UNIVERSIDAD ESAN

FACULTAD DE CIENCIAS SOCIALES Y DERECHO

Carrera de Derecho Corporativo

FINAL REPORT INTEGRATED PROJECT - TEXTILEROS DE

GAMARRA: COMO COMPETIR CONTRA LOS TEXTILEROS
CHINOS

Trabajo que como parte del curso de Estrategia presentan los

alumnos:

Rodríguez Pereda, Diego

Arana Jurado, Lesly
De la Cruz Rojas, Daniel
Pérez Zegarra, Dennis

Profesor: Marco Ríos-Pita Ruiz

Lima, 24 de noviembre de 2019

 GROUP 1
TEXTILEROS DE GAMARRA: COMO COMPETIR CONTRA LOS TEXTILEROS
CHINOS

FIRST PART I

ANALYSIS OF THE MACROENVIRONMENT.

 Economic Environment

According to several market studies, we can say that the data available on Gamarra
textiles, whether economic or social, are very few and often contradictory. The high
informality of the place and business make it difficult to create a reliable database,
official statistics or a monitoring of the dynamics of the place; however, the Central
Directory of Companies and Establishments prepared by INEI registered, until
December 2017, about 39,630 establishments that carry out economic activities in
the commercial emporium, in addition a total of 33,002 companies carry out
economic activities in Gamarra, of which 94.5 % (31,176) are microenterprises.
Likewise, 99.6% of the total number of companies corresponds to 32,857 micro and
small companies (mypes). 99.7% (32,916) of the total companies are micro, small
and medium enterprises.

In Gamarra, 88.8% of the total companies (29,307) are mainly engaged in the
activities of wholesale trade, retail trade and manufacturing. Retail trade reaches the
highest proportion with 48.7% of companies (16.078).

It should be noted that only 4.5% of companies in the commercial emporium carried
out transactions abroad through exports and imports in 2017, so the remaining
95.5% did not export or import.

In the same way and in reason to the economic environment in terms of income, the
total annual turnover generated by the productive units amounted to S / 8,294 million
in 2017, which registered a positive variation of 6.7% compared to the 2016 figure (S/
7,774 million), in addition, the total annual sales per company generated in the
Gamarra commercial emporium is S / 210,000, which represents an average monthly
sales per company of S/ 18,000; The average monthly sales generated by the
microenterprise is S/ 5,600, the small company S / 119,200, and the medium and
large company S / 1,3 million; 0.4% of medium and large companies generate 34.9%
of total sales, while mypes generates 65.0% of total sales.

 Legal Policy Environment

In the segment of the legal policy environment of Gamarra textile manufacturers, it
should be understood that there is currently a high rate of legal informality as
established legal entities or businesses given by natural persons, so that companies
 incentivized to formalize legally before of establishing any legal document they
usually maintain a sustainable capital to apply and ascribe to an appropriate legal
plan. There are many profits needs to open a business, so it is really necessary.
First, in this type of business, it is strongly recommended to start a small corporation
or a limited liability company, due to the size of the company and the nature of
growth and high demand as well as competition in the Gamarra textile market.

 Social Cultural Environment.

Regarding the cultural social environment, it is estimated that eighty percent of

Gamarra's businessmen are of Andean origin and the rest are neighbors from La
Victoria and mostly descendants of the workers of the large textile factories that were
installed there. At the end of the last century.

The presence of Korean immigrants, who also set up their workshops in the area,
began to be observed in the last two years.

It is believed that about 100,000 people work in Gamarra, although nobody knows
exactly. The conditions in which the work is carried out are not known, but there are
no protests, because in a country like Peru, where almost 80 percent of the
workforce is under-occupied, having stable and full-time employment is equivalent to
winning the lottery. This is a key factor, since it is necessary to know the culture,
customs, perceptions, preferences of Gamarra textile workers and the basic
behaviors of this consortium within society.

 Technological Environment.

In the segment of the technological environment of the textile producers of Gamarra,

the environment of the conglomerate merchants and producers brings together more
than 10,000 small businesses, which have been forged without the help of
technology or training of the State or other institution although with the passing of the
years and the rapid growth and high demands as well as new commercial and import
alliances, the textile workshops present every day new technologies that replace the
previous ones, at the same time that they create new markets and new
commercialization opportunities.

