Trendsetters shops - Assignment Example

?Introduction: The small and medium enterprises are the enterprises which play a very important role in the global economy and constitute 90% of the global economy. Because of the saturity in the developed countries the Small and medium sized enterprises are making more advancements in the developing nations which are mainly the BRIC countries (Brazil, Russia, India and China). The WTO has recognized the importance of these small scale industries and thus has promoted these industries. The small and medium enterprises are the enterprises which begin with their own innovations and inventions and survive competition in order to succeed globally. This report is a personal report and in this topic I will focus mainly on the development of our own small medium enterprise called the “Trendsetters” in which I and my brother are partners and it is a family business. I have been into this business as soon as I completed my higher secondary exams. I began my role in the firm as accountant. This topic and firm has been chosen by me for my research purpose as I have personalized experience in the firm and I foresee my future in this firm. Beginning of as an accountant in the business I have started managing all the aspects of the business in order to carry our family legacy further. I and my brother have started discussions concerning all details about the shop like the supply chain procedures that we need to adopt, the pricing and the marketing strategies that needs to be implemented, the seasonal highs and lows etc. “SMEs enhance competition and entrepreneurship and hence have external benefits on economy wide efficiency, innovation, and aggregate productivity growth. SMEs are generally more productive than large firms. SME expansion boosts employment more than large firm growth because SME are more labor intensive” (Small and Medium Enterprises, 2011, P.1). This research will shed light on “Trendsetters” as case study and example of successful small business in India. This research relies on the case study methodology, whereby personal description is provided which calls for analytical as well as descriptive study and provides accurate information on the actual developments in the research topic. 2. History of Trendsetters Shop: My Grandmother was the brain from where such an idea of family business emerged. She was a great textile designer and she could make her own designs which of course she did not market but created for her own family uses. Due to her talent people came to her for design tips on their clothes. My father grew up hearing this that many people wanted my grandmother to start her own small business but my grandmother was afraid because of the knits and guts that is required in the business field. My father had then acquired his business administration degree and instead of venturing out and sourcing him to other firms he decided with grandmother to start his own business so that his academic excellence and my grandmother’s ideas of design could merge together and they started a small garment factory. There was difficulty in procurement of initial capital and the initial capital was a loan with 10% interest from the Regional Rural Bank in our locality. With 5 of my grandmother’s friends our business’s first contract began. It was a very small contract but it ensured confidence in my father to further the business. My father became the managing director of the firm. The present number of employees in the firm is 75 which consist of designers, purchase officials, logistics officials and marketing officials. Comments: Even though the enterprise is a small scale it shows the merger of business idea with high academic excellence. It is notable how the family merged skills with education in order to start their own business. “Another area in which small entrepreneur has faced the difficulty is that of management. The principles of management have not been properly studied and translated into practice owing to the influence of old traditions and customs. It has seldom bothered to foster or train new entrepreneurs” (Basu, 1998, P. 111). 3. Analyses of an enterprise: Even though small scale industries are given preference in the Indian budgets in the present times during the times when my grandmother and father started the unit grants were not appropriately allocated to the small scale enterprises projects. “About one third of sample entrepreneurs felt that different government policies and rules affected their units to a varying degree” (Tewari, 1991, P. 110). Even though the Indian government promoted the development of the small scale industries the change in governments has created problems. At first we needed to obtain SSI registration and then obtain clearances from a number of departments like the electricity department, the water authority department after which we had to make arrangements for land for which we needed clearances from the land department authorities, then arrangement needed to be made for plant and machinery and infrastructure arrangements had to be made. “SSIs will be exempt from the Indian labor laws pertaining to retrenchment of permanent workers and will be permitted to use contract labor” (Anderso, 2003, P. 342). Then the project report was made to obtain finance and then final clearances were obtained. “Family owned businesses play a crucial role in the economy of most countries. Much of the small scale industry and the service sector are run by family business” (Charantimath, 2011. P.286). “SWOT analysis promotes the sharing of information and perspective across departments. This cross pollination of ideas allows for more creative and innovative solutions to marketing problems” (Ferrell & Hartline, 2010. P. 123). SWOT analysis was used in analyzing the enterprise: Strengths Weakness Opportunities Threats Small businesses has requirement of less capital which can be easily obtained. The set up of small business requires large government formalities. Customer base is quite large because there is wide variety of customers for the textile market. Fierce competition from established markets. Small businesses are offered grants and subsidies. The set up of business requires approvals and clearances from many departments. Good designed textiles are selected for exhibition purposes and thus can appeal to international customers also. High prices of rare fabrics and colors which needs to be procured from international markets. 