A comprehensive strategic analysis on Footwear Industry through TTF Team 4A EMBA 35 W650 PDF

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Strategic analysis of footwear industry through TTF model...

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A comprehensive strategic analysis on Footwear Industry through Triple Triangle Framework (TTF) Course Name: Business Strategy in a Competitive Environment (Code: W650)

Prepared for: Sheikh Morshed Jahan Professor Institute of Business Administration University of Dhaka

Prepared by: Group 4A_EMBA 35th Batch Sl No.

Name

ID

e-mail

Cell no

1

Gazi Abdullah Al-Beruni

ZR1903008

[email protected]

01709647789

2

Noor Ul Azam Khan Romel

ZR1903024

[email protected]

01717924832

3

Alimul Razi

ZR1903026

[email protected]

01712353971

4

Towhid Hasan

ZR1903023

[email protected]

01675281809

5

Ahmed Bin Monsur

ZR1803017

[email protected]

01711086813

Institute of Business Administration, University of Dhaka

Date of Submission: 23 February, 2021

Sensitivity: Internal

Introduction to the Leather & Footwear Industry The amount of leather produced each year is 350 million Sq. ft. Out of the total leather production, 2025% is used to meet the domestic demand while the rest is exported. In the footwear industry, Bangladesh produces 378 million pairs of shoes (all forms of footwear along with leather is included) each year. Bangladesh currently stands at 8 th position in the global footwear market in terms of production volume. The domestic market size of footwear is around TK 170 billion. Domestic demand for footwear industry is around 200-250 million pairs a year. In 2018-19, Bangladesh had exported $607.88 million worth of leather footwear and $271.53 million worth of non-leather footwear. Global footwear market was valued at $246 billion in 2017 and is expected to reach a valuation of $320 billion by 2021. There are currently 220 tanneries, 2,500 manufacturing units and 90 larger firms operating in Bangladesh.

Domestic footwear industry of Bangladesh has two sections- branded or organized footwear market and non-branded or unorganized footwear market. Unorganized footwear market still dominates the majority of sales. However, the market share of branded footwear is increasing and currently stands at 30% of the total market. Increase in per capita income, fashion consciousness and health consciousness are some of the key drivers behind the increase in the branded footwear market share. High rent fee is the key challenge for increasing the number of retail showrooms for the branded segment. The overall footwear market is growing at 12%-15% rate. However, inflation consists of a big portion of this total growth and sales volume are not increasing significantly. Footwear business has cyclicality effect as almost 25%-30% footwears are sold during the Eid Al-Fitr period.

Organized footwear market of Bangladesh was dominated by foreign companies mainly by Bata even a decade ago. Most of the local manufacturers were focused on exporting their products. But, in the recent years, local manufactures are entering the domestic footwear market with their own brand to capitalize on the growing demand in the domestic market. Almost 30 exporters have introduced local brands. Some of the local popular brands that are currently operating in the market are Bay, Hamco, Jennys, Fortuna, Crescent, Vibrant, Leatherex, STEP, Walkar, Orion, Falcon, Zeils, Shampan etc

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Number of outlets of Footwear Brands Footwear Brands No of outlets Bata 261 Apex 220 Bay Emporium 50 Walkar 50 Orion 30 Crescent 20 Fortuna 15 Zeil's 12 Shampan 9 Vibrant 6

Along with footwear brands, clothing brands such as Ecstasy, Sailor, Occult and Freeland are also selling shoes to the local consumers. Apex footwear is currently the largest domestic footwear manufacturer with 17.82 million pairs annual production capacity. Most of the exporters have entered the local market in last decade. Bay Emporium has entered the market in 2006. ZEiL’s Brand has entered the market in 2012. Shampan group has introduced its “Shampan” brand in 2012. Hamco group, Orion footwear, Walkar and Vibrant have entered the market respectively in 2014, 2015, 2017 and 2018. In the next decade, local footwear manufacturers are expected to increase their share of the domestic footwear industry.

TTF Domains

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Enterprise - Capacity - Capital - Culture

Industry - Competitor - Collaborators - Customer

Facilitation - State & Society - Technology & Innovation - Globalization & Int’l Forces

Enterprise Level (3Cs) Below is the enterprise 3C model analysis for Major players at this moment: Bata (Industry leader): In Bangladesh, Bata Shoe Company (Bangladesh) Limited started its operation in 1962. The company is one of the largest tax–paying corporate bodies contributing Tk. 1.2 billion (year 2009) which represents approximately 70% of tax paid by the entire footwear sector of Bangladesh.

Ca p a c i t y

Ca p i t a l

Cu l t u r e

Modern manufecturing facilities Supirior Cutomer service Vast and strong supply chain and ecommerce presence Strong brand value Investment in new project Scope for innovation Potential to grab huge untapped target market in case of both local and foreign Extensive product lines and capacity to further scale

Organizational culture & leadership: Innovation & values driven Entrepreneurial mind-set: Growth focused with high business ethics

Apex : Apex Footwear Limited (AFL) is the leading manufacturer and exporter of leather footwear from Bangladesh to major shoe retailers in Western Europe, North America and Japan. The local retail wing was established in 1997.

