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TABLE OF CONTENT

ACKNOWLEDGEMENT

ABSTRACT

HISTORY OF INDIAN TEXTILE INDUSTRY……………………………….………………..2

INDIAN TEXTILE INDUSTRY………………………………………………..…………………3

POSITION OF INDIAN TEXTILE INDUSTRY…………………………………………………4

MAJOR MANUFACTURERS AND THEIR MARKET SHARE……………………………..5

INDUSTRY SUPPLY CHAIN……………………………………………………………………..6

INDIA’S COMPETITIVENESS…………………………………………………………………..7

GOVERNMENT POLICIES ...............…………………………………………………………..11

TEXTILE COMPANIES IN INDIA ….…………………………………………………..……..15

BCG MATRIX……………………………………….……………………………………….……19

PORTERS FIVE FORCE MODEL……………….…………………………………………..….20

SEGMENT ANALYSIS…………………………….…………………………………………..…25

SWOT ANALYSIS OF TEXTILE INDUSTRY….….……………………………………….....27

Comparing Technological Innovation of Textile Industries in India and China……………..29

What The Chinese Are Doing Right ?.......................................................................................34

PRESENT SCENARIO OF TEXTILE INDUSTRY...............................................................36

CONCLUSION..........................................................................................................................38

REFRENCES.............................................................................................................................40

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HISTORY OF INDIAN TEXTILE INDUSTRY

The history of textiles in India dates back to nearly five thousand years to the days of the Harappan

civilization. Evidences that India has been trading silk in return for spices from the 2nd century have

been found. This shows that textiles are an industry which has existed for centuries in our country.

Recently there has been a sizeable increase in the demand for Indian textiles in the market. India is

fast emerging as a competitor to China in textile exports. The Government of India has also realized

this fact and lowered the customs duty and reduced the restrictions on the imported textile machinery.

The intention of the government’s move is to enable the Indian producers to compete in the world

market with high quality products. The results of the government’s move can be visible as Indian

companies like Arvind Mills, Mafatlal, Grasim; Reliance Industries have become prominent players

in the world. The Indian textile industry is the second largest in the world-second only to China. The

other competing countries are Korea and Taiwan. Indian Textile constitutes 35% of the total exports

of our country.

The history of apparel and textiles in India dates back to the use of mordant dyes and printing blocks

around 3000 BC. The foundations of the India's textile trade with other countries started as early as

the second century BC. A hoard of block printed and resistdyed fabrics, primarily of Gujarati origin,

discovered in the tombs of Fostat, Egypt, are the proof of large scale Indian export of cotton textiles

to the Egypt in medieval periods.

During the 13th century, Indian silk was used as barter for spices from the western countries.

Towards the end of the 17th century, the British East India Company had begun exports of Indian

silks and several other cotton fabrics to other economies. These included the famous fine Muslin

cloth of Bengal, Orissa and Bihar. Painted and printed cottons or chintz was widely practiced

between India, Java, China and the Philippines, long before the arrival of the Europeans.

India Textile Industry is one of the largest textile industries in the world. Today, Indian economy is

largely dependent on textile manufacturing and exports.

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INDIAN TEXTILE INDUSTRY

Textile Industry in India is the second largest employment generator after agriculture. It holds significant status in India as it provides one of the most fundamental necessities of the people. Textile industry was one of the earliest industries to come into existence in India and it accounts for more than 30% of the total exports. In fact Indian textile industry is the second largest in the world, second only to China.

The Indian textile industry has a significant presence in the economy as well as in the international textile economy. Its contribution to the Indian economy is manifested in terms of its contribution to the industrial production, employment generation and foreign exchange earnings. It contributes 14 percent of industrial production, 9 percent of excise collections, 18 percent of employment in the industrial sector, nearly 20 percent to the country’s total export earning and 4 percent to the Gross Domestic Product. It is closely linked with the agricultural and rural economy. It is the single largest employer in the industrial sector employing about 35 million people.

If the employment in allied sectors like ginning, agriculture, pressing, cotton trade, jute, etc. are added then the total employment is estimated at 93 million. The net foreign exchange earnings in this sector are one of the highest and, together with carpet and handicrafts, account for over 37 percent of total export earnings at over US $ 10 billion. Textiles, alone, account for about 25 percent of India’s total forex earnings.

India’s textile industry since its beginning continues to be predominantly cotton based with about 65 percent of fabric consumption in the country being accounted for by cotton. The industry is highly localized in Ahmedabad and Bombay in the western part of the country though other centers exist including Kanpur, Calcutta, Indore, Coimbatore, and Sholapur.

The structure of the textile industry is extremely complex with the modern, sophisticated and highly mechanized mill sector on the one hand and the hand spinning and hand weaving (handloom) sector on the other. Between the two falls the small-scale power loom sector. The latter two are together known as the decentralized sector.

Over the years, the government has granted a whole range of concessions to the non-mill sector as a result of which the share of the decentralized sector has increased considerably in the total production. Of the two sub-sectors of the decentralized sector, the power loom sector has shown the faster rate of growth. In the production of fabrics the decentralized sector accounts for roughly 94 percent while the mill sector has a share of only 6 percent.

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POSITION OF INDIAN TEXTILE INDUSTRY

The Indian textile industry contributes about 14 per cent to industrial production, 4 per cent to the country's gross domestic product (GDP) and 17 per cent to the country’s export earnings, according to the Annual Report 2009-10 of the Ministry of Textiles.

It provides direct employment to over 35 million workers directly and it accounts for 21% of the total employment generated in the economy and is the second largest provider of employment after agriculture. Some of the textile clusters in which productions happens are very huge and significant for the overall industry, for example

Panipat produces 75% of all blankets produced in India Tirupur contributes 80% of the country’s cotton hosiery exports Ludhiana makes 95% of total woolen knitwear produced

According to the Ministry of Textiles, Export target in textiles in 2010 at USD is 50 billion. the cumulative production of cloth during April’09- March’10 has increased by 8.3 per cent as compared to the corresponding period of the previous year.

Moreover, total textile exports have increased to US$ 18.6 billion during April’09- January’10, from US$ 17.7 billion during the corresponding period of the previous year, registering an increase of 4.95 per cent in rupee terms. Further, the share of textile exports in total exports has increased to 12.36 per cent during April’09-January’10, according to the Ministry of Textiles.

As per the Index of Industrial Production (IIP) data released by the Central Statistical Organisation (CSO), cotton textiles has registered a growth of 5.5 per cent during April March 2009-10, while wool, silk and man-made fibre textiles have registered a growth of 8.2 per cent while textile products including wearing apparel have registered a growth of 8.5 per cent.

The textile sector has increased their investment in projects to upgrade their equipment amid fierce market competition and to meet the growing demand for more textile products. Total investment in the textile industry between 2004 and 2008 was around Rs.65,478 crore in India, which is expected to reach Rs.1,50,600 crore by 2012. This enhanced investment would generate 17.37 million jobs-- 12.02 million direct and 5.35 million indirect—by 2012.

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MAJOR MANUFACTURERS AND THEIR MARKET SHARE

In 2006, the largest apparel manufacturers and exporters were countries from the Asia-Pacific region which included countries like China, Hong Kong, Phillipines, Malaysia, Indonesia, Bangladesh, Srilanka, Pakistan, Thailand and India. The other major apparel manufacturing nations were USA, Italy, Germany and Mexico.

To understand Indias position among other textile producing the industry contributes 9% ofGDP and 35% of foreign exchange earning, Indias share in global exports is only 3% compared to Chinas 13.75% percent. In addition to China, other developing countries are emerging as serious competitive threats to India. Looking at export shares, Korea (6%) and Taiwan (5.5%) are ahead of India, while Turkey (2.9%) has already caught up and others likeThailand (2.3%) and Indonesia (2%) are not much further behind.

The reason for this development is the fact that India lags behind these countries in investment levels, technology, quality and logistics. If India were competitive in some key segments it could serve as a basis for building a modern industry, but there is no evidence of such signs, except to some extent in the spinning industry.

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INDUSTRY SUPPLY CHAIN

The apparel industry supply chain can be broadly categorized into six major components - raw materials, textile plants, apparel plants, export chains, retail stores and customers.

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INDIA’S COMPETITIVENESS

CONTRIBUTION TO ECONOMY:

The textile industry occupies a unique place in our country. One of the earliest to come intoexistence in India, it accounts for 14% of the total Industrial production, contributes tonearly 20% of the total exports. Being the largest foreign exchange earner, accounting formore than 5 per cent of GDP and providing direct employment to 38 million people,primarily the weaker sections, it is the second most important sector only after agriculture.The No.1 exporter of textiles, China, has a share of more than 10 per cent followed byKorea with 8.1 per cent; India's hovers at 3.5-4 per cent. In clothing exports, China holds ashare of 18.5 per cent followed by Italy (6.7 per cent) and India (3 per cent). India's sharemay look small but in monetary terms it is large.

