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Independent University, Bangladesh

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A Report on a Bangladesh Leather Company Apex Adelchi
Footwear Ltd

Submitted to

Dr. Md. Anowar Hossain Bhuiya

Legal & ethical Issues in Business

Sec: 02

MBA515

Submitted by

Moniruzzaman ID#1610622

Mohammad Reaz Uddin ID#1630949

Mehedi M. Saimum ID#1630959

M. M. Al-Fuad ID#1620958

MD. Nazmul Islam ID#1630850

MD. Rounak Ahmed ID#1630849


DATE: 28/03/2017

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Executive summary

A leading manufacturer and exporter of finished and crust leather from Bangladesh to major
products manufacturers in China, Japan and Italy. The company has annual export revenues of
USD 37 million in 2006-2007, comprising almost 15% of the total export earnings from leather
of Bangladesh. ATL pioneered the export of value added crust and finished leather from
Bangladesh and accessed capital markets for growth. ATL introduced the first convertible
debenture in Bangladesh and has been publicly traded since 1986. ATL currently employs 955
persons, is professionally managed and is in full compliance Report under Section 2CC of the
Securities & Exchange Commission Notification Order. ATL is also the first tannery in
Bangladesh.

Apex Adelchi Footwear Limited is a leading manufacturer and exporter of leather footwear from
Bangladesh to major shoe retailers in Western Europe, North America and Japan. AAFL
pioneered the export of value added finished products in the leather sector of Bangladesh and is
also involved in the local footwear retail business with the second largest shoe retail network in
the country. AAFL has equity, technical and marketing participation from La Nuova Adelchi one
of the largest footwear manufacturers of Italy. The report emphasizes with the analysis of the
footwear industry, company in focus, presenting the mission & vision, the values & product,
description of 8 associates companies, finance related issues are discussed in detail along with
their results and possibilities. Along with the report contains my practical observation and
experience in Apex Adelchi Footwear Limited at Head office. The overall performance of AAFL
shows a satisfactory position although they have been suffering last few years. It is gradually
expanding its asset base and able to proper utilize assets. No business stays at the top if it doesnt
maintain its performance. Thus it is very important to fulfill the demand of the consumers
through competitive advantage. Since their policy is very well-formed we can hope that the
growth of the companys will increase and this company will bring success for our country in the
leather footwear in future.
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Contents
Executive summary.................................................................................................... 2
Introduction................................................................................................................ 5
Origin of the Report.................................................................................................... 6
Background of the Report........................................................................................... 7
Objective.................................................................................................................... 7
Methodology............................................................................................................... 7
Limitations of the Study............................................................................................. 8
Location of Leather Firms/Units................................................................................11
Ownership Pattern of Leather Firms/Units................................................................12
Company Profile......................................................................................................... 6
Product Category...................................................................................................... 12
Vision........................................................................................................................ 12
Mission..................................................................................................................... 13
Major source of hides & skins...................................................................................13
Raw Materials........................................................................................................... 14
Raw Materials used by the Leather Firms/Units........................................................14
Raw Materials: Leather Processing...........................................................................14
Raw Materials for Wet Blue (Raw Hides)...................................................................14
Raw Materials for Crust............................................................................................ 14
Raw Materials for Finished Leather...........................................................................15
Chemicals and Accessories: Leather Sector.............................................................15
Machineries.............................................................................................................. 15
Machineries Used in the Leather Sector...................................................................15
Machineries: Leather Footwear................................................................................. 16
Machineries: Leather Processing.............................................................................. 16
Labor in the Leather Sector...................................................................................... 16
Labor: Leather Processing........................................................................................ 17
Operating functions of Apex..................................................................................... 17
Human Resource Division......................................................................................... 18

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Importance and Features of Leather Sector in Bangladesh......................................19
SWOT Analysis of Apex Adelchi Footwear Limited....................................................20
Findings.................................................................................................................... 20
Prospects.................................................................................................................. 20
Draw-backs............................................................................................................... 21
Recommendation..................................................................................................... 22
Conclusion................................................................................................................ 23
Reference................................................................................................................. 24

