Cygy Garments

Statement of the Problem

After the Asian crisis, new trends developed in the Philippine garment industry. CyGy Garments, a family corporation that exclusively supplied SM Department Stores of excellent quality ladies wear, faces the threat of heightened competition. With the entrance of cheap manufactured clothes from imports, and as more entrepreneurs venture into garments manufacturing, market share of CyGy began to decrease, and its margins decline as SM demanded that it match the lower prices of its competitors. This leads us to the general problem of the group,

"How can CyGy Garments cope with the competition in the current trend of Philippine garment industry?"

We will provide answers to questions that are rather specific to address our main considerations in the case, namely, the direct customers, final buyers and the competitors. These questions;

"Is it still advantageous for CyGy to maintain its loyalty to SM or resort to supplying other direct customers (i.e. specialty boutiques)?"

"Is it necessary for CyGy to expand product line to maintain market share or is expanding its market a better proposition?"

"Is it crucial for CyGy to take part in the price wars of the industry? What alternatives may be considered?"

guide the group in conceptualizing the most appropriate marketing strategy CyGy Garments need to undertake in the short run.

Assumptions

In this case study, the group assumes the following;

Ð'* Economic conditions will continue to strengthen providing more opportunities for the Philippine garment industry.

Ð'* Operational processes of CyGy Garments are already efficient and standardized. Outsourcing has been the most efficient operational strategy in the industry, and local garment manufacturers obtain their raw materials from competitive suppliers.

Ð'* There exists the same intensity of competition in Philippine Retailers.

Ð'* Buying power of final customers plays an important role in decisions of SM merchandisers.

Decision and Recommendations

In the context of the assumptions and upon deliberating the pros and cons of alternative courses of action, the group takes the stand that CyGy Garments should continue to supply SM with its ladies wear, keeping the same quality at the same price but with improved designs. Furthermore, the group strongly recommends that CyGy manufacture a new set of ladies wear under a new brand name. This new line will be available at a lower price, trading off quality that will be less than the original (sister-brand) but comparable with that of other garment manufacturers who are able to produce at the same low price. Designs for all samples submitted to SM merchandisers will be at par in level. This course of action is much less costly and risky rather than venturing outside SM or introducing other product lines Ð'- considering CyGy's experience in manufacturing ladies wear and its relationship with SM. Now, having two brands with equally adept designs that can ensure orders from SM merchandisers, CyGy can therefore compete better in the current trends of Philippine garment industry and improve its market share.

In the long run, as CyGy Garments is expected to become more stable because of the marketing strategy stated above, it can then opt to supply other department stores and specialty stores or even do direct selling. The group also recommends that it ventures out in manufacturing other product lines (i.e. men's wear, knitted clothes, etc.) with the same excellent quality.

Analysis and Justification

To be able to justify our decision and recommendation, the group made an analysis on three particular areas; (a) final customers, (b) merchandising of SM, and (c) threats and opportunities of Cygy, that will make use of facts related throughout the case as well as the exhibits.

The Final Customer

The buyers who SM caters to, come from the low to high-mid class. These buyers are the final customers that CyGy Garments must grab. We defined these customers as either price-conscious or quality-conscious. It can be argued that buyers from the lower class are more price conscious Ð'- low priced rather than high quality products, and those from middle to high middle class are rather quality conscious Ð'- products reasonable priced higher for high quality. However, it is certain that both look for stylish and up-to-date designs. Designs are very important, these is the first thing that will attract the customers (more than low prices or high quality) to a product, also, it will be the last basis of decision of whether to buy or buy not the product as customer considers whether his money to buy the product is worth it. Ultimately, these customers determine the salability of every supplier's products, and in effect, SM buys only those products that these customers buy.

Merchandising of SM

Exhibit 3: SM Wears Departments shows estimated monthly budget for various categories (i.e. ladies' wear, men's wear, boys teens etc.). It is notable that of the 5 categories, Ladies wear has the highest estimated monthly budget, meaning highest probability of being accepted as a supplier to SM's very competitive merchandising system. The ladies wear has sub categories illustrated in Exhibit 4, by which trendy casual wear (woven) has the highest budget, 78% of these is supplied by CyGy Garments.

The data presented allows us to conclude that CyGy Garments is already in the best position in terms of aligning its products to the priorities of SM, as measured in the budget it allotted for different sections.

Threats and Opportunities for CyGy

Although confronted by the high bargaining power of SM due to increase number of suppliers in the garments manufacturing industry. SM still offers high market opportunities through its target market of low to high middle class and because of the additional five branches that will be added to its already large chain (Exhibit 1). Aside from SM, there are other Philippine retailers like Rustans, Bench, Bayo, etc. that may provide better opportunities for Cygy (Exhibit 2). Another threat is spoon-feed to us, as Exhibit 6 shows an incredibly lower price both from local and imported.

The threats and