Environmental Analysis of Textile Industry

Journal of the Textile Association – May-June 2006 5

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ENVIRONMENTAL SCANNING IN INDIAN TEXTILECOMPANIES

S. K. SHARMA, SUNIL GIRI and DEEPA MANGALA

MANAGEMENT

INTRODUCTION

The success of the businessdepends on their managerialcaliber and ability to scan theenvironmental changes and torestructure or modify the businessstrategies in the concerned areas.

ENVIRONMENTAL SCANNING –BASIC APPROACHES

Kubr has suggested three basicapproaches, which could beadopted for sorting out informationfor environmental scanning.1

Systematic Approach

Under this approach, informationfor environmental scanning iscollected systematically. Informationrelated to markets and customers,changes in legislation andregulations that have a directimpact on an organisation’sactivities, government policystatement per taining to theorganisation’s business andindustry, etc. could be collectedcontinuously to monitor changesand take the relevant factors intoaccount. Continuously updatingsuch information is necessary notonly for strategic management butalso for operating activities.

Ad Hoc Approach

Using this approach, anorganization may conduct specialsurveys and studies to deal withspecific environmental issues from

Environment scanning leads to the identification of many issues that affect the organization. Theseissues could be judged on the basis of the intensity of their impact on the business of the organizationand the relative probability of such an impact. In this situation, it is a serious challenge to top businessexecutives/strategists how to manage their business portfolios effectively in the changing and turbulentenvironment.

Key words: AD-HOC, Stratigests, Portfolios.

time to time. Such studies may beconducted, for instance, when anorganization has to undertakespecial projects, evaluate existingstrategies or devise new strategies.Changes and unforeseendevelopments may also beinvestigated with regard to theirimpact on the organization.

Processed-Form Approach

For adopting this approach, theorganization uses information in aprocessed form available fromdifferent sources both inside andoutside the organization. When anorganization uses informationsupplied by government agenciesor private institutions, it usessecondary sources of data and theinformation is available in aprocessed form.

STATUS OF INDIAN TEXTILEINDUSTRY

The Indian textile industry is oneof the second largest employmentgenerating industry next toagriculture. It accounts for 14% ofthe total industrial production,contributes to nearly 30% of thetotal exports. The Vision Statementprepared by the Indian Cotton MillsFederation has projected that theindustry has the potential to reacha size of $ 85 billion by 2010 fromthe current level of $ 37 billion.Further, the Vision Statement hasestimated that textile exports couldtouch $ 50 billion by 2010 from $11

billion in 2002. India’s share in theglobal textile and clothing trade isexpected to double from 4% to 8%by 2010.2

Our textile exports during April-August 2005 has increased to$5776 million as compared to$5223 million during the sameperiod last year. It stands at just9% as compared to the currentyear’s target of 20%. The lower thanexpected growth is primarily dueto decline in unit value realizationdue to strong competition fromChina. Scrapping of export quotashad led expectation of a big boomin the textile expor t but ourperformance is poor as comparedto China. Despite restr ictions,China’s textile exports to the USgrew at near 55% in the first eightmonths of the current calendaragainst about 25% for India.3 Indiantextile players are in the processof expanding their capacity whileinvesting a huge amount.

Investment Plan of IndianTextile Companies

l Raymond plans to doublecapacity at the cotton shirtsfacility to 6,000 units per day,which will see investment to thetune of Rs. 640 crores.

l Welspun India is also planninginvestment to the tune Rs. 650crores to expand capacity andboost exports.

6 Journal of the Textile Association – May-June 2006

l S. Kumars Nationwide Ltd. Isexpanding capacity to 14million metre per annum, andexpecting expor ts wor thRs. 250 crores in the nextthree years.

l JCT is now on an expansiondrive. It is investing Rs. 300crores to expand its cotton andnylon production capacities.

l Indian Rayon has also spelt outa Rs. 536 crores capitalexpenditure programme for itsvarious division ranging fromtextiles and garments.

l Arvind Mills has alsoundertaken new projects sincethe mood is bullish despiteslow growth in overall exports.

l Vardhman group is alsoplanning to set up a new plantat M.P.

