Asssignment of OM CEMBA

Open University of Sri Lanka –Commonwealth MBA Program Take Home Assignment – Operations Management-MCP 1604 Change the Strategy in Line with Challenges The apparel industry accounts for 67 % of total industrial production which contributes to 46 % of total production of Sri Lanka. Along with these emerging realities, Sri Lankan apparel industry is expected to be most vital industry for playing key role in island nation’s economy. However, in 2005, after phasing out of the Multi Fibre Agreement (MFA) which was signed by Sri Lanka for trade facilitations such as customs reduction and trade quotas led to find solutions for sourcing locations, contraction of markets, quicker trend changes and a global shift towards single-source design faced by the apparel industry. Odds and ebbs in transformation in the global apparel industry were a gigantic challenge for Brandix group who marked a leadership of apparel industry in Sri Lanka. In the wake of losing trade quotas, Brandix group had to counteract those challenges by applying unconventional strategy to consolidate its customer base in response to elimination of the MFA and the over supplied apparel market around the globe. They started to shift from their broad customer portfolio to deep and thin niche market segment providing all-inclusive fashion model, a strategy of innovation-to-execution, which integrated all aspects of fashion from developing to transforming into the final brand. The hallmark of Brandix is remarkable due to its contribution to the society and the economy of the island nation by delivering direct employment opportunities more than 22000 and indirect employment opportunities more than 11000 while it is capable of having turnover more than worth of US$ 320 million, including value addition more than 50 % surpassing the established norm through vertical integrated operations in textiles, thread, buttons and hangers. Therefore, Brandix has been the limelight in the apparel industry for steering the direction of the Sri Lankan apparel industry to be highly competitive in the global apparel market overcoming apparel manufacturing rivals adopting a strong focus of such as intimate wear, lingerie and underwear. Anticipation and Being Proactive Since its beginning, Brandix has taken measures to impart professionalism to the Brandix group to equip itself for meeting future demands by bridging the gap and its manufacturing level and global leading apparel manufactures. Brandix has been proactively committed to invest in future of apparel industry of the Sri Lanka by capitalising on its experience and expertise in the field to position sublime Sri Lankan apparel industry in the region. By excelling in the apparel field, Brandix has awarded following internationally and locally recognised institution by praising its achievements. 1|Page

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 In recognition of its contribution to the national economy as the Highest Net Foreign-Exchange Earner in 2005 the Outstanding Exporter of the Year award in the Apparel Category in 2005.  The Export Development Board of Sri Lanka identified Brandix as Sri Lanka’s largest Apparel exporter in 2007 by awarding the Gold Award in the Apparel Sector.  Most Outstanding Exporter of the Year award at the National Awards for Export Excellence in 2003.  The President’s Environmental Excellence Award in 2005.  Recognised for environmental excellence at the CIMA Community Leader Awards.  The Nagasaki Yamamoto Kaizen Award and the Taiki Akimoto 5S Awards in 2004.  National Safety Awards, National Productivity awards.  CIMA Community Leader Awards, Kaizen Awards and numerous customer-recognition tributes.  Social Responsibility Award by the American Apparel and Footwear Association in the Preservation of the Environment Category in 2006.