The textile sector in Gamarra is feasible according to statistics, showing that at

present, the workshops work at 60 or 70 percent of their installed capacity.

The Gamarra phenomenon is of such magnitude that even large industrialists and
textile merchants recognize its importance and the need to provide technological
training.

For this reason and despite informality, Gamarra textile workers constantly seek to
innovate in the kinds of products that will be offered, also in the processes used to
produce them, as well as see over time what other new aspects could be
implemented in the business to improve, attract new customers and keep customers
satisfied.
 Demographic Environment.

Regarding the business demographic environment of Gamarra textile manufacturers,

INEI figures show that during 2016, 504 companies were created in Gamarra, of
which 75.2% are economic units that carry out wholesale and retail trade activities,
14.1% correspond to manufacturing activities, 3.8% to food and beverage services,
among the main ones.

On the other hand, according to legal organization, 83.1% of companies created are
natural persons, 9.3% public limited companies and 7.4% individual companies with
limited liability.

Likewise and following the same business demographic line of the textile workers,
the INEI figures show that the 419 productive units created and registered as natural
persons, 60.4% were conducted by women, while men had a lower percentage in the
conduction of 39.6% Regarding the registration of productive units registered as
natural persons classified by economic activities, women had a greater participation
in the activities of food and beverage services (68.7%) and retail trade (63.8%), while
Men excel in services provided to companies (58.3%) and manufacturing industries
(51.0%).

Finally, demographic figures show that during 2016, 342 companies were closed, of
these units the largest proportion corresponds to wholesale trade with 32.5%,
manufacturing industries (27.8%) and retail trade (27, 5%), as an additional fact, it
was shown that during 2016, of the 214 companies registered as natural persons and
discharged, 52.8% were conducted by women, while men represented 47.2%. the
casualties of productive units registered as natural persons classified by economic
activities, in the activity of retail trade, 62.4% were driven by women, while those
driven by men the deregulated productive units reached 37.6 %. The productive units
that carried out wholesale trade discharged, which were registered as natural
persons and led by women, reached 50.8%.

 Geographical Environment.

In relation to the geographical environment of Gamarra textile manufacturers; textile

companies and merchants are located between the border boundaries of Av. Aviation
and July 28 of the district of Victoria, Lima - Peru. The main roads of this district are
Manco Cápac Avenue (the oldest in the district), Mexico Avenue, Isabel la Católica
Avenue and Parinacochas (characterized by the sale of auto parts), Iquitos Avenue,
28 de Julio Avenue, Avenue Aviation, Nicolás Arriola Avenue, Canada Avenue, part
of the Central Highway, part of the La Circunvalación Highway and the Agustín
Gamarra Jirón where the Gamarra Commercial Emporium is located.
La Victoria, a district located in the central part of the Province of Lima, is located in
the central part of the consolidated area of the city. It borders on the north with the
Cercado and El Agustino, on the west with the Cercado and Lince, on the south with
San Isidro, and on the east with San Borja and San Luis.
ANALYSIS OF THE MICROENVIRONMENT.

● Analysis of direct and indirect competition

One of the biggest challenges is having to sell garments made from Peruvian textile
at very low prices, almost reducing our profits by 50%, because the income of
Chinese garments has reduced our sales and has generated that our potential
buyers, prefer the excessively low costs of Chinese garments. Also, these garments
have been very attractive for companies (such as department stores) that seek to
reduce their costs.

However, we initiated a procedure in INDECOPI, in order to impose ANTIDUMPING

measures for the importation of Chinese garments, so that the national clothing
market is not affected by acts of unfair competition.

In the same way, a campaign was initiated in order to demonstrate the greater
durability of garments designed with fabrics of national origin, so that the consumer
can perceive the superior quality of our products.

● Analysis of the supplier market.

Currently in Peru, Chinese clothing enters undervalued and without any restrictions, it
enters at a lower price than it actually costs, so that Gamarra merchants sell such
garments at lower costs than garments made with Peruvian fabrics.

