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INTRODUCTION
„Tayagam‟ is a „trust‟ that was started in 2003. During the initial days of operation, Tayagam was
meant to be a „charity‟ based organization. Nevertheless, the passage of time and the increasing
awareness of business world concepts among the trustees of Tayagam have given a change in the„plan of future course‟ for the organization. In the year 2007, Tayagam is zealously embarking on
a business model called Centre of Excellence Model (CEM). Tayagam believes that CEM when
implemented in the apparel manufacturing sector can provide a compelling value proposition to
the consumer (apparel consumer) and the beneficiaries (rural women, who will be the
employees in the apparel manufacturing units).
CEM aims and hopes to seamlessly integrate the
1. business motive of „ profit based apparel manufacturing‟ and
2. social motive of provision of employment to the lower most economic strata (in rural areas)
without requirement of dislocation
3. social motive of „ providing opportunities for school children to expand their learning and
discover their talents and thus complementing school education‟
MOTIVATION & OPPORTUNITY
MARKET OPPORTUNITY:
The IMAGES-KSA Technopak Indian Apparel Report 2006 estimates the market size of the
men‟s shirt market at Rs 12010 crore.1
In fact, the shirts category commands 14% of the market
share of the total apparel market in India. In addition to being the largest selling segment in India,
this segment has the potential to grow extremely fast. This is one of the reasons for us to pick this
segment to compete in. Also, the variety in terms of size and designs are not as much as one would
expect from other apparel such as sarees, etc. This lends itself to be produced in a business model
such as ours. As of 2002, 88 million branded and unbranded shirts were sold in India. This has
been growing at the rate of 100%. The ensuing GDP growth has been much higher than in 2002
and hence the demand growth now is also expected to be really good.
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Apparel Manufacturing in India2
Indian textile sector has a dualistic manufacturing structure, each of which has its own merits and
demerits. The 2 models of operation of the apparel manufacturing segment are as follows
1. Model 1 – „Apparel retail store „X‟ – middleman - fabricators‟: This is very dominant
model where the entity „X‟ feels the pulse of the market and understands the fashion of the
season (in terms of clothing material, design, colour etc). „X‟ then decides a manufacturing
scheme and out-sources the fabricating work to highly decentralized small scale
fabricating units (say, in rural areas), through middlemen. This is a phenomenon of the
recent years with „X‟ ranging from textile showrooms in India (like RMKV, Pothys of
Chennai) to international retail chains (like Walmart). Example of this model are the
manufacturing units in Pudhiyamputhur in Tuticorin (Tamil Nadu)
2. Model 2 – „Vertically integrated, large scale composite mill and apparel
manufacturing segment‟: This model is fast declining in the Indian context. Typically in
this model, there will be a centralized factory location where fabrication of apparels takes
place. The centralized factories are generally located in city centers and therefore this
model mandates many of the employees to be from the city
In model 1, because of the following reasons the rural apparel manufacturers don‟t capture
enough value –
1. The retailer „X‟ is the one which knows about the market and therefore can decide better
about kind, texture, design of material etc. This makes „X‟ to capture more value in the
value chain.
2. The middlemen capture a significant portion of the remaining value because the apparel
manufacturers are insulated from „X‟ and therefore are at a disadvantageous position when
it comes to bargaining for a better price
Model 2, because of the following reasons, is not of significant value to rural people –
1. The employees are to an extent compelled to stay in urban or semi urban areas, where cost
of living is relatively high
2 “Indian Textile and Clothing Industry Report”, ICRA, October 2005
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2. When moving to the urban / semi-urban areas, the whole family setup is disrupted either in
terms of earning potential (getting USD 1 while being in a township may be probably
better than getting USD 2 while being in a city, when it comes to earning potential) or in
terms of staying together (just to join workforce, spouses split up at least for a short period
which will disrupt family life).
There is significant benefit in consolidation of the highly fragmented apparel fabrication activities
(model 1) and operating on a model which is very similar to „cooperatives‟ in terms of operations
alone. This hybrid model (hybrid of models 1 and 2) will eliminate the impairments of individual
models and thereby helping CEM achieve „best of both the worlds‟ benefits and also helps to pass
on significant benefits to the employees (rural people).
