BESA PROJECT REPORT

AMITY BUSINESS SCHOOL,NOIDA

Strategy Analysis of Hi-Design Leather Products

SUBMITTED TO SUBMITTED BY

Dr. Himani Sharma Abhishek Thaor (B 29)

Faculty, ABS Anil Yadav (B 42)

Manoj Dasgupta (B 45)

Nilava Das (B 46)

Tarun Patra (B 58)

ACKNOWLEDGEMENT

We would like to take this opportunity to thank a lot of eminent personalities,

without whose constant encouragement, this endeavor would not have become

a reality.

Firstly, We would like to thank our prestigious institute the AMITY UNIVERSITY,

NOIDA, for including the Project as part of its curriculum, which provided us with

a wonderful opportunity to nurture & improve upon our research and

presentation capabilities and AMITY BUSINESS SCHOOL for providing us with

such excellent facilities, without which, this project could not have acquired the

shape it has now done.

We would like to thank Dr Himani Sharma for her continuous support, timely

advice and guidance.

Last but not the least , we express our sincere gratitude to Dr. Sanjay

Srivastava, Head, ABS, NOIDA for providing us with the required facilities.

We are also grateful to our parents and all our friends who helped us directly or

indirectly with their valuable suggestions for the completion of this project.

Brief Contents

1. Leather Industry

a. An overview & prospects

b. Major production center in India

c. Expected production capacity

d. Leather statics

e. SWOT analysis of Leather Industry

2. Hi-Design Leather Product Sector

a. History

b. Company’s Vision

c. Core Values

d. Target Segment

e. Building The Brand

f. Brand Report Card

g. Brand Positioning

h. Brand Communication

i. Distribution Network

j. New Products

3. Strategies

a. Business Level Strategies

i. Differentiation

ii. Focus

b. Corporate level strategies

i. Horizontal Integration

ii. Vertical Integration

iii. Diversification

4. Business Models

a. ETOP

b. Porter’s Five Forces Model

c. BCG matrix

d. SWOT analysis

5. Recommendations

a. Brand Extension

b. New Product Line & Target Segment

c. Alternatives to vertical integration

6. Conclusion

7. Bibliography

Leather Industry In

India

LEATHER AND ALLIED INDUSTRIES – AN OVERVIEW AND

PROSPECTS

Leather Industry in India, occupies a place of prominence in the Indian economy, in view of its massive potential for employment, growth and exports. There has been increasing emphasis on its planned development, aimed at optimum utilization of available raw materials for maximizing the returns, particularly from exports.

About 46 per cent of the production in the sector is exported and it ranks eighth in the list of India’s top export earning industries and contributes roughly Rs. 10,000 crores per annum, i.e., about 4 per cent to export earnings. The sector accounts for 2.5 per cent of the global leather-related trade of Rs. 387,200 crores.

Overview of the Leather Industry in India

Products Exported

Leather Footwear Footwear Components (Shoe Uppers, Soles etc.) Leather Garments Leather Goods (Including Harness & Saddlery, Leather Gloves etc.)

Major Production Centers Of Leather And Leather Products

Southern Region

Tamil Nadu Chennai, Ambur, Ranipet, Vaniyambadi, Trichy, DindigulAndhra Pradesh Hyderabad

Karnataka BangaloreNorthern Region

Punjab JalandharDelhi Delhi

Eastern Region

West Bengal Calcutta

Central Region

Uttar Pradesh Kanpur, AgraWestern Region

Maharashtra Mumbai (Bombay)

Estimated Production Capacities

Product Capacity

LeatherHides 65 million piecesSkins 170 million pieces

Leather Products

Leather Footwear

776 million pairs

Leather Shoe uppers

112 million pairs

Non-leather Footwear

960 million pairs

Leather Garments

18 million pieces

Leather Goods 60 million pieces

Industrial Gloves

52 million pairs

Saddlery 0.10 million pieces

Leather Statistics

Country-Wise India's Export of Leather and Leather Products

Value in thousand US$)COUNTRY 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01

U.S.A. 295.62 298.75 251.40 252.71 258.24 343.21

Germany 400.38 362.88 363.41 364.19 293.59 308.13

U.K. 200.93 204.92 219.26 235.79 266.29 271.35

Italy 221.26 182.99 221.53 197.16 165.47 241.06

Spain 50.75 46.97 54.96 69.23 66.72 100.88

Hong Kong 59.46 59.07 53.93 53.26 55.22 98.42

France 88.73 72.34 79.01 79.77 84.36 90.84

Netherlands 38.65 38.48 43.83 49.78 44.17 55.82

Portugal 23.70 20.21 31.91 29.39 24.41 37.44

Russia 47.58 30.22 50.99 25.19 27.97 31.49

Denmark 27.81 23.34 21.73 18.82 28.30 28.77

Australia 40.74 36.91 36.83 35.39 31.84 28.44

Canada 22.84 19.63 21.69 18.77 21.42 26.71

Sweden 12.70 11.20 12.76 15.40 19.79 25.47

S. Africa 31.06 25.70 25.10 26.29 24.28 23.46

Switzerland 20.25 21.14 22.78 21.49 16.13 18.61

Austria 18.37 18.18 20.16 17.22 14.65 15.04

Japan 21.52 13.36 14.31 7.30 8.36 13.32

Greece 5.27 6.33 6.92 5.75 4.50 5.95

New Zealand 4.95 4.59 4.17 4.79 5.28 3.81

Others 130.41 121.07 115.23 127.20 143.45 202.76

TOTAL 1762.97 1618.27 1671.90 1654.89 1604.35 1970.98

Key Characteristics

The average revenue growth of the leather companies in the last two years was around 20%.

The companies operated at an average capacity utilization of 83%.

17% of the companies operated with two or more manufacturing facilities.

92% of the companies are involved in exports.

Europe is the most preferred destination for export of leather goods, followed by Asia (excluding Middle East).