The strategy of Gamarra merchants who have dedicated themselves to selling

Chinese garments is efficient, since, since production costs are 10 times lower in
China than in Peru, as well as import costs, it has generated that Gamarra merchants
They can sell the garments of Chinese origin at very low costs.

● Analysis of the characteristics and evolution of customers in the sector

This type of offer offers benefits associated with the reduction of clothing costs, the
reduction of import costs and the reduction in the production costs of clothing with
fabrics of national origin.

In addition, currently because of the pace of life that is taken, consumers opt more for
garments that can be disposable or for short periods of use, with Chinese clothing
being a very favorable option, especially for young people.

Likewise, although the quality of this type of garments is not very good, it is usually
attractive because of the designs they present, since, being its low-cost mass
production, many countries have chosen to import Chinese garments or order their
Production to Chinese companies.
 SECOND PART II:

STRATEGY FORMULATION

1. Business model

Local located in San Pedro Gallery in Gamarra, La Victoria district, dedicated to selling
clothes with manual elaborating process, using 100% Peruvian cotton with
contemporizing designs and really accessible prices.

1.1 Description of current business model

We are dedicated to selling all kinds of clothing, usually youth clothing. For this, we
have the participation of new young designers, so that the clothing offered to
consumers is not only of good quality because it is made with 100% Peruvian cotton,
but also that the designs stand out on Chinese products which are mass produced,
our designs being made in few proportions. We also offer the idea of creating your
own design, promoting the participation of our consumers in the stage of making our
garments.

1.2 Changes in the market.

The changes in the market are that more and more offers of clothing sales have been
aimed at young people, more and more young entrepreneurs with similar business
ideas and the use of social networks as part of promoting a product have generated
that the market is more competitive.

1.3 Disruptive business models in the market

Now with the new applications to sell clothing online, many customers only request
things and arrive directly at the door of their house, before going to the clothing
stores to buy, even the large department stores, they come to offer attractive Offers
with great discounts, offers with which many times we cannot compete.

Against that, sellers and clothing manufacturers with Peruvian fabrics cannot sell with
great discounts or sophisticated applications that allow direct sales, so that it
generates a disadvantage in an increasingly technological market.

2. Mission Statement
 2.1 Mission

We are a company responsible for providing and offering garments of excellent

quality, whose objective is not only to provide garments aimed at a young public, but
that this offer is accompanied by the best service, in order to meet the needs and
preferences of our customers, through an excellent personalized service and interest
in making the client feel comfortable choosing the best product at affordable prices.
Because your attitude is the best garment.

2.2 Vision

Position us as a new clothing store format, hand in hand with a constant commitment
to environmental care, obtaining a certification for following "Eco-friendly" production
processes. Also, incorporate into the main department stores and position us as one
of the concept stores, which combine the best quality of garments at really accessible
costs.

To do this, we will start a campaign called "Put it to the test", through which, we will
show the resistance and quality of our garments, as well as show the production
process of each garment in order to demonstrate our commitment to the
environment.

2.3 Goals

a. General:

Demonstrate through research and explanation the importance of good

management and control in the production of our garments, as well as constantly
monitor our customer service by employees.

b. Specific:

 Know the origin, history and importance of the resources used to make our
garments.
 Know and analyze each stage of production and how they are linked to our
main goals.
 As another option to contribute to the improvement of people's quality of life,
through the marketing of clothing designed with "Eco-Friendly" techniques.
 Maintain efficient service, even in times of great influence of customers.

3. External and Internal Analysis

 3.1 Opportunities and threats

a. The opportunities:

First, finding we in a society that constantly changes, renews and innovates, has
generated the creation of new digital services and an increasing use of social
networks by consumers. Therefore, we believe that the use of digital resources
provides us with an excellent opportunity to open a door to a new and not so
expensive digital world.

Also, who doesn't want to buy products from the comfort of their home?

b. The Threats:
These are disruptive business models, which open a modern and organized
infrastructure that far exceeds what a conventional store selling clothing can
provide.

3.2 Strengths and Weaknesses

a. Strengths:

One of the main strengths that we have is trust with our clients, that is, it is not just
any store, but there is a bond of friendship between the clients and our workers
through a personalized attention for each client, something that is so difficult to
obtain nowadays.

b. Weaknesses:

Is that we cannot compete against the variety of prices that are offered in Gamarra
because others competitor offers similar clothes but with lower prices because are
Chinese production, even could happened that the customers could prefer the
lower prices over quality designs.