School Education in India (Specifically in Tamil Nadu)3
In terms of education, school education has been identified as the most important part of the entire
academic life for a student in any country (Refer to Exhibit 1 to see the return to education).
Understanding this, the Government of Tamil Nadu has set up massive infrastructure for primary,
secondary and higher secondary schools around the state. However, the significant problem that
haunts the educational department (and the society, of course) is the fact that the government
schools are not performing up to the standards to which they are expected to perform. In fact, some
of the private schools which have been set up in rural areas (some time closer to rural areas), are
out beating the government schools in terms of performance (Refer to Exhibit 2 to understand the
comparison between private and government schools in rural areas). This is happening in spite of
the poor infrastructure (on an average) and less educated (in terms of academic degree) teachers of
the private schools. It has always been felt that the education imparted through government
schools are more of a nominal quality. Co-curricular and extra-curricular knowledge imparted is
almost negligible. In view of the long run benefits of quality class room education has to be
complemented bygood quality library facilities
(which the students can use often to get
accustomed to the process of learning on their own), sports facilities (which will enable the
children to attain an overall growth rather than just book-based-educational growth.
3 “Public Private Partnerships for Quality Education in India”, Karthik Muralidharan, Harvard University, 2006
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BUSINESS MODEL – CEM
The business is envisioned to be set up in Tamil Nadu, India, where there is a lot of textile manufacturing currently happening.
FIGURE 1 – VALUE CHAIN OF TEXTILE BUSINESS AND CENTRE OF EXCELLENCE MODEL
Market Research,
Design and
Procurement
Apparel
Manufacturing
Cost Saving:
Social Benefits:
Marketing/Sales
Function:
R&D,
Design,
Material
Order
Location:
CHO in
Chennai
Function:
Material
Reception
Location:
correspondi
ng RO/PO
Function:
Manufactu
ring: Pre-
stitching
Location:
CoE
Function:
Manufactu
ring:
Stitching
Location:
TH
Function:
Manufactu
ring: Post-
Stitching
Location:
CoE
Function:
Marketing,
Sales
Location:
CHO, RO
(partly)
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Centre of Excellence (CoE)
Geographic coverage – 5000 sq km
Total adjoining population – 100,000
Target population (working age women in
bottom 5%, prospective employees) – 750
Apparel manufacturing capacity - 1,000,000
units per year
Beneficiary school children coverage – 750
HR:
One Fashion technologists (apparel
manufacturing)
Regional Office /
Product Office -
Shirts (RO/PO-
Shirts)
HR:
1 Product manager
2 Office staff
(RO/PO –
Pants)
…
…
CoE
CoE
…
Corporate Head Office
(CHO)
HR:
Design and R&D – 10
Fashion technologists
Procurement of raw
materials – 10 people
Sales and marketing –
10 people
Staff – 10 people
(RO/PO –
Sarees)
Team House
(TH)
Stitching
Machines – 3
Employees – 3
…
TH
FIGURE 2 – VARIOUS COMPONENTS OF CEM
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The important physical components of the CEM are –
1. One central Corporate Head Office (CHO), located in Chennai (Tamil Nadu)
2. One Regional Office / Product Office (RO/PO) in a district (Unique PO- Product-
District combination) coordinating the efforts of the Centres of Excellence of that
district. Typically a district has enough target employees‟ population – to produce
one product (say a shirt or pair of pants etc) and satisfy around 5% of demand in
the regional market (Tamil Nadu)
3. One Centre of Excellence (CoE) in each panchayat union, just near the panchayat
union primary school (Each district of Tamil Nadu typically has around 10-20
panchayat unions) (CoE helps move closer towards the natural habitat of the
villagers)
4. Designated Team Houses (THs, which are nothing but houses of some employees
i.e. villagers). Typically around 200-250 Team Houses come under the purview of
one CoE.