In this direction the textile ministryhas put forward three demands.

l The Industrial Disputes Actshould be amended forexempting exporting units fromlabour law provisions. This, theMinistry feels, will give thecompanies freedom to hireadditional labour. Gone are thedays when orders of fewthousand garment pieces usedto be considered big. Globalorders nowadays, may ask forthe delivery of millions of unitsat short notice. But orders ofthis size are usually seasonaland activity bound. So hiringpermanent workers to meet thistemporary surge in demanddoesn’t make economic sense.Producers would want toretrench workers when thereare no orders to be executed.

l Raise the number of workinghours from 48 to 60, for which,an amendment to the FactoriesAct of 1948 is needed.

l The Ministry has asked forclassifying export activity as apublic utility to curb strikes inthe sector.4

OBJECTIVES OF THE STUDY

To highlight and examine theenvironmental scanning process inIndian Textile Companies.

METHODOLOGY

This study is mainly based onprimary data, which have beencollected through specificallydesigned questionnaire from thestrategies designated likeChairman, Managing Director,President, Executive Director, JointPresident, Senior Vice President,Vice President etc.

SAMPLE SIZE

The researchers have selectedtwenty Indian Textile Companies i.e.Reliance Industr ies, GrasimIndustries, Ashima Syntex, CenturyTextiles, Mahavir Spinning, MalwaCotton Spinning, AbhishekIndustries, Indo-rama Synthetics,Vardhman Spinning, Indian Rayon,Century Rayon, Bhilwara Spinners,Modern Terry Towels, MaralOverseas, Modipon Fibres, SRFLtd., Vardhman Polytex, WelspunIndia, Agarwal Overseas andGontermann Peipers.

APPROACHES USED BY INDIANTEXTILE COMPANIES TOENVIRONMENTAL SCANNING

There are mainly two approachesi.e. Systematic and Adhoc. 13organisations are in favour ofsystematic approach whereas 07organisations have claimed thatthey used both the approaches forenvironmental scanning i.e.systematic and adhoc approaches(Table - 1). As per the opinion ofthe scholars it is essential on thepart of the organizations to useboth approaches for properenvironmental scanning in thepresent scenario.

Table – 1. Approaches used byIndian Textile Companies to

Environmental Scanning

Approaches Organisations

(A) Systematic 13

(B) Adhoc -

(C) Both 07

Total 20

Source: Personal Survey

SOURCES OF INFORMATIONUSED FOR ENVIRONMENTALSCANNING BY INDIAN TEXTILECOMPANIES

Organisations collect the requiredinformation for EnvironmentalScanning from various sources likedocumentary, internal sources,external agencies, formal studies,mass media and spying. Table – 2represents the sources ofinformation used by the selectedorganizations for environmentalscanning. On the basis of individualrank internal/formal data bank isthe main sources of information forenvironmental scanning which havebeen claimed by 17 organisationsout of 20. Informal data source/documentary, formal studies andexternal agencies secured almostequal weightage with a number of14, 13 and 13 respectively.

Table – 2: Sources of Information Usedby Indian Textile Companies for

Environmental Scanning

Sour- Organisa- Rankces tions

(A) Internal/FormalData Bank 17 I

(B) Informal Data 14 IISources/Documentary

(C) External Agencies 13 III

(D) Formal Studies 13 III

(E) Spying 01 IV

(F) Others – –



METHODS USED FORENVIRONMENTAL SCANNINGBY INDIAN TEXTILE COMPANIES

Judgement and Quantitative areimportant methods forenvironmental scanning. Majority ofthe organizations i.e. 17 used boththe methods for environmentalscanning. There were only 2 and 1organisation(s) who have usedquantitative and judgementmethods respectively (Table – 3).Of course single method will notserve the purpose that is why it isessential on the par t of theorganizations to use both themethods for proper environmentalscanning.