4. Strategies at functional-level

 One of the strategies that could work in this type of business is to create a kind of
competitive advantage, which could be based on a plan related to the designs of
clothes that will be sold in those businesses and with an additional marketing program
that allows us to redirect our service depending on the public to which it is aimed and
with it to be able to progressively increase our profits, until maintaining constant
income.

 The level of profit will depend on that difference between price and cost, so creating
production methods at the lowest cost without losing the quality of our products will
generate greater long-term profitability.
  The organizational arrangements in this present business have to be aligned with all
mission, vision and business goals. If not, it will not work out. Both things have to be
aligned.

5. Business-level strategies

 In this present case, the business level strategy that is using is the lowering costs
productions and offering an exclusive service to the clients. They have a lot of different
competitors, so they need to reduce costs, in order to gain a larger profit and to create
brand loyalty as a store.

 They pretend to be increasingly known, so that they can reduce costs to even higher
levels. Companies have to make offers to create brand loyalty and then implement
other procedures that allow a constant reduction of production costs but without losing
quality, so that they can match the price of Chinese products and with it to be able to
contract with a greater number of suppliers, in order to reduce costs and try to improve
their economies of scale.

 They need to create a good strategy in cost advantage in order to become more
profitable and be preferent among not only B/C sectors, but also A segment. This will
avoid possible competitors to entry the market.

6. Global strategies

 A global strategy, which can be applied by the different stores of the San Pedro
gallery, is through the use of the same production methods and quality of their
clothing, with the application of the devices maintained the same quality in the
different points of sale globally Thus, when the export of 100% Peruvian cotton
garments to different countries and regions is put into practice, it can compete
aggressively against Chinese textile importers, because that way it could win the
foreign market, compensate for the losses caused by the entry of low quality and
cheaper textiles.

 By exporting garments, it is sought that products sold around the world retain a
standardized process and quality, it is sought that not only the quality of the product
is promoted but the experience when received in the market, inclining to that the
same process of product marketing and customer service be standardized in stores
in different countries where they allow us to establish and reduce, reduce costs in the
investment of new strategies.
7. Corporate Strategies

 One strategy that can be used is through the diversification of risk by businessmen
who produce garments with 100% Peruvian cotton, however, it is important to
determine what the market will be Diversify the business of Peruvian producers.

 In this case, the most advisable thing is that the entrepreneurs diversify the risk,
entering the markets related to the business model they handle, in that case, we
could enter a business model in which they are looking to make products such as
carpets, curtains and sheets, rather, that is related to the home market, which would
be viable, taking into account that the current business model, then, what is sought is
that the handling of Peruvian fabrics is not lost and that it is competed directly with
the import market of Chinese fabrics.

 Another business model could be to provide classes or advice on making garments

and other products derived from Peruvian cotton fabrics, possibly another model
would be the direct distribution to the large department stores that they usually look
for, in most of the Time, quality, above cost.

 However, we are more inclined towards the first business model that is more related
to the manufacture of garments, since it implies less costs and greater production
and competition against producers and garment manufacturers with Chinese fabrics.

STRATEGIC IMPLEMENTATION

8. Government and Ethics

Regarding the Government and ethics in relation to the strategic implementation of Gamarra
textile manufacturers, we must emphasize that in its origins for the majority of textile and
merchants from informal businesses, observing the existence of an institutional vacuum this
was filled by the values and lifestyles of migrants, not considering state legal structures as
legitimate or inclusive, generating more informal activity without a real structure, organization
or concrete government, without rules of the game, nor ethical nor morally accurate.

As for the new generation of Peruvian businessmen and textile producers who have decided
to enter the Gamarra market with a much more formal and stylized brand concept, as well as
a precise administration, structure and government as well as ethics for this, strategies have
been proposed innovators that de-locate trade through social networks and courier services,
which meant that a large part of their sales are also given outside Gamarra. On the other
hand, the implementation of a strategy to demand government and ethics has been
proposed, which has led the emporium to seek to recover the Gamarra from before but
formalized, that is, with the streets tidy, clean, with contingency plans for disasters as well as
public spaces so that people can rest and stroll between purchases, but maintain their
original agglomeration morphology.

