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Case

Analy
sis
Classic Knitwear and
Submitted by :
Guardian

Group 1
Abhilasha Jas (2013IPM004)
Aishani Verma (2016PGP023)
Akanksha Wasnik (2016PGP030)
Amandeep (2016PGP048)

CASE FACTS

Non- Fashion casual knitwear category ($24.5mn )


In 2005 Classic reported $550 mn revenues (US sales).
Margin 18% vs. 30%-40%.
It operates in two segments-wholesale (screen-prints) and mass retail channels.
75% through wholesale ($413 mn) and 25% through mass retail ($137 mn)
Second player in the sector with 16.5% market share in the wholesale category
Cost advantage over other producers because of state of the art production hub in
Dominican Republic.
Mixed retailers like Wal-Mart and Clothing specialist retailers like GAP.
Branded side of the non-fashion knitwear market was dominated by three large
manufacturers: JamesBrands, FlowerKnit and Greenville corporations TopTops division.
Classic was more heavily invested in shirts than the overall industry.

Problems:
Whether to launch the Guardian insect repellant shirts or to continue to pursue
production efficiency using traditional methods?

Increasing gross margin to 20% in the subsequent years.

Causes:
1. Classic knew it would be only a short time before the competitions realize similar
superior manufacturing efficiencies.
2. Neither controlled labels nor tie-in promotions could ever push overall gross margins
consistently over 20%.
3. Downgrade of classics stock if the company didnt communicate compelling plans
for margin growth.
4. How should they launch their new product as a different product or as a new product
under Classic (including the name Classic Knitwear)?
Options Available:
1. Launch Guardian as Guardian
2. Launch Guardian as Classic
3. Dont launch Guardian
Option 1
Pros:
Leveraging guardians positive reputation
Competitive advantage over competitors(i.e. B&B,Activewear)
Allows Classic access to new distributors (i.e. LL Bean).
Cons:
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Guardian may overshadow effect on Classic.


Additional royalty paid to Guardian (5% on net sales).
Guardian may terminate its agreement if sales of Guardian shirts are adversely
affecting sales of Guardians existing insect repellant products.

Option 2
Pros:
Increase brand recognition for Classic.
Help in achieving the target gross margin of 20% in the coming years.
Does not confuse the current distributors.
Cons:
The new product might affect the sales of the existing Classics products.
Market is hesitant to try out the new product.
Will require additional marketing efforts for brand building.
Option 3
Pros:
Less risky as no extra marketing cost and efforts
Continue enjoying cost advantage over other US producers.
Cons:
Will remain in the 18% gross margin.
Continue to have problem of no brand recognition
Recommendations:
Fixed costs
Break
Even Volume
Advertising
Manufacturers
selling price
Salary
COGS
Total fixed costs
Trade promotion (5%)
Advertising allowance (10% for 20%
retailers)
Contribution margin per shirt
Breakeven Volume

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30,00,000
17.87
5,10,000
10.82
35,10,000
0.89
0.35
5.81
6,04,130

Total Population over 15 years of


age(men)

100,000,000
.00

Consumers who were aware of


guardian name

95,000,000.
00

Consumers having positive


perception of the brand

55,100,000.
00

Awareness among target audience in


2 yrs

13,775,000.
00

Awareness in 1st year

6,887,500.0
0

Awareness in 2nd year

6,887,500.0
0

Consumers
survey
Consumers
would buy
Consumers
year
Consumers
year

who responded to the

1,274,187.5
0

who expressed that they


484,191.25
who would buy in 1st
290,514.75
who would buy in 2nd
290,514.75

Repeat purchases during 2nd year

145,257.38

Total demand over 2 years

726,286.88

As the demand over the two years is greater than the break even, it is recommended to launch
the new product.
This product has a gross margin of 37%-40%, this can drive up the gross margin of the whole
firm.
According to the research Mens Fleece is not that much in demand as compared to other
products, so it needs to be relooked after the pilot launch.
Need to look at the low price options along with the high price options so as to increase the
sales volume.

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Additional market research should be conducted and a pilot launch for the product before the
actual launch.

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