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Apparel Industry
0911666 Tara Molloth
0911653 Niharika Singh
0911643 Ayesha Kazi
Fashion Apparel Industry Overview
The global fashion apparel industry is one of the most important sectors of the economy in terms
of investment, revenue, trade and employment generation all over the world. Apparel industry
has short product life cycles, tremendous product variety, volatile and unpredictable demand,
long and inflexible supply processes. The industry has been in a transition over the last 20 years.
Some of the its major contributors are:
The clothing and apparel industry produces finished clothing products made from both natural
and manmade fibers like cotton, silk, wool, lenin, polyester, rayon, lycra and denim. The
important segments covered in apparel industry include kids clothing, mens clothing, clothing for
women, bridal wear, mens wedding wear and intimate apparel. The apparel is sold through three
major channels, which includes, brick & mortar, catalog and through internet. The market share
of the different channels is shown below:
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materials, textile plants, apparel plants, export chains, apparel manufacturers, retail stores and
customers
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Figure : Country-wise Market Share
As the apparel manufacturing industry has become more labour intensive and requires less
capital investment, its concentration is shifting more towards the developing countries and even
constituting large amount of their exports. This can be analyzed by the fact that the apparel
production in industrialized countries decreased between 1980 and 1996, where as the production
increased in developing countries during the same period. Similar trend was seen in exports, the
apparel exports of developing countries increased six times between 1980 and 1997, and that of
developed economies rose by 150%.
The global apparel industry’s total revenue in 2006 was US $ 1, 252.8 billion, which was
approximately 68% of the overall industry value. Asia Pacific constitutes the largest amount of
production and trade in the apparel industry worlwide. The percentage share of different regions
of the world in the total trade revenue in the year 2006 was
Region % Share
Asia Pacific 35.40%
Europe 29.40%
USA 22.30%
Rest of the world 12.90%
China had captured 65% of the global market share towards the end of 2006 in total apparel
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exports. The other major apparel exporting nations include USA, Germany, Hong Kong, Italy,
Malaysia, Pakistan, Thailand and India. Some of the apparel trade statistics are presented below:
Country US $ Billion
China 8,260.921
Hong Kong 1,723.210
Italy 1,353.586
Malaysia 1,255.069
Germany 669.130
Pakistan 618.830
Thailand 597.758
USA 595.171
India 522.463
Exports in 2006
Industry Challenges
The Apparel Industry is growing at a very high rate but still there
are some barriers, which are hindering the growth of this industry.
Some of them are:
• Most of the raw material needed for apparel manufacturing is available in the developing
or under developed countries and these countries do not have enough resources
and manpower to explore them. These countries also do not have finance to set up
factories for clothing and garment production.
• Globalization has helped the trade in many ways but due to globalization the competition
has increased and so it is not very easy for the firms to cope up with so much
competition, as they have to meet the deadlines and also maintain quality.
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• The importers of developed economies are facing very stiff competition as countries like
China are producing good quality products in low prices due to availability of very cheap
labour.
• Some trade laws still are very much in favor of developed countries and they need to be
reviewed, to facilitate imports from the developing countries.
• As apparel industry is fashion driven, and fashion keeps changing, the firms have to cope
with the changing apparel industry trends and still complete orders in time. Thus they
usually have to work under pressure.
Future Prospects
Though the above trends show a very positive picture but according to some experts, the dilution
of MFA (Multi Fiber Agreement) will make a lot of apparel workers to loose their jobs, in many
regions of USA, Asia, Central and Latin America and these jobs will shift to China. According to
an article published in the Business week magazine, 30 million jobs will be lost to China, the
hardest hit countries would be Turkey, Mexico and some African nations. The World Bank
report says, this will be one of the largest short-term transfers in history. Despite these
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developments the apparel industry is estimated to grow at very high pace and will provide
employment to a large number of people all across the world.
The World Trade Organization (WTO) has taken important steps for development of this sector.
In 1995, WTO had adopted Agreement on Textiles and Clothing (ATC), which provided for
removal of quotas on textile and clothing among WTO member countries. This agreement was
enforced on 1-1-2005 and all the quotas were abolished. Although high tariffs and quantitative
restrictions are imposed by the economically developed countries, the developing countries are
increasingly exporting textiles to developed and other countries.
The future global market for textile and apparel is expected to expand in a significant way. The
reasons for such expansion include growth of new consumption markets, Global expansion of
modern retail business, boom of air and sea shipments, growth of textile and related production
in Eastern Europe, ex Russian block, Turkey, Middle East, South East Asia, India, China and
South America.
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In future, It is going to be a challenging global market full of risks but also full of unbelievable
opportunities. Strategic partnership among various interests will become more important than the
traditional transactions through vendor relations.
Skills & Competences: It is going to be a talent intensive market where certain capabilities will
dominate the market:
Key Trends : There will be no seasons specific textile and apparels, external factors will rapidly
change scenarios, customization & the web will be more prominent:
o While producing textile, factors such as environmental pollution and global warming will
have to be considered. The world already has imposed strict rules and regulations
regarding this.
o Multi seasonal apparels will gain prominence.
o External factors like exchange rates of the currencies such as Dollar, Euro, Yuan, Rupee
etc., the fall and rise of petrol prices, air transport, country specific and global political
situations will have greater impact on the rise or slowdown of the industry.
o Internet sales are growing significantly and it will grow further.
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Strengths:
• India has great advantage in Spinning Sector and has a presence in all process of
operation and value chain.
• India is one of the largest exporters of Yarn in international market and contributes
around 25% share of the global trade in Cotton Yarn.
• The Apparel Industry is one of largest foreign revenue contributor and holds 12% of the
country’s total export.
• Industry has large and diversified segments that provide wide variety of products.
• Growing Economy and Potential Domestic and International Market.
• Industry has Manufacturing Flexibility that helps to increase the productivity.
Weaknesses:
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• Lacking to generate Economies of Scale.
• Higher Indirect Taxes, Power and Interest Rates.
Opportunities:
Threats:
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THE WAY AHEAD...ALWAYS
Koutons Retail India Ltd. is an integrated company starting with designing, procuring
fabric, garment distribution and retails of apparel and accessories.
Koutons has 1000 exclusive stores almost 4 times of any other apparel brand stores. an
impossible target for even big spending MNCs.
This is the story of Mr. D.P. S. Kohli. In 1984 sikh riots his television manufacturing venture
called Apollo Television was destroyed .
Kohli was forced to work as an insurance surveyor to pay off his loans. But his spirit was not
broken , he was determined to rise again and he started his jeans manufacturing business, called
Charlie Creations, with his brother-in-law in 1991.
Koutons started primarily as a denim brand but are today manufacturing and selling complete
men, women and kids wardrobe under the brand name Koutons, Les Femme and Koutons Junior
respectively. Another brand from the stable of Koutons is Charlie Outlaw, which caters to the
teens of the country with apparels including jeans, T- shirts, jackets etc. Koutons Brand is
catering to the Upper & Upper Middle Class of Society with a vast target age group between 18-
60 years.
"Value for Money and High on Fashion" being their USP, Koutons has given the brand an
extension delving into specific consumer segments. The garments are made keeping in view the
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overall need of the niche market and the basic/fashion demand of the Indian masses. The product
range also caters to the tastes of all segments. The Brand is placed as the most dynamic brand of
India. He has learnt his lessons and decided to sell from his own exclusive stores so that he has
control on his brands.
The Koutons story reveals how much a regional brand can grow in a short span of 15 years
competing with major corporate brands. Koutons is totally consumer focused and depends on
brand loyalty for it's tremendous expansion and growth.
The entire idea of Koutons is to give the people the sense of satisfaction and feel that they own
an international quality brand. Koutons often come up with crazy schemes( 50 % +40 % off) to
introduce themselves, or to make the initial push for the consumers to try their brand. Koutons
Retail India Ltd. (KRIL currently has a network of over 1000 exclusive brand outlets of total 8.4
lakh sq ft spread across 221 cities in India.
Koutons was nominated for "Brand of the Year - Men's Casual Wear (Large)" by the Clothing
Manufacturers Association of India.
The Company is in the business of designing, manufacturing and retailing apparel under the
Koutons and Charlie Outlaw brands through a network of 1400 exclusive brand outlets across
India. During the fiscal year ended March 31, 2009, it extended its brand with the introduction of
Les Femme (women wear) and Koutons Junior (kids wear). The Charlie Outlaw brand is a casual
brand targeted at fashion conscious youngsters in the age group of 14 to 25 years. Les Femme
and Koutons Junior offer a range of formal and casual wear for women and children. Koutons
Junior caters to young boys and girls in the age group of 2 to 14yrs. Les femme on the other hand
caters to young women in the age group of 14 to 34 yrs of age.
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Company details
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in 2002 it launched its first exclusive Koutons brand
outlet.
