Analysis of the textile industry in Pakistan

Introduction to Textile Industry in Pakistan

Textile Industry is one of Pakistans largest industries. It plays a vital role in contributing to the countrys economy through its industrial production, high employment opportunities and bringing in Foreign exchange. The industry is going through tremendous changes with respect to globalization and many economic challenges. The proportion of textile industry in the country’s economy along with its contribution to exports, in terms of GDP employment, foreign exchange earnings, investment and value added, and revenue generation altogether placed the industry as the single largest manufacturing sector of the country. The main factor to contribute to such huge developments in the textile industry is the production of cotton in the country, considered as one of the Top 10 textile exporting countries of the world. Pakistan is the fourth largest producer of cotton yarn and cloth, and third largest player in Asia with a spinning capacity of 5% of total world production. It also ranks 2nd in the export of yarn, 3rd in the export of cloth and contributes 3% to the total textile trade of the world.

Pakistan is fast emerging as a hub for textile and garments trade in the Asian region as it is endowed with one of the largest textile and garment producing industries in the world. In agriculture sector, the availability of cotton contributes a lifeline of its economy, making textile and garment the largest industrial sector in the country.

Market Situation

Trends in the Fashion Industry in Pakistan are changing and the style mantras of the past are now becoming obsolete. Fashion choice is now mostly based on the Fashion Icons and celebrities present now a days, being more prone towards the western culture. Due to growing awareness and changing market trends, businesses now carefully study the market and are trying to bring to the customer innovative fashion; clothing that the customers desire, clothing that is entirely based upon the customers’ needs and wants.

Bargaining power of customers: Market analysis show that roughly around 80% of the customers of textile industry in Pakistan belong to lower and lower-middle class with a per capita income of $1051 (as per Ministry of Finance of Pakistan), which make them less attracted towards established brands due to their high prices.

Competitors: The textile industry in Pakistan is a saturated industry; with many established (branded) and non-branded competitors. Thus, the profits are distributed within the industry and are low. The market study of the Pakistan fashion industry shows that many non-brand competitors mostly influence the market. Businesses that have one or two shop business and sells clothes on extremely low prices compromise on the quality, design and fabric of the t-shirts.

Bargaining power of suppliers: There is abundant supply of producers in this market, hence each individual supplier cannot exercise much bargaining power with apparel sellers.

Related & support industries: as mentioned above, Pakistan is the hub of textile manufacturing in the world; hence there is a widespread presence of affiliate industries. With increased government support for the textile industry, the infrastructure supporting the textile industry is also expected to improve tremendously.

Threats of new entrants: the industry is characterized by low profit margins and is relatively saturated; hence the threat of new entrants is low. Also, the high initial investment required to set up a factory makes the industry relatively secure from threat of new entrants.

Target Market & Market Segmentation

Target Market

“Victory tees” targets the segment of the 15 – 33 year olds of every income strata from the middle to the high upper class. It decides to segment its market based on “Graphics” which would comprise of already designed t-shirts based on entirely new fashion trends, and “Artwork”, which would be based on custom-designed t-shirts, enabling its customers to design and create their own t-shirts on a range of fabrics and colors. Along with individuals, the firm also plans to target organizations, NGOs, student organizations, universities, schools and the sports sector for big orders of custom designs.

“Victory tees” segments its target market into two distinct groups; this first group involves customers who prefer pre-graphically designed shirts. The second group is those who like designing their own shirts based entirely on their own imagination, in colors and fabrics that suit them.

Graphics — This group purchases a shirt and has an existing graphic placed on the shirt. This is the less expensive option and lends itself to low production numbers, as low as one, since there is not the inherent expense of artwork creation.

Ages 14-32

69% are students

Median individual income is Rs. 40,000

Artwork — This segment prefers having custom artwork created and placed on their shirt. This segment would prefer to design its own shirts in order to make a certain fashion statement. Occasionally when the customer would not have an exact image in mind, and thus would rely on the artist’s skills to help shape the final product. Some of these customers would require the assistance of Victory Tee’s partner artist, while others would have a friend or other design service providers develop the art.

