands in the country, but Arrow showed the way. Arrow today has the largest
network of 64 exclusive outlets across India. It is also present in 30 retail
chains. It branched into multi-brand outlets in 2001, and is present in over
200 select outlets.
From just formal dress shirts in
the beginning, the product range of Arvind Brands has expanded in the last ten
years to include casual shirts, T-shirts, and trousers. In the pipeline are
light jackets and jeans engineered for the middle-aged paunch. Arrow also tied
up with the renowned Italian designer, Renato Grande, who has worked with names
like Versace and Marlboro, to design its Spring / Summer Collection 2003. The
company has also announced its intention to license the Arrow brand for other
lifestyle accessories like footwear, watches, undergarments, fragrances, and
leather goods. According to Darshan Mehta, President, Arvind Brands Ltd., the
current turnover at retail prices of the Arrow brand in India is about Rs 85
crore. He expects the turnover to cross Rs 100 crore in the next few years, of
which about 15 per cent will be from the licensed non-clothing products.
In 2005, Arvind Brands launched a
major retail initiative for all its brands. Arvind Brands licensed brands
(Arrow, Lee and Wrangler) had grown at a healthy 35 per cent rate in 2004 and
the company planned to sustain the growth by increasing their retail presence.
Arvind Brands also widened the geographical presence of its home-grown brands,
such as Newport and Ruf-n Tuf, targeting small towns across India. The company
planned to increase the number of outlets where its domestic brands would be
available, and draw in new customers for readymades. To improve its presence in
the high-end market, the firm started negotiating with an international brand
and is likely to launch the brand.
The company has plans to expand
its retail presence of Newport Jeans, from 1200 outlets across 480 towns to
3000 outlets covering 800 towns.
For a company ranked as one of the
world’s largest manufactures of denim cloth and owners of world famous brands,
the future looks bright and certain for Arvind Brands Ltd.
Company profile
Name of the Company : Arvind Mills
Year of Establishment : 1931
Promoters : Three
brothers--Katurbhai, Narottam
Bhai,
and Chimnabhai
Divisions : Arvind
Mills was split in 1993 into
Units—textiles, telecom and
garments. Arvind Ltd. (textile unit) is 100 per cent subsidiary of Arvind
Mills.
Growth Strategy
: Arvind
Mills has grown through buying-up of sick units, going global and acquisition
of German and US brand names.
Questions
1.
Why did Arvind Mills choose globalization as the major route to achieve
growth when the domestic market was huge?
2.
How does lifting of ‘Country-wise quota regime’ help Arvind Mills?
3.
What lessons can other Indian businesses learn form the experience of
Arvind Mills?
CASE: II THE ECONOMY OF KENYA
Kenya’ economy has been beset by high rates
of unemployment and underemployment for many years. But at no time has it been
more significant and more politically dangerous than in the late 1990s as an
authoritarian beset by corruption, cronyism and economic plunder threatened the
economic stability of this once proud nation. Yet Kenya still has great
potential. Located in East Africa, it has a diverse geographic and climatic
endowment. Three-fifths of the nation is semiarid desert (mostly in the north),
and the resulting infertility of this land has dictated the location of 85 per
cent of the population (30 million in 2000) and almost all economic activity in
the southern two-fifths of the country. Kenya’s rapidly growing population is
composed of many tribes and is extremely heterogeneous (including traditional
herders, subsistence and commercial farmers, Arab Muslims, and cosmopolitan residents
of Nairobi). The standard of living at least in major cities, is relatively
high compared to the average of other sub-Saharan African countries.
However, widespread poverty (per
capita US$360), high unemployment, and growing income inequality make Kenya a
country of economic as well as geographic diversity. Agriculture is the most
important economic activity. About three quarters of the population still lives
in rural areas and about 7 million workers are employed in agriculture,
accounting for over two-thirds of the total workforce.