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Ca p a c i t y

Apex provides high quality, fashionable footwear to the Bangladeshi consumers. With over 191 own retail outlets and 380 authorized resellers, it ensures nationwide coverage of its diverse range of footwear for its consumers. The company has the capacity to produce 6.5 million pairs of shoes and sandals a year.

Ca p i t a l

Backward linkage with Apex Tannery helps the company to maintain superior product quality Scope for sclaing sub brands Potential to grab huge untapped target market in case of both local and foreign

Cu l t u r e

Honest Growth Value for stake holders Proactive compliance

Leatherex Footwear

A 100% export-oriented leather footwear industry has been working continuously with inherited expertise and know-how. It is now a leading footwear industry in Bangladesh, catering to the footwear needs of a global clientele.

Ca p a c i t y

Working Experience of a decade in the field of leather chemicals, processing of raw-hides to finished leather, producing shoe upper to footwear Most modern state state-of-the-art machinery Leatherex has distribution in Greece for Cat Footwear and Merrell, Hush Puppies and Harley Davidson

As the only authorized distributor for EMEA countries, Leatherex always looks for a reliable and professional distributor to expand the business In 1991, Leatherex Ltd entered into a license agreement for the manufacturing of Hush Puppies Ca p i t a l products, a move that proved very successful for the company

Cu l t u r e

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L u x u r ya n dAr i s t o c r a s y I t a l i a nb r a n da s s e n c ef r o mh o me

Fortuna Shoes Ltd

Fortuna Shoes & Bag Ltd is one of the leading footwear companies in Bangladesh. It has established country's first shoe mold manufacturing factory. Fortuna opened its first outlet in Gulshan in 2010. It now has 16 stores across the country and has plans to take the number to 100 in future.

Ca p a c i t y

First Bangladeshi company to supply footwear to Swedish retail-clothing giant H&M. The company exports 2 lakh to 2.5 lakh pairs of fabric footwear every month Makes more than 10,000 pairs of shoes a day, with a vision to take the production to 40,000 pairs in a year or two.

Ca p i t a l

Fortuna has investments in IT, insurance, financial leasing, digital marketing, market research and start-ups. Another unique thing about Fortuna is that it recruited garment workers and trained them. More than 85 percent of its workers came from the garment sector.

Fortuna is a design driven brand Fortuna also believe in simplicity, creativity and quality Cu l t u r e

Industry Level Footwear is the bestselling item compared in local market. Neither the culture, nor economics or the climate, promotes the usage of footwear in large quantities in the country. Causes of the backwardness in branded shoe usage for local market

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

Economical ability of the local people



Lack of cost- effective project.

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Costly raw materials in comparison to synthetic material.

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Tendency of the industry as being export oriented.

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Lack of market research

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Lack of season-based survey for demand

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Local fashion trends integration inability

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Lack of customer-based marketing

Deriving the 3C industry level 3C analysis from the findings

Presence of local and global competitors Competitor are also segmented in terms of their target market Collaborators Co mp e t e t i o nPresence of plenty locan non branded footwares .

Large parts are located in the country Roles begin in the very early stage of operations Vertical integration tends to reduce the dependence Co l l a b o r a t o r

Not highly fashion driven customer segments Segmented based on gender and income level and age Competitors Cu s t o me r Price sensitive

Facilitation Level

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St a t e&So c i e t y

T e c h n o l o g y& I n n o v a t i o n

Consistent population growth (46% of the population is between 0-24 years) Urban population growth (36% urban in 2017 which was 29% in 2008) Increase in per capita income Change in buying behaviour High spec machines will yeild better quality leather with less waste Modern slaughterhouses Popularity of Rexin might act as a better alternative

Quality of processed leather has deterioted which further reduced the price Loss of int'l customers due to Non compliance (non functional CETP) Low cost supplier Gl o b a l i z a t i o n& I n t ’ l F o r c e s Trade war between US & China (25% tariff on China's leather) Tannery industry in Kanpur was shut down to reduce pollution in Ganga river

SWOT Analysis (Apex): We have done the SWOT analysis of APEX by research and the help of product manager. The SWOT analysis determines the strength, weakness, opportunities and threats of APEX. The SWOT analysis are given below:

Strength:

Market Leader: APEX is one of the market leaders of shoes in Bangladesh. Apex is continuously delivering high quality product through their sophisticated technology that causes minimum harm to the nature. This makes them to stay as market leader. Distinctive design: APEX made distinctive design of shoes than their competitors. Because of this the customers have ability to choose their desired product from a wide range. Best quality:

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APEX has maintained their quality. They always give the best quality products and services to the customers with attractive design. Reliable brand: APEX is one of the oldest footwear brands in Bangladesh. The customers choose our brand and pay a premium price for our products because the brand is reliable, and the products lifetime is higher than our competitors.

