Case Study Report.pdf

Gladrags LtdThe Battle between Traditional and ModernPresentcd to Gladrags Exccutive OlficersPresented by:Matea BokorMatthew CorcoranYara HelouVlarissa Varga\r'f. \.

Table of ContentsI Introduction.........p.4A. Situational AnalvsisB. SWOT AnalysisC. Problem DiscussionII Alternative Courses of Action.. . . . . .. ..p.8A. Status QuoB. BankruptcyC. ModernizeD. Semi-traditional ancl Semi-modernIII Recommenclation..........p.12Appendix A..... .. ..p 13

Executive summaryThis study analyzes the company' "Gladrags" which is specialized in the manufacturing ofIndian traditional clothes. Since it was fbunded in 1965. its traditional values were an asseto thecompany at that time; however. starting in 2003. the companv's profits are going down. Becauseof its traditional approach. the company is not longer competitive in the market. this leading to aseries of-consequences such as disagreements in the management. instability among workers.verlical and rigid structure within the company. non-prolitable n-ranufacturing and the decrease inthe target within the market. LJpon a study that included a presentation of the backgroundinformation. a SWOT Analysis. thc n'rain problem was found in the incongruitv between itstraditional view and the competitive and modern market. IJaving a PEST Analysis and looking atBalance sheets and Profit and Loss Assessments. alternative coLrrses of actions are suggested:maintaining status quo. bankruptcl'. modernization and a semi-traditional/semi-modern approachin the business. The recommendation 1br this case is the semi-traditional/semi-modern model,being the most likel-v to improve the present situatior.r and tackle the younger demographic andbecoming lrorc competitive. as wclI as maintaining thc custorner lol,alty lbr tl-reir moretraditionalistic clients and lor thcir experienced workers.

I IntroductionA. Situational analvsisThe focus of the case is the Indian clothing manuf-acturer Gladrug,s LTD.lt was foundedin 1965 by Naseem Singh. This company deals with designing. prodr-rcing. marketing and sellingIndian clothes. having a centralized and more rigid and conservative control. Ever since it's yearof creation, up until year 2003. the company has had profit because of its appeal to an olderlndian immigrant population who is looking lbr more traditional clothes and therefore thecompany has fbund a niche in the market. Ilowever. evcrsince 2003. the market has beenexperienced a tall in demand lbr traditional st1,le clothing since the targeted population ages,leaving Glutlrugs with a def-icit.Even though Gludrugs LTD was created by one man. Naseem Singh, in 1973 themanagement began to grow: liom that year on. the decision rnaking process was going to go'l'omthrow more than onc person. inclucling: Palmer. Aniay' and Saswati who were Naseem'schildren. as well as Tont's two children. The company' structure is tall and thus allows fbr lessflexibility and a narrow span o[- control. which becomes a weakness in today's competitiventarket. The new parlnership rnadc the distribution of pow'cr which began influencing the entirebusiness and mostly led to diff'ercnces in vision. Sasw'ati proposes the modemization of thecompany's fashion trends. and suggests targeting a youngcr dcrnographic by associating Indiancelebrities lrom the showbiz to thcir clothes and image. llowever. tlrc rest of the nranagementboard is avoiding this clrastichange in'n,ision. even il'they arc aware that thc colxpanv's profitsare ltow dropping according to the Proflt-l.oss statemcnts as thcy dccreasecl fiom $240 in 2004 toSl40 in 2006. Irurthermore. there are dif'fcrent othcr approachcs are suggestcd to solving thisproblent. Since their protits are decreasing. Ana.jay wants. instcad of elintinating the cause. beingthe old and traditional approach. to adapt to the new circumstances and to avoid loosing moremoney suggests thc outsourcing clf production. This conflict is not benet'icial for Gladrags sinccthe visions of how to save thc companv are not neccssarily tackling thc corc problem. but goingaround it. Becar-rse o1'this. the ncgative conseqllenccs continuc to occur. The instability amongstaff almost urgcs them to go olt strike. since their.jobs are threatencd by a potential outsourcemovement. The once positive working atmosphere has deteriorated because of this .lobsinstability and another problcm related to the traditional approach was fbund in the trainingprocedures. Since the more experienced employees were supposed to teach the new ones theproper techniques. they aren't efficient anymore and the production has to sufler from this. Oncemore, since the old staff was retiring" and because of the conlpanv's old vieu's and old andtraditional image. there aren't enough people to fill tl-rose places out the new and youngworkforce since they were oriented to the modernized companies.

