Assignment on Leather

Industry Of Bangladesh

Submitted to

Md. Rashedur Rahman

Assistant professor

Department of International Business

University of Dhaka

Prepared by

Abdullah Al Mamun

Roll No:03

Department of International Business

University of Dhaka.

date
 Table of Contents
Executive Summary.....................................................................................................................................4
Chapter 01: Introduction.............................................................................................................................5
1.1 Origin of the report............................................................................................................................5
1.2 Background of the Study...................................................................................................................5
1.3 Statement of the Research Problem..................................................................................................5
1.4 Objectives.........................................................................................................................................6
1.5 Methodology.....................................................................................................................................6
1.6 Scope of the Study.............................................................................................................................7
1.7 Limitations of the Study.....................................................................................................................7
Chapter 02: Literature review.....................................................................................................................8
Chapter 03: Industry Information................................................................................................................9
3.1 Introduction.......................................................................................................................................9
3.1.2 History of the Leather Industry of Bangladesh...........................................................................9
3.1.3 Location of the Industry..............................................................................................................9
3.1.4 General Classification of Leather Goods...................................................................................10
3.1.5 Major players............................................................................................................................11
3.1.6 Leather export performance......................................................................................................11
3.1.7 Leather and Leather Products...................................................................................................12
3.1.8 Industry Outlook and Investment Incentives.............................................................................12
3.1.9 Government Support and Policy...............................................................................................13
3.1.10 Strength &Growth Prospect of the Leather and Leather Products Industry in Bangladesh.....13
3.2 International perspective.................................................................................................................13
3.2.1 Worldwide Leather Export and Import.....................................................................................13
3.2.2Global Export............................................................................................................................14
3.2.3 Major Players............................................................................................................................14
Chapter 04: Global Industry Analysis.........................................................................................................16
4.1Porter’s Five Forces Model:..............................................................................................................16
4.2 SWOT analysis:................................................................................................................................16
4.3 Core competencies:.........................................................................................................................18

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 4.4 Corporate strategy:..........................................................................................................................19
4.5 Critical success factor of Leather Industries in Bangladesh.............................................................19
Chapter 05: Company Analysis: APEX Footwear........................................................................................22
5.1 company overview...........................................................................................................................22
5.2 Associates Companies:....................................................................................................................23
5.3 Product:...........................................................................................................................................23
5.4 SWOT Analysis of Apex Adelchi Footwear Limited:.........................................................................24
Chapter 06:conclusion…………………………………………………………………………………………………………………………..26
Reference ……………………………………………………………………………………………………………………………………………..27

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Executive Summary

The Government of Bangladesh has identified the leather sector as one with considerable growth
and investment potential ranked fifth in the export earning sector. Currently Bangladesh
produces and exports quality bovine and ovine, caprine (buffalo and cow; sheep and goat)
leathers that have a good international reputation for fine textured skins. However, the entire
leather sector meets only 0.5% of the world’s leather trade worth US$75 billion. There are about
113 tanneries in Bangladesh that produce 180 million square feet of hides and skins per year. In
addition there are about 30 modern shoe manufacturing plants engaged in the production of high-
quality footwear, with over 2500 smaller footwear manufacturers also present in the sector. There
are around 100 small-to-medium leather goods manufacturers, and a small number of niche
larger manufacturers. The sector directly employs approximately 558, 000 people. Most of the
tanneries do not have proper effluent plants and generate 20, 000m3 tannery effluent and 232
tones solid waste per day. Tannery liquid and solid wastes are a potential pollutant but also have
a potential value. Specific technologies to convert wastes are required. These vary from crude
and simple to highly sophisticated and complex. A proposed new leather park is expected to
4
bring a clear transformation to the leather industry with marked increase in production, product
diversification and new product lines with increased sustainability of the sector. Sustainable and
cleaner production will be a key issue for the development without placing burdens on the
environment.

Chapter 01: Introduction

1.1 Origin of the report

The report on “Analysis on leather Industry” was carried out as a part of our Bangladesh in
International Business course. The report was authorized by our course teacher as a part of our
academic requirement. After collecting information according to the teacher’s instruction and
guidance, I prepared the report according to the teacher’s guidance.

1.2 Background of the Study

Increasing domestic and global competition, economic downturn, rapidly changing market
trends, and volatile financial markets have all added to the pressure on organizations to come up
with effective responses to survive and succeed. The success of an organization operating in
domestic and global market depends on many factors from planning to execution. The successful
completion of all the tasks depends on choosing and practicing and dealing with proper products,

5
market structure, competitor analysis, trading process and sharing of information to different
parties.

1.3 Statement of the Research Problem

This report is mainly for searching the answers of the following questions:

 What is the process of operating in leather industry?