Introduction

In 1990, Mr. Syed Manzur Elahi, the chairman of Apex group started a new venture known as
Apex Footwear. In 2006, Apex Footwear Limited collaborated with Adelchi- an Italian company
and changed the name to Apex Adelchi Footwear Limited (AAFL), initiating a joint venture with

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a new business spirit. Apex Adelchi Footwear Limited is a leading manufacturer and exporter of
leather footwear from Bangladesh to major shoe retailers in Western Europe, North America and
Japan. AAFL pioneered the export of value added finished products in the leather sector of
Bangladesh and is also involved in the local footwear retail business with the second largest shoe
retail network in the country. AAFL has equity, technical and marketing participation from La
Nuova Adelchi one of the largest footwear manufacturers of Italy. Public listed and traded since
1993, AAFL is professionally managed, currently employees more than 6800 persons and is in
full compliance with Corporate Governance Compliance Report under section 2CC of Securities
Exchange Commission Notification Order.

Company Profile

Name of the Company: Apex Adelchi Footwear Limited.

Date of Commencement of Business as Apex Footwear Limited: January 4 1990.

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

Type of Company: Public Limited Company

Associates Companies:

Apex Tannery Limited.


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.
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Origin of the Report

To expand the practical knowledge by implementing theoretical knowledge through the semester
program that would make a student to become a competitive with the outside world. That
program not only increases the knowledge but also give the idea about organizational activities
before entering into an organization. Independent University, Bangladesh is one of the reputed
private university in Bangladesh, has designed the curriculum of MBA course such way that
international graduates will be produced. The report thus was titled as Leather Company in
Bangladesh like Apex Adelchi Footwear Ltd.

Background of the Report

The business world is getting dynamic and competitive day by day. It is hard for an organization
to run & even survive in a fast paced, growing and uncertain world if it cannot keep tracks with
the go of business dynamism. Business plays and links important roles in developing the
economy of a country. So, as a business graduate, I think I need to be attached with any
organization to get a handy & versatile experience about the business world before starting our
career. Internship is the arrangement, which makes a bridge between our academic knowledge
and practical world to have an acquaintance with the real business world as well as to gear me up
to lead the future competitive business. I have worked in the accounting division of Apex
Adelchi Footwear Limited, head office, Gulshan-1, Dhaka. In this report, I will try to make an
overall analysis of AAFL.

Objective

To show an overview of the company (vision, mission, value, product offerings,


associates companies)
To present an overview of Department of Apex Leather Company.
To present an overview of footwear industry, economic condition of Bangladesh &

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worldwide.

Methodology

While conducting the report, sources were explored for primary information and data. But hardly
any updated data could be found. In the absence of updated information or data dependence on
secondary has been inevitable. However, wherever possibly primary data has been used. Data
were also collected by interviewing the responsible officers and from some documents &
statements printed by the Apex and the website of AAFL. There have been used some statistical
tools (Microsoft Office Excel table) and graphical representation (Microsoft Office Excel chart)
to find out different types of analytical results and interpretations.

Primary Data Collection:

Practical desk work.


Face to face conversation with the officers and clients.
Data collection of own supervision.

Secondary Data Collection:

Annual report of AAFL.


Official files and folders.
Working papers.
Selected books.
Published and unpublished documents.
Website.

Limitations of the Study

As I did my internship program in Apex Adelchi Footwear Limited & I worked in the
Accounting Department so my report is fully based on the financial performance analysis of the
company. But to prepare this report I faced little difficulties through I have also got some

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limitation which are:

o The first limitation is that I failed to sketch the complete picture of the Apex activities at
the period of my internship programmed. So I tried my best to focus on what I have done
and also tried to make it consistent with other part of the report.
o The second limitation is the lack of intellectual thought and analytical ability to make in a
perfect one. I have to offset with quality due to time constraint, which apparently seems
to be the most severe limitation.
o Sufficient records & publications as well as up to date information are not readily
available.
o Another limitation of this report is that the companys policy of not to disclose some data
& information for obvious reason, which could be much more useful.