Ages 20-35

Median individual income is RS40,000 and above

18% are using the shirt as a form of communication for a cause or a message

Product Review

“Victory tees” is a product that targets the 15-32 year olds and is a high quality, branded T-shirt priced at comparatively lower prices than that of its competitors. It offers its customers a wide variety of quality designs, colors and textures. Not only this, but the business also provides them with an opportunity to design their own T-shirts in various colors and fabrics. This unique and differentiated offer will enable the company to build its repute in the market and will be able to distinguish itself from other competitors.

The t-shirts at Victory Tees would be of six standard sizes: extra small, small, medium, large, extra large and double XL.

The colors of the generic t-shirts could be varied depending upon the demand of the design, and the colors that would be available for the artwork t-shirts (customized shirts) would be:

Red

Yellow

Green

Blue

Pink

Grey

Black

Purple

White

More colors would be introduced later based on demand.

The t-shirts would initially be introduced in cotton only, and considering the demand patterns, more materials would be added to the product line later.

Each shirt from the graphic design category has an average cost of Rs. 100 and would be priced Rs. 500, which is marginally lower than that of its competitors. The shirts in the artwork category would cost Rs. 150, and would be sold at Rs. 700. These prices would be charged initially in order for Victory Tees to capture the intended market share of 1-2%, and could be raised after the success of the product.

Review of Competition

Outfitters deals in clothes almost all over Pakistan. It offers its products via retail stores. They are the makers and the sellers of their products like shirts, tops, knitwear, jeans etc. They also have targeted customers in Islamabad also, for that they have their outlets in F-7 Jinnah Super Market, Blue Area and in F-11 also. Their prices are much competitive in market. Prices starts from Rs.499 to Rs.800 maximum and during off seasons they have their promotional offers like all stock on 25% discount which resulted in great attraction of customers. They actually believe in varying designs to attract more customers through providing them exclusiveness. Prompt changes in designs let them grow very quickly in the market and in off seasons they also offer their outfits at extremely discounted prices. They don’t encourage holding cost at all they always try to keep their stores full with updated designs and on competitive prices.

Crossroads initially is known for its huge range of sweaters but now it enters in a big market by expanding their range of products for unisex. Currently they have 40 outlets in 13 cities of Pakistan. It’s an emerging brand. It has its outlet in G-6, in Super Market and in Blue Area. Most of their Tees are sold for Rs.500 to Rs 700 and prices rise and fall with the variation in the stuff and design. As new arrivals come in old stock tagged with the discounted prices and promotional offers like buy two in Rs.900. they believe in variety providing like if they produce pair of socks their aim is to ensure the availability of sock in maximum colors.

Chenone is the brand which entered in Pakistani market in 1997 in Islamabad. It is a brand which offers wide range of products including clothes. They have their outlet in Jinnah Super. Their products are advertised and featured in leading magazines of Pakistan. They not only deal in clothing but also foot wear, bed linen, kitchen and furniture can be considered as one stop shop. Price range of Tees provided by them is from Rs.700 to Rs.900 and they keeps on fluctuating as Pakistan have very uncertain economic conditions.

PEST Analysis

Political Implications

Pakistan has been facing the problem of political instability since its birth in 1947. From 1947 until 2010, the governments have failed to maintain political stability in Pakistan. There is an uncertainty in government’s structure and we all know when a ruling party faces this sort of uncertainty they fail to do well for public. The opposite parties tend to take advantage of the situation.

As one of the fastest growing industrial sector of Pakistan, the government is paying high attention to the apparel industry. One measure taken is the Balancing, Modernization and Replacement (BMR) program under which loans are provided to the new businesses under concessionary rates. Added to it, the Chamber of Commerce provides the following incentives.

Establishment of Textile City at Karachi and Garment Cities at Karachi, Lahore & Faisalabad.

Gradual reduction of import duty on textile machinery and parts to 5%.