These achievements are not only just the output of their efforts in the field but also a stringent continuous dedication for accountability in business practices by actively pursuing ISO, SA8000 and WRAP certification programmes at its various plants by ensuring recognised quality and environment standards . As a business leader, Brandix has shown their dedication to be partisan of protections of rules and laws by signing an agreement with Microsoft Inc.to be compliance with intellectual property rights for the first time of Sri Lanka. Horizontal and Vertical Integration to be More Productive Brandix group starting its journey since 1972, by venturing in to untapped apparel manufacturing industry as Lux Shirts Limited. After acquiring Kuruwita Textile Mills in 1981, it intensified momentum of its journey along with LM Apparel, Gil garments, Phoenix Fashions, Kuruwita Manchester Textile Mills, Eden Fashions and Lakeside Garments to forge Brandix group what it is now over a period more than four decades. Recognising upward trends of substantial growth of the apparel sector, the group established A&E Lanka in 1990 and Lux Shirts Kahawatte in 1992. In 1993, the Kuruwita Textile Plant, LM Collections were set up while determinative steps were taken to combine the business under MAST Lanka Limited. For the first time, they started its operation abroad after expand their local operation by setting up Eden Fashions (Maldives) whilst concurrently investing in Ocean Lanka and Finitex Textile Finishing. In 1997, the Phoenix College of Clothing Technology, the nation’s first academic institution, was initiated to generate professionals for the contribution of Sri Lankan apparel industry. A series of joint ventures were adopted by Brandix with DTM Buttons, Phoenix Clothing, Quenby Lanka Prints, Comfortwear and Columbia Clothing as well as invest in Textured Jersey Lanka.

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Brandix group, took vital and strategic decision to rebrand the product in 2002 and commenced to operationalise in 2003 by restructuring into apparel, textile and accessories sectors. It is noteworthy to mention the acquisition of joint ventures interest with Mast Industries to form 100% Brandix Company in 2003 and established joint venture with A & E Brandix Hangers in 2004 expanding its operations including hanger productions. Within the period from 2005 to 2006, Brandix had a strategic move to establish Brandix Centre of Inspiration, an automated denim plant, and signed a MOU (Memorandum of Understanding) with India to launch for the Brandix Apparel City. Brandix finalised groundwork for Sintesi and signed MOU to establish Brandix Eco Zone in Horana. Expanding the Product Portfolio through Subsidiaries Enhancing Quality Even if the key production of Brandix is apparel, they are vehemently taking measures to enhance quality level and add more and more value to its service and production. By strategic goals of vertical and horizontal integration ensured the contributions of its subsidiaries specialise in different types of apparel, textiles, accessories, finishing and trimmings. The core product of the Brandix product portfolio is casual wear while its seven production facilities manufacture basic pants, cargo pants, five-pocket jeans, shorts and skirts. Brandix diverse product portfolio, which ensures to cater comprehensively huge spectrum of needs of clientele could be summarised in following manner. 1. Brandix Active wear The latest addition to the product portfolio and produces camisoles, T-shirts, hoodies, jackets, shorts and track bottoms in knit cotton/synthetics. 2. Comfortwear produces fine lingerie – bras, briefs, lingerie and swimwear – for both the European and American markets. 3. Brandix Intimate Apparel dedicates itself to fine lingerie, sleep wear, knit tops and lounge wear based primarily on fleece, knits and micro-satin 4. Sintesi Limited, produces moulded sew-free intimate and active wear. 5. Brandix Finishing Limited makes finishing an art as it undertakes wet processing and finishing. 6. Brandix Textiles Limited produces cotton and cotton Lycra woven fabric. Ocean Lanka and Textured Jersey produce weft-knit and dyed fabric 7. Quenby Lanka Prints Limited specialises in rotary screen and digital printing. 8. A&E Lanka produces industrial sewing, embroidery and filament thread. 9. Brandix Hangers manufactures and supplies 200 million hangers a year.

Advanced supply change management along with, fully integrated manufacturing facilities backed by sourcing offices, more than in 25 locations provided Brandix to be preferred providers to world highly 3|Page