4. Marketing and Marketing Research: The market of textiles and apparels is considered as a rapid developing market over the past many years, with the advancements in fashion designing. The best marketing tip is “convert your customers into publicity agents for your business. Develop an incentive for them to tell associates and friends about the value of your products or services. An endorsement from them is more effective than any amount of advertising - and it is much cheaper” (Leduc, 2011). There are a large number of textiles industries and thus the intensity of competition has increased over the past years. Visiting our own textile unit, you will find variety of fabrics, dyes, cuttings that are farmed in such a way that each apparel created has a unique look and comfort. There are wide varieties of clothes and designer wears for women, men and kids according to the age. “The purpose of marketing research is to link the consumer to the marketer by providing information that can be used in making marketing decisions” (Burns, 2077, P. 8). Comments: Trendsetters is a small successful business and has conducted its own marketing resrach and has framed its small but accurate marketing policies. First satisfy the initial customers. Identifying target customers. Attracting new customers by way of promotional advertising Catering to government and state orders. 5. Start-up strategies: I have been handling this business for the past seven years I worked with my brother as the accountant of the firm and side by side I had also started managing the supply chain operations in the firm and so was aware about the future the market had for Trendsetters. Our father now only assisted us in the work and my brother and me were responsible for managing all the affairs of the small business that has now developed. I and my brother divided the work while my brother was responsible for handling the public affairs of the firm. All internal operations like procurement of materials, managing logistics and supply chain cam under my responsibility. I developed a good number of contacts in the process. Expansion into international markets especially the Asian markets and then the European markets are what we are aiming at. We decided to adopt modern machinery and practices fro expansion purposes. “Going all out and trying to capture all market segments right in the beginning is not an effective strategy for start-ups. Smaller businesses should start by offering specialized goods and services targeted at a smaller demographic, which makes it attractive to that specific group of prospective buyers” (Startup Strategies - Finding your own Niche and dominating it, 2010). Comments: The business in Trendsetters is now concentrating on expansion. Along with skills it has also acquired academic excellence which has developed the business in leaps and bounds and has made it ready to acquire new markets. The business was ready to accept the government incentives for exports and modernizations in order to develop the business. 6. Family Business: My brother and I had always focused on developing the family business. Most of the businesses in India are small and medium and run by the family. “The role of business in the society has witnessed a dramatic change in the recent times. Yesterday, it was the business as family. Today, it is the family as business. And tomorrow, it will be the business of the family to ensure that there is a future for both the business and the family” (Menon, 2006). My father’s excellent academic background in Business Management and his passion towards knitwear manufacturing and exports has paved way for its success. After my brother and I took over his business, we have built a strong team of professionally qualified team who has contributed a lot towards new technologies in production, assuring high quality, logistics and Exam transactions. Our major challenge has been in the areas of replacing the existing plant and machinery, power looms with the latest technology. Establishing and developing new foreign clients for exports is another milestone we decided to cross. Exports being a new approach to our business, it has just started spreading its branches and presently is facing a lot of teething problems. High level of competition is also a major stumbling stone for Trendsetters. Comments: Trendsetters has a long way to go to establish a strong foothold in the foreign markets of the textile industry. The ever-changing fashion, designs, quality of raw materials and accessories have to be met with updated knowledge, information and technology. “Twenty or 30 years ago it might have taken a few years to make it from red carpet to mass market, but today's manufacturers have put the fashion cycle into hyperspeed. Sometimes a hot trend makes it into lower priced retail outlets in as little as a few months” (Nellis, 2011). A very strong management team has to be setup to meet the challenges of all the areas of manufacturing, new product designing, quality assurance, costing and pricing, marketing and customer chain. 