Garmand Case Report

GARMAND CASE REPORT

Questions:

1. What is the competitive position of Garmand?

The competitive position of Garmand is that of a high quality product with relatively high price. Garmand sell protective clothing mainly to the construction and civil engineering sector (CCE), other industries (OI) and agriculture (Agri).  Garmand garments are very well finished and consciously designed. The use of modern machinery ensures that manufacturing techniques are good, in contrast, to most of its competitors whose products have just one lining and offer much less performance such as in terms of ventilation. This position has proofed to be successful in terms of market share: Garmand is the market leader in protective clothing with a market share of 21.5%, So in this sector customers value considerably quality of the product. The DPC believes that the Garmand brand should maintain its position at the top of the market, and therefore, will not reduce quality levels although it could really reduce costs if he made the product a bit less sophisticated. However, despite being leaders in market share, high production costs have caused negative profits in the last years. We have to take into account that the majority of prices for similar quality clothing made by local competitors are between 5% and 10% cheaper than those of Garmand. Finally, Garmand invests very little in brand advertising and the brand name only appears on a small label sewn inside the neck of garments and trouser waistbands.

1. Why is profit margin negative?  

The main reasons for why the department suffered another year of negative profit margin (‐2%) can be summarised as follows: firstly, manufacturing costs are higher than those of its competitors and it would make sense to move production to countries with lower manufacturing costs. But the problem here is that unions oppose this option because they fear it would cause redundancies.

Additionally, Garmand’s workers are paid more than the industry average – and pay levels cannot be renegotiated without union conflict. In this aspect, the parent company wants to avoid any problems with employees. Another reason is due to production of the factory being at only 75% of full capacity, whereas costs could be reduced by 3% if production reached 100% of capacity.

1. What are the main markets?  

Garmand is the market leader in protective clothing. The main markets in which the company has been producing are protective clothing for industrial and agricultural use, as well as waterproof garments for the general public. Therefore Garmand sell protective clothing mainly to the construction and civil engineering sector (CCE), other industries (OI) and agriculture (Agri).  There have also been some timid attempts to sell into the yachting market which failed because of a lack of commercial support from the parent company. Moreover, Garmand also makes specific and special products when large orders are received, occasionally. It is expected that CCE and OI demand is going to increase in the next years while Agri is decreasing.