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TABLE OF CONTENTS
Acknowledgments .........................................................................................................................................................2
Executive Summary .......................................................................................................................................................2
Introduction to Khaadi ...................................................................................................................................................3
Mission Statement ......................................................................................................................................................3
Vision Statement ........................................................................................................................................................3
Khaadi’s Objectives ...................................................................................................................................................4
History Of Khaadi .....................................................................................................................................................4
Industry Analysis ...........................................................................................................................................................6
Porter’s five forces analysis ....................................................................................................................................10
Competitive Analysis ...............................................................................................................................................12
Supply Chain Management ......................................................................................................................................13
value Chain Analysis ...............................................................................................................................................14
Swot Analysis On Khaadi ........................................................................................................................................16
Sfas Matrices On Khaadi .........................................................................................................................................18
Khaadi’s Competitive Strategy ................................................................................................................................21
Khaadi Products In The Bcg Matrix ........................................................................................................................21
Categorizing Khaadi Products In The Product Life Cycle ......................................................................................23
Khaadi Strategies Categorized In The Ansoff Expansion Grid: ..............................................................................24
Company Strategies .....................................................................................................................................................26
Corporate Strategy: .................................................................................................................................................26
Business Strategy .....................................................................................................................................................27
Retail And Merchandising Strategy .........................................................................................................................30
Implications for the future ...........................................................................................................................................32
Khaadi’s future prospects ............................................................................................................................................33
References ...................................................................................................................................................................35
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ACKNOWLEDGMENTS
We would like to express our gratitude towards the management of Khaadi, who gave the
permission to interview our point of contact in their premises. A sincere thank you to Mr. Rameez
Siddiqui, Learning and Organizational Development Manager at Khaadi, who took time out of his
busy schedule and enlightened us with key insights about the company. We are highly indebted to
Mr. Nabil Rahman, Management Trainee at Khaadi, who rendered his services for this project and
was always available to help provide the necessary information. Furthermore, we would like to
acknowledge with much appreciation, the crucial role of Sir Asher Saleem, who provided
continuous support and direction regarding this project, and helped us identify key areas which
had to be perfected.
EXECUTIVE SUMMARY
The following report focuses on Khaadi’s thorough managerial and market analysis from
a comprehensive perspective via secondary and primary data combined. The report includes
Khaadi’s industry analysis, strategies and internal analyses to shed light on different competitive
strategies followed by Khaadi and the over-all industry situation. The report also highlights
Khaadi’s competition within the fashion and textile industry with primary focus on Sana Safinaz.
The report excludes any financial information due to the fact that Khaadi is a Private Ltd. company
and financial data is highly confidential due to its future prospects of an IPO.
The first part of the report includes the company introduction along with its mission, vision
and the history. It helps us in providing a basic layout and introduction of the company in the
Pakistani landscape, how it came into being and its rise to the topmost Pakistan’s fashion retailing
brand.
The second part of the report highlights the industry landscape of Pakistan where the
textile, fashion retail and apparel industries are analysed. Khaadi specifies itself in all three
according to the order mentioned, respectively. It includes the general industry sizes, competitions,
prospects, competition as well as a porter’s five forces analysis.
The third part of the report includes the company’s internal analysis to shed light on its
competitive build-up in the industry. This part primarily analyses company’s supply chain, value
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chain, SWOT analysis, SFAS analysis, BCG analysis and competitive strategy. This part also
categorizes products and strategies in the PLC and Ansoff expansion grid respectively.
The fourth part of our report highlights the company policies from a strategic point of view.
The focus of this part is on the business, corporate and retails strategy of the company. It highlights
as to how Khaadi maintains its long term vision and what steps it is taking to not only maintain
growth but maximize future market size.
The final part of our report includes the future implications and prospects in detail. In this
part, we have tried to relate the company strategy with industry situation and future implications.
INTRODUCTION TO KHAADI
Khaadi started off as a startup, with one small retail store in Zamzama, Karachi. The brand, which
was established by a fresh Indus Valley graduate, now has 43+ stores at major locations in Pakistan
and is the first Pakistani fashion retail brand to successfully step into the global ground, with stores
in the UK and UAE. The founder and CEO, Shamoon Sultan, set up this brand in 1998 to revive
the ancient craft of handloom and revamp it with a contemporary and fashion-focused approach to
cater to individuals looking for high-street fashion. This ideology is showcased in all of Khaadi’s
designs and products which include fashion for men, women, children, accessories, and home line.
