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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.