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Company history
Koutons Retail India, popularly known as Koutons, is the leading manufacturer of readymade
fashion wear brand. The company started its journey in 1990 when D P S Kohli and his brother-
in-law B S Sawheny set up Charlie Jeans.
In 1998 the company launched the brand Koutons and in 2002 it launched its first exclusive
Koutons brand outlet.
The company re-launched its brand ‘Charlie Outlaw’ in 2006. In the same year, the company
changed its name to Koutons Retail India. In 2008 the company launched brand 'Les femme' for
ladies and 'Koutons Junior' for kids.
Currently Koutons manufactures wide range of apparels in men, women and children wear. It has
a network of more than 1420 outlets across India.
The company owns leading brands like ‘Charlie Outlaw’, ‘Les Femme’, ‘Koutons Menswear’
and ‘Koutons Junior’. Koutons has also launched K2one an exclusive footwear brand for men.
The company acquired DBG Retail Holdings in 2007-08 and the latter is now a subsidiary of the
company.
Awards
Koutons Retail India was awarded “Most Admired Fashion Group” at Images Fashion Awards
2008 held in Mumbai.
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The company was honoured with “Brand of the Year Casual (SME): Charlie Outlaw” Award by
Clothing Manufacturers Association of India (CMAI).
Koutons Retail India has won the prestigious “Chain Store of the Year” Award at the National
Awards for the excellence in Apparel business organized by CMAI.
Outlook
Koutons is planning to foray in the Middle East markets and will start operation by opening
around 30 stores in this region.
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Organization structure
S. No Name Designation
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Production and sales
Sales Sales
Product Name Year Month % of STO
Quantity Value(Rs.Million)
Sales Domestic 2009 03 0.00 10466.84 100.00
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Mission, Vision and Mantra
Vision
• To emerge as the most profitable retailer in India by being the most efficient
• To provide contemporary fashion at affordable prices.
• To cut away all areas of distribution and value chain that do not benefit the consumer.
Mission
• We aim to lead through innovation & improve through introspection to serve our
customers and stakeholders equally and become an efficient and low cost operator with a
commitment to quality.
• We aim to be world leader yet remain firmly rooted to our local markets.
Mantra
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Koutons Range
Koutons Menswear
The well known apparel house, Koutons Retail India Ltd. has unveiled their latest collection of
menswear. This collection offers a wide range of formal and informal clothing for men for the
age group of 18 years and above. Known for their comfort and durability the brand has become
synonymous with 'fashion and quality' at affordable price'. The collection caters to men which
includes the working professionals.
The collection includes the shirts, T-shirts, pull overs, sweat shirts ,denim and non-denim
trousers, cargo and shorts for men in trendy yet formal shades the collection also offers a variety
of fabrics to choose from. The basic formal shirts are available in linen and cotton fabrics. The
range is also available in blended fabrics. The special product range wrinkle resistant flaunts ten
to twelve colors to choose from. Using wrinkle-resistant technology the company has sought to
introduce a new breed of weaved hundred percent cotton fabric and blended cotton.
The latest collection of Koutons menswear is a range created for today's generation of men who
wear what they like and firmly believe in themselves. The collection is for those who like to
blend comfort with style.
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Charlie Outlaw
Charlie Outlaw is an exclusive fashion showroom for men. They have a collection of men's
office wear, men's western casuals including designer denims, T-shirts and more. The brand
offers a highly usable range for men. It covers an age span of 15-45 years.
Les Femme
Femme collection offers a wide range of formal and casual wear for women. The collection Les
femme caters to young women in the age group of 16-34 yrs of age and includes apparels like t-
shirts, party wear, lycra, semi formal shirts, denims, capris , tunics, cargos denims. The collection
makes a fashion statement with Knits T-Shirt, shirts for formal and casual attire available in full,
half and 3/4th sleeves etc.
Les Femme offers the new high fashion range which has lot of sequence and bedded work done
on the apparels. Satin and lycra are presented in dazzling colors and reminiscent patterns. The
collection makes a fashion statement in itself at affordable prices.
The range is in sync with the changing moods of the youth and working class, which go in for
care free and relaxed lifestyle, Les Femme provides them with comfortable but classy wear. Les
Femme is a brand created for a generation of women who wear what they like and firmly
believes in individual personality. Almost every piece designed and created for 'Les Femme'
collection depicts timeless creation blended with sophisticated simplistic detail.
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Koutons Junior
The collection offers a wide range of trendy and playful apparels for kids. Known for their
comfort and durability, the brand has become synonymous with 'fashion and quality at affordable
prices'. Koutons Junior offers a wide range of apparels t-shirts, shirts, night wear, capris, cargos,
denims, dangris to denim skirts for boys and girls in the age group of 2-15yrs.
Right from providing formals and casual for boys and girls, Koutons Jr. offers a youthful and
trendy blend of bright shades and wintery hues along with playful cuts and patterns for kids. The
yarn used in Koutons Jr. 100% cotton,100% acrylic, lambs wool blend. The all new kids range is
made from superior quality fabrics keeping in mind the delicate and sensitive skin of children so
the natural fibers used in the apparels are soft in feel for young kids.
Koutons Besides the normal range of apparels a special range of accessories is also available
which includes bags, sun glasses, swim glasses, pencil boxes, bottles, caps, belts ties and many
more.
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Indian Industry
+ India tops the annual list of most attractive countries for international retail expansion.
+ India is the second fastest growing economy in the world, where currently the retail market is
valued at USD 270 bn. Food & grocery is the dominant sector followed by clothing, textiles &
fashion accessories.
Mar ' 09 Mar ' Mar ' Mar ' Mar '
08 07 06 05
SOURCES OF FUNDS
Owner's Fund
Equity Share Capital 30.55 30.55 27.34 4.99 4.74
Share Application Money 0.00 0.00 0.00 0.00 0.11
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves & Surplus 394.64 319.08 135.98 15.08 1.86
Loan Funds
Secured Loans 520.02 206.58 162.43 32.58 13.30
Unsecured Loans 102.91 212.69 47.00 18.68 4.18
1,048.1
Total 768.90 372.75 71.33 24.19
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USES OF FUNDS
Fixed Assets
Gross Block 146.02 75.12 49.84 13.71 5.19
Less : Revaluation Reserve 0.00 0.00 0.00 0.00 0.00
Less : Accumulated Depreciation 31.34 16.54 6.96 3.07 2.03
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Net Block 114.68 58.58 42.88 10.64 3.16
Capital Work-in-progress 9.57 13.68 7.14 0.00 0.00
Investments 2.02 40.52 0.00 0.00 0.00
Net Current Assets
1,090.2
Current Assets, Loans & Advances 813.89 456.06 125.33 34.66
2
Less : Current Liabilities & Provisions 171.95 160.26 133.96 64.68 13.67
Total Net Current Assets 918.27 653.63 322.11 60.65 20.99
Miscellaneous expenses not written 3.58 2.49 0.62 0.04 0.03
1,048.1
Total 768.90 372.75 71.33 24.18
2
Note :
Book Value of Unquoted Investments 2.02 40.52 0.00 0.00 0.00
Market Value of Quoted Investments 0.00 0.00 0.00 0.00 0.00
Contingent liabilities 10.39 2.44 2.44 0.00 0.00
Number of Equity shares outstanding (in
305.51 305.51 273.44 49.90 47.39
Lacs)
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Products
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Awards
2009-
• Koutons received the Award of "Emerging Corporate" at the Corp Excel Award 2008
for National mSME Excellence on 30th Dec, 2009, organized by Corporation Bank.
• Koutons received "The Value Retailer of the Year" Award of Star Retailer on 27th
November, 2009 organized by Franchise India.
• Koutons received the "Best Clothing Company of the Year" of CMAI�s Apex
Awards on 21st December, 2009.
• Koutons was also nominated for the "Best Advertising Campaign of the Year"
and "Brand of the Year"for CMAI's Apex Award.
Mr. D.P.S Kohli was awarded for "Retail Excellence" award by Asia Retail Congress in
January, 2009.
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2008-
• Mr. D.P.S. Kohli, Chairman, Koutons Retail India Ltd. was awarded the title of “Most
Admired Fashion Face” at Images Fashion Awards ‘08 Mumbai
• Koutons Retail India Ltd was award “Most Admired Fashion Group” at Images Fashion
Awards ’08 Mumbai.
• Mr. DPS Kohli was awarded the title of “2008 Top Marketing Man Award” by IMM,
Delhi
• Awarded the “Brand of the Year Casual (SME) : Charlie Outlaw” by CMAI.
• Award of Best Display at India International Garment Fair
• Koutons Retail India Ltd has won the prestigious “Brand of the Year Mens Casual Wear
(Large)” Award at the National Awards for the excellence in Apparel business organized
by CMAI.
• Franchise Award for Excellence in Franchising & Business Development- Retail.
