University of Dhaka

REPORT
ON
Analysis of Leather Industry in
National and International Context

Submitted to:
Md. Rashedur Rahman
Assistant Professor
Bangladesh in International Business (IB-410)
Department of International Business
Faculty of Business Studies
University of Dhaka
Submitted by:
Fireflies
4th Year, 2nd Semester
BBA 17th Batch, IB 4th Batch
Department of International Business
Faculty of Business Studies
University of Dhaka

Date of Submission: 06.01.2015

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 FIREFLIES

1. Zabiyda Juthi Roll: 05

2. Md. Jashim Uddin Mollah Roll: 19

3. Md. Jahir Hasan Roll: 22

4. S.M. Istiak Hossain Roll: 29

5. Ariful Islam Roll: 39

6. Md. Akram Hossain Roll: 53

7. Md. Mehdi Hasan Roll: 60

BBA, 4th Year, 2nd Semester

IB 4th Batch, BBA 17th Batch
Department of International Business
Faculty of Business Studies
University of Dhaka

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 LETTER OF TRANSMITTAL

January 06, 2015

Md. Rashedur Rahman
Assistant Professor
Department of International Business,
Faculty of Business Studies,
University of Dhaka.

Subject: Submission of Term Paper.

Sir,

We are very pleased to submit our report on Analysis of Leather Industry in National and
International Context. We are honored to prepare this report under your guidance since it gave
us an opportunity to enrich both of our knowledge and experience. We have taken this
assignment as an opportunity to know about Leather Industry in Bangladesh. We have tried our
level best to prepare an effective & creditable report.

We believe that it is encouragement for us to get involved with this process of reporting and a
way to enrich our knowledge.

Best Regards
Md. Jashim Uddin Mollah
Roll No: 19
On behalf of the group
Group Name: Firflies

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 Acknowledgement
This report was the endeavor of a great experience on the field of Leather industry sector in
Bangladesh. The completion of the report was much owing to our course Md. Rashedur
Rahman, Assistant Professor, Department Of International Business, University of Dhaka. It is
through his viewpoint that a prolonged part of the assignment could be completed. We also give
our utmost gratitude and respect to our honorable instructor for giving us his prolonged time
behind teaching us every step for evaluating this report. Without his support and advices this
report could not have been completed so successfully and timely.

We would like to thank all the team members who worked so hard to the finishing of the report
with such devotion, target, energy and their participation. However, this report was a combined
effort. Therefore, all the credit of our accomplishment spreads to all the helping hands.

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 Executive Summery
The contribution of the industry sector to Bangladesh economy has been on the increase. Among
the fifteen sectors identified for national income Leather Industry is one of them. Industry is
the backbone upon which the economy of any country prevails. The growth of economy, the
internal development of a nation depends upon the development of industrial sector. The cheap,
reliable, and abundant labor available in Bangladesh is attractive to the worlds leading
transnational corporations, but they have been very slow to move into the country, as they face
regular industrial unrest led by radical trade unions, poorly developed infrastructure, red tape,
and a very small local market. As in neighboring India, the Bangladeshi government promoted
the idea of state-led industrialization combined with heavy state involvement in and state control
of enterprise activities.

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 TABLE OF CONTENTS
Name of contents Page

Executive Summary 5

1. Introduction: 8-9

1. Background of the Paper:

2. Objectives:
3. Scope:
4. Methodology:
5. Limitations of the study:

2. Industry Overview: 10-15

1. Industry Profile
2. Present Scenario
3. Market Player
4. Major source of hides & skins
5. Major Products:
6. Importance and Features of Leather Sector in Bangladesh
7. Location and Market
8. Labor Force

Comparative Analysis 16-19

3. Global Industry Leaders 20-21

Global Footwear Industry
Market Products
Global Leather Industry

4. Bata Bangladesh 21-24

5. Dhaka Leather Corporation 25-30

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6. Apex Adelchi Limited (AAFL) 31-33

7. Leatherex Footwear Industries Ltd. 34-36

8. Leather Samanta industries Ltd. 37-39

9. Findings, Recommendation and Conclusion 40-42

10. Bibliography 43

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 1 Introduction
1.1 Background of the Paper

Leather is one of the oldest industries in Bangladesh and at the same time one of the most
potential one. It has a profound history in this south Asian territory which was laid by RP Saha; a
profound industrialists. Bangladesh earns billions of foreign currency by exporting leather and
leather goods. The leather industries are mostly situated in the densely populated residential area
surrounded by slums, where people are living ignorantly in one of the worst polluted areas in the
world.

Notwithstanding its small size, leather industry in Bangladesh seems to have undergone
significant transformation during the past two decades from a low value addition tanning activity
to a producer of leather footwear and leather goods along with high value added crust and
finished leather. China & India are the two market giants in this leather industry with its huge
number of domestic clients. Their low cost labors and high potential growth with some modern
amenity support make them stay way ahead of Bangladesh in terms of export. Still Bangladesh
intakes some competitive advantage in regards to better quality hides and skin just because of the
climate nature of this territory.