Literature review

Recent Global Economic Condition and Bangladesh

At present the overall economic condition of the globe is not of good shape at all and the world
is facing this type of economic disaster for the first time after a long period. The first world
countries are facing this problem very strongly. Basically after the incident of 1/11 in USA, the
economic crisis began to start and it affected the whole global economic condition very slowly.
The main reason of this crisis is the overall economic activities of USA are very much related to
the whole world as its economy is controlling economy of the world. Basically, the western
world people are very much familiar with the credit card facilities and the financial
intermediaries of that region are very much active for providing this type of facility to the
general people by taking a lot of risk. They only believe in Risk is proportional to return and
this belief back-fired them and most of the high risk taking financial intermediaries of that region
faced bankruptcy. This is just because of very aggressive marketing strategy of those financial
intermediaries. They provided loans to the general ultimate consumers very aggressively and
could not get it back in the due time that means they provided a lot of flexibility to the customers
and their recovery strategy was not so much aggressive. In other words, we can say that the
monitoring activities of the central bank of that particular region was not that much strong or
rude to recover the provided loans to the customers. They also believe that they have got asset

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but not enough liquid money and that is why they took risk and the result is the present odd

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situation. Bangladesh is also starting to face the economic disaster situation, as it is getting grants
from the first world countries as well as from their controlled international organization like
WHO, World Bank, UNDP, UNICEF, WTO, IMF and some others. These welfare organizations
are starting to stop funding in various less important projects that are already running or going to
be started to run in this developing country. Besides, the people outside Bangladesh who are
basically Bangladeshis are sending less remittance than the recent past. It causes less money
supply in the inside overall economy of this country Bangladesh. As our country is partly
dependent on the foreign remittance, we face a lot of problem for the less amount of foreign
remittance. Moreover, our export volume is also becoming smaller and smaller for the global
economic crisis, which also shorten our incoming foreign currency and it also affects the overall
money supply of the country. Not only that, the first world people is also trying to avoid buying
high graded consumer products that means luxury products and they also want to buy the
existing market products in the lesser amount than the recent previous time and that is why the
bidding price that the garment factories of Bangladesh have got from the outside agents is also
becoming lower and it affects the profit margin of them as well as their sustainability. For the
global economic crisis, many Bangladeshi people, who are working in the foreign countries, are
losing jobs and they are coming back to their motherland. Besides, many other Bangladeshi
people are in the pipeline to lose their running jobs. So, as a whole we are going to face a very
big problem in the upcoming very recent future. Top local footwear makers and exporters are set
to increase their production capacity to utilize the growing international demand for low-cost
Bangladeshi shoes. Meanwhile, footwear export recorded around 30 percent growth in the July-
December period in 2010 compared to the same period in 2009. The sector earned $98.74 million
in exports during the period. Top manufacturers, including Apex-Adelchi Footwear Ltd, Jennys,
Landmark, Leatherex, Bay Footwear and Picard Bangladesh, are increasing their production
capacity by opening new factories and importing sophisticated machinery and latest technology.
The continuous growth in footwear export is the main reason that forces local companies to go
for expansion and the enhanced capacity will help the exports increase by more than 40 percent
from 2011, industry insiders said. Currently, the local companies make leather footwear of
around Tk 1,700 crore a year, of which 45 percent products are meant for shipment. The country
exports around six million pairs of leather footwear a year, with Apex Adelchi being the largest

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exporter. Mazharul Haque, general manager of Jennys Shoes Ltd, said his company is set to