Corporate Head Office (CHO)
The Corporate Head Office (CHO) will be located in Chennai. This will be the hub,
and will perform the main upstream activities such as sensing the pulse of the market and
fashion, making designs to meet the trends, R&D and Ordering of required apparels from
the manufacturing locations.
Regional Offices/Product Offices (ROs/POs)
There would also be several Regional Offices (or) Product Offices (PO). Each RO will
basically cater to one particular product such as trousers, jeans, shirts, leather sandals, etc.
They would receive orders from the CHO, and pass it on downstream, and also serve as
point of receiving raw materials (cloth, etc) from supplier as well as the finished product
from production units. These would be split upon geographies within Tamil Nadu, such
that production for one particular product will be clustered into one or more neighboring
districts. This will also help generating economies of scale, and improve coordination
activities.
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Centre Of Excellence (CoE)
The crucial elements in the chain are the proposed “Centres of Excellence” (CoE).
These will basically be located in the panchayat union headquarters (normally there will
be around 10-20 panchayat unions in a district and consequently 10-20 CoEs), which
serve as the hub for a number of adjoining villages surrounding it. The orders from POs
would be received for production. The CoE would house the machinery for the initial
cutting of the cloth based on the product. For example, for “Shirts”, the cloth would be
cut into several bits for the sleeves, the main body, collar, etc. This is a highly
mechanized process, and hence output is envisioned to be of the tune of around 1,500,000
units a year from one CoE. These cut pieces of cloth are then distributed to the Team
Houses for stitching. Also, the CoE would house the facilites for packaging of the
finished products. This would also be a low process time job. One CoE is targeted tocover a geographic area of around 5000 sq. km or a population of around 100,000 people.
Of this, the targeted number of workers is around 750. These workers are mainly targeted
to be women, as it is well accepted that women in general hold superior skills for this
type of activity, and also this would help additionally serve the social cause of women‟s
empowerment.
Team Houses (THs)
The stitching will be done in what are termed as “Team Houses” (TH). These are basically houses where a group of 3 workers jointly work, i.e, the 3 sewing machines, etc
will be kept in one person‟s house and a group of workers collaborate to pr oduce the
required output. The dynamics of Team Houses are very similar to SHGs. THs are
ultimately used to ensure quality of labour even when the labour is happening in
employees‟ houses. The group would come to the CoE at specific frequency of days, and
take the order and the cut pieces of cloth. They would also take the required quantities of
thread, needles, etc if they need replacement.
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BUSINESS MODEL DYNAMICS
Corporate Head Office
The Corporate Head Office will function like a normal corporate entity. There will be an R&D
team which conducts research into materials, manufacturing technology, etc. This team would
have about 10 fashion technologists recruited from institutions like NIFT, etc. There would also be
a subteam which conducts Marketing Research, into the current and expected fashion trends. This
team will then forecast demand. There will be a separate team of around 10 people taking care of
placing orders for different products with the downstream offices and with supplier, for raw
materials by doing Materials Requirement Planning (MRP), etc.
Once the finished products are received from the Pos, there will be a dedicated team of about 10 people for Sales & Marketing, who will handle distribution efforts to various big retailers and
export units. In addition, there will be an administrative staff of about 10 people who will handle
general and admisnistrative duties. Overall, the functioning will be similar to any normal business,
and we will not dwell to much over here, as the key differentiating factor is in the CoEs.
Centre of Excellence
The “Tayagam Centre of Excellence” model is distinctly different from the vertically integrated
model that players like Arvind Mills are using in one key respect. In the vertically integratedmodel, there is a central location usually in a semi-urban area at least (for easier access to various
facililties), where the most of the activity is concentrated. In this model however, the activity is
carried out in the rural areas. The main advantage is that families and workers do not have to be
relocated. They essentially work from home. Also, in a semi-urban area, the cost of living would
be higher and hence wages would have to be higher. Over here, since the workers are staying in
their own places in rural areas. Another key aspect of the model is in targeting the lower most
economic strata of people for workers. Thus wages can be considerably lower. Significantly, this
ensures the self-sustainability of the competitive advantage of the model, as there will always be
strata of people who are relatively at the bottom of the economic ladder. Thus, their labour would
always be cheaper than for the other players.
