Introduction

Pakistan footwear Industry has flourished quite significantly by making effective use of
the indigenous raw materials and the conducive infrastructure available. The footwear
industry runs in parallel with changing fashion, designs and materials. Footwear has
undergone a complete reversal, from being a utility product to a fashion product. Leading
players have to make continuous changes in terms of designs, styles, material used, in all
the offerings.

There is a need to provide innovative solutions in the Pakistan Footwear Industry to

remain competitive and retain customers. Manufacturers have to make products that
match both fashion and utility requirements of the customers. Comfort is a very important
factor in the industry. Cost is also a significant factor for ensuring success. There is a lot
of pressure on margins in the Pakistan footwear industry, due to frequent changes in
fashion and demand.

PFMA is a Trade Association representing Pakistani footwear manufacturers, exporters,

importers and traders. It is an Association duly approved by the Ministry of Commerce,
registered with Directorate General Trade Organizations, incorporated under the
Companies Ordinance 1984 with Securities and Exchange Commission of Pakistan and a
member of Federation of Pakistan Chambers of Commerce and Industry (FPCCI).

Pakistan Footwear Manufacturer Association (PFMA) is operating in Pakistan since…..

The Association was formed to protect and safeguard the interests of Footwear
manufacturers and traders by applications, deputation, delegations, petitions and
memoranda to the Government of Pakistan or the Provincial governments. It is to assist
the members by investigating problems peculiar to the industry and trade with a view to
cause improvements and progress.

List of PFMA managing committee members are,

PFMA
Mr. Nasir Anwar Sheikh Mr. M. Younas
(Elegant Shoes) (Starlet Shoes)
Chairman Vice Chairman

Mr. Waseem Zakria Mr. Rizwan Shahid

(Footlib Shoes) (EPCOT Shoes)
Member Member
 Mr. M. Akram Mr. Imtiaz Ali
(Servis Shoes) (Modila Shoes)
Member Member

Data:
The basic raw materials, hides and skins for footwear is abundantly available in the
country. Pakistan has 44 million large animals and 70 million small animals. The small
animals provide 81% of the total skin, while total raw hides and skins available in 1999
were 43.6 million. The break up of hides and skin is:

There are about 500 fully organized units in the country who are producing quality shoes
and proving their presence nationally and in the world market. This growth is in the
interest of Pakistan economy as this industry is labor intensive employing half a million
labor force at present with export figure higher by 13% till April 2009.

To train the manpower and up-gradation of the skills, an institute is working in

Gujranwala i.e. Institute of Leather Technology. Keeping in view the immense need of
skilled manpower and institute, PFMA is planning to establish another training institute
in Lahore.

In Pakistan, on the average each person wear 1.83 ~ 2.0 pair per annum. Some 25% of
the total footwear production in the country is done at abut 24% mechanized
manufacturing units while 75% demand is met by the cottage industry.

There are around 800 or so cottage units in and around Lahore alone e.g. Chuna Mundi,
Kasoor, Okara, Mureedkay, Pattoki, etc. A good trend is also exist in wearing hand
made shoes like Khusa in Punjab, Pehsawari Chappal in NWFP, Sindhi Khehri in Sindh.

Estimated Production Capacities

The estimated production capacity of major players in Pakistan (Source: Business
Recorder 01-FEB-2002) is given below.

Pair Per Annum (300

Major Units Pairs Per Day days Single Shift
Basis)
 Bata Pakistan 100,000 30m
Servis Industries 35000 10.50m
East Pak Chrome (EPCOT) 2500 0.75m
Footlib 2000 0.60m
Firhaj Footwear 1500 0.45m
Shafi Group (Urban Sole) 1000 0.30m

The graph shows BATA is at the top in terms of production capacity followed by
SERVIS, Footlib and other.

The average unit price per pair of shoe is given below, showing the increasing price trend
from the year 2001~2005. (Source SMEDA)

Commoditie
2000-1 2001-2 2002-3 2003-4 2004-5
s
$ $ $ $ $
Footwear
A.U.P per 7.88 7.53 8.76 8.89 9.64
Pair

Average Price Per Pair in $

12
10 8.76 8
7.53
8 7.88

6
4
2
Global
0 Perspective
2001 2002 2003 2004
The contribution of Pakistan’s leather footwear in the world is about 0.28% (2004). In
2004-05 exports of leather footwear were increased by 38.5% from $ 78 million of the
previous year to $ 108 million. The major buyers of the product were UAE, Saudi Arabia,
Yemen, UK and Germany.