This is why Khaadi is a sought-after brand, with world-wide distinction. Merging the old with
new, globally-inspired designs, Khaadi has successfully made its mark in the fashion industry
("About us - Khaadi PK", 2018)
MISSION STATEMENT
Khaadi is deeply committed to provide high quality products by using hand-woven fabrics,
each completed with absolute finesse, and aims to pass the craftsmanship abilities of today’s
weavers to their later generations.
VISION STATEMENT
To revive the ancient craft of the handloom, reinterpreting it within a more contemporary
and fashion focused context to suit the high street.
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KHAADI’S OBJECTIVES
Khaadi has point-focused and well-defined objectives which dictate their policies and the way
they work. Following are the objectives Khaadi has:
Fulfilling customer’s expectations with quality products, delivering order on time and
making sure consumer needs are catered as a priority.
Exercising responsibilities towards the environment they work in and towards the
community in general.
Experimenting with new ideas to maintain the image of an innovative brand.
Providing competent and efficient management with ethical implications and actions.
Working towards the formation of an efficient system in order to maintain reasonable and
affordable prices of products.
HISTORY OF KHAADI
The brand war in textile actively started from the late 90s or early 2000s, inducing
competition among the giant textile companies such as Al-Karam, Gul Ahmed, Nishat, and many
others, who were offering lawn, cotton, and linen clothes. First significant clothing brand was
Generation which was started in 1983 by Saad and Nosheen Rehman. They set the benchmark of
pret sizes in Pakistan using British standards.
But still the market of clothing brands was largely untapped and this served as an invitation
to brands to come and compete in the textile wars. Seizing this opportunity, in 1999, a clothing
brand, named Khaadi, with a single store, was opened in Zamzama by a graduate of Indus Valley,
Shamoon Sultan. The outlet offered unstitched fabric, men’s kurtas, and women’s kurtis. It is said
that the store got sold out in the first two days of its opening which clearly indicates the success
Khaadi became. Since its advent, Khaadi became a niche brand catering to selective marketing
and evolving into a brand that was the ambassador of innovation in the textile world. Khaadi was
capitalizing on its innovative and unique designs, and was growing by opening new stores.
Khaadi started with ready to wear clothing (Pret/Kurtis), unstitched fabric, and men’s
eastern wear. As time was passing and it was achieving success, it introduced Khaas (exclusive
edition clothing), Kids wear (from 2 to 12 years), Home (bedding and bathing items, and furniture),
and Accessory (stoles, jewelry, and hand bags) along the way.
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Product portfolio
Khaadi caters to a diverse audience ranging from young boys and girls in early teens to females
of ages up to 55 with different product categories; Khaadi has a vast product portfolio as listed
belo:.
Women clothing Bottoms
Unstitched Kids
Pret Accessories
Khaadi Khaas
Home
INDUSTRY ANALYSIS
Khaadi identifies itself primarily in the fashion retailing and textile industry sector. The
fashion retailing industry includes both store-based apparel industry as well as e-commerce.
Hence, the industry analysis below seeks to provide insights in both sectors.
In accordance to the textile industry in Pakistan, Pakistan is the fourth largest producer of
cotton and the industry provides employment to an estimated 40 percent of the industrial labor
force with a GDP contribution of over 8.5 percent (Ahmed and Siddiqui, 2016). The textile
industry has also been facing fluctuating growth rates due to high inflation rates, depreciation of
local currency as well as energy crises, according to the Rawalpindi Chamber of Commerce
(2012).
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Textile industry also accounts for approximately 60 percent of national exports of Pakistan,
however, majority of Pakistan’s textile exports are low-value added products as shown in the
below graphs:
The fashion and apparel retailing industry in Pakistan has a market size of $9.8 billion with
a compound growth rate of over 6 percent. The largest segment in Pakistan is the men’s wear with
women’s wear and kid’s wear lagging well behind, as shown in figure below. Pakistan also
accounts for 1.9 percent of total Asia Pacific’s apparel retailing (Pakistan – Apparel retail, 2018).
Due to its relatively small share in the Asia Pacific region and enormous potential, Pakistan is also
estimated to be the highest growing retail market in the world (Euromonitor, 2018). According to
the report by MarketLine, the clothing, footwear, accessories and online retailing account for
almost 79.5 percent of total apparel sales. Khaadi’s product offering come under this 79.5 percent.