After the independence this industry went through several changes and the latest change came
from the government with direct order of transforming the whole industry from Hazaribagh
residential area to a modern Savar industrialized area. Still the whole process is a undergoing
one. This uprising industry needs better strategic plan and necessary stimulus from government
to better survive in the world competitive market and earn some substantial foreign currency.

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1.2 Objectives

To analyze the leather industry of Bangladesh.

To identify the market player existing in this sector.
To identify problems in the sector.
To show the trends of the leather industry in Bangladesh
To show the contribution of leather industry in the GDP of Bangladesh
To analyze the global leather industry
To depict a overall scenario of global leather industry

1.3 Scope

The study is about leather industry in Bangladesh and it has wide operations whole over the
country. So the overall scope of the report should be around the operating areas of this industry
and also beyond the borders as this industry has export market throughout different parts of the
world. This report primarily concerns the leather sector, its industry size and ownership
distribution, contribution in GDP.

1.4 Methodology

Information for this report is collected from secondary sources. The secondary sources of this
report are Bangladesh Economic Review, Census of Manufacturing Industries, and PHD thesis
repots, Research report by Tannery Owners association, books and Internet.

1.5 Limitations

The main limitation of the study is the time constraint. The time boundary was not enough to
conduct this type of important study and also the lack of sufficient co-operation of related parties
because of business nevertheless their intention. As a result, direct interviews of different
persons from different industries were not possible. For their views, we had to depend on the
national newspapers, internet, and Bangladesh Economic review, report of BBS and thesis
report.

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 2 Industry Overview

2.1 Industry Profile

Leather industry is a high potential sector in Bangladesh since its inception in 1970. Several
factors speeded up the growth of the industry including availability of good quality rawhide, low
labor cost, low maintenance cost, governmental assistance etc. About 95% of leather and leather
products of Bangladesh are marketed 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.

The country is endowed with luxurious vegetation encouraging a large livestock population. The
quality of the raw hide and skin is relatively good, as barbed wire fencing that damage the skins
of animals is not used in the natural farms and fields. Black goatskin of kushtia is particularly
noted for its finegrain structure and tensile strength. The tradition of humane care of domestic
animals also contributes significantly to keeping the leather quality high.

During the 1990s, the export market for Bangladeshi leather grew at an average of 10 15% per
annum. The average yearly exports accounted for $225 million. Finegrain leather of Bangladesh
enjoys preferential demand in Western Europe and Japan. Low wage level and the ban on
exporting wet blue leather helped the industry receive a new thrust in the country. Environmental
concerns arising out of the high concentration of production units in a small area of the older part
of Dhaka city are being addressed with plans for their relocation outside the city.

Leather goods producers in Bangladesh tend to be associated only with manufacturing and
exporting. They do not have much control over downstream operations. However, the success of
a number of Bangladeshi firms in attracting such brand names as Puma, Pivolinos and Hugo
Boss to source from this country proves that there is ample scope for the industrys upward
mobility.

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2.2 Present Scenario

This is a 4th largest export earning and highly potential sector in Bangladesh as the 90% of the
basic raw materials high quality grain leathers are locally available that can certainly find a
strong niche in the world market. Currently there are 220 tanneries in Bangladesh. They have a
total capacity of processing about 400 million square feet of wet blue, 300 million square feet
crushed leather and 130 million square feet finished leather per year. Bangladesh produces about
223.71 million square feet leather including 117.54 million square feet crushed leather for export
and 106.17 million square feet various type of finished leather per year. The earnings from
leather sector were $290.68 million in 2000-01 of which only $39.97 million came from finished
leather products. Leather sector can post 148 per cent increase in earnings if the leather items are
exported in finished forms. $720 million could be fetched annually from the sector, which
currently earns less than $300 million, mainly from export of crushed leather.

About 200 tannery units are located at Hazaribagh of Dhaka in only 50 acres of land popularly
known as tannery estate. According to the records of the Bangladesh Tanners Association, about
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3,000 workers are employed in the tanning industry. Besides, there are about 100 qualified
technologists including foreign nationals who are working in different tanneries. Total capital
invested in the tannery industry is estimated at Tk 2.5 billion, of which government/bank finance
is about Tk. 1.2 billion. About 1,500 persons are involved in the process of collecting raw hides
and skins and making them available at tannery units. About 100 organizations import chemicals
for use in tannery industry.

Bangladesh produces approximately 100-150 million sq feet of raw hides and skins, about 85%
of which is exported in crust and finished form. The rest is used for producing leather goods to
cater to the domestic market. Leather is a traditional export item of Bangladesh. But export
earnings from this sector could not indicate any predictable increase in the past. Since the
production and supply of leather depend on the availability of livestock and demand of the meat,
the total supply of leather cannot be increased in the short run. Therefore, the only way of
increasing earnings from this sector is the production and export of higher value leather products
for which international demand is growing.