It has a unique position as a self-reliant industry, from the production of raw materials to thedelivery of finished products, with substantial value-addition at each stage of processing; it isa major contribution to the country's economy. The industry is composed of handlooms,powerlooms and mills. While the mill sector is well-organised and modern, the same cannotbe said of the powerloom and handloom segments. The mill sector has managed to grab areasonable share of the world export market.

Although the development of textile sector was earlier taking place in terms of generalpolicies, in recognition of the importance of this sector, for the first time a separate PolicyStatement was made in 1985 in regard to development of textile sector. The textile policy of2000 aims at achieving the target of textile and apparel exports of US $ 50 billion by 2010 ofwhich the share of garments will be US $ 25 billion. The main markets for Indian textilesand apparels are USA, UAE, UK, Germany, France, Italy, Russia, Canada, Bangladesh andJapan.

The main objective of the textile policy 2000 is to provide cloth of acceptable quality atreasonable prices for the vast majority of the population of the country, to increasinglycontribute to the provision of sustainable employment and the economic growth of thenation; and to compete with confidence for an increasing share of the global market

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TABLE SHOWING THE INDIA’S COMPETITIVENESS WITH OTHER COUNTRY:

There is no denying India is competitive enough and will become even more competitive once its infrastructure issues are sorted out. China has probably already reached its peak and further improvements may not be as dramatic.

Countries and their positive and negative aspects with regard to textiles

KEY COUNTRIES / REGIONS

KEY POSITIVES KEY NEGATIVES

China Efficient, low cost, vertically integrated

Growth at the cost of profits

India, Pakistan Vertically integrated, low cost

Lacks economies of scale and infrastructure support

Mexico (NAFTA), Turkey Proximity to market, duty and quota free

Lack of China and Indias degree of competitiveness

ASEAN (Vietnam, Cambodia, Indonesia)

Cheap labor No other cost or locational advantage

AGOA (African) countries, Bangladesh

Quota and tariff free, cheap labor

Lack of integration and China and Indias has degree of

competitiveness

Hong Kong, Korea, Taiwan Trading hubs proximity to China

No cost advantage, protected currently by quotas

USA and EU Non-quota barriers likely to prove irritant to

imports

Huge but choosy market

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Indian Textiles targets- 11th Five year Plan (2007-2012)

Market size of US$ 115 Billion

Export target US$ 55 Billion

Domestic market US$ 60 Billion

India’s market share in world textiles trade to grow from 3% to 8 %

12 Million additional jobs

Investment Rs.150,600 Crs

TEXTILES EXPORT TARGET (IN BILLIONS)

Year ( April March) Target Achievement

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2008-09 24.18 24.16

2007-08 21.16 21.14

2006-07 19.73 19.62

2005-06 15.565 17.80

2004-05 15.16 13.04

2003-04 16.31 13.16

2002-03 15.05 12.41

2001-02 13.72 10.76

TOP 10 EXPORTERS (TEXTILE)

Country 1990 1997Billion US$ % share Billion US$ % share

Hong Kong 7.99 7.68 14.6 9.42

China 7.10 6.82 13.83 8.92

South Korea 6.04 5.81 13.35 8.61

Germany 14.00 13.46 13.05 8.42

Italy 9.80 9.43 12.9 8.32

Taiwan 6.13 5.90 12.73 8.21

USA 5.03 4.83 9.19 5.93

France 7.21 4.65 5.86 5.64

Belgium-Luxembourg 6.54 6.29 7.01 4.52

Japan 5.88 5.65 6.75 4.35

TOP 10 EXPORTERS (APPAREL)

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Country 1990 1997

Billion US$ % share Billion US$ % shareChina 9.41 9.14 31.8 21.06

Hong Kong 15.37 14.92 23.11 15.30

Italy 12.07 11.72 14.85 9.83

USA 2.57 2.49 8.68 5.75

Germany 7.82 7.59 7.29 4.83

Turkey 3.44 3.34 6.7 4.44

France 4.65 4.51 5.34 3.54

UK 3.08 2.99 5.28 3.50

South Korea 8.11 7.87 4.19 2.77

Thailand 2.86 2.78 3.77 2.50

Total (top 10) 69.38 67.36 111.01 73.52

World 103.00 100.00 151.00 100.00

GOVERNMENT POLICIES

NATIONAL TEXTILE POLICY 2000

ON NOVEMBER 2, the Government announced the New Textile Policy (NTP), outlining measures to make India a global player in textiles and readymade garments by raising exports from $11 billion to $50 billion by 2010. Of this, the share of readymade garments will be half. The Government has decided to de reserve the garment industry from the SSI category to make the former internationally more competitive. Till now, the garment sector was under SSI reservation, with an investment ceiling of Rs 3 crore, and the maximum foreign direct investment limit of 24 per cent.There are two more modifications. First, the FDI limit of 24 per cent has been removed, and foreign companies will be able to make 100 per cent investments through the Foreign Investment Promotion Board (FIPB) route. Second, the 50 per cent export obligation on firms with foreign equity has been done away with. The Government intends to implement, in a time-bound manner, the Technology Upgradation Fund Scheme covering all manufacturing sectors of the industry. According to the Textiles Minister, Mr

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Kashiram Rana, response to this scheme is improving, and proposals worth Rs 11,000 crore were received.Acording to the RBI, exports of readymade garments in the 11 years from 1987-88 to 1998-99 rose from $1,430 million to $4,444 million -- more than threefold. The annual average growth rate readymade exports during this period were 10.9 percent, against the overall export growth rate of 9.7 percent.Exports of readymade to the developed countries are improving. Against exports of $427 million to the US, in 1987-88, they touched $1,503 million -- again, more than threefold-- in 1998-99. There have been similar increases in despatches to the UK, Germany, France, Canada, Italy, Japan and the Netherlands. There was a decline in exports to the Commonwealth of Independent States (CIS) because of the unstable conditions.India was also able to capture markets in developing countries, especially the UAE. The rising trend of readymade garment exports, even to the most developed countries, proves beyond doubt the competitive ability of the small sector.

TECHNOLOGY UPGRADATION FUND SCHEME (TUFS):

Government of India, Ministry of Textiles has launched a Technology Upgradation Fund Scheme (TUFS) for the Textile and Jute Industries, which is in operation since 01.04.1999 for 5 years i.e. up to 31.03.2004. There is no cap on funding under this scheme. It is an open-ended scheme depending on the capacity of the industry to absorb funds in bankable and techno-economically feasible proposals.The main features of the TUFS are given below: -

I. The scheme provides a reimbursement of 5% point on the Interest charged by the lending agency on a project of Technology Up gradation in conformity with the scheme.

II. The identified sectors in the textile industry viz. Cotton ginning and pressing, spinning/silk reeling and twisting/wool scouring and combing/ synthetic filament yarn texturising, crimping and twisting, manufacturing of viscose filament yarn (VFY) / Viscose Staple Fiber (VSF), weaving/knitting including non woven and technical textiles, garments/made-ups, Jute industry are eligible to avail of these concessional loan for their technology up gradation requirements. Investments in common infrastructure or facilities owned by the association, trust or co-operative society of the units participating in the TUF Scheme and other investments specified are also eligible for funding under the scheme.

III. Technology levels are benchmarked in terms of specified machinery for each sector of the textile industry. Machinery with technology levels lower than that specified will not be permitted for funding under the TUF Scheme.

IV. General eligibility condition and sector specific eligibility conditions have also been

specified in the scheme.

V. Nodal agencies for the scheme are as follows: -

For the Textile Industry (excluding SSI sector) – IDBI

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For the SSI Textile Sector (Cotton Ginning & Pressing, Weaving, Knitting, Processing & Garmenting Manufacturing) - SIDBI

For Jute Industry - IFCI

VI. The interest @5% would be reimbursed to the respective nodal agency through the budget (plan) provisions of the Ministry of Textiles.

VII. The functioning of the scheme is being periodically monitored by TAMC Chaired by Textile Commissioner and Inter-Ministerial Steering Committee, Chaired by Secretary (Textiles).

VIII. A special cell has been set up in the financing institutions for expeditiously processing loan application received under the scheme.

IX. All the 18 SFCs, 17 SIDCs and 11 Twin function IDCs, EXIM Bank and NCDC have been co-opted by SIDBI and IDBI. Further SIDBI has co opted 81 commercial banks, coop. banks and NSIC and IDBI has co-opted 36 commercial banks, 1 co-operative bank and 4 AIFIs (IFCI, ICICI, IIBI and LIC) have also been co-opted by IDBI. IFCI has coopted 3 SFCs, 1 SIDC, 6 commercial banks, 3 AIFIs and Exim Bank for financing jute industry under the scheme.