Despite many changes in the
democratic system, including the switch from a federal to a republican
government, the conversion of the prime ministerial system into a presidential
one, the transition to a unicameral legislature, and the creation of a
one-party state, Kenya has displayed relatively high political stability (by
African standards) since gaining independence from Britain in 1963. Since
independence, there have been only two presidents. However, this once stable and
prosperous capitalist nation has witnessed widespread ethnic violence and
political upheavals since 1992 as a deteriorating economy, unpopular one-party
rule, and charges of government corruption create a tense situation.
An expansionary economic policy
characterised by large public investments, support of small agricultural
production units, and incentives for private (domestic and foreign) industrial
investment played an important role in the early 7 per cent rate of GDP growth
in the first decade after independence. In the following seven years (1973-80),
the oil crisis let to a lower GDP growth to an annual rate of 5 per cent. Along
with the oil price shock, lack of adequate domestic saving and investment
slowed the growth of the economy. Various economic policies designed to promote
industrial growth led to a neglect of agriculture and a consequent decline in
farm prices, farm production, and farmer incomes. As peasant farmers became
poorer, more migrated to Nairobi, swelling an already overcrowded city and
pushing up an existing high rate of urban unemployment. Very high birthrates
along with a steady decline in death rates (mainly through lower infant
mortality) led Kenya’s population growth to become the highest in the world
(4.1 per cent per year) in 1988. Population growth fell to a still high rate of
2.4 per cent for the period 1990-2000.
The slowdown in GDP growth persisted in the
following five years (1980-85), when the annual average was 2.6 per cent. It
was a period of stabilization in which political shakiness of 1982 and the
severe drought in 1984 contributed to a slowdown in industrial growth. Interest
rates rose and wages fell in the public and private sectors. An improvement in
the budget deficit and current account trade deficit, obtained through cuts in
development expenditures and recessive policies aimed at reducing imports,
contributed to lower economic growth. By 1990, Kenya’s per capita income was 9
per cent lower than it was in 1980--$370 compared to $410. It continued to
decline in the 1990s. In fact, GDP per capita fell at an annual average rate of
0.3 per cent throughout the decade. At the same time, the urban unemployment
rate rose to 30 per cent.
Comprising 23 per cent of 2000 GDP
AND 77 per cent of merchandise exports, agricultural production is the backbone
of the Kenyan economy. Because of its importance, the Kenyan government has
implemented several policies to nourish the agricultural sector. Two such
policies include fixing attractive producer prices and making available increasing
amounts of fertilizer. Kenya’s chief agricultural exports are coffee, tea,
sisal, cashew nuts, pyrethrum, and horticultural products. Traditionally,
coffee has been Kenya’s chief earner in foreign exchange.
Although Kenya is chiefly
agrarian, it is still the most industrialised country in eastern Africa. Public
and private industry accounted for 16 per cent of GDP in 2000. Kenya’s chief
manufacturing activities are food processing and the production of beverages,
tobacco, footwear, textiles, cement, metal products, paper, and chemicals.
Kenya currently faces a multitude
of problems. These include a stagnating economy, growing political unrest, a
huge budget deficit, high unemployment, a substantial balance of payments
problem, and a stubbornly high population growth rate.
With the unemployment rate already
at 30 per cent and its population growing, Kenya faces the major task of
employing its burgeoning labour force. Yet only 10-15 per cent of seekers land
jobs in the modern industrial sector. The remainder must find jobs in the
self-employment sector; in the agricultural sector, where wages are low and
opportunities are scarce; or join the masses of the unemployed.
In addition to the unemployment
problem, Kenya must always be concerned with how to feed its growing
population. An increase in population means an increasing demand for food. Yet
only 20 per cent of Kenya’s land is arable. This implies that the land must
become increasingly productive. Unfortunately, several factors work to
constrain Kenya’s food output, among them fragmented landholdings, increasing
environmental degradation, the high cost of agricultural inputs, and burdensome
governmental involvement in the purchase, sale, and pricing of agricultural
output.
