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    Classic Knitwear Case Analysis

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    Abhinav
    This document is a marketing group assignment submitted by Group 3 to their professor. It analyzes options for Classic Knitwear to launch a new insect repellent t-shirt in partnership with Guardian. It considers launching under the Guardian brand name, Classic Knitwear brand name, or not launching. It estimates demand would be 790,875 shirts over two years but break-even point is 622,511 shirts, so launching under Guardian's name may not reach break-even. The group concludes Classic should consider launching under its own brand name instead.

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    Classic Knitwear Case Analysis

    Uploaded by

    Abhinav
    236 views5 pages
    This document is a marketing group assignment submitted by Group 3 to their professor. It analyzes options for Classic Knitwear to launch a new insect repellent t-shirt in partnership with Guardian. It considers launching under the Guardian brand name, Classic Knitwear brand name, or not launching. It estimates demand would be 790,875 shirts over two years but break-even point is 622,511 shirts, so launching under Guardian's name may not reach break-even. The group concludes Classic should consider launching under its own brand name instead.

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    Classic Knitwear case Analysis (IIM Indore)

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    This document is a marketing group assignment submitted by Group 3 to their professor. It analyzes options for Classic Knitwear to launch a new insect repellent t-shirt in partnership with Guardian. It considers launching under the Guardian brand name, Classic Knitwear brand name, or not launching. It estimates demand would be 790,875 shirts over two years but break-even point is 622,511 shirts, so launching under Guardian's name may not reach break-even. The group concludes Classic should consider launching under its own brand name instead.

    Copyright:

    © All Rights Reserved
    236 views5 pages

    Classic Knitwear Case Analysis

    Uploaded by

    Abhinav
    This document is a marketing group assignment submitted by Group 3 to their professor. It analyzes options for Classic Knitwear to launch a new insect repellent t-shirt in partnership with Guardian. It considers launching under the Guardian brand name, Classic Knitwear brand name, or not launching. It estimates demand would be 790,875 shirts over two years but break-even point is 622,511 shirts, so launching under Guardian's name may not reach break-even. The group concludes Classic should consider launching under its own brand name instead.

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    Classic Knitwear and Guardian: A perfect Fit

    (MARKETING GROUP ASSIGNMENT)

    SUBMITTED TO: Prof. Rajesh Kumar Sinha


    SUBMITTED BY: Group 3
    MEMBERS: ABHINAV DOOMRA (2018PGP011)

    KRITI JINDAL (2018PGP479)

    URVASHI SINGH (2018PGP411)

    MANU AGRAWAL (2015IPM059)

    TANAY BHAGAT (2018PGP095)

    REETURAJ BAIDYA (2018PGP296)

    LADE ASHWIN SURESH (2018PGP190)

    SECTION: C
    SUBMITTED ON: 22nd November 2018
    INTRODUCTION:
    Classic Knitwear Inc. is a manufacturer and distributor of unbranded casual knitwear. It
    operated mainly in the non-fashion casual knitwear category of this industry with very few
    SKUs. The company found too much risk in operating overseas and therefore its revenues of
    USD 550 million in 2005 was earned only from the U.S. However, lately the top management
    of the company has realised the need to push the shrinking gross margins. For this the
    company has devised an idea of launching a new mosquito repellent apparel in association
    with Gaurdian Inc. In order to choose the best possible alternative, the company can do the
    following analysis.

    MARKETING PLAN:
    1. Launch the new insect repellent t-shirt under the brand name “Guardian”

    Pros:
    - Help to increase gross margin and meet the company target.
    - Competitive advantages over other competitors.
    - Can use guardian brand name for marketing.

    Cons: - If guardian try to break the offer then classic would suffer
    - Guardian will get publicity instead of classic
    - Additional investment and licensing fees required

    2. Launch the new insect repellent t-shirts under the brand name “Classic Knitwear”

    Pros:
    - Classic can leverage this opportunity to increase its brand equity among its
    customers and subsequently establish itself as a strong player in branded segment.
    - The brand name “Classic Knitwear” would help protect it against any conflicts
    that may arise with Guardian, post their four-year contract.