X. An option has also been provided to the Small Scale Textile and Jute Industries to avail of either 12% Credit Linked Capital Subsidy (CLCS) or the existing 5% interest reimbursement under the TUFS. CLCS-TUFS will be in operation from 1st Jan., 2002 to 31st March, 2004. There is no distinction between public sector, co-operative sector or private sector mills under the scheme, if project proposal is bankable and technoeconomically feasible. Indian textile industry should have focused on all major sectors right from fibre to fashion and planned for an organized growth across the supply chain so as to compete with China and even countries such as Pakistan, Vietnam and Thailand. Instead, the industry had put majority of its stock in the spinning sector. This is clearly evident in the utilization of Technology Upgradation Fund Scheme effectively by the spinning sector. Although it is a positive outcome, in my opinion, the industry turned a blind eye on value-adding sectors such as weaving and finishing.

TEXTILE WORKERS’ REHABILITATION FUND SCHEME (TWRFS):

Textile Workers’ Rehabilitation Fund Scheme came into force with effect from 15th Sept. 1986.The

objective of TWRFS is to give interim relief to the workers rendered jobless due to permanent

closure of the mills. Another reason also was to curtail the widespread disguised employment in the

textile industry. Relief under the scheme is available only for 3 years on a tapering basis, 75% of the

wage equivalent in the first year, 50% in the second year and 25% in the third year.

The government has established various research associations for the textile industry like

Ahmedabad Textile Industry Research Association, Ahmedabad

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Bombay Textile Research Association, Mumbai

South India Textile Research Association, Coimbatore

Northern India Textile Research Association, Ghaziabad

Silk and Art Silk Mills Research Association, Mumbai

It has a few export promotion councils also like

Handloom Export Promotion Council, Madras

Apparel Export Promotion Council, New Delhi

Cotton Textile Export Promotion council, Mumbai

The Synthetic and Rayon Textiles Export Promotion Council, Mumbai

Indian Silk Export Promotion Council, Mumbai

Wool and Woollens Export Promotion council, New Delhi

Carpet Export Promotion Council, New Delhi

Export Promotion Council for Handicrafts

Powerloom Development & Export Promotion Council

2.2 Quality Improvement

The Textile Commission, under the Ministry of Textiles, facilitates firms in the industry toimprove their quality levels and also get recognised quality certifications. Out of 250 textilecompanies that have been taken up by the Commission, 136 are certified ISO 9001. Theother two certifications that have been targeted by the Textile Commission are ISO 14000Environmental Management Standards and SA 8000 Code of Conduct ManagementStandards

.2.3 Foreign Direct Investment (FDI) Policy

100% FDI is allowed in the textile sector under the automatic route. FDI in sectors to theextent permitted under automatic route does not require any prior approval either by the

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Government of India or Reserve Bank of India (RBI). The investors are only required tonotify the Regional Office concerned of RBI within 30 days of receipt of in word remittance.Ministry of Textiles has set up FDI Cell to attract FDI in the textile sector in the country.

The FDI cell will operate with the following objectives:

• To provide assistance and advisory support (including liaison with other organisationsand State Governments)

• Assist foreign companies in finding out joint venture partners

• To sort out operational problems

• Maintenance and monitoring of data pertaining to domestic textile production andforeign investmen

Foreign investment and market presence was not very high in India’s textile and apparelsector. With liberalisation in investment and the subsequent the removal of quantitativerestrictions on several textile products, the Indian market now has the presence of severalinternational brands. However, the presence is more in the nature of brand licensing withIndian players rather than direct investment. U.S. brands have a larger presence in themarket than others.

According to official data from the Secretariat of Industrial Assistance(SIA), the total foreign investment approved in the sector since 1991 is in the region of US$80 million, of which E.U. investment is estimated to be US$ 16.5 million a little over 20 percent of total approvals, from 46 applications. The largest number of approvals was ofinvestments from UK (16) and Italy (14), together representing more than 75 per cent of thecases and 86 per cent of the value approved.

TEXTILE COMPANIES IN INDIA

India being one of the fastest growing economies of the world, which has both positively and negatively, affected the Indian textile industry. On one hand it has become a major retailing hub and a host for various multinational companies on the other hand this has a negative effect on the domestic players. The emergence of mall, brand slavery, fashion awareness, rise in the income level has further reinforced the competition among the multinationals and the domestic players and has lead to opening of number of retail outlets in India.The introduction of VAT and the growth of organized retail industry are also likely to push up growth in the textiles and apparel sector domestically too. While the garments business will pose its own set of challenges in terms of providing flexibility in operations and dealing with labor productivity issues, an increasing contribution to revenues from the garments business, which is less capital-intensive and margins-accretive, would augur well for earnings growth.

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GOKALDAS EXPORTS

Incorporated in 1979, based in Bangalore, it’s one of India's largest manufacturers and designer of garments for men, women and children and caters to the needs of several international fashion brands and retailers. Gokaldas Exports has been a major player in the readymade garment industry across the globe. In the present Indian fashion retailing, Gokaldas has grabbed a distinguished place for itself in the form of "The Wearhouse" catering to the specific fashion needs of the people. The Wearhouse has high profile outlets in Bangalore, Chennai, Hyderabad and Coimbatore. An ISO 9001:2000 Certified Company has a capacity to produce and export 2.5 million garments a month. The Group's products include coats, suits, jackets, parkas, windcheaters, ski wear; warmups, surf wear, swim wear; trousers, shorts; casual wear shirts, ladies blouses and dresses for customers in international market. It mainly operates in India but exports its products to countries like the United States of America, Canada, Mexico, United Kingdom, Germany, Austria, Spain, Italy, France, Netherlands, Middle East, South Africa, Japan, Denmark, Taiwan and Hong Kong. A few of the manufacturing units are 100% export units with capabilities of mass production. They have the license to import duty-free fabrics and accessories from all over the world for re-export. It has over 48,000 employees who work in around 48 fully equipped, modern, manufacturing factories.

ARVIND BRANDS

Arvind Mills Ltd. was incorporated in 1931 with share capital Rs.2525000 ($55000) in Ahmedabad by the Lalbhai group. The Company's operations are divided into the Textile Division, telecom division and garments division. We will be majorly concentrating on the garments division. Products manufactured are dhoties, sarees, mulls, dorias, crepes, shirtings, coatings, printed lawns & voiles cambrics, twills gabardine etc. Arvind Brands is part of the Lalbhai Group, which holds licenses for leading international brands such as Arrow, Lee, Wrangler, Gant and Tommy Hilfiger for retail and wholesale sales in the local market. Its mainstream brands are Excalibur and Flying Machine. In addition, it owns an array of casual sportswear and denim brands marketed in India, including Flying Machine, Newport and Ruf & Tuf jeans and Excalibur shirts along with licensed relationship with various international brands like Nautica, Jansport, Kipling, Hero by Wrangler, Lee Riders and Tommy Hilfiger, and joint ventures with VF Corporation and Diesel. but the company is facing severe competition from major brands like Louis Philippe, Park Avenue and small brands like Trigger and Blackberrys. It produces about 110 million meters of denim every year and the garment section is doing extremely well because of the customer loyalty it enjoys. The demand for jeans, in particular, is expected to rise, as manufacturing companies in the US have shut operations.

KOUTONS

The winner of “ best retailer leadership award 2008” organized by retail congress, Mumbai, Koutons Retail India Limited engages in the design, manufacture, and retail of men’s wear and integrated apparel in India. It currently sells its apparel using the “Koutons” and “Charlie Outlaw” brands. Mr. Kohli along with his brother in law Mr. Sawheny partnered to set up Charlie's Creation. In 1997 the Company diversified its business by introducing non-denim trousers in the existing product range of denim apparel. The company has inaugurated its 89th family Store in Hyderabad, which it claims to be its largest store in the country. Koutons India has an annual finishing and manufacturing capacity of 22.92 million pieces and 12.36 million pieces of apparel, respectively. The capacity utilization for

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the same was 41.21% and 21.99% respectively at the end of FY2007.Koutons has 18 manufacturing/finishing units and 14 warehouses spread across various locations in and around Gurgaon. The company's strategy is to have small, but more stores. This helps to save costs and at the same increase reach of the company. The company has a phenomenal growth record.

ZODIAC

Zodiac Clothing Company Ltd manufactures, exports and imports garments, textiles accessories etc. Zodiac has been in the apparel business for a period of 50 years by now and is known for its quality shirts. Zodiac, is today, the largest selling shirts & tie brand at Shopper's Stop according to Brand Equity (The Economic Times) The Company started business in 1954 and export of readymade garments to Europe started in early '60s, which included mainly ties and shirts. For many decades, Zodiac has been synonymous with ties. The business of ties is a high fashion business and Zodiac has taken this to new highs in India and across the globe. In fact, one can say that in India Zodiac is generically associated with ties. Following Zodiac's huge success with ties, the company entered the arena of men's accessories with Cuff links, Belts, Wallets and Handkerchiefs. In 1973, Zodiac had a stand-alone exclusive shirt shop in Hotel Taj in Mumbai. The company then entered the domestic shirt segment in late '80s.It employs around 3500 people in 7 manufacturing units in 16 offices located in UK, US, Germany, UAE etc.Each manufacturing unit is spread over 35000 sq.ft and has modern equipment to spread 60 yards of cloth at a time. All the manufacturing units are same in design and layout. Quality is maintained throughout the 40 stages of assembly line. All the units have their own power generating units in order to be efficient. It has its own 80 exclusive outlets and around 2000 multibranded outlets. Its continuously showing profit and has a consistently growing export business.