Major Footwear Producers

Major footwear producers with their production in million pairs is shown below showing
china as the leading manufacturer followed by India. Both are the critical countries
affecting the Pakistan Footwear industry. (Source Business Recorder 01-Feb-2002)

Country Million Pairs

China 5841
India 680
Brazil 527
Italy 420
Turkey 283
Thailand 272
Mexico 265
Indonesia 262
Vietnam 240
Spain 208
Pakistan 207

Competitive Position of Neighboring Countries

The Pakistan’s competitive position with its neighboring countries is given below
implying

Items Pakistan India China

Production 226.8 685.0 5520.0
Imports 0.7 0.1 2.6
Export 9.0 32.4 386.10
Total Consumptions 218.5 652.7 2436.5
Per Capita Consumptions 1.5 0.7 2.0

Export Growth Trend

The global export market in leather footwear has been valued at nearly $21 billion. The
five year trend shows negative growth (-for leather footwear and in 1999 exports fell by
5% while its share as a sub commodity of leather has increased from 47% to about 51%.
Thus even though there has been lower trade in leather as whole, leather footwear has not
declined significantly. (Source SMEDA)

Leather Footwear Growth Trend (in million $)

1995 1996 1997 1998 1999
WORLD 21,477 23,083 22,771 22,053 21,049
Growth % age 7% -1% -3% -5%

Leather footwear exports can be further divided into three major classes i.e. footwear
with upper of leathers (83%), sports footwear (14%) and other footwear (2.29%). The
leading exporter of leather footwear is Italy with a 28.21% share of total exports in 1999.
China is second with 13% of the export market and Portugal has 7.57% of the total export
market.

Leather Footwear Export Breakdown

Leather footwear are included items such as sandals, slippers, boots and shoes. The
most popular item in 2000-2001 was leather boots and shoes, which accounted for nearly
70.33% of the total export value of leather footwear.
$ 58 (2000-2001)

Pakistan Leather Footwear Export Breakdown (millions)

1999-2000 2000-2001
Leather Boots and Shoes 20.978 24.631
Leather Sandles 0.578 1.122
Leather Slippers 0.657 0.632
Leather Footwear of Embroidary 0.007 0.054
Leather Footwear 3.450 5.262
Footwear Outersole Of Leather 0.003 1.826
Footwear NES- Outersole - Leather 0.039 0.169
Footwear -Upper of Leather 2.322 1.322
TOTAL 28.03 35.02
@USD: 51.8 @USD: 58

Challenges
Pakistan show industry is facing challenges due to which industry is not getting the
desired results.
• Govt. of Pakistan was helping the Footwear Industry in flourishing by providing
6% grant in the R&D sector. But Government discontinued that 6% R&D
support on 25th June, 2008.

• High Custom duties on Four important shoe items i.e. Soles, Lasts, Insole board
and Toe puff and back Counter Thermoplastic Sheets acting as a big hindrance
in flourishing shoe import. If shoe are imported, these attract a 25% custom duty.
Foot wear raw material attract 5 ~20% and components required for use in shoes
attract 20 ~ 25% duty.

• Footwear industry is facing shortage of training institutes for skill development

shoe designs, proper health & safety shoes, supervision, introduction,
implementation & support of state of the art technology and up- gradation of
skills.
•
• Threat from less expensive shoes from China and India destroying the national
footwear industry creating unemployment and decline in the economy & revenue.

• Instability in Government and frequent changes in Government policies create

confusion and uncertainty among the existing and future investors which is
detrimental to the healthy growth of not only Footwear industry but to any
industry.

• Energy Crisis (Electricity, Natural Gas) is diverting the footwear manufacturers

investments in alternate energy resources e.g. generators, UPS etc from investing
into new product designs/launching, state of the art technology, after sales
support, etc

• Deteriorating Law and Order situation is another impediment blocking the local
as well as foreign investment in the industry.

• Footwear manufacturers are subjected to a variety of local taxes which on the one
hand increase the cost of local as well as exportable products and on the other,
much time is wasted in dealing with government departments.

• Due to lack of Footwear institutes, local manufacturers rely on copying of foreign

made shoe designs instead of designing their own styles and designs.