• Nominated for the Clothing Company of the Year- Domestic by CMAI.
• Nominated for the Best Advertising Campaign of the Year – Retail by CMAI.
Koutons was nominated in Textile & Apparel Category in Emerging India Awards by ICICI.
2007-
• Mr. DPS Kohli was awarded the title of “UDYOG VIBHUSHAN for Excellence in
Industrial Performance” by the Institute of Trade and Industrial Development in 2007.
• Koutons Retail India Ltd has won the prestigious “Chain Store of the Year” Award at the
National Awards for the excellence in Apparel business organized by CMAI.
• Koutons is also credited with another award of “Brand Entrepreneur of the Year” Award
at the APEX AWARDS 2007 organized by CMAI.
Nominated for the Best Advertising Campaign of the Year- Retail by CMAI
2006-
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• Awarded the “Most Dynamic Brand of the Year” by Lycra Images Fashion Awards
• Awarded the title of “Value Retailer of the Year” by Star Retailer- The Consumer Way.
• Koutons Retail India Ltd nominated for “Chain Store of the Year” Award at the National
Awards for the excellence in Apparel business organized by CMAI.
Nominated for the “Brand of the Year Award – Men’s Casual Wear (Large) at Apex Award, by
the Clothing Manufacturers Association of India Group” at Images Fashion Awards ’08 Mumbai.
SWOT Analysis
Strengths:
• Almost 91% of Koutons and 97% of Charlie Outlaw stores are managed by franchisees,
which creates a scalable, low capital intensity model with labor/pilferage costs borne by
the franchisee.
• Tighter cost control vs. peers in tougher times, given integrated nature of its operations
(which results in elimination of various intermediaries). Cost savings could ultimately be
re-invested to ensure lower prices.
• The main costs for the company are all production related [Raw Materials, Fabrication,
Washing and Finishing]. Koutons also bears the Advertisement expense while its
Franchisees are supposed to be fully focused on the customer.
• By building a chain of 999 retail outlets across the country, Koutons Retail India Limited
has outsmarted the competition consisting of 23 major players in the branded apparel
segment.
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• KRIL operates on a model of marketing their apparel directly through a chain of
exclusive brand outlets (EBO) & thus are independent of external marketing pressures
attributable to the national chain stores, multi brand outlets & other intermediaries.
• Category diversification - KRIL provides a wide apparel portfolio which ranges from
shirts, non denim trousers, denims, suits, blazers, T- shirts, cargos, capris, sweaters etc
• KRIL uses a state of the art information flow system to maintain records relating to sales
& inventory & integrate key work flows.
• In the year 2004, KRIL had 27 EBO's within north India only & by 2007 it had
expanded into 999 EBO's in 395 cities spread across India.
Weaknesses:
• High dependency on franchisee for sales of the products - Sales affected by the
franchisees amounted to 98.72% & 99.01% of the total sales in fiscal 2006 & 2007,
respectively.
• Outsource manufacturing of some products; KRIL's manufacturing units are located in &
around Gurgaon & Haryana only i.e. North India.
• Men’s clothing forms bulk of the revenues at 65% followed by 18% from women and
17% from kids.
Opportunities:
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• The growing retail market in India; KRIL has introduced a line of women’s apparel
under the “Les Femme” brand & a brand “Koutons Junior” which is targeted at children.
Expanding into new geographies.
• KRIL intends to target young customers (between the age of 14-45 years) for their
brands.
Threats:
• Stiff competition faced in this sector with large number of players in the unorganized
sector.
• Exports of apparel under the different brand names which disturbs the image of Koutons
as a single entity.
• Inventory risks will continue, given the elevated levels, and management proposes to
mitigate risks by passing excess inventory to stores in Tier 3 and Tier 4 cities.
Recent Controversy
Misgivings have arisen about the state of affairs in Koutons Retail India Ltd after the company
saw the exit of three directors and two senior executives, including the chief financial officer
(CFO), since 10th July, 2010.
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The timing of some of these exits just ahead of the finalizing of the quarterly accounts has raised
concerns about the firm’s financial health.
Rajiv Grover, an independent director, and Anik K. Khatod, who represented the $2 billion
(Rs9,360 crore) fund Argonaut Private Equity, left on 3 August. Ajay Mittal, appointee of
Bangalore-based venture capital firm UTI Ventures, resigned on 21 August.
Their departures were preceded by the exit of CFO Ajay Mahajan in an exodus triggered by the
resignation of the company secretary, Ramit Rastogi, on 15 July.
Koutons held a board meeting on 13 August to consider and take on record un-audited financial
results for the quarter ended 30 June and also declared the audited result for fiscal 2010. Another
meeting to consider and approve the annual accounts for the fiscal year ended 31 March is
expected in September.
“We are experiencing some challenges in cash flow on account of higher working capital
requirement, but do not need any major debt recast,” said chairman D.P.S. Kohli. “We, however,
are contemplating a reorganization of our business (as well as) exploring options of alternate
debt/lenders to reduce interest costs.”
The exits have not led to a liquidation of investments by private equity (PE) investors so far.
Most of the major shareholders—including Argonaut, Fid Funds (Mauritius) Ltd, ING Vysya
Life Insurance Co. Ltd, Lloyd George Investment Management (Bermuda) Ltd and Fortune
Credit Capital Ltd— remain invested in the firm.
“We have not sold. We can afford to take a long-term view if required,” said a PE investor, on
condition of anonymity.
Debt currently stands at Rs570 crore, including working capital limit of Rs425 crore. The bulk of
the working capital limit is used for the manufacturing division, Kohli said.
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Koutons, established in 1991, sells clothing for men, women and children from 1,374 outlets
across India. It moved up the value chain from a garment manufacturer to a retailer by opening
its own stores in 2002.
“Koutons has a healthy debt equity ratio of 1.2 and there is no need for CDR (corporate debt
restructuring),” said Kohli.
He said the firm did expand rapidly since its initial public offering in 2007, but the debt taken on
was within comfortable limits and a necessary part of its penetration strategy to precede later
consolidation.
“We believe retail, like any other consumer-driven venture, has to explore and go beyond before
discovering right size and format. The next phase of growth should start thereafter. We are going
through our consolidation phase to prepare for next growth journey,” he said.
One key investor, who declined to be named due to the sensitivity of the information, has cited
inventory problems as being fairly common in the retail industry, with Koutons being no
exception.
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Company Information
Type- Private
Industry- Apparel
Founded- 1853
Products- Jeans
Employees- 11,400
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Divisions- Levi's, Dockers, Signature by Levi Strauss & Co.
In 1853, the California gold rush was in full swing, and everyday items were in
short supply. Levi Strauss, a 24-year-old German immigrant, left New York for
San Francisco with a small supply of dry goods with the intention of opening a
branch of his brother’s New York dry goods with the intention of opening a
branch of his brother’s New York dry goods business. Shortly after his arrival, a
prospector wanted to know what Mr. Strauss was selling. When Strauss told him
he had rough canvas to use for tents and wagon covers, the prospectors said,
“You should have brought pants,” saying he couldn’t find a pair of pants strong
enough to last.
HISTORY:
The two horse brand design was first used in 1886. The red tab attached to the
left rear pocket was created in 1936 as a means of identifying Levis jeans at a
distance. All are registered trademarks that are still in use.
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In the 1950’s and 1960’s levis jeans became popular among a wide range of
youth sub cultures including greasers, mods, rockers, hippies and skin heads.
Levis popular shrink-to-fit 501s were sold in a unique sizing arrangement; the
indicated size was related to the size of the jeans prior to shrinking and the
shrinkage was substantial.
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two decades of family ownership, rumours of a possible public stock offering
were floated in the media in July 2007.
In 2009, it was noted in the media for selling Jeans on interest-free credit, due to
the Global Recession.
Founder’s Profile:
Levi Strauss - Founder of Levi Strauss & Co.
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Early Life:
On February 26, 1829, Levi Strauss was born in Buttenheim, Bavaria to German-
Jewish parents. In 1845, Levi's father died, and his two older brothers left to join
the Jewish community in New York City. Two years later, Levi, with his
mother and two sisters, joined the brothers. Levi found work in his brothers'
dry goods business.
Career Start:
After a brief stint at his uncle's ranch in Kentucky, Levi became an American
citizen in 1853 and moved to San Francisco to take advantage of the California
Gold Rush. There, he set up a small dry-goods house with brother-in-law David
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Stern. Levi responded to the miners' needs for a sturdy pant that would survive
the rough mining conditions, and started making denim fabric.
The business became known as “Levi Strauss & Co." and by 1870, Levi was a
millionaire.
In 1873, Jacob Davis, a European immigrant tailor and customer of Levi Strauss,
approached Levi with an idea for a patent. Davis had been using rivets to
strengthen the pocket corners of Strauss' denim fabric. Davis told Levi that if he
put up the money for the patent application, Davis would share the patent with
him.
