Small & Medium Enterprise

Case Study on A.M Jeans

Submitted by:
Bilal Ahmed

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Omer Yousaf

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Hasan Nadeem Mian

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Muhammad Ibrahim Aziz

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Zaeem Hasan Ashraf

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Arslan ul Haq

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Submitted to:
Prof. Ayesha Qayyum
Section: A

A Case Study on A.M Jeans

Textile and Garment are two of Pakistan's principal industries contributing more than 67% to
total export earnings, accounting for around 46% of total manufacturing and employing over
38% of the manufacturing labour force. Over USD 4 billion of textile and garment machinery
has been imported in Pakistan in the last few years that has significantly improved the quality
and productivity of Pakistan textile products in the last few years and the Government of
Pakistan is targeting over USD 10 billion of exports of textiles and garments made-ups in the
successive years. Import of textile machinery has registered an impressive growth of 66.29% in
the current fiscal year
International Trade of Cotton-Textile and Apparels
Developing countries in 2004 accounted for more than one-half of
world exports of textiles and clothing. In no other category of
manufactured goods developing countries have such a large netexporting position. Thus liberalization of trade in textiles and
clothing is of major significant for many developing countries for the simple reason; it improves
market access for them in the area of their comparative advantage. However, increased
competition from further liberalization is a matter of concern for developing countries. The quota
restrictions of Agreement on Textiles and Clothing (ATC) were essentially for imports of
Canada, the European Union and the Unites States. These three markets account for more than
one-half of world textiles and clothing imports. The end of the ATC quota regime did eliminate
the quota completely for protection in these markets. It is understandable that the removal of
quotas have a significant impact on global trade flows. The end of a special trade regime that had
existed for more than 40 years for textiles and clothing is a remarkable step both in terms of trade
liberalization and the elimination of negotiated trade arrangements in breach of WTO rules,
(World Trade Report 2005).

5.1.1 Trends in Clothing and Textile International Trade

For the Textile and Clothing trade, 2006 was a significant year as it was the second year after the
phasing out of the Agreement on Textile and Clothing (ATC), which replaced the Multi-Fiber
Arrangement (MFA) in 1995. This shift was to affect exports of many countries producing
winners and losers from the additional liberalization, (World Trade Report 2006). The
termination of the ATC affected the patterns and flows of trade in 2005, and even in 2006. The
structural changes in world trade of textiles and clothing went on unabatedly, (World Trade
Report 2007). Chinas exports continued to increase the market share in all major developed
import markets. The combined textiles imports of the three economies: Canada, the United States
and the EU from China rose by 41 per cent in 2005. There was an increase of 15 per cent in
2006. However, the market shares declined for major traditional suppliers like Turkey, Romania,
Morocco and Tunisia. Advanced developing economies in East Asia also lost market shares.
Interestingly, some smaller suppliers expanded their textiles and clothing exports even faster than
China and the share of least developed countries in imports of the United States and the
European Union went up in 2006. Imports of textiles and clothing have increased by 5.5 per cent,
to about $350 billion in 2006 for the four major developed markets. The increase was slightly
faster than the preceding year. However, intra- NAFTA textiles and clothing trade declined, and
intra-EU trade did not have any significant change in 2006, (World Trade Report, 2007).
The US imports from CAFTA, the Dominican Republic, and Sub-Saharan Africa, went down by
7 to 10 per cent. The decrease in US imports from Asian economies such as Hong Kong, China;
Chinese Taipei and the Republic of Korea was 14 percent. US imports from the EU declined by
2.5 per cent in 2006. Imports from China increased by 15 per cent and it were nearly 30 per cent
of total US imports of textiles and clothing. There was a rise in imports from Indonesia, Vietnam,
Bangladesh and Cambodia. Imports from India, rose 12 per cent in 2006.
In the US market, China gained as a leading supplier, but at the same time imports from smaller
Asian suppliers also rose rather faster than those from China. There was a sharp rise of EU
clothing imports from Hong Kong and China in 2006. Among the developed markets Japans
textiles and clothing imports are mainly concentrated on China because of geographic proximity
and the absence of import quotas in the past. More than three-quarters of Japans textiles and
clothing imports came from China in 2006. Most significantly, the share of imports of clothing
was more than 80 per cent. Amongst the four major developed markets, Canada was on the top in

textiles and clothing imports in 2006. Its imports from China went up by more than 20 per cent.
As a whole 2006 was a very favorable one for the textile trade of the developing countries.