 What are the various products & services?
 Who are the clients of this leather industry?
 How widely the global leather industry is spreaded?
 What is the range of competition faced by the industry competitors?
 What is the main source of profitability?
 What are the ways to improve existing operation?

1.4 Objectives
The main objectives of this paper is to understand

 The overall scenario of the leather industry of Bangladesh as well as the whole world.
 Who are the major player in this industry around the world.
 What is the position of Bangladesh in the world market as a leather exporting country.
 What is the contribution of leather sector in the economy of Bangladesh.
 What are the competitive advantages for Bangladesh for capturing the market.

And to be accounted with one of the leather good producing company so that it can be easy to
understand how a company in this industry works what are the strength and weakness of the
company.

1.5 Methodology
The study undertook descriptive research approaches. The purpose of the study refers to perform
qualitative analysis using secondary data.

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i) Research Design

The purpose of my report is to describe different aspects of leather industry, products & services,
client base, operations type, competition, and ways of improvement of services of----company. It
is a descriptive study. Data mainly came from secondary sources from different websites of the
companies, newspaper articles and internet.

ii) Sample design

According to the teacher’s guidance of selecting an industry, conducting analysis from

Bangladesh and global perspective, leather Industry has been selected. In that sense it is a
random sample selection. It is not a representative of all population but it serves a specific
purpose and can be said a purposive sample selection.

iii) Data collection and fieldwork

Data mainly collected from secondary sources, the industry related articles, newspapers and
Magazine preview.

iv) Analysis

It is a qualitative and quantitative research and I have done narrative analysis. Based on my
collected information I completed the report.

1.6 Scope of the Study

In preparing this report I tried to cover these topics:

 The real picture of the leather Industry has been provided. It shows not only the
Bangladesh’s leather industry sector but also shows the global steel industry market.
 Condition of earnings and profitability.
 Cover a broad area and customer expectation.
 Role of steel industry sector in the economy.

1.7 Limitations of the Study

The preparation of this report was not an easy task. I had to face some problems & limitations
during the preparation of this report. The limitations were:

 Complexity: the data was difficult to analyze.

 Lack of primary data: though I collected data taken from internet bases but it would be
better if we had more data.
 Lack of experience: lack of personal experience of forming that research and analyzing
data was difficult for me.

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 Chapter 02: Literature review

There has been a moderate number of research works, published and unpublished, relating to the
broader field of leather industry in Bangladesh. The existing socio-economic condition of
Bangladesh provides an encouraging prospect for leather Industry. This study makes a humble
attempt to present a brief review of the existing relevant literature on the leather industry of
Bangladesh.

According to Ahmed’s “Prospect of Leather Product Export from Bangladesh and Its
Requirements” published in 2002

Assessed the present status of raw material supply, capacity and production of leather and
leather products, identified problems of production and export and determine needs for the
development of industries to make optimum use of the potentials of local raw stock.

In his article “Leather Industry in Bangladesh: Perspective from Business” Dhanaranjan said that
“Tanners in family business have no formal education and a little or sometimes no learning
about the complexities of leather processing or environmental protection and wastage of leather.”

In Azom et al’s article. “Environmental Impact Assessment of Tanneries: A Case Study of

Hazaribag in Bangladesh” they said that
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“Physical health of related residential area’s people is better than that of tannery workers. They
also found that tannery creates the job opportunity.”

In most recent year 2015 Mr.Khan in his article “Industry in Bangladesh: Opportunities and
Challenges” infer that

“Leather and leather manufacturers constitute an indispensable and dependable source for export
trade and foreign exchange earnings. For Bangladesh, leather is a high priority industrial sector
and footwear exports, an extreme focus area.”

Chapter 03: Industry Information

3.1 Introduction
Bangladesh is a developing country with a population of about 152.5 million in a total area of
147, 570 sq.km making it one of the most heavily populated countries of the world. The
overall economy of Bangladesh has registered a steady improvement with more than 6%
average growth during the last five years (BBS, 2013). The industrial sector has been an
important contributor to the country’s GDP, its share standing at 28.6% in 2011. Bangladesh
has a long established tanning industry which produces around 2-3% of the world`s leather
from a ready supply of raw materials. The country is therefore an established and attractive
location to source and outsource the manufacture of finished leather products. The leather
industry is ideally suited to Bangladesh with its abundance of labor and natural resources at
internationally competitive rates.

