01-05-2012, 08:00 PM
“International Business (MGT520)”
Assignment No. 02
“Case Study”
Classic Cotton (Ltd.) is one of the leading textile manufacturing companies in Pakistan
established in 1980. It has been serving its domestic market customers for last 30 years and
famous for gents formal wear as well as denim jeans, bed sheets and towels. Classic Cotton
(Ltd.) started export to USA and UK in 2003 when company received emails from USA and
UK importers and placed orders for bed sheets and towels. Company export was increasing
year-by-year and expanded business to Denmark, and Korea. However, in recent years
company facing different challenges which affected local as well as offshore sale performance.
The increase in interest rate, inflation and depreciation of rupee increased the value of imported
material and thus increased the cost of production. Non- guaranteed power supply by WAPDA
authority has also negatively affected production efficiency of Classic Cotton (Ltd.) and it
could not meet export orders on time. In addition to that, shortage of gas supply also crippled
Classic Cotton (Ltd.) business performance and was left with no other option but to cut the
labor force and shut down few units. One of good source of increase in export was the frequent
visits of importers who were able to see quality of products personally at factories or by
attending export exhibitions. The numbers of foreign importers visits have dropped
significantly due to law and order situation in the country and especially in Karachi. The
ultimate effect is that these customers are shifting towards Bangladesh and China. Textile
industry contributes significant share to country’s GDP but companies, as Classic Cotton (Ltd.),
are quite disappointed and dissatisfied from the government actions. Classic Cotton (Ltd.) has
to wait every year for new budget to see what kind of new policies introduced by the
government. Despite the backbone of Pakistan economy, textile industry has been ignored in
past and governments have not given due share from its billions rupees contribution. Classic
Cotton (Ltd.) lost hopes from government when government introduced taxes on domestic sales
and withholding tax on imported textile items. Keeping in view this situation, Classic Cotton
(Ltd.) management has decided to shift its production unit from Pakistan to Bangladesh.
QUESTIONS:
1. What kind of expansion strategy Classic Cotton (Ltd.) used? Was its expansion into
foreign markets a result of pro-active action or reactive action? Describe with logics.
2. What kind of political and economic risks have made Classic Cotton (Ltd.)
uncompetitive in textile industry? Explain with logical reasoning.
The Special Note: How can you avoid zero marks status?
Assignment No. 02
“Case Study”
Classic Cotton (Ltd.) is one of the leading textile manufacturing companies in Pakistan
established in 1980. It has been serving its domestic market customers for last 30 years and
famous for gents formal wear as well as denim jeans, bed sheets and towels. Classic Cotton
(Ltd.) started export to USA and UK in 2003 when company received emails from USA and
UK importers and placed orders for bed sheets and towels. Company export was increasing
year-by-year and expanded business to Denmark, and Korea. However, in recent years
company facing different challenges which affected local as well as offshore sale performance.
The increase in interest rate, inflation and depreciation of rupee increased the value of imported
material and thus increased the cost of production. Non- guaranteed power supply by WAPDA
authority has also negatively affected production efficiency of Classic Cotton (Ltd.) and it
could not meet export orders on time. In addition to that, shortage of gas supply also crippled
Classic Cotton (Ltd.) business performance and was left with no other option but to cut the
labor force and shut down few units. One of good source of increase in export was the frequent
visits of importers who were able to see quality of products personally at factories or by
attending export exhibitions. The numbers of foreign importers visits have dropped
significantly due to law and order situation in the country and especially in Karachi. The
ultimate effect is that these customers are shifting towards Bangladesh and China. Textile
industry contributes significant share to country’s GDP but companies, as Classic Cotton (Ltd.),
are quite disappointed and dissatisfied from the government actions. Classic Cotton (Ltd.) has
to wait every year for new budget to see what kind of new policies introduced by the
government. Despite the backbone of Pakistan economy, textile industry has been ignored in
past and governments have not given due share from its billions rupees contribution. Classic
Cotton (Ltd.) lost hopes from government when government introduced taxes on domestic sales
and withholding tax on imported textile items. Keeping in view this situation, Classic Cotton
(Ltd.) management has decided to shift its production unit from Pakistan to Bangladesh.
QUESTIONS:
1. What kind of expansion strategy Classic Cotton (Ltd.) used? Was its expansion into
foreign markets a result of pro-active action or reactive action? Describe with logics.
2. What kind of political and economic risks have made Classic Cotton (Ltd.)
uncompetitive in textile industry? Explain with logical reasoning.
The Special Note: How can you avoid zero marks status?
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