1
Executive Summary
Khadi and Village Industries Commission is a statutory body of Government of India, which
has been identified as one of the major organisations in the decentralised sector for generating
sustainable nonfarm employment opportunities in rural areas at a low per capita investment.
It undertakes activities like skill improvement; transfer of technology; research and
development; marketing for a diverse range of handcrafted products which ultimately helps in
generating employment opportunities in rural areas.
KVIC sells these products through 7050 retail stores, inclusive of 12 Department Sales
Centre (DSC) owned directly by the organisation. All other stores are being owned by KVIC
affiliated institutions.
This is an era of sustainability where everyone wants to do their part to sustain the natural
resources for upcoming generation. Khadi India provides plethora of handcrafted products
which are produced without throbbing the environment, along with being a socially
responsible entity. Though at the retail front, the shopping environment offered by KVIC is
not appealing the Indian consumers and is also confusing them with incongruent store names
at different locations. Due to these reasons, KVIC has not been able to settle on a brand
identity for Khadi India.
For handcrafted products, the consumers are not price conscious but discerning enough to
zero down on a quality product that is comfortable, skin friendly, nature friendly and
certainly attractive. Being a decentralised organisation, KVIC has not been able to provide a
standardized product across all stores as the affiliated institutions are separate business units,
which are operating with limited funds. Due to this, there is a lack of design elements and
size specifications in Khadi apparels.
With such an extensive retail presence and a wide product mix, there is an extreme potential
for KVIC to establish itself as a brand that can provide quality products and satisfy the needs
of right target consumers.
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Objectives
The major objective of this Reengineering business plan is to revitalize the current structure
of KVIC and make it a profit earning organization which will offer value proposition in
following areas:
•
Retail Makeover of 12 Department Sales Centre
•
Establishing Khadi India as a brand.
•
Instilling Brand Preference
•
Cost effectiveness achieved through Supply Chain and Distribution
•
Effective Sales training
•
Offering standardized products.
In the first year, 12 Department Sales Centres have been selected for revival on the basis of
their ownership, location and sales performance. The other stores would be revitalized in the
next three years on the basis of their institutions grading system.
Key Financials
The initial investment required for the business plan is Rs. 15,96,38,646. The total projected
sales after implementation of the plan amounts to Rs. 58,38,89,500 and the projected net
profit at the end of the first year comes out to be Rs. 1,02,47,263 after providing for all
expenses. The breakeven point in sales amounts to Rs. 53,62,13,406 which is achieved in the
first year itself.
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Organisation Overview
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Khadi & Village Industries Commission (KVIC) is a statutory body established under the
Khadi and Village Industries Commission Act, 1956 (61 of 1956), underneath the protection
of the Ministry of Micro, Small and Medium Enterprises. The organisation is engaged in
promoting and developing Khadi and village industries for providing employment
opportunities in the rural areas, thereby strengthening the rural economy.
(KVIC Annual Report, 2008-09)
2.1 Organisation Objectives
The social objective of providing employment
The economic objective of producing saleable articles
The wider objective of creating self-reliance amongst the poor and building
up of a strong rural community spirit.
(KVIC Annual Report, 2008-09)
2.2 Organisation Functions

Planning, promotion, organisation and implementation of programs for the
development of Khadi and other village industries in the rural areas in coordination
with other agencies engaged in rural development.

Building up of a reserve of raw materials and implements for supply to producers,
creation of common service facilities for processing of raw materials as semi-finished
goods and provisions of facilities for marketing of KVI products apart from
organisation of training of artisans engaged in these industries and encouragement of
co-operative efforts amongst them.

Including the use of non-conventional energy and electric power with a view to
increasing productivity, eliminating drudgery and otherwise enhancing their
competitive capacity and arranging for dissemination of salient results obtained from
such research.
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
Providing financial assistance to institutions and individuals for development and
operation of Khadi and village industries and guiding them through supply of designs,
prototypes and other technical information.

Undertake directly or through other agencies studies concerning the problems of
Khadi and/or village industries besides research or establishing pilot projects for the
development of Khadi and village industries.

Establish and maintain separate organisations for the purpose of carrying out any or
all of the above matters besides carrying out any other matters incidental to its
activities.

Undertakes research and development activities through in-house research and also by
sponsoring projects to other R&D organisations. The main objectives of the R&D
programme are achieving increase in productivity and wages of the workers,
improvement in quality, efficient use of local skills and local raw materials, and
reduction of human drudgery. In addition to Jamnalal Bajaj Central Research Institute
(JBCRI) now renamed as Mahatma Gandhi Institute for Rural Industrialization
(MGIRI), Wardha, KVIC undertakes R&D activities through Central Bee Research
and Training Institute (CBRTI), Pune; Dr Ambedkar Institute of Rural Technology
and Management (AIRTM), Nashik; Kumarappa National Handmade Paper Institute
(KNHPI), Sanganer, Jaipur; Central Village Pottery Institute (CVPI), Khanapur,
Karnataka; and Khadi Gramudyog Prayog Samiti (KGPS), Ahmedabad.

For quality control measures KVIC has made arrangements with the National Institute
of Design (NID), Ahmedabad; ‘Dastakar’, Andhra Pradesh; IIT, Delhi; and Textiles
Committee, Mumbai. The Memorandum of Understanding signed between KVIC and
the Textiles Committee, a statutory body under the Ministry of Textiles facilitates 13
laboratories of the Committee situated throughout the country, which are being used
for testing of Khadi and polyvastra. Under the arrangement, the quality of Khadi is
expected to receive a fillip, thereby improving its marketability. A number of Khadi
institutions have availed of benefits of this arrangement.
(KVIC Annual Report, 2008-09)
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2.5 Retail Structure
The retail stores under KVIC is a venture of Micro, Small & medium Enterprises. Khadi
institutions are mostly nongovernment organizations (NGO) formed either under the
Societies Registration Act (1860), Charitable Trusts registered under Indian Trust Act, 1882,
Section 25 of the Companies Act, 1956 or State Cooperative Societies Acts.
2.6 Production and Sales Performance
The KVI sector recorded an improved performance during 2008-09 in comparison to the
previous year (2007-08). The total KVI production during 2008-2009 (provisional)
stood at Rs. 17,358.00 crore (Khadi – Rs 565.00 crore and VI – Rs. 16,793.00 crore)
as against Rs. 16,677.71 crore (Khadi – Rs 543.39 crore and VI – Rs. 16134.32 crore) during
2007-08, thus reflecting an increase of 4 %. Similarly, sales of KVI products also registered
an increase to Rs. 21,006.00 crore (Khadi – Rs.855.00 crore and VI Rs. 20,151.00 crore)
during 2008-09.
(KVIC Annual Report, 20008-09)
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2.7 Khadi
Khadi is the single largest product of
the KVI subsector. Within the KVI
Retail
subsector, Khadi is considered to have
the
most
development
potential
due
to
for
inclusive
its
marked
Production:
1952 Khadi
Institutions
emphasis on gender, minorities, and
other socioeconomically marginalized
people, as well as community based
processes. At the bottom of the
pyramid of the Khadi process are the
Artisans:
Spinners,Weavers,Embroiders
spinners, weavers, and other artisans,
such as skilled embroiders collectively referred to as artisans, are employed or engaged by
Khadi institutions.
KVIC has 1,252 affiliated Khadi institutions and KVIB has 700. These institutions are
engaged in production which comprises hand spinning of cotton sliver, silk, and/of wool;
hand reeling silk into yarn; handloom weaving yarn into fabric; processing for finishing; and
garment making followed by retailing of Khadi products. A few Khadi institutions are
integrated into the production of raw materials (sliver or threads) from cotton.
Top Khadi Producing States:
Rank
Cotton
Khadi
(% Wool Khadi (% Share)
Share)
Silk
Khadi
(%
Share)
1
Uttar Pradesh (45.36)
Haryana (23.48)
West Bengal (31.48)
2
Tamil Nadu (8.59)
Uttar Pradesh (19.12)
Tamil Nadu (31.02)
3
Gujarat (6.74)
Rajasthan (18.46)
Karnataka (7.69)
4
Haryana (6.41)
Karnataka (10.20)
Gujarat (6.13)
(ADB Report, 2008)
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2.7.1 Khadi Value Chain
Cotton Bales
• Producer : Farm households
• Process: Farm production
• Market/Marketer: Sliver (or cotton threads on spindles) plants
Sliver
• Producer: 6 Central Sliver plants: KVIC (6), Khadi Institutions
• Process: Cotton bale converted into cotton tapes, which is then
used to produce sliver, a loose soft untwisted strand of textile fiber
produced by a carding or combing machine
• Market/Marketer: Khadi institutions
Yarn
• Producer :Spinners, mostly poor women
• Process: Sliver is traded by khadi institutions to spinners who
convert sliver into yarn on hand powered spinning equipment
(charkas).
• Market/Marketer: Khadi institutions buy back the yarn from the
spinners on payment of conversion charges
Fabric
• Producer: Weavers, mostly poor men
• Process:The yarn is traded by khadi institutions to weavers who
weave the fabric on handlooms and sell it back to the khadi
institutions in return for conversion charges
• Market/Marketer: Fabrics are sold as processed cloth, a more
refined product than yarn, either directly to the end consumer
through khadi institutions own retail outlets, traded with other
khadi institutions, or through direct sales outlets of KVIC
Garment
• Producer: Tailors working under Khadi Institutions
• Process: The fabrics are processed (e.g., dyed) and converted into
garments using mechanized means for preset designs, developed
as customized garments, or embellished with value additions, e.g.,
embroidered by skilled artisans
• Market/Marketer: Khadi institutions owned stores, KVIC owned
store
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2.8 Marketing Mix
• Customer Solution:
sustainable and handcrafted
clothing, Skin friendly
personal care products
• Acceptability: By few
• Communication: Low
emphasis on communication
• Awareness: Low
• Cost: Artisans wages, loans.
• Affordability: By middle
class and above
Product:
Diverse
Range of
Handcrafted
products
Price:
Moderately
Priced
Promotion:
Print &
Outdoor
Advertising,
Local Cable
Network
Place:
KVIC’s
affiliated
KVIB’s
affiliated
• Convenience: Many stores
• Accessibility: Easy
2.8.1 Product mix
KVIC offers a diverse range of handcrafted products in its stores, which are
environment friendly and are made in rural parts of India.
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2.8.2 Price
The KVIC products are moderately priced, which can be affordable by people in the middle
class category and above.
Product
Duppatta
Tie
Shirts
Kurta
Bed Sheet
Saris
 Tassar Silk
 Matka Silk
 Woolen Khadi
 Pure Silk Sari
 Baluchari Sari
 Kantha Work Sari
Price (INR)
350-800
150-250
250-1000
175-350
450-1500
300-350
450-550
200-250
850-1250
4000-4500
3650-4000
2.8.3 Place
KVIC has got an ultra wide retail presence with 7050 retail stores across the country, which
are owned by 5549 Khadi & Village institutions. These institutions are affiliated with KVIC
and state KVI Boards. Also some of the Khadi personal care products are available in
department stores like Big Bazaar, Apollo Pharmacy.
2.8.4 Promotions
KVIC’s communication has been low profile through ATL activities, but they have picked up
pace
with
BTL
Radio
Television (Doordarshan)
Hoardings: Railway
Stations, Bus Stands, Govt
Offices , Major Airports
BEST buses
activities
Below the Line
Above the Line
the
in
recent
times.
Exhibitions & Trade Fairs
Fashion Shows
Sponsorships
Conferences
Seminars
Workshops
People's Education
Programme
For details, refer Advertising on Page
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2.9 Customer Profile
Demographics
• Age- 18-65yrs (Indians, foreigners)
• Gender- Male, Female
• Occupation- Students, Professionals, Politicians,
Farmers
• Social Class- Middle & Upper Middle Income Group
• Religion- Any
• Education- Schooling, Undergraduates, Postgraduates
Psychographics
• Lifestyle- simple & classy.
• Attitude- motivating, self dependent ,nature lovers.
• Activities- spend money on self adornment, like to
know about Indian culture
• Values- modern, traditional
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Environmental Analysis
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3.1 Demographic Environment
It is the study of human population in terms of size, density, location, age, gender, race,
occupation and other statistics. It is of major relevance for KVIC because it involves people
and people make up markets.
Population:
• 1.15 Billion (July 2008)
Population growth rate:
• 1.1578%
Age Structure:
• 0-14 yrs: 31.5%
• 15-64 yrs: 63.3%
• 65 – Over: 5.2%
Sex ratio:
•
•
•
•
At birth: 1.12 male/female
Under 15: 1.10 male/female
15-64 yrs: 1.06 male/female
Total population: 1.064 male/female
Population Projections:
• 2010: 1.175 bln
• 2015: 1.256 bln
• 2020: 1.331 bln
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3.2 PEST Analysis
Political Environment
Political factors have a huge influence upon the regulation of businesses, and the spending
power of consumers and other businesses.
Stable Government : since six years.
Government Policies: favorable policies for KVIC like 10% rebate to all
customers on all purchses from stores (The Hindu Business Line, 2009).
Extensive Institutional Framework: Like any other Government
institution, KVIC also has a very rigid framework.
Government policies have a very positive view towards KVIC, because it
provides employment to a very high number of people.
Economic Environment
Marketers need to consider the state of a trading economy in the short and long-terms.
GDP Growth: 6.7% (2009) (The Hindu, 2009)
Unemployment: 6.8% (2009)
Agricultural and allied sectors accounts for about 60% of the total
workforce.
Economy going through recessionary phase.
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Social Environment
The social and cultural influences on business vary from country to country. It is very
important that such factors are considered for KVIC.
Hindu religion dominated country.
Indian products are preferred by a major proportion of population.
Men are still the dominant part of society, though in Rural India both men
and women work together.
Society is becoming aware of benefits of using Khadi products.
Technological Environment
Technology is vital for competitive advantage, and is a major driver of globalization.
Latest technologies facilitate manufacturing of goods lesser time, at
cheaper prices and of better quality.
Technological advancement has removed complexities of handling
supply chain in rural India.
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3.3 Competitor’s Analysis
India’s forte of hand crafted products is predominantly known because of Khadi and the
village industries, comprising the maximum strength of artisans working under its
institutions. But there are other players like Fabindia, Anokhi, COIR board, Central Cottage
Emporiums, State Emporiums, and local players at street markets which are also selling
handicrafts like KVIC. Though nobody has surpassed the retail giant because of its vast
presence and utmost grasp of artisans, Fabindia has given away a probable intimidation in
terms of its quality products and brand image.
Fabindia being a private limited company is considered as the only nearest competitor player
for KVIC’s retail chain.
Figures
Sales 2008-09
Sales 2007-08
in crore
Average Sales Per Average Sales Per
store
store
KVIC
21006
21543.48
2.97
3.05
Fabindia
300
257
2.7
2.37
With 108 stores across the nation, Fabindia produced similar average sales per store,
produced by that of KVIC’s 7050 retail stores.
Fabindia’s retail footprint is a mere 1.5% of
KVIC’s presence, but it has tapped the emerging
market with a faster pace by working on
following areas:

Quality product offerings and satisfying
market needs

Helping artisans as well as building
brand image

Better shopping environment
Key facts about Fabindia
• 108 retail stores
• 650 employees; 90% women
with nominal shares to all
employees
• 750 producer groups (7500
artisans) across 20 states in
India
• Business philosophy to help
artisans and satisfy market
needs
• 95% sales in domestic market
and 5% in export market
(S. Singh, 2007)
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3.3.1 Fabindia’s Marketing Mix
Products
The major product categories of Fabindia are Apparels, Home Furnishings and Personal Care
which are on the competing lines with KVIC’s products.
Price
The price ranges for Fabindia
Products
Price Range (Rs)
are a bit above then of KVIC’s
Mens Kurtas
399- 1700
products, as they are offering
Mens Shirts
519-699
better designs and consistent
Mens Pyjama’s
375-735
quality of fabric.
Women’s Kurtas
420-1219
Women’s Tops/Shirts
425-768
Skirts
810-1400
Women’s Pants and Capri’s
425-500
Dupatta’s
385-1550
Bed Linen
477-1375
Quilts
1570-1885
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Place
There are 108 Fabindia stores in India which are located in up market areas. Internationally, it
has got six stores in Rome, Dubai, Qatar and China. Fabindia operates itself with three kinds
of stores:
Premium: Wide range of products, high proportion of high ticket items
Regular: Wide range of products but low proportion of high ticket items
Concept: Test stores opened in new markets.
Promotions
Outlet level promotion/ ‘in shop’ promotion
Labelling of various types of organic products like certified (Green) , inconversion (Blue) and natural (Yellow)
Marketing partnership with Tea Board for organic Darjeeling tea logo
Promotional literature
Participation in organic/traditional food, festivals/rural exhibitions/melas
Advertorials, PR activities
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3.3.2 Fabindia’s Supply Chain
Fabindia has moved from centralized model to regional
supplier companies in the recent times. The company has a
philosophy
to
maintain
long-standing,
personalized
relationships with suppliers that go back a generation. This
leads to a consistent growth of artisan suppliers linked
exclusively to Fabindia.
Fabindia ensures complete geographic coverage of crafts and
supply chain through the 17 Community owned companies
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3.4 A comparison of Khadi India and Fabindia
Parameters
Products
Khadi

Fabindia
Apparels
o
o
Threat of
Mens
New
Women
Entrants

Apparels
o Mens
o Women
o Children
PriceBargaining
o Children

Fibre Products

Fibre Products

Personal Care

Personal Care
Rivalry
Low to medium
priced amongst Medium priced
Location
Power
of
Suppliers
Bargaining
In all the states
of India, All
majorinUp market areas in all the major
Competing
Firms
Power of Buyers
markets and streetsIndustry
cities across India
Store atmosphere
Improper layout of stores done, Soft lighting, signifying a chic
Not a soothing ambience.
ambience.
Threat of
Substitute
Lack of sales training
Products
devoid of extravagance or loud
No. of stores
7050 stores across India
108 stores
Promotions
Magazines, Television ads on Word
Customer service
Spacious,
simple,
displays.
Friendly and helpful
of
Doordarshan, exhibitions, trade monthly
mouth
publicity,
interactive
sessions
fairs, events like Paridhan Utsav, known as 'Coffee Mornings' at
hoardings
some of the stores, to which
customers were invited.
Future plans
Modernization of Khadi outlets , Increase the number of stores to
to go for value addition
250 and
the number of rural
artisans to 100,000 by 2010
Challenges
To improve upon the marketing Fast growing requirements,
activities in India, establishing Need for more artisans, need of
itself as a brand.
setting more regional centres,
issue of inventory control
3.5 Porter’s Five Forces model of competition
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Threat of New Entrants
The Threat of New Entrants is a moderate threat for KVIC, due to the following factors:

Economies of Scale
o Khadi India is a perfect example of economies of scale as they are working
on huge operations. No new other new entrant can have such economies of
scale.

Product Differentiation
o The Manufacturers are an amalgamation of Rural Industries, which produce
all carefully handcrafted products.
o Apparels, Cosmetics, Fibre Products: the USP of manmade, handcrafted

Capital Requirements
o The investments for setting up a retailer like Khadi India would be really
high as the potential competitor will have to raise funds for equal to or more
than 7050 stores and make an association of manufacturers.

Access to Distribution Channels
o Requires very strong distribution channel to reach rural India, which would
not be easy for a new entrant.

Government Policy
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o Government of India has many favourable policies for KVIC like 10% rebate
to customers. No new entrant would be able to get such benefits from
government policies.

Expected Retaliation
o KVIC provides income and employment to millions of people thus a new
entrant will have to face retaliation from them.
Bargaining Power of Suppliers
Bargaining power of suppliers is less significant due to the following reasons:

Khadi India dominates the supplier industry as there are large numbers of firms.
o The KVIC will always have an upper hand on suppliers in whole of the India,
as the suppliers are all small clusters and mini industries which are surviving
because of Khadi. They cannot stand out as individual players.

Suppliers’ products have many substitutes.
o Khadi India’s products are all hand crafted and are all made in mini cottage
industries and rural Industries which makes them unique, specially for its
customers who prefer to buy natural, herbal, hand spun products. But, Khadi
has substitutes of machine made fabrics, cosmetics, paper and other things
which are all produced in urban industries.

Buyer is not an important customer to supplier.
o Khadi as a buyer is the most important customer to all the suppliers as these
little industrial hubs are earning majorly through Khadi only.

Suppliers’ product is an important input to buyers’ product.
o The supplier’s product is indeed important to Khadi, as Khadi deals with
multiple suppliers so they can offer everything under roof.

Suppliers’ products are differentiated.
o Khadi India sells products which are clearly set apart from its substitutes
offered by the direct as well as competitors. The reason is the identity of
products made by rural industries which are completely natural and hand
crafted.

Suppliers’ products have high switching costs.
o The switching cost aren’t that high in case of Khadi India suppliers as these
are rural industries and multiple suppliers in each category. For instance a
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natural soap in different aromas comes from Modinagar & Lucknow in UP,
Kashipur in Uttranchal.

Supplier poses credible threat of forward integration
o There is no threat of forward integration at all from the suppliers as
individually these are very small units.
Bargaining Power of Buyers
The Buyers from retail store have a very insignificant bargaining power but the institutions
that KVIC is dealing with, for bulk orders do have bargaining power.

Buyer has full information.
o The buyers are fascinated by products from Khadi India as they know the fact
about these products which are handcrafted and picked up from each corner of
India to be sold at the stores. These buyers are very knowledgeable about the
products.

Product unimportant to quality.
o The quality of Khadi India products does matters, especially for cosmetics
product range.

Buyer presents a credible threat of backward integration.
o There is no threat from buyers venturing into backward integration.

Buyers’ industry earns low profits
o Buyers’ of KVIC products are given 10% rebate for all the purchases made
from KVIC stores, thus this is an extra benefit that they get.

Buyers face few switching costs
o There is no switching cost involved.

Products are undifferentiated
o Products are partially differentiated as only few private retailers are providing
such hand crafted products at a large scale.

Purchase accounts for a significant fraction of supplier’s sales.
o There are multiple numbers of buyers for KVIC products.

Buyers are concentrated or purchases are large relative to seller’s sales
o The buyers are completely fragmented.
Threat of Substitute Products
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Threat of substitute products is very high because there are plenty of other synthetic fabrics
made apparels in market which are available in all price ranges. Also there are plenty of non
herbal cosmetic ranges available.
Rivalry among Existing Competitors
There are very few direct competitors like Fab India and Mother Earth for Khadi India. But
these retailers sell their products at a higher price and possess a smaller foot print as
compared to Khadi India. Thus there exists a very subtle rivalry among existing competitors.
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3.6 SWOT Analysis
Based on the complete background study and environment scanning, a SWOT analysis of
KVIC as an organisation has been done.
Strengths
Weaknesses
• Govt aided organisation
• Ultra wide retail presence- 7050
outlets
• Diverse Variety of products under one
roof
• Rural Empowerment
• Carries the perception of a govt run
organisation
• Less trained staff.
• Unorganised stores
• Less of marketing activities
• No strategic advertising.
• Lack of store planning & layouting
Opportunities
Threats
• Widespread retail presence can be
utlised in an efficient manner.
• Funding of financial resources frmo
Govt of India, Asian Developmnet
Bank.
• The eco friendly era of sustainability.
• Fab india has already tapped this
market and is doing great abroad as
well
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Problems Identified
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4.1 Issues with KVIC
Khadi is estimated to constitute less than 1% of India’s textile market. The textile industry
has made tremendous strides with the adoption of modern technology, branding, and savvy
marketing. In contrast, Khadi India has been unable to adapt to economic and technological
advancements. As a result, the community-based production and marketing model of a
product is still revered, is neither able to gain market share nor substantially contribute to
rural employment.

Weak Links in the Value Chain
Khadi production and marketing under the KVIC Khadi program are constrained by the
following:
Raw Materials
• Lack of proper
quality control
procedure and
equipment
leads.
Institutions
• Fragmented.
• No expertise.
• Less Financial
means
• Limited product
development
capability.
• Out-dated
equipment
Retail
• 7,050 retail
outlets isolated
from current
marketing
trends.
• Dismal
performance
o Raw Materials. The lack of proper quality control procedure and equipment leads
to uneven raw material quality which affects the quality of the final product.
o Equipment. With out-dated equipment and raw material quality constraints, khadi
production cannot be expanded even if demand grows rapidly.
o Marketing. Khadi is primarily sold through 7,050 dilapidated retail outlets of
khadi institutions that are isolated from current marketing trends.
o Institutions. Khadi institutions are fragmented and dispersed, lack the expertise,
financial means, and unified vision to adjust to changing market trends.
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4.2 Key Problems
Branding
• Diverse names & image of retail outlets owned by
Khadi institutions
• Less awareness as a brand
• Strong perception of a laidback business run by
government.
Marketing
• Inconsistent marketing strategy
• Lack of synergy among advertisements of different
stores
Merchandise
• Product strategy not based on consumer preference
• No merchandise planning
• New stock ordered only when shelves starts getting
empty
• Improper placement of merchandise within the stores
• Lack of standardization of merchandise designs
Retail Stores
• Poor visual merchandise
• Untrained staff
• Poor Fixtures
• Unappealing store ambience.
Management
• Functions overlapping.
• Insufficient skills for managing commercial operations
• Obsolete information technology and management
information system
Reengineering Khadi India
30
Project Strategy & Plan
Reengineering Khadi India
31
5.1 Business Idea: “Reengineering Khadi India”
KVIC products are sold through 7050 stores across India. The purpose of this business idea is
to reengineer the entire working of KVIC in such a manner that it can be made more
profitable and yet keeping in mind the social objective of providing employment. Under this
business idea we look forward to propose plans for restructuring the following key functions:

Creating Umbrella Brand.