HOUSE OF PEARL

House of Pearl Fashions Limited is a multinational ready to wear apparel manufacturing company. The company also provides supply chain solutions for the fashion industry globally along with warehousing & distribution networks in the UK & US. It operates in 11 strategic locations in six continents. It has two brands Kool hearts, DCC in the United States of America. The brand Kool hearts focuses on the young fashion, where as the focus of DCC is more towards the Missy segment It basically deals with 3 streams which are manufacturing to Retailers, souring solutions for retailers, Marketing, Distribution & Branding for Retailers. It takes care of the whole process from design & development, manufacturing or sourcing till offering a range of pre retailing services, warehousing to delivering at the door step on a call off basis. It manufactures a broad range of products comprising of knits, woven, sweaters and bottoms in basic as well as complex designs. It has a good manufacturing capacity; the present in-house manufacturing capacity of the company is twenty million pieces. Per annum spread over more than 725,000 sq feet of built up area with efficiently designed layouts to ensure smooth flow of materials. The company is planning to double the capacity by expanding the operations in Chennai, Bangladesh & Indonesia. It intends to have a capacity of 30million pieces by the end of 2009. The company adopts integrated marketing techniques and has merchandising teams in Canada, Europe, HK, UK, and US, closely interacting with existing and potential customers at their doorstep. The Company shares were listed on the stock exchanges first time in Feb, 07. It recently went for a joint venture with LERROS, a premium apparel brand from Germany.

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HARIA EXPORTERS

Haria Exports Ltd. is a leading garment exporter in the country for the last twenty four years. It is a Star Trading Company and has won the golden status certificate in the year 1999. This company occupies a unique place in the industry of the by its contribution to Industrial output, employment generation and Foreign exchange earnings. Even though the textile industry has the distinctive advantage in respect of raw material and skilled labor, the industry is suffering from technology obsolescence which in turn affects the quality, productivity and cost effectiveness. The high capital cost is impeding the process of Hi-Tech up gradation. Therefore, the Government of India, Ministry of Textile has launched Technology Up gradation Fund Scheme for Textiles & Jute Industries of Rs.25000.00 crores at a concessional rate of interest of appx.5%. In order to compete with the outside world, the company is paying attention to the application of technology, closely following up the fashion trends and improved product quality. In order to be more cost efficient the company has acquired latest machinery which ascertained exact material consumption depending upon the style and pattern. The Government policies, interest rates, export incentives etc may also affect the overall performance of the company, but even then the company is optimistic about its revenue and growth.

EVINIX

The company started in 1996 with the manufacture of headgears, baseball caps and high altitude jackets, using cotton textile and leather, mainly for exports. The company was incorporated on 1st May 1996 as Evinix Fashion Accessories Private Limited under the Companies Act, 1956. Mr. Sanjay Taneja, brother of Mr. Raujeev Taneja (the original promoter of the company) joined the Company as a Promoter replacing Mrs.Anuradha Taneja, who disassociated herself from the company. The name of the company was changed to Evinix Accessories Private Limited from Evinix Xsesryz and a fresh Certificate of Incorporation dated 20th March 2003 was taken. In March 2005, M/s Ambros Exports Private Limited took equity stake in the company.The apparel category constitutes men and women’s shirts, trousers, skirts and tops, kidswear and nightwear. Organic cotton wear for expecting mothers and infants is an additional strength. They use Organic cotton and its products through its brand name “Othentix”- Authentic Sustainable Textiles, lends a unique personality to each garment manufactured and supplied by Evinix. The company came out with a principle of Rapid Retail suggesting that every merchandise has a limited shelf life at CUT stores; CUT is an acronym for Comfortable, Urban and Trendy. Evinix is setting up CUT stores (averaging 4000-5000 sq feet) in fast urbanizing young Indian towns. It recently launched the CUT youth style store in Rajkot. The Rapid Retail business concept embraces the e.t.o.a.d concept i.e. the exact time of awaited departure when the product will move out to the next best price bracket.

PEARL GLOBAL

Pearl Global Limited was incorporated on 23rd October, 1979 under the name Pearl Agencies Private Limited. The Company became a Deemed Public Company with effect from 1st July, 1991 The name of the Company was change to PEARL GLOBAL LIMITED (PGL) on 2nd September, 1993 in terms of Section 21 of the Companies Act, 1956 as per fresh Certificate of Incorporation issued by the Registrar of Companies, Delhi & Haryana. PGL manufactures, sells, and exports ready to wear apparel in India. The company primarily produces garments in woven and knitted fabrics. Its

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products include casual wear dresses, ladies’ blouses, and bottoms. The company is based in Gurgaon, India. PGL is a subsidiary of House of Pearl Fashions Limited.

BANG OVERSEAS LTD

Bang Overseas limited’s principal activity is to manufacture and market textiles and apparels. The Group's textile includes readymade garments, under garments and hosiery.It markets with a brand name of Thomas Scott. The Group operates only in India. It was incorporated in the year 1992 and is presently providing fashion fabrics and meeting ready to wear requirements of the customers in apparel, textile and Retail segment. The company started the business from trading in textile and since 1998, they are conceptualizing and designing fashion fabrics and outsourcing the manufacturing process of the same from countries like Turkey, Portugal, Mauritius and other European Countries. In the same year, they launched our seasonal fabric collections in textile under the name "Bodywaves", marketed through their own distribution channel to different brands and retailers. They have ventured into ready-to-wear mens' segment in 2000 by outsourcing manufacturing process and in turn selling to various international brands. They launched ready-to-wear mens' garments under our brand name "Thomas Scott" in 2002. They started their own first apparels manufacturing unit in Bangalore in the year 2005 in the name of Reunion Clothing Company with an installed capacity of 350,000 pieces per annum and in the year 2006 then they started the second manufacturing unit in the name of Formal Clothing Company with an installed capacity of 360,000 pieces per annum. At present they have installed capacity of 720,000 and 540,000 pieces per annum at their Reunion Clothing Company and Formal Clothing Company. Their products are presently retailed through 157 point of sales comprises of our own Retail outlets, Large format stores (LFS) like Shoppers' Stop, Pyramid, Globus, the LOOT, SAGA and Multi Brand Outlets (MBO) spread all over India. They cater to the demand of various other apparel manufacturer and brands also. They have centralized warehousing and logistics centre at Kalher Village near Bhiwandi to facilitate our supply chain management as well.

BCG MATRIX

BCG Matrix is also called the Boston Matrix because it was created by Bruce Hendeson for the company Boston Consulting Group in 1970. The BCG matrix method is based on the product life cycle theory that can be used to determine what priorities should be given in the product portfolio of a business unit.

StarThe high growth and high market share brands that exist in Indian market and are the market leaders. This category consists of the companies like Zodiac, Du Pont etc. These companies are regularly investing in R&D and gaining market share as time passes. These stars try to become the cash cows of the future and want to remain in the market.

Cash CowsThe companies which have low business growth and high market share are the cash cows that generate milk continuously with the small investment to be as the mature company in the market.

Question marks (also known as Problem Childs)

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The companies that have high growth rate and lower market share are the question mark as they could be new ventures started or they are companies that do not have liquidity enough to increase their share in the market. But these companies have potential to be the star in the market due to good growth rate and thus they could invest more into their business to expand as the star and then becoming the cash cows.

DogsThe dogs are more charitable pets that exist in the market and have the low market share and low growth rate so these companies are better to get out of the market or much cash is required to set them up. These companies have the cash traps which ties up the money in a business with the lower potential.

GOKALDAS

In the present Indian fashion retailing, Gokaldas has grabbed a distinguished place for itself in the form of "The Wearhouse" catering to the specific fashion needs of the people. It ainly operates in India but exports its products to countries like the United States of America, Canada, Mexico, United Kingdom, Germany, Austria, Spain, Italy, France, Netherlands, Middle East, South Africa, Japan, Denmark, Taiwan and Hong Kong. This means the company has a high growth rate since its inception.Therefore I put it in star.

PORTERS FIVE FORCE MODEL

I. RISK OF NEW ENTRY BY POTENTIAL COMPETITOR

1. Brand LoyaltyThe existing players have been in the industry for a long period of time and have established a good reputation with their customers in domestic as well as foreign market. This has resulted in the high brand loyalty by customers. But this will not act as a potential barrier for other companies because most of the Indian textile companies operate in B-To-B segment and all the players keep competing among themselves for new consignments from the clients. 2. Absolute cost AdvantageAbundant availability of raw material is one of the key advantages of the Indian textile industry; this also gives a major opportunity to Indian textile industry and creates a barrier for foreign players to compete with Indian companies in cost advantage.