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increase its production units and showrooms across the country. The demand for Bangladeshi
low-cost footwear for both men and women is on the rise in the international market, as we
produce shoes from high quality finished and crushed leather he said, adding: The prices of our
products are lower than those of Indian and Chinese. The export growth in value-added leather
products, like shoes and bags, is fuelled by the declining demand and consumption of finished
leather in the international markets caused by the global financial crisis Haque said. He said his
company set up a new factory in Gazipur in 2009 for bulk production mainly to meet the
increasing orders from Italy, Portugal and the UK. We are constantly improving the quality of
our products by upgrading technology that we import from Italy and Germany, said Haque. The
company opened 12 new showrooms in and around Dhaka in 2009 and plans to capture a
significant market share by opening showrooms in all district towns by this year. Jennys exported
six lakh pairs of shoes in 2009, while the annual turnover of the company stood at Tk 80 crore.
AKM Afzalur Rahman, managing director of Landmark Footwear Ltd, said the increasing orders
from Japan and European nations made his company increase its production capacity further.
The cost of producing leather shoes is lower in Bangladesh than in China and India and this is
why we are receiving orders from Japan and Europe, he said. Another reason behind the
growth is the Italian technology we are using, which builds a level of trust among the buyers,
Rahman said, adding that his company also supplies to the renowned Japanese brands like ABC.
Landmark introduced eight production lines in 2009, while each production line costs around Tk
5-6 crore and can produce only one design. The company plans to add more production lines by
2011, said Rahman. Footwear export has started to grow fast mainly from the last quarter of
2008, when the countrys finished leather export declined because of global financial crisis and
the local entrepreneurs started to produce value-added products. Many developed countries such
as Italy suspended production of branded shoes for both men and women as the demand for
branded shoes marked a sharp fall in the face of global recession. Also countries like China and
India are failing to produce high quality but low-cost leather items because of the anti-dumping
rules of the World Trade Organization (WTO). So, orders from Germany, Italy, France, Japan and
Canada are shifting to Bangladesh. The US government move to cut dependency on China and
European embargo on Chinese and Vietnamese footwear are also pushing the buyers into

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Bangladesh, said industry insiders.

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Location of Leather Firms/Units
The census study is based on the firms where at least 15 or above employees is employed. It has
been found that there are as many as 131 operational firms having more than 15 employees of
which 96 are leather processing units, 26 are footwear manufacturing units and 7 are leather
goods producing units.

Almost all leather units are located in Dhaka. Of the leather processing units about 95% are
concentrated in the Hazaribag area of Dhaka city. Footwear and leather goods producing units
are also located mainly in Dhaka. Other than Dhaka some leather units mainly footwear
manufacturing firms have been found in Chittagong. Of the leather units 5% are located inside
EPZ at Dhaka and Chittagong.

Ownership Pattern of Leather Firms/Units

Most leather firms/units covered in the census study are under sole ownership or proprietorship.
Especially, about three-fourth of the leather processing units are owned by the sole owners.
About 42% of the footwear-manufacturing units are private limited companies and another 42%
are sole-ownership firms. Of the leather goods producing units, 80% are either solely owned or
private limited companies. Only an insignificant proportion (less than 5%) of the total
firms of the leather sector is converted in to public limited companies.
Most of the leather firms are of local origin. Only slightly higher than 5% of the total firms are
owned by the foreigners all of which are leather processing units. A few footwear manufacturing
units located in the country are joint venture companies. All leather goods manufacturing units of
the country are owned by the local investors only.

Product Category

Mens Item Ladies Item Leather goods


Shoes Sandals junior kids Belt
Sandals School cads Wallet
Sports item

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Foot product
Leather bag

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Vision

Honest Growth

Mission

Sustainable Growth.
Creating value for our shareholders.
Proactive compliance.
Corporate Social Responsibility.

Major source of hides & skins


The principal sources of bovine hides are the meat markets in North America, Europe, Australia,
and Latin America. The former Indian subcontinent (India, Pakistan and Bangladesh) is also a
significant source of cattle hides, but the quality is not up to international standards. Sheep skins
are sourced mainly from Europe, New Zealand, Australia, Iran, and Sudan. Goat skins are
supplied largely by developing countries including Bangladesh.

Table: Number of Animal Population in Bangladesh (thousand head)

Types 97 98 99 2000 2001 2002 2003 2004 2005est.

Bovine 24816 24220 24480 24730 24830 24958 24882 25121 25460
Animal

Sheep and 1110 1121 1132 1143 1143 1150 1135 1139 1148
Lambs
Goats and 33500 33800 34100 34400 34400 34612 34959 35389 35817

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Kids

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Source: FAO, 2006

Raw Materials

Raw Materials used by the Leather Firms/Units


As the survey data show, raw materials used by the leather sector firms are collected mainly from
the local sources. Except for an insignificant proportion, almost all raw materials of wet blue i.e.
raw hides are collected from the local sources. Raw materials for Crust leather and finished
leather are wet-blue and crust respectively. Over 95% of the raw materials of crust and finished
leather are sourced locally. The broad categories of leather firms, footwear sector used highest
proportion of raw materials (includes finished leather, sole, adhesive etc.) from external sources
(around 20%).