Weakness:

Maintenance of the brand: APEX is market leader so to keep their position in top they need to expense a lot in promotion, marketing, adverting and in all areas. In a nutshell, we can say that to stay as a top footwear brand and maintain the market share, they need to spend a lot of money that’s why maintaining the brand is difficult for them. Stores not available everywhere: APEX has their stores in center of the district or in popular areas of the district. They need to give more outlets so that people can buy their shoes at ease.

Opportunities:

New machinery: There are some advanced machines which are available in other countries also some are in develop process for advanced leather tanning and cutting. If they can bring this machine in our country, it will help them to make products in ease.

Purchasing capability: Bangladesh is currently a lower middle-income country and this situation will be changed as our government took steps to make it a middle-income country by2020. As the purchasing

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power increases, people will buy costlier product. In this way, APEX will be benefitted as it produces upper class footwear. This is one of the biggest opportunities for APEX. Taste: The lifestyle and taste of people are changing. People want to wear some brand shoes now a day. Shoe is one of the factor of proper clothing. This is one of opportunities for APEX to make some unique and premium design products. Online shopping: People are now buying their necessarily goods through online shopping. Apex has recently launched their online website which is Apex4u.com. People can buy shoes from wide range in this website conveniently.

Threats:

Local shoe manufacturer: The local shoe manufacturer can be threat for us as they can offer shoes in cheaper price. Many local shoe manufacturers are already available, and it is increasing day by day. Tannery industry shifting outside of Dhaka: As per government order tannery industry need to shift outside of Dhaka which is currently in Hazaribagh area of Dhaka. Because of this reason the production cost should increase as a result the product price should also increase. This is one of threats they need to handle carefully. Main competitors: Our

main

competitors

such

as

Bata,

Lotto,

Bay

Emporium,

Orion

are bringing

some new technology also providing good quality shoes to the consumer. We need to keep

Sensitivity: Internal

delivering high quality product through our latest technology so that we can stay as a market leader.

Recommendation: Distribution Strategy The distribution channel of Apex Footwear is quite good but can be better. Apex Footwear outlets all over Dhaka city. But They lack distribution strength outside Dhaka. As their prior target customers are upper middle-class people, they should be focused on the urban part of the countries for giving outlets. Apex usually uses rented trucks or courier service to distribute the products outside Dhaka city. However, they need to invest in their own logistics as well.

Collaborative Strategy:

Apex footwear needs to collaborate with foreign famous brands to build brand value in the local markets. This will help the company to compete with brands like Bata with the vast array of branded options that they have.

Market Awareness Strategy

APEX footwear needs to do Demographic segmentation to acquire new market strategy. We don’t think APEX footwear should change their existing market segmentation strategy. They are dividing the market on few variables which is age, gender, income. But they are missing out on their online presence. Apex has shoes, sandals and accessories for different age which are kids, teens, and adults. They also have different products for men and women. Last of all they have

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segmented the market based on income. All of these market segments are in online arena now. Apex should build rigorous awareness for Apex4u ecommerce solution.

Infrastructural Changes: 1.

Non- Compliance issues need to be solved to end: Tannery factories have been

transferred from Hazaribagh to Savar in a bid to increase environmental compliance. But, the CETP has not yet started its full-fledged operation and as a result, global compliance standards have not been achieved. Solid wastes are also being dumped in open space which also adds up to the non-compliance issue. 2.

Establishment of more modern slaughterhouses like the Chittagong’s one can improve

the quality of rawhide resulting in increased value of finished leather exports. 3.

2 new industrial leather parks and newly drafted leather policy can boost Bangladesh

Leather & Leather Goods export to achieve the expected growth

Conclusion: Analyzing Footwear industry, we have identified that the shoe industry is growing and identified their main weakness is insufficient development and infrastructure issues. On the other hand, distribution system and vertical integration are the strengths of the industry from strategic viewpoint. Based upon these facts recommended strategies would assist in more growth of Apex Footwear Ltd. in among the upcoming fierce competition in the shoe industry.

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References: 1. http://www.theindependentbd.com/post/179028 2. https://thefinancialexpress.com.bd/economy/bd-to-be-leading-actor-in-global-footwear-marketsay-experts-1510771658 3. https://www.prothomalo.com/economy/article/1594561/

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4. Comprehensive Report 2017 On Bangladesh Leather Goods and Footwear Industry 5. https://www.thedailystar.net/business/news/rawhide-prices-unchanged-eid-1782826 6. https://www.thedailystar.net/backpage/news/3-factors-behind-rawhide-mess-1785940 7. https://www.thedailystar.net/business/news/tanners-pay-rawhide-traders-three-phases1789336 8. https://www.prothomalo.com/economy/article/1594561/বব-ববববব-ববববববববববব-বববববববববব 9. https://fashionunited.uk/news/business/global-footwear-market-to-rise-by-30-percent-in-5years/2020101351357#:~:text=The%20global%20footwear%20market%20is,as%20healthier %20lifestyles%20increase%20demand. 10. https://www.academia.edu/35410484/Strategic_Analysis_of_Bata_Shoe_Bangladesh 11. https://www.leatherex.com/about-us697

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