3.1.2 History of the Leather Industry of Bangladesh

Leather industry developed in Bangladesh on a large scale basis from the 1970s. The leather
industry is now reasonably well established in Bangladesh, with about 200 Government-
recognized leather plants processing raw hides and skins into wet-blue, crust or finished leather,
and over 2,000 leather footwear and leather-goods units (over 90% employing less than 9)
producing various kinds of leather footwear and other leather products such as garments, ladies
bags, suitcases, wallets and some fancy items. It is, however, the processing of raw hides and
9
skins into some form of crust, finished or semi-processed (wet-blue) leather which has
dominated the industry in Bangladesh, as high as 85 per cent of the total output being exported
from this sub-sector.

The manufacture of crust/finished leather and that of wet-blue, both for exports, is the dominant
activity of the industry. The value of exports from leather goods is negligible, although this sub-
sector is dominant in the domestic market especially in leather footwear, as almost the entire
demand in this regard is satisfied through local production. Another Important item of output of
the leather sector is vegetable tanned leather, made of buffalo hides. The entire output is locally
used for shoe-soles and industrial lead.

3.1.3 Location of the Industry

The industry is now heavily concentrated at Hazaribagh in Dhaka, with three-quarters of the total
number of registered tanneries located here. Besides, a large number of tanneries at the cottage
level, estimated at over 100, are located at Hazaribagh. Such a concentration is likely to offer a
number of benefits in the form of sharing knowledge, raw materials, spare parts by the investors,
and also helping a rapid development of vertical and horizontal integrations of the industry
centering on the locality. However, Hazaribagh is a wrong place for the concentration of an
industry like leather manufacturing. Firstly, the area was originally developed as a residential
locality and, consequently, its narrow street and limited sewerage facilities are highly inadequate
to meet the needs of a growing Industry like leather manufacturing. Secondly, the unplanned
growth of the industry at Hazaribagh and the limited land area available in the locality has not
made it possible to make any provision for the much needed effluent treatment.

3.1.4 General Classification of Leather Goods

There is wide variety of leather goods produced in the Bangladesh. The main groups are below:

1.Small leather goods/Fancy leather goods .

2. Medium leather goods.

3. Heavy leather goods.

1)Small Leather goods

Small leather goods or sometimes called personal leather goods which are usually carried in
pocket or hand bags, includes purses, wallets, key case, passport case, note case, card case,
cigarette case and cigar case, match box case and so others. Most of those products are made
without any internal stiffening of reinforcement. These leather goods require leather having
thickness of about 0.5 mm to 1.00 mm. different types of hides and skins which are usually used
in making small leather goods are, cow softy, goat glaze, sheep napa, calf skin etc.

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2) Medium Leather Goods

It includes hand bags, shopping bags, shoulder bags, document cases, attach cases and so on.
These bags are made from calf, goat, sheep and exotic skins and hides finished with range of
colors which generates a good appearance and look sophistication and modernity. Leather, which
has a thickness of 0.8 mm to 1.2 mm, is used in making of medium leather goods. Cow softy, dry
milled, cow napa, sheep napa, goat and buff softy leather are widely used in making of medium
leather goods.

3) Heavy Leather Goods

These are made generally from cow and buffalo hides, which are strong and durable. The hides
have distinct surface grain patterns and size ranges from 20 to 30 sq. ft is full hide. Cow and buff
hides of thickness 1 to 1.5 mm are used for making heavy leather goods. The type to leather
goods for making heavy leather goods are, box sides, Katti Leather, Split Leather, Cow Upper,
Upholstery, Buff Softy, etc.

3.1.5 Major players

1.HBM Leather Crafts.

2. Capital Tannery.

3.Apexdelchi Footwear LTD.

4.RMM Leather Industries Ltd.

5.Chowdhory Leathers.

6. LIB Tannery Ltd.

7.Akash Leather company Ltd.

8.Mun Muns Leather private Ltd.

9.Radu and Co.

10.Pheenix Leather Company Ltd.

11.Jeenyes Footwear Ltd.

12.Unicon Leather &Leather goods.

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3.1.6 Leather export performance
The contribution of the leather industry to the Bangladesh economy was about US$500 million,
accounting for 3% of country’s exports6 in 2010-11. Recent export trends indicate that the
footwear sector (value added merchandise), is growing the fastest. Figure 1 shows that the
performance with regard to footwear is increasing substantially. Further progress in this regard is
expected in the years to come. Currently there are about 30 mechanized footwear companies in
the country, most produce leather footwear for global export. A large number of semi
mechanized and non-mechanized footwear units are also operating for the domestic market.
Some 5 or 6 companies produce quality leather goods which are regularly exported in
appreciable volume. Export performance can be anticipated to increase in the next five years
with at least 12-15% growth in turnover per annum. In the next two years the existing footwear
factories are likely to export more shoes. The new capacity [expanded and new factories] that
will come on stream from late 2012 will give increased growth. The Export Processing Zones at
present there are at least seven large factories under construction. factories under construction
include the Korean company ‘Young ones’ footwear complex which will be the largest in Asia.
The leather products sub-sector is ideal for youth, women and micro entrepreneurial start-up
businesses, based on the low costs and capital investment. It can also provide the opportunity to
gain experience to transfer to footwear or other creative sub sectors.