6% R & D support to garment exporting businesses.

Reduction of import duty on ginning presses to 5%.

Reduction of turn over tax on retailers of specified textile fabrics and articles of apparel including readymade garments or fashion wear to 1% and reduction of sales tax from 15% to 2%. Both these taxes will be their final tax liability.

Long term financing for export oriented businesses.

Looking ahead, the apparel industry in Pakistan faces some serious challenges from the growing political tensions and issues. The policies regarding foreign exchange, imports, exports and investments have been consistently unpredictable due to the political instability in the country. In short, the constantly changing regulations and instability in the policies of the government have greatly hampered the overall apparel industry in achieving its optimum potential.

Economic Factors

Economic stability of any country is a very essential part, which needs to be considered when it comes to the growth of a business firm. It is like a core ingredient around which all other factors of an organization are revolving.

The Pakistani economy is in a desperate state, and the causes are long-term, structural fluctuations. The new Zardari government in Pakistan and especially in Islamabad has inherited high inflation, large income inequality and a chronic lack of spending for infrastructure.

In the last two decades, economic depression is witnessed all over the world. This has caused a huge sudden change in the purchasing power of the customers. Poverty level, Foreign Direct Investment and export are on high-speed decline. Many garment industries have been shut down today due to all these factors. With frequent price fluctuations, garment industry is forced to increase the prices of their products which customers are not willing to purchase.

Finally yet importantly, Pakistan depends heavily on the bilateral and multilateral support to close its financing gap and avoid serious balance of payment stress. Due to weak institutions and governance, economic development is slow and heightened risk will continue to linger.

Technological Factors

Rapid changes and developments in technology have increased the competition. The machinery used by the industries in Pakistan is obsolete and outdated. Government fails to provide the funds and loans to the owner of garment industries hence they cannot install new machinery, which can perform tasks in an easier and faster manner.

Power failure is another big issue which garment industry is facing these days. Long duration electricity load shedding without any schedule; instable prices of electricity , per unit price of electricity rises after every few month, shortage of gas supplies in winter, increased rated of petroleum products, lack of CNG, as well as water shortages are some of the prominent causes of garment industry downfall in the last two or three years.

In addition, lack of research-oriented attitude leads to lack of improvement in the industry. New and Innovative products are introduced by the garment industries of other countries but Pakistan is lacking behind in this context.

Socio-Cultural Factors

Society and Culture are very important factors that any organization cannot ignore. There should be a perfect match between the production and social systems in a specific area. This match will help us in gaining high goodwill. Therefore, we need to examine the socio-cultural environment of a country before entering its markets, in order to know the demands and requirements of the target consumers.

Following Factors must be considered when launching a new product such as Victory Tees:

Population Growth- Population is growing rapidly in Pakistan. There is a gap between the demand and supply of labor, which can be exploited to take advantage of low labor costs. The labor is usually unskilled and amateurish hence a significant amount of money and time has to be spent on their training.

Customer Behavior is varying rapidly. People are more aware about quality issues now hence want to spend their money on high quality products. This is the reason imported products are much preferred over local. but inflation has caused a compromising change in behavior of consumers from the lower class.

Religion and Culture- It is very important to have an understanding of the religious principles and concepts existing in a country, in order to gain good will and popularity. Pakistan is an Islamic country hence business firms have to take appropriate and suitable steps in every aspect so that nothing is against the Islamic culture.

Advertisements and Marketing have to be done by keeping in the demands and requirements of the people of the specific culture in a country.

Age Distribution-Pakistan has the highest number youth and since Victory Tees is targeting youth this factor can be used to increase sales and earn high profits. Youngsters of our country are attracted highly towards the western culture and are brand conscious thus; there is a greater chance of satisfying the needs of the targeted customers.

