Garmand Case Report

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- What advice would you offer to remedy the situation?

Clearly the positioning of the brand as high quality makes them have a good amount of market share despite having a greater price than their competitors. So in this case our advice would go on the line of trying to reduce costs in various ways to create a positive profit margin. Eventually if costs are considerably reduced, we could think about a slight decrease in price, still having positive margins, which would increase even more the company’s market share. One of the problems that makes difficult reducing costs is the union conflicts which would happen. Employing two shifts would double capacity and probably reduce costs, but it would also cause problems with the unions. Manufacturing costs are higher than those of its competitors and it would make sense to move production to countries with lower manufacturing costs. But the unions oppose this option because they fear it would cause redundancies.

Reducing costs is a difficult task: making the fabric is labour intensive and as a result of collective bargaining, Garmand’s workers are paid more than the industry average – and pay levels cannot be renegotiated without union conflict. The parent company wants to avoid any problems with employees.

Additionally, an increase in production would reduce costs making the factory operate at 100% of its actual capacity, and not the current 75% of capacity.

- Alternatively, and due to the low sales of the “very large size”, it would be feasible to reduce the sizes offered to three to avoid production of “very large” and therefore avoid outstanding remaining stocks.

Savings in costs could also be invested on brand advertising as we know that currently Garmand invests very little in brand advertising and the brand name only appears on a small label sewn inside the neck of garments and trouser waistbands.

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