  2014 2015 2016 2017 (Estimated)

Market Size N/A N/A N/A N/A

Local Production N/A $1,075,000 $1,180,000 $1,416,000

Imports N/A N/A N/A N/A

Exports $1,120,000 $1,130,000 $1,210,000

$1,000,000
Total Market
N/A N/A N/A N/A
Size

$U.S. thousands (total market size = (total local production + imports) - exports)

3.1.7 Leather and Leather Products

Bangladesh has a large leather industry. These industries make leather based products, such as
shoes, belts, bags, and jackets. These products are sold both in the domestic and foreign markets.
Leather footwear is the fastest growing segment of the leather industry. Bangladesh meets the

12
demand for about 10% of the world’s total leather market. The main benefit of the leather
industry of Bangladesh is the ample supply of raw materials.

3.1.8 Industry Outlook and Investment Incentives

Bangladesh produces between 2% and 3% of the world’s leather. Most of the livestock base for
this production is domestic, which is estimated as comprising 1.8 % of the world’s cattle stock
and 3.7 % of the goat stock. The hides and skins (average annual output is 15m sq.m.) have a
good international reputation.

Foreign direct investment in this sector along with the production of tanning chemicals appears
to be highly rewarding due to this presence of basic raw materials for leather goods including
shoes, a large pool of low cost, trainable labor, and a tariff concession facility to major importing
countries under Generalized System of Preferences (GSP) coverage. Thus Bangladesh is an ideal
offshore location for leather and leather products manufacturing with low cost but high quality.

The government is in the process of setting up a separate leather zone, relocating the existing
industry sites to a well-organized environment. Footwear is more important in terms of value
addition. This is the fast growing sector for leather products.

3.1.9 Government Support and Policy

The government of Bangladesh provides a support to the leather industry through various steps,
including monitoring the export market, evaluating the performance of the sector by a permanent
Parliamentary committee and bank credit.

3.1.10 Strength &Growth Prospect of the Leather and Leather Products Industry in
Bangladesh
Leather and Leather products occupies fifth place in our export trade as a non -traditional export
items. The export potential of Leather and allied industries to our economy in view of its massive
approach towards growth prospects on terms of value addition and scope of employment
generation is very high. There has been increasing emphasis on its planned development through
choice of technology for preservation of raw hide & skins production technique, optimum
utilization of available raw materials and stopping of its pollution as a whole. The Government
of Bangladesh should given special attention to export oriented leather & leather products sector
at various levels with a view to boost exports considering its inherent strength and prospective
futures. Possible formation of Leather Council and a co-operative attitude towards entrepreneurs
of leather industries from the financial Institutions and other co-operation in this regard have to
be considered as the major change in the Government policy on leather. Bangladesh’s leather

13
sector is deemed competitive because of its low labor cost differentiation, local availability of
hides and a favorable business environment. For this reason, Japanese companies have huge
opportunity to do business in Bangladesh.

3.2 International perspective

The global markets for Bangladesh in terms of leather and tanning industry is up roaring, since
the independence of the country in 1971. Lately during 2003, BELA (Bangladesh Environment
Lawyers Association) has requested law suit from the Supreme Court regarding the shifting of
leather tannery industry at Hazaribagh, and locating at a more environment friendly zone. The
lawsuit also mentions about recycling the tons of tannery disposals, (Writ Petition no. 891 of
1994) henceforth, creating a tannery recycling industry at the location of the new leather and
tannery zone, which was later on shifted to Savar area. This has played a positive role, for the
foreign investors to invest in this industry, especially Japan and Italy, to observe the new areas,
and work alongside the existing leather and tannery industry. Whilst Bangladesh is expanding its
leather market in Italy, it holds strong chances of entering the EU (European Union), roughly
shifting the countries trade blocs, giving it a positive role to dominate the leather market in future
years.

3.2.1 Worldwide Leather Export and Import

The value of the world trade in leather and leather products is expected at around US$100
billion, and the industry has been rapidly growing improving and developing countries. From
Table 1, it is seen that the import value increases from $13.9 billion to $22.7 billion in 14 years
period from 1998 to 2012 (COMTRADE, 2014), similarly the export value increases by $8.9
billion. This increase shows that the leather industry is becoming one of the word most
influential sector that is plays a vital role in improving the own country’s GDP.