• Most manufacturers are still dependent on usage of old technologies, manual

shoe making, old machinery and methods, not getting the return in true sense.

• Seasonal effect on usage of shoes as people wear different shoe in different

industries.
 • Competition from international brands like Pierre Cardin with comparable prices
badly affecting the footwear industry as people find high quality and comfort
shoes in reasonable prices.

• Shoe industry employs child workers, violating the Child Labor Act of Pakistan
that no child before the age of 13 is legally allowed to work.

• High inflation rate forcing labor for high demand in labor rate.

Operating Companies
There are lots of local and international companies operating in Pakistan but we
are considering few top companies for our analysis.

• BATA Pakistan
• Servis Pakistan
• EPCOT
• Urban Sole
• ECS/FootLib/Milli Shoe

BATA
 Bata Pakistan Limited is a Pakistan-based company. The Company is engaged in
the manufacturing and distributor, with footwear as its core business. It is engaged in the
sale of footwear of all kinds along with sale of accessories and hosiery items. The total
production of the Company during the year ended December 31, 2008 was 9.48 million
pairs. Its major brands include Power, Weinbrenner, Marie Claire, Comfit and
Bubblegummers.

BATA has market share of about 6% in Pakistan and serves about 1million
customers a day. There are about 40,000 employees working in about 5000 retail stores.

Brands of Bata

Marie Claire shoes are for women with an active

lifestyle who seek contemporary modern styles

Bubble Gummers

Bubble gummers is the leading children’s footwear

brand in Pakistan

Hush Puppies
World's first casual shoe and provided a new alternative in
footwear. Hush Puppies emerged as a soft, breathable and very
comfortable shoe.

Other Brands
Servis Pakistan

Introduction Of Servis Pvt Limited:

Servis Group is Pakistan's largest footwear manufacturer and exporter. It also has
interests in retailing. Its Group Company, SSC PRIVATE LIMITED, is the country's
largest retailer and wholesaler of footwear. The Group has diversified interests in rubber
products including tyres and in defense industry products. The Group was set up in 1958
and today has sales of more than PKR 9 billion. Servis Group employs close to 8000
people in its Group Companies.

Servis Industries Limited

SIL is a public limited company listed on the stock exchanges of Pakistan. It has
annual revenue of USD 80 million. It is the largest manufacturer of footwear and tyres &
tubes for two-wheelers, and has been the largest exporter of footwear from Pakistan for
the last 10 years.

The company employs more than 5,000 people in its facilities located in Gujrat
and Muridke. The company's products are exported primarily to Germany, Italy, France
and UK.

SERVIS BRAND
CHEETAH

CHEETAH is the leading brand of sports

footwear in Pakistan, Cheetah has developed a cult
following among sportsmen and symbolizes the
sportsman’s spirit.

CALZA

The unique style and amazing comfort of CALZA have

made it Pakistan’s most favorite slipper. Designed to keep you
light and carefree wherever you go, CALZA is perfect all-day casual footwear and
ensures comfort in each and every step.

LIZA

When it comes to everyday living for the modern woman,

LIZA is the ladies shoe that stands apart from the rest. Featuring
trendy designs and go-anywhere comfort, every step is a step
towards life with LIZA

TOZ

TOZ brings kids a colorful world packed full of fun and

adventure. The fun never stops with TOZ!

SKOOZ

SKOOZ puts a whole new spin on student life with

comfortable and durable shoes that are perfect for fun on and off
the schoolyard

EPCOT:

Introduction
EPCT Private Limited formerly known as (East Pakistan Chrome Tannery) is the
largest manufacturer and exporter of both of finished leather and leather shoes in
Pakistan. The company was originally founded by Mr. Muhammad Usman, Chairman of
Ayesha group of Industries in 1947. The founding purpose of the company was to export
goat napa to the American and European market under the brand name “EPCT”.
In 1978 company established its own dying unit. In 1985 an in house finishing
department was organized thus laying the foundation of a company. In 1992 the EPCT
set up a composite shoe manufacturing unit targeted to the European market soon to
dominate world market. Since 1947 the company has grown 10 fold with sales touching
3 billion Pak Rupees and as a result has become the undisputed market leader.