Pakistan Trade of Textile and Clothing

Textile trade that thrives on Cotton as basic raw material is the back bone of the Pakistans
economy. Cotton manufactures contribute around 60 percent of total export earnings. Moreover,
it accounts for 46 percent of the total manufacturing and gives employment to 38 percent of the
manufacturing work force. Cotton production and quality plays the central role in the growth of
the industry. Pakistan Cotton-Textile manufacture export consists of Cotton Yarn, Cotton Cloth,
Knit wear, Bed wear, Towels, Tents, Canvas and Tarpaulin, Readymade Garments, Synthetic
Textiles and Made up Articles. Cotton and cotton related products are the most significant
industrial and agriculture products for Pakistan. Altaf (2007) believes, what happens to the
economy in Pakistan is very much dependent on the cotton-yarn- textile- apparel complex.

Punjab, the land of five rivers as it is referred to in the local language, is home to one of the
finest cotton crops in the world the region prides itself with one of the largest concentration of
the textile related production facilities.
Apparel & Fashion - The Fashion Designing & Apparel industry is becoming an important
dimension of Pakistans economy due to its export potential worldwide. In Pakistan, the
significance of fashion industry is being realized in view of its huge potential for future
expansion. The importance of building individual brands in Pakistan fashion industry cannot be
overemphasized. Pakistani designers are building own brand names in local, regional, or
international market as we may deem fit. We have to look for opportunities for creating new
concepts. In Pakistan, other than catering the affluent and the elite all the fashion designers of
haute couture also have an exclusive line of prt a porter or ready-to-wear outfits, which again,
before being introduced into the market are made public at fashion shows. Fashion does not
stand still, tastes shift and so do geographic focus.

AM Jeans is one of the SME established about three decades ago. A stitching unit started in a
small room near Gulshan Ravi Lahore by the person name Muhammad Shafiq. The company
faces many challenges from existing competitors and industry condition which is being affected
by global economic crisis, political instability and natural disasters (Flood). Despite all of the
hurdles the company eventually grows to a scale that today it is employed more than 110
employees. The company is currently producing denim jeans (core product), formal pants, formal
shirts and casual shirts.
Business process of operations
The process of value addition begins with the import or purchase of raw materials from local
market, the next step is to store and sort out raw material in racks for better utilization of space,
the next step is cutting of fabric according to pattern of the article to be made, the next step is of
stitching, the next step is clipping in which extra treads are removed, the next step is washing
which include the process of special wash to add special effects and characteristic in clothes
(stone wash), the next step is ironing, the next step is quality check, the next step is packing and
last step is to deliver the products to customers usually wholesalers. Consignments are delivered
on credit and recovery of credit is done weekly according to the situation of the market.

Competitors
Name
AM Jeans
SB Garments

unit produced 2012

unit produced 2011

unit produced 2010

960000
1080000

Blue Star Garments

720000

Golden Needles

600000

Opportunities To Grow
In the growing industry of textile and textile product market carry a lot of potential to flourish
using the finest raw material of home country. The geographical location of resident country
Pakistan give another great opportunity to local industry to import variety of raw materials from
neighbouring country China and can export its products all over the world using its sea ports.

Keeping in mind this tremendous potential and strategic location of country AM Jeans had a
great opportunity to grow by meeting the demands of customers offering cheaper and best
quality products.AM Jeans had many opportunities like to increase its area of production, import
latest specialized stitching and laser cutting machines. Increasing stocks and importing direct raw
material from China to offer latest high quality and variety of designs.

Challenges
When global economic crisis hit the market it generate a demand of long term debt for goods, it
eventually effect the buying power of customer and no. of customers start to decrease , to arrange
finance in order to buy raw material in bulk to have economies of scale, political unrest and no
proper planning and investment in energy sector make industries of Pakistan vulnerable to
energy crisis. The shortage of electricity had made difficult to make orders on time in the same
way gas shortage result in unavailability of tread by looms causing increase in price of raw
material. As the company is growing labor force is increasing requiring the company to adopt
human resource management because arising employee confect and turn over, it is also being
observed that workers are involved ill legal information sharing .

Method Applied To Grow

Advertising of brand through tags on articles, packing and banners is done in order to increase
demand and make strong brand image, generators were installed to overcome energy shortage
and to meet deadline in delivering orders to customers, get to gathers were held to develop good
word of mouth and increase better supplier relations, retain earning ratio was increase to arrange
required amount of finance, special efforts were done in order to reduce wastage for increasing
efficiency in processing, racks were made and installed to increase space utilization of existing
area. To develop a culture within the organization n increase the bonding between employees the
practice of common meal is exercised on every Thursdays. Area for Prayer is allocated in the
factory.

Future Plans
AM Jeans is willing to purchase new adjacent land to Increase space of existing factory , to do
backward integration company is making feasibility to manufacture thread for own use and
selling in open market , efforts are made to contacts suppliers in China for direct and timely
import of raw material. Due to resent flood in United States Of America, United Nation had
decided to give Rebate to Pakistan on export Tariff. This is a great opportunity for Pakistani
Textile sector to avail maximum benefit from this relief.