3.2.2Global Export
During the last 4 years Italy remain the dominant player in leather products exports as table 3
and figure-2 shows that Italy earned the most export revenue by $ 4638.2 million, this shows that
Italy gives excellent service to its customers.

Even though the growth percentage has decreased by 1.2% in 2012 compared with 2008. But
Italy predominates the World share by 19.6% export revenue. Similarly China earned the second
most revenue of $2321.1 million. Particularly footwear, because of its high capacities installed,
infrastructure, and component supply industry. Nigeria on the other hand shows exceptional
exponential growth to 13.5% over the last 4 years, by earning 1129.8 Billion, even more than
India. There is a decline of leather export trend in Western countries, the export earnings from
20082012 of Argentina, Germany and USA. All though, Europe and USA have vibrant leather
products machinery, but there is a contracts between Classy Italian shoes in with cheap Chinese

14
footwear. These make Europe to loose share in the global market. In Asia China is the most
dominant followed by India, who has an average increase of 7.9% form 2009-2012.

China is the undisputed leather in the import of Leather products and the biggest import market
in the world 13.2% in 2012. China imports cheap quality shoes and high quality designer leather
goods. The size of the markets also varies due to population and consumption trends, and fashion
plays a big part in the mass market.

Similarly the EU partners, Italy, Germany, Romania, Spain, there import of leather materials has
declined drastically December 2008 to 2012. The biggest consumers of footwear and leather
goods in the world are China and Vietnam. EU nations like Germany in particular, and France,
Italy to some extent, have had depressed economic climates and hence has limited growth
potential. USA on the other hand is one of the biggest individual market in the world for leather
products, with earnings of $651 million in 2012.

3.2.3 Major Players

1.4V designs.

2.74 street bags.

3.Adam O Leathers.

4.Allen Edmonds.

5.Albatross Brand.

6.Allett Co.

7.Alstad Goods.

8.American Bench Crafts.

9.Angel Jackets.

10.Arne Mason.

11.Arrow &Board.

12.Ashland Leather.

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 Chapter 04: Global Industry Analysis
4.1Porter’s Five Forces Model:

Michael Eugene Porter has developed the idea to aid firs for analyzing the competitive forces in
any industrial environment. He also stated that the stronger is each of these forces, the more
limited is the ability of establishing companies to increase prices and gain higher profits (Porter,
M.E.). The leather and tannery industry in Bangladesh, limited entry for new entrants, due to
huge capital requirements. Moreover, the government of Bangladesh has recently set restrictions
about introducing new leather and tannery industry, making it dearer for the infants. The foreign
buyers hold stronger powers, as they have the opportunity to switch between competitors – like
India, Pakistan, etc. The suppliers’ power within the country is very high, due to collection of
basic raw hides and skins. Leather industry itself has huge substitutes, like – jute, the golden
fiber of Bangladesh for bags, textile industry, which has huge prospects in fashion industry. The
rivalry between industries, is very strong, they hold strong ties with the government. Other
countries, expertizing in this industry, are focusing at the research and development including the
environment friendly tanning process, which is higher in other nations compared that of
Bangladesh.

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4.2 SWOT analysis:
A SWOT analysis (alternatively SWOT matrix) is a structured planning method used to evaluate
the strengths, weaknesses, opportunities and threats involved in a project or in a business
venture.

Strengths:

The leather goods producing enterprises only a few in number ( 15-20 units) with product lines
relating to travel goods, suitcases, briefcases and fashion accessories, along with belts, wallets,
hand bags, case holders etc. for overseas export. Export of leather goods made of Ostrich bird
leather, is an unique collection amongst many other exciting products made of goatskins, cow
calf, Buff-Calf etc.. Articles made of ostrich bird leather are exported to Australia (ostrich bird
leather is imported from South Africa and Australia). Bangladesh has also entered the field of
Leather fashion garments with items of distinction. The leather goods manufacturing firms use
basically finished leather and lining leather as raw materials and all are collected from local
sources.

About 95% of leather and leather products of Bangladesh market is abroad, mostly in the form
of crushed leather, finished leather, leather garments, and footwear. Most leather and leather
goods go to Germany, Italy, France, Netherlands, Spain, Russia, Brazil, Japan, China, Singapore
and Taiwan. Value addition in these exports averages 85% local and 15% foreign. About 100
modern tannery units are now in operation in the industry. These are located mostly in the
Hazaribagh area of Dhaka city. In 1998, the sector exported 178 million sq. ft of leather and
earned $160 million. The country`s share in the world leather market is 2%. The export of

17
finished products such as shoes, slippers, leather jackets, hand gloves, bags, purses, wallets and
belts also earn a sizeable amount of leather products to penetrate new market segments.

