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Armour Garments Company

RIZAL TECHNOLOGICAL UNIVERSITY BONI AVENUE, MANDALUYONG CITY COLLEGE OF ENGINEERING AND INDUSTRIAL TECHNOLOGY INDUSTRIAL ENGINEERING DEPARTMENT APPROVAL SHEET In partial fulfillment of the requirement for the subject Engineering Management, the case study entitled “Armour Garments Company” has been prepared and submitted by Mena, Mary Cris C. and Menor Wealth R. Recommended for approval and acceptance in partial fulfillment for the degree of Bachelor of Science and Industrial Engineering. Nestor MirhanJapis Professor RIZAL TECHNOLOGICAL UNIVERSITY BONI AVENUE, MANDALUYONG CITY COLLEGE OF ENGINEERING AND INDUSTRIAL TECHNOLOGY

INDUTRIAL ENGINEERING / INDUSTRIAL TECHNOLOGY DEPARTMENT In partial fulfillment for the requirements of the subject Engineering Management (ES223) A case study about ‘Armour Garments Company’ Presented to the Industrial Engineering Department Engr. Nestor MirhanJapis Submitted by : Mena, Mary Cris C. Menor, Wealth R. Executive Summary This case study is all about the Armour Garments Company and all the problem it encounters. The first chapter is all about the company profile, its history, the plans and programs, the targets and standards, the present problems and the different definition of terms.

The second chapter comprises the Review of related literature about Foreign and Local literatures and studies. Chapter three encompasses the methodology of our case study. It includes the different methods used in analyzing the case. Chapter four contains the presentation and analysis of data, Time Context, Point of View, The statement of the problem, our objectives, the areas of consideration together with the SWOT analysis, Altenative Course of Action and the Decision Matrix. Chapter five includes the recommendation, our own mission, and vision and action plan about the case.

Chapter six is about the curriculum vitae together with the bibliography and our own profiles. TABLE OF CONTENTS Acknowledgement ………………………………………………………………………. iii CHAPTER 1: Problem and its Background ………………………………… ………1 Introduction ……………………………………………………………….. …. …………. 1 Background of the study ……………………………………………….. ………………. 2 Definition of Terms ………………………………………….. …………………………. 5 CHAPTER II: Review of Related Literature …….. …………………………………. 6 Foreign Studies ………………………………………………………………………….. 6 Foreign Literature ………………………………………………………………………. 9 Local Literature ……………………………………………………………………….. 21 Local Study …………………………………………………………………………….. …. 24 CHAPTER III:Methodology ……………………………………………………………25 Chapter IV:Presentation and Analysis of Data ……………………………………27 Time Context………………………………………………………………………………27. Point of View ………………………………………………………………………………27 Statement of the Problem ……………………………………………………………….. 28 Objectives …………………………………………………………………………………. 28 Areas of Consideration …………………………………………………………………… 29 Alternative Courses of Action ……………………………………………………………. 30 Decision Matrix …………………………………………………………………………….. 32

CHAPTER V: RECOMMENDATION …………………………………………………. 33 Mission ……………………………………………………………………………………33 Vision …………………………………………………………………………………….. 33 Action Plan ………………………………………………………………………………. 34 CHAPTER VI : CURRICULUM VITAE …………………………………………………36 Bibliography ………………………………………………………………………………36 Profiles …………………………………………………………………………………….. 37 CHAPTER III METHODOLOGY This chapterdescribes the procedures use in order to come up with a decision needed to solve the case. The analysis was being donethrough the use of methods such as SWOT analysis alter native courses of Action (ACA).

Decision Matrix and Five Point Lilkert scale. SWOT Analysis SWOT stands for strength, Weakness, Opportunity and threat. The use of this method is to classify the internal and external environmental factor that gives more detailed information about the study being analyzed. Alternative Courses of Action (ACA) This method is used to help initialize different actions that would fit for the resolution of the problem. ACA is one way to determine which among options is better to recommend for the company’s problem. Decision Matrix This method is use to rank the different sets of ACA.

It consists of set weighted criteria up on which the potential actions can be scored and sums to gain the total score and average. Based on this it could determine which among the options is the best and suitable for the case situation Five Point Likert Scale This is used to have the appropriate basis of criteria. This Five point Likert scale is a type of psychometric response scale often used in questionnaires and is most widely used scale in every research. The five ratings for the criteria are as follows 5 – MOST FAVORABLE 4 – MORE FAVORABLE 3 – FAVORABLE 2 – LESS FAVORABLE 1 – UNFAVORABLE CHAPTER IV PRESENTATION AND ANALYSIS OF DATA

This chapter presents the information gathered from the previously discussed methodologies for the purpose of analysis. In this chapter you will see the Time Context, Point of View, the statement of the problem focused in our case study, objectives, areas of consideration, Alternative Courses of Action, Decision matrix and the Cost Benefit Analysis. TIME CONTEXT August 22, 2011 – September 5, 2011 The time context of this case study started when we started to brainstorm about the case of the Armour Garments Company. From that time up to September 5, 2011 we are accomplishing our case study that will be presented to our professor.