The deal was struck and the patent was granted in to Strauss and Davis 1873.
Levi Strauss & Co. brought the new workpants to market, and, in 1890, began
using the lot number “501” to identify the product: the birth of the infamous 501
blue jean.
Leaving a Legacy:
Levi Strauss died on September 27, 1902 at the age of 73 years. He never
married, and his nephews inherited the company. Levi Strauss & Co. continues
to be privately held by descendants of the family of Levi Strauss.
The generosity that Strauss was known for during his life continued after his
death. His will contained a number of bequests to Bay Area charities which
serve children and the poor. In addition, the 28 University of California,
Berkeley scholarships that Strauss established in 1897 are still in place
today.
Company’s Profile:
Values & Vision
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We believe that business can drive profits through principles, and that our
values as a company and as individuals give us a competitive advantage.
Empathy — walking in other people’s shoes
Empathy begins with paying close attention to the world around us. We listen
and respond to the needs of our customers, employees and other stakeholders.
Originality — being authentic and innovative
The pioneering spirit that started in 1873 with the very first pair of blue jeans still
permeates all aspects of our business. Through innovative products and
practices, we break the mould.
Integrity — doing the right thing
Integrity means doing right by our employees, brands, company and society as
a whole. Ethical conduct and social responsibility characterize our way of doing
business.
Courage — standing up for what we believe
it takes courage to be great. Courage is the willingness to tell the truth and to
challenge hierarchy, accepted practice and conventional wisdom. It means
standing by our convictions and acting on our beliefs.
We are the embodiment of the energy and events of our time, inspiring people
from all walks of life with a pioneering spirit. Generations have worn Levi’s®
jeans, turning them into a symbol of freedom and self-expression in the face of
adversity, challenge and social change. Our customers forged a new territory
called the American West. They fought in wars for peace. They instigated
counterculture revolutions. They tore down the Berlin Wall. Reverent, irreverent
— they took a stand.
brands.
Product Profile:
45
LEVI Strauss & Co. (LS&Co.) strives to provide the world’s casual workday
wardrobe, inside and out. LS&Co., a top manufacturer of brand-name clothing
globally, sells jeans and underwear under the Levi’s, Dockers and Levi Strauss
Signature in more than 110 countries. It also markets men’s and women’s
underwear and loungewear. Levi’s jeans –department store staples- were once
the uniform of American youth, but LS&Co. has been working to reconnect with
the niche and expand outside the US. It has transformed its products portfolio to
include wrinkle-free and stain resistant fabrics used in making some of its Levi’s
and Dockers slacks.
The brands at Levi Strauss & Co. have clothed the generations around the world,
and their products are marketed under leading brand names that are among the
most successful apparel brands in the world. Levi’s® brand is one of the most
widely recognized brands in the history of the apparel industry.
From updating classics with the latest finishes, fabrications and colors, to
reinventing five-pocket jeans, they are always creating new, innovative products.
Invented in 1873, Levis® jeans are the original, authentic jeans. They are the
most successful, widely recognized, and often imitated clothing product in the
history of Apparel industry.
Products:
46
Men:
47
Women:
48
Kids:
49
Top Ten Reasons to Work at Levi Strauss:
50
Work Culture:
We hire high-calibre team players who share our values and our drive to be
first, fast and best. We promise an open team environment where employees
can be honest, direct and supportive. We require collaboration and, at the same
time, robust debate.
By nature, we are externally focused and we are determined to stay that way.
This means constantly scanning developments that affect our business, and
acting on that information to surprise and delight our customers.
Innovation is woven into the fabric of our company. We strive to make the
extraordinary happen, and we mean it with our brands, our business practices
and in all other possible ways.
The more we win the more change we can make. That, too, is part of our
culture because we are a company that believes we’re here for something
bigger than ourselves. Like our founder Levi Strauss, we apply original,
courageous thinking to seemingly intractable problems. From environmental
sustainability to ethical product sourcing, we look at the big picture of corporate
citizenship, focusing on the toughest, most complex challenges facing our world
today.
We have a long and distinguished history of corporate citizenship, including our
unwavering commitment to responsible business practices. To ensure we
provide our employees with a clear set of standards and guidance for
conducting our business with integrity and the highest degree of compliance
with the law, we established our Worldwide Code of Business Conduct.
The Global Anti-Bribery and Anti-Corruption Policy provides additional, specific
guidance on two critical sections of the Worldwide Code of Business Conduct –
Compliance with Laws, Rules and Regulations and Government Officials.
BENEFITS:
Financial Education
The Red Tab Foundation also provides educational programs and services to
help people learn how to develop spending and savings plans and manage credit
card debt.
Apparel
Corporate employees receive a 30 percent discount at all company owned- and-
operated stores and e-commerce sites. They also may purchase Levi’s®,
Dockers®, and Signature by Levi Strauss & Co. ™ apparel at a significant
discount at periodic sample sales.
Excellence Award
The Excellence Award is given annually to recognize “best in class” employees in
each of our three regions. The award is given to employees and employee teams
who help to further our company’s vision while contributing to our strategic and
annual operating plans.
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Worldwide Koshland Award
The Koshland Award is the highest honour employees can receive. This award
recognizes the “best of the best” performance worldwide, decided by the
company’s most senior leaders.
Matching Gifts
Employee financial contributions of up to $1,200 per year, made to eligible non-
profits, are matched dollar for dollar by the Levi — for U.S. based employees.
Community Day
Community Day reflects our long-standing history of supporting communities
where we do business. Each year, an annual Community Day event is held
combining community service, grant making, team building, and fun.
53
Community Service Grants
Employees who actively serve on the board of a non-profit, or have
volunteered for at least one year, may apply for a Community Service Grant
for their charitable organizations for up to $1,200 per year — for U.S. based
employees.
Organisational Structure:
Levi Strauss & Co. Is a worldwide corporation organized into three geographic
divisions: Levi Strauss America(LSA), based in the San Francisco headquarters;
Levi Strauss Europe, Middle East and Africa(LSEMA), based in Brussels; and
Asia Pacific Division(APD), based in Singapore. The company employs a staff of
approximately 10.500 people worldwide, and owns and develops a few brands.
Levi’s the main brand, was founded in 1873 in San Francisco, specializing in
riveted denim jeans and different lines of casual and street fashion.
From the early 1960s through the mid 1970s, Levi Strauss experienced explosive
growth in its business as the more casual look of the 1960s and 1970s ushered
in the “blue jeans craze” and served as a catalyst for the brand. Levi’s, under the
leadership of Jay Walter Haas Sr., Paul Haas Sr., Paul Glasco and George P.
Simpskins Sr., expanded the firm’s clothing line by adding new fashions and
models, including stoned washed jeans through the acquisition of Great Western
Garment Co. (GWG), a Canadian clothing manufacturer, acquired by Levi’s.
GWG was responsible for the introduction of the modern “stone washing”
technique, still in use by Levi’s Strauss.
Mr. Simpskins is credited with the company’s record paced expansion of its
manufacturing capacity from fewer than 16 plants to more than 63 plants
nationwide from 1964 through 1974. Perhaps most impressive, however, was
that Levi’s expansion under Simpskins was accomplished without a single
unionized employee as a result of Levi’s and the Hass families’ strong stance on
54
human rights and Simpskins’ use of “pay for performance” manufacturing
at the sewing machine operator level up. As a result, Levi’s plants were
perhaps the highest performing, best organized and cleanest textile
facilities for their time. Levi’s even piped in massive amounts of air conditioning
into its press plants, which were known in the industry to be notoriously hot, for
the comfort of Levi’s workers.
2004 saw a sharp decline of GWG in the face of global outsourcing, so the
company was closed and the Edmonton manufacturing plant shut down. Dockers
was launched in 1986. Sold largely through department store chains, helped the
company grow through the mid-1990s, as denim sales began to fade. Levi
Strauss attempted to sell the brand in 2004 to relieve part of the company’s $2
billion outstanding debt.
Launched in 2003, Levi Strauss Signature features jeans wear and casual wear.
In November 2007, Levi’s released a mobile phone in co-operation with
modelabs. Many of the phone’s cosmetic attributes are customisable at the point
of purchase.
Worldwide Regions
Levi Strauss & Co. employs a staff of approximately 10.00 people worldwide,
including approximately 1,010 people at its San Francisco, California
headquarters. Levi Strauss & Co. is a worldwide corporation organized into three
geographic divisions:
Levi Strauss & Co.’s Asia Pacific Division is comprised of subsidiary businesses,
licenses and distributors throughout Asia Pacific, the Middle East and Africa.
The divisions sources, manufactures and markets at Levi’s®, Dockers®, and Levi
Strauss Signature® products through affiliates.
