LAHORE SCHOOL OF ECONOMICS

WACC NO: 11

MBA 2

SECTION: B

NAMES:
Waleed Nadeem Butt
Waleed Haroon
Muhamma Irfan
Aown Muhammad Sahi
TOPIC:
Styles and trend : Strategic focus

Introduction:
Shehzad, Nadira and Muhammad Ali tariq conceived Styles and Trend as part of their
Entrneurship course project at LUMS in 1988. On december 1993 Muhammad Ali tariq CEO of
Styles nd trend met his two partners to discussed the strategic choices for their knitwear
production company. First they started as a small stiching unit serving only limited markets over
last four years. They wanted to expand into fully integrated unit capable of manufacturing high
quality Knitwear. Knit wear field was becoming competitive in Pakistan. The final year MBA
project at lums which was conducted by a team of 4 helped them to develop insights and
experience on the several seasoned knitwear experts. Due to shortage of finances they started as
small stiching unit and than to fully integrated unit by taking debt from financial institution , the
team were not willing to inject equity in the company due to the reason that they were not willing
to risk their rapport that the three of them had developed.
Styles and trend had serviced small orders from 5000 to 8000 orders and the buyers were from
UK , they sold products to Saudia Arabian retail chain , they ahd opened Mushroom shop in
Lahore and the company was very much happier by the customer response.
The company wanted to serve the Large western customers.
Products offered by Styles and trend:

Simple Tshirts
Ladies blouses
Baby garments
Jump suits.

Pakistani Knitwear industry:

The textile sector of Pakistan was strong part of Pakistan industries till the early 80s the focus
was on spinning sector and weaving sector the main product was cloth both these sector were
considered high value added because spinning averaged about 60% value addition and weaving
about 40 %.
The textile chain tracing the process from picking of cotton to apparel manufacture started with
picking and gaining operation. In 1992 Pakistan produced 13.2 million bales of cotton all of
which were picked by hand.
The knit wear sector perfomed knitting,finishing,dyeing and stiching operations in producing
finished products.Following the success of industry pioneer , Ammar textiles by 1986 several
young new breed entrepreneurs forayed into knit wear area. Somehow The well known textile
families of Pakistan stayed away from this sector because industry experts claimed that they did
not have organizations to manage the many complex operational variables in the Knitwear
Garment Business.
The national average of Knitwear selling price was $42 perdozen in 1992. In 1992 category 338.
Pakistan had 211 volume of US imports but only 2% of the value. Pakistani knitwear producers
were averaging around 70% or ontime delivery. Typical lead times for large foreign buyers were
about 50-60 days from order confirmation to shipment which took another three weeks to the
USA.
Competition:
The Lums project team conducted strategic studies for styles and trend had focused on what was
general industry consensus considered the first line producers in Lahore and one rather old , this
has narrowed the competitive field to down to four major players.

Ammar textiles
Angora textiles
Leisure Garments
Omega knitwear

Ammar textiles:
Under the dynamic Bilal Ahmed was recognized both nationally and internationally as industry
leader in the Pakistan knit wear with 1993 sales of approximately rs 45 million . It had the ability
of supplying reasonable quality in quantity which often meant orders of 10,000 pieces by well
known buyers like levi startus.
Angora textile:
In terms of on-time delivery Angora was regarded as being even beter than Ammar by some
foreign buyers. IT headed by Awais Mazhar an ex policer officer who had gained corporate
experience after early retirement form Government and he attended Harvard business school
executive program.
Leisure Textile:
It was started by Azhar Iqbal a former banker who saw a potential of integrated unit. Leisure
were new they did not have track record as Angro. The inexperienced Azhar did not involve
himself in production matters it used technical staff raided from companies like Ammar.
Omega Knitwear:
It is one of the oldest manufacturers, it is family owned company run by Sidat family.Omega has
adopted a gradual approach towards expansion but hope to double their current capacity in three
by entering in US market.

