Porter's Five Forces

Porter's Five Forces is a simple but powerful tool for understanding the
competitiveness of your business environment, and for identifying your strategy's
potential profitability.

It is a framework for industry analysis and business strategy development created

by Michael E. Porter of Harvard Business School in 1979. Indian textile industries
five forces are explain in below are:-

1. Threat of New entrants

Indian Textile Industry is extremely dependent on personal associates and experience.

The new performers would have to get some kind of customer base along with the
new establishment. Without any established customer portfolio it is difficult to attract.

As the new entrant has less experience in textile manufacturing and they don’t have
relationships with customers so they might experience disadvantages comparative to
the recognized competitors.

Governmental policies do influence the industry environment to some level. An example

of this is subsidies, which are obtainable to companies launching production in certain
regions.

2. Bargaining power of customers (demand scenario)

India is likely to gain from the increasing demand in the home textiles in which it
has competitive border against its neighbors.

Therefore, the bargaining power of customers is strong. As a result, it is importance for a

producer of apparel to make different their products, thus it will not compete with price
as primary mean.

Differentiation can be important in the Indian textile industry since agreements are
usually put on short-term base and are hardly ever set more than six months ahead.
Thus, there is a need to tie the consumer to manufacturers without the need of open
agreements. And thus, the bargaining power for the consumer is enhanced.
3. Bargaining power of suppliers (supply scenario)

In India, we have various players in textile industry. There has been raise in production
and supply of textile products in last few decades.

In India, The excess of available suppliers gives an initial sign of a weak bargaining
power for the supplier. In addition, the suppliers lack switching costs and have a
low level of product differentiation. This directs to huge chances for textile
manufacturers to scout the suppliers for finest terms and prices for production.
Therefore, manufacturers can make contact with a huge number of suppliers and play
suppliers against each other. Such activity weakens the bargaining power for suppliers
and as a result pushes prices down and makes prices similar among suppliers.

A benefit which the Indian Suppliers have capitalized on is, Due to their capacity to
integrate ahead in value added chain, they have got an enhanced bargaining position
towards textile manufacturing.

4. Threat of substitute products

When using such a wide term as Textile, there are apparent reasons for identifying
substitute products proves hard.

Obviously, there are differences in types of material and clothing. Differences in textile
sector can also be known as trends in styles and fashion. Thus products in the apparel
sector can act as substitutes but the common conclusion still places; there’s no
substitute to apparel.

5. Competitive rivalry within the industry

The textile manufacturing sector is an enormous sector with lot of companies producing
apparel. The high growth rate of total textile exports shows that the rivalry between
manufacturers is low. In some products segments growth rate is high but even negative
in others. Thus, the rivalry between textile manufacturers is varied since they enjoy
different growth rates.

As Indian textile manufacturers are forced to lower prices in order to stay competitive
with companies in a foreign country, the overall rivalry within the industry gets
companies to spread out their consumer base so as to keep profits up. Therefore
reasonable to consider that such developments may happen on the behalf of
competitors if possible, and thereby raise the rivalry in the industry sector.

PEST Analysis
PEST is an acronym for political, economic, social and technological. It's a
way of understanding how external forces impact your business. It was
created by Harvard professor Francis Aguilar in 1967. It should be included
in every business plan, in addition to a SWOT analysis, as it is part of risk
management and strategy design.

Using a PEST analysis helps a business to understand various macro

environmental factors that they need to take into consideration when
determining the decline or growth of a particular market.
POLITICAL FACTORS
The management of business enterprises and their policies are considerably influenced
by the existing political systems. And India is a democratic country, there are probably
problem of stability in politics.

Political and Government Diversity:

The reservation of production for very small companies that was imposed with an
intention to help out small scale companies across the country, led substantial
fragmentation that distorted the competitiveness of industry. However, most of the
sectors now have been de-reserved, and major entrepreneurs and corporate are
putting-in huge amount of money in establishing big facilities or in expansion of their
existing plants.

Secondly, the foreign investment was kept out of textile and apparel production. Now,
the Government has gradually eliminated these restrictions, by bringing down import
duties on capital equipment, offering foreign investors to set up manufacturing facilities
in India. In recent years, India has provided a global manufacturing platform to other
multi-national companies that manufactures other than textile products; it can certainly
provide a base for textiles industry.

And some motivating step taken by the government, other problems still sustains like
various taxes and excise imbalances due to diversification into 35 states and Union
Territories. However, an outline of VAT is being implemented in place of all other tax
diversifications, which will clear these imbalances once it is imposed fully.

But now the Indian government has introducing measures such as the national
technology up gradation fund and removing the differential taxation scheme which
discriminated against large units.

ECONOMICAL FACTORS
Economical factors such as per capita income, national income, resources mobilization,
exploitation of natural resources, infrastructure development, capital formation,
employment generation, and industrial development influence textile industry.

Textile industry provides one of the most fundamental necessities of the people with
huge value-addition at every stage of processing.

Today textile sector accounts for nearly 14% of the total industrial output. Indian fabric
is in demand with its ethnic, earthly colored and many textures. The textile sector
accounts about 30% in the total export. This conveys that it holds potential if one is
ready to innovate.

The textile industry is the largest industry in terms of employment economy, expected
to generate 12 million new jobs by 2010. It generates massive potential for employment
in the sectors from agricultural to industrial. Employment opportunities are created
when cotton is cultivated.

Current Scenario
Textile exports are targeted to reach $50 billion by 2010, $25 billion of which will go to
the US. Other markets include UAE, UK, Germany, France, Italy, Russia, Canada,
Bangladesh and Japan. The name of these countries with their background can give
thousands of insights to a thinking mind. The slant cut that will be producing a
readymade garment will sell at a price of 600 Indian rupees, making the value addition
to be profitable by 300 %.

SOCIAL FACTORS
Managers and policy makers can not disregard social variables like education,
knowledge, rural community norms and beliefs which are predominant in India,
especially in the rural society while cultural differences are unthinkable for any
international manager or even an urban Indian manager. Textile industry of India based
on cotton and cotton as the agriculture product, which found in rural areas so the social
responsibility of the textile industry. Social stratification plays a vital role in rural
societies.

TECHNOLOGICAL FACTORS
Technology is considered to be one of the most important factors of textile industry.
That is why the government, in its industrial policy resolutions, industrial licensing
policies, MRTP and FERA regulation, and in liberalization policies, assigned great
importance to sophisticated technology and technology transfer.

The Working Group on Textiles & Jute Industry for the 11th Five Year Plan (2007-2012)
has studied the major problems being faced by the textile industry which include:

1. Structural weaknesses in weaving and processing,

2. Fragmented and technologically backward textile processing sector,
3. Fragmented garment industry,
4. Inadequate capacity of the domestic textile machinery manufacturing sector,
5. Inadequate training facilities in textile sector.
The Government has undertaken a series of progressive measures like introduction of
Technology Mission on Cotton (TMC), Technology Upgradaiton (sp) fund Scheme
(TUFS), Scheme for Integrated Textile Park (SITP), reduction in customs duty on import
of state-of-the-art machinery, Debt Restructuring Scheme, setting up of Apparel
Training and Design Centers (ATDCs), 100% Foreign Direct Investment in the textile
sector under automatic route, setting up of National Institute of Fashion Technology
(NIFT) etc, for upgrading and strengthening the textile sector in India.

At present, the textile industry is undergoing a substantial re-orientation towards other

then clothing segments of textile sector, which is commonly called as technical textiles.
It is moving vertically with an average growing rate of nearly two times of textiles for
clothing applications and now account for more than half of the total textile output. The
processes in making technical textiles require costly machinery and skilled workers.