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    Davilla-Bond and The Latin American Sweater Market PDF

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    Yes, outsourcing some production to Mexico while maintaining strict quality control processes could allow D & Bond to maintain its reputation for quality. Careful partner selection and oversight would be needed.

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    Davilla-Bond and The Latin American Sweater Market PDF

    Uploaded by

    namz bamz
    103 views12 pages
    Yes, outsourcing some production to Mexico while maintaining strict quality control processes could allow D & Bond to maintain its reputation for quality. Careful partner selection and oversight would be needed.

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    Davilla-Bond and the Latin American sweater market.pdf

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    Yes, outsourcing some production to Mexico while maintaining strict quality control processes could allow D & Bond to maintain its reputation for quality. Careful partner selection and oversight would be needed.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    103 views12 pages

    Davilla-Bond and The Latin American Sweater Market PDF

    Uploaded by

    namz bamz
    Yes, outsourcing some production to Mexico while maintaining strict quality control processes could allow D & Bond to maintain its reputation for quality. Careful partner selection and oversight would be needed.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 12

    Analysis of Davilla-Bond and the

    Latin American sweater market

    Herma Alberta Kroon, 28071921


    Nameer Rather, 27144658
    Saleema Aftab, 27162826
    Tutorial day and time: Wednesday, 4pm-5pm
    Tutor’s name: Janie Chin Hsien Yeen
    Questions in the case
    Q1. Would increased sales to Mexico help alleviate some of the uncertainty that D & Bond was experiencing?

    Q2. Were there underlying issues related to Ecuador’s adoption of the U.S. Dollar that might dampen the
    potential in the Mexican market?

    Q3. Would finding stronger distribution partners there (in Mexico) be essential?

    Q4. What were the benefits and drawbacks of possibly getting involved in manufacturing in Mexico, perhaps
    through one of the Mexican maquila’s?

    Q5. Did it make sense to outsource some part of his production to Mexico?

    Q6. And if so, could the D & Bond quality reputation be maintained?
    History
    1974: Fernando Davila & Rosalind Bond -> Hilacril

    1980: Company began to export to Colombia

    1990: Finished products under the brand name D & Bond

    2003: Exporting to Colombia, Mexico, Brazil, Bolivia and Chile


    Q1. Would increased sales to Mexico help alleviate some of the uncertainty that D &
    Bond was experiencing?

    Yes, increased sales to Mexico would alleviate some of the uncertainty as the company is relying too heavily on the
    Ecuadorian market, with over half of the company’s sales coming from Ecuador.

    1. Ecuador faces Chronic economic,corruption and political problems.


    2. Sales in Ecuador are subject to a dynamic and unstable environment
    3. Increase in labour cost had resulted in a loss of D & Bs competitive advantage of producing in Ecuador
    Sales in other international markets has also deteriorated, with

    1. ·The importer in Chile had lost interest in D and Bond, there were reducing sales in Chile,
    2. Sales declining in Chile due to stiff competition from other international comanies, the importer had a lot of
    different companies to import from other than D & bond
    3. Economic crisis in Argentina had trickled down to Brazil, devaluation of Brazilian real had made
    continuation of sales to Brazil unprofitable
    Q2. Were there underlying issues related to Ecuador’s adoption of the U.S. Dollar that might dampen the
    potential in the Mexican market?

    A weak domestic currency stimulates exports, and a strong domestic currency makes the country’s exports less
    competitive in the international market compared to goods from other countries. (Wang, 2016)

    Firstly, the Dollarization will affect the tax structure in Ecuador. Taxes are frequent to change and the min taxes in
    Ecuador are progressive income tax (up to 25%) and Value-added tax (12%)

    Progressive income tax would affect the profit D & B earns as the tax is now paid in dollars as compared to the Sucre
    (old currency) which had a lot less value compared to the dollar (25000 to 1$ in 1999). This could hinder the potential
    of expanding in Mexico as D & B has less profit compared to before Dollarization.

    Value-added tax also effects D & B in terms of manufacturing. D & Bs factory of acrylic yarn produces the raw
    materials for its weaving department to make finished products for its consumers.
    Q3. Would finding stronger distribution partners there (in Mexico) be essential?

    2004: D & Bond was developing its distributors


    1. Sell under the original name D & Bond + private label like Liverpool, Wal-Mart
    2. Tackle the lower markets all over Mexico -> great boost on sales
    Q4. What were the benefits and drawbacks of possibly getting involved in
    manufacturing in Mexico, perhaps through one of the Mexican maquila’s?

    Benefits:

    1. Mexico: largest trading nation in Latin America and the eighth largest of the world.
    2. GDP growth had been strong since 1996. More growth in the future was almost a certainty.
    3. With a market of 101 million people and a GDP of $9,100 per capita, an increase in sales in Mexico was
    promising
    4. Ecuadorian’s labour costs are rising, Mexico will become a cheaper option in the future.

    Drawbacks:

    1. Mexico’s labor laws are difficult to handle


    2. Mexico had a significant problem with clothing industries and counterfeit/contraband difficulties with other
    consumer goods
    3. D & Bond has not enough money to start a factory
    Q5. Did it make sense to outsource some part of his production to Mexico?

    - Outsourcing - making a contract with an outside supplier to produce for you


    - D & Bond is dependent on Ecuadorian
    - Machines are working on their optimum level
    - Outsourcing to Mexico seems promising
    - Six fold increase in sales in Mexico makes it a vital market
    - Expand D & Bond's market and reduce the cost of exporting and transportation to Mexico
    - Labor cost would shift from Ecuador to Mexico making it a competitive advantage.
    - Labor laws in Mexico being difficult makes outsourcing ideal.
    Q6. And if so, could the D & Bond quality reputation be
    maintained?
    - D & Bond’s products were made from advanced technology
    - Expensive machinery imported from Germany and its raw synthetic imported from Germany and Peru made
    the brand image creating high quality products.
    - D & Bond’s each final product goes through 7 point quality check before sold
    - Establishing D & Bond's quality expectations upfront would reduce any chance of errors
    - Few investment and capital restrictions in Mexico would mean easy access to the German machinery being
    imported.
    - Improved working conditions with high payments, being paid $250 while minimum wage $150, would mean
    less or non existent labour turnover.

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