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India is more cost competitive vis-à-vis countries like Brazil, China and South Korea in manufacture of textiles

Cost advantage arises mainly from the large pool of low cost but skilled manpower available in India

In case of textured yarn and fabric, India is less competitive, which is a result of the higher tax burden (excise duty) on manmade textiles in the country

India’s position is strong vis-à-vis other countries in most raw materials

Largest producer of jute

Second largest producer of silk

Third largest producer of cotton, accounting for nearly 16% of global production

Third largest producer of cellulosic fiber/yarn

Fifth largest producer of synthetic fibers/yarn

Eleventh largest producer of wool

Cotton - Predominant fabric used in the industry

With 4.13 million metric tons of production, country accounts for almost 16% of global production of cotton

India also leads the world in cultivated area under cotton (roughly 8.82 million hectares in 2004-05)

Jute - Occupies an important place in the Indian economy

Has a strong contribution to direct employment as well livelihood in the tertiary sector and allied activities

India leads globally in jute with its annual production of 7.5 million bales in 2004-05

Silk - Highly remunerative cash crop, with minimum investment and sustained attractive returns

India accounts for 18% of world raw silk production (15.74 thousand tones production in 2003-04)

India has the unique distinction of being endowed with all 4 varieties of silk - Mulberry, Eri, Tasar, Muga

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Wool - With its annual production of 50.7 thousand tons of raw wool fiber, India accounts of roughly 2% of global production

3. Economies of Scale: The textile industry across the value chain is largely decentralized

Units mostly independent and small scale in nature, rather than composite units undertaking all activities together

Large scope for entry of organised integrated textile manufacturers

4. Customer switching cost:As earlier mentioned that the existing players are operating in this industry for a long period

and also have established long term relationship with their customers. Over a period of time these companies have customised their products as per the needs of the customers therefore customers also prefer to still to the existing suppliers rather than moving to others as there is a high switching cost involved here and if the customers switch to new suppliers than again he need to train the suppliers as per their requirements

5. Government Regulations: Historically the textile industry in India has been reserved for the small scale sector,

which has been exempted from taxes, thus discouraging investments in increasing scale The government, through its various Budget announcements has sought to rationalize

taxes

Budget 2002-03: Textiles brought under the ambit of Cenvat (credit for duties paid on inputs or capital goods) and introduced on all yarns

Budget 2003-04: Cenvat extended across the entire textile chain to include fabrics, made-ups and apparel; excise duty exemptions on many sectors and processes, specially SSI removed; excise duty rates reduced

Budget 2004-05: Cenvat made optional - every manufacturer allowed to choose between a complete exemption from payment of excise duty or adopt the Cenvat route; excise duties lowered to 4% on cotton textiles and 8% on non cotton textiles (except man made fibers, polyester filament yarn, nylon filament yarn) for those claiming Cenvat credit

Always government regulations aimed at improving competitiveness of industry to face a post quota regime

Several government initiatives targeted to attract investments:

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Technology up gradation fund scheme: Scheme launched in 1999 to provide firms access low interest loans for technology up

gradation and setting up new units with state-of-art technology

Scheme has disbursed INR 91.61 bn till 31st December 2005

Policy related to foreign investment: Up to 100% foreign direct investment allowed in textile and apparel manufacturing industry,

with approval of the Foreign Investment Promotion Board (FIPB)

USD 1.02 bn of FDI in the sector approved between 1991 and 2004

Companies free to set up fully-owned sourcing (liaison) offices, as well as marketing operations

Upgrading Infrastructure: “Scheme for Integrated Textile Parks” (SITP), based on public-private partnership model to

build world class infrastructure facilities

Product specific “Cluster Approach” targeting development of 100 additional clusters in textiles

Technology Mission on Cotton (TMC), focusing on cotton R&D, dissemination of technology to farmers, improvement of market infrastructure and modernization of ginning and pressing sector.

II. THE EXTENT OF RIVALRY AMONG ESTABLISHED FIRMS

1. Industry competitive structure:Since this industry is highly fragmented there is always high probability during the boom phase that many new players could enter this industry which would lead to a price war and ultimately end up with the bankruptcy of some players or consolidation of industry. So, this is a treat to the existing players.

But also the existing players work a lot on cost efficiencies therefore the treat of new entrant is negated by the cost efficiencies of existing players

2. Industry Demand:In the current scenario textile exports have declined drastically and even in domestic demand there is a little slowdown. Due to which textile companies are working on reducing cost by ways of reducing

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the work force, decrease in operation cost etc. Also this will evoke more rivalry among the existing players as they all will like to maintain their market share in spite of the slump in industry

3. Exit Barrier:This is not just a labour intensive industry but even the cost involved in plant setup is very high along with that with the invent of many new technologies many companies have adapted to modern techniques to remain competitive in industry as well as to produce better products for their customers in lesser time and with lesser cost.

Therefore because of high involvement and emotional attachment with the business as it has been a traditional business for generations for many companies they still prefer to stick and continue with the business. But in the current scenario many textile mills have closed down because of deep cut in demand and high operational cost due to severe global crisis.

III. THE BARGAINING POWER OF BUYERS

Indian textile companies are facing a tough competition from Chinese, Brazilian and South Korean companies as they are able to produce at a lower cost compared to Indian companies

This industry is fragmented and there are large number of players in the industry, therefore buyer get the option of choosing from many suppliers

Indian textile industry is no more just a mass producer of textile rather it has moved into niece segment and has developed capability to produce finest quality of fabric which provides them distinctive competencies against other countries as well as small players who could cater to mass consumers only.

Therefore overall buying power of buyer will defer from company to company. Companies like Arvind mill, Raymond, aditya birla group have achieved certain degree of distinctive competencies therefore with them buying power of buyer is negated to large extent against their competencies.

But many small companies who are mass producer of textile face a strong buying power of buyer.

IV. THE BARGAINING POWER OF SUPPLIER

Here again bargaining power of supplier dictated by the segment that they are targeting to, for a niece players and companies who have achieved operational excellence can dictate terms to buyers but for small players who just produce for mass consumption do not have much say in the business deal and the prices are mostly dictated by the buyer.

V. THE THREAT OF SUBSTITUTE PRODUCT

Textile itself is a very broader term and is a solution to a very basic need of any human being therefore there is as such no substitute to this but within the textile industry there are many substitutes

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to different category of textiles. In India there are various types of textile produced from cotton, silk, synthetic etc.

There is always a risk of substitution of one type with the other type also there is constant research carried out to develop new types of textiles but combining different textiles in different proportion. But in broader perspective there is no substitute to textile.

SEGMENT ANALYSIS

India’s textile industry comprises mostly small-scale, non-integrated spinning, weaving, finishing, and apparel-making enterprises. The figure below depicts the overall value chain and the number and type of units within the industry.

Textile Sector – High Level Value Chain

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Spinning millsWith an installed capacity of 40 million spindles, India accounts for about 22 per cent of the world’s spindle capacity. In 2005, India’s spinning sector consisted of about 1,161 small-scale independent firms and 1,566 larger scale independent units. Independent spinning mills account for about 75 per cent of capacity and 92 per cent of production.

Knit/Weaving/Knitting UnitsIndia’s weaving and knitting sector is highly fragmented, small-scale, and labour-intensive. The woven fabric production industry can be divided into three sectors: powerloom, handloom and mill sector. In 2005 it consisted of about 3.9 million handlooms, 1.8 million power looms, and 0.1 million looms in the organised sector. The decentralised power loom sector accounts for 95 per cent of the total cloth production. The knitted fabric forms 18 per cent of the total fabric production.

Processing UnitsThe processing industry is largely decentralised and marked by hand processing units and independent processing units. Composite mill sectors are very few falling into the organized category. Overall, about 2,300 processors are operating in India, including about 2,100 independent units and 200 units that are integrated with spinning, weaving or knitting units.Garment Manufacturing UnitsSmall-scale fabricators dominate garment manufacturing. Most garment manufacturing units fare reasonably well on the technology count. The bulk of apparel is produced by about 77,000 small-scale units classified as domestic manufacturers, manufacturer exporters, and fabricators (subcontractors). The fragmented structure of the industry provides the advantage of a large pool of skilled workers in different areas of textile manufacturing, and also gives scope for entry of organized integrated textile manufacturers. Small scale units in different sectors can also be leveraged as a supply base for sourcing materials at low cost. Apart from these advantages, the industry has also been experiencing consistent growth across different sectors, making it one of the key potential sectors in India.

Production and Exports

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India has been experiencing strong performance in the textile industry, across differentsegments of the value chain, from raw materials to garments. Domestic production has beengrowing, as well as exports.

Textile Exports

The Indian textile industry contributes substantially to India’s export earnings. The exportbasket consists of wide range of items containing cotton yarn and fabrics, man-made yarnand fabrics, wool and silk fabrics, made-ups and variety of garments. India’s textile products,including handlooms and handicrafts, are exported to more than hundred countries.However, USA, EU Member States, Canada, U.A.E., Japan, Saudi Arabia, Republic ofKorea, Bangladesh, Turkey, etc are the major importers of our textile goods.