Restructuring existing stores (Store Layout, Visual Merchandise, etc).

Sales Force training.

Promotions strategies.

Product strategies and differentiation.
5.2 Value Proposition:
Merchandise: Apt with
latest trends
Association with
sustainable acts
True representative of
Indian essence
Better shopping
experience
Improved Customer
Service
Reliable product
quality
Reengineering Khadi India
32
5.3 Selection of Stores
There are more than 7000 retail outlets which are
Basis of Selection
affiliated to KVIC and KVIB, of these 12 stores are
directly operated by KVIC. In the first year of reengineering KVIC, the scope of work would be to revive
Controlwise
these 12 departmental sales centers.

These DSC’s represent the true picture of KVIC
in India, as only few of these DSC’s are making profits,
Zonewise
rest all are in losses.

Product
Category
These DSC’s are directly under the control of
KVIC, therefore the implementation of the retail
makeover plans would not be a lengthy process. In case
of institutions owned stores it would have been a
prolonged process as these institutions don’t have
Institutions
grading
enough capital to invest for a make-over. They will be
demanding for a loan from government which requires
passing a lot of bills.

These DSC’s are in all regions of India. They cater to diverse target groups, thus it
will be a holistic coverage, by understanding the Target consumers and implement
branding techniques accordingly.
Reengineering Khadi India
33

Successful revival of these 12 stores will set the example for all Khadi institutions to
implement the changes.

The size of these stores varies between 1000 Sq ft and 20,000 Sq Ft thus these stores
are the ideal sample representative of all Khadi stores in India.
5.4 The Initial Plan
Brand Building, Retail Makeover & New Product Development
Launching E-retail
Initiating Participations in International Trade Fairs & Exhibitions
Concentrating on E retail
Concentrating on International Participation Trade Fairs & Exhibitions
Exports
Reengineering Khadi India
34
5.5 Segmenting, Targeting and Positioning
Segmentation
Khadi is perhaps the only brand which has the reach and acceptability in every nook and
corner of the country, thus the growth potential is immense. The target market of Khadi is
extremely vast rightly said by Gandhi ji, Khadi is the fabric of India. In rural India, apparels,
bed sheets and fabrics are the most selling items of Khadi India. The target group of Khadi in
urban India is vast, most of the teenagers likes the herbal cosmetics ranges of Khadi, while
few also like the Kurta’s sold at Khadi outlets. Professionals and businessmen are regular
customers of Khadi leather range. For Housewives, Khadi stores have a range of sarees,
fabrics, fiber products, processed fruits, vegetables and cereals. About the corporate sales,
KVIC has an impressive clientele list already which includes Indian Railways, Defence,
Government Hospitals, and Boarding Schools etc.
Thus on a broad term, Khadi target customers can be divided into two segments:
Rural
• Farmers
• Artisans
Urban
•
•
•
•
Students
Professionals
Housewives
Politicians
Reengineering Khadi India
35
Targeting
Segment1: Rural Consumers
Khadi stores in villages are perceived as an
expensive branded store by the villagers, thus
the target customers are elite class villagers
which are into farming as well as Panchayati
Raj, artisans like sculpture makers, weavers
which can afford to buy readymade Khadi
Kurtas, fabric materials, Bed sheets and Durries from Khadi.
Demographic Segmentation
Age (Yrs)
• 33 - 45
• 45 - 65
Gender
• Male
• Female
Annual Income (Rs)
• 1,20,000- 1,50,000 INR
Occupation
• Farmers
• Artisans
Family Life Cycle
• Families with adolescents
• Launching children and moving on
• Families in later life
Generation
• Parents
• Grand Parents
Social Class in Villages
• Upper Middle Class
• High Class
Reengineering Khadi India
36
Psychographic Segmentation
Lifestyle
Personality
Values
• Conservative
• TV, Radio, Melas source
of entertainment
• Dominating
• Decision Makers
• Nature friendly
• Social welfare
Behavioural Segmentation
Occasions
• Panchayats, sabhas
• Marriages
• Village Festivals
Benefits
• Comfort
• Nature friendly
User Status
• Regular Users
Usage Rate
• High
Loyality Status
• Hard core loyal
Buyer Readiness stage
• Interested
• Intend to buy
Attitude
• Positive
Reengineering Khadi India
37
Segment 2: Urban Consumers
Demographic Segmentation:
Age (Yrs)
•
•
•
•
18 - 23
24 - 32
33 - 44
45 - 65
Gender
• Male
• Female
Annual Disposable Income (Rs)
• Above 2,40,000 INR
Occupation
•
•
•
•
Students
Government Officials, Politicians
Professionals
Home-Makers
Family Life Cycle
•
•
•
•
•
Single young adults
Families with young children
Families with adolescents
Launching children and moving on
Families in later life
Generation
• Young Adults
• Parents
• Grand Parents
Social Class
• Upper Middle Class
• High Class
Reengineering Khadi India
38
Psychographic Segmentation
Lifestyle
Personality
Values
• Contemporary
• Well aware
• Classy
• Down to earth
• Nature friendly
• Social welfare
• Gandhian way of living
Behavioural Segmentation
Occasions
•For Students- College wear
•For Government officials, Politicians- meetings, elections
•For Home Makers- social get togethers
Benefits
• Eco friendly
•Socially Responsible
•Comfortable
User Status
•Regular Users- government officials
•First Time Users- students, professionals
Usage Rate
•Low
•High
Loyality Status
•Hard core loyal
•Split loyal
Buyer Readiness stage
•Aware
•Informed
•Interested
•Intend to buy
Attitude
•Positive
Reengineering Khadi India
39
Positioning
In the brand re-engineering process, Khadi will be repositioned as a nature friendly, socially
responsible trendy brand by:

Revitalizing the retail structure which includes renovation of retail stores and training
the sales staff to bring out synchronization in the retail outlook across the country.
For revival of the stores, Vinoba Seva Samiti, an A+ grade Khadi institution can be
benchmarked, as they have recently renovated all their stores in Delhi and Rajasthan
and are having fruitful results.

Brand Building through extensive advertising strategy

New product development.
Reengineering Khadi India
40
5. Pricing Strategy
KVIC is currently working with cost plus pricing where the institutions have a given cost
chart, authorized by KVIC.
Cloth Manufacturing (15.2 Cotton Khadi
Silk
meter roll) in Rs
Yarn
370.1
1730.27
Weaving
87.5
134.5
Weaving Labour
31
31
Employee Funds
19.3
36.73
Processing Charges
26.5
26.5
Total
534.4
1959
Interest @ 4%
21.4
78.36
Insurance @ 1%
5.3
19.59
Trading Spend @ 3%
16
58.77
Margin @ 20%
106.9
391.8
Total cost per than
684
2736.25
Cost per Meter
45
180
This cost chart is easy to calculate but is an inflexible way of pricing with several drawbacks:

Reduces the scope for enhancing artisan earnings.

Inhibits creativity, enterprise, and the potential for artisans to enhance earnings.

No focus on quality and performance of the products

Ignores competitor’s pricing
Instead of cost plus pricing, Market oriented pricing is proposed which will be flexible
enough to take in consideration the scope of improvisation in designs, in sync with the
marketing trends.
Reengineering Khadi India
41
5.8 Roll Out Plan
Reengineering Khadi India
42
5.9 Methodology

Typical data was collected from primary and secondary sources.

To understand the organizational working the head of KVIC was visited wherein
interviews were taken from marketing manager, publicity manager, finance manager
and assistant to CEO of KVIC.

To understand the manufacturing and distribution process KVIC central sliver plant
was also visited. For the same purpose many KVIC affiliated institutions were also
visited in Delhi, Jaipur, Kerala, Uttar Pradesh and Bassi, Rajasthan.

For retail study various stores in Delhi, Jaipur, Mumbai, Kerala, Agra and Amritsar
were visited.
5.10 Limitations:

Unwillingness of government employees to reveal information

Data constraints: KVIC doesn’t records any data except for sales and production
figures, thus a very limited secondary data was available.

Due to time limitation, few numbers of stores have been selected for retail makeover.

KVIC has a vast product mix, where each and every product cannot be focussed upon
due to time limitations. For this purpose, three foremost categories are being
strategically selected for the project.
o Apparels: Scope of Product Development, Promotions
o Personal Care: Best performing category, Scope for Exports
o Fiber Products: Slow moving products
Reengineering Khadi India
43
Branding
Reengineering Khadi India
44
Branding ‘Khadi India’
The strengths of KVIC make it different from its competitor Fabindia as KVIC is backed by
Government with a gigantic retail presence of 7050 retail stores. These stores provide diverse
range of products under one roof, sourced from all regions of India. KVIC aspires to make
Khadi cloth and various other rural traditional handicraft
items more popular in the domestic and international
markets.
KVIC has its retail brand called Khadi India, with an
authorized logo by KVIC. The logo’s visibility is there on
the retail store boards on the fascia and on some roadside
hoardings in local markets.
The retail stores operated directly by KVIC have the frontal
boards with this logo, however the retail stores operated by
state boards have an obligation to mention both the state
board and central board logo. But the retail stores which are
operated by institutions
are working with freedom of giving their own names to the retail store like Khadi Niketan,
Khadika, Khadi Gramudyog Bhawan, Khadi Mandir, Khadi Bhandaar, GramShilpa etc. Only
few of these institutions place the KVIC logo on a corner, but mostly these frontal boards
have a certification stamp by KVIC, Government of India.
Due to these different names at all the stores, the customers do not perceive it as a brand.
Though there are efforts done by KVIC to position it as a brand but it is always taken as a
Reengineering Khadi India
45
laidback business run by the government with drowsy retail stores, unconcerned sales people
and not so trendy Khadi apparels.
In the product category, KVIC has three registered brands under the purview of KVI sector:

Khadi Brand: Mainly for premium and export
oriented products

Sarvodaya Brand: Products for consumption of
middle and lower income group

Desi Aahar: Organic food items
6.1 Brand Identity
Brand identity is all that an
organization wants the brand to
be considered as. It is a bundle
of
mental
and
functional
associations with the brand.
These
associations
“reasons-to-buy”
provide
are
not
but
they
familiarity
and
differentiation
that’s
not
replicable getting it.
Brand identity leads to brand
loyalty, brand preference, high
credibility, good prices and
good financial returns
.
Reengineering Khadi India
46
Characteristics
•
•
•
•
Government aided organisation
Provides rural employment
Retail presence- 7050 retail stores
Participation in IITF, other trade fairs, fashion shows.
Benefits
• Eco friendly Products
• Socially responsible
• Wide reach for consumers
Performance
• All kinds of Khadi(cotton, wool, silk) produced in varied
qualities in different regions of India.
• Diverse range of products under one roof
Service Support
• Institutions
• Clusters of artisans
Values
• Traditional Handicraft of Rural India
• Gandhian Philosophy
• Rural Population
Reengineering Khadi India
47
6.1.1 Brand Identity Prism
Brand Personality
Khadi India tries to reflect itself as holistic brand which provides a diverse range of all
handcrafted products under one roof, in a very simple yet traditional atmosphere. The
communication of the brand over the years has also been very traditional, the TV
commercials that are being telecasted on Doordarshan still portrays Khadi as a traditional
brand which keeps in mind the sustainability factor.
Brand Physique
The retail outlook of any brand speaks a lot about itself. Khadi India’s brand physique is not
established yet because all the retail stores have different structures and outlook, which
doesn’t gives any clarity to the consumers. The ambience and environment inside mainstream
stores is simple and unappealing. The extensive usage of orange colour is the only common
aspect amongst majority of stores and usage of word “India” in logo clearly lives the impact
of being a brand of India with Indian products that are environment friendly.
Reengineering Khadi India
48
Brand Culture
The culture of Khadi India right from its inception has been to provide employment to the
rural India. Khadi was popularised by Mahatma Gandhi during the era of freedom movement.
It was the Gandhian philosophy to wear and promote this hand spun and hand woven fabric
which till date stands as an indispensable part for brand’s inspiration.
Brand Relationship
This brand identity element is the key driver of a brand’s image. Khadi India always portrays
itself as a socially responsible Indian brand, thus it shares a very patriotic relationship with
Indians. Khadi India’s relationship with the consumers is also very conventional because of
its age old existence.
Brand Reflection
Brand reflection is the reflected image of its target customers in its communication. Khadi
India portrays itself as socially responsible brand with a motive of providing employment to
Rural India, and as a nature friendly which follows all sustainable acts at every step of
production.
Brand Self Image
The target consumers of Khadi India are very particular about their personal health and
hygiene and they find authenticity in comfortable to wear fabrics, naturally processed foods
and skin friendly personal care products provided by them. Though the notion of social
welfare is secondary, but it does strikes in their mind once, that by buying Khadi products,
they have made their contribution for rural empowerment.
Reengineering Khadi India
49
6.2 Brand Elements
Logo
Symbol
URL
www.kvic.org.in
Slogan
Presenter
Threading Lives,
Weaving
Destinies
Mahatma Gandhi
Analysing Brand Elements of Khadi India
Memorability
The Khadi Logo is prominent on the
store frontals and on some roadside
hoardings, POS displays. The boards
are widespread everywhere which
makes the logo easily recognisable.
The visibility of KVIC’s symbol is
not as extensive as of the logo, and is
more used internally for organisation.
Reengineering Khadi India
50
KVIC have a website which was initiated by MSME
Government of India. The website mentions about the
organisation, its structure, schemes and products made
by Khadi and Village industries. It has not developed
any memorability because the website is for the
organisation, and not for the retail business. Thus, it
does not form a direct connection with the end
consumers.
KVIC has a slogan- ‘Threading Lives, Weaving
destinies’.
This
slogan
talks
about
the
rural
empowerment which has happened through their
organisation.
This
slogan
has
not
gained
any
importance as it is used very rarely by some of the institutions.
KVIC participates in IITF since last four years, and this
time they positioned themselves as a global brand , by
extensively using slogans like ‘Khadi goes global’ and
‘Serving the world’ on boardings, electronic POS
displays and other banners.
Besides this they also promoted themselves by another
slogan ‘Your eco-friendly Partner’ at various POS
displays.
Using more than one slogan doesn’t create an identity
and the consumers are able to recall only that slogan
which is more prominent to eyes.
With the trade fair venture, Khadi India has got
associated with Khadi goes Global more rather than all
other slogans.
Reengineering Khadi India
51
The presenter for Khadi India is Mahatma
Gandhi along with his trademark Amber
Charkha. Brand Gandhi is still the most
powerful Indian icon celebrated globally
(Economic Times, 2009), and Brand Gandhi
stands for Khadi as its brand ambassador.
Brand
experts
believe
that
Gandhi’s
simplistic image was an extension of a
bottoms-up brand building exercise.
Meaningfulness
The
Khadi
India
logo
describes the Indian essence
into the brand by writing in
Hindi
Calligraphy
to
establish a connection with
the Indian consumers and
they repeat the same words
in English intentionally so
that the chunk of foreigners
who visit India and are fond of handcrafted Indian products can also recognise it.
The oval shaped logo of Khadi India is in Orange colour, which represents cheerfulness and
enthusiasm of both red and yellow colour, fascination, creativity, hard work and
determination of the artisans .Orange is a very bright colour, which catches a lot of attention,
and every passerby gets a glimpse of Khadi because of extensive usage of orange colour even
on their boards also.
The other brand elements like Symbol, Slogans, and URL are not symbolic of a quality
product to the consumers, because these elements do not signify anything about the quality of
the product apart from mentioning the word ‘eco-friendly’ in a slogan used occasionally.
Khadi means handmade cloth which justifies the apparel category in Khadi India, but
somehow other products made by village industries don’t comprise in between the brand
Reengineering Khadi India
52
name, but the organisation name in augmented form (i.e. Khadi & Village Industries
Commission) suggests the diverse range products.
The brand elements doesn’t signify all the attributes of Khadi and village industries products
apart from hand spun and hand woven fabric from India.
All the brand elements together leave an impact that conveys a partial brand promise.
Likability
The brand elements are not aesthetically
appealing to the consumers as the orange colour
is not only used in logos but also excessively
used in hoardings, stores frontals, POS displays
which takes away the appealing factor out of it
and is not pleasant to the eyes. The brand
elements are noticeable as the positive aspects
are usage of words like Khadi, India, eco
friendly as they denote some unique factors but
they does not evoke any cheerfulness and excitement amongst the target consumers because
of no synergy in the retail outlook of all the stores.
Transferability
The transferability of Khadi India is limited as
the name denotes fabrics and garments made out
of Khadi only.
But KVIC have a full range of
personal care products under the
registered brand name of Khadi,
which is exceptionally preferred by
urban consumers as it’s totally
natural with chemical free contents
and
superior
packaging.
This
Reengineering Khadi India
53
product brand of KVIC is standardised across India.
Though there is a mismatch between the brand name and the product category, it actually
sells like hotcakes in all Khadi stores, trade events because people can recognise it, and
consider it trustworthy.
Infact all other products are not in sync with the brand name but the share of their sales in
total sales comes out to be a massive 96% (Annual Report 2008-09).
The transferability factor is quite contradicting as Khadi India stores are running majorly
because of village industries product. The marketers can introduce new product categories
but pertaining to the fact that all products should be handcrafted.
The brand elements can cross geographic and cultural boundaries, especially in this era of
sustainability as it will represent the Indian culture with extreme pride. Marketers can also
strategically enter into new market segments by improvising the quality of the products and
positioning itself for bridge to better market.
Adaptability
The brand elements of Khadi India are not adaptable as they are widespread across the nation
with 7050 retail stores and are very peominent because of its presence on such a large scale.
It would not be feasible to update the elements at one go.
Protectability
The brand logo is protective under KVIC as it is a government ked organisation, but
otherwise all the enterprises which are into similar business league like Fabindia, Anokhi,
State Emporiums and designers use Khadi as a word to define their handmade fabrics and
garments which is a threat to Khadi India.
Reengineering Khadi India
54
6.3 Consumer Based Brand Equity Model for Khadi India
Brand Relationship
Resonance
Brand Response
Brand Meaning
Brand Identity
Judgement
Brand
Performance
Feeling
Brand Imagery
Brand Salience, Brand awareness
Brand Identity: Who is Khadi India?
Despite of the fact that Khadi doesn’t have very a
Recall
strong and positive brand image, the awareness
•
•
•
•
•
•
•
•
•
level of Khadi is extremely high. This is because of
its presence in every nook and corner of the country
and its age old existence. The recall of brand Khadi
is extremely in purchase situation of any naturally
produced product.
Natural Cosmetics
Handicrafts
Natural Fabrics
Kurtas
Handmade stationery
Cotton Sarees
National Flag
Durries
Fibre Products
Brand Meaning: What is Khadi India?
Brand meaning refers to what characterises a brand; this can be distinguished in terms of
functional performance, and abstract image-related meanings. To create brand equity, the
brand must have strong, favourable and unique brand meanings.
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55
Brand Performance: Five attributes and benefits underlie brand performance:

Primary characteristics: Natural fabric and processes

Product-reliability, durability and service ability: The reliability, durability and
service ability of most of the Khadi products is really doubtful. This is the reason why
the competitor’s brands like Fabindia are out beating Khadi India.

Service effectiveness, efficiency and empathy: Extremely poor of service parameter.
Just like any other government organization with a laid back and careless attitude.

Style and design: In recent time efforts have been made to update the style and design
elements of Khadi products but still they are not at all in sync with latest fashion
trends. This is because of decentralized product development activities of Khadi
institutions. Each Khadi institution makes their own designs and only very few of
them use the services of updated designers.

Price: Khadi India follows a very rigid pricing structure, cost sheets are provided by
KVIC which have to be followed by all Khadi institutions. Most of the products of
Khadi are moderately priced, except for leather and personal care goods.
Brand Imaging; Four categories underlie the ways the brand attempts to meet
psychological or social needs:


User profiles
o
Age- 18-65yrs (Indians, foreigners)
o
Gender- male & female
o
Occupation- students, professionals, politicians
o
Social Class- Middle & Upper Middle Income Group
o
Religion- Any
o
Education- schooling, undergraduates, postgraduates
Purchase and usage situations: Khadi products are sold through 7050 retail outlets and
through some MBO’s all over India

Personality and values
o
Lifestyle- simple & classy, but finicky about themselves.
Reengineering Khadi India
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
o
Attitude- motivating, self dependent, nature lovers.
o
Activities- spend money on self adornment, fascinated about Indian culture
o
Values- modern, traditional
Heritage and history: Very rich and strong heritage. Khadi has the association of
India’s freedom movement patronized by Mahatma Gandhi.
Brand Response: What about Khadi India?
Brand Judgments

Brand quality: Khadi India provides its customers with products made through all
natural and sustainable processes, which in turn provides employment to rural India.

Brand credibility: Despite of its association with the Government of India, the brand
has not gained much of credibility due to corrupted and complex organizational
systems.

Brand consideration: The relevance of brand Khadi India for the customers is that
they get products that are environment friendly and are providing the employment to
rural India.

Brand superiority: Characteristics of the brand Khadi India that differentiates it from
brand like Fabindia is association with patriotism, its wide spread foot prints and age
old history.
Brand Feelings: The feelings that brand Khadi India provides to its customers are off
warmth, security, social approval, self respect, patriotism, socially responsible,
environment friendly.
Reengineering Khadi India
57
Brand Relationship: What about Khadi India and its consumers?
Brand Resonance works at 4 levels with a brand:

Behavioural loyalty

Attitudinal attachment

Sense of community

Active engagement
It can easily be concluded that brand Khadi India has not yet reached the level off resonance.
Very few customers are loyal to brand Khadi India, and majority of these loyal customers are
loyal to just personal care product range.
Reengineering Khadi India
58
6.3.1 SWOT analysis based on CBBE model
•
Strengths
•
Khadi India brand gets purchase considerations in various product
category.
•
•
•
Brand Awareness depth: Extremely high.
•
Rich and age old heritage and history of brand.
•
Association with Freedom movement.
•
Brand Mahatma Gandhi as patron for Khadi India.
•
Association with natural and sustainable acts.
•
Loyal customer base for personal care
Weakness
•
Poor brand credibility and brand quality.
•
No special effort to create a brand identity.
•
Product reliability, durability and service-ability not standardized.
•
Extremely low on customer service parameter.
•
Product style and designs not in sync with latest trends.
•
Product style and designs vary from institution to institution.
Opportunity
•
Scope of instilling brand preference by improvising all customer touch
points and providing better products.
•
Association with the government of India can be utilized for creating
brand credibility
•
•
Strategic usage of all brand elements.
•
Building customer loyalty
Threats
•
Competitors brand creating preference over Khadi India.
•
Awareness and credibility of Khadi India is likely to diminish if branding
is not emphasized upon.
Reengineering Khadi India
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6.4 Branding traps
Brand Image Trap
A brand is successful when there is no gap between its identity and the perceived brand
image. KVIC has never worked for establishing its brand identity, due to which over the
period of time their image has become their brand identity. The consumer has defined Khadi
India as a brand of laidback governmental organisation, with very dull stores and
uninterested staff, which provides all kinds of handcrafted products under one roof, with
uneven quality in apparels. The brand needs to create a more accurate portrayal of future
brand promise.
The External Perspective Trap
Khadi India is struck on external perspective trap, the brand has failed to realize the role that
a brand identity can play in helping an organization understand its basic values and purpose.
An effective identity is based in part on a disciplined effort to specify the strengths, values,
and vision of the brand; it can provide a vehicle to communicate internally what the brand is
about. But Khadi India itself has not realized its strengths and values and has never ever
made an attempt communicate them. The employees here just work like any other
government organization.
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6.5 Branding Proposal for Khadi India
The existing marketing setup of Khadi India with limited brand building activities doesn’t
yield any credibility and preference to the brand.
To bring out the consistency and gain recognition for Khadi India it has to be methodically
promoted as a brand that connotes social, cultural, and environmental values. KVIC has to
utilise all its strengths and capabilities to
realise the worth of Khadi India as a
reliable brand.

Shift focus from Social welfare to
The brand re engineering process
would focus on shifting Khadi
India from a welfare approach to a
unique
selling
approach,
and
proposition
promoting
USP approach
the
intrinsic qualities of Khadi, which
Indian
Hand spun
Sustainable
are Indian, Hand spun and sustainable.

Due to the decentralised system of KVIC, it would be difficult to do standardization
of apparels within all Institutions, but the retail structure can be revitalized according
to the modern taste and preferences to build some interest and shift the thinking
paradigm of consumers from dull environment of stores to a contemporary ambience.
o A shop floor layout and visual merchandising always leave a long lasting
impact on the consumer that is why there is a need to bring in a
synchronisation amongst all stores of Khadi India with same outlook and only
one brand name and single logo of KVIC stores which is ‘KHADI INDIA’.

Khadi India has got powerful brand elements and associations but KVIC hasn’t
realised the worth of it. A strategic handling of these elements would lead to a greater
upliftment of Khadi India as a brand. The following is the list of some suggestive
ways of using its brand elements.
o Placement of Logo on requisite customer’s media touch points, stores,
packaging.
o Limited usage of orange colour, a mixture with earthy browns and greens to
highlight the eco friendly element.
Reengineering Khadi India
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o Extensive usage of Brand Gandhi, as it speaks louder than words. Its
recognisable by all kinds of consumers, be it rural, urban or foreigners.
o Opting for one appropriate slogan or merging all the existing ones.
o Using KVIC symbol only for backend operations.
o Developing a new URL for brand Khadi India.