For the fiscal year 1995, the
Kenyan budget deficit was $362 million, well above the government’s target
rate. Dealing with a high budget deficit is a second problem Kenya currently
faces. Following the collapse of the East African Common Market, Kenya’s
industrial growth rate has declined; as a result the government’s tax base has
diminished. To supplement domestic savings, Kenya has had to turn to external
sources of finance, including foreign aid grants from Western governments. Its
highly protected public enterprises have been turning in a poor performance,
thus absorbing a large chunk of the government budget. To pay for its expenses,
Kenya has had to borrow from international banks in addition to foreign aid. In
recent years, government borrowing from the international banking system rose
dramatically and contributed to a rapid growth in money supply. This translated
into high inflation and pinched availability of credit.
Kenya has also had a chronic
international balance of payments problem. Decreasing prices for its exports,
combined with increasing prices for its imports, left Kenya importing almost
twice as much as it exported in 2000, at $3,200 million in imports and only
$1,650 million in exports. World demand for coffee, Kenya‘s predominant
exports, remains below supply. In 2001-01, a dramatic surge in coffee exports
from Vietnam hurt Kenya further. Hence Kenya cannot make full use of its
comparative advantage in coffee production, and its stock of coffee has been
increasing. Tea, another main export, has also had difficulties. In 1987,
Pakistan, the second largest importer of Kenyan tea, slashed its purchases.
Combined with a general oversupply in the world market, this fall in demand
drove the price of tea downward. Hence Kenya experienced both a lower dollar
value and quantity demanded for one of its principal exports.
Kenya faces major challenges in
the years ahead as the economy tries to recover. Current is expected to be no
more than 1 to 2 per cent annually. Heavy rains have spoiled crops and washed
away roads, bridges, and telephone lines. Foreign exchange earnings from
tourism, once promising, dropped by 40 per cent in the mid-1990s, then suffered
again after the August 7, 1998, terrorist bombing of the US embassy in Nairobi.
Even more frightening, however, is the prospect of growing hunger as Kenya’s
maize (corn) crop has failed to meet rising internal demand and dwindling
foreign exchange reserves have to be spent to import food. Corruption is
perceived to be so widespread that the International Monetary Fund and World
Bank suspended $292 million in loans to Kenyan in the summer of 1997 while
insisting on tough new austerity measures to control public spending and weed
out economic cronyism. As a result, the economy went into a tailspin, foreign
investors fled the country, and inflation accelerated markedly.
Unfortunately, needed structural
adjustments resulting form the World Bank—and IMF—induced austerity demands
usually take a long time. Whether the Kenyan political and economic system can
withstand any further deterioration in living conditions is a major question.
Public protests for greater democracy and a growing incidence of ethnic
violence may be harbingers of things to come.
Fig 1 Continuum of Economic Systems
Pure Market Pure
Centrally Planned Economy
Economy
 |
The US France India China
Canada Brazil Cuba
UK North
Korea
Questions
1.
Is the economic environment of Kenya favourable to international
business? Yes or no—substantiate.
2.
In
the continuum of economic systems (see Fig 1), where do you place Kenya and
why?
Case III: LATE MOVER
ADVANTAGE?
Though a late entrant, Toyota is planning to
conquer the Indian car market. The Japanese auto major wants to dispel the
notion that the first mover enjoys an edge over the rivals who arrive late into
a market.
Toyota entered the Indian market
through the joint venture route, the partner being the Bangalore based
Kirloskar Electric Co. Know as Toyota Kirloskar Motor (TKM), the plant was set
up in 1998 at Bidadi near Bangalore.
To start with, TKM released its
maiden offer—Qualis. Qualis is not a newly conceived, designed, and brought out
vehicle. Rather it is the new avatar
of Kijang under which brand the vehicle was sold in markets like Indonesia.