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Some local sources also highlight the apparent trends and requisites for further growth in
Pakistan’s fashion industry. One analysis highlights the slow initial growth of the fashion industry
in Pakistan due to backward perception initially. This was changed around 2000s, when Pakistan’s
middle class grew, younger generation shifted perceptions and entrepreneurship culture focused
on this sector. This was the time when Khaadi also started its operations and experienced immense
success due to its innovative mindset and consumers’ shifting mindset. The article also highlights
the relatively low market size and penetration rates in Pakistan (as discussed above) a source of
concern as it will require considerate investments to fulfill the country’s fashion retailing potential
(Baig, 2017).
According to report from the Pakistan and Gulf economist, Pakistan’s apparel exports
constitute 19 percent of its total exports (Arifeen, 2017). This report is also backed by the
Pakistan’s Textile Journal (PTJ) which provides values to the apparel export of the country as
shown in the table below:
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The industry is experiencing rapid growth due to a number of factors, including a rise in
household income levels, and a rise in the number of women in the labor market from 16.2% in
2001 to 24.3% in 2013 (Pakistan Bureau of Statistics, 2013). There is also an availability of skilled
designers and skilled labor. However, the industry has a weak implementation of copyrights, and
is highly competitive with almost a hundred (100) designer brands competing with each other.
Aggressive marketing strategies are also seen as brands engage in “Lawn Wars” (Isani, 2016).
The apparel industry can be categorized into two main divisions: unstitched and stitched
(pret). More than two-thirds of the market is dominated by the unstitched category. Within these
categories, the sellers offer four main types of apparel namely loosely branded, replicas,
exclusively branded and designer (premium). The loosely branded cater to the working and lower
middle class and range well below PKR 5000. This category is available in various “bazaars”.
The replica market caters to the brand conscious consumers who are also price sensitive.
This group of consumers mainly belongs to the middle class. The exclusively branded category
targets the upper middle and upper class, whereas the premium category targets the upper and elite
classes.
The industry has also seen a growing trend of forward vertical integration and manufactures
are seen as rapidly shifting towards retail.
(Memon, 2017)
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4. Degree of rivalry
The degree of rivalry also has varying factors within it, in the apparel retail industry. There
exists a very low switching cost, lack of diversity in offerings (differentiation), high number of
similar-level players while low level of zero-sum game, easier to exit market and low fixed costs
also exist to moderate it (Pakistan – Apparel retail, 2018). However, in Pakistani markets varying
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levels of businesses have different levels of rivals among them for example, Sana Safinaz includes
Khaadi and Gul Ahmed as its main competitors while developing a strategy, while a small-scale
retailer would consider their own business level rivals as competitors. Footwear, accessories as
well as technology usage are also some of the factors which the retailers have focused on to
differentiate their offerings from rivals.
5. Threat of substitutes
The threat of substitutes in this industry is high. With other brands like Sana Safinaz, Gul
Ahmed, and Saphire, consumers have the choice to easily switch to another brand. As the target
market and the pricing strategies are roughly similar, consumers face no hardship in making this
change. In addition, a variety of high-end boutiques also provides an opportunity for the consumers
to not purchase Khaadi’s ready to wear collection instead opt for a cheaper unstitched cloth that
can be sewed at these boutiques. Having these potential substitutes makes it harder for Khaadi to
substantially alter its own pricing strategy (unless it is willing to risk losing some customers) or
how to sell the products. The strategies have to be in line with the actions or decisions made by
these substitutes as well.
COMPETITIVE ANALYSIS
According to Khaadi, it considers competition in the following order:
1. Gull Ahmed
Being a renowned name in the textile industry, Gul Ahmed also proves to be a strong
competitor to Khaadi. Having been in the market for decades with their three-piece suits on offer,
Gul Ahmed proudly boasts its “Original Lawn” image. Their main focus is on quality, brand value
and consumer satisfaction and loyalty. Gul Ahmed has a very strong supply chain network, which
works towards strengthening the brand image. Since the textile company is vertically integrated,
Gul Ahmed is involved in the value chain from producing yarn to the finished products (Recorder
Report, 2018). They also have a strong retail presence with over 40 “Ideas by Gul Ahmed” retail
stores nationwide. Financially, the firm did quite well with the net margin increasing by 250
margins for FY18 (Recorder Report, 2018).
