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Classic Knitwear and Guardian

A perfect fit?

1. Evaluate the product-company fit?

Product Company Fit
The product offered gross margin 38~39% which would enhance the margins of Classic
Knitwear from 18% which was substantially lower compared to industrial standards.
Guardian brand had high level of awareness and it had patented insect-repellant clothing
technology. The product had a good market potential due to its innovativeness. This advantage
can be leveraged by the production efficiency of the company to achieve a sustainable
competitive advantage.
The company had a moderate cost advantage over other US producers due to high-volume, low
SKU production runs. The addition of the new product meant addition of 16 SKUs. This new
product might lead to some inefficiency in its present system.

2. Evaluate the product-market fit?
Product Market Fit

Classic Knitwear operated in $24.5 billion category of non-fashion casual knitwear.
The branded side of non-fashion knitwear market was dominated by three large manufacturers:
JamesBrands ($4.5 billion), FlowerKnit ($1.25 billion) andGreenville Corporation ($0.63
billion). These big brands operated on gross margin of around 30-40%.
In unbranded segment, Classic competed with little known firms like B&B Active wear which
held market share of 23.6% and the Big Three were also involved in this market.

There was a customer need for protection against the rising insect-borne illness and the
customers were dissatisfied with few prevention products available in the market. The category
is virtually non-existent in the mass market as the present players in the insect repellant clothing
only sold in niche markets.

3. Will consumers and the trade respond to the Guardian marketing program?

Response of the trade(channel)
Presently, the retailers were provided with 50% margin on branded knitwear and 40%margin on
private-label knitwear. The new product would provide the trade a 45%margin. Our opinion is
that displays would occupy a large amount of retailers space and also the retailer margin is on
lesser side i.e. 45% Vs 50% offered by other brands. This would not encourage the retailers to
stock the product. But the provision of trade promotion and advertising allowance might induce
them to stock the product.
The company projected sales would be 10,000 displays within two years of product launch, of
which 50% would be in discount stores, 25% in general merchandise stores, and 25% in sporting
goods and apparel stores. We think that as the company has no experience in selling to these
retail channels, it has to spend considerable resources to develop the channel.
The company would make the Guardian shirts available to its existing wholesale clients for
distribution to interested screen painter in a later period as it has currently decided to brand the
product as Guardian Apparel.

Response of the Consumers
Based on the consumer research, 18.5% of the thousand respondents (185 respondent)were
interested in the product. Based on past market research experience,60% of the respondents who
indicated they would definitely try (38%) would do so (22.8 %)within the two-year introduction
period. The company also predicted that at least 50%(11.4%) would buy an additional shirt the
following year.
4. What are the advantages and disadvantages of the licensing agreement?
Wholesalers sold to screen-print channels customized t-shirts and other knitwear with
Competitive advantage
Opportunity to reach the outdoor enthusiast market
Positive perception of the brand ( 58% recognizing Guardians pioneering status )
Brand high level of awareness and positive costumers associations
Low marketing investment ($3 millions)

More man oriented products
Classic would suffer an immediate loss of its market share and also sales revenue in case
Guardian decides to pull its offer
Customers may be reluctant towards the new products
No guarantee that Classic would be able to achieve the level of acceptance within two
Continue to have no brand recognition

5. What sales volume is required to break-even on Classics 2-year marketing program?

6. If Classic implements all of Millers recommendations, what is the estimated demand for
the new product line over the 2-year launch period?