Arvind Mills Case

Topics: Innovation, Technology / Pages: 7 (654 words) / Published: Jun 8th, 2014

Environmental Factors
Inability to anticipate & manage risk
▪ Poor prediction (Thought NAFTA impact would be 10 years; but impacted in less than a year)
▪ Mexico emerged as a new garment cluster (Competition)
▪ 17% Duty for outside of NAFTA made Arvind non‐competitive

 Lack of vision
▪ Got carried away by its success, hype by media, stock market and industry

Blind expansion /Careless /lavish spend p /
 Commoditization

Invested hugely into expanding mfg set ups
Lavish spend on plants – Huge Fixed Cost (Santej Plant)
Failed to realize commodity is imitable
Insufficient Measures to create product differentiation (Biz Level)

 Core Competency turned out be Core Rigidity
 It’s DNA of mass manufacturing turned out to be a bane
It s DNA of mass manufacturing turned out to be a bane
▪ It’s not Size; Its Product Innovation

No de‐risking strategy
 All
All eggs in one basket – D i Mf i b k t Denim Mfg
 Did not anticipate Denim down fall
 Industry is fragmented ‐ Top 5 Players account only 10% of y g p5 y y global capacity
 Stacks of new capacity had come all over the globe: including China

 Rapid changes in the industry is inevitable
 ARVIND failed to accept “volatility and build that into it’s

strategic plans”
▪ Arvind had put up 110 million meter of denim capacity – p p p y
▪ Re.1 / meter fall in denim price led to 10 Crore bottom line losses

▪ High Level of Concentrated Risk
High Level of Concentrated Risk .

EXTERNAL FACTORS (Contd.,) d  Failed to anticipate and Manage Risk
 Steep fall in Denim price
 Sudden fall in Denim market world‐wide

De‐risking Balance Sheet
 Failed to sense market volatility

Economic Factors
 Collapse of global Denim Market
 Prices of Naphtha Feedstock for Arvind’s Captive

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