2.3 Market Player

The leading tanneries of Bangladesh are-

Dhaka Leather
Apex Tannery
Lexco
Karim Leather
Samata Tannery
Bay Tannery

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2.4 Major source of hides & skins

Bangladesh is a significant source of cattle hides and skins, but the quality is not up to
international standards. Goat skins are supplied largely by developing countries including
Bangladesh.

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

Types 1997 1998 1999 2000 2001 2002 2003 2004 2005
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
Kids
Source: FAO, 2006

2.5 Major Products:

The major products are:

Shoe
Bag
Suitcase
Belt
Wallet

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2.6 Importance and Features of Leather Sector in Bangladesh

The leather industry contributes modestly to the countrys GDP. Contribution of leather sector to
GDP is 0.31% 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.

Table-2.1: Contribution of Leather Sector to GDP in Bangladesh

Year Leather and Hide and Footwear Except Total % of Total
Leather Goods Skin Rubber GDP
1992 792 3022 792 4606 0.33
1993 878 3066 878 4822 0.33
1994 1104 3104 1104 5312 0.35
1995 1282 3147 1282 5711 0.36
1996 1383 3189 1383 5955 0.36
1997 1471 3233 1471 6175 0.35
1998 976 3276 976 5228 0.28
1999 1529 3322 1529 6380 0.33
2000 1402 3368 1402 6172 0.33

Source: BBS, 2000

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2.7 Location and Market

Almost all leather units are located in Dhaka. Of the leather processing units about 95% are
concentrated in the Hazaribagh 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). They are mostly export oriented. About 12% of the leather
firms/units supply their entire production to the local market and the rest are exported. The
collective annual turnover of these leather firms is Tk. 16968 million. Of the total annual
turnover of the leather firms, the leather processing units contributes about 80% and footwear
manufacturing units about 18%.

2.8 Labor Force

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
either seasonal or part-time employees.

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 3 Comparative Analysis
3.1 Gross value added of top ten industries

3.1.1 Gross value added of top ten industries (value in 000)

Name Gross value added

1997-98 1999-2000 2001-2002
Readymade garments 39350586 56994590 65282477
Pharmaceuticals 8434412 9073565 53146102
Food & beverage 19762109 23435906 30657203
Cotton textile 6470676 10013860 20001691
Non-metallic mineral product 5750683 8856723 15006158
Leather & leather product 16283065 17052619 8 8,816,822
Wooden furniture 264266 1722994 8 8,456,584
Paper printing & publishing 6212528 9814705 491459
Jute textile 8578965 6006395 7 7,217,582
Soap & detergent 2059332 1923016 5,301,847

Source: BBS, Dhaka, 2003.

Among all the manufacturing industries readymade garment is on the top position and it has been
increasing year to year. Besides though the lower production in the former period, it has been
raising at a promising rate FY 1999-2000.

3.1.2 Production of major industrial goods:

Products Unit 2001-02 2002-03 2003-04 2004-05 2005-06

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 Readymade Million Tk 179381 188654 208604 221335 275205
Garments
Pharmaceuticals 000 Tk 20122359 19469750 21245600 22307084 24490160
Fertilizer 000 mt 1753.53 2263.53 2198.73 2102.36 1926.67
Cement 000 mt 2514.30 2564.69 2594.89 2942.69 3210.76
Jute Goods 000 mt 352.00 320.00 285.00 275.45 255.22
Paper 000 mt 40.37 30.26 28.92 25.90 25.70
Soap & detergent 000 mt 42.44 45.98 48.50 52.74 57.26
Leather Million 17.35 15.05 7.17 16.33 8.12
sq.meter
Beverage Million dz. 19.87 21.15 21.82 23.74 28.70
bottle
Cotton Yarn Million kg 65.58 69.84 84.57 105.57 120.90

Source: Economic Review of Bangladesh, 2006.

3.2 The production of Leather Goods

The trend of leather goods production is not in same direction in different years. In FY 2004-05
it has increased to 16.33 million square meters that immediately fall into 8.12 million square
metres in FY 2005-06.

3.2.1 Sales and Exports of Leather sector Enterprises/Firms

Table: Target and export performance of leather sector (in million $)

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Commodity Target Export Target Export Target Export Target Export
for performance for performance for performance for performance
2001- during 2001- 2002- during 2002- 2003- during 2003- 2004- during 2004-
02 02 03 03 04 04 05 05
Leather 200.00 207.33 227.74 197.23 200.00 211.41 230.00 220.93

Source: Export Promotion Bureau.

Leather processing units exported most of their sold products that accounted for about over 80%
of their total sales revenue during 2004. Footwear manufacturing firms exported about 50% of
the products (in terms of volume), however, sales revenue accounted for only about 40% of their
total revenue.