7. Finance, including sources of start-up finance: “According to the survey results, majority of the respondents in the textile industry prefer to arrange for their financing needs through bank term loans and internal accruals or through their own sources of finance. In the past none of companies raised funds from Venture Capitalists/Private Equity but a few had plans to raise funds through these channels” (Cluster Financing, n.d). Trendsetters being solely established by my father, the initial capital have been brought in by him who was sourced out of his share of family inheritance. He chose Tirupur, fondly known as ‘knitwear city of India’, in Tamil Nadu as his business hub because of its international presence in quality knitwear manufacturing sector. Indian government has recognized the importance of textile industry and has taken many initiatives to reform and develop the same. Since we took over the business, my brother and I made maximum utilization of the incentives provided by our Government schemes such as Apparel Parks for Exports (APE) and Textile Centres Infrastructure Development Scheme (TCIDS) to set up new machines and power looms after the second year of our taking over its operations. Comments: Funding and arranging finance for all the latest machinery, constant repairs and maintenance is a major challenge we have been facing. The small factory setup by my father had to be developed into medium scale industry. Government recognition and its reformist nature towards the textile industry had paved way towards removal of SSI reservation for woven apparel in the year 2000 and knitted apparel in 2005. The new Textile policy set up by the government in 2000 had made the banks and financial institutions more liberal and this helped us to approach them for Working capital loan, term loans and overdraft facilities. Our inflows slightly increased in 2002 – 2003 due to the gradual reduction in the excise duties for most type of fabrics by the Government. Reduction in corporate tax from 35% to 30%, reduction in depreciation rate of plant & machinery from 25% to 15%, reduction of customs duty on textile machinery and polyester yarn are also being utilized by us to improve the strength of our balance sheet and increase profits. A very strong professionally qualified team in our finance department has been an added advantage to generate funds and roll them to maximize outputs. “Out of the total companies that were surveyed in the textile industry, around 43% of the companies found procurement of funds relatively easy. Around 40% of the remaining companies faced moderate difficulties in the getting funds” (Cluster Financing, n.d). 8. Branding, sales and selling: Trendsetters have been maintaining its position as one of the top textile factories in its region. It has succeeded in establishing its strong hold in areas and activities like Weaving, bleaching / dyeing, printing, embroidery, finishing etc. The brand name ‘Trendsetters’ had already been well engraved in the markets of South India during my father’s times. After we took over the business, our main focus was to plunge and expand into the foreign markets. “A brand image is defined through its selected symbolic patterns. The most important among these are the brand’s name, logo, and composition of graphic elements and colours all associated with the company” (Dhanabhakyam & Latha, 2011). My brother being experienced professionally qualified marketing personnel, he brought with him invaluable outputs in the areas of foreign branding, merchandising and general management which helped us to establish new customers in France, Belgium, UK, Canada, USA, Australia, Saudi Arabia and Singapore. Our readymade varieties like T-shirts, Polo-Shirt, Sweat-Shirt, Cardigan, Jacket, Tank-Top, Bermuda, Legging, Skirt, Pyjama, other Nightwear and underwear for Men, Women, Children and Babies. We have received many repeat orders from our foreign customers which only proves the high demand as a resultant of the best quality in the products of Trendsetters. The marketing team has ensured that ample advertisement is given periodically in all media like newspapers, TV etc. As a part of our marketing strategy, we have also designed a website with all information on our products, prices, availability etc. Constant interaction with customers has also been made possible through a feedback / write-to-us option in the website. Comment: The most important and difficult criteria in a garment industry is to keep in pace with the latest fashion and deliver the same. A continuous universal study of the textile market is necessary to keep track of the latest trend which has always been proven by the strong marketing team in Trendsetters. The motto of Trendsetters has been “Partnership with customers” which brings a mutually beneficial long term relationship among both Trendsetters and its customers. Increasing the customer base is equally important as we cannot always depend on the same customers for orders, because if they face a crisis for reasons unknown, they might show signs of withdrawal from their business which would suddenly plunge our firm into a crisis of survival. In Trendsetters, most of the decisions in marketing can be classified into ‘four Ps’: Product, price, place and promotion. All the customers are not the same. Their needs and wants differ. Hence, the marketing efforts can not be the same for all the customers. The marketing efforts