Nalli Silk Sarees (A)
On a balmy night in the summer of 2011, Dr. Nalli Kuppusamy Chetty, chairman of Nalli Silk Sarees Private Limited, waited at the Chennai international airport to receive his granddaughter, Lavanya Nalli (HBS MBA 2011), from her transcontinental flight. As Kuppusamy waited for the flight to arrive, he reflected on the next steps he should take to keep the Nalli Group competitive. Established in 1928, the Nalli Group- a family owned and operated business that retailed Indian ethnic wear- had enjoyed impressive growth with a $95 million turnover, a 22 store retail footprint, and had outdone its competitors by being the only player in its segment to have a national presence (see Exhibit 1 for Select Information on the Nalli Group). In 2011, however, Kuppusamy felt that the market and the competitive landscape were changing. Over the years, the business had become more complex to manage because of the growth in the number of stores, the increase in product categories, and the proliferation of the number of StoreKeeping Units (SKUs) that had to be managed. The company was also starting to face intense competition from not only large Indian and multi-national corporations that were aggressively entering the Indian apparel market, but also from small privately owned stores that were offering heavily discounted products to entice customers. As a reaction to changing market conditions, the Nalli Group earlier that year had announced a $25 million expansion plan and proposed the opening of 12 new stores over a period of two years.1 With aggressive expansion plans on the anvil, Kuppusamy also recognized that the Nalli Group might need to revisit its pricing sstrategy, merchandising process and product assortments in order to increase its own competitiveness. Kuppusamy was also acutely aware that much of Nalli’s past growth had been due to the company’s strong culture and zealous emphasis on customer service and he wondered what impact the expansion plans would have on overall customer experience. With Lavanya Nalli only in Chennai for a few days before she headed back to the US for her new assignment with a top consulting firm, Kuppusamy knew he and his confidante had only a few days to deliberate on future steps that the company should take.
Nalli Silk Sarees
Silk: Queen of Fiber
Silk is a strong, organic fiber with high natural luster. While many different types of insects can produce silk, the silk that was used to make fine textiles and clothing was obtained from the larvae of mulberry silkworm. In commercial silk production, hand-picked silk moths laid eggs which became caterpillars or silkworms. The silkworms were fed fresh mulberry leaves until they grew to a size that was almost 10,000 times their original weight.2 Once they reached this size, these silkworms used their silk glands to spin a cocoon around their bodies. Silk harvesters allowed the larger cocoons to become silk moths and sorted the remaining by size, texture and color. These cocoons were then put through a series of boiling hot and cold immersions to help soften, separate and spool the silk strands that form the cocoon. In order to make the silk strong enough to be woven into fabric and textiles, 3 to 10 strands or filaments were spun together to create a silk thread. The silk thread was then woven into silk cloth in factories. It was estimated that approximately 2,000 to 3,000 cocoons produced one pound of silk.3 This, along with the complex cultivation and handling process, made silk one of the most expensive fibers in the world. In 2009-2010, the cost of raw mulberry silk was around...
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