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2. Sana Safinaz
One of the major competitors of Khaadi is Sana Safinaz, with their presence in more than
10 cities nationwide. Sana Safinaz expanded into the lawn category from their designer apparel,
thereby giving Khaadi a direct competition. Their ethnic clothing collection and timely delivery is
also a string forte. Sana Safinaz offers both unstitched and ready-to wear women apparel, in
addition to accessories and footwear. Their revenue is estimated to be $15 million annually (Owler,
2018).
3. Saphire
Saphire is mainly known for its specialization in cotton yarn, fabric and complete outfits
for women. The brand has also vertically integrated from Saphire Textile Mills, and has a
nationwide presence.
4. Nishat Linen
Nishat Linen has also vertically integrated from Nishat Textile Mill into the retail sector.
Nishat Linen offers a one-stop shop ambience, and attracts a variety of customers through their
diverse variety of clothing, accessories and other product offers. Due to their strong product
diversification, and strong product development, Nishat Linen gives Khaadi a strong competition.
5. Al-Karam Studios
Another brand that has vertically integrated from a textile mill to the retail sector, Al-
Karam has attracted consumers through its unique innovation and product specialization. Even
though the brand has been in the industry for some time, it does not prove to be a very strong
competitor to Khaadi.
Internal Analysis
SUPPLY CHAIN MANAGEMENT
Supply chain is one the most important function for Khaadi not only because of its volume
of distribution but also because of its outsourcing of manufacturing. It manages its vendors under
strict scrutiny through the manufacturing as well as during selection until the goods are delivered
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to the factory. All Khaadi products are packaged at the factory for further distribution to the
retailers.
According to Mr. Rameez Siddiqui, Learning and OD Manager at Khaadi, the outsourced
manufacturers are selected on the basis of exclusive production only while the designs are provided
by the organization’s own design department. Khaadi does not rely on a single vendor and
implements the policy of keeping at least two different vendors for one specific type of production
in order to mitigate risk. Some of the major Khaadi vendors are: Folk tales, IKL, Art of weaving,
Grace Apparel Pvt Ltd., Texmark and Adamjee Retail.
The outsourced manufacturers are required to supply the product to the company’s
warehouse. The warehouse is situated next to the Khaadi head office at SITE area. Product quality
check and packaging is done at the warehouse to ensure maximum efficiency. All tags namely
product tags, product codes and price tags (with and without tax) are placed here. The warehousing
is done through FIFO (First In First Out) method. The company also keeps a threshold of 20
percent of total product inventory at warehouse to cater online sales.
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Primary Activities:
1. Design:
One of the most crucial differentiating factors, avoiding the traditional booti (motif)
designs
Housed in Head Office with core departments of R&D and Marketing
Incorporation of marketing team’s ideas with ideas of Creative Head
Well-equipped design studio with graduates from arts universities hired for innovation
2. Operations:
Local and international sourcing of silk and cotton from Dubai, UAE, India
Purchase of high-grade materials to suit value proposition
A move towards fast-fashion – inventory management – merchandise planning –
outsourcing support functions
3. Outbound logistics:
When order comes in the warehouse, shipped to outlets
Order sent to small retailers in small cities
4. Marketing and Sales:
Focus on reducing prices and increasing volumes
360 degree marketing strategy used
From tapping bloggers to providing them samples, presence on radio, cable advertisement
in small cities, email messaging, text messaging etc
5. Service:
Customer comes first
Priority is to make customer satisfied
Customer loyalty cards given on the purchase of Rs. 10,000/- or more
Relaxed exchange policy – no-one else has it
Even without receipt exchange is possible
Customer experience with elevator, café in Bilawal House branch
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Supporting Activities:
1. Firm Infrastructure:
Centralized decision-making
Moving towards matrix structure for projects
Moving to a cross-functional structure
2. HRM:
Well-defined JDs. Everyone knows what is expected of them
Well-paid employees
Employee well-being of utmost importance
3. Technology:
Partnership with Systems Limited to modernize Khaadi’s existing business processes
RFIDs
4. Procurement:
Ensure merchandise is available in all stores at all times
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Weaknesses:
Rising perception as a feminine brand: A rising challenge for the company is its
perception as a specific gender-oriented brand (females) due to its successes in the female
lines. This limits the organization’s audience reach.
Weak clothing for men: this is related to the first shortcoming aspect. Khaadi’s male line
of clothing requires significant investment to cater the male proportion of the population.
It has to combat the perception that is formed in the minds of the consumers and address
demands of male members of the target market.