Raw Materials: Leather Processing


Leather processing units or tanneries produce wet-blue, crust, and finished leather. In producing
wet-blue and crust, the firms use raw hides and wet-blue as raw materials respectively. Crust
leather is used as raw materials in producing finished leather.

Raw Materials for Wet Blue (Raw Hides)


Raw hides used for producing wet-blue is mainly collected from local sources. Locally, raw
hides are collected mainly from leather depot located at Dhaka, Chittagong, Comilla, Kustia,
Natore and Rangpur. Only a very insignificant volume of camel hide is imported from external
sources. South Africa is the major source of camel hide.
Raw Materials for Crust

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As in case of wet blue, raw materials for producing crust is mainly collected from local sources

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mainly from Dhaka. Only some quantity of wet-blue to prepare crust leather is collected from
Chittagong and Jessore. Only a very insignificant volume of camel wet blue is imported from
external sources mainly from South Africa and Australia.

Raw Materials for Finished Leather

Crust leather used for producing finished leather is mainly collected from local sources. Only
about 5% of the cow crust is imported from external sources valued Tk.34 million (monthly
average).

Chemicals and Accessories: Leather Sector


A number of chemicals are used in the leather processing, footwear manufacturing and leather
goods manufacturing units most of which are foreign chemicals. Above 95% (of the total value)
of the chemicals used in the productions of crust and finished leather are foreign. Over 70% (of
the total value) of the chemicals used by the footwear manufacturing is foreign made. However,
leather goods manufacturing units depends wholly on local chemicals.

Many accessories are used in the production of footwear and leather goods. These include
bukles, belt, button, belco tom etc. Both footwear and leather goods manufacturing units use
foreign made accessories for their products. As a whole, only about 20% of the accessories used
in the production of footwear and leather goods are locally made.

Machineries
Machineries Used in the Leather Sector

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A number of machines are used in the leather sector industries: leather processing, leather

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footwear and leather goods. A huge number of machines used in different leather sector
industries are collected from external sources.

Machineries: Leather Footwear


In footwear industry generally more than one machine/tool are used in each stage of production.
Most of these machines are foreign made. Italy, India, Germany, Taiwan, and Korea are the main
sources of machineries used in the production of footwear.

Machineries: Leather Processing


Under leather processing, production wet-blue, crust, and finished leather require different types
of machines at different stages. Drums are extensively used at different levels in the processing
of wet-blue. Platting machine, dyer, hook dryer, drum etc. are

some common machines/tools used in the processing of crust leather. In the production of
finished leather deducting machine, buffing machine, spraying machine etc. are commonly used.
Most drums used are locally made. However, most of the other machineries used in the leather
processing are foreign made machines. The main sources are India, Italy and Germany.

Labor in the Leather Sector


The survey data show that a total of 18059 employees are directly employed by the leather sector
firms/units having above 15 working force . Of them, about 60% are skilled (having experiences
of more than 3 years), about 21% are semiskilled (having experiences of 1-3 years), around 15%
are unskilled (having experience of less than 1 year) and less than 4% are professionals.

Most of the leather sector manpower/employees (about 80%) are full-time employees, and most
of them belong to skilled employees category. A notable number of about 18% of all the
manpower are seasonal employees. Of the total employees about 59% are employed in the
leather processing units, 37% in the footwear manufacturing units, and remaining 4% are in
leather good manufacturing firms. Among the employees about 73% are male. About 97% of the
total female employees are full-time employees; however, about 28% of the male employees are

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either seasonal or part-time employees.

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Labor: Leather Processing
In the leather processing units, most of the employees are involved in the production of wet-blue
and crust leather. They accounted for over 70% of the total persons employed in the leather
processing units/firms. Division of labor at different departments are there in the leather
processing units, however, a few workers are involved in more than one departments in some
firms (as revealed in the survey). Though the number of cases is very few, there is data
overlapping. Of the total employees of leather processing units, about 6% are engaged in
finishing and packaging and management comprised over 9%.