Hierarchy:
55
Bob Haas- Chairman
• R. John Anderson- SVP, North American
Region Operations
David Bergen- President, COO, and Director
56
♦ Mary Boland- VP, Finance, Levi Strauss North America
Management Team
Our worldwide leadership team, which includes the CEO and 11 executives, sets
the company’s overall direction and is responsible for all major strategic, financial
and operational decisions.
57
Armin Broger Robert Hanson
President, Levi President, Levi
Strauss, Europe Strauss Americas
58
Jaime Cohen Cathy Unruh
Szulc Senior Vice
Senior Vice President, Global
President & Human Resources
Chief Marketing
Officer, Levi’s®
Brand
Board of Directors
• R. John Anderson
• Vanessa J. Castagna
• Peter A. Georgescu
• Robert A. Eckert
• Robert D. Haas
• Richard L. Kauffman
• Leon J. Level
• Stephen C. Neal
Marketing Strategies:
Executive Summary:
59
Levi’s Strauss and Company is one of the world’s largest brand-name apparel
marketers. The company manufactures and markets branded jeans and casual
sportswear under the Levi’s, Dockers, and Slates brands for men, women, teens,
and children.
Situational Analysis:
Levi Strauss and Company is approaching to the saturation of Jean Market. The
fast changes in consumer tastes, competition from both lower and higher-end
brands, the fast development in the modern distribution and sales technology has
brought about a continuing loss of market share.
A new series Engineered Jeans has been developed and launched as part of a
program intending to meet the needs of their major target, in order to regain lost
market share and maintain their position in the industry. Their expertise in Jeans
and casual dress industry will be fully exploited at a world basis.
Market Demographies:
The company makes clothes for men, women, Teens and children. So everyone
is a potential customer for Levi’s. Levi’s generally appeals to more mature
generations not necessarily looking to make a fashion statement. Levi’s makes
an effort to appeal to all customers in one way or another, which been a key to
their success over the years.
Market Needs:
It’s not just how good a product is that determines if consumers will buy it,
“Many people find themselves motivated by several different factors when that
all-important decision to purchase a specific product is made. For some it is as
simple as comparing prices, but for many others there are many emotional
factors that weigh heavily on their decision. Does this product make me feel good
about myself? What image does this product present me with? What effect will
owning this have on my life? Consumers ask themselves questions such as
these when making decisions about whether or not to buy something.
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Do people want to be like someone they see in an advertisement? This question
is the basis for marketing, particularly in the clothing industry. Buyers over the
years have liked the rugged, confident, individualistic, and laid-back image that
Levi’s give them. This image, which has been created through the company’s
intelligent marketing schemes, has allowed to company to maintain its prosperity
over the years.
Market Trends:
Technology is changing products, promotion, place and price. Thus, for instance
products such as jeans in USA have a wider fifth pocket to hold a pager device;
the transfer pants have contract stitching and side pockets big enough to hold a
CD player. Promotion is facing new approaches through Internet advertising.
Distribution is enhancing by using electronic data interchange (EDI). Levis value-
delivery network that connects itself with its suppliers and retailers allow it to
order more fabric for the next day out of the purchases of its major retailers.
Communication and coordination activities, and therefore commercial
relationships with licenses, improve as a result of a better technology.
Marketing Objectives:
• To improve leadership market positions and superior product and services.
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Financial Objectives:
Since reaching its peak in 1996, the company has declined drastically each year
in terms of sales. The “Global Success Sharing Plan” has since been cancelled
because the goals set in 1996 are now unrealistic. As has occurred in the past,
many competitors are once again taking customers away from the company.
When Levi’s reached this lowest of points, it was decided to open executives’
books to a wider group of investors by realising public quarterly earnings.
Therefore, the objective is to regain the earnings reaped during 1996 at 12% of
capital profitability.
Target Market:
The company markets a broad line of branded jeans-wear, casual wear and
dress pants that appeal to diverse demographic groups in markets around the
world. Through a number of sub-brands and product lines under the Levi’s(R),
Dockers(R) and Slates(R) brands, they target specific consumer segments and
provide product differentiation for their retail customers in their selected
distribution channels. More information about target markets can be shown in the
product offering section.
Positioning:
Positioning differs between countries and market segments. For example, in
America and much of Europe the emphasis is on Jeans as casual attire. In
contrast, Russian wears indicates to social fashion awareness and high status
(Jeannet, 1998)
For adolescent and younger adults (14 to 24 years) who want casual attire,
Engineered Jeans by Levi’s provide a unique fit and functional status, unlike
other competitors like Wrangler and Pepe.
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63
Future strategies
in India:
Levi’s India is changing the marketing strategies for its Denims and Non-
Denim brands. On the one hand it is seeking to expand its presence in the
Premium and Super-Premium segment by launching more products in this
segment. On the other hand, it is seeking to strengthen its Value Brand –
Signature. Launched last year and priced between Rs 599-Rs999 (USD 15-
USD 25) in small towns and up to Rs 1399(USD 35) in larger towns,
Signature seeks to capture a large share of the Value segment of Branded
64
Jeans – which is currently estimated at about 10 million units – by having
more than 5000 sale points for the same throughout India (as against 1000
currently).
The estimates for the market of Premium and Super Premium denim in India
are about 7 million and 3 million (though I need to verify the same) and offer
substantial possibilities for growth for brands like Levi’s. However, the going
will not be as smooth since Levi’s will not be able to offer great washes in its
Signature line – and washes are one of the biggest factors for purchase of
Jeans by the young.
News Article:
65
San Francisco's iconic denim major, Levi Strauss, is planning to open 1050
stores across India in the next three years.
Shumon Jaya Chatterjee, managing director of Levi Strauss India, said: "We aim
to open a store each day in the next three years."
The company plans to have exclusive Levi's stores in 100 towns and Dockers’
stores in 500. It will also have exclusive signature stores in 1000 towns.
Of 7.5 crore pairs of denim sold in India each year, 1.2 crore pairs are sold in six
major towns. Levi Strauss has 30% share of the premium segment of the denim
market and 10% of the overall market across price segments in the country.
While 6.5 crore pairs are sold by the unorganised sector, the organised sector
accounts for only a crore. Eyeing the buoyant denim market in India, the
company wants to increase sales to half of the business in the US in the next five
years.
The company, founded in 1853 by a Bavarian migrant, Levi Strauss, will hit the
Latin American market with its entirely India-made version of street wear---
Sykes--- in September this year. The company launched it in Malaysia and
Singapore last year.
The street wear version of Levi's, launched four years ago to tap the 15-19 year
age group of non-denim users in India, was designed and manufactured in the
country.
Launched recently, Redwire are iPod-compatible jeans that merge the iPod plug
and play technology into the denim apparel. Redwire Jeans are priced at Rs
9,000 and are available for both men and women.
66
• San Francisco LGBT Community Center- Impact Award
2008
2007
2006
67
2005
• World Affairs Council of Northern California Award for Corporate
Citizenship in a Global Economy (2005)
2004
2001
• San Francisco Beautiful corporate award — in recognition of our inaugural
Community Day, held in 2000 (2001)
2000
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2009 Performance:
Despite the tough economic environment, 2009 was a productive year for Levi
Strauss & Coo. Our Levi’s® brand grew on a global basis. We also took
advantage of the global downturn to make business investments that strengthen
the company and position it for growth.
• Net revenue for 2009 was $4.1 billion, a 7 percent decrease versus the
prior year.
• Gross margin was 48.1 percent compared with 48.6 percent compared
with 48.6 percent in 2008.
• Operating Income was $152 million, down from $229 million the previous
year, primarily reflecting the operating margin.
• Net Income was $152 million the previous year, primarily reflecting the
operating income results.
• Debt, less cash at year-end, was $1.58 billion, our lowest year-end net
debt level in 13 years. This compare with $1.64 billion at the end of 2008.
69
LEVI STRAUSS & CO. AND SUBSIDIARIES
71
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$269,609
Accrued salaries, wages and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$195,434
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$28,709
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,993
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$726,976
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,834,151
Long-term capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,513
Postretirement medical
benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $156,834
Pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$382,503
Long-term employee related
benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $97,508
Long-term income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$55,862
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$43,480
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,735
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,320,562
Commitments and contingencies (Note 14)
Temporary equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,938
Stockholders’ Deficit:
Common stock — $.01 par value; 270,000,000 shares authorized; 37,284,741
Shares and 37,278,238 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . .
$373
Additional paid-in
capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$39,532
Accumulated
deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(123,157)
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(249,867)
Total stockholders’ deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(333,119)
Total liabilities, temporary equity and stockholders’ deficit . . . . . . . . . . . . . .
$2,989,381
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SWOT Analysis: Levi’s
STRENGHTS:
1. Having been around for one hundred and fifty years, Levi’s has been able
to gain and hold a specific share of the clothing industry. Other companies
do not come close to its jeans sales.