During the year 2005-06, the share of textiles exports including handicrafts, jute, and coir inIndia’s total exports was 16.63%. India’s textiles exports have registered strong growth in thepost quota period. Textiles exports grew from US$ 14.03 billion in 2004-05 to US$ 17.08billion in 2005-06, recording a growth of 21.8 per cent. Therefore, the Government has fixeda higher target of US$ 19.73 billion for the year 2006-07.

SWOT ANALYSIS OF TEXTILE INDUSTRY

STRENGTHS

Removal of quota restrictions to give a major boost to the exports. India is one of the largest exporters of Yarn in international market and contributes around

25% share of the global trade in Cotton Yarn. Low per capita consumption of textiles in India as the world consumption is 6.8, India only

consume 2.8 of it. That’s why there is large scope of manufacturing and exports. Availability of the cheap labour in India would help the development of the textiles at the

lower cost.

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Cost competition is not much in India as majority of Indian population is not dependent on the big brands like Armani, United Colours of Beneton etc, so India itself does not hold much competition with these brands.

The large cotton production in India would lead to the development of the textile mills in the better way, as India does not have to import the raw material from outside.

There are well established production bases for made ups export as well as for domestic purpose.

WEAKNESS

The most serious problem of the industry is the lack of adequateprocessing facilities; there is over-dependence on hand processors and traditional items.

The Indian textile industry is fragmented. Most of the SMEs are tiny and cottage type units without sufficient capital back-up.

The government policies in India for the textile industries are traditional as they are not upgraded like the up gradation of the policies for the IT industries.

The quality of wider-width fabrics for meeting the export demand is lacking in many respects, which is acting as a disadvantage to the growth of the industry.

The technology used in the most of the textile mills is old enough that they can’t be modified, but there have to be new machineries imported to give the edge in technological advancements in this sector.

OPPORTUNITIES

As per available information, the market for processed cotton fabric will increase in the European and other markets and, therefore, the powerloom industry may benefit and expand substantially. Further the growth in the export segment will be mainly from cotton made-ups and garments along with processed fabrics.

Grey fabric export is continuing to grow and will show increasing trends. Value added products will have greater demand and, therefore, processing will play an

important role. India with traditional designs and craftsmanship can command a greater market share for

niche products in made-ups and garments. Indian companies need to focus on the product development and this could easily be possible

as there is the greater scope in the Indian Market. As the new generation is keen towards the western culture the training for specially textiles

could be provided to them and they could be encouraged to develop the efficient sector of India.

Increased use of computer aided designing to develop the designing capabilities of the textile. Using new technologies and softwares ease the use of virtual design on the computer and then choosing from various alternatives.

THREATS

Increased competition in the domestic market yield to the development of the more SMEs which invest more to survive in the market.

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The working area of most of the industries in the textile industries is not hygienic enough to give the workers more comfortable area to work in. so this condition has to be improved.

Need to revamp consumer consciousness Chinese goods are cheap as well as the machinery provided by them is also cheap. So the

threat for the export and designing is the Chinese Aggression over the International market. Continuously quality improvement is needed to make sure that people would rely on Indian

goods not on the foreign goods. Traditional items like terry towels are manufactured in EOUs all over the country with

superior quality. This has been eroding the traditional markets for powerloom and handloom products forcing them to go for product diversification.

Comparing Technological Innovation of Textile Industries in India and China

I. Various Characteristics of Chinese and Indian Companies

Chinese companies are specializing in reducing the cost to a very competitivelevel, not only by means of cheap labor, but also through mass production and highproductivity. In fact, the average wage of Chinese workers is higher than that ofIndian workers. While a Chinese textile worker earns normally $100 per month, anIndian worker is usually only paid $70 per month. However, the Chinese companiescut the costs even lower than their Indian and other competitors through mass

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production and returns-to-scale of the economy.

The biggest factories in India looklike lightweight players in China. For example, the largest spinning company in India,Vardhman Group, has a capacity of 500,000 spindles. In contrast, the largest Chinesespinning company, Weiqiao Textile, is running 3,000,000 spindles. The largestweaving company in India, Arvind Mills produces 110 million meters of denim and30 million meters of fabric per year, while Weiqiao Textile has a capacity of 157million meters of denim and 844 million meters of fabric in total.

On average, the size of Chinese textile companies is five times larger than that of the Indian ones. Another important aspect of cost efficiency is high productivity per worker.Compared with their Indian counterparts, the Chinese workers are much moredisciplined and work more intensively. The managers are strict in controlling theworking time and efficiency of workers. Even military-style management isintroduced to some factories. Besides, China has invested heavily in modernequipment to boost productivity.

According to the International Textile Manufacturers Federation, between 2000 and 2010 over 55% of spinning machines and over 68% of weaving machines delivered worldwide went to China. 3 Consequently the productivity of the Chinese worker is significantly higher, adding US$5000 in value to what he produces compared with the US$2600 for his Indian equivalent.

Although Indian companies are not able to beat the Chinese in terms of cost andproductivity, their strength is in small batch orders and customization. Because of thelarge capacity of Chinese companies, small orders are not attractive to them, since therearrangement of working positions in a big factory may cause bigger costs, or theunused capacity may cause larger loss of opportunity cost.

On the other hand, Indian companies are more flexible and can accept this kind of order. Besides, the English speaking Indians have the advantage of communication with Western customers, andthat is important for customized products. Last but not least, most of the Indian textileenterprises have a longer history and better management than the Chinese companies.

Most of the Chinese enterprises have no more than 30 years of history and are stillstriving to standardize their manufacturing procedure and quality control because theirexpansion has been so fast. In contrast, most Indian companies are quite experiencedin maintaining high quality and have an established control system. This also gives anadvantage to Indian companies in customized production, as quality control is moreimportant in the high-end market.

Customized products bring more profit. For example, China’s export of textileproducts to the US in 2010 was $ 38.47 billion in value and 26.00 billion squaremeters in volume. The average value of the Chinese exports is US$1.48 per squaremeter. India’s textile exports to the US in 2010 were US$5.38 billion in value and3.26 million square meters in volume.

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The average value of the Indian exports is US$1.65 per square meter,5 about 12% higher than the Chinese products. The Indian companies are satisfied with their high-margin manufacturing. Indian garment producers make it clear: for items under US$30, leave it to China. Above US$150,leave it to European companies.

II. Reasons for different models

Why is there such a difference in business models? Actually in both China andIndia the cost-conscious and the profit-conscious models exist. Although focusing onreducing cost, the Chinese companies do not forget to pursue more value-addedproducts and profit. Indian companies also introduce new machinery and enhancemanagement to improve cost-efficiency.

However, historic, cultural, and social contexts in each country inform the various emphases and strategies that enterprises use in their decisions. Such decisions cannot be simply explained through static comparative advantages. As we see, labor costs in India are as cheap as in China, andChina has as many engineers as India. Only by examining the development pathcomprehensively can we understand the reasons behind the divergence in businesspatterns.

As mentioned before, today’s major Chinese textile companies are prettyyoung. While the old state-owned textile enterprises lost their competence and wentbankrupt, competitive private textile mills and garment factories were set up onlyafter the economic reform in 1978. Since the focus of early economic reform in Chinawas in rural areas, some of the peasants and small hand-workers became the firstbeneficiaries of reform and established their enterprises.

Today 87.5% of the textile and apparel enterprises are based in rural areas. Some of the most famous apparel brands such as “Younger,” “Luomen,” “Shanshan,” and “Sanhong” were all foundedand managed by former peasants. Consequently these companies lag in human capital and technology acquisition.

The quality of such “production”was of course pathetic and there was no design, for they simply copied others’products. However, in the early 1980s China was still largely locked into a plannedeconomy. The shortage of consumer products was so serious that the consideration of quality and brand was merely secondary. The basic products were still salable on the world market, and China’s textile giants today obtained their first capital in this manner. Reducing costs, increasing productivity and managing mass production continue to be the major themes of Chinese textile industry.

In comparison, many Indian textile enterprises have a long and stable developmenthistory, which can be traced back to the colonial era. Arvind Mills was founded in1931; Premier Mills was set up in 1949; The Raymond Group was incorporated in1925; Lakshmi Mills was established in 1910. Even the “younger brother” Vardhman,established in 1962, is almost two decades older than its Chinese counterparts.Through a long period of market operation, Indian companies have relatively

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established market networks and regular customer groups. Not concerned withsurvival, they are aiming at higher profit.

Besides, the founders and managers of Indian enterprises are eitherexperienced experts in the textile industry or industrialists who are able to understandsophisticated technology. The Indian entrepreneurs belong almost exclusively to theupper classes in the social (caste) system. They have the knowledge, the capital, andthe social relationships to build up their enterprises. Their good educationalbackground, systematic management, and technological and financial capabilityenable them to consider more value added and profit, whereas the Chinese villageentrepreneurs struggled for survival under circumstances of little technology and littlecapital for a long period.

Apart from management, the external conditions in India are not friendly tomass production. The road traffic, train transportation, and harbor facilities in Indiaare of poor quality. Restrictive labor laws prevent companies from recruiting largenumbers of workers. When the enterprises hire more than 100 workers, they have todeal with worker unions. Under the unions’ pressure, only 2% of Indian textilefactories have three shifts, whereas about 20% of Chinese counterparts are operating24 hours a day.

