CAse study:

ABC Textiles is a textile company located in the Nimar valley of Narmada on the Mahrashtra-MP border. The valley is the cotton bowl of India, and cotton is almost exclusively farmed in the surrounding villages. The valley lies in the middle of Malwa plateau with Narmada flowing in the middle of the valley. The nearest towns are Indore on one side and Sirpur on the other. Due to abundant availability of raw material, all major textile groups have production units here.

ABC is an integrated textile unit, starting from spinning and ending in a garmenting unit. It produces knitted garments like T-Shirts and Polos exclusively for exports to be sold under some of the most well known brands in US.

Some important production figures are as under:

1. Yarn Producuction has increased from 1 million meters in 2016, to 1.25 million meters in 2017, to 1.5 million meters in 2018.

2. Woven Fabric has remained constant to 50,000 meters over the three years.

3. Knitted Fabrics has increased from 50,000 meters in 2016, to 60,000 meters in 2017, to 70,000 meters in 2018.

4. Wastage has gone up from 10% in 2016 & 2017 to 12% in 2018.

5. Profits have decreased from 100cr from 2016, to 90cr in 2017 to 60cr in 2018.

Profitably of the unit is falling constantly for the following three reason:

a. Increasingly Egyptian yarn has to be imported for making finer woven fabrics, as local cotton cannot be spun into higher counts which then leads to finer fabrics. Other manufacturing units in the area also face this problem, and to counter this problem, are encouraging farmers to produce organic cotton, products from which can be sold at higher price. However, this would need to development of new 'green' brands which would involve large amounts of capex.

b. Despite repeated efforts, there are problems in the dyeing area, especially in the colour black. There is a lot of wastage in the dye house because large meterage gets rejected by QC on shade issues.

c. The garmenting unit is beset by labur issues. Since all people employed are from surrounding villages, local politics often enters production lines and in fact at times situation has become almost violent. Peace is maintained only because the Production and HR managers are universally respected.From the case study anwer the following questions:

1. What do you think are the strategic capabilities of the unit.

2. What do you think is the core competence of the unit?

3. What do you think should be the strategic direction of the unit, so as to reverse this declining profit trend?