    Cons:
    - Marketing the classic knitwear will cost an investment of 8-10 million
    - Required licensing fees and additional sales employees.

    3. Do not launch insect repellent t-shirts

    Pros:
    - No additional investment required

    Cons:
    - No increase in gross margin of classic knitwear
    - No increase in brand equity
    - Competitor can collaborate with guardian for insect repellent T-shirt
    MARKET DESCRIPTION:

     PRICING
    - Margins-
     Since Classic dealt with unbranded knitwear, it did not have a reputation or brand of
    its own through which it could differentiate itself from other brands in front of the
    retail customers. Hence, the gross margins were quite low

     The margins were currently at around 18% which was significantly lower compared
    to those of branded products (30%-40%)

     Classic had been able to achieve low production costs since the production was done
    offshore in Dominican Republic. Also, it was able to achieve economies of scale
    through high volume production. This can be one of the factors while deciding pricing
    for the products and can result in higher margins.

    - Profitability-

     According to exhibit 1 (Classic Knitwear income statement), the current net income
    margin% of the company is 3.2%. To determine whether the launch of new product
    will be profitable for the company or not, we need to see the time in which it will
    break-even and then compare the margin% with the existing one

     COMPETITION

     There were three major manufacturers in non-fashion knitwear market: JamesBrands


    having a revenue of $4.5 Billion, Flowerknit having revenue $1.25 Billion and
    Greenville Corporation having revenue of $630 million.
     Seventy-five percent of Classic’s output consisted of unbranded screen printed
    products. In this sector, there were numerous little firms such as B&B Activewear
    (23.6% market share) which competed with Classic directly
     In retail business, manufacturers competed using price, variety and prompt delivery

     DEMAND FOR THE PRODUCT

     Based on the consumer research, 18.5% of the 1000 respondents were interested in
    the product. Based on past market research, 60% of the respondents indicated they
    would definitely try (38%) would do so (22.8%) within the two-year introduction
    period.
     The company also predicted that at least 50% (11.4%)would buy an additional shirt
    the following year
     Currently the insect repellent clothing was being sold in niche markets consisting
    mostly of hunters and fishermen. The company is now thinking of taking this product
    into mass market by initially targeting males aged 18-35 years.
    BREAK EVEN ANALYSIS –

    CALCULATION OF BREAK EVEN POINT


    Manufacturer's Selling Price 17.87
    Less: Variable Costs
    Cost Of Goods Sold 10.82
    Advertising allowance (10% for 20% retailers) 0.3574
    Off-Invoice Trade Promotion (5% of sales price) 0.8935
    Contribution Margin per Shirt 5.799

    Break Even Sales(Shirts) for 2 years 622511

    CALCULATION OF EXPECTED DEMAND


    Potential US Men Population (age 15 and above) 10,00,00,000
    Target Market Population(Assume 60% of Total Population) 6,00,00,000
    Awareness among Target Audience in two years (25%) 15000000
    Interested number of consumers as per survey (18.5% of 7500000 consumers) in first year 1387500
    Consumers "definitely would buy" as per survey(38% of 1387500 ) in first year 527250
    Consumers that would buy based on past experience(60% of 527250) in first year (1) 316350
    Consumers who would buy additional Shirt in second year(50% of 316350) (2) 158175
    Consumers that would buy based on past experience (60% of 527250) in second year (3) 316350
    Total Demand in 2 years(Estimated) [ (1) + (2) +
    (3)] 790875
    Notes-
     Manufacturing Prices and Cost of Goods sold have been taken from exhibit 4.
    Average prices across the four styles have been used for calculation as per demanded
    in the case. Other variable costs are taken from the case facts.
     Fixed Cost to calculate break even sales has been calculated as-
    = 3,000,000 (Advertising) + 510,000 (Salary of 3 Sales people for 2 years as
    85000*3*2) + 1,00,000 (Licensing Cost)
     Exhibit 2 has been used to calculate the number of interested consumers.
    CONCLUSION:
    According to our analysis we believe that if the company launches the new product under
    Gaurdian’s name the break-even will not be reached. This is because the estimated demand is
    far lower than the break-even point. We however believe that the company can try launching
    the product under its own brand name.

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