Tropical Leisure Limited Tropical Leisure Limited has been making high quality Caribbean leisure wears for over twenty-five years, in old rented premises located in the heart of the Barbadian capital of Bridgetown. The company has a flexible labour force of about twenty employees and three directors, only one of whom, namely Mr. Grant, the managing director, is fully active in the business. The company specializes in leisure and swim wear garments. Their current range consists of tee shirts, shorts, skirts and bath suits in rich vibrant Caribbean colours and styles for men, women and children. The company capacity is 400-500 garments per week, depending on style and continuity of the production run, but additional floor space and machines could be brought in quickly to raise production levels to a maximum of 1000 garments weekly if required. Trade sources estimated that the Barbadian market was valued at US$ 1.5 billion in 2010 but since then inflation and recession has deflated the market, resulting in many smaller businesses having to cease operations. Census of production figures indicated some 15 leisure wear manufacturers, six of which accounted for 25 per cent of total industry output. Independent retail stores account for 25 per cent of tee shirts and 30 per cent of sales for shorts, shirts and swim wears; stores catering to tourists account for 15 per cent and 25 per cent while and department stores 15 handled another 15 per cent and 20 per cent respectively. Tropical Leisure’s sales were traditionally distributed through an assortment of clothing store agents, who tended to change frequently throughout the years. However, in the period 2006 to 2012 Tropical Leisure’s production was increasingly taken up by Modal Fashions, a successful regional clothing boutique chain store with outlets located throughout the Caribbean. In the 2011- 2012 financial year, Modal Fashions accounted for over 80 per cent of gross sales of Tropical Leisure. By, then, Tropical Leisure had terminated most of their other distributor agreements leaving only the one it had with Modal Fashions. In 2012, owing to market depression, Modal Fashions drastically reduced their contract quantity to 25 per cent of the previous year and Tropical Leisure was forced into two-days-a-week production. Although quantities have gradually increased since late 2012, negotiations with Modal Fashions have become more and more difficult, such that the agreed price gives Tropical Leisure a net profit per garment as low as 10% on some styles. Mr. Grant believes level of profit is too low to sustain the company and suspects that Modal Fashions is using Tropical Leisure only as a back-up supplier to complement the much cheaper garments it imports directly from China. It is currently rumoured in the market that customers are turning away from Chinese made garments due to their unattractive styles and tendency to quickly fade in colour after the first or second wash An attempt was made in 2012 by Tropical Leisure to export through a large international department chain store that has locations in Canada and America. However, the deal did not last long as the chain opted instead to import cheaper made garments from Asia. Although Modal Fashions ordered Tropical Leisure garments for sale through their outlets located in Trinidad, Jamaica and Guyana in 2012, the quantities were embarrassing low and the orderssuddenly dried up without any explanation, although no complaints had been received by Mr. Grant. Since 2012 Tropical Leisure had traded around breakeven levels and is working within a bank overdraft of US$50,000 along with reduced credit levels from suppliers. Tropical Leisure’s bankers have recently asked for a meeting with Mr. Grant to discuss both the overdraft and the future prospects of the company. The lease on Tropical Leisure’s premises is due for renewal at the end of this year. Mr. Grant, in some desperation, has called in the services of a marketing consultancy for advice. 4. For each of the strategies that you have outlined suggest how Mr. Grant might proceed to evaluate these strategies.
Tropical Leisure Limited
Tropical Leisure Limited has been making high quality Caribbean leisure wears for over twenty-five
years, in old rented premises located in the heart of the Barbadian capital of Bridgetown. The
company has a flexible labour force of about twenty employees and three directors, only one of
whom, namely Mr. Grant, the managing director, is fully active in the business.
The company specializes in leisure and swim wear garments. Their current range consists of tee
shirts, shorts, skirts and bath suits in rich vibrant Caribbean colours and styles for men, women and
children. The company capacity is 400-500 garments per week, depending on style and continuity
of the production run, but additional floor space and machines could be brought in quickly to raise
production levels to a maximum of 1000 garments weekly if required.
Trade sources estimated that the Barbadian market was valued at US$ 1.5 billion in 2010 but since
then inflation and recession has deflated the market, resulting in many smaller businesses having
to cease operations. Census of production figures indicated some 15 leisure wear manufacturers,
six of which accounted for 25 per cent of total industry output.
Independent retail stores account for 25 per cent of tee shirts and 30 per cent of sales for shorts,
shirts and swim wears; stores catering to tourists account for 15 per cent and 25 per cent while and
department stores 15 handled another 15 per cent and 20 per cent respectively.
Tropical Leisure’s sales were traditionally distributed through an assortment of clothing store
agents, who tended to change frequently throughout the years. However, in the period 2006 to
2012 Tropical Leisure’s production was increasingly taken up by Modal Fashions, a successful
regional clothing boutique chain store with outlets located throughout the Caribbean. In the 2011-
2012 financial year, Modal Fashions accounted for over 80 per cent of gross sales of Tropical Leisure.
By, then, Tropical Leisure had terminated most of their other distributor agreements leaving only
the one it had with Modal Fashions.
In 2012, owing to market depression, Modal Fashions drastically reduced their contract quantity to
25 per cent of the previous year and Tropical Leisure was forced into two-days-a-week production.
Although quantities have gradually increased since late 2012, negotiations with Modal Fashions
have become more and more difficult, such that the agreed price gives Tropical Leisure a net profit
per garment as low as 10% on some styles. Mr. Grant believes level of profit is too low to sustain
the company and suspects that Modal Fashions is using Tropical Leisure only as a back-up supplier
to complement the much cheaper garments it imports directly from China. It is currently rumoured
in the market that customers are turning away from Chinese made garments due to their
unattractive styles and tendency to quickly fade in colour after the first or second wash
An attempt was made in 2012 by Tropical Leisure to export through a large international
department chain store that has locations in Canada and America. However, the deal did not last
long as the chain opted instead to import cheaper made garments from Asia.
Although Modal Fashions ordered Tropical Leisure garments for sale through their outlets located
in Trinidad, Jamaica and Guyana in 2012, the quantities were embarrassing low and the orderssuddenly dried up without any explanation, although no complaints had been received by Mr.
Grant.
Since 2012 Tropical Leisure had traded around breakeven levels and is working within a bank
overdraft of US$50,000 along with reduced credit levels from suppliers. Tropical Leisure’s bankers
have recently asked for a meeting with Mr. Grant to discuss both the overdraft and the future
prospects of the company. The lease on Tropical Leisure’s premises is due for renewal at the end of
this year. Mr. Grant, in some desperation, has called in the services of a marketing consultancy for
advice.
4. For each of the strategies that you have outlined suggest how Mr. Grant might
proceed to evaluate these strategies.
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