EPCOT Brands:
URBAN SOLE

Introduction

Urban Sole was launched as a National Brand in June 1988 by Shafi (Pvt.) Ltd.
The leather shoe industry was evolving at that time and Urban Sole was introduced as a
national brand proving quality products in the market in much affordable prices. The
shoe was designed for those who approach life with intensity and passion, those who
desire quality craftsmanship and incomparable leather quality with best suited styles for
their shoes.
So keeping this mind in mind Urban Sole made an entry in the market introducing
shoes with ultimate finish, classically designed and elegantly style; an Urban Shoe Brand
for the consumers. The shoes were designed in all categories starting from male to
female in casual, formal and rough wearing.
Considering this fact that Urban Sole is a part of Shafi Groups Pakistan, which was
established in 1940 and working in Pakistan since then in chemical, leather and textile
industries. Urban Sole is a Brand introduced by Shafi group in recent past with a huge
investment and was backed up by company’s total turnover of more than US $ 100
million.

Before the launch of Urban Sole in Pakistan, the group was exporting shoes and
other leather made manufactured goods to Germany, France, Italy, China and other
European Countries and was rated as the top export company of Pakistan generating the
highest revenues in Pakistan.
Urban sole Brands

DRIVING MOC

MARINE CLUB

TRAIL

RACER

SOFT STEP

FREE WALK
MILLI SHOES

INTRODUCTION:

Milli shoes is a leading name in the shoe industry in Pakistan has vast experience
of manufacturing quality shoes since pre-partition under the patronage of Muhammad
Ahmad Ansari. His sons, Shafiq Ahmad Ansari, Iqbal Ahmad Ansari And Riaz Ahmad
Ansari also joins the business during 1970’s.

In 1978, 1st flagship outlet was inaugurated in Liberty Market followed by

Anarkali outlet in 1983 and the Mall outlet in 1987. In 1997, another outlet was opened
adjacent to the Mall outlet to need the ever-rising demand of its customers. All these four
shops have a wide range of Ladies, Gents and Children shoes. In last decade, a number
of leather items such as Briefcases, Wallets, Handbag, and Belts etc have also been added
to these shops.

Shoe Industry SWOT Analysis


Strengths
• Comfortable availability of shoe raw
material
• Good Quality Upper Leather
• Hand Skilled Labor
• Better shoe life and durability.
•Export of hand made shoe e.g.
Khussa, Khehri, etc
• Easy availability of low cost labor
• Exposure to export market
• Spare manufacturing capacity
• Good quality school shoes
• Direct delivery capability
• Presence of technologist
• Product innovations ongoing.
• experts
• Shoe production in sports, safety,
casual, comfort categories
• Can serve from existing sites.
Opportunities
• Growing fashion consciousness
globally
• Use of IT and decision support
software’s (ERP, SAP, etc) to help
eliminate length of the production
cycle for different products
• Growing international & domestic
Weaknesses
• Low labor productivity due to
inadequate training and unskilled labor
• Low level of modernization
• Low level of up-gradation of
technology
• Low integration of developed
technology
• Less no of organize product
manufacturer
• Lack of modern finishing facilities
for leather
• Highly unhygienic environment
• Unawareness of international
standards by many players
• Poor infrastructure and access to
testing, designing and technical
services
• Environmental problems
• Import of shoe components
• Limited budget.
• Lack of after sale support
• Lack of fresh investment in the sector
• Lack of training institutes and shoe
• Uneconomical size of manufacturing
units
• High taxes and customs duty
• No R&D support by Govt.
• Low machine and material productivity
• Delayed deliveries
• Weak support infrastructure for export
• Poor distribution network
• Lack of coordination among supply
chains
Threats
• Entry of multinational brands in
domestic market
• Energy crisis
• Instability in Government and it’s
policies
• Meeting domestic and international
quality, delivery, cost standards
 PEST Analysis
Political Economic
Political instability is effecting badly to the
footwear industry • Economic crisis hit badly on
• Energy problem (high cost and footwear industry especially raw
power failure) is the main issue in material to manufacture footwear.
these days, because it leads to • One of the most important
increase in production cost. problems in the growth of
• The import of under-priced shoes footwear industry is higher
was badly hitting the domestic energy prices.
footwear industry,especially Increasing energy and inputs prices leads to
an increase in the cost of Production
hundreds of cottage industry
that influences the expected
footwear units working across the production of the industries and the
exports
country.
 • From the previous some years
Government of the Pakistan are
encouraging import and export
policies. And also encourage the
foreign investors to invest in
Pakistan.
Government should take measures to check • Pakistan footwear exports for the
the inflow of foreign footwear into
Pakistani market through the tactics year 2006 were about US$ 135
of under-invoicing and miss- million. Out of total footwear
declaration
exports, leather footwear
accounts for 43.15%, which

