10mba1051 ib assn
TRANSCRIPT
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International Business
Assignment I
Business Policy Report
Submitted by
Prasanna Soundappan G
(10MBA1051)
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Loyal Group provides a broad range of products and services to textile and
apparel Markets, It is an ISO 9002 2000 accredited, Loyal Group exports
products to Israel, Egypt, Turkey, USA, EU Countries, United kingdom, Japan,
Thailand, South Korea, Dubai, Sri Lanka, Bangladesh, Brazil, Argentina,
Columbia, Mexico, Taiwan, Vietnam, Iran, Israel, China and Indonesia. The
organisation is committed to philanthropy & socio environmental development
activities. Loyal group provide the range of products and services to textile and
apparel industries for about seven decades. Loyal group has made several
benchmarks in exports.
Loyal group has three composite mill, one dye house, one spinning mill, four
garment manufacturing units, one trading and retailing company and a joint
venture trading company in Italy.
Loyal group has strict code of ethics in business operations. It make an annual
turnover of Rs.10 billion (US$ 225 million), of which Rs.8 billion (US$ 180
million) revenue is generated by exports.
Loyal group has The Trading House Status awarded by govt. of India for its
excellence n continual improvement is exports.
With the strong commitment to quality and customer satisfaction, the
organisations vision encompasses the folln:
To be one of the most admired textile companies which follows and
supports sustainable environmental friendly processes right from cotton
cultivation to Product distribution; practices high level of integrity andfairness in dealing with all the stake holders.
To remain focused on developing Speciality and Technical products for
safety and functional wear.
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Mission of the organisation:
Is to become the most admired group by all stakeholders i.e., Customers,
Employees, Share holders and Society at large. To pursue world- class standards in People, Products, Processes and
Performance.
To seek quantum growth to lead in the International and domestic market
and enhance international presence by encouraging Innovation and
Nurturing Intellectual Processing.
To be always conscious of the path to ensure highest ethical and moral
compliance even as the organisation remains totally focused on the goals.
Production Facilities of Loyal Group:
Spinning
Twisting and Gassing
Weaving
Garments
The Loyal Group manufacture premium quality of yarn in different
diameters namely the different varieties of yarn produced by them are
compact yarn, melange yarn, dyed polyester blended yarn, kermal blended
yarn, carbon yarn and fancy yarn. All these yarns are widely used in textiles,
sewing, knitting, weaving, embroidery etc.,
They specialize in offering superior quality woven fabric which is of types
namely Grey woven, plain sheeting or poplin, drill or broken free, sateen or
satin, stripe satin, oxford or chambray, rip stop, corduroy, dobby designs and
yarn dyed.
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Loyal group has a good experience in producing knitted and woven
garments. It produces 1,500,000 pieces of woven garments and 2,000,000
pieces of knitted garments. Loyal group markets about two million pieces of
Work-wears through its joint operations with Italian company, Gruppo and
Loyal SPA.
The products are:
Long coat
Overall with zip
Pant
Shirt
Bib pant
Jacket
Coat
Loyal has an division for home textiles, core business of this unit is
designing and lining bed linen, bathing items and upholstery like flat fitted
pillows, sharns, duvets, comfort shells with and without down proof, bed
skirts, shower curtains and sofa covers.
Loyal Group strongly believes that the organic way of the cotton cultivation
and Eco-friendly way of converting the raw materials into finished products
is the only sustainable way. Loyal Group is certified by "control union
world group" (formerly known as SKAL International) to support organic
products under GOTS. All the plants such as spinning, weaving, knitting,
dyeing, finishing and garmenting are GOTS certified for processing organic
cotton.
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Loyal textile mills ltd has four spinning mills located at Kovilpatti, Sattur
,Arasanur and Naidupet(AP). It comprised of highly advanced technology
machines which are fully automatic.
Spinning mill located at Kovilpatty has five spinning blocks, i.e. five units.
Production per day in unit 1 is 6000 kgs. Production per day in unit 2 is
5000 kgs. Production per day in unit 3 is 3500 kgs. Production per day in
unit 4 is 2000 kgs, and its OE unit produces 12,000 kgs per day.
Loyals twisting unit is located at Sattur. The unit located at Naidupet
produces 10,000 kgs of spinned yarn.
Joint ventures:
Loyal group exports about 2.5 million pieces of apparel via its German and
Italian joint venture companies namely. M/s. Gruppo P&P Loyal SPA and
Schaefer Loyal. Through this Loyal exports Works-wear.
100% Cotton Regular Styles
Polyester Cotton Regular styles
High Visibility Reflective tapes
Anti-entangling Garments
Flame Retardant Finishes
Electro conductive
T-Shirts
All the protective clothing manufactured by Loyal have EN (CE)
certification.
Loyals Export Market:
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Oriented towards achieving desired results, Loyal Group works with a
highly professional approach, while maintaining ethical business practices.