POINT OF VIEW The point of view of this study is all about the decision making and the decision making process on this case must come from the top management since the main issue is more on operational aspect. STATEMENT OF THE PROBLEM As AGC has been the business for 21 years being the pioneer of high quality undershirts, In 1972, the company is starting to feel the pinch of profit deterioration due to stiff competition arising from competitors showing a product of high quality undershirts with lower prices and longer credit terms in the market place.

As a solution for this threat the Armour Garments Company introduced “Blossom” – a new brand of with the same product quality but of lower price to match the competitors product to the middlemen in Divisoria. This product is introduced to save the other two brands of the company namely “Amromur” and “MarcaTroca” from the price war happening in the market. Yet, the product blossom withdrawn from the market in several years because it was selling more than the other brands and that kind os situation is unacceptable.

As AGC’s financial condition continuous to worsen, the way to save the decreasing profitability of the company is to invest more capital to modernize the factory and turn out more and better quality product lines than competitors could produce. Would it be proper to the owners of AGC instill additional funds to the company? What strategies should have to reinstate their losing profitability? OBJECTIVES The objective of our study is to give a vivid explanation and solution of the problems that the company faces.

Moreover, we also give explanations why our solutions are more effective enough to lessen and manage things that cause problem to the company. AREAS OF CONSIDERATION Case Facts (SWOT) – Internal/External Factors TABLE 1 INTERNAL / EXTERNAL Strengths •Pioneer in the underground business. •Top selling brands before the business took a downturn (Armour&MarcaTroca) •Competitive Blossom brand. •It has 250 workers. Weakness •Complacency of managers in the operation of the business. •Poor marketing strategy. •Product lines is limited to men only. •Product sales seasonally.

Opportunities •The Garment Industry has a huge market potential (product is being used among all ages). •Changing preference of consumers (room for new products to develop). •Technological advancement (faster/easier to use sewing machineries to create new designs). •Several distribution channels other than Divisoria. Threats •Increasing number of competitors in the market offering lower prices. •Strong bargaining position of middlemen (lower cost and longer credit terms). •Economic issues (increase in prices of raw materials being imported). •Government policies (tarrifs).

SO STRATEGIES (Strength Opportunity) •Strengthen product development in the undergarment segment. •Look for other distribution channel. •Invest more on promoting blossom brand in the domestic market. •Export Armour and MarcaTroca. SW STRATEGIES (Strength Weakness) •Provide attractive payment scheme for Divisoria wholesalers granted that the profitability of the company is not sacrificed. WO Strategies (Weakness Opportunities) •Develop undergarments that would cater the women’s need as well. •Invest and purchase new machines to modernize the factory (room for product innovation).

WT Strategies (Weakness Threats) •Introduce other designs for shirts. ALTERNATIVE COURSES OF ACTION (ACA) ACA 1 ?Invest more and stick to the “Blossom” Brand alone. Since the company is currently in financial difficulty, they can no longer afford to risk more money for the business. They should figure out a way on how they can regain their market share and workout using their current assets. Besides, the AGC has sold more of the Blossom brand than the other two brands (MarcaTroca&Armour) and it is competitive enough because of the cheaper price. ACA 2 Incorporate additional investments to modernize machineries and facilities to produce other garments that may help the company increase its profit. This will allow them to produce new product lines since under garments shirts are no longer fashionable. Furthermore, the world we live in right now is modernized, so shall the company and its factory. ACA 3 ?Invest more to the ‘Blossom’ brand and lessen the production of ‘Armour’ and ‘MarcaTroca’. Minimize the production of the two products due to market unacceptability. TABLE 2 ACA DISADVANTAGES ADVANTAGES 1 A probability that it would also turned out the same as what happened to the other two products. ?This limits and inhibits the company to produce more product lines which can give greater opportunities and profitability. ?This will help the company increase their working capital. ?This could also help them boost their profitability, considering the losses gained from their traditional product lines. 2 ?Purchasing new machines is very costly. ?Risky and the market response could not be favorable since they have produce products earlier which failed in its marketability. This allows them to produce more and new quality products which ae more acceptable in the market. ?It can increase their capital & profitability. 3 ?The company might not be able to capture back its buyers from the “Blossom” brand due to its withdrawal from the market. ?This could help boost their profitability. ?A chance of still capturing a potential market in their traditional product lines since they were the pioneers and it’s a quality product. DECISION MATRIX TABLE 3 ACA 1 ACA 2 ACA 3 Profitability 4 3 5 Cost Effectiveness 4 2 3 Company Image 2 5 4

