Classic Knitwear and Guarding: A Perfect Fit

Submitted by:
CHATLA PRASANTH
KUMAR
NIMBALKAR MOHIT
HEMANT
SAMISHT SEHGAL
ANUBHAV A KEDIAA
PRANJALI GANESH
SILIMKAR
PRIYANKA SHAW
MADHUR PAHUJA
SHARATH MADHULIKA

2016PGP100
2016PGP237
2013IPM076
2016PGP063
2016PGP278
2016PGP289
2016PGP198
2013IPM083

Introduction: Classic Knitwear wants to improve gross margins from 18% to at

least 20%. 75% of Classics revenues come through screen-print channels and
remaining 25% come from knitwear sold through mass retail channels as private
label merchandise, which typically carried the name of the retailer or of some inhouse brand the retailer had invented. Classics private label or unbranded
knitwear had no branded recognition among retail customers, which limited its
opportunity to differentiate its products. Classic heavily invests in T shirts and #
2 player in screen-print sector with 16.5% market share.
Opportunity: Classic has got an opportunity to negotiate a licensing partnership
with Guardian, a manufacturer of insect repellents and to manufacture insect
repellent T-shirts. Due to growing national awareness of insect-borne illnesses,
insect repelling clothing is a rapidly growing niche market with less number of
competitors. It has below 3 options to launch this new product line of insect
repellent shirts:
1. Launch new product line of T-shirts with name Guardian:
Advantages: Guardian had recently received EPA registration for a newly
patented insect-repellent technology that is 3 times better than competitors.
Also 50% target audience (males in age group 18-35) already held positive
perceptions of Guardian. So less marketing investment is required to launch
this new product with name Guardian and it can improve gross margins to
40%.
Disadvantages: If Classic agrees with Guardian to launch the new product
line with name Guardian, then Classic will not get any opportunity for its
brand awareness among customers. It also need to pay license fees and
royalty to Guardian. If Guardian decide to terminate the agreement, Classic
would be in problem.
2. Launch new product line of T-shirts with name Classic Knitwear:
Advantages: Classic will get any opportunity for its brand awareness among
customers and will be able to improve its gross margins.
Disadvantages: As customers are not aware of Classic brand, more
marketing investment is required to reach to target audience. It also need to
pay license fees and royalty to Guardian. If Guardian decide to terminate the
agreement, Classic would be in problem.

3. Do not launch any new product line for insect-repellent T-shirts:

Advantages: Classic doesnt need to spend money on new product
manufacturing. Also it need not spend on marketing and need not pay license
fees and royalty to Guardian.
Disadvantages: It will not be able to improve the gross margins and will
miss the opportunity for brand awareness among customers.
Consumer Survey Analysis:
As per consumer survey, 38% respondents will buy the new product and 24%
respondents will probably buy the product. Also almost 50% respondents are
ready to pay high price for the product.

Break-Even Analysis:
No. of units in display units(12 dozens per
display unit)
selling price per unit
Sales Revenue
Variable Costs per unit
cost price per unit
royalty to Guardian(5% of Selling price)
5% off-invoice trade promotion allowance
10% advertising allowance to 20% retailers
Total Variable Costs per unit
Fixed Costs
license fees to Guardian
salaries to 3 new sales representatives
Advertising costs
Retail displays(per display unit cost $100)
Total Fixed Costs
Contribution per unit(selling price-variable cost
per unit)
Break Even Point(in units)
Total Costs
Profit
Assumptions for calculations:
1. License fees is paid once in first year only.
2. No royalty fees will be paid in first year.

Year 1

Year 2

7200000
17.87
12866400
0

7200000
17.87
12866400
0

10.82
0
0.8935
0.3574
12.0709

10.82
0.8935
0.8935
0.3574
12.9644

100000
255000
600000
500000
1455000

255000
600000
500000
1355000

5.7991
250901.0
019
88365480
40298520

4.9056
276214.9
38
94698680
33965320

3. Number of display units in first year are 50000 and 500000 in second year.
4. Calculations are done assuming number of units produced in year 1 will be
12 dozen shirts per display unit, so 12*12*(50000 display units) =
72,00,000 shirts in year 1 and 2.

Conclusion:
After doing the analysis, we think that it should launch the new product with
name Guardian. Insect-repellent clothing is growing niche market due to
growing national awareness of insect-borne illnesses. 50% of target audience, i.e.
Males in age group 18-35 who are outdoor enthusiasts, are ready to pay higher
price for this product. Guardian is already known in this target group and so
launching the product as Guardian will reduce the marketing investment of
Classic.