The Group manages a synergy with its clients for mutual growth. At
present, Loyal Group exports textile and apparel products to the discerning
markets all across the globe
Garments are exported to Europe, Switzerland, Middle East, USA, UK and
South Korea. Finished fabrics are exported to UK, Sri Lanka, Dubai,
Europe, USA and Bangladesh. Home Textiles are exported to USA, UK,
European and Japan. Grey Fabrics are exported to USA, Europe, Hong
Kong, South Korea, Israel, UK, Bangladesh, Turkey, Egypt and Sri Lanka.
Yarn is exported to Europe, Japan, Hong Kong, Korea, Australia, Spain,
Egypt, Israel, Turkey, Thailand, Taiwan, Bangladesh, Mexico, Vietnam,
Iran, China, South Africa and Indonesia.
Problems faced by Loyal Group in exporting:
Price fluctuation in Raw materials
Fluctuations in exchange rate
Transportation cost
Exercise duty and value added tax
Enforcement of law
Unfavourable Annual budget
Low supply of raw materials
Others
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Price fluctuation in raw materials:
Due to the fluctuation in price of raw materials like cotton, steel and fuel i.e.
oil, Textile mills in the Coimbatore region have hiked yarn prices by Rs 15per kg, The popular Shankar-6 cotton which is their major raw material has
jumped 10.7% since February 7, but yarn rates for the widely-used 40s
count have moved by only 5.7%.
Prices of Shankar-6 have spurted 50% since September 2010 to Rs 58,500
per candy (356 kg) but rates of the 40s count, which were keeping pace with
the cotton prices initially, have increased 39.5% to Rs 275 per kg on
February 23. Yarn accounts for nearly 60% of the costs for garment makers,
and it is difficult to operate if prices are increased frequently. Every 100 kg
of cotton, 75 kg of combed yarn and 85 kg of carded yarn can be produced.
For every Rs 1000 (per candy) increase in cotton prices, hence by increasing
the yarn rates by Rs 4 per kg there will be a balance. The company is unable
to fix a particular price of a product. So the company is unable to quote the
fixed price instead they inform the buyer, there may be a 10 percent increase
in cost due to direct and indirect price fluctuations. This includes the issues
like increase in the cost of labour. As discussed with the executive manager
of Loyal Group, he mentioned about the recent price hike in cotton made the
price of yarn high so there was some problems with making quotations to
buyer. Hence this is one of the major problems in making export orders.
Fluctuations in Foreign Exchange rate:
The order quotation is made as per the buyers money say in US$. The price
is quoted by valuing the current exchange rate of US$ with rupee. The
exchange rate fluctuates daily. If the value of money appreciates its a bad
time for exporters. Because the payment received from buyer may be as per
quotation but the appreciation of rupee makes a loss. As discussed with
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executive manager, Loyal Groups, he said that The Textile Ministry and the
Ministry of Commerce are discussing with the Ministry of Finance the issue
of capital subsidy of 10 per cent to 20 per cent for the exporters.
Transportation cost:
Transportation cost plays a major role in exporting. It also acts as a bench
mark in fixing the target. For example the time given by the buyer to finish
and receive the goods is say six months, if the company is about to send the
goods by ship then they should despatch the goods at least a month before
so the time to work on the order gets reduced so they should urge on the
work this may lead to quality defect. If the time taken to work on order
exceeds, as per contract law, a penalty has to be paid to the buyer. If the
penalty is lower than the air fare to transport the goods Loyal Groups sends
the goods by air so that the name of company is not spoiled. If the air fare
exceeds the penalty, Loyal Group manages to send the goods by ship.
Exercise duty and Value added tax:
Due to sudden increase in exercise duty and introduction of value added tax.
It leads to rise in price of goods, so there was cancellation of orders due to
price hike. The executive manager Loyal Group says Introduction of 5%
VAT on the readymade garments manufactured in the state for the growth of
the business. We are facing a tough time following heavy inflow ofreadymade garments from China, Taiwan, Thailand and Indonesia in the
state where the industry in readymade textiles is on a rather advanced stage
Unfavourable annual budget:
Last budget, the government had increased VAT on readymade garments
from 4 to 14% wherein rate of VAT in Rajasthan for readymade garments
was the highest in the entire country that resulted in escalated cost of local
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products within the state as compared to same product sold in other states.
Later, however, with the traders protesting, the government reduced it to 5%
which was still higher than the other states that have 4% VAT except Delhi,
UP and Punjab that have 5% VAT on readymade garments. Hence even a
unfavourable annual budget too have a great effect over the exporters in
India.
Low supply of raw materials:
The supply of raw materials has a great effect on price of goods. Agriculture
is now reduced compared to early days since the supply of cotton is low the
demand raises, this scenario leads to rise in price of cotton hence it creates a
price hike which affect the export orders.
OTHERS:
The other factors which lead to cancellation of export orders are eco friendly
certificates, no child labour involved certificates; proper disposal of dying
wastes through treatment plants certificates issued by governments would be
demanded by the buyer before the export order is confirmed. It is not
provided on demand it will lead to cancellation of order.
Conclusion:
These are the problems faced by Loyal Textiles Group in exporting its
finished good to foreign countries.