Khadi India has to develop a new brand personality for itself by utilising the
associated keywords like sustainable, natural, Indian, most widespread, authentic etc
and then communicate it in the promotions.
o KVIC hasn’t ever done any far-reaching advertising and promotions of the
brand Khadi India, so right is the time to take on integrated marketing
communication plans for Khadi India and establish a brand relationship with
its users.
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Advertising & Promoting
Khadi India
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7.1 Current Advertising
Advertising
Above the Line
Below the Line
• Radio
• Television (Doordarshan)
• Hoardings: Railway Stations, Bus
Stands, Govt Offices , Major Airports
• BEST buses
•
•
•
•
•
•
•
Exhibitions & Trade Fairs
Fashion Shows
Sponsorships
Conferences
Seminars
Workshops
People's Education Programme
KVIC has empanelled four agencies for its creative and media duties – Prachar Advertising,
Pam, Span and Unnati in February 2009. All four agencies are handling the Rs15-crore panIndia account for two years. They will be handling 360-degree account comprising print, TV
radio and outdoors.
KVIC put efforts to advertise, but it has always been overlooked due to many reasons:

There is no integration between all the advertisements as all the ads are based on
different themes which breaks the synergy.

KViC’s objective of advertising has always been communicating their social
objectives through incorrect media vehicles.. All advertisements are based on social
cause, where KVIC promotes its social objective of providing employment to rural
India. They are running documentaries about Employment generation Programmes,
Scheme of Fund for Regeneration of Traditional Industries(SFURTI) and other
schemes, but not about the core product and benefits that customers will get.

The ads are very narrow in scope, as each Khadi institution is a separate business
entity, they advertise for their own self only, in local newspapers and local cable
network in a limited budget.

The reach of media vehicles that they use is very constricted. With magazines like
Sandesh Bureau, Srijana and television medium as Doordarshan, the scope of
awareness gets even more emaciated.

These media vehicles are reaching a particular group of audience which is very
limited. This leads to under- positioning of the brand of Khadi India.
Reengineering Khadi India
64
New Delhi
• Sandesh Bureau
• Shabdhaboodh
• Hindustan
Mediacom
• Dalit Adivasi
Sanvad
• Srijana

Mumbai
• Sarvodaya
Sadhna
• Bhartiya Vidya
Bhawan
Nagpur
• Protsahan
• Param Mitra
Publication Apia
Param Mitra
The radio slots are done majorly to advertise
about ongoing events like 30% rebate scheme
for 90 days and participation in trade fairs.
Though the selection of Radio channel was
appropriate in the recent times, but the kind of
excerpts used in the radio slot weakens the
brand value of Khadi India.

A location which gets the maximum eyeballs
struck would be ideal at public places but
KVIC hoardings are not placed at a noticeable
position on Railway stations and Airports.
The roadside hoardings are small in size,
focussing on the local store offerings, and are
present amongst a clutter of other hoardings
or placed on less height which again is not
attention-grabbing
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65
The above the line activities of KVIC have been unsuccessful to create an aura of Khadi India
as a brand which stands for nature friendly unique products, But in the recent times all below
the line activities done by KVIC are remarkable enough to generate awareness as well as
sales.
Exhibitions
Domestic
Exhibitions
•
•
•
•
•
•
•
•
•
IITF
Giftex, Mumbai
Khadi Utsav
Industrial Trade Fair
Buyer Seller Meet,
World Trade Centre,
Mumbai, Goa
Chennai International
Trade Fair
Khudra Shilpa Mela,
Kolkatta
Destination
Maharashtra, Mumbai
India international
Garment Fair, New
Delhi
Mobile Exhibitions
• Azad Express train
(2007)
• Mobile Vans
International
Exhibitions
• Natural & Organic
Products International
Trade Fair, London
(2007) - 5 institutions
• SAITEX, Johannesburg
(2007)
• Fibre Products- South
Asian countries
Commodity Fair,
Beijing, China
• Herbal Products International Trade Fair,
Ethiopia
• Food Products International Trade fair,
Tokyo
KVIC’s Khadi Pavilion has been a huge hit in India International Trade Fair since four years.
Many institutions and artisans from all over the country participate in the fair with their own
specialised products and the response has been overwhelming. KVIC officials stated that over
85% of footfalls are turned into conversion in
Khadi Pavilion, and such exhibitions helps in
clearing the stocks of Department Sales Centre
of KVIC. Also the event strikes the devoted
psyche of people towards Indian products like
handicrafts, fibre products, and different kinds
of Khadi. The target consumer loves to visit
such exhibitions and fairs where they can seek
out for variety of handmade articles.
Reengineering Khadi India
66
The Khadi pavilion at IITF had a creative visual merchandise
that unified all the crafts and specialities of Khadi and village
industries from all parts of the country, which was very
impressive and just to see the rotating tree of art and craft by
KVIC, many footfalls got generated.
The theme for this year’s
Khadi pavilion IITF was
“Export of Services-Healthy
Growth Progress” and to
emphasise they mentioned slogans like ‘Serving the world’,
‘Khadi goes global’, and ‘Your eco friendly partner’
promoted the theme from all aspects.
KVIC has been regularly exhibiting
since last two years in various cities
in the domestic region. The most
interesting exhibition format was in
the train Azad Express in which
Khadi and village sector’s products
were displayed and sold.
It has initiated participation in International trade fairs and exhibitions also, but the products
categories that are being exhibited internationally are majorly non apparels. Khadi has two
brands called Khadi, Desi Ahaar which are being exported the most. The international
exhibitions are aiming to seek more export orders.
Reengineering Khadi India
67
Another BTL activity done by KVIC regularly is
fashion shows where they collaborate with some
design schools like NID and NIFT to showcase
seasonal collections. Khadi over the decades has
moved from a freedom fighter’s identity fabric to a
fashion garment. Some designers like Sabyasachi
Mukherjee, Ritu Kumar, Rohit Bal, Jatin Kochhar
etc, have used Khadi in their exclusive designer
range which is changing the aspirational value of
fabric bringing in more sets of consumers. With this
kind of innovative use of Khadi, the fabric is rising
on popularity level which has got Khadi back in
vogue.
Though the Khadi fabric being used by designers is
not always produced by KVIC, but this designer
indulgence into Khadi has publicised KVIC’s Khadi
Bhawans as well.
These Khadi fashion shows presented by KVIC and
other designers are being held all over India in all
zones.
The other BTL activities are majorly focussed on promoting and strengthening of KVI
deemed with Export Promotion Council (EPC)
The People’s Education programme is conducted through various essays and debate
competitions organised for students, which bring in the awareness about the Khadi and
village industries.
7.2 Public Relations
KVIC associates itself with other
government bodies like domestic
Reengineering Khadi India
68
airports and Ministry of tourism’s Incredible India websites where the latter ones mention it
as a shopping hub of Khadi and other handicrafts.
During the time of elections, Khadi takes a benefit to publicise about itself. Also fashion
shows which are showcasing Khadi collection, create a buzz about Khadi, and KVIC being
the owner of this top-of-mind word, gets the undue advantage.
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69
7.3 DAGMAR Analysis
To what extent advertising aims at closing sale?
• A very Little
• Focus on promoting schemes and social objective.
Does the advertising aim at near-term sale by
moving the prospect, step by step, closer to the
sale?
• No, only initial step taken
Does the advertising aim at building a long-range
consumer franchise ?
• No, a connection cannot be formed.
How important are supplementary benefits of enduse advertising ?
• Supplementary benefits of Khadi advertisements would be the
"Social welfare" aspect of using Khadi products. Although it is
important but it should be supported with the primary benefits of
product.
7.4 VIPS formula Analysis
Visibility
• Through BTL activities
like exhibitions, trade
fairs, fashion shows
Identity
• KVIC’s orange logo
Promise
• Unclear, due to extensive
promotion of social
objective
Singlemindedness
• Limited concentration on
Social objectives, when
the business can be
profitable.
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70
7.4 Advertising Proposal for Khadi India
Khadi India advertising has to be in synergy for
promoting it as a brand, and for this purpose an
ad campaign will be designed with a theme of
Unification of all the Handicrafts from all states
of India. The Incredible India campaigns can be
taken as a benchmark for this, where the motive
would be appreciation of rural art and craft and
highlighting the Indian essence into the ads.
The message strategy would be instilling brand
preference through such feel good ads.
The media mix has to be mechanised in such a
way that it reaches both set of urban and rural
consumers.
Also , selection of right kind of media vehicles
will not only reach the right target segment, but
also will help in positioning of the brand Khadi
India in the desired way.
The final selection of media mix and the cost
would be based on a thorough research for all
media touch points of the consumers.
Some innovative ways of reaching the customers will be validated after research.
Bus Wraps
Khadi India
Bazaars
Promotional
Auto rickshaws
Railway
Stations
Airport
National
Highways
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Supply Chain of
Khadi India
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8.1 Khadi Supply Chain
KVIC is a decentralised organisation where all the Khadi Institutions have their own
operations including supply chain. All the institutions have some product specialisation, thus
there is a horizontal supply of goods at the institutions level which then keep the goods at
their store, along with the usual vertical flow of goods from manufacturers i.e the institutions
to the stores.
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73
8.2 Khadi Production
During the year 2008-09, Khadi production, both in terms of quantity and value, registered
better performance over the achievement reported in previous year. The production during
the year moved to 76.25 million square meters of fabric valued at Rs, 543.39 crores compared
to 71.88 million square meters of fabric valued at Rs 491.52 crores in the previous year. This
shows a growth of 10.5% and 6% in terms of value and quantity respectively (KVIC Annual
Report, 2008-09).
North Zone
Total Production in
Total Production in
Volume (In Lakh Sq mt.)
Value (Rs in Lakh)
Chandigarh
0.01
0.39
Delhi
5.14
218.73
Haryana
50.63
4496.59
Himachal Pradesh
3.12
392.87
Jammu & Kashmir
3.66
1223.26
Punjab
25.40
1128.00
Rajasthan
38.53
3166.94
Total
126.49
10626.78
East Zone
Total Production in
Total Production in
Volume (In Lakh Sq mt.)
Value (Rs in Lakh)
Bihar
10.37
856.94
Jharkand
2.01
334.51
Orissa
3.50
294.51
West Bengal
37.96
5490.35
Total
53.84
6976.31
West Zone
Total Production in
Total Production in
Volume (In Lakh Sq mt.)
Value (Rs in Lakh)
Gujarat
34.20
3309.33
Maharashtra
1.30
395.52
Total
35.50
3704.85
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North East Zone
Total Production in
Total Production in
Volume (In Lakh Sq mt.)
Value (Rs in Lakh)
Arunachal Pradesh
0.05
9.41
Assam
4.28
618.00
Manipur
0.71
67.89
Meghalaya
0.10
6.32
Mizoram
0.42
0.34
Nagaland
0.17
55.95
Tripura
0.05
2.67
Total
5.78
760.58
South Zone
Total Production in
Total Production in
Volume (In Lakh Sq mt.)
Value (Rs in Lakh)
Andhra Pradesh
27.88
2211.83
Karnataka
50.62
3854.84
Kerala
25.77
1574.22
Pondicherry
0.01
6.95
Tamil Nadu
50.98
6316.39
Total
155.26
13964.23
Central Zone
Total Production in
Total Production in
Volume (In Lakh Sq mt.)
Value (Rs in Lakh)
Chattisgarh
5.93
969.62
Madhya Pradesh
7.15
888.10
Uttrakhand
22.31
1165.89
Uttar Pradesh
350.17
15282.50
Total
385.56
18306.11
Grand Total
762.43
54338.86
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75
8.2.1 Per Capita Productivity
Per capita productivity refers to average production of a worker. The annual per capita
productivity for Khadi stood at Rs 5,560 in 2007-08 but due to induction of improved tools
and equipments the per capita productivity increased to Rs. 5,932 in 2008-09 (KVIC Annual
Report, 2008-09). One such initiative was that frame looms machines were replaced by Gram
laxmi semi automatic looms. While working Frame looms a weaver can only make use of his
hands, but Gram laxmi looms had provision of foot pedals, thus on an average the
productivity of a weaver increased from 7.5 meters a day to 15 meters a day.
8.2.2 Production Capacity
Only production that KVIC directly operates is that of sliver. For this purpose they have six
sliver plants. These six plants had produced around 3000 tonnes of sliver during 2008/09.
These plants operate at their full capacity, but then also they are able to meet just 30%
percent of total sliver demand of KVIC institutions. Rest 70% of sliver is produced by few
other Sliver plants owned by institutions. Following is the capacity of each plant and their
actual production:
S. No
Plant
1
Kuttur, Kerala
2
3
4
5
6
Actual
Production Capacity
Production Qty in Qty in Lakh kgs
Lakh kgs
5.16
5.5
Production
Variance
Chitradurga,
Karnataka
Sehore, Madhya
Pradhesh
Raibareily, Uttar
Pradesh
Etah, Uttar
Pradesh
Hajipur, Bihar
7.35
7.5
2.00
5.71
5.75
0.70
6.16
6.25
1.44
4.93
6
17.83
0.55
1
45.00
Total
29.86
32
6.69 %
6.18
Central Sliver Plants
Reengineering Khadi India
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KVIC has six sliver/roving plants to supply the raw material to the Khadi institutions. These
six plants had produced around 3000 tonnes of sliver of during 2008/09. The performance of
these plants, reported an increase of 26% over previous year.
Production:
Production Value:
Qty in Lakh kgs
Rs in Lakh
Kuttur, Kerala
5.16
502.01
Chitradurga, Karnataka
7.35
638.85
Sehore, Madhya Pradhesh
5.71
494.12
Raibareily, Uttar Pradesh
6.16
517.14
Etah, Uttar Pradesh
4.93
479.66
Hajipur, Bihar
0.55
59.00
Plant
Terms and conditions by Sliver Buyers

Sliver will be checked on 4 point system from MTL/ ITS lab and inspection and
quality Certificate should be attached with dispatch documents.