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The social benefit of this model is that it serves to generate employment for the economically
backward and helps them come up. It also equips them with new skills which would make them
independent and give them confidence.
Another main advantage is that the infrastructure needed is much lesser, since they work from
homes. Hence, much lesser number of people have to be housed in the Centres of Excellence.
Therefore, the space required and consequently the capital investment is considerably reduced.
This would make it easier to obtain a higher return on investment.
Why Team Houses?
As explained earlier, having workers work from their homes would reduce physical infrastructure
needed. Stitching is a fairly routine job, the necessity of having to be in one location for constant
monitoring is lesser. However, this is also tackled to an extent by making the workers work in
groups through the concept of Team House. Thus, they get to interact, help out and learn from
each other (especially in terms of learning curve effect where more experienced employees can
help out less experienced ones).
The more significant utility of the Team House concept is however that of having quality control
built in to an extent. The team would take the cut pieces of cloth together, and would have to
deliver the output as a team. In case the output is not of sufficient quality, the entire team‟s
compensation would suffer. Hence, this leads to a positive incentive within the team to conduct a
quality check within them to ensure that poor performance of one of the members does not
jeopardize the pay of the rest of the team. It would also help increase output. This would happen
by a variable compensation component to the pay, linked to output over a benchmark quantity, for
the team as a whole. Thus, again the incentive is to perform to get the maximum possible as a
group. Thus, there will be peer pressure to perform from amongst other group members, which
will help in obtaining a good production output.
Why “Centre o f Excellence”?
The CoE will be a building which houses about 200-300 people inclusive of the workers involved
in cutting and packaging activities. Thus, there will be a fair amount of space which would lie
waste in the evenings after working hours (which is envisioned to be upto about 4 p.m). Thus, the
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CoE can be used a small library-cum-activity area for school children to come and indulge in
enriching activities. The library would house a number of elementary picture books, magazines,
news papers in Tamil (vernacular language) and English. A large number of children in rural areas
and small towns are extremely eager to learn contrary to popular opinions. The objective is to help
the children also increase their awareness, and gain general knowledge. The manager of the CoE
would be in regular touch with the teachers of the local school so as to be able to provide material
which supplements the school education and so that the CoE becomes, not a competitor, but as a
partner to the school. Activities like encouraging one child at a time to read aloud a magazine/
newspaper to the rest of the group, make posters/charts about certain topics, etc can be initiated.
In this manner, by helping more children discover their innate talents and shine, it would truly
serve as a Centre of Excellence.
From the apparel manufacturing business point of view, CoE‟s help Tayagam reach out to the rural
areas (after ensuring economies of scale) and therefore tap the cheapest available labour pool.
MARKET SIZE/ESTIMATION
Segmentation The market for apparel could be broadly classified into 3 categories:
Segment Customer expectations Brand loyalty
1 Unbranded Apparel Cost conscious None
2 Branded Apparel Value for money Little
3 Premium Branded
Apparel
Prestige conscious High
In the Unbranded Apparel segment, there are a multitude of suppliers. There is seldom significant
importance laid on retaining customer loyalty. There may not be much choice for the customers to
select from in terms of design and colour. For the customer, cost overrides all other considerations.
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In the Premium Branded Apparel segment, the players present are huge and have significant
marketing depth and command high levels of brand loyalty. It is very difficult to wean away
customers from these brands.
It is the Branded Apparel segment, where the customer does not mind experimenting between
products of similar quality if he could get a price saving, that we would be targeting.
Targeting Rationale for choosing the Branded Apparel segment :
The chief competitive advantage of our business model is going to be the fact that apparel of
similar quality to that being offered by competitors would be produced at a much lower price. The
quality of apparel to be produced will be much higher than those being produced in the Unbranded
Apparel segment. Also, building a sustainable brand image is extremely difficult in the
„Unbranded Apparel‟ segment. On the other hand, we lack the marketing muscle to take on the
players in the Premium Branded Apparel market.