Table – 3 : Methods Used by IndianTextile Companies for Environmental

Scanning

Methods Organisa-tions

(A) Judgement 01

(B) Quantitative 02

(C) Both 17

Total 20


Techniques used forEnvironmental Scanning byIndian Textile Companies

Strategists may choose thetechniques which suit their needsin terms of the quantity, quality,availability, timeliness, relevanceand cost of environmentalinformation. Various authors havementioned the methods andtechniques used for environmentalscanning. LeBell and Krasneroutline nine groups of techniques:single-var iable extrapolation,theoretical limit envelopes, dynamicmodes, mapping, multivar iableinteraction analysis, unstructuredexpert opinion, structured expertopinion, structured inexpert opinionand unstructured inexper tspeculation.5 Fahey, King andNarayanan have included tentechniques in their survey ofenvironmental scanning and

forecasting in strategic planning.These are: scenario-writing,simulation, morphological analysis,PPBS, game theory, cross-impactanalysis, field anomaly-relation,multiechelon coordination and otherforecasting techniques.6 Whilemany of these techniques arebased on statistical methods usedfor forecasting some of them, likescenario-writing, may not usestatistical information but employinformed judgement and intuition topredict what the future is most likelyto be, expressed in the form of adescriptive statement or report.

Scenario Writing, Decision TreeAnalysis, Trend Analysis, CustomerDialogue and Basic StatisticalForecasting are the importanttechniques which are used bymajor ity of organiasations forenvironmental scanning andrequires lot of efforts in their uses.14 organisations out of 20 appliedtrend analysis for environmentalscanning whereas 13 organisationshave treated customer dialogue asimportant technique (Table – 4).There are two more techniques i.e.Scanario Wr iting and basicstatistical forecasting whichsecured the equal number i.e. 4.Of course the use of abovetechniques is not a easy task onthe part of the organizations.Organizations require a few expertsin the area of statistics andoperations research.

Table – 4 : Techniques Used by IndianTextile Companies for Environmental

Scanning

Techni- Organisa- Rankques tions

(A) Scenario Writing 04 III

(B) Decision TreeAnalysis 03 IV

(C) Trend Analysis 14 I

(D) CustomerDialogue 13 II

(E) Basic StatisticalForecasting 04 III


QUEST Used by Indian TextileCompanies for EnvironmentalScanning

B. Nanus proposed QuickEnvironmental ScanningTechniques (QUEST) forenvironmental scanning, whichincludes a four step process:

(1) Strategists make observationsabout the major events andtrends in their industry.

(2) Then, they speculate on a widerange of important issues thatmight affect the future of theirorganizations by scanning theenvironmental broadly andcomprehensively.

(3) The QUEST director preparesa report summarising the majorissues and their implications,and three to five scenariosincorporating the major themesof the discussion.

(4) The report and scenarios arereviewed by the group ofstrategists who identify feasiblestrategic options to deal withthe evolving environmentalconditions. The options areranked and teams aredesignated to developstrategies.7

Quick Environmental ScanningTechnique (QUEST) is also a goodtool for environmental scanning butunfortunately only 6 organisationshave used it. Fourteen organiza-tions i.e. 70% have given thenegative response to the request.The status of QUEST of theselected companies have shown inTable – 5.

Table – 5 : QUEST Used by IndianCompanies

Status Organisa-tions

(A) Used 06

(B) Not-Used 14

Total 20



Factors affecting the process ofEnvironmental Scanning

Researchers have consideredstrategic related factors,organization related factors andenvironmental related factors whichaffects the process ofenvironmental scanning.8

Strategist-related factors

There are many factors related tothe strategist, which affect theprocess of environmental appraisal.Since strategists play a central rolein the formulation of strategies, theircharacter istics such as age,education, experience, motivationlevel, cognitive styles, ability towithstand the time pressure andstrain, etc. have an impact on theextent to which they are able toappraise their organisation’senvironment and how well they areable to do it. Apart from thesefactors, related to strategists asindividuals, group characteristicstoo have an impact on how wellenvironmental appraisal is done.Such group characteristics could bethe interpersonal relations betweenthe different strategists involved inappraisal, team spirit, and thepower equations operating betweenthem.

O R G A N I S AT I O N - R E L AT E DFACTORS

Like those of strategists, manycharacteristics of the organizationalso have an impact on theenvironmental appraisal process.These characteristics are thenature of business the organizationis in, its age, size and complexity,the nature of its markets, and theproduct or services that it provides.

