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Mavi Jeans Essay

1364 words - 6 pages

Mavi Jeans
Guven Textiles Company was founded in Istanbul, Turkey in 1971 by Sait Akarlilar. In 1984 a subsidiary company, Erak, was established for the production of private label blue jeans.Very good quality denim was sourced in the U.S. and Honduras and they were quickly able to grow sales through private label arrangements with Calvin Klein, Tommy Hilfiger, Armani, Ralph Lauren and other suppliers of high-end designer jeans.

In 1991 the decision was made to create their own brand of blue jeans. The Turkish word for “blue” is “mavi”; their brand name is Mavi Jeans. With good success in Turkey, distribution of Mavi Designer Jeans throughout Europe was started in 1994. In 1996 the ...view middle of the document...

By the end of 1996 Mavi had become the most popular brand of jeans in Turkey. Their bold advertising campaigns “We are being too much”, “We’ve gone too far” and then “Made in Maviland” were designed for global use and helped put Mavi in the top 10 of A.C. Nielson’s list of well-known brands of jeans. In a 2003 survey of university students in Turkey, Mavi Jeans was ranked as the second most popular brand after Coca-Cola. This is truly an impressive success story.

Erak now employs 3500 persons. They have a production capacity for 13 million pairs of jeans per year and sold 7.4 million in 2004. One-third of 2004 sales volume was their own Mavi brand and two-thirds was private-label jeans.

Most of the large rolls of denim fabric are currently purchased by Erak from production facilities in Southeast Asian countries. The costs for material and labor to produce a basic pair of jeans is €5.00. This includes labor intensive cutting and stitching, washing and finishing. Mavi sells the basic jeans, both with private labels and for sale under their own label. The enormous success that Mavi has had has been, however, with stylized, comfortable fit jeans that require extensive handwork. This includes techniques that have been developed for sanding and cutting the jeans to give the “worn” appearance typical of higher priced designer jeans. This additional custom handling is particularly labor-intensive and adds from €10 to €15 to the cost of the jeans, bringing total direct costs in the range of €15 to €20.

The End of Textile Trade Quotas

During the 1960’s many developed countries created a quota system to protect their own textile manufacturers from cheap foreign competitors. The U.S. and most European governments set strict limits on the quantity of clothing that can be imported. Each government rations apparel imports according to detailed categories, such as women’s cotton tops or men’s denim trousers. In 1995 agreement was reached within the World Trade Organization (WTO) that the textile quotas would expire on December 31, 2004. As part of the negotiations leading to accession of China to the WTO on December 11, 2001 it was agreed however that textile importing nations could limit Chinese textile imports through 2008.

The impressive growth achieved by Mavi is due to a number of factors, including very effective marketing and a labor cost advantage compared to European and American competitors. They have grown despite competition from low labor cost textile producing countries such as Mexico, Bangladesh, Honduras and Vietnam. However labor costs in the more remote regions of China are lower than in any of those nations. The monthly cost of one typical factory worker at Mavi is $800 while the comparable wage rate in northern China, where textile factories are being located and expanded, is $100.

Is this a threat to Mavi?

The abovestated information on Mavi is based on material published or otherwise provided by Mavi. The...

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