SWOT Analysis

Strengths

Custom designing of the shirt will be the Unique Selling Proposition (USP) for the business. It would help the business to gain a competitive edge over the competitors and earn the business more customers. Also, outsourcing costs for the business are relatively low which would eventually lead the business to sell their shirts at a relatively low price. It would enable the customers to buy high quality shirts at a low price, and even design their own shirts. Changing social dimensions will go a long way in helping Victory Tees make a name for itself. Youth nowadays is innovative and evolving. They like to experiment hence providing Victory-tees a chance to enter this market

Weaknesses

The business does not have a production department making it solely dependent on the supplier. The business will be dependent on the supplier and in crisis situation there might be a delay in the delivery in the products. This would further add the supplier’s profits to the costs of the business. Also, the business does not have much initial capital available for the business. As Victory-Tees plans to obtain a bank loan it would add to further business risks. There are already well known brands in this industry, enjoying a specific brand loyalty so it may prove to be very hard to penetrate the market.

Opportunities

With the recession mounting, the new brands such as Victory Tees would suffer a lot. There won’t be many opportunities for them in the market. They have to utilize every chance they are offered by the market. Victory Tees being a totally new product needs to develop a new and unique formula to capture the market profitably and to establish customer loyalty towards the brand. The formula must define product/service, target market, capabilities required and resources to be employed, returns expected and the level of risk allowed. The formula will help define what comes within the sphere of an opportunity to focus on those areas and pursue those opportunities where success is possible.

The trends that are usually followed by the youth nowadays would be targeted. The survey was conducted to get idea about the preferences of the youth. This survey helped us identifying the very foremost choices by the customers and idea of the current trends in the market. The best of the best designers are hired and if the product like Victory Tees is being offered the youth would be very interested in trying a new local brand. The youth, specifically the innovators are being targeted as they would be more interested in trend setting.

The brand has a lot of favorable circumstances as the market is already established; the only thing needed is Market Penetration. As it is Market Penetration, the Victory Tees would be highly receptive for the weaknesses of their competitors. Their very high price of the products can turn out to be an advantage for the Victory Tees. Playing the right card, the Victory Tees can win the hearts of their customers.

Lastly, the company has planned itself to be very up to date with respect to the upcoming technology in the market. They have the latest machinery available in the market.

Threats

As Victory Tees would be entering an already established market, the biggest threat to it would be the already established brands of the T-shirts. Keeping PEST analysis in mind, Pakistan is going through the worst phase in its history as the economic and political conditions are exceedingly unstable. The country is going into deep recession with every coming day.

It’s a very big advantage that the market is already established, but ever-changing market trends and in a country like Pakistan, it can also be the biggest threat. Market changes could be like always decreasing income levels of the costumers leading to decreased purchasing power, their needs and priorities changing with the rising inflation, Competitor’s moves and demographic changes. Technological changes can also affect the company as it is the most expensive department of a company and implementing new technologies every now and then can make the offerings obsolete.

Right now, the main competition would be by the brands like Outfitters, River Stone, Stone Age and Cross Roads. And these competitors are offering best quality at a pretty high price they have a very well established brand loyalty so for breaking into this market Victory Tees should offer the best quality at a reasonable price. As in fashion world, the trends and designs keep on changing from time to time, appropriate steps should be taken to make the brand a real success by offering latest designs and trends set by competitors should be kept in mind.

Objectives and Issues

Objectives

The objective of Victory Tees is to open at least one more outlet within two years of its launch in the Islamabad market and to capture a sizeable market share within the same period.

The market for branded t-shirts within the medium price range in Islamabad is comparatively smaller than that in Lahore or Karachi in terms of sales, and it is in this market that Victory Tees should be able to achieve 1 – 2% of the total market sales within the first two years of operations. With the expected level of popularity, the brand would be able to attract enough sales to achieve this target. Another target would be more material in nature: the opening of at least one additional outlet within two years of the launch of the initial one.

Issues

In relation to the launch of a new brand in an existing market, one major issue that could arise would be that of marketing. There are a number of large players in the market and thus Victory Tees would not only have to inform its customers of its existence, but would also have to persuade them to shift from its competitors to this brand.