Countries provide services to other makes leather Footwear

countries by the using of labor of extremely significant.
that country, as China is providing
the services to the Pakistan .Main • Pakistan’s footwear industry
advantage of it is, that manufactures around 120 million
manufacturing cost of the products
come down (cost reduction), like the pair annually for local
electricity bills, other factory Consumption and it exports 2
overheads, taxes etc, so this is the
reason that Pakistan prefer to million pair per annum roughly
outsource mostly products from and the average price charged for
China even in the finished form
each pair stands around $10.
• Its share in Pakistan’s total
exports is about to touch the
figure of$200 million. So
To establish a plant for this industry is not
so much easy, one has to fulfill economic downward trend is
certain rules and regulations, and badly affecting the industry.
also the huge investment is required

• The overall political trend is

negative for industry.
Social Technological
In Pakistan the life style of people is
changing with a fast pace. Their life
has become more money and time
oriented.
major shift in the values of the people of
Pakistan. People now prefer western
life style rather than the traditional
one.
• Everyone wants that he or she wear
new shoes at every occasion.
Especially it is a race between ladies
to have more and matching shoes
with her dresses which are more
trendy and fashionable.
increased demand for foot wear products
especially in young generation
In Pakistan people mostly purchase foot
wear on the time of occasion like
marriages, Eid and on the seasonal
base like in summer season shoes
are different and the winter season
shoes are different. And ladies wear
new trendy and fashionable shoes at
every occasion.
As cities are growing and more people
shifting from ruler areas to urban
areas therefore increase students,
people having jobs and trend to play
sports and healthy physical
activities so this social trend has
direct positive impact on demand of
footwear industry.
• Pakistan is among the top ten most
populous countries of the world,
increase in population also increase
in demand for the products and it
also increase demand for footwear
New technology trends also effecting
footwear industry in Pakistan.
Multinational competitors are
introducing innovative techniques to
manufacture footwear
• In sports footwear new technology is
being used regarding technical
aspects on that particular sport. For
processing of raw material like
leather new techniques are being
implemented by multinationals.
• The process of leather includes a
number of different steps during
which large quantities of water and
chemicals are applied to the skins.
About 130 different chemicals are
used in leather processing, depending
on the trends is now in leverage
technology to gain competitive
advantage. New technologies like
water proof souls, polyurethane soul
which are light weight and other
artificial leather etc.
 industry.
People are becoming health conscious day
by day and people think more as
compared to past on confront and
quality of footwear’s.
Fashion industry is growing rapidly in
Pakistan now people think footwear
in terms of fashion like their other
fashionable items

Future Trends in Political Environment

Government is developing a frame work so that in future the exports of shoes industry
will increase for this purpose Government has decided to give relief regarding to decrease
the exports duty for machinery.
Future Trends in Economical Environment
The economy is expected to perform well in the near future as petrol prices decreases and
electricity problem will resolve then it will decrease our trade deficit. Government is
getting aid from IMF and some other countries are also helping the Pakistan economy.
Government is also trying for minimizing the trade deficit and encouraging for foreign
investment as well as exports of the local industry. It is still hoped that national economy
will continue to grow and rising prosperity will bring expanding opportunities for the
shoes Industry.
Future Trends in Social Environment
People will buy the walking shoes and other formal shoes with the changing the fashion
and special events. As per capita income is increasing people will mostly prefer to buy
comfort and leather shoes. Shoes industry is also having some peak seasons sale like
marriages, summer and Eid events.
Future Trends in Technological Environment
High tech technology will used in shoes for the comforts of customers. By using a laser
foot scanner to create a 3D computer model of a person’s feet, the ERGOSHOE system
bridges the design gap between shoe manufacturers and customers, allowing shoe
comfort to be improved efficiently and at relatively low cost.