Around 76% of the companies generated more than 50% of their revenue from exports.

Around 20% of the companies manufacture and market branded products.

Around 52% of the companies were relatively older and started operations prior to 1990s while 38% of the companies were established between 1990s and 2000. Around 12% were newly commenced operations post- 2000.

Leather Export Statistics

Product Leather Accessories

Product Range Wallets, Purses, Handbags, Belts, Key Chains, Passport Folders, Spectacle Cases and Hand Gloves, Travelware, Portfolios, Suitcases, Harness and Saddlery Goods

Important Production Centres in India

Calcutta, Chennai, Delhi, Jallandhar, Kanpur and Mumbai

Top 10 Importing Countries

U.S.A., Germany, U K., Italy, Netherlands, France, Spain, Russia, Canada and Sweden.

India's Total Export Value[April 2000 - March 2001 ]

443.83 US$ Million

SWOT Analysis of the Indian leather industry 

Opportunities

Rising potential in the domestic market Growing fashion consciousness globally

Use of information technology and decision support software to help eliminate the length of the production cycle for different products

Use of e-commerce in direct marketing

 Strengths

High Growth Ready availability of highly skilled and cheap manpower

Large raw material base

Policy initiatives taken by the Government

Capability to assimilate new technologies and handle large projects

Continuous emphasis on product development and design up gradation

Weaknesses

Lack of warehousing support from the government International price fluctuation

Huge labor force resulting in high labor charges

Lack of strong presence in the global fashion market

Unawareness of international standards by many players

Threats

Major part of the industry is unorganized Limited scope for mobilizing funds through private placements and public issues

(many businesses are family-owned)

Difficulty in obtaining bank loans resulting in high cost of private borrowing

Stricter international standards

High competition from East European countries and other Asian countries

Lack of communication facilities and skills

Various Sectors of Indian Leather Industry

Tanning & Finishing

Footwear & Footwear Components

Leather Garments

Leather Goods including Saddlery & Harness

Indian Leather Goods IndustryItems produced by this sector include, in addition to bags, handbags, hand gloves and industrial gloves, wallets, ruck sacks, folios, brief cases, travelware, belts, sports goods & upholstery.

A surfeit of modern units in Chennai, Kanpur and Calcutta employing skilled human resources and equipped with modern and sophisticated machinery account for a diversified range of superlative small leather goods including bags, purses, wallets, industrial gloves etc. made of quality leathers of cows, sheep, goats and buffaloes. The products meet the requirement of bulk buyers and consumers in Europe, USA and Australia.

The major market for Indian leather goods is Germany, with an off take of about 25 per cent of the leather goods produced in India followed by USA, UK, France and Italy. With products ranging from designer collections to personal leather accessories, this sector has a share of 20.53 per cent in the leather industry, while maintaining an average growth rate of 11 per cent recorded in the last five years

Leather products sector

Hi- Design - A Major Player

Hi Design A Major Player In Leather Products Sector

From its artisan roots of a two man workshop to a company of 3000 spread all over the world, Hidesign has stayed focus on innovation based on the strong base of heritage of craftsmanship. Hidesign stands out for the sensuous naturalness of its high quality leathers and the smooth soft glow of its solid brass fittings.

"We have stopped thinking of ourselves as manufacturers; instead, we are looking at ourselves as designers."

Dilip Kapur, President, Hidesign, in November, 2005.

Hidesign is a recognized leader in the research of the ecological use of vegetable tanned leathers for its leather goods. Learning from the centuries old skills of tanning with natural

seeds and barks, Hidesign has created fashionable leathers that age exceptionally well. The heritage of fine hand craftsmanship is visible in the details that make Hidesign products stand out and exclusive.

The History – From Scrap To The Present Heights

Hi design was set up by Dilip Kapur in 1978 as a ‘one-man artisian workshop’ at Auroville, Pondicherry which he operated from his house. Initially, the venture was just an extension of a special interest in leather craft that Kapur had developed while he was studying in the U.S.

The name Hidesign was formed by merging the words "hide" and "design" . And true to its name, Hidesign went on to become a premier design house for leather goods, gaining acceptance even in the highly competitive western markets.

Most of Hidesign’s initial customers were foreigners who spotted the bags while traveling in India. The Company received its first order from a German organization in India that had a catalog.

Gradually the business expanded with the company winning a number of export contracts. Although initially, the firm experienced hiccups in developed markets like the UK and the US, its good quality, distinctive designs, and aggressive marketing strategy helped it succeed in carving out a niche for itself.

The Company’s Vision

All Hidesign product lines reflect the Hidesign concept and create a harmonious image that reflects the sophisticated lifestyles of our customers.

Our core classic range of briefcases, handbags and wallets are always contemporary, sophisticated and ideal for the successful executive lifestyle. Our wide range of garments reflects a continuous adaptation to the latest fashion tendencies. Our extensive range of small leather goods and fashion accessories complement the handbags, the effect is stylish and harmonious.

Kapur emphasizes on workmanship and design, making beautiful, affordable bags. 70% of the manufacturing is done by hand &craftsmen carry out labor-intensive steps such as double-stitching of pressure points.

The Core Values of Hidesign

Hidesign brand values are always consistent & provide Hidesign a unique identity & great customer loyalty.

Natural

Hidesign sees great value in natural beauty. The soft, sensuous leathers and smooth solid brass fittings speak of the highest quality natural materials.

Hidesign does not cover its leathers with layers of pigments and paint or emboss it with artificial patterns to hide defects in low quality materials , nor does Hidesign use electroplated steel or zinc fittings that do not age well.

Ecological: Vegetable Tanning

Hidesign believes in the highest ecological values. Hidesign is a leader in research on using vegetable extracts from seeds and barks for tanning to replace heavily polluting chemicals.

Craftsmanship

Every Hidesign product is uniquely handcrafted. There is no mass manufacture at Hidesign, and the great traditional skills of our craftsmen are encouraged to be perfected over years.

