Crazy Leather where to invest and grow?Crazy Leather , a 20
million dollar export turn over company located in Chennai has
become a successful Leather goods manufacturing company today. Mr.
Prasad, 55 years old self mode business man started this company in
1975 as trade of footwear, had ups and downs in the 1980s and
finally made a strong network in Europe and North America. By 2000
he launched a wide range of leather jackets which lured thousands
of new customers. Leather jacket as a product, has few extra
advantages as compared to footwear (i) premium price (ii) few
competitors (iii) scope for new design and style (iv) cold and
affluent countries are the markets. Therefore, Prasad has now a
product focus. But there are few limitations whiles the product
moves from India from business angle, though India has a raw
material base, cheap labour and favourable government
policy.Western countries do not pay high price due to Indias
ability to build brand for leather jackets. Fashion and design
aspects percolate to India late. Hence, Indian manufacturer fails
to skim the market. While Italian brands command high price
countries like Pakistan and Ethiopia enter into many markets by
quoting ridiculously low prices for their jackets. Indian
manufacturers, including Crazy Leather have to work out different
strategy to sustain in the world market.The option is, to expand
business by setting up overseas manufacturing unit. Mr. Prasad has
selected two locations as outcome of six months study and planned
to start leather jacket production by Jan, 2006. One ideal
destination should be immediately finalized for manufacturing 60000
jackets per year.ParametersKenyaItaly
1. InvestmentMinimum( $1m)5 times higher
2. LabourCheap($2/day)20 times higher
3. R. MaterialAvailable nearbyImported from faroff
4. Demand in the marketLocal nil only exportHuge, the whole
Europe
5. Govt. incentivesIn many formsNil
6. BureaucracyHighLow
7. ProductivityOnly through workforceThrough automation
8. OwnershipWholly ownedOnly through local partner
1. What kind of business approach crazy leather should have to
setup an unit in Italy?2. By investing in Kenya, will crazy leather
have cost advantages? Categories them.3. Apply Porters model of
competitive advantages of nations to both the destinations?4.
Enumerate the risks which are involved in the business operation
both in Kenya and Italy?