As Victory Tees is a new venture, a critical issue would be that of the initial capital. This capital would be raised primarily through one source, that being the owner’s own investment. The owner of this venture would invest Rs. 10,00,000 (Rs. 1 million) as the initial capital.

Sale Point in Islamabad: Jinnah Supermarket is considered a prime location which is visited by youth in Islamabad. It is a hub of social and cultural activity in the capital, and attracts several thousand people daily from all walks of life, both from the twin cities of Islamabad and Rawalpindi, as well as all over Pakistan. A trip to Islamabad is not considered complete unless one visits the “dandy” Jinnah Supermarket.

Since Jinnah Supermarket is a haven for the nouveau riche, as well as the young elite, it is planned to establish the first Sale Point of Victory Tees in Jinnah Supermarket, Islamabad.

High property prices in Jinnah Supermarket may be a limiting factor in starting this sale point, but considering the potential of establishing the brand name in future, it is a risk worth taking, and this is why establishing the first sale point in this high profile location has been planned.

Outsourcing issues: Outsourcing the production of Victory Tees T-Shirts is one of the most important steps leading to the success of this product. Selection of the production source requires exhaustive and meticulous market research to enable the selection of a manufacturer who provides not only high quality, durability and attractive T-shirts, but should also be affordable, easy to negotiate and prompt on delivery promises.

While many manufacturers have ensured of these features however, it is important to contact previous clients of these manufacturers and obtain their honest and candid feedback before any manufacturer is selected and an advance payment made.

Unfortunately the market is teeming with so called manufacturers who will claim to be established manufacturers, but are actually just agents who will sub-contract the work to others, and make their own commission. Such “manufacturers” have no control of the quality which will be produced, since they will be jumping between various low-cost manufacturers, while on the other hand will not be able to maintain their promises on dates of delivery, since they themselves will be at the mercy of the actual manufacturers. So, it is important to actually visit the manufacturing facility whether Victory Tees T-Shirts are to be manufactured. In this age of fraud, it is essential to verify that the person with whom negotiations are being carried out, are the actual owners of the premises, and will be able to produce the required quality of T-shirts on the premises.

It is essential to negotiate each and every aspect of the production of the T-shirts right from the quality, source and weightage of the yarn to be used, to the density of the weave, to the fastness and quality of color, and of course the quality of finishing of the product. Every little minute detail must be worked out, and agreed upon in writing in the form of a contract.

Production of shirts and printing of designs: Once a reliable manufacturer has been selected, and all details worked out, it’s not enough to sit back, relax, and wait for the finished product. One must be actively involved in step by step checking of the T-shorts while they are being prepared, right until the final product is in your hands.

Designs: The young generation of Pakistan is one of the trendiest set of youngsters in the world. Having access to both Western and Eastern designs, their choices are not limited to anything which is the “going” or “hot” fad or fashion, but have a vast array of design possibilities to be attracted to. Hence Victory Tees T-Shirts have to be designed keeping this clientele in mind. Designers will be selected not on the basis of old and outdated experience, but in fact trendy young designers will be invited to contribute their designs by open competition. The selected designs will be awarded prizes either in the form of cash, or some other youthful incentives, like mobile phones laptops etc.

In addition to this, perhaps one of the most striking features of Victory Tees T-Shirts is that clients will have an opportunity to design their own T-shirts, as well as customize pre-selected designs with their names, signatures, messages, logos, photographs, or any graphics that they would like to have on their shirts. This sort of feature has been available with limited resources, and has mainly been in the form of a clients photograph taken in black and white and transferred onto a T-shirt or vest through an iron on label. This not only lacks quality and durability, but limits the imagination only to what a camera can photograph in black and white.

MARKETING STRATEGY

Victory Tees T-Shirts is a novel innovation which will undoubtedly create a stir in the fashion market of Pakistan. Not only is the idea completely novel and expected to be a hit, but it the requirement of the local youth of today.