Innovation

Hidesign products are unique. The multicultural design team has won several international awards for its excellence and design leadership. True to its values, Hidesign constantly innovates to stay in touch with the continuous fast moving changes in the lifestyle of its customers.

Hide and Design- Market Segment Selected As The Target Audience

Hidesign mainly targets the upwardly mobile educated internationally minded executive. The brand is known for its craftsmanship and the quality of its products.

The target market consisted of people aged between 20 and 50 years, belonging to high income households, who traveled frequently, often internationally; and insisted on high quality products.

A typical Hidesign retail customer was well-educated and typically was a service industry executive. 53% were age 25-35, 30% 35-45, and 10% over the age of 45. 54-55% of customers were women, and handbags were the biggest-selling single item.

Hidesign : Truly International- Building the BRAND

Hidesign is India's premier leather goods company that makes leather bags, briefcases and wallets. This 90 crore brand is the Indian brand that features in the premium international stores worldwide. The Indian leather market is expected to be around Rs 1000 crore and the branded market is around 120 crore.

Hidesign is a brand that was built overtime through careful brand building . The brand which was launched as an export brand came to India and surprised to find the reception it had, despite astronomical prices. The brand came to India at the right time when the Indian

consumers are splurging on lifestyle products.

All these years this brand has never compromised on quality. The main USP of this brand is its craftsmanship. The brand still uses the traditional craftsmanship and 70% of the work is by hand. The brand depends heavily on the craftsmanship. The core value of the brand is its attitude, tradition and its commitment to environment. Instead of using the much polluting dyes, the brand uses vegetable dyes.

The brand is positioned along the core values and the craftsmanship. The brand initially was projecting quality as its major focal point , now the brand is on a campaign to connect to the customer emotionally.

The Brand Report Card (Dr.Kevin Lane Keller) for Hidesign

Delivering On Customer's desire

The brand has been able to identify and satisfy the customer's desires. The customers were in need of a brand that can offer them quality and looks which was lacking in the unbranded products.

Relevance

The brand is relevant to customer because of the change in the lifestyle of the upwardly mobile Indians.

Value

Although the brand is priced astronomically , the target group is finding value in this product. But with these prices the brand is out of reach to most Indians.

Positioning

The brand rightfully identified its core value and the positioning is in line with the strength of the brand . The choice of the media and the copy of the campaign also reflects the positioning.

Portfolio

The brand has wide range of models and is seriously looking into expanding to different segments with in the category. The company is planning to introduce bags for the college going under a separate brand name.

Integrated Marketing Activities

The brand has been using its stores and all the marketing mixes carefully in promoting the brand.

Management

The brand has been built over time and the management has been careful in building the core values of the brand.

Support

There has been lot of support for the brand building efforts . The company has been spending the money wisely and carefully.

Marketing

The overall marketing activities has been perfect and has helped the company to create a world class brand.

Hidesign is an internationally successful brand in the “affordable luxury” category. It’s a brand that is born out of passion, sets its first foot internationally and then comes to Indian market almost two decades of marketing its presence in various parts of the globe.

The feeling of luxury comes from providing an exclusive product and service through the exclusive ambiance of our stores that is custom made and shows the luxury of the product.

BRAND Positioning- Stage where people recognize it for what it is

Hidesign has been an international company, distributing under its own brand name across the world. Today , Hidesign has its own manufacturing units, company tannery and buckle factory. Hidesign sells leather bags and garments under its own name in Australia, Greece, South Africa, United Kingdom and the United States.

When Hidesign started off in India, way back in 1996, the whole process was to establish brand salience. The initial focus was to set up stores at the tourist places primarily to see how the Indian audience take to the brand. It was good to see that the Indian audience did find an affinity to the brand and many of them became hard core Hidesign loyalist. Hidesign community grew primarily through word of mouth and the company encouraged this as a feeling of belonging, of being a Hidesign customer.

Brand Communication Hidesign focuses on fashion and lifestyle media for their communication in India. One could find Hidesign in Femina, Jetwings, l’officiel, Marie Claire, Brunch and some newspaper supplements like Mumbai Mirror, Delhi Times etc. Hidesign launches its new collections through fashion shows, once a year. Senior media personnel are invited to attend the show, at Pondicherry, coupled with visit to the factory. Local fashion shows are also organized at cities like Cochin, Hyderabad and Calcutta.

Designs

Hidesign has three design set ups. UK, India and Italy.

Worth Global Network Sourcing (WGNS) is a source of inputs on styles and designs. This provides information on new motifs, animal prints etc. The designers also do a study of the existing markets, what the big brands are doing, what are the current trends and what should be the trends for the next season. New shapes are only 10% of total collection. There are some classic designs that are globally favorite and they continue season after season.

Alberto Ciaschini, who earlier worked with Armani, is a designer working for Hidesign, based in Milan and keeps the other designers updated on designs, styles, concepts, finishes, fittings, leather, texture, feel etc.

Collections

Hidesign has two seasonal collections: Spring - Summer and Autumn – Winter.

The products are classified in two types. Core and Collection. Core is the classical range which consists of the ‘most sold’ types that are available through the year. Collections are seasonal and time bound. If a collection becomes successful, it goes to the core. New designs keep coming in and old ones are replaced. The feedback on design changes is gathered from customers when they purchase from the retail outlets. It is also derived from the kind of bags sold at various stores and ‘the most sold and least sold’ designs.

"The Hidesign brand has tremendous quality and price advantages in Austria. In spite of the strong competition, Hidesign has created a niche for itself."

A Hidesign distributor for Austria, in 2009.

Hidesign's Distribution Network- Reaching The Target Segment

In its overseas markets, Hidesign graduated from a firm fulfilling export contracts to selling through distributors and then through high-fashion retail chains like Selfridges.

In later years, it even started wholly-owned concept stores. On the other hand, in India, Hidesign started its distribution operations by opening wholly-owned stores (in 2000).