Opportunities:
New product line: According to Mr. Rameez, new product lines in new categories as well
as new markets is under discussion as Khaadi’s brand name involves a huge potential for
Khaadi.
Online sales: Khaadi’s highest sales is through its website (online), but still majority of
target market is hesitant in online purchase due to general perception of mistrust. The
remaining target audience can be a source for great success. Since e-commerce in Pakistan
is still in its infancy stage, Khaadi can avail this lull in the market and take advantage of
the initial pace, doing R&D alongside.
Men’s wear demand in Pakistan: there’s a handsome 24.2% demand in men’s wear and
that’s an inviting opportunity if Khaadi rebrands itself as a Brand for Male and Female
both rather than being perceived as a female specific Brand.
Steady Growth in Apparel industry: Statistics show that since 2013 till 2017 demand for
Apparel industry has constantly risen and highest rise being in 2017 that was 7.1%. This
Statistic is clear indication for the high amounts of Sales that Khaadi can achieve if it is
determined to seize this opportunity.
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Threats:
Increasing competition: Khaadi is facing increased competition day by day from local
and international player since Pakistan has emerged as a very lucrative market for retailing.
Brands such as Sapphire, Beechtree, Hina Khan etc.
External factors: External factors such as political, economic or environmental can affect
Khaadi’s growth rate significantly.
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Total 1 2.8
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CASH COWS
DOGS
Women unstitched
Men wear
Other accessories
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Kids section
The kids section for Khaadi lies in the question mark part of the BCG matrix. The market
share for the kids section is currently low but the company representatives consider it a section of
enormous potential in near future. Khaadi believes that this is a complimentary category for their
primary target market which are females and, therefore, their higher footfall can result in a higher
performing kids’ category for them too, if proper strategy is implemented.
Women accessories:
Women accessories also come under the question mark segment in the BCG matrix. It
includes scarfs, perfumes, jewelry and so forth. Since, Khaadi has always made its name in the
clothing sector specifically, it has yet to see thriving success in its accessories segment. Although
it is much better than the kids section in terms of sales, but company believes that it is far from its
potential and can reach similar figures as to other women clothings (unstitched, pret, khaas and
bottoms).
Home accessories:
The home accessories segment is included in the star part of the BCG matrix. This segment
of the company includes numerous offerings such as bed sheets, cushion covers etc. Although the
volumetric sales are significantly low compared to other successful items in other categories but
the company representatives believe its growth rates to be positive and on the right track. This is
also due to the fact that company policy considers it a secondary business opportunity compared
to other offerings.
Women pret:
According to Mr. Rameez, Khaadi’s pret wear is one of the primary factors of their success.
Its exponential growth rates have made Khaadi the leading clothing chain in Pakistan as well as a
contender for international market share. It is also placed in the star category of the BCG matrix.
It is the highest sold product of Khaadi nationally and internationally with both high market share
and high growth rates. The key factor behind this segment’s success is the advent of working
women class who prefers this specific style of clothing.
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Men wear:
Khaadi’s men wear is considered in the dog category of the BCG matrix. It has low market
share as well as a low growth rate. This shortfall is less due to the company’s focus and more due
to the brand’s personality skewness towards being too feminine. Due to its ground breaking
success in the female clothing sector, the brand is automatically being associated with females.
Furthermore, the presence of sole male clothing retailers such as J. and Amir Adnan only market
their male categories which is another reason for Khaadi’s low share and growth in the said
category.
Other accessories:
The other accessories for Khaadi mostly include secondary women clothing namely khaas
and bottoms. This category is also placed in the dog category in the BCG matrix but it is believed
to have potential for an easy growth rates and, hence, its placement here is short-lived.
Women unstitched:
The women unstitched clothing is another one of the biggest segment for Khaadi’s sales.
It is placed in the cash cow section in the BCG matrix. The reason behind it is that even though
Pakistan’s apparel industry is majorly unstitched clothing but it is on a decline due to emergence
of working women and their preference for pret wear.
Maturity
Khaadi Pret and Women unstitched are the two products that, in our opinion, are in the
maturity stage in the product life cycle. These products have had considerable success over the
past years and are guaranteed purchases from the customers. Khaadi has kept introducing new
designs and up to date trends to recondition itself according to the current market.
Decline
The ‘Khaadi Men Wear’ is in the decline stage of the Product life cycle. Khaadi is already
planning to stop its men collection due to low sales volume and lack of innovation in the section.