The main thrust of the marketing strategy will be based on product differentiation. Victory Tees T-Shirts is different from any other competitor in the market, since there is no other shop or outlet of branded T-shirts which offers the facility of self designing of T-Shirts. Not only this, but customers will be guided by professionally trained staff to design their own T-shirts, or have them designed according to their needs, taste, liking, and above all, the latest trends in the market.

The concept of customization of T shirts is an entirely new phenomenon. People of all ages, especially the youth want to look different, but while maintaining their identity and individuality. This is why designer clothes and apparel are so popular, even though they may not necessarily be the best in terms of quality, substance or design. It is the desire to look and feel different, and essentially a cut above the rest, which drives this concept. Victory Tees T-Shirts actually takes this even a step further. While, there is no doubt that Victory Tees T-Shirts will offer individualized and personalized T-shirt designs, it will be the first time that clients will be able to actually be involved in the designing of a product according to a personal desire, dream, or simply a liking.

People will pay hundreds of thousands of rupees to obtain car number plated reading “1” or just having their family name on a car, like “Malik 1” etc. The same concept essentially applies to providing high quality, top of the range T-shirts, but with the wearers own personal fancy depicted on it.

Penetrate an existing market To penetrate the existing market is extremely difficult if one is just offering a run-of-the-mill product with no particular advantage over its precursors. But Victory Tees T-Shirts has no competition in this parameter at all, since it is planned to outclass all competition by far, in terms of quality and cost. Quality would be not only high quality of the fabric, stitching and colour, but also individuality of the design itself.

However complacency in penetrating the market will not be permitted. Despite having an undeniable edge in terms of all the parameters required for a successful product, Victory Tees T-Shirts will still be actively and aggressively marketed maintaining a ground realty position. No stone will be left unturned until Victory Tees T-Shirts becomes a house-hold name, and an undisputed leader in the field of T-shirts in Pakistan, and abroad.

Positioning

As has been envisaged that Victory Tees T-Shirts will become a brand leader in customized T-shirts, not only in Islamabad, where it will be launched, but throughout the country, and possibly globally too. Using product differentiation, we are banking on a new idea of customization of T shirt designs and marketing will focus on the projection of this feature. How we position ourselves in the market will depend not only on successful marketing of the product, but also on the quality and desirability, which in themselves should be strong marketing features. Any marketing campaign, if not supported by an equally strong product in terms of quality, affordability and popularity, will soon become ineffective.

The entire concept of Victory Tees T-Shirts is being promoted to become a brand leader, and not just another frog in the pond!

Product Strategy

Initially it is planned to launch the product, as per product review. However a wider range of colors, fabrics and designs will be introduced with the passage of time. Once an exhaustive range of T-shirts has been established, other matching and complementary apparel will also be introduced, such as fleece lined jackets, sleeveless and sleeved jackets and casual coats, and designer tops.

As the launch of Victory Tees T-Shirts will be in early summer / late spring, it is planned to launch Victory Tees T-Shirts in pure, high quality combed cotton, in a range of summery colors and designs. This, coupled with the facility of client customized designs, should take Victory Tees T-Shirts to the number one position in a short period of time.

However with change in weather and climate, Victory Tees T-Shirts will have the adaptability to change the fabric, design and color schemes to be in vogue with the weather and climate, and the location. So, when the product will be expanded into different cities of Pakistan, it is envisaged to have different types of materials, fabric, stitching and design to suit different environments, climates and seasons in the different major cities of Pakistan.

To complement this range of attractive Victory Tees T-Shirts, a complementary range of matching apparel will also be launched. Again, the apparel will be designed for each individual city according to the requirements of that region. For example, fleece lined jackets, woolen, acrylic and mixed material will be used in thicker weave for winter seasons in the colder environments of Pakistan like Islamabad, Murree, mountainous regions, and rainy areas. Correspondingly, sleeveless and sleeved jackets and casual coats, and designer tops will be more in vogue, made from lighter, more absorbent cotton, in light weave and texture for locations where it is hotter, and people are more prone to sweating.

It is this highly individualized p