Forecast:
In coming five years competition will be among two major competitor segments local
versus multinational rather than among multinationals because majority of customers in
Pakistan are price conscious instead of quality and brand. Though behavior of customers
is changing towards quality but bad economic situation is resulting lower income level in
coming five years.
The basis of competition will be on price with more diverse retail strategy. Multinationals
are currently missing to capture those customers which are price conscious and living in
rural areas.
In future companies having diverse strategies regarding in inertial outlets in their value
chain will have the tendency to capture more market share. In mass production the
company which will give differentiation to their product on reasonable prices will have
the tendency to gain success. So service is moving in right direction to maintain its
leadership of overall strategies though still weak in diverse retailing.

Porter’s five forces

 • Brand Identity:
In Pakistan industry there is no heavy spending is required for brand identification for
new entrant.
• Switching Cost:
In terms of switching cost for new entrants threat is high.
Capital Requirements:
•
High capital is required to compete at highest level but on small scale competition
Bargaining Powers of Buyers

• Concentration:
Buyer is fragmented throughout the country and they are large in numbers that’s why
bargaining powers of buyer becomes low regarding concentration.
 • Product Cost Vs Total Purchases:
Servis is providing reliable products to its buyers in terms of usage in all types of brands
and buyers bargaining power is low.

• Product Differentiation:
Servis is offering relatively differentiated products in terms other brands of and comforts
and set high standard therefore buyers bargaining power is low.
• Switching Cost:
Buyers perceive Servis shoes as quality product giving value against cost and Servis has
better brand image so in this case buyer switching cost is high and bargaining power is
low.

• Profits:
Buyers consider themselves self on profit side when he uses Servis footwear.

Impact on Quality/ Performance

Servis is offering high quality product so the bargaining power is low.
• Buyer Information
Buyers have no such information regarding processes of Servis shoes. Because Servis
doesn’t use such channels which provide confidential information to buyers. Buyers have
less information and have low bargaining power.

Bargaining Powers of Suppliers

• Concentration:
Suppliers are fragmented for raw material like leather throughout the country but
chemicals used in manufacturing and equipment are imports from outside the country e.g.
PU material for sole is imported from France and large pool products China and
Germany. So the bargaining power of supplier in terms of concentration is low.
• Presence of Substitute Inputs:
Servis company suppliers are readily available in terms of raw material especially for the
manufacturing of leather shoes so bargaining power of supplier is low.
 • Importance Relative to Customer:
Servis has unique brand image and leading in footwear industry of Pakistan. For supplier
Servis is relatively powerful customer therefore in this sense supplier bargaining power
become low.
• Impact on Quality/ Performance:
Servis requires high quality raw material from its suppliers to manufacture quality
product so supplier bargaining strength increases with respect to this aspects.
• Product Differentiation
As Servis use high quality raw material for its products to gain competitive edge so
Servis demand raw material from its supplier which is not just commodity. So supplier’s
products have direct impact on the quality of Servis product.
• Switching Cost:
Servis can easily switch for raw material like leather and small scale equipment therefore
switching cost is low.
• Forward Integration:
Pakistan leather industry growing and supplier on small scale can do forward integration
for local competition therefore threat of forward integration is high.

Rivalry among the Firms

• Industry growth:
Shoe industry in Pakistan is growing rapidly and a lot of companies is competing for
market share so the rivalry among the firms is intense.
• Fixed Costs:
Servis Company is currently using unique ways and methods to innovate its products
using new technology it makes fixed cost high as well as prices. In these aspects
competitors can cut their cost to reduce their price.
• Intermittent Overcapacity
Industry is producing more than its demand in the total production of industry, because
there are local manufacturers and imports of shoes from China. So there is threat of price
war.
 • Product Differentiation
. Servis shoe company is using direct inject technology by which shoe is made as a single
piece and ultimately there is no any kind of stitches in the shoes. This gives
differentiation to its product over the competitor’s products.
• Brand Identity
In case of brand identity service has low treat from its local except multinationals r
because service is perceived as company giving reliable products to customers and has
brand loyalty.
• Switching Costs:
Using good quality and reliable products of Servis Company it is difficult for consumer
to switch another company. But lots of companies are fulfilling the needs of buyers on
low prices ultimately switching cost low.

• Concentration and Balance:

In these aspects there is intense rivalry among competitor because many companies
trying to chase same customers.
• Diversity of Competitors
Servis has threat from its competitor’s especially local competitors because they are
implementing more diverse strategies on distribution and retail channel.
• Corporate Stakes:
Servis has 15% of market share and revenue averaging 3405.19 million in past recent
years. Servis is trying to increase its profits in market but lagging behind its strategies.

