Chapter # 2

Environment Scanning
2.1. Description:
Environmental analysis is a tool to identify all the outside and interior influences, which
can affect the organization’s performance. As market faces changes every days there are
some factors that are beyond our control. Environmental scanning enables us to measure
the level of threats and opportunities from external environment as well as strengths and
weaknesses from internal environment and these evaluations are later translated into the
strategic management procedure to develop strategies align with firm’s environment in
which it may operate or trade.

2.2. Industry Analysis:

2.2.1. Assessment through PESTEL model:
There are some analysis tools that can evaluate those factors influencing the external
environment the most used detailed analysis is the PESTLE analysis. Managers and
strategy makers use these assessments to find the factors which may influence their
decisions. It also helps to forecast that where the organization will be in the future.
PESTLE analyses factors can influence every industry directly or indirectly and can be
categorized as followings:
 Political factors
 Economic factors
 Social factors
 Technological factors
 Legal factors
 Environmental factor
If we consider the above factors in mind there are following updates this regard:
“1. The National Tariff Commission was criticized by the Pakistan Yarn Merchants
Association (PYMA) for imposing anti-dumping duties between 3.25% and 11.35%
on import of polyester filament yarn (PFY) from China and 6.35% on such imports
from Malaysia.
2. The All Pakistan Textile Mills Association (APTMA) has urged the government
to announce a long-term policy for the revival of the textile industry.
3. International Monetary Fund (IMF) had advised Pakistan for raising petroleum
taxes and withholding taxes for increasing tax-to-GDP ratio to improve key
macroeconomic indicators.
4. The government has withdrawn sales tax and customs duty on cotton imports with
effect from January 8, 2018, to meet the shortfall of cotton. The Economic
Coordination Committee (ECC) of the Cabinet approved a proposal regarding the
same at a meeting headed by Prime Minister Shahid Khaqan Abbasi.
5. The total imports of the EU bloc in 2016 were around $5.22 trillion. Of this,
Pakistani exports to the EU were $6.92 billion. Clothing and textiles exports
amounted to more than 78% of total exports to the EU.
6. Pakistan Yarn Merchants Association member Ghulam Rabbani said cumulative
FDI inflows during past 10 years stood at $32 billion, including privatisation
proceeds of $3.1 billion. Because of poor economic policies of the government, the
foreign private capital flows witnessed a negative growth in the world average surge
of 22% percent.
7. The Pakistan Readymade Garments Manufacturers & Exporters Association
(PRGMEA) has urged the government to relax duties on yarn import to encourage
value addition, reduce the cost of doing business and bridge the gap between
production and consumption.
8. The Pakistan Hosiery Manufacturers Association (PHMA) has rejected the
government’s move of ‘eliminating Associations role’ in verification and
disbursement of Duty Drawback under revised PM Package for exporters,
expressing a fear that a new channel of corruption is going to open in this context.
9. The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) urged
the United States to extend the generalized system of preferences (GSP), valid till
December 2017, to December 2020 and include textile products under the facility.
 10. PTEA Vice Chairman Ammar Saeed suggested that the government should
frame a comprehensive strategy to counter the high energy tariffs in an effort to gain
a competitive edge in the international market and to accelerate the pace of
industrial production and exports.’’

Textile Briefs National: Retrieved from http://ptj.com.pk/Web-2018/02-2018/Textile-

Briefs-National.html

2.2.2. Assessment through Micheal Porter’s model:

Michael Porter's Five Forces is a powerful tool to analyze the external environment and
to measure the competitiveness of business according to different five forces in the
industry. To sustain in the business we should have an eye on these forces or otherwise
these will push the organization out from the industry. After collecting information
about these forces we can formulate our strategies accordingly.

i. Industry Rivalry.
ii. Potential of new entrants into the industry.
iii. Power of suppliers.
iv. Power of buyer.
v. Threat of substitute.
While keeping all these factors to operate in international market Kleider should focus
on following updates.
“1. Cotton production in Australia is forecast to rise by 4% to 968,000 tonnes in 2017-18
seasons. This is expected to be largely driven by an increase in yields in irrigated
plantings following the poor yields achieved in the previous season.
2. Vietnam recently leveraged its growing position as a hub of textile manufacturing, as
well as trade concessions under the China-ASEAN free trade agreement, to capture the
Chinese market.
3. The Indian government for the development of the power loom sector has formulated
a Solar Energy scheme under which it will provide incentives and concessions to loom
weavers to utilize solar energy to increase production, said Minister of State for Textiles
Ajay Tamta.
4. International apparel market trends are evolving at a rapid pace. This is evident from
the changing preference of consumers in markets such as the US where the share of
cotton products in total US textiles has decreased from 40% in FY10 to 29.7% in FY17.
5. In European market India and Vietnam have been able to increase their exports to the
bloc the most. Vietnam has increased its exports by more than six times since 2003, and
India by almost 2.4 times. Pakistan, on the other hand, has not been able to achieve
similar growth numbers.
6. At least six new denim mills will come into operation in Bangladesh in the next two
years with an investment of US$ 100 million. The increasing demand for denim fabrics
from garment makers has encouraged the investors to establish new factories, said
Mostafiz Uddin, Organiser of Bangladesh Denim Expo.
7. Textile and apparel exports from India contributed majorly to its total exports in the
last three years. The share of textile and apparel exports in total Indian exports in 2016
was US$ 40 billion, that is, 15.3% of the total exports of amounting to US$ 262.3
billion.
8. The US officials said that China’s cotton imports will recover more than had been
expected this season (2017-18), due to the need for high-quality fibre by a domestic
spinning industry.
9. The textile industry in India is pegged at US$120 billion and expected to surpass
US$230 billion by 2020. Inherent advantages include strong multi-fibre base (cotton,
jute, silk, wool and synthetic), excessive investments, rising disposable incomes and
governmental initiatives.
10. The cotton industry in India is beginning to recover, and is set to grow as cotton
acreage increases across the country. Cotton acreage is expected to increase at a rate of
10% to 15%, reaching approximately 120 million hectares in FY18.’’
Textile Briefs International: Retrieved from http://ptj.com.pk/Web-2018/02-
2018/Textile-Briefs-International.html
 2.2.3. Description of opportunities:
 New style and Trends Demands.
 New market segments around the world.
 Abolition of Quota.
 Existing production Capacity.
 Lower cost competitiveness.
 Advanced Technology.