3.2.2 Export of Leather and Footwear

Table: Export of Leather and Footwear (Value in million dollars)

Year Total Export Leather Total Footwear export Total($)

2001-2002 207.33 48.49 255.82
2002-2003 191.23 46.72 237.95
2003-2004 211.41 68.30 279.71
2004-2005 220.93 87.55 308.48
2005-2006 257.27 102.56 359.83

Source: A study of expansion planning of leather business (28-08-2006)

3.2.3 Export Market of Leather and Footwear

Table-: Country wise Export of Leather & leather manufactures (Tk. in crore)

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 Year
Countries 2004-2005(1) 2003-2004(2) 2002-2003(3) Changes(1-2) Changes(1-3)
Italy 275.2 255.8 217.3 19.4 38.5
Germany 92.2 48.8 26.4 45.4 20.4
Spain 44.2 53.1 41.1 -8.9 12.0
France 39.6 41.2 42.3 -41.2 -1.1
U.K. 26.9 28.0 19.2 -28.0 8.8
Belgium 13.0 15.4 8.4 -2.4 7.0
Netherlands 12.1 14.9 7.2 -2.8 7.7
U.S.A 8.5 7.0 12.3 1.5 -5.3
Canada 3.6 0.5 0.5 3.1 0.0
Total 515.3 464.7 374.7

Source: Export promotion Bureau-2004-2005

Global Leather Industry

Every country in the world has a leather products industry in one form or another and every
country is a market for finished goods, the biggest of which is footwear. The manufacture of
products, especially footwear, pulls through the development of the tanning industry. Tanners
and leather products manufacturers are mutually interdependent. Most of the world population
has some sort of foot covering. Even people in the poorest of African and Asian countries
manage to obtain some sort of shoe. As populations increase and living standards raise so does
the demand for shoes. This may not be the case for leather goods, bags, wallets, belts, garments
etc. as they are more of a luxury item than a necessity. The growth in this sub sector tends to
lag behind footwear.

The manufacturing of leather products takes place in the East with the major market being in the
West. The main consuming markets in the world for leather products are Europe; the biggest,
and North America. These areas are the target markets for many leather products manufacturers
who aspire to be exporters. The footwear manufacturing industry in these areas has declined year
after year for the past 20 years, as they lose the battle with imports. Per capita consumption in
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recent years has shown a very modest increase. The effects of imports have been to decimate the
local manufacturing industries. Only in certain special situations has the local industry still
managed to survive.

India has not yet reached its potential on the world market. It is also building new shoe cities
aimed at the export market. Leading footwear players like Adidas, Puma and Nike are likely to
shift some of their purchasing and production from China to India over the next three years. In
December 2008 The Indian government has approved plans to build a footwear complex and
footwear components park in Chennai. The government will invest $3 million in the complex
and $2.1 million in the components park. A Footwear Design and Development Institute is also
being established in Chennai and is expected to be up and running by the 2010-11. The
government has also approved proposals to establish a leather goods park in Kolkata,
West Bengal ($1.1 million) and a leather complex in Andhra Pradesh ($ 6.2 million).
India has witnessed promising technology inflw and foreign direct investments. The entire
leather sector is nowde-licensed and de-reserved, paving the way for expansion on modern
lines with state-of-the-art machinery and equipment.

Global Footwear Industry

The global footwear market is expected to reach $195 billion by 2015, according to research
from Global Industry Analysts, with volume sales exceeding 13 billion pairs by 2012. Market
growth is predicted to rebound as consumer confidence builds in the post-recession economy.

Footwear sales have been falling in developed countries and slowing in emerging countries due
to lower income levels; and therefore, less spending on apparel and footwear. Consumers are
focusing increasingly on value for money, looking for simple, hard-wearing shoes that last.
Designer shoes have borne the brunt of this shift in consumption brought on by the economic
recession. Shoe manufacturers and retailers are since forced to compete on price and value.

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Market Products

The leather footwear market includes the manufacture and retail of different types of shoes,
including casual, sports and dress shoes. Leather is a common material in high-end shoes, used in
many designer brands. US brands often source their leather from outside of the US, in countries
such as India.

China exports more shoes than any other country, producing almost 13 billion pairs, or 63% of
overall production, in 2010, according to RNCOS. Domestic sales have been driven by online
shopping and rising demand for specific brands. China has been faced with domestic currency
appreciation, along with rising raw materials and production costs. Branded shoes are strong
sellers in China, with companies popularizing their shoes with promotional practices. Chinas
footwear market has recorded strong growth in consumption and exports, which is likely to
continue at an annual volume growth rate of 7% for the few years to come. Exports are strong
because on the domestic market, Chinese people consume less than 2.5 pairs of shoes each year,
whereas the Western average is far higher.

Indias footwear market is expected to record strong growth in the years to come, reports
RNCOS. The market, which has been impacted by an increasing presence of international
companies, is predicted to record close to 10% annual growth from 2011 to 2014. The market is
fuelled by advantageous factors such as a skilled workforce combined with low labor costs. In
production terms, India is second only to China. This market sector drives expansion in Indias
leather exports.

Global Industry Leaders

Key players on the global footwear market include Bata, Deckers, Brown Shoes, Wolverine,
Weyco, ECCO, Kenneth Cole, Nine West, Timberland, Puma, Gucci, Lacrosse, Vans, San Paulo
& Alpargatas, R.G. Barry, Nike and Adidas.