Most employees of the leather processing units are having more than three years experiences
(skilled). About 30% employees in the management are professionals. Umber of professional
involved in the production of wet-blue, crust, and finished leather ranges from 2.5-4 % of their
respective number of employees. As the normal trend of the overall leather sector, most
employees are male and are full time employees. Age distribution of the employees as observed
show that most employees involved in the production of wet-blue, crust, and finished leather
belong to the age group of 15-29 years followed by 30-44 years. In the management however,
over 60% employees aged between 30-59 years. As can be expected professionals are highly
paid as compared to the other employees. Of the full time other employees, skilled employees
get maximum payment followed by semiskilled and unskilled. No such trend is observed in case
of part-time employees. Male employees draw better salaries compared to the female employees,
and as expected skilled employees involved in the management get better payments.

Operating functions of Apex


Operating functions of Gallerie Apex (GAPX) is more effective according to the vision of this
company. Whole process of GAPX operates a functional team on the demand of whole
marketing process. These departments are shown as below:

Human Resource Division.


Product Development.
Marketing Department.

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Sales Department.
MIS Department.

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Merchandising Department.
Supply Chain Department.
Accounts Section

Human Resource Division


This division always monitors the facilities of employees and to check problems. (Mominur)
There are some activities that HR department also do for the employees of Gallerie Apex like:

Human Resource Planning


Recruitment and selection
Compensation and Benefit
Accommodation
Health and safety
Employee and worker relation
Training and development
Motivation
Maintenance

Every manager and employees of every company wants a healthy and safe work environment.
This environment is one of the more challenging areas for HR department. This department of
Gallerie Apex provides maximum safety and healthy environment under their activities.

CSR activities of Apex Footwear Limited

Activities done for their employees

Medical care facilities inside the Factory

Free Immunization for children of employees

Free Tetanus vaccination for all female workers

Child care facilities


Group Life Insurance Policy for all workers

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Workers Profit Participation Fund

Activities for the community

Apex Footwear Limited as a part LFMEAB donated Tk. 5m for the medical treatment of the
survivors of Rana Plaza Tragedy at Savar. & through its sister concern Apex Pharma, it also
donated Tk. 150,000 worth of medicine for the victims.

Board level CSR committee with allocated budget.

Education-Providing stipend to the local school children for their education.

Co-sponsored Knowledge Centre by Bangladesh Brand Forum.

Participated in Beautification Program of Farm Gate area of Dhaka.

Donations for Flood, Cyclone victims.

Sponsored first ever Industry Centre of Eccellence for Leather (COEL), first of its kind in
Bangladesh.

Training & Skills Development Activities

Started training using the factory premises of Apex Adelchi Footwear Limited with the help of
Poverty Reduction by Increasing the Competitiveness of Enterprises (PRICE), which is funded
by the United States Agency for International Development (USAID) to train 400 individuals
every three months time, resulting in a total of 2400 operators trained in one and half years to
create employment opportunities in footwear and leather goods sectors.
Importance and Features of Leather Sector in Bangladesh

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Leather sector is perceived to be one of the important economic sectors in Bangladesh. As a

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single sector of the economy, the sector contributes modestly to the countrys GDP. Contribution
of leather sector (hide &skin, leather and leather goods, and footwear except rubber) to GDP is
0.31% (at constant price) in FY 2003. There was a declining trend in this indicator following
1995. It came down to 0.30% in 2000 from 0.36% during 1995 and 1996.

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: AAFLs 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: 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.

Findings
By analyzing the leather industries of Apex Bangladesh we find the following prospect and we
also find some drawbacks that are creating hindrance to develop our leather industry:
Prospects

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The labor-intensive leather industry is well suited to Bangladesh having low-cost and
abundant labor.

Bangladesh has a domestic supply of good quality raw material, as hides and skins are a
by-product of large livestock industry.

Adequate government support in the form of tax holidays, duty free imports of raw
materials and machinery for export-oriented leather market

The industry lacks domestic technology and expertise and local support industries such as
chemicals are still under-developed.

Present government is in the process of setting up of separate Leather Park relocating the
existing industry sites to a well-organized place.

Leather exporters have been given 15% Duty drawback of cash incentive.

Low establishment cost.

Draw-backs

Leather and leather-based products and footwear sectors were not brought into
appropriate rules and regulations after liberation

Lack of infrastructural and other necessary facilities in comparison with competitive


countries

Lack of proper roles in the world market by our Embassy

Lack of banking facilities


Higher rate of interest of bank and other loans

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Procrastination in granting loans for project implementation

Lack of advanced technology

Natural disaster

Political unrest, hartal, strike, lockout etc.