It was followed by tie-ups with retail chains like Westside in 2003 and subsequently Shoppers' Stop, Landmark, etc. In late 2005, it announced plans to open exclusive franchised outlets.

International Distribution

Initially, Hidesign was an exclusively export-oriented outfit, fulfilling orders from European and American distributors. It concentrated on taking small orders and fulfilling them to high quality standards and delivering on time. This proved crucial in building its reputation among high-end overseas customers and in gaining their initial goodwill.

A Hidesign bag won the ‘Accessory of the Year” award from a British magazine, which

gained the firm much visibility, and department stores began picking Hidesign as a supplier.

Thus, famous merchants as Selfridge’s, the House of Fraser, and John Lewis started

carrying a range of Hidesign bags, which significantly increased the Indian manufacturer’s

sales while building much more awareness overseas of its style and quality. During the

1990s, the product mix changed from 45% of sales from branded goods to 95% of sales.

In the early 1980s, Hidesign entered the UK through local distributors. However, initially, the

leather and luggage shops in the UK were not keen on stocking an Indian brand but as

Hidesign’s international expansion was picking up momentum, its president and founder

Kapur wondered how best to move forward in building a truly scalable brand with global

reach.

Domestic Distribution

Hidesign started its retail operations in India in 2000 when it opened its first wholly-owned exclusive retail outlet in Bangalore. The Indian market too proved receptive to the high quality leather goods of Hidesign and the business boomed.

"Ever since we began retailing in India, we have registered a 60% annual growth every year"

Dilip Kapur, President, Hidesign, in November, 2003.

Hidesign went in for a major expansion in India in 2002-2003. The fact that the global market for luxury goods was facing a slowdown while the Indian fashion market was buoyant and that there were no major competitors in the same category, prompted Hidesign to exploit the huge opportunity.

"In India, we have two distinct advantages. One, our economy is still growing at 6% and two, there is no competition in leather at the top end of the market. So we are filling up a vacuum..."

Dilip Kapur, President, Hidesign

By 2006, the firm owned 35 stores in India and had announced plans for 17 more . Diversifying into retail changed the nature of the business, much as moving into foreign department stores

New Products: Sustaining Excitement

The success of a luxury product depends as much on its 'Coolness Factor' as on an appropriate distribution network. Therefore, Hidesign put in a lot of effort into creating new products and a buzz around the brand.

Hidesign is an internationally successful brand in the “affordable luxury” category. The feeling of luxury comes from providing exclusive products and services.

Its classic range of briefcases, handbags and wallets are always contemporary, sophisticated and ideal for the successful executive lifestyle.

Throughout its lifetime, the brand has never compromised on quality. The main USP of this brand is its craftsmanship. The brand still uses the traditional craftsmanship and 70% of the work is by hand. The brand depends heavily on the craftsmanship. The core value of the brand is its attitude, tradition and its commitment to environment. Instead of using the much polluting dyes, the brand uses vegetable dyes .

Hidesign is truly international brand. It is a showcase of Indian marketing acumen and proves that Indians can make a world class brand.

Strategies Adopted – For achieving , what it has

How did Hidesign achieve the present status ?

Business Level Strategies:- The Success Determinant

Differentiation Focus Distribution

1. Differentiation

Hi design stresses on natural leather processing to show authenticity & differentiation.

Leather Checking

Unlike most mass produced leather goods, Hidesign bags are made using Full Grain Hide leather that needs no correction. Hidesign has its own tannery to ensure that the best quality hides are used. In stage 2, the leather is tanned by the time honoured traditional method of vegetable tanning hides in extracts of bark and seed (which represent the

required tannic acid) collected from renewable sources in the forests of Africa and India. Only after these vegetable extracts have been fully absorbed oils & waxes applied to make the hides supple. This method, though more extensive and time consuming, is by far the most thorough and environment friendly.

The leathers are checked to ensure that the Classic leather has sufficient body for a briefcase to be firm, built is not too boardy. Casual leather is checked for its softness, without looseness and wrinkles. Keeping the tradition and environment in view, Hidesign products are normally hand-dyed. This enhances the strength and the beauty gained from the vegetable tanning process.

Cutting

Hidesign still insists on hand-cutting with knives, for with its tiny sharp cutting point, it enables the skilled pattern cutter to make clean cuts and go around corners exactly as per the pattern. Hand-cutting allows the cutter to lay down the whole leather on the table and place various patterns onto it to ensure correct matching between adjoining pieces on the bag before actually cutting. Inherited talents and long apprenticeships gives Hidesign this unique strength to handle natural leathers that most factories, dependant on machine clicker cutting, cannot cope up with

Constructing the Bag

A high quality bag requires a great deal of preparation. A common misconception is that cutting leather and stitching it together makes a bag. Although this may be true of inexpensive bags, the making of a high quality bag requires very little stitching but great deal of work constructing a bag.

Assembling the bag

The bag is first put together with glue before being stitched. This ensures the bag has the correct shape and that each bag is joined together exactly where it should be. Only then is the bag finally assembled. The bag is checked at all stages to ensure good quality.

Quality and Checking

Attention to details such as burning down excess threads, cleaning off glue and polishing, takes place before a final check of each bag by three different checkers.

Fittings

Only solid brass buckles are used for Hidesign products. Brass scrap is obtained, melted and each having been individually sand cast and hand polished reflecting the old saddlery tradition, Fittings that are not produced in our foundry are imported from the most respected suppliers in Europe and the rest of the world. Our traditional methods allow us to produce a product that is rich in character, texture and individuality. Each bag is therefore, by its very nature, a Limited edition.

Final Product

Hidesign knows no other way of making bags that will give years of pleasure.

2. Focus

Focus on uniqueness and innovation. Each product was “limited edition”

INNOVATION:

Hidesign products are unique. The multicultural design team has won several international awards for its excellence and design leadership. True to its values, Hidesign constantly innovates to stay in touch with the continuing fast moving changes in the lifestyle of its customer.