The market leader in this category, Junaid Jamshed, gets majority of the sales. Whereas, brands
such as Edenrobe and Almirah also have higher sales volume than Khaadi.
Product Strategies
Existing New
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According to Mr. Shamail Siddiqui and the secondary data available, Khaadi is striving
primarily for market development and market penetration strategies while a secondary focus is on
product development strategies. The diversification strategy is not being followed at the moment
by the company, according to official sources.
As per the market penetration strategy, Khaadi competes with its present competitors such
as Gul Ahmed and Sana Safinaz in different clothing retail target groups such as kids clothing,
women clothing (stitched and unstitched), men’s clothing and so forth. This market domain is the
initial market where Khaadi invested and now leads among its competitors and still strives to
increase its market share through branding, differentiation, design and retailing experiences.
According to the company, this strategy is only limited to the top 5 cities of Pakistan for Khaadi.
As per the market development strategy, Khaadi operates in diverse and middle tier cities
within Pakistan as well as in international markets. These two markets are not efficiently targeted
by Khaadi’s direct competitors especially Sana Safinaz. Even though competing companies are
also expanding in these areas (within Pakistan) but still lack in this domain as compared to Khaadi.
There are five cities within Pakistan where only Khaadi is operating out of its twelve cities which
are Gujrat, Mandi Bahauddin, Mirpur, Rahimyarkhan and Sahiwal. Additionally, out of local
clothing chains, only Khaadi is present on international arena on a large scale with presence in six
countries as compared to Gul Ahmed’s presence in only two countries.
As per the product development strategy, Khaadi strives to cater to the existing target group
through new offerings in terms of new stocks as well as introducing new products such as pret
wear etc. Khaadi’s extensive sales throughout the year also illustrates the company policy of
finishing all products to stock new designs.
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COMPANY STRATEGIES
CORPORATE STRATEGY :
According to numerous research articles, Khaadi follows a strict growth strategy. It has
focused its strategies on expanding its reach nationally and internationally with extensive numbers
of national and international outlets since its launch in 1998. (Khaadi, 2018)
In the early years of its Khaadi’s operations, Mr. Shamoom Sultan invested all the brand’s
revenues back into the business without taking any amount, with the view of increasing the brand’s
scale of operations. As a result of this, Khaadi had opened 5 stores in the first five years of
operations, which is phenomenal growth rate even for a brand of Khaadi’s stature.
Khaadi follows the strategy of horizontal integration. This means that it aims to open up
stores on more locations and thus tapping the market of newer customers every time a new store
opens up. This has ben done by not only opening up several stores in metropolitan cities of the
country but also cities such as Mandi Bahauddin, Mirpur (AJK) and Rahimyar khan. This enabled
Khaadi to attract customers from not only these cities but also from nearby cities which do not
have any high end apparel retailing outlet. Khaadi follows the strategy of quasi integration in its
value chain process. This earns that it does not own any of its suppliers outright, however it
purchases most of its key supplies from outside suppliers which are under its partial control.
Khaadi’s strategy is not only focused on capitalizing its premium brand image nationally
but it also seeks to take its advantage among foreign countries’ customers which emphasizes the
point that Khaadi is not only focused on local expansions but expansion on an much larger and
international scale.
Khaadi has been known to initially follow a stringent policy of deploying all returns back
into its operations initially, according to a study undertaken by IBA Karachi. (Shah, 2016)
From the above, we can conclude that Khaadi is focusing its resources on the corporate
strategy of growth to further the distance from its other competitors by focusing its efforts on
remaining the leading Pakistani fashion retailing icon locally and globally.
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BUSINESS STRATEGY
Khaadi’s business strategy was initially focused on cost leadership and differentiation,
according to company statements and researches (Andrew, 2017). Differentiation is aimed at the
broad mass market and involves the creation of a product or
service that is perceived throughout its industry as unique. (Wheelen & Hunger) The
resulting brand loyalty by following a differentiation strategy lowers the customers’ sensitivity
towards price. The increased costs are translated to the buyers. However, these costs are
compensated by the brand loyalty that is built. Customer loyalty also acts as a barrier to entry to
the market, as the new firms will have to develop their own features to differentiate their products.
Khaadi also uses the cost leadership strategy on some of its products. These products are
offered at lower prices as compared to similar products from other products. the low cost strategy
generates more sales volume and increases the market share of the brand. However, the
differentiation strategy generates greater profits as it offers unique products and also creates
barriers to entry.