Weakness:

The industry is now heavily concentrated at Hazaribagh in Dhaka, with three-quarters of the total
number of registered tanneries located here. Besides, a large number of tanneries at the cottage
level, estimated at over 100, are located at Hazaribagh. Such a concentration is likely to offer a
number of benefits in the form of sharing knowledge, raw materials, spare parts by the investors,
and also helping a rapid development of vertical and horizontal integrations of the industry
centering on the locality. However, Hazaribagh is a wrong place for the concentration of an
industry like leather manufacturing. Firstly, the area was originally developed as a residential
locality and, consequently, its narrow street and limited sewerage facilities are highly inadequate
to meet the needs of a growing Industry like leather manufacturing. Secondly, the unplanned
growth of the industry at Hazaribagh and the limited land area available in the locality has not
made it possible to make any provision for the much needed effluent treatment.

Opportunities:

There is an enormous scope for entrepreneurs and investors. The sector is still catering to the
low-end export market. In order to advance it must move to the next levels. Business friendly
policy: The sector needs business friendly policy by Government to increase the investment.
Needs more skilled workers and managers: Although there are unskilled competitive labor
forces, there is shortage of skilled workforces, managers and entrepreneurs. Limited access to
market - Bangladesh has a limited or small share (~0.56%) in the global business, so there is a
tremendous opportunity to grow to capture more market share around the world. Vietnam can be
a benchmark for Bangladesh who imports 70% of raw materials and exports Shoes and footwear
products: USD 6.549b, Bags & leather handbags: USD 1.289b

Threats:

Limited access to market information: A deeper, more widely held understanding of market
trend in terms of quality, fashion, leather product prices, competitors, importers and consumers’
preferences, and anticipated regulations and restrictions needs to be developed in Bangladesh.
Poor cooperation between firms/ stakeholders: strong connections between value chain members
for a strong sector position, the stakeholders should hold their hands together for mutual benefits.
Unfortunately this is still not the case. Low product quality and productivity: Product quality
and overall productivity is always a concern for this sector. The product quality means the
reliability and aesthetics of the finished products. It stems from the quality of basic raw materials
including flayed hide/skin and chemicals, the overall workmanship and the machines/process
used in the industry, so the sector still today target mostly the low end product market. Outdated

18
Machineries - Traditional status quo mind set of the owners; they lack information on
appropriate machineries, sources, prices etc. They also lack awareness on incentives for product /
productivity improvements, are using traditional tanning and manufacturing methods and
process.

4.3 Core competencies:

Core competencies are the combination of pooled knowledge and technical capacities that allow
a business to be competitive in the marketplace. Theoretically, a core competency should allow a
company to expand into new end markets as well as provide a significant benefit to customers.
Some companies have already started to focus at tanning crocodile skins, snake skins and other
forms of animal skins available for tanning. They are mostly targeting to gain the premium
leather market, which deals with specialized animal skins, like Maxwell Scott and some other
Italian firms, who cater the high – end leather customers around the world. Many tanners firms
have focused at serving the local market alongside capturing the international markets. Like –
apex industry, bata, have taken steps to cater in the local market, continuing to gain more profit,
and gains higher market shares. Foreign direct investment in this sector along with the
production of tanning chemicals appears to be highly rewarding due to this presence of basic raw
materials for leather goods including shoes, a large pool of low cost, trainable labor, and a tariff
concession facility to major importing countries under Generalized System of Preferences (GSP)
coverage. Thus Bangladesh is an ideal offshore location for leather and leather products
manufacturing with low cost but high quality.

4.4 Corporate strategy:

The footwear sub-sector of Bangladesh earned revenues in excess of USD 335.51 million in
2012-2013. The EU is the biggest destination for footwear exports with a 60% Meeting with
representatives of the footwear sub-sector highlighted an optimistic sentiment about business.
The businesses view their products as price and quality competitive. Footwear manufacturers in
the country rate themselves as being able to respond quickly to buyer inquiries, possessing the
ability to offer competitive prices, quality products, and prompt fulfillment of orders. The growth
of this sector is very encouraging and shows off the underlying potentiality of the sector.
However quite a few supply side weaknesses were also highlighted. Among the most important
are the inability of the tanneries to supply required quantities and quality of leather and the weak
track record of environmental standards, the lack of availability of high quality components and
accessories, the shortage of lasting capacities, the lack of footwear design and development
capacities, the nascent testing and analyses infrastructure, insufficient numbers of enterprises in
the sub-sector, shortage of craftsmen and supervisory-level personnel, and last but not least,
negative buyer perception on enterprise capabilities.