In short, the choices between two paths of technological development –promoting productivity or customization – have been decided by the historical,cultural, economic, and social conditions in India and China. Under its particularsocio-political conditions, it was reasonable for Chinese enterprises to prioritize amass production model, which led to the Chinese textile industry’s amazing boom. Bycontrast, Indian companies based their strategies on market experience and maturemanagement, which do not trigger explosive growth, but are stable and effective.

III. Technology Improvement and Adaptation

The aforementioned characteristics describe the general trends of technologymanagement in the textile and apparel companies in India and China so far. Inspecific development phases and concrete enterprises, more varieties of developingapproaches and strategies can be observed.

There are continuous experiments for technological improvement; however, development is always a try-and-fail process. The final success of technological transformation usually means the adaptation of technology into the local social and market circumstances. Thus, there are also various development tracks in each of these two countries lately with the arrival of new technologies.

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1. Digitalization of the Enterprises (ERP and CRM)

In the age of information technology, ERP (Enterprise Resource Planning) andCRM (Customer Relations Management) software systems have been introduced tothe textile and apparel industries in both countries. Some of the Indian textileentrepreneurs, owing to their higher education and better understanding of technology,even set up their own ERP/CRM companies several years ago as a strategy ofbusiness diversification.

However, since the size of the Indian textile and apparelcompanies is usually quite small, there is not sufficient market demand for ERPsoftware, which is designed for managing large-scale production. Many of thecompanies use only CRM software.

In comparison, the situation in China is much more complicated and needsmulti-level technological adaptation. First, international ERP software companies likeSAP and Oracle are too expensive for low-profit textile and apparel companies. Thesoftware produced by these international companies is not suitable to the uniquebusiness models and corporate backgrounds of local Chinese enterprises.

Second, for many companies, there is no need for an overall ERP/CRM software. These companies are primarily interested in managing the crowded manufacturing sector and raising production efficiency. Therefore the ERP software often is introduced together with (semi-)automated machinery. This actually avoids the problem of incompatibility of hardware and software too.

Third, the application of the ERP software means restructuring the company organization as well. For a few entrepreneurs, the major advantage of ERP software is not that it promotes productivity, but that it provides a chance to standardize the whole manufacturing process and modernize the enterprise structure. Standardization becomes the target of the managers because it significantly reduces the risk ofaccidents and lays the groundwork for further development.

As more and more Chinese textile and apparel companies utilize ERP software, one consequence is that Chinese companies are becoming more flexible so that they can cut into Indian companies’ market territory. For example, previously an order of 5,000 pieces of knitwear was unattractive to Chinese companies, because the whole line of 40 workers would be trained for an entire day, but after maybe 3 days the order is complete and the workers need to be trained again. With the installation of ERP and automation machinery it is possible to allocate only 10 workers in the production linefor a similar order.

The other 30 workers can then be given other orders. The hanging circulation system enabled by ERP programing can send the required items to the designated positions so that the whole production line can be divided into several parts to fit the order. In addition, ERP systems enhance the capability of customization. Integrated with computer-aided design and manufacturing, circulation systems can flexibly move cloth between various procedures to make customized products.

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2. R&D activities

Today Chinese apparel companies aspire to enter the high-end market, but oneof the key obstacles is the lack of high-quality textile fabrics. Although China is thenumber one apparel export country, it imports large amounts of high-quality textilefabrics every year. Compared with the international leading brands, the Chinese-madefabrics are still not satisfactory in respect of color, texture, quality etc.7 China alsoexports immense amount of textile fabrics, but these exports are mainly littleprocessedor low-costs products. U.S. and European companies even use these verycheap primary fabrics (e.g. gray fabrics) for further processing and sell them back toChina at a much higher price.

The main reason for this awkward situation is that Chinese companies used tocompete in the low-end market for long time. Nonetheless, during recent years, thereare more and more fabric companies that want to move up the value chain and arecapable of manufacturing advanced textile materials. Yet, these new products are notyet widely known to industry or accepted by the designers in apparel companies.

A few large apparel companies are also planning to build their own fabrics branch inorder to can catch the initiative of the market directly. For instance, one of the largestgarment groups Youngor has invested over US$ 100 million to develop high-endfabrics in cooperation with Japanese enterprises. Chinese apparel and garmentcompanies are apparently eager to play a bigger role in the high-end market with itsresearch on high-quality fabrics.

In comparison, many Indian textile enterprises are already able to manufacturehigh-quality fabrics. Their R&D interest lies rather in the prediction of market trendsand control of quality; and because their business model depends on customizationand high quality, they want to keep their edge over the Chinese competitors.

What The Chinese Are Doing Right ?

Chinese textile industry is an interesting case study of how policy intervention, firm levelchanges, and strategic technology choices helped it to become an important player in the worldmarket. It is important to point out that most of these changes have taken place over years andthat the industry has been successively climbing up the value added ladder. While it is difficult tocreate a single visual of these efforts, one can identify several factors that have contributedpositively to the growth of the Chinese textile sector.

Together, their current global market share is close to 26% including both primary textiles and apparels.The Chinese industry has followed a two pronged strategy in building market share, i.e.,developing large volume/low cost units and low volume/high value adding units. This dual

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strategy has drawn Chinese expatriates from Hong Kong, Taiwan, Europe and the US who haveplayed the role of “market makers” as well as producers with factories in China. It must,however, be mentioned that the quality of the domestic market is far inferior to that of exportmarkets and is thereby open to competition, just like India, after year 2004

. In fact, the extent of competition in the domestic market is not as intense as one finds in India. Chinese policy has encouraged export oriented units in a variety of ways that range from the availability of credit for buying new equipment to canalizing raw materials and finished goods through centralized channels. This has helped in reducing uncertainty in availability of good quality material forexports.

In addition, it has setup a single apex body for each of the sub-sectors in order to facilitate export formalities and to better coordinate across the sub-sectors. With implementation of the “responsibility system,” pressures on most state enterprises has increased to perform, especially, since the wage bill has been linked to output levels. This has driven many firms to export as that was the only way to fund purchase of new technology through which they could increase their output and consequently their wages bills.

Another pillar in thismodernization process has been technological upgradation. Since 1985, cotton & silk firms have imported equipment worth US$ 1bn each year (Wang, 1998). However by the year 2000 only 20-25 % of the total technology stock would have been updated. cottonAnother example of such investments has been the State run Beijing No. 3 Cotton Mill which has invested close to US$1bn in new equipment in the last ten years.

Another feature of this growth has been a spateof joint ventures that each of these firms have entered with firms outside China - most of thesefirms produce to specifications provided by foreign partners.There has been another facet of development in the Chinese textile industry which has provideda significant long term benefit to individual firms.

China does not have a long or strong history of managerial initiatives. However, its secondary and technical education programs are very stringent. Chinese firms have recognized this lacunae and have started to invest in in-companytraining of its workforce in modern technology and managerial skills.

On the average, Chinese textile firms give 70 hours of training each year to an experienced worker as opposed to 32 hours in Canada and 10 hours in India (Chandra et al., 1998). This survey also found that about 16% ofIndian firms did not provide any training to a new employee as compared to 1.8% in China. Toput these efforts in perspective, the training that a long term auto worker gets as a new hire atSaturn’s plant in the USA is between 350 to 700 hours (Rubinstein et al., 1993). Chinese workunitson shop floor are increasingly making productivity related decisions.

. The Chinese government has been anxious to enter new application areas in textiles and has set up a commercial R&D organization, the Chinese Textile Science and Technology Development Corporation, to help develop new capabilities especially in industrial textiles.

Finally, Hong Kong has been playing a key role in China’s growth. It provides high quality design & apparel manufacturing and marketing services, efficient financial and shipping facilities that have

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considerably reduced delivery times, and plants that are capable of quick ramp up to meets customers’ short delivery requirements. This network of low cost operations in mainland China, fashion design, operational skills for quick turn-around & efficient port handling in Hong Kong, and Chinese market makers in Europe & USA have allowed the Chinese textile industry to make significant strides.

China’s position in the textile industry is extremely strong and undoubtedly leads theglobal production. A study presented by the end of 2009 claims that, even under thenegative effects of the global financial crisis, China is still the most competitive location inthe world for the textile industry

During the financial crisis, while the overall decrease in Chinese exports amountedaround 15%, the textile industry felt only partially the downturn effects. Textile exportamounts decreased by a relatively low 7% in 2009 and it took very little time of to showsignificant signs of recovery. In the first 10 months of 2010, China exported more thanUS$ 62 billion dollars in textile, a rise of 29% comparatively to the same period in 2009. Inthis same period, exports of clothes also grew, totalling more than US$ 100, presenting anincrease of nearly 20% compared to 2009.