Qualis virtually had no
competition. Telco’s Sumo was not a multi-utility vehicle like Qualis. Rather,
it was mini-truck converted into a rugged all-purpose van. More importantly,
Toyota proved that even its old offering, but decked up for India, could offer
better quality than its competitor. Backed by a carefully thought out
advertising campaign that communicated Toyota’s formidable global reputation,
Qualis went on a roll and overtook Tata Sumo within two years of launch.
Sumo sold 25,706 vehicles during
2000-2001, compared to a 3 per cent growth over the previous year, compared to
25,373 of Qualis. But during 2001-2002, it was a different story. Qualis had
been clocking more than 40 per cent share of the market. At the end of Sept
2001, Qualis had sold over 25,000 units, compared to Sumo’s 18000 plus.
The heady initial success has made
TKM think of the future with robust confidence. By 2010, TKM wants to make and
sell one million vehicles per year and garner one-third share of the Indian market.
The firm is planning to introduce
a wide range of vehicle—a sub-compact, a sedan, a luxury car and a new
multi-utility vehicle to replace Qualis. A significant percentage of the
vehicles will be exported.
But Toyota is not as lucky in
China. Its strategy of ‘late entry’ in China seems to have back fired. In 2005,
it sold just 1,83,000 cars in China, the fastest growing auto market in the
world. Toyota ranks ninth in the market, far behind Volkswagen, General Motors,
Hyundai and Honda.
Toyota delayed producing cars in
China until 2002, when it entered a joint venture with a local company, the
First Auto Works Group (FAW). The first car manufactured by Toyota-FAW, the
Vios, failed to attract much of a market, as, despite its unremarkable design,
it was three times as expensive as most cars sold in China.
Late start was not the only
problem. There were other lapses too. Toyota assumed the Chinese market would
be similar to the Japanese market. But Chinese market, in reality, resembled
the American market.
Sales personnel in Japan are paid
salaries. They succeeded in building a loyal clientele for Toyota by providing
first-class service to them. Likewise, most Japanese auto dealers sell a single
brand, thereby ensuring their loyalty to it. Japan is a relatively a well-knit
country with an ethnically homogeneous population. Accordingly, Toyota used
nationwide advertising to market its products in its home country.
But China is different. Sales
people are paid commissions and most dealers sell multiple brands. Obviously,
loyalty plays little role in motivating either the sales staff or the dealers,
who will ignore a slow selling product should a more profitable one turn up.
Besides, China is a large, diverse country. A standardised ad campaign will not
do. Luckily, Toyota is learning its lessons.
Competition in the Chinese market
is tough, and Toyota’s success in reaching its goal of selling a million cars a
year, by 2010, is uncertain. But, its chances are brighter as the company is
able to transfer lessons learned in the American market to its operations in
China.
Questions
1.
Why
has the ‘late corner’s strategy’ of Toyota failed in China, though it succeeded
in India?
2.
Why
has Toyota failed to capture the Chinese market? Why is it trailing behind its
rivals?
CASE: IV DELVING DEEP INTO USER’S MIND
Whirlpool is an American brand alright, but
has succeeded in empowering the Indian housewife with just the tools she would
have designed for herself. A washing machine that doesn’t expect her to get
‘ready for the show’ (Videocon’s old jingle), nor adapt her plumbing, power
supply, dress sense, values, attitudes and lifestyle to suit American
standards.
That, in short, is the reason that
Whirlpool White Magic, in just three years since its launch in 1999, has become
the choice of the discerning Indian housewife. Also worth noting is how quickly
the brand’s sound mnemonic, ‘Whirlpool, Whirlpool’, has established itself.
