raymondtextiles–globalizationwithinemergingmarkets.docVIP

Raymond Textiles – Globalization within Emerging Markets Mr. Gupta, the President of Raymond Textiles, was deep in thought when he came out of the monthly strategy meeting with the Executive Board in Mumbai, India, in March 2005. The meeting had revolved around the potential investment in a Greenfield integrated textile manufacturing plant in the South East Asian region. The proposal had been in the works for quite some time and the strategy team had been considering various countries in the region as a potential location for the plant. While the initial investment in the plant would not be considerable, Mr. Gupta knew that the success of the project would determine the company’s longer-term strategy of creating low costs manufacturing hubs outside India to fuel future growth. The plant would be the first step in a long series of similar investments in the region. While the preliminary financial analysis conducted was encouraging, Mr. Gupta was not sure whether the analysis had taken into account all the risks associated with the project. He had asked Mr. Sandeep Bhagaria, a senior financial analyst in the corporate office into carry out a more detailed analysis of the project. On entering his office, Mr. Gupta saw the completed project report lying on his desk and he sat down to read it. Background on the Textile Industry The textiles industry consists of the production of cotton, wool and man-made fibers for different uses such as apparel, home furnishings, footwear and other industrial purposes. In 2003, the global textiles sector was worth $958.6 billion at manufacturers selling price (MSP), having grown at a compound annual growth rate (CAGR) of 2.9% since 1999. (Exhibit 1) In recent years the prices have been declining due to the pressures being placed on the sector’s end-users, such as manufacturers of apparel, home furnishings and automotive interiors. Despite this, the sector has retained its positive growth, primarily due to increased demand for textiles