should be specifically suited to the particular segment like infants’ wear, kid’s wear, ladies’ wear, men’s wear etc. 9. Networking: Textile industry solely depends on its strong, cost effective and efficient distribution and networking channels. In Trendsetters, we have a strong base of foreign customers / importers, local distributors, wholesalers and retailers and commission agents that cover most of the major cities in India. Our brand has become a household name and our customer base has increased to a large extent. We have a separate Customer relations team (CRM) who interact with them and collect their responses / complaints / suggestions etc. This also keeps us updated on the recent trends and changes in fashion and design. “In 1990s, people became more aware of the development of the buyer-seller relationship and realized that these relationships had consequences for the entire organizations. Customer relations were no longer a marketing issue, but everybody in the organization played a direct or indirect role in customer contact” (Peelen Ed, 2008). Comments: On the other side of the coin, this industry has a very fragmented sales and distribution network due to India’s large and diversified Textile industry with different segments and sectors. It is very difficult to keep pace with the recent developments and accordingly change or adjust the existing plant, machinery and technology to meet these requirements. The existence of large number of competitors in this industry also poses a big threat. To sustain in the international market is also very difficult due to the vibrant export-import policies of the government, legal modalities and other policies of the ruling parties. 10. Solo self employed: “A sole proprietorship is the oldest and the most common form of business. It is a one-man organisation where a single individual owns, manages and controls the business. It accounts for the largest number of business concerns in India” (Sole Proprietorship, n.d). Trendsetters started off as a sole proprietary firm by my father and have just been converted into a partnership between my brother and myself a few years back. The policies and approaches adopted by my father were based on old theories of business management. He did not even know have formal training in usage of computers. But, he being a very adaptable person explored and made innumerable efforts to keep pace with the changing ideologies in the textile industry. Most of the staff have served this firm for many years and have long term relationship with my father. My brother, who has all the qualifications and the vision to take ‘Trendsetters’ to greater heights, is facing a lot of resistance from the senior staffs. They do not want to change their approach to work and cannot keep pace with the fast world of computers. They also do not accommodate young talented staffs, who also share the vision with my brother and me. Comments: The conflict and unhealthy relationship among the senior and experienced staff with the young qualified ones has become a major concern in Trendsetters. The management has the resources to bring in new technology, know how and expertise into the existing business in order to pave way for expansion and growth. But the human and man power aspect of the company has become weak to meet up with these challenges which require perception, speed and accuracy. The Indian garment business is one of the oldest industry but has a very major contribution towards the economy. Diversification and branching out to other related areas is a must for its growth and sustenance.As per statistic of Small and Medium scale industries, their growth rate has been steady from 9% in 2002 -2003 to 13% in 2007-2008. “Small and Medium Enterprises (SMEs) typically contribute to around 50 per cent of GDP and 60 per cent of employment internationally. The Small Scale Industry (SSI) Sector constitutes a vibrant and dynamic sector of the Industrial economy of India. Currently, the sector accounts for around 95 percent of the industrial units in the country contributing to 40 per cent of the manufacturing sector output and 35% of the nation’s exports” (Profiles of Exportable Technologies/ Projects from Indian Small & Medium Enterprises, n.d). Trendsetters has also created more employment opportunities and contributed to the development of the economy as a whole. 11. Management problems, turnarounds and corporate failure: In small business projects risks are often involved due to various reasons. Along with my brother I planned to start a special project which we had to drop in middle because of lack of market knowledge. In a state like Tamil Nadu which is known for its increasing exports of garments, competition from big business groups were a set back for small enterprises like ‘Trendsetters’. Besides the competition from the huge firms, global financial crisis and the new government regulations made the existence of small industries in danger. Above all it was difficult for the small industries to hire labor due to high wage rates. The trend of employees to work for short period to get experience also adversely affected the small industries. “Small scale industries serve to stimulate growth in the overall economy, providing stakeholders with numerous benefits. However, in spite of their benefits, most small scale enterprises fail in less than two years.” (O'Farrell, 2011). Comments: In family businesses generally members follow the path of their ancestors. The solution for the problem of failure in the process of succession can be found out by studying such cases. An intensive study of these problems reveals the untimely bonding of the industry’s past and present. “Small scale industrialists cannot expand their business due to lack of capital and due to non-availability of new technology. The difficulty to find the profitable markets and competition with the large scale industries which produces better goods, the small industry has to face losses. The cause of problems in small scale industry is the use of old and outdated means of production. The Step Motherly Treatment of the government departments creates lot of problems” (Small Scale Industry and Problems of Small Scale Industry, 2010). 