The growth expected to occur in the Indian middle class is likely to shift customers from segment
1 to segment 2 and not so much from segment 2 and segment 3. This is also one reason for
choosing segment 2 to target.
Positioning
Our value proposition would be to offer the best quality shirts at a highly competitive price
compared to those of our competitors.
ROLL OUT PLAN
Marketing Strategy
Promotional campaign:
The promotional strategy would be conducted on broadly two fronts:
1. Advertising through mass media like newspapers and regional language television
channels, primarily with a view to create brand awareness.2. Paying the retailers in order to acquire shelf space which is of utmost importance in
attracting the customers who visit the shops to our brand.
70% of the resources would be expended in the quest for shelf space and the remaining 30% would
be used for advertising via the media.
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Distribution Footprint
Also, the areas that we expect to cover would amount to 40% of the Indian market. While we would primarily have our footprint in the
Southern States, in the long run, our aim would be to establish a pan Indian presence by tying up with major retail stores all over the
country.
ORGANISATIONAL STRUCTURE
Figure 3: ORGANISATION STRUCTURE
CEO
President -Finance
Accouning /Payroll
President – Marketing
R&D
Market Research Fashion Design
Sales Team Brand Manager
COO
Product Manager1 (Shirts) Office
CoE 1
TH1
TH 2
CoE 2
Product 2(Trousers)
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Roles And Responsibilites / Operations Strategy
Demand Forecasting is done by Market Research by studying fashion trends
Fashion Design team makes the designs
Based on these, orders are given to Operations department Materials Requirement Planning is done by using data of inventory, capacity, planned
increases, etc from Product Offices
Based on MRP, orders are given for cloth to suppliers from CHO from the COOs office
Supply is made straight to the Product Office
Cloth is distributed to CoEs based on labour capacity available, and consumable such as
thread, needles, etc are also sent
Production is carried out in CoEs and THs as described earlier
Finished Products are again transported from CoEs to PO
Sales Team will meanwhile approach various dealers and retailers, and obtain orders from
them
Once the order is available, shipping of finished product will be made straight from PO to the
retailers address through contracted transportation
Implementation
The roll out will be carried out a district at a time. A separate dedicated team will be out in
place for this purpose.
Initially the towns within the district where the Centres of Excellence are to be located are
chosen.
One person will be deputed toward setting up of each CoE. The building can be either bought
completely, or expanded upon a purchased building or constructed.
During the time for renovation, setting up of the CoE, the in-charge will try to accumulate
information regarding the target population of workers.
This can be obtained from the details of the houses, and families from Panchayat Office. This
data however, will not be complete, and will have to be supplemented by field visits to the
neighbouring villages to ascertain the number of families, the economic status of them, no. of
working members, and of possible their identities.
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This is important since the recruitment of the workers should be such that, only one from a
family is given employment. This is so that the broadest base of families can be reached, for
employment generation.
The data is also important to ensure that the workers should also be from the lowest economic
strata.
Reasons:
Social Angle - This is for the social objective of reducing the economic disparity levels.
Business Angle - Only by continually selecting from lowest economic strata, can the model
become self-sustaining, due to use of lowest cost labour available
Meanwhile, sewing machines are ordered and purchased. This is initially given to the workers
as their own, and a small monthly instalment deducted from salary. In this way, the workers
can own the sewing machine, and thus will feel enabled and empowered.
All the workers will be put through training in the near most Industrial Training Institute (ITI).
This will impart the necessary skills to them, but the training period is not extremely time
consuming
If the building is being constructed, the CoE should be ready to start production within 3
months
Once, the CoE is going to start production, a regular crew will be sent there, and the cutting
machines and equipment for packaging, etc will be set up.
Contracts would also be simulatenously be fixed with Transport Operators for transportation of
the finished product to various cities.
Once the CoE is up and running, the dedicated team will be assigned towards setting up of
Product Office and CoEs in another district/ geographical cluster.