2. Its products under the Levi’s, Dockers and Levi Strauss Signature brands.
While Levi’s conveys an image of quality and innovation, the brand is
mostly recognized for its status as the original pioneer brand among
international customers.
3. With sales in more than 100 countries, Levi’s is a global company with
three geographic divisions: the Americas, Europe Middle East and Africa
and Asia Pacific.
5. Levi’s stands for something beyond profit. The family takes pride in
providing quality products, personal service and fair treatment. The family
name and tradition is associated with respect for people-customers,
employees, and the community.
WEAKNESSES:
1. The company is rapidly losing its market share to newer, trendier, more
aggressive brands and designer labels.
2. The Levi brand has lost luster and relevance to the younger generation.
Levi’s jeans are perceived to be their parent jeans.
3. Their tradition of promoting within may also be a reason for their dark
side. Long term managers are used to doing things a certain way, and
keep new ideas and new blood at a distance. The company is inwardly
focused, so they miss out the great changes occurring in the fashion
world.
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4. Their main flaw is that they do not have a clear development
strategic plan, do not pay attention and learn new technologies, and do
not keep track of the competition, market and consumer tastes.
OPPURTUNITIES:
1. In today’s society, the consumer is becoming more leisure oriented, and
wears jeans more often. Levi’s is still on top, and hold the majority market
share in jeans sales.
THREATS:
1. The company is subject to fast changing fashion trends.
3. The company faces threats from its nearest competitors like Sorenson,
GAP, Provogue, Lee, Guess, Polo etc.
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Tara Molloth
0911666
75
2BBA B
Company Information
Type Public
Industry Fashion
Products Clothing
Accessories
Perfumes
Website www.burberry.com
76
distinctive tartan pattern, a type of plaid pattern, has become one of its most widely
copied trademarks. The company has branded stores and franchises around the
world, and also sells through concessions in third-party stores. It runs a catalogue
business and has a fragrance line. HM Queen Elizabeth II and HRH The Prince of
Wales have granted the company Royal Warrants. Burberry's trademark products
are its handbags and fragrances. The Creative Director is Christopher Bailey. The
company is listed on the London Stock Exchange and is a constituent of the FTSE
100 Index.
History:
77
In 1891, Burberry opened a shop in the Haymarket, London, which still exists and
until recently was the site of Burberry’s corporate headquarters. Now the
headquarters are at Horseferry House just behind Houses of Parliament,
Westminster (London).
20th century
In 1901, the Burberry Equestrian Knight Logo was developed containing the Latin
word "Prorsum", meaning forwards, and registered as a trademark. In 1911 they
became the outfitters for Roald Amundsen, the first man to reach the South Pole,
and Ernest Shackleton, who led a 1914 expedition to cross Antarctica. A Burberry
gabardine jacket was worn by George Mallory on his ill-fated attempt on Mount
Everest in 1924.
In 1914 Burberry was commissioned by the War Office to adapt its officer's coat to
suit the conditions of contemporary warfare, resulting in the "trench coat". After the
war, the trench coat became popular with civilians. The iconic Burberry check was
created in the 1920s and used as a lining in its trench coats.
Burberry also specially designed aviation garments. A. E. Clouston and Mrs Betsy
Kirby Green made the fastest flying time to Cape Town from London in 1937 and
were sponsored by Burberry.
Recent history
78
Burberry was an independent company until 1955, when it was taken over by Great
Universal Stores (GUS). Burberry Group plc was initially floated on the London Stock
Exchange in July 2002. GUS divested its remaining interest in Burberry in December
2005.
In 2006 Rose Marie Bravo, who as Chief Executive had led Burberry to mass market
success, retired. She was replaced by current CEOAngela Ahrendts.
Operations
To complement the Burberry USA online store, Burberry launched their transactional
store in UK in October 2006; and in March 2007, extended order fulfilment across
selected European countries. In November 2007, fulfilment was again extended to
the whole of the EU. Both sites offer the latest new arrivals and classic pieces.
Company profile
Overview
From its founding in 1856 when Thomas Burberry constructed his first outerwear
garments for the sportsmen of Basingstoke, England, Burberry has become a
leading luxury brand with a global business.
The Burberry brand is defined by its:
• Authentic British heritage
• Unique democratic positioning within the luxury arena
• Founding principles of quality, function and modern classic style, rooted in the
integrity of its outerwear
• Globally recognised icon portfolio: the trench coat, trademark check and Prorsum
horse logo
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• Multi-category competency: womenswear, menswear, non-apparel and
childrenswear - with innovative outerwear as the foundation
• Channel expertise in retail (including e-commerce), wholesale and licensing
• Global reach: operations in markets throughout the world, with a balance across
major geographic regions
• A unified, passionate and seasoned management team
The Group management and their teams are challenged with the responsibility of
maintaining the integrity and vitality of this extraordinary brand while continuing to develop
a business which remains relevant to ever-evolving markets and consumer tastes. The
following pages outline Burberry's strategy under each of its five key strategic themes:
80
is one example of this in practice. In mid-January 2010, following a strong holiday season,
the merchant and design teams developed a capsule collection to supplement the main
Spring 2010 offering, which was then delivered to stores at the end of April.
• Licence amendment. In October 2009, the Group announced an
amendment to its apparel licence in Japan which better positions Burberry to optimise its
presence in Japan and the high-growth Asian region over the medium term.
• Spanish restructuring. 2009/10 also saw the restructuring of the Group's
business in Spain. Deteriorating performance during the previous two years in
combination with the poor state of Spain's economy had resulted in a local operation that
was no longer viable. While difficult, the closing of that operation in favour of integrating
the market with global Burberry is in the long-term best interests of the brand.
Leading digital
Through the integrated efforts of its Marketing, Creative Media and IT teams,
Burberry has built sector leading expertise in the digital media arena.
• Live streaming. The live streaming of the Spring 2010 show invited
consumers globally to share the full experience of a Burberry fashion show for the first
time. The brand broke new ground by live streaming in 3D the Autumn 2010 show to five
locations around the world. The webcast also allowed consumers to purchase runway
items for expedited delivery – another first for the luxury sector.
• Social media. The brand has established a leading presence across social
media platforms, creating new communities of interest. Burberry is the leading luxury
brand on Facebook with over one million fans. During the year, the Group also launched
artofthetrench.com, a social media website which introduces the iconic trench coat to the
digital generation and is attracting the new, younger luxury customer to the brand.
Core Values
The core purpose of the Burberry brand is to protect, explore and inspire. These
three values are at the heart of Burberry, its culture and behaviour as a company.
The work of the Burberry Foundation and further progress in corporate responsibility
demonstrates these values in practice.
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ethical trading, environmental responsibility and community investment. 2009/10
initiatives included a 30% increase in factory visits by Burberry representatives and a
reduction in CO2 emissions per unit of turnover from Group facilities.
Corporate Responsibility
Since its foundation in 1856, Burberry has sought to achieve the very
highest quality standards. This focus is an integral part of the brand and
informs ongoing efforts to ensure that Burberry is recognised as much for
operational excellence as it is for its luxury products. Putting Corporate
Responsibility at the heart of Burberry's business practices is a key part of
this philosophy, and speaks to the heritage and longevity of the brand as
well as its pioneering spirit.
• 30% increase in visits to product suppliers' factories over prior year to 634
• Launched Sustainability Leaders Initiative across the business
• Continued to reduce our CO2 emissions from the Group's buildings by a
further 9% per £1,000 of turnover
• Committed to purchasing 29% of all our UK electricity from Combined Heat
and Power and renewable sources in 2010 calendar year
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Corporate Responsibility Governance
Michael Mahony, Senior Vice President Commercial Affairs & General Counsel
is accountable for CR matters on behalf of Burberry and the Board. He chairs
the CR Committee which formally reports to the Group Risk Committee. The
CR Committee held three meetings during the year.
Burberry believes that its products should only be made in factories that
comply with local labour and environmental laws and by workers who work
fair but not excessive hours; are provided with a safe and hygienic work
environment; and who can exercise their right to freedom of association and
collective bargaining.
All Burberry suppliers are governed by its Ethical Trading Policy that sets
clear expectations regarding issues like living wage, child labour and regular
employment. Seven Burberry team members are charged with ensuring the
implementation of the policy throughout the supply chain as their sole
responsibility.
With periodic assistance from third-party auditors the team regularly visits
factories to assess their performance related to Burberry's Ethical Trading
Policy and develops factory improvement plans based on their findings.
Follow-up visits are conducted to ensure that the plans have been
implemented.
83
Burberry understands that it cannot solve supply chain issues on its own and
that a participative and collaborative approach is needed. Burberry will
continue to maintain an open dialogue with its suppliers, peer companies,
other brands, NGOs and trade unions to bring collective action to bear across
the supply chain.