12. Conclusion: The importance of small scale industry increases manifold due to the immense employment generating potential. As these industries lack capital, they utilize the labor power for the production of goods. “Small scale industry is widely recognized as a powerful instrument for socioeconomic growth and balanced sectoral development. One of the distinctive characteristics of small scale sector is that the development of these industries would create broader employment opportunities assisting entrepreneurship and skills development and ensure better use of scarce financial resources and appropriate technology.” Better utilization of technology and undertaking of research will lead to an enhancement of the small scale industries. (A look at the small scale industries, 2011). Reference List A look at the small scale industries, 2011. [Online] oboulo. Available at: http://en.oboulo.com/a-look-at-the-small-scale-industries-64315.html [Accessed 2 April 2011]. Anderson, A. 2003. India's manufacturing sector: policy framework. [Online] Academic Foundation, P.342 Available at: http://books.google.co.in/books?id=xfN4LY5wRr4C&pg=PA341&dq=start+up+strategies+for+small+scale+business+in+india&hl=en#v=onepage&q&f=false[Accessed 2 April 2011]. Basu., 1998. Business Organisation and Management. [Online] Tata McGraw-Hill Education, P.111 Available at: http://books.google.co.in/books?id=VfG-CWficcEC&pg=PA111&dq=importance+of+professional+management+in+small+scale+industries&hl=en#v=onepage&q&f=false[Accessed 2 April 2011]. Burns,. 2077. Marketing Research. [Online] Pearson Education India, P.8 Available at: http://books.google.co.in/books?id=BJil19CAGQwC&printsec=frontcover&dq=Marketing+and+Marketing+Research&hl=en#v=onepage&q&f=false [Accessed 2 April 2011]. Cluster Financing, n.d. [Online] D&B. Available at: http://www.dnb.co.in/SMEMumbai2009/ClusterFinancing.asp [Accessed 2 April 2011]. Charantimath, PM., 2011. Entrepreneurship Development and Small Business Enterprises. [Online] Pearson Education India, P.286 Available at: http://books.google.co.in/books?id=gvtA6vvj9PEC&pg=PA214&dq=time+needed+to+complete+formalities+in+setting+up+small+scale+business+opportunities+in+india&hl=en#v=onepage&q&f=false[Accessed 2 April 2011]. Dhanabhakyam, M. & Latha, M., 2011. Indian textile Industry: Brand strategy and export competitiveness. [Online] fibre2fashion. Available at: http://www.fibre2fashion.com/industry-article/1/29/indian-textile-industry-brand-strategy1.asp [Accessed 2 April 2011]. Ferrell, OC., & Hartline, M., 2010. Marketing Strategy. [Online] Cengage Learning, P.123 Available at: http://books.google.co.in/books?id=Lt12ggizMhIC&pg=PA123&dq=SWOT+analysis&hl=en#v=onepage&q=SWOT%20analysis&f=false [Accessed 2 April 2011]. Leduc, B., 2011. 7 Small Business Marketing Tips. [Online] businessknowhow. Available at: http://www.businessknowhow.com/marketing/small-business-marketing.htm [Accessed 2 April 2011]. Menon, V., 2006. India’s Business Families: Redefining the Roles. [Online] V.L.B Janakiammal College of Arts & Science. Available at: http://www.isb.edu/FamilyBusinessConference/India'sBusinessFamiliesDefiningtheRoles.pdf [Accessed 2 April 2011]. Nellis, C., 2011. Hot or Not. [Online] about. Available at: http://fashion.about.com/od/latesttrends/a/trendover.htm [Accessed 2 April 2011]. O'Farrell, R., 2011. Problems of Small Scale Industries. [Online] ehow. Available at: http://www.ehow.com/about_5368391_problems-small-scale-industries.html [Accessed 2 April 2011]. Profiles of Exportable Technologies/ Projects from Indian Small & Medium Enterprises, n.d. [Online] nafenindia. Available at: http://exportable.nafenindia.com/intro.php [Accessed 2 April 2011]. Peelen Ed., 2008. Customer Relationship Management. [Online] Pearson Education India. Available at: http://books.google.co.in/books?id=AOJbK2nbF_wC&printsec=frontcover&dq=customer+relations+management&hl=en#v=onepage&q=customer%20relations%20management&f=false [Accessed 2 April 2011]. Small Scale Industry and Problems of Small Scale Industry, 2010. [Online] guess papers. Available at: http://www.guesspapers.net/377/small-scale-industry-and-problems-of-small-scale-industry/ [Accessed 2 April 2011]. Small and Medium Enterprises, 2011. [Online] World Bank Publications, P.1 Available at: http://books.google.co.in/books?id=R7uCR2rMkEoC&printsec=frontcover&dq=small+and+medium+enterprises&hl=en#v=onepage&q&f=false[Accessed 2 April 2011]. Sole Proprietorship, n.d. [Online] Business. Available at: http://business.gov.in/starting_business/sole_proprietorship.php [Accessed 2 April 2011]. Startup Strategies - Finding your own Niche and Dominating it, 2010. [Online] smallbusinessloancentral. Available at: http://www.smallbusinessloancentral.com/start-small-business/business-startup-strategies.aspx [Accessed 2 April 2011]. Tewari, VK., 1991. Small scale industry: success and failure. [Online] Concept Publishing Company, P.110 Available at: http://books.google.co.in/books?id=Mn0ZW3vpxNgC&pg=PA110&dq=govt.+regulations+needed+for+small+scale+industries&hl=en#v=onepage&q&f=false[Accessed 2 April 2011]. Read More