One of the major constraints raised by this sub-sector was the lack of finished leather variations
to match emerging trends in the EU market, due to the lack of innovation and up gradation by

19
tanners in Bangladesh. Anecdotal evidence gathered in meetings with enterprises highlighted that
some of the highest quality manufacturers are sourcing upwards of 40% of their leather
requirements from overseas and this impacts competitiveness. Another constraint seen was the
lack of new entrepreneurs entering the business, to augment capacity and provide a critical mass
that can attract more buyers to Bangladesh. The shortage of craftsmen and supervisory personnel
is also another constraint to the development of this sub-sector. Bangladesh produces 2 to 3
percent of the world`s leather market. The leather industry in Bangladesh is highly competitive.
Bata shoes, Apex tannery, Legacy footwear, Samata leather and Apex Adelchi footwear are
renowned companies in Dhaka and Chittagong stock market as well. But there are numerous
other small and big manufacturers of leather products. At present there about 15 exports oriented
shoes manufacturing units located mostly in and around Dhaka city. There are more than 2000
shoe making units supplying in the domestic market of Bangladesh.

4.5 Critical success factor of Leather Industries in Bangladesh

Competitive pricing is a sensitive issue for our leather industry. Globally leather and leather
goods have a vast market and a saturated one too. Indian, Pakistani, Chinese, Vietnamese
products are available at a cheaper rate in the market.

The developed countries are outsourcing now. Bangladesh mostly exports finished leather. The
leather goods portion is not yet too high. But to survive in the market competitive pricing is used
often. Where other Asian countries are offering products at a relatively cheaper rate Bangladesh
can’t help keeping up with their pricing.

Quality of Products

Bangladesh has one of the biggest advantages and that is quality leather. The cowhide, oxhide,
sheep and goat skin found in Bangladesh are of unparallel quality. The advantage Bangladesh
leather sector holds over their competitors is the quality of leather. Bangladesh has soft, classy
and very suitable leather that can be used to produce very good quality leather goods. That’s why
the leather this country exports have a very high demand. As good as the leather sector is in
finished leather, the designer products suffer from bad finishing, designing and so on.

Strong Distribution Channel

There is no established distribution channel for leather and leather goods yet. More or less
leather and leather goods related businesses are growing up surrounding Hazaribagh. Almost
29% of the businesses are small businesses and micro businesses are almost 57%. These
businesses do not have their own distribution channels. As a result they sell their products to
various brands and those brands sell the goods under their brand umbrella. These small and
micro businesses do not have the chance to expand further. But if they have distribution channels

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of their own it will allow them to create their own brands and increase positive competition in
the market.

Cost Control

Apart from leather, non-footwear leather goods have a very small market in Bangladesh. But this
needs to change. To create a local market, the high pricing of leather goods will have to change.
If these goods can be made affordable in the local market to a bigger number of consumers, the
market will become bigger too. To make these products available in the local market at an
affordable price, the business people must lower their production cost. Cost control strategy is
crucial for that purpose.

Meeting Ecological Standards

Industrialization is a blessing and a curse at the same time. It has sped up life but harmed the
environment. Every industry must meet the ecological standards. Leather industry is in dire need
of healthy work environment. Tanneries are not only damaging the health of the workers but also
polluting the environment to a great extent. Not only that, the developed countries that purchase
leather and leather products from Bangladesh maintain strict rules and regulations about
workers’ rights and safety, healthy environment, meeting ecological standards. Failure to
maintain these can not only damage our hard built goodwill but also will cause to lose the global
market.

Ensuring Government Support

Though the government has declared various incentives for the growing leather industry, most of
them are not operational yet. The solid government support will give this industry a very big

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Chapter 05: Company Analysis: APEX Footwear

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5.1 Company overview
Apex Footwear Limited (AFL), with revenues of USD 138.5 million in 2013, is one of the
leading manufacturer and exporter of leather footwear from Bangladesh to major shoe retailers in
Western Europe, North America and Japan. AFL is involved in the local footwear retail business
with the second largest shoe retail network in the country and Public listed and traded since
1993, AFL currently employs over 9,000 persons and is in full compliance with Corporate
Governance Compliance Report under Section 2CC of the Securities Exchange Commission
Notification Order.

Apex ltd in Bangladesh is the local manufacturing and retail wing of Apex Footwear Limited and
earned both critical and commercial fame through export of high quality leather footwear in the
international arena. It has over 180 own retail outlets and 380 authorized resellers. The ten in
house brands, namely Venturini, Apex, Sprint, Maverick, Moochie , Nino Rossi, Sandra Rosa,
Revive, Twinkler and School Smart and one international brand. Dr. Mauch. Apex provides a
huge selection of shoes, sandals, belts and other accessories.