Whiteboard beginning
As a company, the US-based white
goods major Whirlpool had entered India in 1989, in a joint venture with the
TVS group. Videocon, which had pioneered washing machines in India, was the
market leader with its range of low-priced ‘washers’ (spinning tubs) and
semi-automatic machines, which required manual supervision and some labour. The
brand’s TV commercial, created by Pune-based SJ Advertising, has evoked
considerable interest with its jingle (‘It washes, it rinses, it even dries
your clothes, in just a few minutes…and you’re ready for the show’).
IFB-Bosch’s front-loading, fully automatic machines, which could be programmed
and left to do their job, were the labour-free option. But they were considered
expensive and unsuited to Indian conditions. So Videocon faced competition from
me-too machines such as BPL-Sanyo’s. TVS Whirlpool was something of an
also-ran.
The market’s sophistication
started rising in the 1990s and there was a growing opportunity in the
price-performance gap between expensive automatics and laborious
semi-automatics. In 1995, Whirlpool gained a majority control of TVS Whirlpool,
which was then renamed Whirlpool Washing Machines Ltd (WMML). Meanwhile, the
parent bought Kelvinator of India, and merged the refrigerator business in 1996
with WMML to create Whirlpool of India (WOI), to market both fridges and
washing machines. Whirlpool’s ‘Flexigerator’ fridge hit the market in 1997. Two
years later, WOI launched its star White Magic range of washing machines.
Whitemagic was late to the market,
but WOI converted this to a ‘knowledge advantage’ by using the 1990s to study
the Indian market intensely, through qualitative and quantitative market
research (MR) tools, with the help of IMRB and MBL India. The research team
delved deep into the psyche of the Indian housewife, her habits, her attitude
towards life, her schedule, her every day concerns and most importantly, her
innate ‘laundry wisdom’.
If Ashok Bhasin, vice-president
marketing, WOI, was keen on understanding the psychodynamics of Indian clothes
washing, it was because of his belief that people’s attitudes and perceptions
of categories and brands are formed against the backdrop of their bigger
attitudes in life, which could be shaped by broader trends. It was intuitive,
to begin with, that the housewife wanted to gain direct control over crucial
household operations. It was found that clothes washing was the daily activity
for the Indian housewife, whether it was done personally, by a maid, or by a
machine.
The key finding, however, was the
pride in self-done washing. To the CEO of the Indian household, there was no
displacing the hand wash as the best on quality. And quality was to be judged
in terms of ‘whiteness’. Other issues concerned water consumption, quantity of
detergent used, and fabric care—also something optimized best by herself. A
thorough wash, done with gentle agility, was what the magic was all about.
That was the break-through insight
used by Whirlpool for the design of all its washing machines, which adopted a
‘1-2, 1-2 Hand Wash Agitator System’ to mimic the preferred handwash technique.
With a consumer so particular about washing, one could expect her to be
value-conscious on other aspects too. Sure enough, WOI found the housewife
willing to pay a premium for a product designed the way she wanted it. Even for
a fully automatic, she wanted a top-loader; this way, she doesn’t fear clothes
getting trapped in if the power fails, and retains the ability to lift the
shutter to take clothes out (or add to the wash) even while the machine is in
the midst of its job.
The target consumer, defined
psychographically as the Turning Modernist (TM), was decided upon only after
the initial MR exercise was concluded. This was also the stage at which the
unique selling proposition (USP)—‘whitest white’—was thrashed out.
WOI first launched a fully
automatic machine, with the hand-wash agitator. Then came the deluxe model with
a ‘hot wash’ function. The product took off well, but WOI felt that a large
chunk of the TM segment was also budget-bound. And was quite okay with having
to supervise the machine. This consumer’s identity as a ‘home-maker’ was
important to her, an insight that Whirlpool was using for the brand overall, in
every product category.
So WOI launched a semi-automatic
washing machine, with ‘Agisoak’ as a catchword to justify a 10—15 per cent
premium over other brand’s semi-automatics available in India.
The advertising, WOI was clear,
had to flow from the same stream of reasoning. It had to be responsive, caring,
modern, stylish, and warm, and had to portray the victory of the Homemaker.