Sliver should be free from defects. Sliver should be in maximum of two shade lots.

The Sliver shall be supplied strictly in keeping with material specifications/ technical
parameters specified in the purchase order or Quantity.

Packing roll length should be above 30 meters.

Sliver dispatched after due date will automatically result in discount on Sliver price/
air freight.

Rejected Sliver will be replaced within 2-3 days.

Sliver should be delivered with the original document not with chalan.
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8.3 Use of Information Across the Supply Chain
Customer Type
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Demographics
Psychographics
• Age- 18-65yrs (Indians,
foreigners)
• Gender- Male, Female
• Occupation- Students,
Professionals, Politicians,
Farmers
• Social Class- Middle &
Upper Middle Income Group
• Religion- Any
• Education- Schooling,
Undergraduates,
Postgraduates
• Lifestyle- simple & classy.
• Attitude- motivating, self
dependent ,nature lovers.
• Activities- spend money on
self adornment, like to
know about Indian culture
• Values- modern, traditional
Sales Data
The KVI sector recorded an improved performance during 2008-09 in comparison to the
previous year (2007-08). Sales of KVI products registered an increase to Rs. 21,006.00 crore
(Khadi – Rs.855.00 crore and VI Rs. 20,151.00 crore) during 2008-09 (KVIC Annual Report,
20008-09).
List of KVIC owned retail stores
1. Khadi Gramodyog Bhavan, New Delhi
2. Gramshilpa, New Delhi
3. Khadi Gramodyog Bhavan,Bhopal
4. Khadi Vastragar, Ahmedabad
5. Khadi Gramodyog Bhavan,Mumbai
6. Khadi Gramodyog Bhavan,Goa
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7. Khadi Gramodyog Bhavan,Bangalore
8. Khadi Gramodyog Bhavan,Ernakulam
9. Khadi Gramodyog Bhavan,Patna
10. Khadi Gramodyog Bhavan, Kolkatta
11. Central Vastragar, Bhubaneshwar
12. Khadi Gramodyog Bhavan, Agartala
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8.4 Key metrics
8.4.1 Supply chain planning metrics
Existence
Forecast accuracy
No forecasting
Total inventory
Worth Rs 46,60,07,177
Plant utilization
93.31%
 Sliver plants - 21.4%
Warehouse utilization
Fleet utilization
Dwell time through supply
chain
 KVIC institutions - 50%
 Retail stores - Full
A fleet of 2 Tata 407 and 3 Tata Ace,
carrying out milk run method
Extremely High
Production plan variance
6.69 %
Opening Stock
Particulars
2008-09
2007-08
Raw Materials (In Rs)
73500648.57
72779432.29
Work in Progress (In Rs)
8636475.86
7288766.99
Finished Goods (In Rs)
332792086.6
363227122.2
Consumables & Packing Materials (In Rs)
66,46,567.29
70,08,885.75
Total
42,15,75,778.3
450304207.2
Closing Stock
Particulars
2008-09
2007-08
Raw Materials (In Rs)
7,98,05,185.92
7,25,93,880.57
Work in Progress (In Rs)
85,21,366.46
86,36,475.86
Finished Goods (In Rs)
36,68,13,859
33,27,92,086.6
Consumables & Packing Materials (In Rs)
9959998.31
66,46,567.29
Raw Material in Transit (In Rs)
9,06,768
9,06,768
Total (In Rs)
46,60,07,177.7
42,15,75,778.3
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Average Inventory
= (Opening Stock + Closing Stock) / 2
= (42,15,75,778.3 + 46,60,07,177.7) / 2
= Rs 44,37,91,478
COGS = Opening Stock + Purchases – Closing Stock
= 42,15,75,778 + 94,04,09,000 - 46,60,07,177
= Rs 895,977,601
Inventory Turnover Ratio
= COGS / Average Inventory
= 895,977,601 / 44,37,91,478
= 2.02 Times
Plant Utilization
The total manufacturing capacity of six Sliver plants is 32 Lakh Kgs. The actual production
for year 2008-09 was 29.86, there was a variance of 6.69% in actual production and the
production capacity. Thus, the plants are being operated at 93.31% capacity.
Warehouse Utilization
Warehouses operate in three levels of KVIC supply chain:

Warehouses at Sliver plants - 21.4%

Warehouses of KVIC institutions - 50%

Warehouses at Retail stores - Full

Warehouses at Sliver plants
All of the six sliver plants have their own
warehouses where the sliver rolls are kept. The
capacity of these warehouses is far more than
the actual annual production of the plants. For
instance the capacity of the CSP at Etah, Uttar Pradesh is 7 Lakh Kgs whereas the annual
production of slivers for the year 2008-09 was 4.93 Lakh Kgs. During the visit to the
warehouse 1.5 Lakhs Kgs was kept in the warehouse. Thus the warehouse was utilized at
just 21.4% of its capacity.
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
Warehouses of KVIC institutions
There are 5549 institutions which are affiliated with KVIC. Almost each of these
institutions has their own warehouses where the stock of raw material, work in progress
and finished goods are kept. During the visit to Khadi Gram Udyog Sadan Vikas Samiti,
Bassi, Jaipur it was found that the warehouses are utilized at even less than 50% of their
capacity.

Warehouse at retail stores
There are 7050 retail outlets affiliated to KVIC and each of these stores has a warehouse.
In most cases these warehouses are located inside the outlets whereas in few cases stores,
warehouses are located at a nearby place. These warehouses are always utilized up to
their maximum capacity, reason for that being lack of inventory management. Most of
manufacturing units of Khadi Institutions are located in rural India, thus in order to ensure
the availability of merchandise, retailers keep a good amount of stock in their
warehouses.
Fleet Utilization
Many of KVIC institutions have their own fleet of vehicles and for transfer of goods with in a
territory they use their own fleets, and for the goods that are to be delivered outside the state
territory then they send it through the fleet of some transporter. For instance, Vinob
a
sewa samiti, Jaipur (KVIC Institution) has a fleet of 2 Tata 407 and 3 Tata Ace which transfer
goods within the territory of Rajasthan. This fleet of both small and big quantity goods carrier
ensures that Vinoba sewa samiti achieves maximum fleet utilization. Moreover they also
make use of milk run method, wherein one Tata 407 picks up material from the warehouse
everyday and one run it delivers material to all of the 33 stores operated by the organization
in Jaipur. For transferring goods to other states they use services of Laxmi golden transport
cooperation, Jaipur.
Dwell Time
Dwell is the ratio of time an inventory sits idle to the time required to satisfy its designated
supply chain mission. It would be the ratio of time the inventory is in storage to the time it is
in transit. The dwell time for Khadi would be extremely high, reason being the long value
Reengineering Khadi India
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chain. The value chain for manufacturing Khadi products is extremely large; the product
spends a long time in the warehouses.
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8.4.2 Supplier relationship management metrics
Existence
Supplier quality
No Standards
Purchase costs
Rs 94,04,08,810
Delivery performance
Extremely Good
Suppliers on time performance
Very Stringent
Purchase Costs
For year 2008-09 the net purchase amount for KVIC stood at Rs 94,04,08,810, this included
purchase of finished goods, raw materials and conumables.
Delivery Performance
Delivery performance of Khadi has been extremely good because of following reasons:

Suppliers keep huge amount of finished goods in their warehouses, thus any demand
by KVIC stores is met immediately. However due to heavy inventory levels at
warehouses the inventory carrying period and inventory carrying cost of Khadi
suppliers remains high.

For each product category there are hundreds of KVIC suppliers available, thus any
demand is met by one or the other supplier.

KVIC is a very key client for the suppliers not only because of the huge demand but
also because of the risk free payment. Thus suppliers maintain a high delivery
performance level, so that they do not lose a client like KVIC.
Suppliers on Time Performance