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 1. Bata Bangladesh

About Bata Bangladesh

In Bangladesh, Bata started its operation in 1962. The company is one of the largest taxpaying
corporate bodies contributing Tk. 1.2 billion (year 2009) which represents approximately 70% of
tax paid by the entire footwear sector of Bangladesh. Currently Bata Shoe Company
(Bangladesh) Limited operates two manufacturing facilities one in Tongi and the other in
Dhamrai. With a production capacity of 110,000 pairs of shoes daily, the company also has a
modern tannery facility with an output of 5 million square feet of leather annually. Annual shoe
sales currently stand at slightly more than 30 million pairs with a turnover for the year 2009 of
Tk 5 billion.

Bata is playing a pivotal role in developing the leather industry of the country. Bata has a firm
commitment to eco-friendly business and a state of the art Effluent Treatment Plant (ETP) has
been set up to provide a pollution free environment for both workers and the locality.

Vision

To make great shoes accessible to everyone

Mission

1. To help people look and feel good.

2. To be the customer's destination of choice.
3. To attract and retain the best people.
4. To remain the most respected Footwear Company.

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Porters Five Forces Model Analysis

This section will take the analysis one step further and conduct a brief Porters Five Forces
analysis to further map out the industry.

Threat of new Entrants:

Threat of new entrants is high in Bangladesh because Apex is already entered into the market as
a domestic shoe industry with high expectation and good management. Apart from that foreign
competitors like Liberty of India which already taking a grip into the shoe market especially the
women segment. There are also some other foreign shoe manufacturer like Nike, Reebok,
Addidas and Woodland. There are also some other domestic companies like Baly, Pagasus, and
Homeland etc. So the road ahead for Bata is not smooth at all and to forget the independent
sellers and smuggled shoe sellers who already have the highest market share. Bata has to go for
variety as well as their durability which they known for long.

Bargaining power of Suppliers:

The bargaining power of suppliers is relatively moderate. The number of suppliers is huge. And
the upcoming and other shoe companies buy in so much quantity that the suppliers have to
satisfy them even if by increasing quality and by decreasing price. The threat of forward
integration by the suppliers is high as brand identity is not a critical issue in the shoe industry in
many cases.

Bargaining power of Buyers:

Bargaining power of buyers is increasing day by day as new shoe companies with optimistic
future plan and changing trend and quality consciousness in increasing day by day. People want
durable shoes as well as modern designs. So to satisfy the customers the companies have to keep
up with the trend as well. The entrance of foreign brands like Nike, Reebok doesnt make the
scenario easier.

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Threat of substitutes:

One cant think of much substitute of shoes. There are not too many bare footed people now
days. At least they wear a sandal. So the threat of substitute is not that much.

Degree of Rivalry in the Industry:

Though Bata has enjoying quite a good market share and know the market for long the market
competition is intensifying day by day. In the decade the only worry for Bata was independent
sellers who have the minimal establishment costs and in many cases sale shoes of high quality of
minimal cost or poor quality shoes. But the situation has been changed much since now not only
the independent sellers but also the regional and world famous brands are now in Bangladesh. So
the competition has now much more intense. Bata Bangladesh has to think both of their old
threats as well as new competitors who has much more organized structure than the old
competitors.

SWOT Analysis of Bata Bangladesh

Strengths:

Image of the company

Quality Product
Differentiated line of products
Competitive Pricing
Strong distribution channel
Modern manufacturing facilities
Brand loyalty at mass level

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Weaknesses:

Insufficient promotional activities

Bata at present conducts all the store management activity manually. This results lots of
lengthy paper works, errors & waste of time.
Inability to catch the present trend in time
Less competitive price due to high cost structure.
VAT & tax barrier

Opportunities:

Despite political turbulence a segment of our middle-class is coming up with reasonable

buying power. Many of them are women who are decision maker so the city store
concept of Bata can attract them as whole of the family footwear can be available there.
Consumers like to shop in a store where they serve the whole family.
More competition results in more campaign for products.
Business Expansion in Shoe care products
Utilize outsourcing especially the synergy sources to achieve competitive pricing
Franchisee opportunity with global brands like Nike, Reebok, Hush Puppy

Threat:

Political instability affects the supply of raw materials and distribution of finished
products.
Uncontrolled counterfeit of Bata products
New companies like Apex, Homeland, Pagasus of Bangladesh and the foreign companies
like Nike, Reebok, Addidas are already in the market with good quality product. Have to
keep up with them respect of quality.
Rapid market expansion program by organized competitors like APEX.

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 2. Dhaka Leather Corporation

Environment Analysis:

Social and Cultural Factors:

Social and cultural indicators are positive signal for the future prospects of the company.
Peoples lifestyle is changing with the increase in disposable income and more and more people
are becoming quality and fashion conscious. Since people travel more and more they know what
the other leather company offers to them elsewhere. So Dhaka Leather must have to design to
suit with more modern fashion

Technological Factors:

Technological factors are one of the most important factors to produce more products efficiently.
Internet plays an important role as a medium to reach the consumers by providing information
about the products. Dhaka Leather provides new forms of technological improvement where
MIS department monitor their whole operation.