Name of the Company: APEX ADELCHI FOOTWEAR LIMITED

Date of Commencement of Business as Apex Footwear Limited: January 04, 1990

Name Change to Apex Adelchi Footwear Limited: December 27, 2006

Type of Company: Public Limited Company

VISION: “HONEST GROWTH”

Mission:

1. Sustainable Growth.

2. Creating value for our shareholders.

3. Proactive compliance.

4. Corporate Social Responsibility.

5.2 Associates Companies:

 Apex Tannery Limited.

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 Adelchi Footwear Bangladesh Limited.

 Apex Pharma Limited.

 Grey Advertising Bangladesh Limited.

 Quantum Marketing Research BD Limited.

 Mutual Trust Bank limited.

 Pioneer Insurance Company Limited.

 Gallerie Apex.

5.3 Product:

Since the beginning of the retailing business, in 1990, AAFL received a remarkable response
from the local market which motivated the company to expand over the years. (Abrour) Today,
the company offers the local consumers of Bangladesh a much wider range of products than
before. (Abrour) Most of the products that are offered in the local market by AAFL are relatively
different from the ones that are exported, especially in terms of design and material. (Abrour)
The reason behind this is the different climate, culture and the demand of the consumers of local
and foreign markets. (Abrour) For example, AAFL exports products like ladies boots which are
not available in the local market because the boots do not complement with neither the clothes
that most of the ladies wear nor the culture of the country. (Abrour) So, AAFL offers ladies
open sandal to meet the demand of the local market which, on the other hand is not exported as it
would not satisfy the taste of foreign consumers. (Abrour) Thus, the product development unit
of AAFL is continuously working to develop products based on the needs and wants of the local
consumers

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5.4 SWOT Analysis of Apex Adelchi Footwear Limited:

Strengths:

AAFL has advanced machines and skilled manpower which make it possible to produce high
quality footwear. As a SBU of Apex group, it also has good financial backup. As a partner
company of Adelchi, Apex gets product designs from them which make it possible for them to
follow Italian fashion trend. They have renowned brand image in the footwear market.

Weakness:

AAFL‟s product price is comparatively high. On the other hand, their ladies and kids footwear
brands are not that much strong. Furthermore, they have to depend on foreign suppliers for raw
materials and design support.

Opportunities:

The quality of the leather available in Bangladesh is really very good. Furthermore, here labor
cost is low which makes it possible to produce the products more cheaply. On the other hand,
young generation is now more fashion oriented and brand conscious.

Threats:

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Consumers are now more prices sensitive day by day. Furthermore, most of the raw materials are
not locally available. Beside this, leather price is increasing day by day due to high demand.
Production is also hampering due to electricity crisis.

Part 6: Conclusion and recommendation

26
Developed countries are treating Bangladesh’s leather sector as a secure for investment.
However, the sector has a rather constrained demand structure in the domestic market due to the
limited national purchasing power. Nevertheless, industry insiders are expecting a growth in the
domestic market in consideration of the fact that approximately 10% of Bangladesh’s total
population (around 15 million) is estimated to have an income level comparable to that of the
developed countries. Hence, there appears to be a large unexplored domestic market for footwear
and other leather products for Bangladesh with an estimated demand for 30 million pairs per
year. The footwear sub-sector of Bangladesh earned revenues in excess of US$250 million in
2010-2011. The European Union (EU) is the biggest destination for footwear exports with a 60%
share, followed by Japan with 30%, and the rest of the world accounting for 10%. Bangladesh
has only a 1% share of the world footwear market. There are about 49, 300 tones of solid waste
generated every year from tanneries in Bangladesh. The government should try to facilitate
growth in industries which can use these wastes to make other value added products. A by-
product manufacturing unit and energy generation could be useful options.

Reference
1.H.J.Paul,P.S.Philips,Bangladeshi leather industry: An overview of recent sustainable
development, SLTC journal,vol:97,pg:57.

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2.Bangladesh Export Promotion Bureau (EPB). 2011,(http://www.epb.gov.bd), Dhaka,
Bangladesh.

3. Daily Star. 08 March 2015. Leather sector aims for US$5bn in exports.
http://www.thedailystar.net/leather-sector-aims-for-5b-in-exports-54932.

4. www.Bangladeshtrades.com,Leather Industry in Bangladesh,[

http://www.bangladeshtrades.com/bd-company-list/leather-industry-in-bangladesh.html]

5.Bangladesh investment development authority,Leather and Leather goods,[

http://www.bida.gov.bd/site/page/b4c822d6-9613-40c6-89da-e4904e64c8c4/Leather-and-
Leather-Goods,11aug,2016.

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