Read The Case Scenario And Answer The Two (2) Questions That Follow

Caribbean Wear Limited

Caribbean Wear Limited has been making high quality Caribbean leisure and casual wear for over twenty-five years, in old rented premises located in the heart of the Cross Roads in Kingston.

The company has a flexible labour force of about twenty employees and three directors, only one of whom, namely Mr. Frank, the managing director, is fully active in the business.

The company specializes in casual, leisure and swim wear garments. Their current range consists of tee shirts, shorts, skirts and bath suits in rich vibrant Caribbean colours and styles for men, women and children. The company capacity is 400-500 garments per week, depending on style and continuity of the production run, but additional floor space and machines could be brought in quickly to raise production levels to a maximum of 1,000 garments weekly if required.

Trade sources estimated that the Jamaican market was valued at US$ 1.5 billion in 2011 but since then inflation and recession has deflated the market, resulting in many smaller businesses having to cease operations. Census of production figures indicated some 15 leisure wear manufacturers, six of which accounted for 25 per cent of total industry output.

Independent retail shops account for 25 per cent of tee shirts and 30 per cent of sales for shorts and swim wear; stores catering to tourists account for 15 per cent and 25 per cent, while department stores handled another 15 per cent and 20 per cent respectively.

Caribbean Wear's sales were traditionally distributed through an assortment of clothing store agents, who tended to change frequently throughout the years. However, in the period 2011 to 2016 Caribbean Wear's production was increasingly taken up by Modal Fashions, a successful regional clothing boutique chain store with outlets located throughout the Caribbean. In the 2015-2016 financial year, Modal Fashions accounted for over 80 per cent of gross sales of Caribbean Wear. By then, Caribbean Wear had terminated most of their other distributor agreements leaving only the one it had with Modal Fashions.

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In 2015, owing to market depression, Modal Fashions drastically reduced their contract quantity to 25 per cent of the previous year and Caribbean Wear was forced into two-days-a-week production. Although quantities have gradually increased since late 2016, negotiations with Modal Fashions have become more and more difficult, such that the agreed price gives Caribbean Wear a net profit per garment as low as 10% on some styles. Mr. Frank believes the level of profit is too low to sustain the company and suspects that Modal Fashions is using Caribbean Wear only as a back-up supplier to complement the much cheaper garments it imports directly from China. It is currently rumoured in the market that customers are turning away from Chinese-made garments due to their unattractive styles and tendency to quickly fade in colour after the first or second wash.

An attempt was made in 2014 by Caribbean Wear to export through a large international department chain store that has locations in Canada and America. However, the deal did not last long, as the chain opted instead to import cheaper made garments from Asia.

Although Modal Fashions ordered Caribbean Wear garments for sale through their outlets located in Trinidad, Barbados and Guyana in 2014, the quantities were embarrassingly low and the orders suddenly dried up without any explanation, although no complaints had been received by

Mr. Frank.

Since 2013 Caribbean Wear had traded around breakeven levels and is working within a bank overdraft of US$50,000 along with reduced credit levels from suppliers. Caribbean Wear's bankers have recently asked for a meeting with Mr. Frank to discuss both the overdraft and the future prospects of the company. The lease on Caribbean Wear's premises is due for renewal at the end of this year. Mr.Frank, in some desperation, has called in the services of a marketing consultancy for advice.

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QUESTION 1 [CLO 2]

Elaborate on four (4) environmental factors which are likely to impact on Caribbean Wear's business over the next five years. (20 Marks)

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QUESTION 2 [CLO 1]

Discuss five (5) strategies that Caribbean Wear can implement in the short term, to profitably increase sales and regain market share given its current production and financial constraints and suggest how Mr. Frank might proceed to evaluate these opportunities. (25 Marks)