Backward Integration: From Trading to Manufacturing

We run a wholesale trade business and we have the idea to go for manufacturing. Thus we will be able to make the design and size of our products according to our targeted customers and to achieve good margins. We have decided to focus on boy shirt manufacturing. To realize our project we need to arrange for labour, machines, fabric (raw material) and working capital. The idea is basically to expand our current business which has good scope especially in the unorganised shirt category.

The expected margin is quite decent, around 25% net minimum .

I believe there is an immense opportunity in the boy (3yrs. to 16yrs.) shirt business because:

1. The size of a child's cloths keeps changing every 2-3months.
2. The Indian market offers incredible opportunities since no supply overpasses the demand.
3. The medium range we have chosen will further excel the volume.
4. Due to our experience in the wholesale business, where we got a good response even in the context of tight competition, we know that customers are looking for value for money and we can say that we 'got the nerve' of what they exactly want.

The project is at a very initial stage. We need funding for fabric, labour, machines, and working capital.

The market is currently operated by Asia's biggest garments wholesalers and we observe that many of our competitors are not providing good quality, maybe due to lack of qualified labour or to the hastiness of their initiative.

There are few competitors, more specifically, only 2 in our region. We plan to target different regions depending upon season.

With manufacturing at hand we will have an edge advantage.

There are other playes that are making good money out of the business. However, we have an agent (aartis) in our market who will bring us customers on commission base.

The investmnet will be used for the manufacturing process.

We need the funding because we have already financed our money in our wholesale business which we planning to continue.

The investment is to be scheduled depending on the stage - machinary, labour, fabric, etc..