B. S.l(.O.T Analvsis:l. Strengths:a. Tom Palmer. an ambitious young designer is driving the company forwardthrough popular clothing trends. This could potentially lead to both a newconsumer target market and new consumers.b. Anjay, Gladrags marketing manager. owns I 5o/ of all shares in the company,thus is able to voice his opinion aboul the direction of the business.c. Sawatioined the design department and owns 15% of the company's shares.This allows him to over-see finished products and make sure clothingappearance had a correlation with the company's initial vision plan.ct. Anjay is working to develop a markct plan to support "Sass1,r" line. a divisionof Gladrags apparel. in order to appeal to er yolrnger and ncw market.e. A Positive work atmospherc creates a good working environment fbremployces. thus increasing productir,'ity.f. Good liquidity of monetary and business assets allow for a better flow ofmoney, and better zrccessibility of fr-rnds.g. A local owncr. Nasccm Singh. allows the company to bc able to expandwithin the commLrnity seeing that the owner ltas cxperiencc in and with hiscotnlnunity.h. Increasing diversity' in product range will allow the contpany to furthersegmentheir rrrarkct. thus will increase revenlre as difl'erent age. sex. culture.etc. groups are introcluced to nell'products.i. Narrow span of ccintrol allows fbr f-ew to have actual say in the running of thebusiness. thus less arguments occur duc to this tall hierarch.v-..f. Due to the previous problem of wasled materials (7Yool- all flnished productsbeing re.jectedue to low quality) Total Quality Managcment (TQM) has been putin place which leads to increased profits as lewer products are damagcd.k. The proximity between prodr-rction and distribution lacilities lower the firmscosts due to a lower cost fbr tranpoflation.2. Weaknesses:a. Stepehn MofJ-at's prcsence creates concerns anlong employees about jobsecurity. and productivity falls due to this.b. .lenny Boulton is angry with Tom Palmer. seeing that proper recruitmentprocedures were not met.c. Internal motivation among workers has worsen due to insecr,rrity at theworkplace. leading to a dccrease in productiveness.d. Conflicts between management and production staff are brought about due toAnjay's proposition to move production overseas and cr-rt costs. This lead toquitting staff and anxiety among workers.e. Narrow span of control does not allow for micro-management and employeesmay feel as though they have no say in production. or company procedures. Thisalso leads the firm to be seen as less flexible.f. Due to overproduction. the company must flnd suitable storage conditions fortheir overstock. This leads to an additional expense for the conlpany.5

g. Naseem and Tom present different vision plans fbr the company whichenhances instability in the workplace.h. Inexperienced new staff are not as productive or efficient as olderemployees and may be seen as more of a liability than an asset.i. Due to retiring workers. Gladrags must flnd temporary replacements tosubstitute older workers. which are leading to increased costs for the firm.3. Opporlunities:a. Entry of China into WTO will lead to expansion of trade between Chinaand Europe.b. Immigrant populations has been rising. They also bring in additionaldisposable income. much of which is spent on luxurious items such asclothing.c. Developments in computing have lead to much improved designpackages that can be linked to textile and new production equipment.d. The average age of consumers entering thc shops has been increasingbecause young consumers prefbr more western clothing of the Indian styleclothing off-ered by Gladrags. The "Sassy" line of clothing could help pullthese young consumers further into the shops.e. Contact with Indian celebrities could prcsent many opportunities lorGladrags in terms o1-pror.nolional advertising. ancl would help them largeta younger demographic.1. The 2012 Olympics. said to be hcld in [.ondon, will bring about funherdevelopments, along with an influx of people as the city gets ready for thegames. This large inflow of people could pose as a high gain in profit, anda morc popr"rlar brand name.g. Significant investments in the clothing industry have hclped reduce thecost of prodLrction equipment. Production technology has developedconsiderably over the years and this ofl'ers increased potential forproduction.h. A property developer has made a flnancially attractive offer fbrGladrags two production facilities which could pull them out of financialinstability.i. Could sell business to Indian Multi-national Corporation who seeks toexpand to the UK.j. Distribution chain further developed throughout London departmentstores promotes higher brand awareness.k. Overseas production is discussed in order to reduce costs and lead thefirm to become more competitive.4. Threats:a. Decline in manufacturing and reduction in the number of opporlunitiesfor apprenticeship has led to a shortage of skilled labour in UK clothingindustry.