KVIC has very stringent rules for suppliers on time performance, for regular items
like personal care products and apparels, suppliers are given minimum time period
depending upon the distance from supplier’s facility to the retail stores. For ex. The
Khadi gramudyog bhavan orders shirts and kurta to a Jaipur based supplier (Vinoba
seva samiti) on a delivery period of two days. If the suppliers don’t deliver the
material in 2days time then KVIC has the right to cancel the order. However usually
charges a penalty to the supplier instead of cancelling the order.
8.4.3 Customer relationship management metrics
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Existence
Customer lift
No Record Maintained
Customer retention
No Efforts for retention
Customer life time value
Moderate
Sales performance
Rs. 21,006.00 crore
Sales off take versus out of stock
at stores
Stores are rarely out of stock
Promotions goal compliance
No Promotion goals
Customer Lift
Usually KVIC doesn’t maintain any data related to customers sales, but recently few of
KVIC affiliated institutions have made an effort to do so. The only customer lift that KVIC
gets is during its 3months annual sales, around the month of October.
Customer Retention
No efforts have been made by KVIC to retain the customers, in fact due to better customer
relationship practices followed by the competitors like FabIndia, Khadi India has lost its
customer base.
Customer Lifetime value
The lifetime value of a Khadi customer is not that high, reason being that Khadi doesn’t have
much products for children’s and teenager. The average age of Khadi customer would be 30
yrs, thus the lifetime value will not be that high. But still it is extremely important to retain
the existing customer, because getting new customers is always an expensive process.
Sales Performance
The KVI sector recorded an improved performance during 2008-09 in comparison to the
previous year (2007-08). Sales of KVI products registered an increase to Rs. 21,006.00 crore
(Khadi – Rs.855.00 crore and VI Rs. 20,151.00 crore) during 2008-09 (KVIC Annual Report,
20008-09).
Sales off take versus out of stock at store
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Despite of improper inventory management, the stores are rarely out of stock, reason being
that stores keep a huge stock of inventory and inventory is replenished on daily basis.
Another reason for this is that Khadi has a huge supplier’s base, so even if one supplier is
unable to supply in the required time, there is always an alternative available.
8.4.4 Enterprise resource planning metrics
Existence
Perfect order
32340
Supply chain costs
3–5%
Accounts payable
Rs 77,85,17,801.44
Accounts receivable
Rs 124,92,46,076.60
Cash-to-cash cycle times
325 days
Order cycle time
8 days
Economic Order Quantity
(D) Average Annual Demand = 15,16,596
(C)Average Cost Price = Rs 290
(A)Cost of placing an order = Rs 7,000
(I) Inventory Carrying Cost = 7%
EOQ
= √2AD/H
= √2*1516596*7000/ (290*.07)
= √21232344000 / 20.3
= 32340
Number of Order per year = Annual Demand / EOQ
= 1516596 / 32340
= 47
Interval between Order
= 365 / 47
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87
= 7.75 days
Lead time
= 10 days
Reorder Point
= (Annual Demand/365) * Lead time = 41,550
Accounts Receivables
Particulars
2008-09
2007-08
7,91,96669.47
43,21,09,096.70
Khadi Institutions & Boards
86,64,37,153.55
49,38,19,625.83
Government Departments
19,25,26,786.87
17,85,89,645.84
Other Receivables
1,99,39,934.71
1,64,03,365.02
124,92,46,076.60
1,20,00,34,640.76
Departments
Total
Source: KVIC, Annual Accounts 2008-09
Accounts Payables
Particulars
2008-09
2007-08
Departments
36,62,02,729.23
30,96,00,987.64
Khadi Institutions & Boards
37,99,70,398.26
35,11,81,588.93
66,90,675.78
1,26,27,121.78
Others
2,56,53,998.17
2,06,28,213.94
Total
77,85,17,801.44
69,40,37,912.29
Government Departments
Cash to Cash Cycle
Cash to Cash Cycle = Days of sales outstanding + Inventory days of supply - Days of
payables outstanding
Days of sales outstanding = Average Inventory / (COGS/365)
= 44,37,91,478 / (895,977,601 / 365)
= 44,37,91,478 / 2454733
= 180 days
Inventory Days of Supply
= Average Accounts Receivable / (Sales / 365)
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88
= 1224640358 / (1006356875 / 365)
= 444 days
Days of Payables outstanding = Average Payables / (COGS/365)
= 299 days
Thus Cash to cash cycle for KVIC = 180 + 444 – 299
= 325 Days
The cash to cash cycle for KVIC is extremely poor; which shows that the organization is not
efficiently using the working capital. The prime reason for having such poor cash to cash
cycle is that, more than 50% of KVIC sales are from government supplies and other
institutional sales and there is a huge list of debts receivable by the company.
Order Cycle Time
Order cycle time refers to time period between placing one order and the next order. At
KVIC replenishment orders are placed after every 8 days.
Reengineering Khadi India
89
8.5 Sales Forecasting
For KVIC and all KVIC institutions affiliated with KVIC
Year
X
Y (Rs in
x-x^
y-y^
(x-x^) (y-y^)
(x-x^)2
Lakh)
2006-2007
1
19551.4
-0.5
4026.18
-2013.09
0.25
2007-2008
2
21543.48
0.5
6018.26
3009.13
0.25
2008-2009
3
21006
1.5
5480.78
8221.17
2.25
9217.21
2.75
2009-2010*
27403.72
Total
6
89504.6
x^
2
y^
29834.87
b
3351.713
a
23131.44
y^
36538.29
Thus the forecasted sales for 2009-10 for KVIC and KVIC Institutions is
Rs
365,38,29,000.
It has to be noted that the Sales forecasted over here are on the basis of the existing retail
structure.
Reengineering Khadi India
90
8.6 Recommendations for Supply Chain
Proposed Vendor Rating Index (VRI)
Implementing the vendor rating index will increase vendor awareness about the KVC
requirements. Such a procedure will ensure that KVIC will get material at best
possible price, of best possible quality and in best possible time.
The format for calculating the VRI will be as follows:
Factors
Weight
Vendor
Weighted
Vendor
Weighted
age
A
Score
B
Score
Lead Time
15
8
12
9
13.5
Quality Supplied
15
6
9
9
13.5
of 15
6
9
9
13.5
Credit Facility
10
9
9
8
8
Price Offered
15
8
12
7
10.5
Quantity Rejection
10
7
7
9
9
Capacity
10
10
10
9
9
Overall Service
10
8
8
9
9
Total
100
62
76
69
86
Reliability
Delivery
In the above example the weighted score for Vendor A is coming out to be 76
whereas for Vendor B it is coming out to be 86, thus Vendor B would be preferred
over Vendor A. however if the difference between the two parties would have been
minor then both the vendors would have been called for negotiations.
Delivery Authorization
Under delivery authorization system, a supplier is issued a delivery authorization
letter on the receipt of which, supplier dispatch the material. Till now KVIC doesn’t/t
has any such system. When the demand arises, KVIC issues a Purchase Order (PO)
to the supplier, after which the supplier dispatches the material as per the stipulated
date. In case of delivery authorization, KVIC will first issue the bulk purchase order to
the suppliers, and then delivery authorization letter for smaller quantities will be
Reengineering Khadi India
91
issued to suppliers whenever delivery is required at retail stores. Such a system will
reduce the inventory pile ups in retail stores.
Warehouse Utilization
Warehouses at the central sliver plants of KVIC operate at 21.4% utilization level.
The plant utilization of these plants is 93.31% but still these sliver plants supply just
30% of total sliver quantity demanded by Khadi institutions. Thus the market is there
if the production levels are increased. Therefore it is recommended that the excess
of space at warehouses can be utilized for production purposes.
Central Warehouses
After the retail makeover of the stores, it is recommended that 5 central warehouses
should be developed. These 5 warehouses in 5 zones of the country will supply
finished goods to the Khadi stores in their respective zones. This would result in
better inventory management in KVIC. It will also reduce the space required for
storage at retail stores, and thus that space can be utilized for retail sales. Also this
would help in reducing the shrinkage level at retail stores.
Reengineering Khadi India
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Sales and Distribution
for Khadi India
Reengineering Khadi India
93
9.1 Distribution
The structure is very haphazard and not synchronized. As goods are directly supplied
to retail stores, a storage and distribution centre can be added in between them. So
that the institutions supply the goods to this centre and from there the goods are
further distributed to the stores according to the requirement.
6 Cotton Sliver
Plants
1952 Institutions
(Manufacturers)
7050 Stores
Consumers
Reengineering Khadi India
94
9.1.1 Proposal
Thus, in order to make it more synchronized one more channel of distribution can be
added in between. The concept of introducing warehouses in between will make the
retail stores to keep minimum of stock at the stores, hence the costly retail space
would be utilized for retailing only. Another benefit for having such a frame work is
that the small institutions who were till now unable to supply material to distant retail
stores can now supply the material to their nearest warehouse.
9.2 Sales Training
Although in past KVIC has taken initiatives for training sales staff about retailing
skills, consumer orientation at the shop floor, accounting and inventory management
the store staff still lacks required skills. At present KVIC have 7 training centres in
India which conducts 138 training programs, but none of them are specialized for
selling skills. This fact proves that the importance is selling skills is totally
underestimated at KVIC. The sales staff at stores has a much laid back attitude
which really doesn’t work in such competitive environment, where the competitors
Reengineering Khadi India
95
like Fabindia are eating up the share of Khadi India purely on the basis of product
quality and service parameters.
To improvise the skills of the store staff a training agency would be hired, which
will initially train the sales staff of KVIC 12 Department Sales centre. The training
would be focussed on the following parameters:
Customer
Relationship
Product
Knowledge
Communication
Skills
Soft Skills
Motivation
Group Work
A consideration in all these areas of training would lead to better customer treatment
at the stores, and delighted customers moving out of the store is always fruitful for
the brand.
To motivate the sales force and employees to be comprehensive in all these areas
constantly, various measures to be adopted

Personality grooming sessions to mould the appearance, convincing skills
and language skills of the sales force

Implementation of incentive schemes for the sales staffs to achieve a
sales target on a daily or weekly basis

Weekly briefing and reporting for the sales staffs for giving them clear
guidelines on what are expected out of them and to help them perform
better in the stores and achieve more sales
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9.3 Structure of Retail Store Staff
At present the sales staffs at Khadi India stores is not structured in an apt way.
Though the number of sales staff required is dependent on the store size and staff
requirements, some small stores are overloaded with staff, and some big stores have
less number of staff then necessary.
A restructuring of store staff is required which will provide a sense of responsibility
and designated authority.
For a small Department Sales centre, the authority and responsibilities can be shared
by the staff with a store manager personally taking care of the back end operations
and heading well trained staff who can be trained to do multi tasking. But for a big
store like the Khadi Gramudyog Bhawan, Regal Building, Delhi, a store manager at
the top will be managing both store front end and back end operations with
executives underneath.
Store Manager
Front End
Apparel
Supervisor
Sales
executives
Personal Care
Supervisor
Back End
Fiber Products
Supervisor
Sales
executives
Sales
executives
Cashier
Accounts
executive
Store Keeping
staff
On the front end, category supervisors will be positioned who will be responsible for
their own category’s accountability and inventory management. The number of sales
executives can range from 2 to 4, pertaining to the requirement according to stores
size.
On the back end, there would be an accounts executive for managing daily
entries and a crew of store keeping staff.
This structure of store staff would be ideal as there is vast variety of product range,
which is not co-related to each other. The clientele for each product category is
different from other. For instance the clientele for personal care products would be
Reengineering Khadi India
97
well educated and aware, whereas for a product like Silk sari the customer would be
a traditional Indian house wife.
Khadi India stores have abundance of sales staff at the stores; since all of them are
government employees it is not possible for KVIC to terminate any of them. Thus
such a structure would ensure that all the human resources are utilized in most
efficient manner. Also this structure would ensure that the sales staff would have the
best possible knowledge about the products.
9.4 Key Accounts Management
Key Accounts of KVIC
Indian railway
• Bed sheets, spreads and
blankets used in Indian railway
are supplied by the Khadi and
village industries and
commission.
Indian Defence
• Runners
• Dusters
Government schools
• Uniform materials
• Runners
Non Governmental
Organisations
• Bed Sheets
• Beddings
Potential Clients for Khadi

School uniform fabrics for more government schools

Pushing sales of Khadi fabrics by making it mandatory for schools to use
Khadi fabrics uniform at least once or twice a week by government

Designers for high quality Muslin, Cotton and Silk.

Looking beyond government organizations:
o Uniforms for Offices
o Bed Sheets for Hospitals
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o Airlines curtains and spreads
o Bed Sheets, curtains and cushions for Hotels
o Real estate developers for soft home furnishings
9.4.1 An Effective Selling Process for Institutional Sales
Prospecting and Qualifying
Under this step a database would be prepared for all prospective clients. KVIC has
the benefit of being a government organization, it is very easy for KVIC to build
clientele with other government organizations like Defence, Air India, Hospitals etc.
Pre- approach
Under this step an in depth analysis of the prospective clients will be done. This in
depth analysis will include:

Preparing the list of Key employees of the client organization

Understanding the product needs of client

Understand the working environment of the organization

Study the past purchasing patterns

Understanding what benefits are clients looking for.
Approach
After doing the home work of pre approach, the next step is to approach the client;
this can be done taking appointments, tele calls, emails and direct mailers. Use of a
reference can really help in approaching the client.
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99
Presentation and demonstration
Under this step the sales staff meets the client and gives his proposal to the client. At
this stage the sales person should emphasize on the benefits that the client would
get out of the product, not the features of the product. Also sales person must carry
the samples along with him to demonstrate the product.
Overcoming objections
If the sales person had done a proper in depth study of the client under pre approach
stage than overcoming objections at this stage will not be a big problem. The sales
person should be able to foresee what all objections the client can have, and he
must have the answer beforehand.
Closing
The closing in case of a successful dealing would be when the payment is received
from the client, but at this stage the sales staff should not think that this was the last
dealing with the client. The life time value of a institutional client is far more than a
retail customer.
Follow up and maintenance
In case of institutional sales there is huge scope of getting repetitive order, thus the
sales staff must maintain a healthy relationship with the client. This can be done
even through season’s greetings and reminders of latest schemes and products.
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100
9.5 Transactional Selling Model
Emphasis on
sales skills.
Knowledge
about the
product.
Respond to
customer
needs.
Provide
quality
products.
Establishing
Customer
Relationship
Emphasis on Sales skills
Khadi sales are majorly done through sales people in the stores. Each product
section has two to three sales staff that takes care of the customers personally and
assists them for the details related to the products and they are expected to help the
customer find the right product and explain them the benefits of using the products.
Therefore the sales skills become very important and the sales majorly revolve
around the sales skills.
Knowledge about the product
The Khadi products are well understood and identified by the sustainability
conscious customers and people who wants purity in their products. Whenever a
customer goes into a Khadi store, the sales staff is a medium through which the
customer gains more information about the products. The knowledge of products in
staff is extremely poor. Although the products are well understood by the customer
but still sales staff should add on the knowledge of the customers..
Respond to customer needs
Due to diverse product offerings the needs of the customers also varies. The staff at
Khadi store thus should emphasize on responding to these needs. Thus employees
should be trained to respond to varied customers’ needs. Also due to diverse product
offerings the scope of cross selling also increases, till now there is no effort made by
the sales to staff to generate cross sales.
Provides quality products
Khadi products are perceived to be upto the quality standards by the target
audience. They are produced in an eco friendly way using natural ingredients and
their cosmetics section is handmade. But still there is a huge scope of improvement,
the quality of product varies from store to store, one store might offer a good quality
Reengineering Khadi India
101
product but the same product sold at some other store might not be having same
quality level.
Establishing customer relationship
Currently, Khadi is not involved in any customer relationship technique. They are not
using any kind of software to interact with customers, nor are they involved in any
kind of employee training.
Challenges
As KVIC is a government organization, it is very difficult to make changes under this.
The challenges that has to be faced are as follows
Cannot remove anyone from the existing sales force.

The system of Khadi works in such a way that it becomes very difficult if
someone from the sales force has to be removed or replaced due to lack of
good performance as Khadi has a very rigid working frame.

The sales staffs are usually aged and not very educated. To add on to the
problem most of the sales staffs are stubborn and has a very unfriendly
attitude towards the customers.

Language constraints.

In today’s scenario every brand retail outlets have very trained sales staff as
well as multi language skills. But most Khadi sales staffs lack multi language
skills which apparently leads to language constrains as foreigners are a major
portion of the customers who visit the Khadi stores.

Appointing trainers for such employees.

Appointing trainers for untrained staff also is not easily possible as all the
Khadi stores are not handled by one particular body but some retail stores
come under state institutions some fall under the control of KVIC.