E N V I R O N M E N T- R E L AT E DFACTORS

The nature of environment facingan organization determines how its

appraisal could be done. Thenature of the environment dependson its complexity, volatility orturbulence, hostility, and diversity.

Majority of the strategists haveclaimed that environmental relatedfactors (10) as an import factorwhich effect the process ofenvironmental scanning followed byorganization related factors andstrategist related factors with anumber of 6 and 6 respectively(Table – 6). It may be analysed fromthe table that environmental relatedfactors must be given dueimportance for the environmentalscanning. Strategists related factoras well as organizations relatedfactor are internal whereasenvironmental related factor isexternal area. In sum, how wellenvironmental appraisal is donedepends on the strategists, theirorganisations, and the environmentin which their organizations exist.

Table – 6 : Factors AffectingEnvironmental Scanning for Indian

Textile Companies

Factors Organisa-tions

(A) Strategists relatedfactors 06

(B) Organisation relatedfactors 06

(C) Environmental relatedfactors 10

Total 22


USE OF ETOP

Environmental, Threat, OpportunityProfile (ETOP) is also an importanttechnique for the organizations.Every organisation must knowthreat and opportunity before theyenter in the business. If anorganization is able to analyse itsthreats and opportunities it canenjoy favourable results.9 Anoppor tunity is a favourable

condition in the organisation’senvironment which enables it toconsolidate and strengthen itsposition. A threat is a unfavourablecondition in the organisation’senvironment which creates a riskfor or causes damage to theorganization.

The preparation of ETOP providesa clear picture to the strategists ofwhich sectors, and the differentfactors in each sector, have afavourable impact on theorganization. By mean of an ETOP,the organization knows where itstands with respect to itsenvironment. Obviously, such anunderstanding can be of a greathelp to an organization informulating appropriate strategiesto take advantage of theopportunities and counter thethreats in its environment.

Help also can be taken from theexternal consultant/experts whilepreparing ETOP for the business.It is essential on the par t ofstrategists to exploit the opportunityas early as possible because it willnot wait for you, and try to dealwith the threats with the availableresources of the organizations.50% organizations have claimedthat they have prepared ETOPanalysis whereas 50% have shownnegative response (Table – 7). Inthe absence of ETOP analysis,these organizations can’t show thefavourable results.

Table – 7 : Status of ETOP in IndianTextile Companies

Status Organisa-tions

(A) Used 10

(B) Not-Used 10

Total 20



CONCLUSION

To conclude it could be said thatenvironmental appraisal played avery important role in the corporatehouses and organizations mustmonitor it through the properenvironmental scanning techniqueslike, customer dialogues, basisstatistical forecasting, scenariowriting, decision tree analysis, trendanalysis etc. Strategists must givedue response to the quickenvironmental scanning techniquefor environmental scanning in thecomplex, volatile and turbulentenvironment. All the companiesmust examine the ETOP analysis

and reduce the degree of threatson the basis of their competencyand capability. This is the only wayout to compete with China in future.

REFERENCES

1. Kubr, M., (Ed.), Managing aManagement Development Institution(Geneva: International LabourOrganisation, 1982), 88.

2. The Hindu: Survey of Indian Industry(2005).

3. The Economic Times: 25th Oct.,2005.New Delhi.

4. The Economic Times: 28th Oct., 2005,New Delhi.

5. Labell, D. and O.J. Kranser, Selectingenvironmental forecasting techniques

Threats- High Prices of Cotton, Electricity

Fuel and water- Increasing wages- Worldwide market depression

Threats- Low price of yarn- Low requirement of market- High cost of production due to increased cost

of power, fuel labour, logistics etc.

Threats- Open competition- Excess supplies

Threats- Poor infrastructure in the country- Less friendly labour- Laws/Revenue laws

Threats- Price competition from other fibres- General low economy worldwide- Unhealthy textile industry in India

Threats- Low productivity- Poor labour laws

ETOP analysis of six selected textile companies out of 20 have been given as under:

Opportunities- Consumer’s taste towards cotton- Reputation and goodwill of company

Opportunities- Product Development- Develop new market- Better cotton selection

Opportunities- Quota free period after 2004- Increase in population would need more clothing

Opportunities- Larger consumer base- Abundance of skilled workers- Huge international markets- Good availability of raw materials

Opportunities- Promotion of dyed fibres- Application development

Opportunities- Art of technology

Table - 8 :

for business planning requirements,Academy of Management Review, 7,373 (1977).

