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V.G.NARAYANAN NAMRATA ARORA VIDHYA MUTHURAM Nalli Silk Sarees (A) On a balmy night in the summer of 2011, Dr. Nalli Kuppusamy Chetty, chairman of Nalli Silk Sarees Private Limited, waited at the Chennai international airport to receive his granddaughter, Lavanya Nalli (HBS MBA 2011), from her transcontinental flight. As Kuppusamy waited for the flight to arrive, he reflected on the next steps he should take to keep the Nalli Group competitive. Established in 1928, the Nalli Group- a family owned and operated business that retailed Indian ethnic wear- had enjoyed impressive growth with a $95 million turnover, a 22 store retail footprint, and had outdone its competitors by being the only player in its segment to have a national presence (see Exhibit 1 for Select Information on the Nalli Group). In 2011, however, Kuppusamy felt that the market and the competitive landscape were changing. Over the years, the business had become more complex to manage because of the growth in the number of stores, the increase in product categories, and the proliferation of the number of StoreKeeping Units (SKUs) that had to be managed. The company was also starting to face intense competition from not only large Indian and multi-national corporations that were aggressively entering the Indian apparel market, but also from small privately owned stores that were offering heavily discounted products to entice customers. As a reaction to changing market conditions, the Nalli Group earlier that year had announced a $25 million expansion plan and proposed the opening of 12 new stores over a period of two years.1 With aggressive expansion plans on the anvil, Kuppusamy also recognized that the Nalli Group might need to revisit its pricing sstrategy, merchandising process and product assortments in order to increase its own competitiveness. Kuppusamy was also acutely aware that much of Nalli’s past growth had been due to the company’s