Harvard Case - One Family Textiles: Stepping Back to Move Forward?
"One Family Textiles: Stepping Back to Move Forward?" Harvard business case study is written by V.G. Narayanan, Alpana Thapar, Fares Khrais. It deals with the challenges in the field of Accounting. The case study is 16 page(s) long and it was first published on : Jun 24, 2021
At Fern Fort University, we recommend that One Family Textiles (OFT) pursue a strategic repositioning focused on leveraging its core competencies in manufacturing and distribution while embracing digital transformation and sustainable practices. This involves a multi-pronged approach: 1) Streamlining operations through activity-based costing and process optimization, 2) Expanding into new markets with a focus on emerging economies, 3) Developing a robust online presence to reach a wider customer base, and 4) Embracing sustainability in all aspects of the business. This strategy will enable OFT to achieve sustainable growth, improve profitability, and secure its long-term future.
2. Background
One Family Textiles (OFT) is a family-owned textile manufacturer facing declining profitability and increasing competition. Despite a strong reputation for quality and customer service, OFT struggles with outdated accounting procedures and policies, inefficient manufacturing processes, and a lack of digital presence. The case highlights the challenges faced by a traditional business in a rapidly evolving market. The main protagonists are the family members who own and manage OFT, each with their own perspectives on the company's future.
3. Analysis of the Case Study
This case study can be analyzed through the lens of strategic management and financial performance. OFT's current strategy is based on its traditional strengths in manufacturing processes and customer service. However, this strategy is no longer sufficient in the face of changing market dynamics.
Financial Analysis:
- Financial statements reveal declining profitability and a shrinking market share.
- Cost analysis highlights inefficiencies in the cost allocation process, leading to an inaccurate understanding of product profitability.
- Activity-based costing can provide a more accurate picture of costs and help identify opportunities for cost reduction.
- Financial performance measurement needs to be strengthened to track key metrics such as profitability, cash flow, and return on investment (ROI).
Strategic Analysis:
- Corporate strategy needs to be updated to address the changing market landscape and incorporate new growth opportunities.
- Emerging markets present significant potential for OFT's products, given their focus on quality and affordability.
- Digital transformation is crucial for reaching new customers and improving operational efficiency.
- Sustainability is becoming increasingly important for consumers and can be a key differentiator for OFT.
4. Recommendations
- Implement Activity-Based Costing (ABC): OFT should adopt ABC to gain a more accurate understanding of product costs and identify areas for cost reduction. This will help them make informed decisions about pricing, product mix, and resource allocation.
- Optimize Manufacturing Processes: By leveraging lean manufacturing principles and implementing process automation where feasible, OFT can improve efficiency and reduce costs. This will require investment in new technology and employee training.
- Expand into Emerging Markets: OFT should explore opportunities in emerging markets with high growth potential. This could involve setting up manufacturing facilities or establishing partnerships with local distributors.
- Develop a Robust Online Presence: OFT should invest in building a strong online presence through an e-commerce platform, social media marketing, and search engine optimization (SEO). This will allow them to reach a wider customer base and increase brand awareness.
- Embrace Sustainability: OFT should integrate sustainability into all aspects of its business, from sourcing raw materials to reducing its environmental footprint. This can be achieved through initiatives such as using recycled materials, reducing energy consumption, and implementing responsible waste management practices.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of OFT's current situation and future prospects. They address the key challenges facing the company and align with its core competencies.
- Core competencies and consistency with mission: The recommendations focus on leveraging OFT's strengths in manufacturing and distribution while incorporating new technologies and sustainable practices.
- External customers and internal clients: By embracing digital transformation and sustainability, OFT can attract a wider customer base and improve employee engagement.
- Competitors: The recommendations help OFT differentiate itself from competitors by offering a unique combination of quality, affordability, and sustainability.
- Attractiveness ' quantitative measures: The recommendations are expected to improve profitability, increase market share, and enhance long-term growth prospects.
6. Conclusion
One Family Textiles has the potential to achieve sustainable growth and secure its future by embracing a strategic repositioning that leverages its core competencies, embraces digital transformation, and prioritizes sustainability. By implementing the recommendations outlined above, OFT can adapt to the evolving market landscape, improve its financial performance, and build a stronger brand for the future.
7. Discussion
Alternatives not selected:
- Merging with a larger company: This option could provide access to resources and expertise, but it also carries risks such as loss of control and potential cultural clashes.
- Focusing solely on the domestic market: This option would limit growth potential and leave OFT vulnerable to competition.
Risks and key assumptions:
- Implementation challenges: Successfully implementing these recommendations will require significant investment, change management, and employee buy-in.
- Competition: The textile industry is highly competitive, and OFT needs to be prepared for challenges from existing and new players.
- Economic uncertainty: Global economic conditions can impact demand for textile products, creating volatility in the market.
8. Next Steps
- Conduct a detailed feasibility study: This should include a comprehensive cost-benefit analysis, risk assessment, and resource allocation plan.
- Develop a detailed implementation plan: This should outline specific actions, timelines, and responsibilities for each recommendation.
- Communicate the strategy to stakeholders: This includes informing employees, customers, and investors about the changes and the expected benefits.
- Monitor progress and make adjustments: OFT should regularly track key performance indicators (KPIs) and make adjustments to the strategy as needed.
By taking these steps, OFT can successfully navigate the challenges of the modern textile industry and achieve its long-term growth objectives.
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Case Description
This case explores how a family business builds a board that includes independent directors that helps to professionalize and strengthen governance in the company. The case relates to One Family Textiles, an Abu Dhabi-headquartered manufacturer of garments. The company was founded in 1975 by Adnan Kalam and his elder brother Ali Kalam; two Kenyan nationals with Indian roots. The company enjoyed impressive growth, and by the early 1980s had several factories in the South-Asian sub-continent and sold to businesses in Asia, the Middle East, North America, and Europe. By the mid-1990s, members of the second generation joined the family business and pushed Adnan to further professionalize the company and strengthen its governance practices. Accordingly, the family sought the help of consultants and hired experienced senior executives, two of whom (first in 2014, and then in 2018) were appointed as the first independent directors of the advisory board. Over the next two years, the board focused on helping revamp operations and instilling sound governance measures. By January 2020, Adnan had stepped back from day-to-day operations and bought out his brother's stake in the company, making him the sole owner of the business. His eldest son was the group CEO and felt it was time for an IPO. The board was divided on this decision; significant improvements in professionalization and governance had been made, but the independent directors foresaw more work to be done. What should Adnan do?
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