Leather
Burberry joined the BLC Leather Working Group in order to have a clearer
understanding of the environmental impact of tanneries, investigate the
possibility of hide traceability and collaborate with other brands and tanneries
to improve environmental standards within the leather industry. Burberry
supports the working group's efforts to ensure the preservation of the
Amazon Biome (rainforest).
Fur
There has been, and will continue to be, occasions where consumer tastes
demand the use of fur. Burberry believes that any materials derived from
animals should be produced without inflicting cruelty or threatening the
environment. Burberry will not use fur if there is any concern that it has been
produced using the unacceptable treatment of the animals. For this reason,
Burberry does not source such materials from China. Fur is carefully sourced,
safeguarding the correct ethical standards and traceability. Fur is principally
sourced from SAGA furs which is known for upholding high standards of
ethical treatment of animals and shares the Group's concerns about animal
welfare. The farms that supply fur are open to third-party inspections at any
time and have been visited by the Burberry CR team.
Uzbek cotton
Following the deeply concerning reports relating to alleged forced child labour
in the Uzbekistan cotton industry, Burberry has taken steps to exclude Uzbek
cotton from its supply chain. In progress is a cotton traceability project
related to Uzbek cotton and other raw materials.
84
o Stakeholder engagement: Actively participated in the BLC Leather
Working Group and the Responsible Cotton Network
o Capacity building: Developed Corporate Responsibility Handbook for
vendors
o Worker hotline: Expanded confidential worker hotline to Japan and Italy
o Raw Materials Traceability: Agreed and signed contract to launch a
2010 traceability project
Environmental performance
85
2009/10 environmental performance results
Energy:
Packaging:
Business travel:
Waste:
Digitalisation:
86
o Converted lookbooks from paper to digital – used by buying teams and
wholesale customers to choose products. This is estimated to save 32
tonnes of paper and £70,000 annually
o Digitised visual merchandising props ordering process for regional
teams Information technology
o Launched an online environmental data management system to cover
100% of Burberry's global sites
87
The data in these graphs comes from a combination of automated and
manual internal processes. The majority is based on actual data,
supplemented, when necessary, by approximations.
Excellence in people
Organisational effectiveness
The Burberry brand captures the energy of youth and is underpinned by its
values – protect, explore and inspire. Burberry's workforce encompasses the
digital generation and experienced craftsmen and women. In the 2009 Long
Service Awards, the Company recognised service up to 45 years.
2009/10 results
88
o Recruitment: Successful implementation and roll out of Burberry's
global careers website has attracted over 20,000 applications for roles
in the Company this year.
o Organisational development: Continued evolution and development of
the organisation has enabled the Group to continue to ensure its
infrastructure and capability is able to deliver both the growth agenda
in line with the key strategic themes and the business efficiencies
Burberry is committed to.
89
that ensures all Burberry manufacturing sites and distribution centres are
audited at least annually with major offices and retail locations audited at
least once every three years. All audits were completed successfully with no
problems reported.
During the year, there have been a number of visits by regional enforcement
bodies all with successful outcomes and no required changes to systems or
processes.
To further strengthen this area, a Corporate Health and Safety Manager was
appointed whose role will be to further develop the Global management
system and related training programmes, incident management and key
performance indicators in the coming year. The most significant of which will
be an integrated Health and Wellbeing Policy linking a number of key
departments such as Human Resources, Talent Development, Facilities and
the external Occupational Health Provider.
Following the success of the Burberry Experience sales and service pilot
training programme during 2008/09, an enhanced programme has been
rolled out to mainline stores and concessions this year. Led by the Service
and Productivity teams at Corporate and in the Regions, more than 1,800
retail store employees have been trained this year. The training programme
has been designed for and delivered to all retail staff to ensure that the
customer experience is in line with Burberry's brand standards and luxury
positioning.
The evaluation of the effectiveness of the training is ongoing, and has shown
positive results and improvements in levels of service being delivered to our
customers globally. The training continues to be enhanced and extended to
improve leadership skills and productivity. The Burberry Experience will
continue to be rolled out to new markets where Burberry operates globally.
Community investment
90
Established in 2008, the Foundation is a philanthropic organisation dedicated
to helping young people realise their dreams and potential through the power
of their creativity.
The Foundation's goals are to help young people to:
Employee engagement
In-kind donations
Corporate donations
91
An ongoing part of doing business is to selectively support customer and
supplier-related events and charitable causes. Each regional office has a
discretionary charity budget which is managed and approved locally.
Disaster relief
Future Focus
We know that we can not do this important, difficult work alone. We will need
the committed support of our internal business partners and external
stakeholders to develop holistic, credible and effective programs to address
evolving and fundamental issues like living wage, purchasing practices and
the traceability of raw materials.
Product profile
92
Burberry branches out into many diffrent areas, these include, womenswear,
menswear, kidswear, women’s accesories, men’s assesories, shoe, beauty and
perfumes.
93
Womenswear:
94
Menswear:
95
Kidswear:
96
Womens and mens accessories:
Shoes:
97
Beauty:
Perfumes:
98
Heirarchy:
99
Directors and Management
Executive Directors
• Angela Ahrendts (49) , Chief Executive Officer
• Stacey Cartwright (46), Executive Vice President, Chief Financial
Officer
Non-Executive Directors
• Philip Bowman (57) , Senior Independent Director
• Ian Carter (48) , Non-executive director
• Stephanie George (53) , Non-executive director
• David Tyler (57) , Non-executive director
• John Smith (52) , Non-executive director
Marketing:
100
Burberry is a global luxury brand with a distinctive British heritage, core
outerwear base and one of the most recognised icons in the world.
Burberry designs, sources and markets apparel and accessories, selling
through a diversified network of retail, digital commerce, wholesale and
licensing channels worldwide.
Burberry operates in the global luxury sector which, for Burberry's relevant
categories, is estimated to be an approximately €150bn global market.
Since 2004, the global luxury goods market had grown by around 8% per annum
prior to the economic downturn in late 2008. In 2009, it is estimated that the global
luxury market declined by around 9%, as consumer confidence and spending fell.
Industry analysts expect the sector to show some recovery in 2010, although not as
high as the 8% seen prior to 2008.
Burberry competes with a variety of luxury goods companies. Some are large
international conglomerates, owning many luxury brands; others are focused on a
single brand locally; while others are small, more localised operations. Burberry's
relevant peer group differs by product category – non-apparel, womenswear,
menswear and childrenswear.
101
Retail: includes 131 mainline stores, 262 concessions within department
stores and 47 outlets, as well as digital commerce in 27 countries
Burberry sells its products to the end consumer through both the retail (including
digital commerce) and wholesale channels. For 2009/10, retail accounted for 58% of
revenue and wholesale 34%.
Burberry also has selective licensing agreements in Japan and globally, leveraging
the local and technical expertise of its licence partners.
RISKS
The management of the business and the execution of the Group's growth
strategies are subject to a number of risks. The risks set out below
represent the principal risks and uncertainties which may adversely affect
the management of the Group and the execution of its growth strategies
The steps the Group takes to address these risks, where they are matters within its
control, are also described. Such steps may mitigate but not eliminate these risks.
Some of the risks relate to external factors which are outside the Group's control.
102
The order of the risks is in no way an indication of their relative importance, and
each of the risks should be considered independently. If more than one of the
events contemplated by the risks set out below occurs, it is possible that the
combined overall effect of such events may be compounded.
Risks are formally reviewed by the Group Risk Committee (the 'Committee') who
meet at least three times a year. The membership of the Committee comprises the
Chief Executive Officer, Executive Vice President – Chief Financial Officer, Executive
Vice President of Corporate Resources, Chief Operations Officer, Senior Vice
President Commercial Affairs and General Counsel and the Director of Audit and
Risk Assurance. At the invitation of the Committee, the Director of Intellectual
Property, Director of Corporate Responsibility, Head of Risk Management and
representatives from other assurance teams regularly attend Committee meetings.
The assessment of the Group's risks and the processes in place for management
and mitigation of these risks are reviewed by the Audit Committee on a regular
basis. Key business risks are also considered by the Audit Committee and are
considered generally as part of the Group's strategic development and ongoing
business review processes.
In common with all Burberry's competitors, the global economic downturn affected
the level of consumer spending on discretionary luxury items. During a recession,
when disposable incomes are lower, a global downturn will adversely affect
Burberry's sales in certain markets.
Following a further review of Burberry's Spanish business, the Group announced the
planned restructuring of its Spanish Operations consistent with its strategy of
aligning Burberry in Spain with its global business model.
103
consistent manner, particularly in times when public sector debt is high and tax
revenues are falling. Furthermore, some of these countries have not had stable
governments historically and have been subject to political instability.
When the Group enters a new market, governance processes are in place to monitor
the implementation programme, which includes oversight by the Group's legal,
company secretariat, tax and audit and risk assurance departments. The Group
uses the services of professional consultants to advise on legal and regulatory
issues and to monitor ongoing developments.