2.2.4. Description of threats:

 Strong Local competitors.
 Strong international Competitors.
 Economic Downturn.
 Change in Government Policies.
 Lack of Conducive Environment of Business.
 Rise in utilities expenses.
2.2.5. Performing External Factor Evaluation (EFE) Matrix:
EFE Matrix
Weight Rate TWS
Opportunities
New style and Trends Demands 0.10 3 0.30

New market segments around the world 0.25 2 0.50

Abolition of Quota 0.05 2 0.10

Existing production Capacity 0.04 4 0.16

Lower cost competitiveness 0.06 2 0.12

Advanced Technology 0.05 3 0.15

Threats
Strong Local competitors 0.08 3 0.4

Strong international Competitors 0.15 3 0.45

Economic Downturn 0.10 1 0.10

Change in Government Policies 0.04 1 0.04

Lack of conducive Environment of Business 0.04 2 0.08

Rise in utilities expenses 0.04 2 0.08

Total 1.00 2.32

2.2.5.1. Interpretation of External Factor Evaluation (EFE) Matrix:

The analysis of the External Factor Evaluation (EFE) Matrix and the weighted
average score shows that the new market development internationally is the most
important factor for Kleider but the response rate is low, which means Kleider is not
successful in this aspect. One of the main threats can be strong international competitors
at this time when textile business is quota-free and any country can export to other
countries. The total weighted average score of 2.32 shows that Kleider is working on
below the average score of 2.5 which means that Kleider is not doing well in taking the
advantage of opportunities and avoiding the threats.
2.3. Internal Strategic Positioning analysis:
An internal company analysis is an evaluation of a company's current position from the
combined perspectives of marketing, operations, and finance for strategic use. The
ultimate purpose of an internal analysis is to use the information for strategic planning,
meaning the company's plan for furthering growth, success, and leadership in the
marketplace. Determining the business's strengths and weaknesses translates into the
steps necessary for achieving goals.

2.3.1. Description of Strength:

 Cotton yarn Quality.
 Economy of Scale.
 ISO and other compliance certification.
 State of the art Equipment.
 Brand Name.
 Availability of Cheap Workforce.
 Diverse Product Range.
 Strong Suppliers.
 Strong Buyers (Wal-Mart etc.).

2.3.2. Description of weaknesses:

 International Branding.
 Management hierarchy (Seth culture).
 Lack of workforce training.
 Poor Marketing.
 Capacity Utilization.
 Supply chain.
2.3.3. Performing Internal Factor Evaluation (IFE) Matrix:
Internal Factor Evaluation (IFE) Matrix
Weight Rate TWS
Strength
Cotton yarn Quality 0.08 4 0.32
Economy of Scale 0.07 3 0.21
ISO and other compliance certification 0.03 4 0.12
State of the art Equipment 0.08 3 0.24
Brand Name 0.08 4 0.32
Availability of Cheap Workforce 0.06 2 0.12
Diverse Product Range 0.05 3 0.15
Strong Suppliers 0.04 2 0.08
Strong Buyers (Wal-Mart etc.) 0.08 2 0.16
Weaknesses
International Branding 0.13 1 0.13
Management hierarchy (Seth culture) 0.04 1 0.04
Lack of workforce training 0.06 2 0.12
Poor Marketing 0.08 1 0.08
Capacity Utilization 0.06 2 0.12
Supply chain 0.04 2 0.08
Total 1.00 2.29

2.3.3.1. Interpretation of Internal Factor evaluation (IFE) Matrix:

Internal Factor evaluation (IFE) Matrix shows that Kleider should focus to create its
brand positioning in the international market it will increase the revenue. IFE analysis
reveals that Kleider strong brand in local market and yarn quality. As total weighted
score (business response to internal environment) is 2.29 and is below from 2.50(bench
mark). It shows that business strategy for internal environment is poor.