Chinese prevailing competitiveness in the textile industry is also supported by public investments and industry internal organization in China. There are cities, like Changshu City (Jiangsu province) and Dongguan City (Guangdong), which concentrate a high number of textile enterprises (2300 and 6500 textile companies respectively). Companies in these cities are co-ordinately moving to improve the industry competitiveness. It is an important movement, given China’s accession into WTO. In addition, these textile industrial centres help to attract new companies and investors due to the existing appropriated infrastructure and business momentum.

PRESENT SCENARIO

China’s textile exports reached 206.53 billion dollars in 2010, among which the exports of textile raw materials were 4.736 billion dollars, the textile fabrics were 72.3 billion dollars and the garments exports were 129.5 billion dollars. India was the second textile production and export nation, which was only next to China, the textile industry accounted for 14% of the total industrial output, the direct employment staff was 65.4 million and the indirect employment staff was about 100 million.

In 2010, India’s total exports of textiles got 50 billion dollars, which accounted for 30% of the total exports. India’s textiles were exported more than 120 countries and regions, which it was quite competitive in the international market. As the second textile production country, India would become the big winner that it was only next to China. It was reported by WTO that China and India

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were the biggest beneficiaries for canceling the quota system, while the competition of textile industry also increased between two countries.

Seen from the textile raw materials, the international market share was small between China and India. 2007~2008, India’s international market share was equal with China, and it indicated the export competitiveness of textile raw materials was quite in China and India. 2009~2010, India’s international market share also declined.

However, in the aspects of textile fabrics, China’s international market share of fabrics was higher than India, which it showed China’s export competitiveness of textile fabrics was stronger than India. Moreover, China’s international market share of garments also was higher than India, which it stated China’s export competitiveness of garments was stronger than India. 

As the leading textile production and export country, China’s international position was stable. Whether the textile raw material or fabrics and garments, China’s international market share was higher than India among 2006-2010. China’s export of textile raw materials had no advantages. China was a net importer of the textile raw materials, while India was the net exporter of the textile raw materials. 

Meanwhile, China’s international market share of garments was higher than India, and China’s garment competitiveness was stronger than India in the international market. China and India were the production and export nation for fabrics and garments, and they had obvious advantage in the garment industry, which mainly depended on labor factor. India was the net exporter of textile materials, which the international market share of garments was less than China, and it was argued that India’s textile industry focused on the raw material, while China tended to fabrics and garments. 

The trade competition of textiles would more and more intense between China and India in the international market. Although India’s international competitiveness of fabrics and garments was less than China, it was obvious for India’s transformation achievements of industrial structure, and China’s and India’s product structural differences would be reduced.. 

China's dominance of the global garments trade may be eroded as rising labour and raw material costs are making it tougher to compete with rival Asian producers, a textile industry executive said. "China is gradually losing its traditional competitiveness in production costs, while other Asian countries are speeding up development,'' Sun Ruizhe, vice president of the China National Textile & Apparel Council, said at a conference in Beijing on Tuesday.

China accounted for almost a third of world garment exports last year, according to Sun. A slowdown in shipments may help to reduce the country's trade surplus, which surged 52 % in the first 11 months of 2007 from a year earlier to $238 billion. Textiles and apparel accounted for 15 % of total exports. “China will only be a textile export juggernaut for a fixed period of time, perhaps 10 to 15 years,'' Robert Antoshak, president of Nashville-based cotton information provider Globecot Inc. said at the conference.

Other Asian nations, such as Bangladesh, Pakistan and India, will take some of China's business, while Vietnam and Cambodia may become apparel “tigers,'' Antoshak said in an interview.China's average wages

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have risen more than 50 % in the past five years, while the yuan currency has gained about 14 % against the dollar since the end of a peg in 2005.The government has also cut export tax rebates and tightened lending. “Production costs have increased in terms of raw material, labour, energy and environmental protection,'' Sun said. “Rising interest rates and capital shortages also affect the industry.''

China exported $156.6 billion worth of clothing and textile products in the first 11 months of last year, up 20 % from a year earlier, the top economic planning body, the National Development and Reform Commission, said on Dec. 21.China's growth in exports of apparel may slow after 2010, and its purchases of shoes and clothing from overseas may rise as domestic consumers become more affluent, Antoshaksaid.The expected rise in China's consumption may be offset by declines in developed countries, he added. China's cotton imports fell 37% to 2.14 million tons in the first 11 months of 2007 from a year ago, according to customs data.

FUTURE OUTLOOK

Expectations are high, prospects are bright, but capitalising on the new emergingopportunities will be a challenge for textile companies. Some prerequisites to be includedin the globally competing textile industry are: Imbibing global best practices Adopting rapidly changing technologies and efficient processes Innovation Networking and better supply chain management Ability to link up to global value chains.

The Indian textiles industry has established its supremacy in cotton based products,especially in the readymade garments and home furnishings segment. These two segmentswill be the key drivers of growth for Indian textiles. Readymade garment exports wereworth US$ 8 bn in FY06 and will cross US$ 16 bn by the end of 2010, assuming aconservative growth of 15% per annum.

The readymade garment segment will be the principal driver of growth even in thedomestic industry. The changing preferences of Indian consumers from buying cloth to‐‐readymade garments have prompted several companies to move up the value chain into‐‐the finished products segment

ConclusionThe development of textiles industries in China and India has shown different paths of technological innovation. Whether promoting productivity or enhancing customization, both approaches are viable strategies for local industries. A company’s choice largely depends on historical, cultural, social and other factors. Meanwhile the decisions made by the companies will influence the paths of further technology development in the industry and the society.

It also seems that both countries are trying to break their limits: China wants to enter the high-end market and India has to increase its production scale. As the technological transformation of the textile industries continues, the respective national characters of India and China are going to change

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with time too. In the aftermath of the Multi-Fiber Agreement, the global textile market is further integrating and the competition is growing fiercer. Facing new market challenges, Indian and Chinesetextile industries are again facing fundamental transformation.

To effectively tackle the situation India needs to invest in research and development to develop new products, reduce transaction costs, reduce per unit costs, and finally, improve its raw material base. India needs to move from the lower-end markets to middle level value-for-money markets and export high value-added products of international standard. Thus the industry should diversify in design to ensure quality output and technological advancement.

The weakest links in the entire chain are the powerlooms and the processing houses. The latter especially are very important because they are responsible for the highest value addition in the manufacturing line. A powerloom co-operative structure could be evolved for pooling of common services and functions such as quality testing, marketing, short-term financing, etc. Further, because of the geographical proximity enjoyed, a cluster approach can be adopted.

The government also needs to make policy changes like dereserving the small-scale sector so that it can achieve economies of scale and adopt a synergistic approach.Handlooms by their very nature can adopt a strategy of "niche” marketing. In this respect, export promotion, common credit and marketing facilities and more significantly publicity are important areas for co-operation. Here too, a co-operative structure would be useful though government agencies should be involved because of their outreach. Newer and more innovative forms of involvement are required where decentralisation should be a key element.

India has made little attempt to forge partnerships – in equity, technology and distribution in overseas markets. The newer nuances of global apparel trade demand joint control of brand positioning, distributing and quality assurance systems.

The Indian textile industry has recognised the need for a cradle-to-grave approach when tackling environmental issues i.e. eco prescription should be applied right from the stage of cultivation to spinning to weaving to chemical processing to packaging. Here especially there is great scope for private -public partnerships.

A great deal of work has been done by Indian trade and industry to comply with ecological and environmental regulations, and so Indian garments can adopt an appropriate label signifying a distinct quality.

Efficiency and output of handloom and powerloom sectors also needs to be increased. The clothing sector needs the support of high quality and cost-effective cloth processing facilities. Modernisation

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of mills is a must.Human resource is another area of focus. The workforce must be trained and oriented towards high productivity.

The business environment of the future will be intensely competitive. Countries will want their own interests to be safeguarded. As tariffs tumble, non-tariff barriers will be adopted. New consumer demands and expectations coupled with new techniques in the market will add a new dimension. E-commerce will unleash new possibilities. This will demand a new mindset to eliminate wastes, delays, and avoidable transaction costs. Effective entrepreneur-friendly institutional support will need to be extended by the Government, business and umbrella organisations.

References

History of Textile - http://www.textileasart.com/weaving.htm

History of clothing and textiles - http://en.wikipedia.org/wiki/History_of_textiles

Multi Fibre Arrangement - http://en.wikipedia.org/wiki/Bra_wars

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China's migrant workers hit by economic pinch as 20 million lose jobs -http://business.timesonline.co.uk/

http://www.thehindubusinessline.in/2003/12/26/stories/ 2003122600090900.htm

http://www.business-standard.com/india/news/indian-textile-industry- should-grab-chinas-market-share-sanjay-lalbhai/350870/

http://www.equitymaster.com/research-it/sector-info/textiles/Textiles- Sector-Analysis-Report.asp

SWOT ANALYSIS http://www.sava.in/blog/2011/11/indian-textile-industry-swot-analysis/

International Textile Manufacturer Federation, October 2011,http://www.cotlook.com/userfiles/file/Uzbek2011/06.pdf.