Hidesign mainly targets the upwardly mobile educated internationally minded executive. The brand is known for its craftsmanship and the quality of its products.

The target market consisted of people aged between 20 and 50 years, belonging to high income households, who traveled frequently, often internationally; and insisted on high quality products.

Corporate level strategy- expansion

1. Horizontal Integration

Process of acquiring or merging with industry competitors for achieving competitive advantage.

Hidesign is focusing on India and other emerging markets to grow business hence, the company tied up with Kishore Biyani-led Future Group & rolled out first India-specific brand Holii — in all the major . It expects to clock sales of Rs25 crore within two years from the new brand.

Besides developing the Holii brand, the company has tied up with fashion designer Rohit Bal for another collection, which will also be launched by next month.

“Our new brand is completely a new concept and is very Indian in terms of its designs. We will be working closely with the Future Group, where they will provide expertise in retail and operations while we will be associated with brand building and design,”

Dilip Kapur, President, Hidesign

2. Vertical Integration

Company expands its operation either backward into an industry that produces input for the company’s product or forward into an industry that uses or distributes company’s products.

Backward Integration

The core value of the brand is its attitude, tradition and its commitment to environment.Kapur did not like the look of normal leather, which seemed to slick to him. He saw some samples of leather that had been tanned using traditional methods of soaking the hides in vegetable extracts, and liked the different look this gave the material hence, Hidesign set up two wholly-owned tanning establishments near Chennai to maintain control over the quality of its leather. Where most other bags used plated-metal fittings, Kapur insisted on solid brass.

3. Diversification

Hidesign was viewed as a product out of the mainstream in its export markets, carried by exclusive distributors who built something of a cult following within each of their geographies so, Hidesign products were typically sold in stores with more of a fashion emphasis. But in 2000 the brand started Diversifying into retail which signaled a new era for Hidesign. By 2006, the firm owned 35 stores in India and had announced plans for 17 more.

The first exclusive Hidesign boutique outside India opened in August, 2004 in a 400-square-foot space in Dubai’s newly-opened Souq Madinat Jumeirah shopping mall.

As the nature of the business changed, the brand became more planned. It achieved real

clarity on what it was and what it wanted to achieve, that is it moved towards brand equity.

In 2009, Hidesign also signed agreements to open new stores at the airports in

Copenhagen and in Hong Kong. The Hong Kong store would be opened by a new joint

venture for China established with Ray Chan, the former account manager for Hidesign at

the firm’s Chinese distributor.

The company is also studying the markets of Switzerland, South Africa and Canada. In the domestic market too, Hidesign plans to expand from 35 stores currently and add 18 more in 15 months. Average investment on each store in India would be Rs 35-50 lakh, while the company would invest about Rs 70 lakh per store abroad.

Hidesign is positioned as a premium brand in the country whereas internationally it is seen more as an affordable luxury.

Business Models

Environmental threat and opportunity profile

( ETOP)

Environmental threat and opportunity profile is referred as ETOP profile. Environmental

analysis is a systematic process that starts from identification of environmental factors,

assessing their nature and impact, auditing them to find their impact to the business and

making various profiles for positioning.

Environmental Analysis Process

A business manager should be able to analyze the environment to grasp opportunities or

face the threats. Some factors are positive to the organization whereas others are negative.

Therefore, it is necessary to find out their impact to the organization. Positive, neutral, and

negative sign in ETOP denotes the relevant impact of environmental factors. Organizations

need to build their own strengths and repair/cover up their weaknesses available in the

business environment. Therefore, this process consists not only a single step but various

steps. Environmental analysis comprises scanning, monitoring, analyzing and forecasting

the business situation.

Scanning is to get the relevant information from the information overload. It is to

focus on the most relevant information.

Monitoring is to check the nature of the environmental factors.

Analyzing requires data collection and use of different required tools and

techniques.

Forecasting is to find the future possibilities based on the past results and

present scenario.

Environmental analysis process is not static but a dynamic process. It may differ depending

on the situation or the product. However, a general process with few common steps can be

identified as the process of environmental analysis . The commonly followed steps are viz.

Monitoring or identifying environmental factors.

Scanning and selecting the relevant factors and grouping them.

Defining variables for analysis.

Using different methods, tools and techniques for analysis.

Analyzing environmental factors and forecasting.

Designing profiles.

Strategic positioning and writing a report.

Identifying Environmental Factors

First of all a strategist should identify all the relevant factors that might affect his or her

business. In this process, one should first know what the internal areas of the business are.

This includes all the systems, internal structure, strategies followed, and culture of the

organization. All these areas can be covered into the five functional areas in classical

approach. Similarly, a business daily interacts with the close environmental components

outside the business such as customer, competitor, and supplier. It might cover all other

stakeholders such as trade union, media and pressure group. Furthermore, general such

business environment factors as political-legal, economic, socio-cultural, and technological

factors are to be identified.

Scanning and selecting relevant and key

factors

Out of all the business environmental factors, a strategist should focus only on the relevant

factors for further analysis. All the factors are not equally important and affecting to the

business. In this context, a strategist has to scan the environmental trend to select only the

most affecting environmental factors from the information overload. This step paves the way

of environment analysis and forecasting.

Defining Variables for Analysis

Selected environmental factors are to be further specified into the variables. A concept can

be interpreted into different variables. For example, political situation can be measured

using few variables such as instability, reliability and long-term effect. Economic

environment might cover many variables such as Per Capita, GDP, and Economic policies

that can be further classified into many other variables. Variables are the basis of

measurement in environmental analysis process. Variables can be compared, grouped,

correlated and predicted to find the clearer picture of the broader concept. It is therefore,

necessary to define the variables first in any kind of analysis including the environmental

analysis.

Using Different Methods, Techniques and

Tools

Different types of methods, tools, and techniques are used for analysis. Some of the major

methods of analysis can be Scenario Building, Benchmarking and Network methods.