It was also substantiated by Aurora’s study on the local pret wear consumers:
The above study was published in 2015 which signifies Khaadi leading the pret wear (and
the fashion retailing throughout), gvies best value for money and is only a fraction more expensive
than its competitors. (Andrew, 2017)
However, Khaadi has now focused its strategy on differentiation rather than its
combination with cost leadership. Due to its consistent lead in the fashion retailing sector,
innovative designs and premium retailing experience, the company has now moved towards
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singular focus on differentiation strategy with slightly higher prices. Khaadi is penetrating in a
highly competitive market with clothing labels being introduced almost every single day. This is
one reason why Khaadi goes the extra mile to please its customers to stand out among the crowd.
What makes this intense competition irrelevant for Khaadi is its remarkably implemented Blue
Ocean Strategy – more than its clothes, it’s the experience at Khaadi that differentiates it from the
rest. When ever an individual visits any Khaadi outlet, they have a “wholesome” experience –
from apparel to home décor to kids wear to accessories, Khaadi makes sure that whether or not a
person buys anything, they tend to have a ‘good time’ and this adds to the brand value on the
whole.
To identify where to compete in the market, Khaadi primarily used offensive strategies it
initially used bypass Attack, to reach the customers. In this kind of strategy, the entrant does not
directly attack the established players, rather it attempts to cut the customer base from the
defending brands by offering different products than the existing brands. Khaadi did this by
initially offering hand loomed fabric, which at that time was not offered by any other brand.As
Khaadi began to grow, it moved from hand loomed fabric to pret and unstitched clothes, and thus
used the encirclement strategy to attack the competing brands. In encirclement strategy, one brand
attacks other brands on the basis of product or market or both. (Wheelen & Hunger)
Khaadi transitioning policy is not something new as the company also moved from
complete in-house production to outsourcing all forms of productions while only keeping the in-
house designing department which is discussed in detail in other parts of the report.
Sana Safinaz, on the other hand, has always followed differentiation strategy. They offer
their products at relatively high prices but offer a little different products as compared to the
competitors. Over the years, Sana Safinaz has positioned itself as a premium brand and targets the
upper class and upper middle class customers. Sana Safinaz’s philosophy has always been to be in
line with the latest international trends and incorporate them with local clothing preferences. Sana
Safinaz has also diversified by having separate furniture and home interiors division under the
same umbrella name
Furthermore, Khaadi’s business strategy also includes its segmentation strategy which can
be classified into the following, according to our primary research:
The demographic segmentation is usually based on age, gender, occupation and income.
The primary target market determined by Khaadi are females, aged 18 – 45. The occupation ranges
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from students, house wives and working women depending on the product offering and marketing
adverts. The SEC classes targeted are SEC B and above.
The geographic segmentation is focused on urban areas only in Pakistan and major cities
in the world. This is indicated by its stores in a number of cities in Pakistan as well as international
stores. KLI region (Karachi, Lahore and Islamabad) in Pakistan are focused primarily due to the
high public expenditure in retailing as well as high demand for branded clothing. Similarly, Khaadi
focuses on UAE, UK and Qatar in international segmentations due to high demand of ready-to-
wear clothing from Pakistani in the region.
Khaadi’s psychographic segmentation is based on segmenting based on lifestyles, social
classes, values and attitudes. The specific lifestyle targeted by Khaadi is the one in which
consumers seek high-end retail experience as the primary focus for expenditures. It divides social
classes on the basis of urban population, while the values and attitudes Khaadi pursues is based on
people who seek unique branded experience which Khaadi can provide through numerous unique
touchpoints.
Khaadi also cross-segments its customers on the basis of their clothing needs according to
consumers seeking:
Unstitched clothing Kids clothing
Eastern clothing Home accessories
Western clothing Different complimentary accessories
Similarly, when we talk about the apparel giant’s targeting strategy, we find traces of
differentiated marketing being applied. The consumer base of Khaadi is widespread with people
belonging to a vast array of geographical, economic, and social backgrounds. To cater to the needs
of these diverse customers, it is imperative to employ strategies that focus on recognizing and
fulfilling their distinct aspirations and requirements. The diverse product portfolio aims to capture
different segments of the market, but the uniformity of the brand’s image and persona prevails
across the myriads of products offered. With such carefully devised plans, the company’s
unwavering focus translates into financially lucrative results. Even the international strategy aims
to inculcate the elements of local values and norms of Pakistan to attract the foreigners. The market
segmentation at Khaadi is based on demographic factors like age. Different types of core offerings
at Khaadi encompass different target markets like:
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Unstitched Cloth: The target market demographics for this product fall between the age
slab of 30 to 55 who prefer their clothes to be stitched by local tailors who provide bespoke
solutions. Geographically, these customers are concentrated in smaller cities and towns where the
local traditions and norms play an important role in the design of the suit.