TEAM
Arul V is Trustee and Director of Tayagam Charitable Trust. A second year student from IIM
Bangalore, he is keen on starting new ventures which shall be sustained by „Tayagam‟.
Vignesh Kumar M is a PGP 2nd
year student at the Indian Institute of Bangalore. He is working
with Vikasana, the social service initiative of IIM Bangalore. He has had experience of conducting
English classes and sports campus for children of a neighbouring school.
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Hemant Chandrasekaran is PGP 2nd
year student at the Indian Institute of Bangalore. He is the
founder member of a student run organization called Diya and has prior experience of conducting
activities like blood donation camps and cultural activities. He is also a volunteer with AID
INDIA.
FINANCE
Table – 1: Annual expenses of Corporate Head Office (CHO)
Annual expenses
Office space INR 480,000 $10,667Office supplies INR 50,000 $1,111R&D spend INR 120,000,000 $2,666,667Marketing spend INR 10,000,000 $222,222IT spend INR 1,000,000 $22,222
Procurement overheads INR 1,000,000 $22,222SalariesDesign, R&D employees INR 5,000,000 $111,111Sales and marketing INR 5,000,000 $111,111Raw material procurement INR 4,000,000 $88,889Staff INR 2,000,000 $44,444Management salary INR 2,000,000 $44,444PO and below (4 no) INR 7,512,232,500 $166,938,500Total expenses INR 7,662,762,500 $170,283,611Expense/output (output = 22,500,000 * 4) 85.14180556 $1.9
Table - 2: Annual Expenses of Product Office (PO)
Annual expenses
Number Expense / year Expense / year Office space INR 240,000 $5,333Office supplies INR 50,000 $1,111CoE level expenses 15 INR 1,706,243,750 $37,916,528Product manager salary 1 INR 500,000 $11,111Staff salary 2 INR 400,000 $8,889Transport Expenses INR 170,624,375 $3,791,653
Total expenses INR 1,878,058,125 $41,734,625Output 22,500,000
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Table – 3: Startup Costs
Start up costs Rs. $CoE setup (15) 79410000 1764667Office supplies 250000 5555.556IT 1000000 22222.22Salaries for 1 year 19600000 435555.6Working capital 1000000 22222.22Total 1.01E+08 2250222
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Table – 4: Annual Expenses of Centre of Excellence (COE)
Number of Employees per CoE 750Number of student beneficiaries per CoE 500Output 1,500,000Initial Working Capital $1,000Common Cap-ex
Head Quantity Units Cost (in INR) Cost (in USD) Life in INR in USD
Land 0.1 acre INR 300,000 $6,667 20 years life INR 15,000 $333Building 2000 sq. feet INR 1,000,000 $22,222 20 years life INR 50,000 $1,111
Computer 2 number INR 70,000 $1,556 3 years life INR 23,333 $519Telephone connection 1 number INR 3,000 $67
Apparel manufacturing related Cap-ex
Machinery 750 number INR 3,750,000 $83,333 10 years life INR 375,000 $8,333Sundry equipments 750 number INR 75,000 $1,667 10 years life INR 7,500 $167
CoE related Cap-ex
Books 300 number INR 90,000 $2,000 1 year life INR 90,000 $2,000Sports equipments 10 number INR 5,000 $111 2 years life INR 2,500 $56Stationery 10 number INR 1,000 $22 1 year INR 1,000 $22
TOTAL Cap-ex INR 5,294,000 $117,644 INR 564,333 $12,541
Common On-Going Cost
Electricity consumption INR 100,000 $2,222 INR 100,000 $2,222Phone bill INR 12,000 $267 INR 12,000 $267CoE manager 1 number INR 300,000 $6,667 INR 300,000 $6,667Local assistant 1 number INR 25,000 $556 INR 25,000 $556
Sundry INR 100,000 $2,222 INR 100,000 $2,222
Apparel manufacturing related On-Going Cost
Salaries 750 number of staff INR 37,500,000 $833,333 INR 37,500,000 $833,333Raw materials INR 75,000,000 $1,666,667 INR 75,000,000 $1,666,667Sundry INR 10,000 $222 INR 10,000 $222Training cost 750 INR 75,000 $1,667 INR 1,667 $37