Scenario presents overall picture of its total system with affecting factors. Benchmarking is

to find the best standard in an industry and to compare the one’s strengths and weakness

with the standard. Network method is to assess organizational systems and its outside

environment to find the strength and weakness, opportunity and threats of an organization.

Some of the techniques of primary information collection can be Delphi, Brainstorming,

Survey, and Historical enquiry. Delphi technique collects independent information from the

experts without mixing them. Brainstorming is information collection technique being open

minded without criticizing others. Survey is to design questions and to ask them to the

participants whereas the historical enquiry is a kind of case analysis of past period.

Analysis tools can be statistical such general descriptive tools as mean, median, mode,

frequency. Tools can be inferential as ANOVA, correlation, regression, factor, cluster, and

multiple regression analysis. There are many tools of analyzing functional areas. Finance

and accounting use mostly profitability, leverage, fund flow and other similar accounting and

financial tools for analysis. Human resources use employee turnover, training, satisfaction

and many others as the basis of evaluating strength and weakness. Production area is

assessed using quality control, productivity, breakdown, and many others. Similarly,

marketing effectiveness is judged from the sales volume and market coverage. Research

and development is perceived successful if it can really develop the strength in an

organization.

Forecasting Environmental Factors

Collecting relevant information from the selected areas and to identify the variables in such

areas are the basics of analysis. Analyzing the past information to predict the future is the

main objective of this step. As discussed earlier, use of different methods, techniques, and

tools comes under the analysis process. It is, therefore, a comprehensive process that

analyzes collected information using different tools and techniques.

Designing Profiles

After analyzing the environmental factors they are recorded into the profiles.

Such profiles record each component or variables into left side and their positive, negative,

or neutral indicators including their statement in the right side. Internal areas are recorded in

Strategic Advantages Profile (SAP) and external areas are recorded in Environmental

Threat and Opportunity Profile (ETOP). Strength, Weakness, Opportunity, and Threat

(SWOT) profile can be designed combining both of these two profiles into one.

Nowadays, strength & weakness and opportunities & threats (SWOT) profile has become

very popular.

Environmental Threat to Leather Industry

Dharavi is one of the major hubs in raw leather manufacturing and processing. There are

several tanneries located in and around the area. Tanning is one of the major processes of

refining and processing raw leather.

The nature of the processes involved in tanning results in the discharge of untreated

effluents. The effluent not only contaminates the water supply on the land, it also affects the

food supply for the population. All of these forms of pollution have detrimental effects upon

the health of the people in the vicinity. Hence, in view of the environmental considerations

and threat to human life the Government has ordered for the closure of the tanneries.

Presently, there are about 10-12 tanneries which are operational. Over the years these

have also shrunk in size. Tanning requires not only chemicals but also involves multiple

stages of treatment, which need space. Thanks to the Maharashtra Government’s

Directives, in the space previously occupied by these tanneries other tenements have come

up, leading to mushrooming of other unorganized sectors. The existing tanneries do not

treat the leather completely. They source vegetable tanned hides or semi tanned leather

from within Maharasthtra (Baramati, Meeraj) or from Chennai, Kanpur and Kolkatta and

then carry out only the finishing work. (According to one of the respondents the tanneries do

not carry out even 20% of the processes, which should be carried out to make the leather of

international standards. The leather called ‘Dharavi leather’ is banned by various countries

in Europe and US).

Problems of Tanneries

Environmental pollution due to lack of facilities for treatment

and disposal of hazardous wastes.

Lack of financial assistance

High cost of semi-tanned leather

Unhygienic working conditions leading to health hazards for the

workforce.

No facilities for quality testing.

Environmental Threats:

Soil contamination by the sludge produced thereby affecting the agriculture of the

adjoining region.

Water pollution by the by-products and solid wastes disposed by the tanneries and

leather manufacturing industries thereby affecting water life and pisci-culture.

Using cheap imported synthetic rubber from China thereby resulting in poor quality

products which can have adverse effects on skin/body.

Rampant slaughtering of wild animals to procure authentic leather thereby affecting

wildlife and eco structure of nature.

Disposal of untreated wastes into land and water bodies from tanneries results in air

and water pollution as well as emission of greenhouse gases like methane and

carbon dioxide.

Opportunities:

Abundant scope to supply finished leather to multinationals setting up shops

in India.

Growing fashion consciousness globally.

Product diversification in leather garments and goods.

Growing domestic and international market.

Porter five forces analysis

"Porter's five forces" is a framework for the industry analysis and business strategy development developed by Michael E. Porter of Harvard Business Schoo l in 1979. It uses concepts developing Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one where the combination of forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition".

Three of Porter's five forces refer to competition from external sources. The remainder are internal threats. It is useful to use Porter's five forces in conjunction with SWOT analysis.

Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a business unit to re-assess the marketplace given the overall change in industry information. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. Firms are able to apply their core competencies, business model or network to achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low and yet individual companies, by applying unique business models, have been able to make a return in excess of the industry average.

Strategy consultants occasionally use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position. However, for most consultants, the framework is only a starting point or "checklist" they might use. Like all general frameworks, an analysis that uses it to the exclusion of specifics about a particular situation is considered naїve.

Porter's five forces include three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.

According to Porter, the five forces model should be used at the line-of-business industry level; it is not designed to be used at the industry group or industry sector level. An industry is defined at a lower, more basic level: a market in which similar or closely related products and/or services are sold to buyers. A firm that competes in a single industry should develop, at a minimum, one five forces analysis for its industry.

Porter makes clear that for diversified companies, the first fundamental issue in corporate strategy is the selection of industries in which the company should compete; and each line of business should develop its own, industry-specific, five forces analysis. The average Global 1,000 company competes in approximately 52 industries (lines of business).