Exhibit 8 analysis:
Ratios
Gross margin
Net Margin
ROA
ROE
Current ratio
Quick ratio
Total/total assets
Working capital
Days receivable
Days payble
Inventory turnover
Fixed asset ratio
Times interest earned

1989-90
23.01
0.63
2.68
0.29
1.26
0.8
37.08
0.46
44.33
12.37
2.34
0.46
1.07

1991-92
26.53
5.96
6.47
3.55
48.36
0.45
4.81
8.3
61.58
5.70
15.79
1.53
2.39

Times Interest Earned or Interest Coverage is a great tool when measuring a company's
ability to meet its debt obligations. HERE the interest coverage ratio is greater than 1 and
is increasing, the company is generating enough cash from its operations EBIT to meet its

interest obligations.
A increasing inventory indicates that the company is converting its inventory into cash as
quickly as before. When this occurs, the company ends up having decreased storage,

insurance and maintenance costs.

In the early stages of growth of a company, the ratio ROA was usually not be as attractive
as it is later in the company's life. Once the business matures and starts to get everything

in order, the return on assets ratio has improved.

An increasing gross profit margin is ideal. It means that your company is improving its
sales efficiency. As gross profit margin increases, operating margin and net margin have
increased as well.

Exhibit 8 Analysis:
Category

HONGKon Taiwa

S.Kore

Indi

Chin

Indonesi Thailan

Malaysi Pakista

Product

g
5

n
5

a
5

a
3.4

a
3

a
4

d
4

a
4

n
2

Technical

3-4

3-4

3-4

Ability
Mangema

3-4

3-4

3-4

2-3

Relaibility 4
Machiener 4

4
4

4
4

2
3

3
2.3

3
3-4

3-4
3-4

3
3-4

1
2-3

y
Productio

4.5

4.5

4.5

2-3

4
36

3-4
35.5

3
35

2-3
23

2
21

3-4
27

3-4
28.5

3-4
28.5

2
16

Range

nt ability

n control
Efficiency
Overall
ranking

The comparison of competitors production and mangemant performance shows the less
average ratings in all categories only management ability and machinery has better rating

2-3 which is still lower than other countries.

The overall ranking is lowest due to longer lead times , less reliability and poor
production control and efficiency.

Issues and problems:

Out of three scenarios one should be selected based on the fact that the company is

medium sized unit with the capacity of 10,000dozen t-shirts permonth.

Muhammad Ali Tariq was concerned about the lack of collective decision making within

the partners.
Risk averse nature of Styles and trends partners they didnt inject equity and they still

didnt converted to integrated unit despite of being in business for a couple of years.
Lack of longterm strategies due to operational pressures.

Core Problem:
Lack of longterm strategies and lack of finacing.

Scenario 1:
This include 100% export to US with capacity utilization of 70% and qutoa price of $600/ dozen
and the products included category338 Mens T shirts and Rugby shirts.
Scenario 2:
This includes 50% export to US and 50% export to UK and middle east. It states $600/dozen in
US and 4180 dozen in UK and with capacity utilization of 65% the products are category 338
ladies garments.
Scenario 3:

This includes export 100% to Europe and middle east with capacity utilization of 50% the
products included are t-shirts,blouses,skirts,lingerie,baby garments.with quoted price of
$180/dozen in UK.

Evaluation of USA market

Benefits of USA market
Capacity Utilization was high as 70%
Demand Potential
Established Reputation of Pakistani Companies in USA
Disadvantages of USA market
Stringent quality Standard
Evaluation of European Market
Probes
Market was very large and there was huge demand for the knitwear products
The market was more trendy and colorful
Contrast

The market was fragmented and not served by large apparel houses
The Pakistani supplier were not competitive in higher end European market
Lead time was very critical due to nature of market
They were more concentrated on top manufacturing countries relative to Pakistan

Quality standard were very high

Profit margin were low and there was competition based on prices

Recommendation
On the basis of evaluation of the market of USA and European we hereby recommend the
scenario 1 for style and Trend. The reason behind our recommendation is that Pakistani supplier
has strong presence in USA market for long time, so if style and trend should enter into USA
market because there is great potential in this market for knitwear products. The only problem
which the Style and trend might face will be the stringent quality standard. But such quality
standards are also required in other market as well.
Scenario 2 & 3 cannot be adopted due to stringent quality standard required for the European
market, and there is also price competition in the market due to which it will be difficult for
Pakistani supplier to cope with standard. Furthermore middle-east markets are although untapped
but there is very low potential in these markets that will not feasible for supplier like style and
trend.