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reputed apparel retailers by ensuring its adherence to the vision of Brandix, “to be the inspired solution to branded clothing ”. Innovation and Uphold Productivity through Technology An aggressive strategy adopted by Brandix was to respond to challenges emerged with the termination of MFA by infusing a huge chunk of money to expand Sri Lankan operations, invest in manufacturing infrastructure with additional production, research and development. The Brandix Centre of Inspiration (BCI) is a unique facility housing of a 250,000 square-foot, equipped with the latest technology for exclusive product designs, developments, central warehousing and cutting facility as well as marketing and merchandising operations. It’s an innovative and encouraging introduction of the casual-wear cluster’s one-stop point for design-to-delivery, expecting greater effectiveness and efficient from process of production. This an excellent opportunity to get a competitive advantage over competitors by using latest technology to enhance the capacity. Other than that, even other subsidiaries such as, Sintesi provides research, design and manufacture of moulded products while Intimate Apparel commenced operations at a 10-acre facility in order to expansion of production in 2007. Stevensons Lanka (subsidiary of Brandix) had a joint venture for exclusive dying operations with Quantum Clothing and Lanka Equities in Biyagama EPZ (Export Processing Zone). This is only dyeing plant equipped with hi-tech machines which can be used not only for cotton garments but also for softer garments made of material such as lamb’s wool, cashmere, acrylic and more sensitive blends of cotton and woollen garments. By creating investment opportunities for supply-chain and related service partners, Brandix used its vertical operation knowledge to set up Apparel City – a 1,000acre apparel-manufacturing park in India. Adopting Ethical Business Strategy for Sustainable Growth and Business with Human Face Ethical business is recent global paradigm shifting along with unprecedented challenges posed by the environment, society, civil and human rights and legal implications. Brandix believed that customer and vendor relationship is the most important success factors in their business with a great emphasize on the

working in an ethical, socially responsible and transparent manner. It has identified that

environment, people, technology, community commitment and compliance are elements of its growth and strategic orientation. Brandix has been an ethical employer by maintaining employees’ integrity and preserving confidentiality of all stakeholders to have sustainable growth in all aspects of its endeavour. In accordance with the commitments towards environment, it launched a Green Plan commissioned over five years from 2008 incorporating views of carbon neutralisation, waste and energy and energy

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Management, alternative energy options, cleaner technology initiatives, and health and safety amongst a host of measures to ensure a completely green-compliant organisation.

1)

There are a lot of factors that support business process by streamlining activities relating to planning, and implementation for maximum utilization of resource to achieve organizational goals. Success Factors are the areas of a business or a project that are absolutely essential to its success. By identifying and communicating these successful factors, the management ensure their business or project is wellfocused and avoid wasting efforts and resources on less important areas. By making successful factors explicit and communicating them with everyone involved, the management can keep the business on track towards common aims and goals of the business. First, the business of Brandix was started as Lux shirt limited in 1972 venturing into virgin apparel market in those days despite the risk which was abundant due to dynamics of incipient apparel market. As an entrepreneur, it is imperative to adopt risk and consequences even though some entrepreneurs have inertia to change and risk taking. Adopting risk without hesitation, Brandix had envisioned their opportunity for the future apparel market, throughout the journey of endeavour. Risk-taking was initial successful factors that greatly supported to venture in to various businesses, enlarging the Brandix image, by way of horizontal and vertical diversifications. They starting the strategy of horizontal integration by acquiring Kuruwita Textile Mills in 1982 and aggressively followed a series of acquisition of LM Apparel, Gil Garments, Phoenix Fashions, Kuruwita Manchester Textile Mills, Eden Fashions and Lakeside Garments. Being competitive is very important element of running business and a successful factor for a long term sustainable growth with future prospects for increasing market share. Horizontal integration is important strategic decision to increase market share in Sri Lankan and global market because the Horizontal integration creates a pool of technological skills and specialities, effective and efficient process of production and new market clientele. Vast inventory of business-conducive factors always assist to have competitive edge over the rivals for increasing market share by attracting customers. Hence, competitiveness of Brandix was a vital successful factor forged with various aggressive integration with various manufacturers and their research and development methods in line with latest technology. After the deregulation of market in Sri Lanka by adopting open economic policies from 1977, The Brandix had opportunities to export their production while they could import quality and cheap materials. However, they had a challenge of facing highly competitive environment due to new entrants to the local market with market liberalization policies. The power of competing with rivals mainly depends on the comparative advantage of a business which enables a business to produce efficiently and effectively at low cost with the quality than the other rivals of the market. In the Sri Lankan context, 5|Page