Political and Legal Factors:

In Bangladesh, political instability like hartal, strikes etc. are a serious barrier in the smooth
functioning of a company. However, Dhaka Leather is able to take some positive outputs from
political factors. As they are 100% taxpayers to Bangladesh government, they must able to make
understand the politicians the importance of FDI in the country.

Economic Factors:

Economic factors are other important factors to produce more products efficiently. Economic
factors are involve in income per capita, currency rates, interest rate, inflation rate etc. of a
country which affect to produce a product of a country.

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Porters Five Forces Model Analysis

This section will take the analysis one step further and conduct a brief Porters Five Forces
analysis to further map out the industry.

Threat of new Entrants:

Threat of new entrants is high in Bangladesh because Bangle leather complex, RMM leather
industry are already entered into the market as a domestic Leather industry with high expectation
and good management. There are also some other foreign manufacturer. So the road ahead for
Dhaka Leather is not smooth at all and to forget the independent sellers and smuggled leather
sellers. So Dhaka Leather has to go for variety as well as their durability which they known for
long.

Bargaining power of Suppliers:

The bargaining power of suppliers is relatively moderate. The number of suppliers is huge. And
the upcoming and other leather companies buy in so much quantity that the suppliers have to
satisfy them even if by increasing quality and by decreasing price. The threat of forward
integration by the suppliers is high as brand identity is not a critical issue in the shoe industry in
many cases.

Bargaining power of Buyers:

Bargaining power of buyers is increasing day by day as new leather companies with optimistic
future plan and changing trend and quality consciousness in increasing day by day. People want
durable leather as well as modern designs. So to satisfy the customers the companies have to
keep up with the trend as well. So the company must aware of the situation and work and take
steps accordingly.

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Threat of substitutes:

Another important force is much substitute of leather in market place. There are too many
substitute company in the market. So the threat of substitute is the important force of a company.

Rivalry in the Industry:

The situation has been changed much since now not only the independent sellers but also the
regional and world famous brands of leather are now in Bangladesh. So the competition has now
much more intense. Dhaka Leather has to think both of their old threats as well as new
competitors who has much more organized structure than the old competitors.

SWOT Analysis of Dhaka Leather Company:

Despites its enormous opportunities, it is still a long distance to be traversed as few as production
finished leather. Technology and others infrastructures are to be geared up. Moreover, an
environmental aspect is a big question.

Strengths:

Image of the company

Availability of raw hides and skins.
Cost of production is comparatively lower.
Leather sector enjoys a reduced rate of interest for industrial credit from the financial
intuitions.
Availability of low wage labor force.
Technologist in leather, Footwear and leather products are locally available.
Strong distribution channel.

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Weakness:

Leather industry in Bangladesh has been built up haphazardly in Hazaribagh without

proper planning.
No effluent treatment plant.
Insufficient practical knowledge of modern technology.
Lack of appropriate skills of the butchers in flaying and curing.
Insufficient Research and Development facilities.
Poor demand in domestic market.
Challenges of international brand images.

Opportunities:

Increasing global demand for leather and leather products.

Easy, simple and flexible procedures to foreign investment.
High potential for quality raw materials and maximum value addition inside the country.
Geographical location of the country is ideal for global trades with very convenient
access to international Sea and Air route.
Importing facilities of raw hides and skins if necessary.

Threats:

The impact of climate change is a great threat for industry.

Political scenario remains teased.
Availability of low priced commodity of synthetics fibers.
Huge dependency of high priced imported chemicals and accessories.
Competing with strong competitors like Bangle leather complex, RMM leather industry
ltd.

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 3. Apex Adelchi Limited (AAFL)

Apex Adelchi Limited (AAFL) is a leading manufacturer and exporter of leather footwear from
Bangladesh to major shoe retailers in Western Europe, North America and Japan. The company
has revenues of USD 119 million in 2012. AAFL pioneered the export of value added finished
products export 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.

Objective, Vision & Mission

Objectives:

Manufacturing shoes, boots, sandals, slippers and all kind of footwear; to market globally not for
domestic market.

Visions for the Future:

Apex Adelchi Footwears vision is, Honest Growth.

Missions:

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

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SWOT analysis:

Competitors:

Apex Adelchi Footwear Ltd.s main competitors in Bangladesh are BATA, AIMCO Footwear
Limited, Fortuna Shoes Limited, Shampan Shoes Limited, Titas Footwear Bangladesh and Bay
Emporium.

Strength of Apex Adelchi Footwear Ltd:

With large market share, Apex Adelchi Footwear Ltd is the market leader. They have their huge
demand in the foreign market because they could keep up the consistency of their quality and
they are the best quality provider. Their packaging is also unique which their strength is also.
They also take the fast mover advantage of the market.