CoE related On-Going Cost
News papers, magazines 10 per day INR 18,250 $406 INR 18,250 $406 Awards 10 INR 10,000 $222 INR 10,000 $222Intra district events coordination costs INR 100,000 $2,222 INR 100,000 $2,222Sundry INR 10,000 $222 INR 10,000 $222
TOTAL On-Going Cost INR 113,260,250 $2,516,894 INR 113,185,250 $2,515,228
TOTAL PER ANNUM COSTS INR 113,749,583 $2,527,769
PER YEAR COST
Centre of Excellence (CoE)
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Table – 5: Roll Out Plan
We are expecting to have to have the following roll out plan
Roll outstrategy
Productoffice Product
Per productcost
Per productcost
Month 1 1 Shirts INR 90 $2.00
Month 4 2 Shirts INR 87 $1.93
Month 7 3 Trousers INR 86 $1.90
Month 10 4 Kurtas INR 85 $1.89
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Table – 6: Cost Structure Corresponding to the roll out strategy
Total cost Total cost Output Cost/Output Cost/OutputPO costs - (1PO)
INR1,878,058,125 $41,734,625.0
INR2,028,588,125 $45,079,736.1 22,500,000 INR 90.16 $2.00
PO costs - (2PO)
INR3,756,116,250 $83,469,250.0
INR3,906,646,250 $86,814,361.1 45,000,000 INR 86.81 $1.93
PO costs -
(3PO)
INR
5,634,174,375 $125,203,875.0
INR
5,784,704,375 $128,548,986.1 67,500,000 INR 85.70 $1.90PO costs -(4PO)
INR7,512,232,500 $166,938,500.0
INR7,662,762,500 $170,283,611.1 90,000,000 INR 85.14 $1.89
CHO costsINR
150,530,000 $3,345,111.1
Costs for fabrication of a shirt come to around USD 2 during the initial few months and USD 1.89 during month 10. Price of INR 300
– INR 500 (USD 6.7 – USD 11) is possible and gives a profit margin 251% - 485% which can be ploughed in for the expansion of
operations.
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Table – 7: SRoI calculation
The very tangible social benefits are 2 fold –
1. The increased wage for people at their village itself (Villagers would get a maximum of
USD 1 per day, otherwise; with Tayagam CEM coming to their village, the apparel
fabricators can earn USD 2 per day, with a very minimal labour efficiency)
2. The complementation to school education which essentially makes the effectiveness of
school education pass a minimum threshold. The private return to school education in Asia
is 64% (314
for primary education, 15 for secondary education and 18 for higher
education). Our venture can at least add 10 more percentage return and make the
numbers close to Latin America‟s returns (32 for primary, 23 for secondary and 23 for
higher education)
Excess wage to apparel fabricators INR 45.00 $1.0
Excess return to education due to Tayagam 10%
Initial coverage 4 POs
Employees 45000 $1,000.0
Student beneficiaries 45000 $1,000.0
Investment in CoEsINR
90,000,000.00 $2,000,000.0
Social value - imparted towards employeesINR
2,025,000.00 $45,000.0
Social value - imparted towards studentsINR
9,000,000.00 $200,000.0
Total social value (First year)INR
11,025,000.00 $245,000.0
Growth rate expected 15%
Risky rate of return 15%Social rate of return (Total social value / Invetsment inCoEs) 12%
4 Returns to Education: A Further International Update and Implications, George Psacharopoulos, Journal of Human
Resources, 1985
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EXHIBITS
EXHIBIT 1 – RETURN ON EDUCATION
Source: Returns to Education: A Further International Update and Implications, George
Psacharopoulos, Journal of Human Resources, 1985
EXHIBIT 2 – PUBLIC VS PRIVATE SCHOOLS IN RURAL INDIA
Source: Public Private Partnerships for Quality Education in India, Karthik Muralidharan, Harvard
University, 2006
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