In that sense, associations of businessmen have been generated as part of a government

and ethics in order to obtain a space in the local government, as well as to generate an
alliance with universities and young professionals to propose an integral restructuring of the
space and to manage independently of the Municipality of La Victoria.

In short, the government and ethics of textile businesses in the Gamarra emporium continue
to be mostly a model of family ownership and family structure (family businesses) only with a
view to greater formality and organization, being that in companies with this type of model
the control of the property is given by an excessive control on the part of the owner, who in
turn plays a directive and executive role, while in another type of corporations and
governments there is a division between the property and the control.

A dynamic way to be able to compete correctly and correctly against Chinese textile workers
would be to progressively change this model and structure of government without a clearly
established ethic by opting for a model such as that of external directors who are not full-
time employees of the company. Many of them are full-time professional directors who hold
positions in the boards of several companies, this directly related to the partnerships and
business alliances that have been presented in the textile emporium. The need to maintain a
reputation as competent external directors gives them an incentive to perform their tasks in
the most objective and effective way possible.

9. Design of Organizational Structure

The organizational structure of Gamarra is defined in a business structure because it is an

establishment formed by small and medium enterprises as well as small businesses.

Within it it is divided into establishments, these are subdivided into establishments according
to their type, which can be matrices, branches or auxiliaries; establishments according to
their economic activity, which are manufacturing industries, sale and repair of vehicles,
commerce. Wholesale, retail trade, transportation and storage, food and beverage service
activities, services provided to companies and others.

It can also be divided by companies according to their business segment, that is, micro,
small, medium and large companies.

On the other hand, it is also usually divided according to its legal organization, of which we
find natural persons, corporations, limited liability commercial companies and individual
limited liability companies.

Finally, it is usually divided according to its activity related to foreign trade, it is derived
importers, exporters, importers and exporters and here it does not import or export.

On April 21, 2008, the Gamarra Peru Business and Guild Society was founded, bringing
together the majority of entrepreneurs in the textile sector of Gamarra and Lima in general.
This was designed so that a board of directors and a supervisory board was created.
The board of directors is shaped as follows:
 President
 Vice president
 Economics secretary
 Organizing Secretary
 Secretary of minutes
 Press and propaganda secretary
 First vowel
 Second vowel

The supervisory board was formed as follows;

 President
 Secretary
 Vocal

10. Organizational Cultures Design

The design of the organizational culture of Gamarra, is an organizational structure to the fort
because it is in a high synergy, being diverse companies with different directives, its original
structure flows because there is no close vigil, giving them high freedom of work, also of this,
jobs are not standardized and there are no limiting factors.

It is for this reason that all who make up the Gamarra emporium are within a culture in which
they work independently, with their individual autonomy, with support, performance and
tolerance among themselves.

11. Design of control and coordination systems

In this section we can implement a strategic control system so that the textile producers of
Gamarra can organize themselves by means of the following concepts:

 Control and efficiency. - at this point measure how efficiently the resources that each
entrepreneur uses in the production of garments and in the trade of these finished
products can be used with a complex but thorough survey with the guilds, suppliers
and other groups of close interest that allows them to control said expense or
consumption. A job that will allow you to see the success of the way of saving without
reducing costs or reducing quality to offer a good product against oriental
competitors.

 Control and quality. - the quality control not only of the products, but of the service
they offer and the comments of their clients, both corporate and retail. It is essential
that quality be accompanied by the implementation of these observations so that not
only customers are loyal but can identify new consumers within the market.
 Control and innovation. - Although in this section it is difficult to empower the
knowledge of workers with management knowledge, it is preferred to delegate
certain responsibilities to certain employees so that new ideas are born in them and
that benefit the growth of the business.

 Control and responsiveness to customers. - In this last point, it is in which employees

must be more careful, not only because they feel threatened with accusations about
how they work, but also ensures that the client-employee treatment is correct.
Implementing said strategy to the most correct extent will allow the client to hear,
resolve their complaints and attend to a better shopping experience.