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8II. Alternative course of actionFour possible alternative courses of action for the firm, Gladrags LTD, as well asadvantages and disadvantages to each course of action in order to solve the firm'sproblem are further examined in this section. We will be looking at efficiency, stability,profit, customer loyalty, market growth. opportunity, employee relations. and production.and whether or not these pose as advantages or disadvantages fbr Gladrags.A. Status Quo: Meaning 'state in which'. status quo suggests the course of doing nothingas an option. This options entails staying traditional in the marketing and productionaspects as well as their image. until they re-evaluate their position in the market,compared to the other firms, as well as their status in relation to how their staff isfunctioning and their margin of profit wlien they fbel a new problem has arisen.l. Advantage:a. Gladrags will maintain their imagc that they havc establishedwhich is personalised unic}re traditional Indian crothing which is aniche rnarket in the [J.K.b. By re.raining with the companies initial vision plan, Gladragswill ntaintain customer lovallv.2. Disadvantages:a. cilerclrags will continue to have a small target group. thus ressmarket growth opportunity. as customers, due to the fact that theolder generation of the Indian conrmunity is scarce in the U.K.b. Gladrags way of production in non-efficicrrt. dr-re to the out ofdatc nrcthods arrd technology. so the problem arises wrren othercompanies conre into competition with clladrags who have newerproduction technology allowing them to give better prices.therelbre redr-rcing the margin profits possihlc fbr Gladrags.c. Due to remaining in the current state. Gladrags efliciency islikely to continue to fall as it has been doing progressively over theyears. and poses as a threat to the company.d. Stability poses as a disadvantage due to the lact that thecompany already possesses an unstabl enr,'ironment. and will notbe changing this environment if they decide to remain in thecurrenl situation.e. The firm's profit has slowly been decreasing due to both internarproblems, such as distress among employees leading to a decreasein production. and external problems, such as increasedcompetition. If Gladrags decide to remain in the cument situation,their profits are likely to continue to fatl.f. Current distress among employees has lead to high levels ofstress and low efficiency and productivity. By remaining in thecurrent situation Gladrags is cerlain to see a possible revolt amongemployees as internal conflicts are not resolved.

B. Bankruptcy: Inthis option Gladrags will shut down the company and file to theBritish governmenthat it no longer has money to continue in the market.1. Advantages:a. Gladrags will no longer have the responsibility and pressure tofind a solution fbr their problem since they will be no longer inbusiness. Due to this they will also no longer be required to find asolution for the lack of efficiency the firm presents.b. By filing for Bankruptcy. Gladrags will no longer beexperiencing a loss o1'profit. and may possibly be able to makesome money by selling olTproduction locations. materials, andmachir-rery.2. Disadvantages:a. Gladrags will cause the loss of many jobs, thus being entirelyresponsible for the problems the employees have to face that comealong with being unemployecl. This disadvantage relates back toemployee rclations.b. The Indian community of the tl.K. will have no place to go forqr-rality. handmade. unique and personalised Indian traditionalclothing. Customer loyalty will dissipate, and if Gladrags wishes toreintroduce themselves back into the market, they will mostprobably find themselvestruggling, as many consumers decide tono longer remain loyal to the brand.c. l-he hard work. of the management. ancl time invested inbuilding Gladrags will have gone to waste. Prodr"rction poscs as adisadvantage in this course of action seeing that the firm will nolonger be producing any of their products. Also, if the companydecides to sell their equipment and materials, they will have adifficult time if they decide to re-penetrate the market.d. Upon filing lbr bankruptcy. Gladrags will most probably destroyany reputation they have worked so hard to build. Thisdisadvantage relates back to the stability of the flrm, and how it isviewed internally, and externally.e. Bankruptcy will result in the firm being no longer able to engagein market groMh opportunities, thus no profit. brand awareness;etc is attributed to this course o1'action.C. Modernlse.' Meaning that Gladrags will modernise their image. that is fabricateclothing that appeals to the younger generation, all while integrating Indian aspects intotheir clothing. In addition, outsourcing their production and renewing machinery to keepup to date with the newest technology and have a place in the competitive market.

l0l.Advantages:a. Renewing ways of production, meaning new machinery andtechnology as well as outsourcing production, will increaseproductivity; therefore the margin of profit will increase.b. The new clientele attracted by the line of modernised clothes.that is advertised by famous Indian celebrities which appeal to theyoung and old generation thus associating Gladrags brand namewith celebrity power. while earning a recognised name. They willalso expand the target market earning Gladrags an increase inprofit.c. Efficiency is likely to increase due to the possibility of eitheroutsourcing. or the purchase of new'machinery. This will also leadthe firm to a higher net profit.2.Disadvantages:a. Possibility of loosing older and loyal customers due transition inthe style of the clothing that appeal to the younger generation. Thismay result in a smaller target markethen expected.b. Gladrags will loose its uniqr-re in-ragc that it has created amongits loyal customers. The f-irnr will lose its niche market bccause ithas to adapt to many others.c. New machinery could result in high costs and Gladrags new riskin modernising may not allow them to have the required budget.d. Employees relations may suflbr dr.re to the fact that outsourcingis a direct possible opportr"rnity of modcrnizing. This would mostlikely result in letting go of much of the currcnt employees atGladrags.'l'hisD. Semi-traditional nnd Semi-modern'. option combines two of the previousoptions. It seeks to combine the best of modem and traditional in soft to help Gladragsor-rt of its troubles. It uses outsourcing of production, and new technology. that machineryfinds marketing techniques that targct the young and old generation. as well as providingclothing for both types of their clientele.l. Advantages:a. It will ensures that the target market will grow to the fullest bysatisfying all types of clientele, thus ensuring a place for their loyalold generation customers. This shows that Gladrags will continueto engage in many market growth opportunities.b. Efficiency will increase as better machinery and means ofproduction allow employees to produce at a f-aster pace.c. The clientele and the distributors will be glad to pay premiumprices for good quality material due to the outsourcing ofproduction. Also by remaining sontewhat traditional. Gladrags will