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cheap skilled labour rendered labour-intensive industries the comparative advantage. Brandix gained this advantage to exploit maximum opportunity of the market liberalization. Their continuous efforts in searching opportunities and exploiting them is an important successful factor in their business since Brandix group’s beginning. Globalization offers a bunch of favourable factors and those favourable factors of business come in various forms, sometimes in disguise. Brandix has been successful in focusing on trends in globalization and adopt those in favour of themselves. By establishing its first overseas production facilities with setting up Eden Fashions in Maldives in 1996, they started to have international foothold beyond Sri Lanka local boundaries understanding the value of globalization. This expansions assisted to Brandix get more and more market share and the favour of location along with trade quotas offered by MFA. After that, Brandix established Apparel City in India to create investment opportunities for global apparel supply-chain partners and related service providers. Globalisation is dynamic and Brandix also faced turbulences of market place after phasing out of MFA in 2005. But they didn’t give up their business efforts but changed their strategic direction upside in the stream by adopting strategic focus on how to respond to those opportunities and threats by changing from wide ranging product portfolio to narrow product portfolio. Their strategic plan of innovation-to-execution was very important to use their efforts, knowledge, skills and resources to focus on to specific area and do their best to offer more and more quality and productive products to global markets. The strategic focus of Brandix is very important success factor to run their business without falling into pitfalls in the periods of economic turbulence. The system resilience is another successful factor which come out as result of coordinating their plants, people (employees, vendors and customers) and resources in a way that they can easily change their strategic direction in accordance with market needs. Strong and healthier relationship among those contributing factors are very decisive to transfer their business values, aims and goals derived from the mission statement “to be the inspired solution to branded clothing”. This strong, transparent and healthier relation have fortified its successful factor, the system resilience. Brandix next giant leap was their vertical integration started within the period of 1998-2001 by joint venturing with DTM Buttons, Phoenix Clothing, Quenby Lanka Prints, Comfortwear and Columbia Clothing and the investment in Textured Jersey Lanka. This enabled Brandix to control other rivals of the apparel market and to have certain promised standards of inputs used for Brandix products. Because maintaining the quality of product and efficient and effective production are very important from just beginning of the process of production. Brandix have been preferred by reputed best apparel brands in the world for the quality of their product and Brandix take all measures to ensure the quality by maintaining through various research and development facility such as The Brandix Centre of Inspiration

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(BCI, the casual-wear cluster’s one-stop point for design- to-delivery). Product improvement has contributed to add value more than 50% of the product process in plants of Brandix. Hence, maintaining standard of the product and process by guaranteed quality, effectiveness and efficiency is another successful factor which supports Brandix to excel Sri Lankan apparel industry. Managing people is also an important success factor in Brandix and their locus of attention paid to development their employees by being ethical employer. For the first time in Sri Lanka, they introduce and set up of the Phoenix College of Clothing technology for the purpose of developing skills of their employee and labour market of Sri Lanka. Brandix anticipated that skilled labour market in Sri Lanka is very important to be market leader in the South Asian Region. The goal of enlarging the brand image of Brandix has been achieved through various vibrant and optimistic efforts such as Cooperate Social Responsibility (CSR) projects and adopting a green plan to minimise environmental effects from their production through waste management, using renewable energy, ensuring health, and protection of environments. These efforts have been successful in positioning the brand name locally and internationally because the world is more concerned over ethical products in compliance with human right protection, environment protection and intellectual property rights. Therefore, their ethical production and its reputation have been success of their business that attract more and more customers to their market.