This five forces analysis is just one part of the complete Porter strategic models. The other elements are the value chain and the generic strategies

The Five Forces

A graphical representation of Porter's Five Forces

The Threat Of Substitute Products or Services

The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives:

Buyer propensity to substituteRelative price performance of substitute

Buyer switching costs

Perceived level of product differentiation

Number of substitute products available in the market

Ease of substitution. Information-based products are more prone to substitution, as online product can easily replace material product.

Substandard product

Quality depreciation

Example -Bally, Bottega Veneta, Coach, Fendi, Gucci, Lancel, Longchamp

The Threat Of The Entry Of New Competitors

Profitable markets that yield high returns will draw firms. This results in many new entrants, which eventually will decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (perfect competition).

The existence of barriers to entry (patents, rights, etc.)The most attractive segment is one which entry barriers are high and exit barriers are low. Few new firms can enter and non-performing firms can exit easily.Economies of product differences

Brand equity

Switching costs or sunk costs

Capital requirements

Access to distribution

Customer loyalty to established brands

Absolute cost advantages

Learning curve advantages

Expected retaliation by incumbents

Government policies

Industry profitability; the more profitable the industry the more attractive it will be to new competitors

Internet era; today competitors need only a website to enter a market

Example- DKNY recently entered into leather handbag industry…

The Intensity Of Competitive Rivalry

For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.

Sustainable competitive advantage through innovation. Competition between online and offline companies; click-and-mortar -v- brick-and-

mortar

Level of advertising expense.

Powerful competitive strategy used by a company which can intensify competitive pressures on their rivals.

How will competition react to a certain behavior by another firm? Competitive rivalry is likely to be based on dimensions such as price, quality, and innovation. Technological advances protect companies from competition. This applies to products and services. Companies that are successful with introducing new technology, are able to charge higher prices and achieve higher profits, until competitors imitate them. Examples of recent technology advantage in have been mp3 players and mobile telephones. Vertical integration is a strategy to reduce a business' own cost and thereby intensify pressure on its rival.

The Bargaining Power Of Customers (Buyers)

The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes.

Buyer concentration to firm concentration ratioDegree of dependency upon existing channels of distribution

Bargaining leverage, particularly in industries with high fixed costs

Buyer volume

Buyer switching costs relative to firm switching costs

Buyer information availability

Ability to backward integrate

Availability of existing substitute products

Buyer price sensitivity

Differential advantage (uniqueness) of industry products

RFM Analysis

The brand has been able to identify and satisfy the customer's desires. The customers were in need of a brand that can offer them quality and looks which was lacking in the unbranded products. The brand is relevant to customer because of the change in the lifestyle of the upwardly mobile Indians. Although the brand is priced astronomically , the target group is finding value in this product. But with these prices the brand is out of reach to most Indians.

The Bargaining Power Of Suppliers

The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm, when there are few substitutes. Suppliers may refuse to work with the firm, or, e.g., charge excessively high prices for unique resources.

Supplier switching costs relative to firm switching costsDegree of differentiation of inputs

Impact of inputs on cost or differentiation

Presence of substitute inputs

Supplier concentration to firm concentration ratio

Employee solidarity (e.g. labor unions)

Supplier competition - ability to forward vertically integrate and cut out the buyer

The BCG Growth-Share Matrix:

The BCG Growth-Share Matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970’s. It is based on the observation that a company’s business can be classified into four categories based on combinations of market growth and market share relative to the largest competitor, hence the name “growth-share”. Market growth serves as a proxy for industry attractiveness, and relative market share serves as a proxy for competitive advantage. The growth-share matrix thus maps the business unit positions within these two important determinants of profitability.

This framework assumes that an increase in relative market share will result in an increase in the generation of cash. This assumption often is true because of the experience; increased relative market share implies that the firm is moving forward on the experience curve relative to its competitors, thus developing a cost advantage. A second advantage is that a growing market requires investment in assets to increase capacity and therefore results in the consumption of cash. Thus the position of a business on the growth-share matrix provides an indication of its cash generation and its cash consumption.

Henderson reasoned that the cash required by rapidly growing business units could be obtained from the firm’s other business units that were at a more mature stage and generating significant cash. By investing to become the market share leader in a rapidly growing market, the business unit could move along the experience curve and develop a cost advantage. From this reasoning, the BCG Growth-Share Matrix was born.

The Four Categories Are:

Cash Cows are units with high market share in a slow-growing industry. These units typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a "mature" market, and every corporation would be thrilled to own as many as possible. They are to be "milked" continuously with as little investment as possible, since such investment would be wasted in an industry with low growth.

Dogs or more charitably called pets, are units with low market share in a mature, slow-growing industry. These units typically "break even", generating barely enough

cash to maintain the business's market share. Though owning a break-even unit provides the social benefit of providing jobs and possible synergies that assist other business units, from an accounting point of view such a unit is worthless, not generating cash for the company. They depress a profitable company's return on assets ratio, used by many investors to judge how well a company is being managed. Dogs, it is thought, should be sold off.

Question Marks  (also known as problem child) are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. The result is large net cash consumption. A question mark has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share.

Stars are units with a high market share in a fast-growing industry. The hope is that stars become the next cash cows. Sustaining the business unit's market leadership may require extra cash, but this is worthwhile if that's what it takes for the unit to remain a leader. When growth slows, stars become cash cows if they have been able to maintain their category leadership, or they move from brief stardom to dogdom.

As a particular industry matures and its growth slows, all business units become either cash cows or dogs. The natural cycle for most business units is that they start as question marks, and then turn into stars. Eventually the market stops growing thus the business unit becomes a cash cow. At the end of the cycle the cash cow turns into a dog.

Drawbacks Of BCG Matrix: The growth-share matrix once was used widely, but has since faded from popularity as more comprehensive models have been developed. Some of its weaknesses are:

Market growth rate is only one factor in industry attractiveness, and relative market share is only one factor in competitive advantage. The growth-share matrix overlooks many other factors in these two important determinants of profitability.

The framework assumes that each business unit is independent of the others. In some cases, a business unit that is a "dog" may be helping other business units gain a competitive advantage.