llbe able to ensure customer loyalty among it current consumers,and will be able to market towards it future consumers.d. Due to the reduced prices and the new image Gladragswill porlray it has better chances in the competitive global market.This relates back to production, and means of production. seeingthat Gladrags will be able to provide reduced costs for distributorsdue to the efficiency of production.e. By remaining somewhat traditional. and now being somewhatmodern, Gladrags will be able to ensure internal stability, seeingthat they are not rushing into anything.f. Profit is likely to increase. as Gladrags market becomes morediverse. and production procedures become more efficient. Also.seeing that they will have a broader product range. Gladrags islikely to increase their brand name and awareness.g. Irmployee relations between management and workers willresolve itself as employees are able to retain their jobs and currentpositions. Also. due to an increase in profits, Gladrags will be ableto of'lbr more attractive wages. bringing in a ncw crowd of skilledlabour workers.2. Disadvantage: a. 'I'o ensure that Gladrags is as efficient as possible thecompany will have to outsource. therefbre they may necd to lay-offmanv loval emrrloyees.

l2III. Recommendation:The recommendation for the course of action to take is semi-traditional and semimodem,that is integrating the best aspects of modem and traditional in sort to helpGladrags out of its troubles. It involves outsourcing of production, new machinery andmarketing techniques that target the young and old generation to maintain both types ofclientele.This alternative course of action will help solve the main problem by tackling all thevariables presented through the advantages and disadvantages.All the variables are interdependent and mutually connected, as presented in the diagram.Stability poses many advantages for the opposition between the traditional and modemview of the company, which is a source of conflict and stress within the company and canpossibly become an asset, if both the traditional approach is maintained and the modernone is developed. This would constitute as an advantage for the company allowing it tobe more versatile; when one sector in production that focused on a specific age targetwould decrease, the other would increase, this leading to a safe balance and a constantsource of profit. For efficiency, in order to enhance it, organized trainings should bemade, where only two or three veteran employees would teach the new one. This wouldmaintain a large number of employees working while trainings were being given thusmaintaining efficiency. As soon as profit shifts from a deficit to revenue, newinvestments should be made into acquiring new stores in downtown. This could stand asa great opportunity to attract the younger demographic and to spread the company'simage and name. Another opportunity is the Olympics planned to come to London in2012. This could result in a profit of the company seeing an influx of potential customersif Gladrags change their style to appeal to the young and old tourists. As a companyexperiences a growth in profit, employee relations will experience an increase positivelyas more profit is dispensed on employment and salaries. The choice of keeping thetraditional style would assure customer loyalty while keeping the older clientele that wasalready loyal to their style. However, in order to acquire loyalty from the youngercustomers, investments should be made in advertising, promotions should be effected thatwould be attractive for the youth, and the idea of associating their products with Indianmedia stars should be applied. Furthermore, research should be conducted in establishingthe percentage of traditional and modern consumers. This would help produce moreefficiently since they know how to segmentheir production. Ultimately, efficiency,production and profit are therefore also positively affected. As for the market growthopportunities, regardless of the trends to come, the company would be ready to adapt andseize the opportunity that the Olympics may bring for instance. Also, the changes in themanagement structure that would allow for a more flexible company would be an asset inentering the modern and competitive market. With the new machinery, or the possibilityof outsourcing production, which is an important problem for the firm, would be resolvedhelping them further penetrate the market.However, going semi-traditional semi-modern may cause a few problems. IfGladrags decides to outsource, some employees who have been there for a long time,12

l3who remain loyal to the company and who are also loyal customers as well may be laidoff. As a contingency plan, the option of introducing new machinery instead ofoutsourcing may ultimately solve the problem of unhappy workersFinally, as thoroughly discussed and explored, the reason for this recommendationis due to the fact that the advantages outweigh the disadvantages. This plan of actionwould advantage Gladrags by minimising their risks, by allowing better competition inthe global market, appealing to the older and younger customers by having both of thetwo extreme images, modern and traditional, while keeping their profits high due to thehigh efficiency of production. While the only disadvantagethat Gladrags will have tolay-off loyal workers. Once all that falls into place, Gladrags can ultimately improve thevision plan, and decide on which direction the company should take for its future.l3