Burberry's performance depends largely on its senior managers and design teams.
The resignation of key individuals or the inability to recruit individuals with the
relevant talent and experience to enable future business growth could adversely
impact Burberry's performance.
The cumulative change and significant growth within the business places a
significant pressure on resources and its IT systems
104
In a number of key product categories Burberry is reliant on a small number of
suppliers. During the year, the Group continued to strengthen its supply chain
management team to enable the further evolution and development of the
manufacturing base and also to mitigate the risk associated with over-reliance on a
number of key product suppliers. Where suitable alternatives exist, the Group has
reduced volumes with such suppliers and continues to look for suitable additional
alternatives where necessary.
The Group has a number of key customers whose business represents a substantial
portion of sales. The Group dedicates resources to these customers and maintains
close relationships with such customers to understand and respond to their needs.
The Group closely manages its relationships with key suppliers and customers which
includes monitoring their financial and non-financial performance.
A significant source of profit is derived from the royalties received from licensees,
specifically the Group's licensees in Japan and the fragrance licensee InterParfums
S.A. Burberry relies upon licensees to, among other things, maintain operational and
financial control over their businesses. Should these licensees fail to effectively
manage their operations, the Group's royalty income would decline. Failure to
manage these key relationships effectively could have a material impact on the
sales, profitability and reputation of the Group.
The Group regularly implements royalty reviews and audits of licensees, but cannot
guarantee that they will reveal any non-compliance with the terms of the relevant
licence.
To minimise the risks in Japan, Burberry has its own offices and operations in Tokyo
and closely monitors its relationships with licensees. During the year, the Group
amended the terms of its apparel licence with Sanyo Shokai and Mitsui in Japan. The
amendment, together with the non-apparel joint venture formed with Sanyo Shokai
and Mitsui in November 2008, better positions the Group to optimise its presence in
Japan and the high-growth Asian region.
105
other constraints, the Group is in any way unable to control its wholesale
distribution networks and licensees, the Burberry brand image, and therefore results
and profitability, may be adversely affected.
The Group expects its licensees, suppliers, franchisees, distributors and agents to
comply with employment and other laws relating to their country of operation and
to operate to good ethical standards. The Group, however, is unable to guarantee
that this is the case, although it continually monitors and improves its processes to
gain assurance that its licensees, suppliers, franchisees, distributors and agents
comply with its terms and conditions and relevant local legislation and good
practice.
Burberry could suffer if its supply chain is unable to produce and deliver
goods at a competitive price, on time and to its specification
If Burberry's suppliers fail to ship product on time, or product quality does not
achieve Burberry's standards, this could result in the Group missing delivery dates
to its customers, potentially resulting in cancelled orders or price reductions.
Further, such a failure could affect wholesale customers' confidence which could
adversely affect subsequent seasons' sales.
Burberry continues to evolve its supply chain strategy, refining its selection of
suppliers to maintain and enhance product quality whilst improving sourcing
efficiencies. The Group continues to rationalise its distribution network to minimise
unnecessary costs and to improve delivery timeliness and accuracy.
The Group's planning and pricing function has continued to improve inventory
management processes and effective product flow, facilitated by improved
reporting and visibility provided from the new IT infrastructure. Further
opportunities exist to improve inventory management processes and these will help
ensure that the Group continues to produce merchandise of the right quality, in
accordance with its ethical policy and delivered in accordance with its requirements.
During the year, the Group announced the restructuring of its Spanish operations
consistent with its strategy of aligning Burberry in Spain with its global business
model.
106
The Group's business depends, in part, on the ability to shape, stimulate and
anticipate consumer demand by producing innovative, fashionable and functional
products. Categories are cyclical, so it is critical the Group builds responsive product
teams to exploit trending categories, launch new categories and balance core
apparel and non-apparel categories.
The Group has evolved its product hierarchy and design calendar to enable
continued brand momentum, product refreshment and replenishment to be more
responsive to fashion and consumer trends and to respond more efficiently to
changing circumstances.
Burberry continues to protect its classic core market by adding innovation to further
stimulate sales to current customers, while attracting new customers to the brand.
The Group balances and plans all categories and brand icons through a strict
product hierarchy. To continue brand momentum, and to protect market share in
apparel and non-apparel categories, the Group features outerwear and the Burberry
Check icons as part of its marketing initiatives.
In response to high demand, the Group introduced the April Showers capsule range
in April 2010 to fulfil consumer demand and drive brand momentum.
Nevertheless, it is not possible to guarantee that the actions taken to establish and
protect the Group's trade marks and other proprietary rights will be adequate to
prevent imitation of Burberry's products by others. Trade marks and intellectual
property rights, while subject to international treaties, are largely driven by national
law and the protection of intellectual property rights varies from one jurisdiction to
another.
107
The Group cannot therefore necessarily be as effective in all jurisdictions in
addressing counterfeit products. In many territories the Group is dependent upon
the vigilance and responsiveness of law enforcement bodies whose priorities may
differ from the Group's. They are also subject to budgetary constraints and prioritise
their actions accordingly. Whilst the Group works closely with customs and other
law enforcement bodies, ultimately the Group cannot direct their actions.
In key emerging markets, including China and the Middle East, Burberry is
largely dependent upon third-party operators with the associated lack of
direct control and transparency and as the Group moves into increasingly
higher risk locations the operating and reputational risk increases
The Group has established joint ventures in Japan, the Middle East (excluding Saudi
Arabia) and India to collaborate with experienced operators in high-growth, under-
penetrated markets and improve its ability to ensure the operations are managed in
accordance with the Group's global standards.
Burberry derives a significant percentage of its profits from its Japanese licensing
arrangements. As a consequence, the Group is exposed to a significant risk
associated with the Yen to Sterling exchange rate. In addition, the Group is
continuing to expand its operations in the United States and Europe as part of its
strategy to accelerate retail expansion in key under-penetrated markets. As the
Group's presence in the United States and Europe increases, it is exposed to an
increased risk associated with the US Dollar to Sterling exchange rate and Euro to
Sterling exchange rate.
108
experienced, and expects to continue to experience, substantial seasonal
fluctuations in sales and operating results. In particular, results vary based on the
weather because of the large proportion of outerwear products Burberry offers and
the effect of the weather on retail markets generally. As a result of these
fluctuations, comparisons of sales and operating results between different periods
within a single financial year are not necessarily meaningful. In addition, these
comparisons cannot be relied on as indicators of the Group's future performance.
Competition in the luxury goods sector has intensified in recent years and Burberry
is faced with increasing competition in many of our product categories and markets.
The Group competes with international luxury goods groups who control a number
of luxury brands and may have greater financial resources and bargaining power
with suppliers, wholesale accounts and landlords. If Burberry is unable to compete
successfully, operating results and growth may be adversely impacted.
Financial statements:
Income statement:
109
Year to 31 March 2006 2007 2008 2009 2010
Revenue £m £m £m £m £m
Adjusted operating
profit *
110
(charge)
Revenue by
product category £m £m £m £m £m
Revenue by
destination £m £m £m £m £m
111
Americas 177,9 196,5 234,8 308,9 324,8
1 1
Retail/wholesale 661,8 764,2 910,6 118,9 182,4
1 1
Total 742,9 850,3 995,4 201,5 279,9
112
Cash Flow:
£m £m £m £m £m
113
Fair value losses on derivative - - (0,5) 10,7 (11,9)
instruments
114
Issue of ordinary share capital 3.7 0.6 0,5 - 1,9
115
116
Balance sheet:
117
Colum Colum Colum Colum Colum
n1 n2 n3 n4 n5
Balance Sheet
£m £m £m £m £m
ASSETS
Non-current assets
Current assets
LIABILITIES
Non-current liabilities
Current liabilities
• Primary
o Comparative study of fashion trends in the present day market and trend
analysis
o Comparison of the sales trends of different tiers in the same industry.
• Secondary
o Insight into the fashion and apparel industry
o Following of the sales and marketing trends and the changes different
companies adopt
o Customer outlook and requirements
o The requirements of the apparel industry a nd their effects.
119
Scope of Study
The scope of study for the apparel industry is quite broad on both the domestic and
international front.
Limitations of Study
• Secondary data source which has limited the scope of research and limited our
accessibility to the company itself as well as the core details of the industry.
• Time constraints due to which data couldn’t be collected directly from the
organization
• The company base would have been more comprehensive had it been more
broad. If more companies were taken up per industry for the review it would
have been much more beneficial to the details furnished.
Data Collection
The method of data collection has been through the collection of secondary data. The
sources have been many and varied.
Tools of Interpretation
Comparative Analysis
McKenzie’s 7S Model
PEST Analysis
Findings
Conclusion
Implications
Bibliography
Annexure
120
121