Achieving uniformity in convincing skills and staff appearance.
To create a strong brand identity and a brand feel, there has to be an
implementation of uniformity in terms of convincing skills of the sales force, the
staff appearance, store format and visual merchandising of the stores. But it is
not possible in case of Khadi as it is highly unorganized in terms of stores and
sales staffs.
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102
Project Implementation
Reengineering Khadi India
103
10.1 Roll Out Strategy
Roll out Plan
Year
0
Year
1
Year
2
Year
3
Year
4
Renovation of 12 DSC owned by Govt
Renovation of stores under A+ institutions
Renovation of stores under A institutions
Renovation of stores under B institutions
Renovation of stores under C institutions
Renovation of stores under D institutions
Product Development Research Process
Product Development
Implementing Retail Outlook Grading System for DSC's, A+ & A
institution's stores
Implementing Retail Outlook Grading System for B, C, D institution's
stores
Establishing Zonal Warehouses for all KVIC stores
Launching E retail
Strategic Participations in International Trade Fairs & Exhibitions
E retail Expansion
Focus on Participation in International Trade Fairs & Exhibitions
Exports
KVIC runs a decentralised system, which allows all the institutions to have complete
authority in producing Khadi apparels as per them. These institutions cater to their
particular target group only, thus they have their own in-house designers for product
development and because of this limited audience they are not in sync with the
market trends and forecasts.
Thus it would be very difficult to standardize the Khadi apparels at the initial stage of
re- engineering. So the major focus in KVIC’s re-engineering would be ‘retail
makeover’ as a synchronisation in the outlook of the stores is required, to create a
brand out of KVIC.
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Year
5
104
10.2 Marketing Feasibility
Khadi and village industries were originally promoted by Mahatma Gandhi in 1920s
for rural self employment. Khadi is estimated to constitute less than 1% of India’s
textile market. The growth in production and sales of Khadi is marginal compared to
the increase in the production of textiles at a compound growth rate of 7% in volume
and 15% in value during FY2002–FY2006. The textile industry has made
tremendous strides with the adoption of modern technology, branding, and savvy
marketing. In contrast, Khadi has been unable to adapt to economic, technological
advancements and changing consumer needs. As a result, the community-based
production and marketing model of a product that is still revered, is neither able to
gain market share nor substantially contribute to rural employment.
For detailed analysis of marketing feasibility please refer the business plan.
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105
10.3 Operations and Management Feasibility
The 12 selected stores are located in all regions of India, therefore the reengineering taskforce can work according to zonal segmentation:
The scope of work during first year of re-engineering would include:

Renovating the 12 DSC’s

North
• Delhi (2 Stores)
Hiring a marketing team that would
develop a marketing strategy for KVIC.

Training the sales staff at retail
stores.
East

Prospecting
new
clients
for
Institutional sales.
•
•
•
•
Bhubaneshwar
Patna
Kolkata
Agartala

Emphasize on Visual merchandising
aspects of the stores.

Product development according to
the latest trends.
West
•
•
•
•
Goa
Mumbai
Ahmedabad
Bhopal
Following is the list of job positions that
would
be
required
to
attain
above
mentioned objectives:

Marketing
team:
South
manager,
• Ernakulum
• Bangalore
marketing executives.

1
Brand
1
manager
Marketing
and
4
Institutional sales: 1 Institutional
sales head and 8 Key accounts managers
(2 for each zone).

Visual merchandising: 4 Visual merchandisers (1 for each zone).

Product development: 2 Designers
Reengineering Khadi India
106
10.4 Financial Feasibility
Sales Forecast:
The best performing store is KGB, New Delhi which accounts for nearly 61% of total
sales of all these stores, while Kolkata and Mumbai are the next in league with a
share of 14.5% and 7.1% sales respectively. Thus an increment of 25 to 30% is
expected after revival of these stores.
The other stores at Ernakulam, New Delhi are having a share of 5.7% and 4.2%
respectively which is a very minimal share, thus these stores have a lot of potential
which can realised after revival, with a 50% increment in sales.
All other stores are poor on performance despite of being owned by KVIC directly. A
revival for these stores can yield more than 70% sales.
“Vinoba Sewa Samiti” is one of the NGO affiliated with KVIC owns 37 Khadi stores in
India. During FY 2007-08 the institution renovated all of its 37 stores, they also
advertised through vernacular media tools. Since then the stores have been
achieving a growth in sales varying between 30% and 70%. This growth strategy of
the Institution has been taken as the bench for this business plan.
About the corporate sales, KVIC has an impressive clientele list already which
includes Indian Railways, Defence, Government Hospitals, and Boarding Schools
etc. After implementing Key account management, KVIC stores can have an
increment in the range of 25% to 75%, by approaching prospective clients like
Private hospitals, schools, NGO’s, Designers, Cotton garment manufacturers.
The total increase of sales in percentage comes out to be around 32% in the first
year itself.
Product Costing
Cloth
Manufacturing
(15.2 Cotton
meter roll) in Rs
Khadi (B)
Yarn
370.1
Cotton Khadi (A)
Silk
419.68
1730.27
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107
Weaving
87.5
112.7
134.5
Weaving Labour
31
31
31
Employee Funds
19.3
24.79
36.73
Processing Charges
26.5
26.5
26.5
Total
534.4
614.67
1959
Interest @ 4%
21.4
24.59
78.36
Insurance @ 1%
5.3
6.15
19.59
Trading Spend @ 3%
16
18.44
58.77
Margin @ 20%
106.9
122.93
391.8
Total cost per than
684
786.78
2736.25
Cost per Meter
45
52
180
Costing for a Product in Rs
Mens Cotton Mens
Cloth Cost per meter
Consumption
per
Cotton Womens Silk
Khadi Shirt
Khadi Kurta
Kurta
45
52
180
2.75
2.5
Shirt 2
(meter)
Cost of Cloth
90
143
450
Washing
10
12
12
Cutting
10
12
12
Button Holes
2
2
2
Stitching
10
15
15
Collar
10
6
7
Arm Bands
6
0
0
Labels
2
3
2
Buttons
2
1
1
Checking
2
3
3
Ironing
2
3
3
Packing
4
6
6
Total Cost
150
206
513
68
169
Add:
42%
Mark
Up
(30% 50
Margin)
Reengineering Khadi India
108
Retail Price
200
274
682
The Average Selling Price of three most selling garments i.e Mens Cotton Khadi
Shirt, Mens Cotton Khadi Kurta, Women’s Silk Khadi Kurta comes out to be Rs 384.
Reengineering Khadi India
109
Profit and Loss Account
Particulars
Total Sales
Less: COGS (75% of Sales)
Gross Profit (25% of Sales)
Less: Employee Costs
Salaries of New Employees
Salaries of existing employees
Incentive Allowance
Medical Aid to Staff
Employees PF
Advertising and Promotions (8%)
Less: Operating Expenses
Printing and Stationery
Electricity
Depreciation
Telephone
Miscellaneous
Insurance
Legal Expenses
Vehicle Running Expenses
Uniform Expenses
Travelling Allowance
Rent, Rates and Taxes
Logistics
Postage and Telegram
Gratuity
Watch and Ward
Service and Maintenance
Freight and Cartage
Guest Entertainment
Repairs,Renewals
Conveyance
Preliminary Expenses W/O
Net Profit
Amount (Rs)
58,38,89,500
43,79,17,125
14,59,72,375
75,60,000
2,93,07,353
2,20,947
4,40,501
30,13,639
4,67,11,160
4,23,732
5,80,812
36,41,875
3,22,813
8,75,196
3,23,047
1,26,239
3,45,722
2,12,686
4,51,260
6,89,486
1,16,77,790
1,19,928
3,31,581
7,30,763
33,449
18,215
1,73,592
4,29,703
1,37,794
2,68,25,830
1,02,47,263
Cost sheet has been worked out for all additional expenses that will be incurred for
implementing the re-engineering strategy. Re-engineering of the 12 Khadi DSO’s will
lead to sales of Rs 58,38,89,500 in the first year, the net profit on which would work
out to be Rs1,02,47,263. Thus it is feasible to move ahead with the project work.
These are certain assumptions related to the cost sheet:
Reengineering Khadi India
110

Preliminary expenses will be written off over the period of 5 years.

Average selling price is estimated to be Rs 384, based upon the average of
prices of 3 high selling items.

Initial Advertising and Promotions amount is assumed to be @ 12% of Total
Sales.

Due to the limitation of data availability, the expenditures for 12 DSC’s have
been worked out on consolidated basis. KVIC has 37 revenue generating
centres; out of these 12 are the DSC’s. Thus the total expenditure for these
DSC’s has been divided in the proportion of 12:25.
Preliminary Expenses
Preliminary Expenses:
Amount
Renovation Expenses of 12 stores
1,67,51,250
Advertising and Promotions (20%)
11,67,77,900
Training Cost
Total
6,00,000
13,41,29,150
Preliminary Expense W/o in 5 Years
2,68,25,830
The preliminary expenditure for the project in calculated to be Rs 11,67,77,900 which
would be written off over the period of next 5 years. These preliminary expenses
include the Renovation Expenses of 12 stores, Advertising and Promotions and
Training Cost.
The total initial investment requirement for the project will Rs 16,05,90,465 which will
sourced through budgets that are annually allocated by the central government to
the Khadi and Village Industry Commission.
Initial Investments:
Working Capital Requirement
Renovation Expenses of 12 stores
Advertising and Promotions
Training Cost
Fixed Assets
Total Funds Required
Amount
2,46,12,495.84
1,67,51,250
11,67,77,900
6,00,000
8,97,000
15,96,38,646
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Break Even Analysis
Particulars
Amount (Rs)
Fixed Costs
12,11,70,302
Variable Cost Per Unit
298
Selling Price
385
Break Even Quantity
13,92,762
Break Even Value
53,62,13,406
Working Notes
Fixed Costs
Salaries of New Employees
Salaries of existing employees
Amount
75,60,000
2,93,07,353
Incentive Allowance
2,20,947
Medical Aid to Staff
4,40,501
Employees PF
Advertising and Promotions (8%)
Electricity
Depreciation
30,13,639
4,67,11,160
5,80,812
36,41,875
Telephone
3,22,813
Insurance
3,23,047
Legal Expenses
1,26,239
Uniform Expenses
2,12,686
Rent, Rates and Taxes
6,89,486
Watch and Ward
7,30,763
Service and Maintenance
Repairs,Renewals
Preliminary Expenses W/O
Total Fixed Cost
33,449
4,29,703
2,68,25,830
12,11,70,302
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Variable Cost
COGS (75% of Sales)
Amount
43,79,17,125
Printing and Stationery
4,23,732
Miscellaneous
8,75,196
Vehicle Running Expenses
3,45,722
Travelling Allowance
4,51,260
Logistics
1,16,77,790
Postage and Telegram
1,19,928
Gratuity
3,31,581
Freight and Cartage
Total Variable Cost
Variable Cost Per Unit
18,215
45,21,60,548
298
The break even of the project will be achieved at the sales figure of 53,62,13,406,
which would be achieved with in first year of operations. The reason for this early
achievement of breakeven is that more than 80% of the cost is variable cost.
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10.4.1 Scenario Analysis
A Scenario analysis has been done where in the forecasted sales figures have been
reduced by 20%.
Particulars
Amount
Total Sales
467111600
Less: COGS (75% of Sales)
350333700
Gross Profit (25% of Sales)
116777900
Less: Employee Costs
Salaries of New Employees
7560000
Salaries of existing employees
29307352.59
Incentive Allowance
220946.8872
Medical Aid to Staff
440501.2302
Employees PF
3013639.149
Advertising and Promotions (8%)
46711160
Less: Operating Expenses
Printing and Stationery
Electricity
Depreciation
423731.6772
580811.571
3641875
Telephone
322813.0845
Miscellaneous
875196.1932
Insurance
323046.9048
Legal Expenses
126238.9638
Vehicle Running Expenses
345721.6365
Uniform Expenses
212685.669
Travelling Allowance
451259.8827
Rent, Rates and Taxes
689485.7982
Logistics
9342232
Postage and Telegram
119928.4101
Gratuity
331580.8593
Watch and Ward
730763.3508
Service and Maintenance
33448.9506
Freight and Cartage
18214.6338
Guest Entertainment
173592.2769
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Repairs, Renewals
429703.0131
Conveyance
137794.0971
Preliminary Expenses W/O
Net Profit
26825830
8197810.533
Even if the sales have been reduced by 20%, the company will still make profit of Rs
81,97,810.
Reflections
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Reflections
Under this highly competitive and consumer oriented environment, it imperative for
India’s own brand “Khadi” to revive itself. Khadi is estimated to constitute less than 1% of
India’s textile market. The textile industry has made tremendous strides with the adoption of
modern technology, branding, and savvy marketing. In contrast, Khadi India has been unable
to adapt to economic and technological advancements. With such wide spread footprints the s
cope of growth for Khadi India is immense.
This project is aimed at converting the weakness of Khadi into its strengths. The project
started with analyzing the weak links in the structure of KVIC, following by implementing
the feasible solutions. Implementing any new project in any of government institutions
counters retaliation, but this plan has been structured keeping in mind the interest of all
stakeholders, be it employees, institutions or the top management of KVIC.
In past also KVIC has taken many initiatives to revive the brand but all of them had
backfired, thus before making the plans lessons were taken from previous failures. The final
outcome of the project would be a win-win situation for all, weavers and artisans in villages
will get more employment, KVIC employees will get to enhance their skills, affiliated
institutions will get more business and KVIC will convert itself from a liability on Indian
government to a an asset that would represent India’s textile and apparels industry.
Reengineering Khadi India