The matrix depends heavily upon the breadth of the definition of the market. A business unit may dominate its small niche, but have very low market share in the overall industry. In such a case, the definition of the market can make the difference between a dog and a cash cow. While its importance has diminished, the BCG matrix still can serve as a simple tool for viewing a corporation's business portfolio at a glance, and may serve as a starting point for discussing resource allocation among strategic business units.

BCG matrix for Hidesign:

Cash cow: briefcases and travel bags, back packs, conference folders, wheeled luggage.

Star: Computer bag, wallet.

Cash Dog: wash bags, pencil case.

Question marks: Across body bags.

SWOT ANALYSIS OF HIDESIGN LEATHER PRODUCTS

Strengths:

HiDesign is recognized worldwide and now sells leather bags and garments under its own name in Australia, Greece, India, New Zealand, Scandinavia, Slovakia, South Africa, the United Kingdom, and the United States. They have the expertise to create a product that is excellent.They do not compromise on quality of the products.They have stayed focused on innovation, based on the heritage of craftsmanship.They stands out for the sensuous naturalness of its high quality leathers and the smooth soft glow of its solid brass fittings.They have loyal customers.

WEAKNESSES:

They are very weak management wise.Their products are only for the higher income class people and very few for middle class people.They have concentrated market i.e. only in metro cities.They follow traditional ways of production and through these ways it is very difficult to compete with the competitors.They are highly dependent on craftsmanship.The rate of up gradation of technology is very slow.

OPPURTUNITIES:

Demand of the leather products is very high in domestic as well as in international market.They can expand their market share providing more range of products at lower price mainly for middle class people.They can reduce the production time by using the advanced technologies.They can market their products in 2nd tier cities instead of marketing in only metros.

THREATS:

Competition is quite high in this industry.Threats from the competitors as they are using new technologies in production and hidesign is still following the traditional way.Threats from some organizations like PETA as they are negatively advertising the leather industry.Environmental threats as the waste from these industries are very harmful.International standards are very strict.

Course of action for growth without

brand dilution ?

Solutions:-

• Approach 1 : Launch the new variety keeping the same brand name: Hidesign Brand Extension

• Approach 2 : Undertake Promotion campaign and look for alternatives in the form of Joint ventures & Franchisee.

• Approach 3 : Enter into a different product line & target a different customer segment.

Line Extension:- A current brand name is used to enter a new market segment in its product class.

Brand extension:- A current brand name is used to enter a completely different product class.

Brand Extension Model

Brand Extension Categorization

Functional Concept : A brand with a functional concept as one designed to solve externally generated consumption needs.

Symbolic Concept : A brand with a symbolic concept is designed to associate the individual with a desired group, role, or self-image

Experimental Concept : A brand with an experiential concept as one designed to fulfill internally generated need for stimulation and/or variety.

Hidesign brand must undergo an image makeover after a customer opinion revealed that while the brand was highly valued for its quality, it was perceived as "boring" and not "cool" enough.In an attempt to change this image, Hidesign must undertake ad campaign in for giving the brand a trendier image, to appeal more to younger prospects. In the campaign, Hidesign must promote itself as a "fashion forward" brand that customers in any part of the world could relate to.

New Product Line:

Hidesign bags were typically sold overseas in a price range between $125 and $200 (in 2006 prices). This represented a markup of 550-600% over factory cost. Typically, the wholesale price for a bag was 85% over the landed costs in a foreign country, and a standard retail markup was in the vicinity of 240-250%.

Instead of targeting the premium & executive class the company must launch products for ,

instead of an upper-upper class brands. Every country is an individual case. It is not easy

for brands to cross over cultural lines. If one is successful in Australia, that doesn’t mean it

will be successful in Indonesia. The company must realize that each country is a separate

independent exercise in brand building.

For gaining success in Domestic market Hidesign must launch -a range of high class trendy products, which can be designed for daily use and must be priced at an affordable range. With a wide range of color options like black, biscuit, tan, light blue, dark blue, red, etc., the range must target at young working women & youth who might find it interesting to match the range of bags with their wardrobe...

Alternatives to integration

“Being able to find the right joint venture partner is an important barrier to scaling

Hidesign’s boutiques outside India”

Dilip Kapur, President, Hidesign

Hi-Design only had success with people we have already known, never looked systematically and professionally for joint venture partners instead focused on commitment and capability.With a strong joint venture partner ,who can work independently with the company the organization can further strengthen the BRAND . They simply can not micro-manage from India .They tried that at first in Dubai because they hoped it was close enough to India, but it proved a disaster. Hi-Design can manage things centrally within India, but not internationally.

Conclusion

By mid-2009, Hidesign’s revenues were reported as being in the vicinity of 112,000 crores , growing at 25% per year. Within a few years, Hidesign penetrated all the likely locations it wished to occupy in India, so international expansion remains the key to growing this business.

Kapur and his German-born wife Jacqueline had opened two boutique hotels in Pondicherry in 2004 and 2005, and Kapur had mused in the press that Hidesign’s joint venture in China might provide the right vehicle for the firm to diversify into apparel. However, it was clear to the Hidesign president that accelerating the pace at which the firm opened stores abroad and establishing a truly international brand stood at the top of his leadership agenda.

Hi Design Boutique

Bibliography

1.Strategic Management An Integrated Approach- Charles W. L. Hill- Gareth R. Jones

2. Strategy Formulation and Implementation- Pearce John A & Robinson R B

3. www.cityleathers.com/leatherBags.htm

4. www. hidesign .com/home.mvc/The Product

5. http://www.livemint.com/2009/08/23111919/Hidesign-to-focus-on-Indiaspe.html

6. http://www.dare.co.in/people/case-studies/hidesign-to-expand-the-brand.htm

7. http://www.ameinfo.com/44375.html

8. http://www.avg.com/in-en/homepage

9. www.hidesign.com/content/Images/showroom.jpg