6. Fahay, L. King, W.R. and Naryanan, V.K., Environmental scanning andforecasting in strategic planning, DavidHussey, Pergamon Press, Oxford, 497(1983).

7. Nanus, B., QUEST – QuickEnvironmental Scanning Technique,Long Range Planning, 39 (1982).

8. Kazmi Azhar, Business Policy andStrategic Management, Tata McGrawHill, New Delhi,115 (2002).

9. Glueck, W.F. and Jauch, L. R.,Business Policy and StrategicManagement, McGraw Hill, New York,120 (1984). n


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l ITEMA

Signing Biggest Contact

The biggest order of 1,500 weavingmachines in the Chinese markethas been signed by the textilemachinery Group headed byMr. Miro Radici.

Today Mr. Miro Radici – ManagingDirector of Itema Group, worldwideleader in the textile machinerysector, - has signed the mostimportant order ever obtained bythe North Italian Company for thesupply of 1500 air jet looms in theChinese market.

In particular, the agreement isreferred to a first supply by theItalian Group of 776 machines (airjet weaving looms type Mythos E-Tec) for the new production plantof Jiangsu Hengli Chemical Fibre.A fur ther expansion of thisproduction site has been alreadyplanned for next year.

Wujiang City in Jiangsu Province(where Jiangsu Hengli ChemicalFibre Co. Ltd. is located) is lessthan 2 hours from Shanghai by car.This city with 1,200,000 habitantsnowadays (45% of the economybased on textile) has started todevelop more than 100 years agowith the production of silk and hasnow become one of the biggestarea worldwide for the productionof polyester (the weaving machinesinstalled exceed 140,000, 95%Japanese and 5% European).Jiangsu Hengli Chemical Fibre Co.Ltd. is one of the biggest privateChinese concern for the productionof polyester fibres. With a coveredarea of 1,600,000 sqm., this

company actuallyproduces 500 Mio ofsqm of fabric (someprojects nowunderway willincrease thisproduction to 1,100Mio of sqm.) and 400tons of yarn yearly(with a project underfulfilment to reach540 tons) and todaythey have 3000 waterjet looms and 400 airjet looms installed.

The signedagreement is part ofa project, which will allow theChinese company to double thefabric production to reach 1,100Mio of sqm. and to pass from theproduction of light to medium heavyfabrics. For this target they chooseMythos E-Tec, a loom which offersthe widest guarantees of qualityand reliability for the production ofthis kind of fabrics.

At the same time, Itema Group hasalso signed another contract witha pool of 11 private Companies forthe supply of 680 weavingmachines (the same air jet loomstype Mythos E-Tec).

“This important order - Mr. MiroRadici also states - allows us tolook at the Chinese market with amuch greater optimism.

Itema Group is present on theChinese market with a productionsite since 2003. In the 20.000 sqmtproduction facility, of which 6.000fully covered, 170 people areemployed with an overall turnoverof around 30 millions of EURO for

a year 2005. The production for2006 is expected to be of 2200looms in excess with a turnover of55,4 millions of EURO.

Itema Group with its 9 companies,7 Research & Development centres, locally active in 90 countries,around 2700 employees and aglobal turnover of 605 millions ofEURO in 2005, now represents themain textile machinery Group in theworld.

The companies belonging to ItemaGroup Holding are: Savio (winders),Promatech and Sultex (weavingmachines), First (accessories),Eutron (electronics) while thecompanies operating directly onforeign markets are ItemaAmerica., Itema India, ItemaShanghai Textile Machinery andItema Asia.

For further informationContact:

Riccardo MautinoPromatech S.p.A.Tel. (+39) 035.7283405Fax . (+39) 035.743379

CEO Performing the Signature

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Environmental Analysis of Textile Industry