Pret Wear: This product is specifically targeted for students, business professionals, and
housewives who fall between the age bracket of 18 to 30. This offering by Khaadi is a solution for
women who face tough schedules and need quick solutions to their wardrobe problems.
Kid’s Wear: The target market is the parent’s category who make the buying decision for
their children. The demographic targeting is not bounded by the age limit in this product category.
This is a prime example of “Decision Making Unit”, where the consumer and customer are two
different entities in the supply chain.
Home: The target market for the product category is vast, including women from the age
group of 27-30 to 45-50. Khaadi’s value proposition is the assurance of premium quality for which
customers are willing to pay the additional money. These products are specifically targeted to
augment the aesthetics of a home environment.
Men’s Wear: The targeting is not limited by the age demarcations. All age groups are
potential consumers. Khaadi ensures that it keeps on adding new styles and trends to its men
apparel so that the customers’ needs can be satisfied.
idea is to design themes that fit the traits of the customers of a product from the portfolio. The
Khaadi-Kids is designed with the inclusion of elements like shapes and vibrant colors to grasp the
attention of the consumer.
The focus on such intricacies is the result of a long-term vision and that leadership trait is
provided by the CEO of Khaadi, Shamoon Sultan. By closely following the business models of
Zara for fashion trends and IKEA for retail outlet designs, Shamoon Sultan ensures that he leaves
no stone unturned in retaining his customers in the domestic and international market. Khaadi is
not just about the products it sells, but the idea is to provide customers a shopping experience
which compels them to come and shop again.
The retail strategy is one of the core competencies of Khaadi which provides them with the
first mover’s advantage in the apparel industry of Pakistan particularly concerning its progress in
the tertiary sector. Following the business models of Zara and IKEA, Khaadi allocates a substantial
part of its resources in designing aesthetically pleasing and large retail outlets that gives them an
arena to interact with customers which small retailers simply can not afford to provide. Khaadi
aims to establish outlets with an approximate area of 25000 square feet which might have looked
like an ambitious target considering that the first store at Zamzama covered an area of 400 square
feet. To elucidate the gravity of situation, Khaadi’s network of retail outlets features the smallest
store with an occupied area of 2000 square feet while Dolmen Mall and Lucky One Mall feature
enormous outlets. By opening stores at such lavish locations with extensive covered area, the
competitors are automatically driven out due to their inability to bolster similar plans as Khaadi’s
with finances.
Khaadi aims to penetrate the uncharted territories of rural Pakistan as well where local
brands are reluctant to enter. This will once again provide Khaadi with the benefits of first mover’s
advantage of cost reduction, forming customers shopping habits, and developing a
learning/experience curve early.
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In September 2015, Shamoon hoped to open large format stores in the newer malls to ‘take the
retail experience to a new level’. To stay ahead of everybody like they always do, Khaadi plans to
keep its source of innovation close to it and change the concept of ready to wear retail. It has tried
to achieve this by opening large stores locally as well as internationally.
Khaadi’s focus in the future is also on quality. Knowing how customers look for best value
for money, Khaadi’s aims continue working on the retail experience, design, and pricing strategy.
In a competitive market where new brands come in every year, the organization realizes how
important a role quality plays and can help distinguish brands from one another. This is why
Shamoon stated that the brand can not risk compromising on quality as this is what will push them
farther away from others. Since 2015, Khaadi has worked on quality control by establishing lab to
create an in-house quality assurance system.
Talking about increasing prices in the future, Shamoon said the prices could increase a
little bit but for now, it’s better not to. Although the company is the best priced in the market, he
recognizes the dynamics of the country and knows fashions has to be affordable in country like
Pakistan. Khaadi wants to become a national brand, not an elitist brand. For that to work, it has to
appeal to the masses. Benchmarking Zara’s practices, Khaadi aims to make clothes for everyone
and make it possible for everybody to consider buying Khaadi products.
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Generating
Building upon revenue streams
competitive through
advantage different product
lines
Establishing Becoming a
more large-scale global Pakistani
retail outlets brand
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