Weakness of Apex Adelchi Footwear Ltd:

Their products are quite expensive. They have limitations in their offering. Their distribution
channel has to be improved. Their product is not much diversified.

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Opportunity of Apex Adelchi Footwear Ltd:

They are getting a large potential market. Their product is suitable for all age group.

Threat of Apex Adelchi Footwear Ltd:

Since Apex Adelchi Footwear ltd is a Bangladeshi based company, some time the foreign
government impose some rules and regulation which does not support the AAFL activities.

Environment Analysis:

1. Legal:

AAFL must be maintained these regulations to develop their business: Competitive regulations,
Employment law, Future legislation, Tax regulations, Regulatory, bodies and processes,
Consumer protection, International legislation.

2. Economic:

Due to inflation the rate of Apex production rate increase.

3. Social:

AAFL has some special products depend on the culture of the area.

4. Technological:

The selling process of showrooms of AAFL is digital transaction process using banking card as
ATM, VISA card etc.

5. Competitive:

In the first month of the year, the competitor liker as Jennys shoes produces the school shoes
like as AAFL.

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 4. Leatherex Footwear Industries Ltd.
Leatherex Footwear Industries Limited a 100% export oriented leather footwear industry has
been working continuously with inherited expertise and knows how. It is now a leading footwear
industry in Bangladesh, catering to the footwear needs of a global clientele. It is manufacturing
and exporting all kinds of Leather Footwear.

The company is ISO-9001:2000 certified and Winner of National Export Trophy. Its main
export market is Japan, Korea, UAE and Italy.

Our country has GSP facility for duty free access in many countries. ITC (under UNO) has set up
a project in Bangladesh under Italian supervision for designing and training.

SWOT analysis:

Strengths

Leatherex is a very competitive organization. Among its strength Business goodwill,

Brand value, Skilled Management, Quality assurance are the most potential.
As Leatherex has been operating in the country for 15 year this gives the company a
goodwill with establish brand value which is adding to its strength.
Quality good is advantage Leatherex took over other competitor to gain a competitive
advantage.
It has own linkage industries for Outsole (TPR, Rubber, EVA, Leather etc), Heel, Insole
and Leather. Its specialty is strict Q.C. (100% PSI), minimum lead-time and self-
sufficiency in main materials.
Its factory is operated under technical supervision of Italian, Japanese and Korean
management.

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Weaknesses

The cost of production is high compared to other local company.

Leatherex products range is very narrow as it focuses more on women product.
Limited awareness in other parts of the world which may lead to the company losing
market.
Currently possess a small percentage of the male market.
Forecasting fashion trends is difficult, but necessary for profitability.

Opportunities

Footwear is a huge and increasingly diversified business which has huge global
potentials.
Lifestyle trends have been in an upward shift as more people have disposable income the
Company using this to their advantage and their shoes fit perfectly into the category - the
young, trendy professionals.
The company has a strong global brand recognition
Womens market is a very strong and steady growing market.

Threats

In international arena the competition is far more intense.

The market for shoes is very competitive with high entry barriers in most EU countries.
The retail sector is very price competitive and consumers are very price sensitive between
similar products.
Managing an efficient distribution channel and other strategies is far more complicated.
Home market lobbying or pressure groups raise voice against the working conditions in
factories.

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Porters Five Forces Model Analysis

Supplier Power (LOW)

As Leatherex is a market leading company with huge demand for raw material it can exert
greater power over the supplier. On the other hand Leatherex is vertically integrated which gives
the organization secure supply.

Buyer Power (HIGH)

Buyers have high bargaining power in this industry as there are a vast number of players that
provide similar services. Thus, buyers can be selective and are very conscious of those
companies that offer either lower prices or differentiated services. Thus, buyer bargaining power
is high.

Barriers to Entry (MODERATE)

There are some other foreign shoe manufacturer like Nike, Reebok, Addidas and Woodland.
There are also some other domestic companies like Baly, Pagasus, and Homeland etc. However,
a differentiated company would have an easier time entering the industry if they were able to
offer customers something truly unique at a reasonable cost. Thus, the barriers to entry are
moderate.

Threat of Substitutes (LOW)

For shoe there is hardly any substitute but for leather there are some substitute but they dont
offer the same quality as that of leather so threats of substitute goods are very low in this
industry.

Rivalry (HIGH)

Buyers have high bargaining power and there are many available substitutes, it is difficult for
players in this industry to succeed. Accordingly, these factors mean that there is a high overall
risk for companies in this industry that do not have appropriate cost or differentiation strategies.

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 5. Leather Samanta
Mission Statement

Being a leader in the footwear industry, Samanta embodies five core values: Start, Communicate,
Imagine, Partner, and Inspire. Their mission statement expresses the importance of listening to
customers and delivering a product that allows consumers to feel the pride, respect, and trust of
everyone. They continue to build their company based on customer individuality and hard
work, to ensure that each shoe is made to the same degree of quality as when they first began
their business.

SWOT Analysis

Strengths

Offers quality products at competitive prices.

