Kreative Kasuals Inc. Harvard Case Solution & Analysis

Situation Analysis

PESTEL Analysis

Political Factors

However, since due to the increased competition overseas market, the Canadian textile producers heavily rely on the government tenders for the procurement of textile goods and in case of any change in the local government the already granted tenders will be subject to further review. Meanwhile, the further review of already granted tenders can result in dishonor or cancellation of previously granted tender which will expose the Canadian textile companies with huge losses that will arise due to the commitment made by the company for the production of granted tender. Therefore, in case of a change in the governing political party, the already secured tenders and their production will become riskier due to the expected review for the already granted tender by the new government. Meanwhile, the growth of textile industry is also affected by the government spending (McGregor, 2012).

Economic Factors

Meanwhile, due the international sales of Canadian textile producers, the economic conditions that affect the Canadian textile industry include not only the local Canadian economic conditions, but also include the economic condition of the countries where Canadian producers exports their textile goods. However, the recession in the United States affects the exports of Canadian textile producers which exposes the Canadian export industry to risk of a reduction in sales revenues.

Further, the export of textile involves the foreign exchange and the exporting company will receive foreign exchange for the goods exported which will be converted into local Canadian currency at a future date when the actual export receipts are received by Canadian exporter. Therefore, the changes in exchange rates will also have an impact on the Canadian textile industry ((EPA), 2003).

Social Factors

Moreover, the changes in fashion and individual preferences over the quality and type of textile that they wear will directly have an impact on the production of textile goods.

Technological Factors

Additionally, the technological factors also affect the Canadian textile industry, because the production of textile goods is carried out by the heavy machinery and equipment, therefore, any technological change in textile machinery used by the Canadian textile producers will affect the quality of their goods. Further, in case of technology advancement the international textile producers will move to new technology and if Canadian producers do not move their production to advanced technology, then this will lead to the reduced quality of their textile goods in comparison to the other international supplier of textile goods.

Environmental Factors

Further, the production of textile goods requires chemicals for the washing and cleaning of producing textile goods and the wastage of the textile companies’ case harms to the local society and the surrounding environment.  Therefore, the environmental factors will also affect the textile industry of Canada (Challa, 2006).

Legal Factors

Additionally, changes in the laws and regulations that govern the textile industry will also affect the textile market. Since Kreative Kasuals pays their labor a wages on an hourly basis, hence, an increase in per hour labor cost will also affect the production cost of Canadian textile producers which will reduce their competitiveness in international market. Therefore, the increase in minimum wage rate will lead to the increase in production cost of Kreative Kasuals (Malatest, 2010).

Porter Five Forces

Bargaining Power of Customers

However, since the majority of the textile production is exported from Canadian textile producers which mean that the majority of its customers are other countries such as the United States and these countries are in more power to influence the textile producers of Canada, therefore, the bargaining power of importing countries is higher than the bargaining power of Canadian textile exporters. Additionally, the Canadian exporters provide its production to the government of Canada through tenders and bidding process and the Canadian government has the authority to accept or reject the bids. Hence, again the bargaining power of customers, i.e., the Canadian Government, is high. Therefore, the bargaining power of the customer is overall high in the Canadian textile industry.

Bargaining Power of Suppliers

Further, the large number of textile producers in Canada led to increased competition for increasing their sales revenues. Additionally, since the government is the only large local buyer of the textile goods, hence, the producer has no choice to negotiate with the government on the terms of supply, which reduces the bargaining power of suppliers. Further, the overseas export market consists of a large number of small and large exporters which reduces the bargaining power of textile suppliers. Therefore, the overall bargaining power of textile producer is low......................

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Ontario-owner of a small textile manufacturer must decide whether to bid on two government tenders and, if so, at what price. The owner must analyze each bid by calculating its direct absorption and total cost, consider the effect of adding the amount of each bid at the current power level of the company, and to determine the difference between one time and long-term contract tender. The owner also wants to look at the overall "fit" of contracts with the current activities of the company and the direction. "Hide
by Elizabeth M. Grasby, Kevin Dean Source: Richard Ivey School of Business Foundation 9 pages. Publication Date: February 10, 2012. Prod. #: W12826-PDF-ENG

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