FCB-Ulka, which had bagged Whirlpool’s account in March 1997 from contract (in
a global alignment shift), worked with WOI to coin the sub-brand Whitemagic, to
break into consumer mindspace with the whiteness proposition.
The launch commercial on TV, in
August 1999, scored a big success with its ‘Whirlpool, Whirlpool’ jingle…and a
mother’s fantasy of her daughter’s clothes wowing others. A product
demonstration sequence took the ‘1-2, 1-2’ message home, reassuring the
consumer that the wash would be just as good as that of her own hand. The net
benefit, of course, was an unharried home life.
Second Wave
Sadly, the Indian market for
washing machines has been in recession for the past two years, with overall
volumes declining. This makes it a fight for market share, with the odds
stacked against premium players.
Even though Whirlpool has sought
to nudge the market’s value perception upwards, Videocon remains the largest
selling brand in volume terms with its competitively priced machines. Washers
have been displaced by semi-automatics, which are now the market’s mainstay (in
the Rs 7,000-12,000 price range). In fact, these account for three-fourths of
the 1.2 million units the Indian market sold in 2000. With a share of 17 per cent,
Whirlpool is No. 2 in this voluminous segment.
Whirlpool’s bigger success has
been in the fully automatic segment (Rs 12,000-36,000 range). This is smaller
with sales of 177,600 units in 2000, but is predicted to become the dominant
one as Indian GDP per head reaches for the $1,000 mark. With a 26 per cent
share, Whirlpool has attained leadership of this segment.
That places WOI at the appropriate
juncture to plot the value curve to be ascended over the new decade.
According to IMRB data, Whirlpool
finds itself in the consideration set of 54 per cent of all prospective washing
machine buyers, and has an ad recall of close to 85 per cent. This indicates
the medium-term potential of Whitemagic, a Rs20.5 crore on a turnover of
Rs1,042.8 crore, one-fifth of which was on account of washing machines.
The innovations continue.
Recently, Whirlpool has launched semi-automatic machines with ‘hot wash’. The
brand’s ‘magic’ isn’t showing signs of wearing off either. The current ‘mummy’s
magic’ campaign on TV is trying to sell Whitemagic as a competent machine even
for heavy duty washing such as ketchup stains on a white tablecloth.
The Homemaker, of course, remains
the focus of attention. And she remains as vivacious, unruffled, and in control
as ever. The attitude: you can sling the muckiest of stuff on to white cloth,
but sparkling white is what it remains for its her hand that’ll work the magic,
with a little help from some friends… such as Whirlpool.
Questions
1.
What
product strategy did WOI adopt? And why? Global standardisation? Local
customisaton?
2.
What
pricing strategy did WOI follow? What, according to you, could have been the
appropriate strategy?
3.
What
lessons can other white goods manufacturers learn from WOI?
CASE V: CONSCIENCE
OR COMPETITIVE EDGE
The plane touched down at Mumbai airport
precisely on time. Olivia Jones made her way through the usual immigration
bureaucracy without incident and was finally ushered into a waiting limousine,
complete with uniformed chauffeur and soft black leather seats. Her already
considerable excitement at being in India for the first time was mounting. As
she cruised the dark city streets, she asked her chauffeur why so few cars had
their headlights on at night. The driver responded that most drivers believed
that headlights use too much petrol! Finally, she arrived at her hotel, a black
marble monolith, grandiose and decadent in its splendour, towering above the
bay.
The goal of her four-day trip was
to sample and select swatches of woven cotton from the mills in and around
Mumbai, to be used in the following season’s youth-wear collection of shirts,
trousers, and underwear. She was thus treated with the utmost deference by her
hosts, who were invariably Indian factory owners or British agents for Indian
mills. For three days she was ferried from one air-conditioned office to
another, sipping iced tea or chilled lemonade, poring over leather-bound swatch
catalogues, which featured every type of stripe and design possible. On the
fourth day, Jones made a request that she knew would cause some anxiety in the
camp. “I want to see a factory,” she declared.