Competition 4 4 5 TOTAL 14 14 17 AVERAGE 3. 5 3. 5 4. 25 RATINGS: 5 – Most Favorable 4 – More Favorable 3 – Favorable 2 – Less Favorable 1 – Unfavorable EXPLANATION: •PROFITABILITY ACA 1 was rated as more favorable (4) since the brand “Blossom” alone sold more than the traditional brands and in ACA 3 was rated as most favorable (5) seeing as the “Blossom” brand is more favorable in the market and also with the traditional brands (MarcaTroca&Armour) they could maintain the image of the company being the pioneer of good quality products. •COST EFFECTIVENESS

ACA 1 was rated as more favorable (4) because it costs the lowest among ACA 2 and ACA 3 because it has only one brand. ACA 3 was rated as favorable (3) because it costs lower than ACA 2 since ACA 2 costs higher and because of the worsen financial condition of the company it will take time to implement it. •COMPANY IMAGE ACA 1 was rated as less favorable (2) because the company invests only one product in one brand and has a cheap price while ACA 2 was rated as most favorable (5) because the company will be modernized and will have new different product lines.

ACA 3 was rated as more favorable (4) because the traditional products that were better known with good quality were maintained and with the additional of the product “Blossom” that was favorable to the market. •COMPETITION ACA 1 was rated as most favorable (4) since it compete to the cheaper products because of the cheaper price while ACA 2 was rated as more favorable (4) because of new products made with that are fashionable.

ACA 3 was rated as most favorable (5) since more blossom brand are going to invest and it is competitive enough to the market and with the additional of their traditional products that was known with good quality products. CHAPTER V RECOMMENDATION We recommend that the company should take into consideration its current financial condition; its working capital and profitability. Taking our Alternative Courses of Action to invest more on the “Blossom” brand and lessen the production of “MarcaTroca” and “Armour” (ACA 3) is what we think the best solution for financial problem and status of the Armour Garments Company.

This ACA also supports our objective about increasing the working capital and also its profitability. Since the company is experiencing a financial difficulty, they need to consider the reduction on its manpower specifically the contractual personnel considering about their sales that is currently low poor income flow. At the same time, they need to produce and reintroduce “Blossom” to regain the support of the wholesalers no only in Divisoria but also in other parts of the Philippines and suffice the requirements of the middle class consumers. Introduce the traditional roducts, “MarcaTroca” and “Armour”, in malls and other shopping centers for the well – off members of the society as they can afford the said products. MISSION ?To increase the profitability of the company and regain the money that has been lost. ?To satisfy the consumers by the good quality products. VISION ?To be the highest volume company delivering and producing the best quality of undershirts which meet and exceeds the customer’s wants and needs. ACTION PLAN TABLE 4 ACTIVITIESPEOPLE/DEPARTMENT RESPONSIBLETIME FRAME Meeting with the Top Management Top Management 4 hrs. Present the brands of products including the “Blossom Brand”

Creative Department 4 hrs. Financial Reports Accounting Department 4 hrs. Approval of the products Managers 1 day Producing of approved products Laborers 3 days Distribution of produced garments to the middlemen Distribution Department 2 days Presenting of Financial reports and profits Accounting Department 4 hrs. ‘DEFINITION OF TERMS ?Garments An article of clothing. ?Liquidate To sell all of a company’s assets, pay outstanding debts, and distribute the remainder to shareholders and then go out of business. ?Venture A business enterprise involving some risk in expectation of gain. ?Diversify

To extend business activities into disparate fields. To distribute investments among different companies or securities in order to limit losses in the event of a fall in a particular market or industry. ?Profitability The state or condition yielding a financial profit or gain. It is often measured by price to earnings ratio. The efficiency of a company or industry at generating earnings. ACKNOWLEDGEMENT We would like to express our heartfelt gratitude to the authors of the resources and reference about the background of the company and its current crisis; we have used it referring to our case analysis about the company.

They are fully being recognized and acknowledged. This case study consist of explanations and resolutions concerning to the contemporary situation of the “Armour Garments Company”. LIST OF TABLES/FIGURES LIST OF FIGURES FIGURE 1………………………………………………………………………………………25 LIST OF TABLES TABLE 1 (SWOT Analysis) …………………………………………………………………29 TABLE 2 (ACA’s Advantages/ Disadvantages) ……………………………………………32 TABLE 3 (Decision Matrix) ……………………….. ……………………………. …………… 33 TABLE 4 (Action Plan) ……………………………………………………………………….. 34