Stop export of wet blue leather from July 01, 1990 without taking any specific
regulations

Recession in world market Twin Tower collapse, attack of Iraq etc causes many
organization to shut down

Recommendation

The overall performance of AAFL shows a satisfactory position although they have been
suffering last few years. The liquidity ratios show that they have impressive ability to meet the
outside liabilities from current assets. They have low return on asset, return on equity at the end
of the study but it can be said that there is every possibility to get better financial condition and
improvements by taking appropriate and accurate action to protect decreasing tendency. The
problem of AAFL can be solved to certain extent. The following suggestion can be made in order
to solve the problem.

They should increase dividend per share that will serve as a promotional tool.
Improvement of productivity through work-study and training of front line supervisors.
Contribution analysis for each of the product lines to optimize profit in light of demand
factors.
Effects to bring selling prices in line with costs having regard to competition and other
market factors.
They have to be more careful about utilization of working capital.
Close attention should be given to inventories and debt management.

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Rationality and planning in materials purchases to avoid unnecessary inventory buildup

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or shortage of materials.
In the face of todays global competition with open market operation, AAFL must
develop and retain the high achievers and motivated work force and equip them with the
latest skills and technologies.
Provision for the training of officers and employees in modern management techniques.
Due to electricity crisis, AAFL is not able to run some advanced machineries which have
higher production capacity that is currently stacked in their warehouses. AAFL can use
HSFO based captive generation (import from Italy) or construct their personal power
plants, to run the present and advanced machines.
Although they have strong distribution network but it is not that much strong like Bata.
To capture more market share, they need to establish more retail houses like Bata so that
their products will available every corner of our country.
The tannery industry in Hazaribagh is unable to meet environmental friendly standards.
AAFL should focus on planning and alternative production source of environmentally
friendly finished leather from raw hides. This can be assessed by green measures that
their partner Italy is using such as intoxication before dumping.

Conclusion
Bangladesh leather industry is dominated substantially by the domestic investment which is
mostly export-oriented. The leather includes some ready-made garments, although that aspect is
continued mainly to a small export-trade in Italian-make garments for the US market.
Footwear is more important in terms of value addition. This is the fast growing sector for leather
products.

Presently Bangladesh produces between 2 and 3 percent of the worlds leather market. Most of
the livestock base for this production is domestic which is estimated as comprising 1.8 percent of
the worlds cattle stock and 3.7 percent of the goat stock. The hides and skins (average annual
output is 150 million sq.ft.) have a good international reputation. Foreign direct investment in
this sector along with the production of tanning chemicals appears to be highly rewarding.
Having the basic raw materials for leather goods as well as for the production of leather shoe, a

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large pool of low cost but trainable labor force together with tariff concession facility to major

Page
importing countries under GSP coverage, Bangladesh can be a potential off shore location for
leather and leather products manufacturing with low cost but high quality. In 2004-05 total
export of leather goods was 220.93 million US$ on the other hand it is 257.27 million US$
during 2005-06 FY.

Provision of newly announced infrastructural facilities through establishment of an integrated


Leather Park and simultaneously, growth in the global demand, opportunities for investing in and
setting up export-oriented leather industry in Bangladesh is definitely attractive. Foreign
investors are welcome to capitalize on this opportunity.

Reference

Annual Report (2006-2009) of AAFL


Annual Report (2009) of Landmark Footwear Ltd
Asekur Rahman, MIS Executive of AAFL, head office, Gulshan-1, Dhaka
Asekhur Islam, Merchandising Manager of AAFL, head office, Gulshan-1, Dhaka
http://www.apexadelchi.com, on 13th November 2010
http://www. economicsinfo.cz.cc, on 8th November 2010
http://www. epb.gov.bd
http://www.reportlinker.com, August 2010
Jerry J. Weygandt, Accounting Principles 7
Md. Jalal, Quality Control Manager of AAFL, head office, Gulshan-1, Dhaka
Md. Nasiruddin, Commercial Manager of AAFL, head office, Gulshan-1, Dhaka
Paul D. Kimmel, Accounting Principles 7