• Exit Barrier:
Exit barrier are high because Servis has assets including new equipment and has large
setup in Pakistan footwear industry.

Threats of New Entrants

• Economies of Scale and Experience:
There is no lot hurdles for mass production to achieve economy of scale producing low
quality products for such entrants who are focusing on price conscious buyers. So in this
aspects threat of new entrants is high.
• Product Differences:
In Pakistan there is low budget is required for customer service or to differentiate the
product in footwear industry in Pakistan. Therefore threat of new entrants is high in this
industry.small financial resources are required. So ultimately threat of new entrants is
high.
• Access to Distribution:
New entrants can easily distribute their products through various channels. The more
common distribution channel is wholesale which is easily accessible.
• Cost Advantages:
Established companies have little bit cost advantage in the beginning over the new
entrants but it can be cashable after some time because to access raw material, facilities is
easy in Pakistan footwear industry.

• Government Policy:
There is no such restriction from the government for new entrants though government is
considering rules and regulation regarding environmental issues for manufacturing sites
especially leather is processed to manufacture the product.
• Expected Retaliation:
Existing firms has less responsive in their overall straggles except few multinational and
have low expected retaliation for new entrants.

Analysis
Pakistan shoe industry is in monopolistic competition and entering into the price war in
future. Basically abundance of Chinese shoes in Pakistan market has changed industry
competition. In future the whole Pakistan shoe industry wills mainly rely on Chinese
shoes. It is because low prices of Chinese shoes. For this purpose local manufacturer and
retailer will try to achieve high margin to cut the cost. Though Servis is not as keen for
Chinese shoes as Bata, but in future Servis should relay on Chinese outsource shoes to
even survive in Pakistan market because in Pakistan the energy cost is high like
electricity, technology. Another reason is buyers are recognizing and also accepting
Chinese outsourced shoes with the brand of large firm like Bata. So the overall behavior
of the buyers and the industry competition will heavily rely on Chinese shoes. But Servis
is doing better with respect to quality in the local manufacture shoes with better
marketing strategy as compared to Bata. Servis is also better in creating good brand
image than Bata.
If Servis will shift their processes for Chinese outsourced shoes, Servis is potential leader
having current marketing and customer relationship strategy in future.

Porter is also known for his simple identification of five generic

descriptions of industries:

1. Fragmented (eg, shoe repairs, gift shops)

2. Emerging (eg, space travel)
3. Mature (eg, automotive)
4. Declining (eg, solid fuels)
5. Global (eg, micro-processors)

Export Growth Trend

The five year trend shows negative growth (-3% for the last 3 years) for leather footwear
and in 1999 exports fell by 5% while its share as a sub commodity of leather has
increased from 47% to about 51%. Thus even though there has been lower trade in
leather as whole, leather footwear has not declined significantly.

Leather Footwear Export Trend (in millions)

1995 1996 1997 1998 1999
Italy 5,938 6,665 5,977 5,617 5,938
China 2,737 2,971 3,626 3,743 2,737
Spain 1,535 1,670 1,773 1,713 1,535
Portugal 1,593 1,609 1,562 1,497 1,593
Brazil 1,330 1,459 1,365 1,171 1,330
Germany 1,002 962 946 989 1,002

In 1999 the value of export earnings for leather footwear was $28 million which is 4.61%
of the total leather exports for Pakistan. The five-year trend shows that there are a lot of
inconsistencies in the growth rate with high fluctuations. However in 1999 while the
global export growth rates declined by 5%, Pakistan’s export growth rate increased by
7%.

In 1999 the value of export earnings for leather footwear was $28
million which is 4.61% of
the total leather exports for Pakistan. The five-year trend shows that
there are a lot of
inconsistencies in the growth rate with high fluctuations. However in
1999 while the global
export growth rates declined by 5%, Pakistan’s export growth rate
increased by 7%.

Leather Footwear Exports Trend (in million $)

1995 1996 1997 1998 1999
Italy 5,938 6,665 5,977 5,617 5,938
China 2,737 2,971 3,626 3,743 2,737
Spain 1,535 1,670 1,773 1,713 1,535
Portugal 1,593 1,609 1,562 1,497 1,593
Brazil 1,330 1,459 1,365 1,171 1,330
Germany 1,002 962 946 989 1,002