2)

Strategic plan is formulated in line with the mission of the organization and this case Brandix has adopted its mission as “to be the inspired solution to branded clothing”. The mission of the company keep the organization focused on track because the mission creates a set of values. From the very beginning, forefathers of Brandix ventured into incipient apparel market with risk taking approach for the betterment of the organization. These decisions are not mere intuitive feelings which entice the management to take risky actions without evaluating the consequences. By observing the development of Brandix more than four decades, it’s not hard to understand by observing that they followed a well -formulated strategic plan. As per the mission statement Brandix really needed to come up with a new apparel production with higher quality product that attracts more customers. The strategic plan is not consistent continuation of set of hard and fast rules but it is a guideline which coordinates everyone and everything to pursue organizational bottom-line goals. a strategic plan should be just fanfare but an empirical approach that influences cooperate organizational strategy to run all the functions such as marketing, operations and financial. In this case, Brandix was responsive to external and internal voices that came from the market i.e. voices of the business and voices of the

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customer. Brandix changed their strategic plan according to the need of their environment, and they converted their threats as their opportunities. After the phasing out of MFA, Brandix faced a lot of problem raised from losing market quotas, quick transformation in apparel industry, markets were flooded with oversupply of apparel production and a global shift towards single-source design to delivery that offered total solutions. To overcome market and production turbulences, Brandix adopted unconventional strategy called innovation-to-execution which offered narrow product portfolio consisting of final branded products integrated with all aspects of

fashion

targeting

only

main

customers

instead

of

broad

product

portfolio.

Brandix has been distinctive market leader adopting a strong focus on products such as intimate wear, lingerie and underwear in the global market. This narrow focused approach helped the Brandix to use its full efforts and resource to introduce innovative products, product and process improvements, cater niche market and adopt core competencies of quality and innovativeness. These distinctive competence are not static and therefore, they needed to be developed, upgraded and changed. A series of horizontal and vertical integrations adopt by Brandix helped to build a supply chain which can be managed according to necessity of the production. Some approaches such as Lean productions can easily be approached minimise cost by alleviating waste while increasing the quality. Based on experience, knowledge, and know-how, core competencies represent sustainable competitive advantages and this is essential to organization excel in their field as Brandix has done. Order winners or order qualifiers is the characteristics of a product which is needed to be addressed prudently while both should be traded off by focusing much on order winners to excel in the industry. This case has exemplified the importance of adopting strategic to improve core competency that represents competitive advantage in the global apparel market. Effectiveness and efficiencies are important in the production process, Brandix has distinctive unit (BCI) dedicated for researching and developing for innovative productions according to customer’s requirements and product and process improvements. On the other hand this supports to add more value the final production earning higher profit margin to the business as well as export sector of the country. Strategic positioning is vital aspect of organization which is involved in international market. This is formed by choosing and focusing on one or two aspects from core competencies such as cost, speed, quality or innovativeness, flexibility. In the international market, comparative advantage is important to gain over the market competitors by using of inputs which are cheaper than the inputs used by market competitors.The cost has been

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reduced by using of comparative advantage of factors of production by setting up their plants in Maldives and India where some factors of production are abundant. Vertical and horizontal integrations have supported the smooth function of supply chain management which enables availability of inputs at right time, in right quantity and in right quality. Effective and efficient production process stemmed from the supply chain management, is paramount part of forming strategic position. Innovativeness of the production is very important to increase the market share by attracting new customers and retaining old customers. Research and Development is the tool, used to invent, improve product and process in line with market requirements. Flexibility is also integral part of strategic position, because it creates a buffer zone to absorb external shocks. External shocks such as economic turbulences, social trends, and legal implications are inevitable and uncertain. Brandix is good example of resilience used to fortify its strategic position encountering external impacts. Managing a business in dynamic world is not an easy task and hence, we have to change our plans according situational factors. Practical examples of implementation of strategic plan, strategic position are vital points in this case analysis, we can use to improve managerial skills to have sustainable growth in the business.

References 1.

Bernard W. Taylor, Roberta S. Russell. (2011). Operations Management Creating Value Along the Supply Chain. Hoboken: Wiley.

2.

www.brandix.com. (2014, 05 24). LKB. Retrieved from Superbrands: http://www.superbrands.com/lkb1/pdf/brandix.pdf

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