Increased the number of their Directly Operated Stores as part of their defensive strategy
of taking more control of the distribution market.
Good brand name awareness.
Product mix profitability with their various lines of samanta.

Weaknesses

Competitive pricing compared to lower priced shoes hurts samanta profit margin
A large share of income is derived from selling into retailers who tend to offer a similar
overall experience to consumers without differentiating between the brands they sell.
Narrow product range
Limited awareness in other parts of the world which may lead to the company losing
market share and profits
Currently possess a small percentage of the female market

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Opportunities

Footwear is a huge and increasingly diversified business driven by a host of demographic

lifestyle and fashion trends.
Lifestyle trends have been in an upward shift as more people have disposable income
Develop internationally to build upon it strong global brand recognition
Consumer buying power and demand continue to grow and we are seeing a shift to a
more retail oriented consumer culture.

Threats

Exposed to international threat from competitors around the world

The market for shoes is very competitive with high entry barriers
The retail sector is very price competitive and consumers are very price sensitive between
similar products.
Home market lobbying or pressure groups against the working conditions in factories
where shoes are made issues prevalent include various health hazards such as:
neurotoxicity, skin ailments, and injuries to children.
Price sensitivity of industry must stay competitive with other shoe companies that make
similar shoes.

Porters Five Forces Model Analysis

This section will take the analysis one step further and conduct a brief Porters Five Forces
analysis to further map out the industry.

Supplier Power (LOW) Companies offering services in this industry will have suppliers that
provide better products . And the upcoming and other shoe companies buy in so much quantity
that the suppliers have to satisfy them even if by increasing quality and by decreasing price.
Thus, because the goods are widely available, supplier bargaining power is low.

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Buyer Power (HIGH) Buyers have high bargaining power in this industry as there are a vast
number of players that provide similar services. Thus, buyers can be selective and are very
conscious of those companies that offer either lower prices or differentiated services. Thus,
buyer bargaining power is high.

Barriers to Entry (MODERATE) Due to the fact that there are many players currently in the
industry offering similar services, there are several barriers to entry. There are some other
foreign shoe manufacturer like Nike, Reebok, Addidas and Woodland. There are also some other
domestic companies like Baly, Pagasus, and Homeland etc. However, a differentiated company
would have an easier time entering the industry if they were able to offer customers something
truly unique at a reasonable cost. Thus, the barriers to entry are moderate.

Threat of Substitutes (HIGH) There are many available substitutes available for people who
are looking for better services. Thus, the threat of substitutes for undifferentiated players in this
industry is high.

Rivalry (HIGH) as mentioned previously, there are many players in the industry offering
similar services. Furthermore, because buyers have high bargaining power and there are many
available substitutes, it is difficult for players in this industry to succeed. Accordingly, these
factors mean that there is a high overall risk for companies in this industry that do not have
appropriate cost or differentiation strategies.

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 Findings and Recommendations

Findings:

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

Prospects

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

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 Higher rate of interest of bank and other loans
Procrastination in granting loans for project implementation
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

Recommendations:

Government should formulate appropriate rules and regulations to support Leather and
leather-based products and footwear sectors.
To ensure sufficient and continuous power supply.
They can start joint venture business with other major leather exporting country like India
and Japan.
By collaboration with EU and other developed leather importing countries they can
import advanced technology.
Government should take initiatives to formulate appropriate leather policies to support
the sector which is aligned with the industrial, export, and investment policy and
specially strengthen e-diplomacy.
Government needed to arrange some soft loans for the industry to fight against the
current financial crisis.
Government must take initiative to enhance R&D and technology transfer to the industry.
Government should take initiatives to enrich the livestock of the nation to ensure higher
availability of raw-inputs.
Government needed to arrange some special funding and leather preservation facilities
for the industry in occasion of Eid-ul-Azha.
Government should take initiatives to protect lather smuggling to India.

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Conclusion:

Bangladesh leather industry is dominated substantially by the domestic investment which are
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
large pool of low cost but trainable labor force together with tariff concession facility to major
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

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 Bibliography
Nazneen Ahmed & Zaid Bakht (2010), Leather Footwear Industry in Dhaka: A Case Study,
Bangladesh Institute of Development Studies, E-17 Agargaon, Sher-e-Bangla Nagar, Dhaka-
1207, Bangladesh

Ali, Dr. Karam (2002), A Comprehensive study on leather sector industries of Bangladesh

Venuprashad, Govind (February, 2010), Bangladesh: State of play in the leather sector for
International Trade Center (ITC), Geneva.

Bangladesh Export Processing Zones Authority (BEPZA) -www.epzbangladesh.org.bd

Board of Investment (BOI) - http:// www.boibd.org

http:// www.apexfootwearltd.com/

http:// www.samantashoes.com/a/viv-wide-pump.html

http:// www.batabd.com/

http:// www.leatherex-footwear.com/

http:// www.leathermag.com/contractors/upper-leathers-vegetable-semi-chrome/dhaka-leather-
corporation/

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