After much consultation and
several attempts at dissuasion, she was once again ushered into a limousine and
driven through a part of the city she had not previously seen. Gradually, the
hotel and the Western shops dissolved into the background and Jones entered
downtown Mumbai. All around was a sprawling shantytown, constructed from sheets
of corrugated iron and panels of cardboard boxes. Dust flew in spirals
everywhere among the dirt roads and open drains. The car crawled along the
unsealed roads behind carts hauled by man and beast alike, laden to overflowing
with straw or city refuse—the treasure of the ghetto. More than once the
limousine had to halt and wait while a lumbering white bull crossed the road.
Finally, in the very heart of the
ghetto, the car came to a stop. “Are you sure you want to do this?” asked her
host. Determined not be faint-hearted, Jones got out the car.
White-skinned, blue-eyed, and
blond, clad in a city suit and stiletto-heeled shoes, and carrying a briefcase,
Jones was indeed conspicuous. It was hardly surprising that the inhabitants of
the area found her an interesting and amusing subject, as she teetered along the
dusty street and stepped gingerly over the open sewers.
Her host led her down an alley,
between the shacks and open doors and inky black interiors. Some shelters,
Jones was told, were restaurants, where at lunchtime people would gather on the
rush mat floors and eat rice together. In the doorway of one shack there was a
table that served as a counter, laden with ancient cans of baked beans,
sardines, and rusted tins of fluorescent green substance that might have been
peas. The eyes of the young man behind the counter were smiling and proud as he
beckoned her forward to view his wares.
As Jones turned another corner,
she saw an old man in the middle of the street, clad in a waist cloth, sitting
in a large bucket. He had a tin can in his hand with which he poured water from
the bucket over his head and shoulders. Beside him two little girls played in
brilliant white nylon dresses, bedecked with ribbons and lace. They posed for
her with smiling faces, delighted at having their photograph taken in their
best frocks. The men and women around her with great dignity and grace, Jones
thought.
Finally, her host led her up a precarious
wooden ladder to a floor above the street. At the top Jones was warned not to
stand straight, as the ceiling was just five feet high. There, in a room not 20
feet by 40 feet, 20 men were sitting at treadle sewing machines, bent over
yards of white cloth. Between them on the floor were rush mats, some occupied
by sleeping workers awaiting their next shift. Jones learned that these men were
on a 24-hour rotation, 12 hours on and 12 hours off, every day for six months
of the year. For the remaining six months they returned to their families in
the countryside to work the land, planting and building with the money they had
earned in the city. The shirts they were working on were for an order she had
placed four weeks earlier in London, an order of which she had been
particularly proud because of the low price she had succeeded in negotiating.
Jones reflected that this sight was the most humbling experience of her life.
When she questioned her host about these conditions, she was told that they
were typical for her industry—and most of the Third World, as well.
Eventually, she left the heat,
dust and din to the little shirt factory and returned to the protected,
air-conditioned world of the limousine.
“What I’ve experienced today and
the role I’ve played in creating that living hell will stay with me forever,”
she thought. Later in the day, she asked herself whether what she had seen was
an inevitable consequence of pricing policies that enabled the British customer
to purchase shirts at £12.99 instead of £13.99 and at the same time allowed the
company to make its mandatory 56 percent profit margin. Were her negotiating
skills—the result of many years of training—an indirect cause of the terrible
conditions she has seen?
Once Jones returned to the United
Kingdom, she considered her position and the options open to her as a buyer for
a large, publicly traded, retail chain operating in a highly competitive
environment. Her dilemma was twofold: Can an ambitious employee afford to
exercise a social conscience in his or her career? And can career-minded
individuals truly make a difference without jeopardising their future? Answer
her.
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