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Final year project for marketing and Entrepreneurship....

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Marketing Management (Section B)

Submitted to: Submitted by:

Syed Ali Bukhari Qudsia Laraib Jilliani (S2020151004) Sharjeel Ahmed (S2020275001) Khushbakhat Subhani (S2020305001) Muhammad Ali (S2020052009)

Group Name:

4 Amigos

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INFORMAL INTRODUCTION:

A shoe is an item of footwear envisioned to protect and comfort the human foot. Shoes are also used as an element of decoration and fashion. The design of shoes has diverse hugely through time and from culture to culture, with appearance originally being tied to function.

The Fascinating History of Footwear

Believe it or not, the accessories that currently cover your feet have a 40,000year history. It’s hard to imagine a time before the invention of shoes. Yet what started as a practical venture has grown into a varied, booming industry just as concerned with art as it is with functionality. Though all shoes share basic characteristics, their coloring, materials, and designs have transformed drastically over thousands of years in the fascinating history of footwear. From archeological and paleo archeological evidence, experts hypothesize that

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shoes were invented around in the Middle Paleolithic period approximately 40,000 years ago. However, it wasn’t until the Upper Paleolithic period that footwear was consistently worn by populations. The earliest shoe prototypes were soft, made from wraparound leather, and resembled either sandals or moccasins.

FORMAL INTRODUCTION:

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1.Growth trends in the industry: The special subsidized rates for Pakistan’s worldwide footwear trade have helped increase the exports to the extent of 250 per cent in the last couple of years. Export of shoes has shown an increase of 13 per cent in the previous fiscal year till Apr against the corresponding period of last year. If the support was not withheld the footwear industry would have certainly crossed the$2000000. Pakistan’s footwear industry manufactures around 120 million pair annually for local consumption and it exports 2 million pair per annum roughly and the average price charged for each pair stands around $10. Its share in Pakistan’s total exports is about to touch the figure of $200 million. Volume of Pakistan’s footwear exports grew at a considerable rate of 16% for the years 2003 and 2004. The share of Pakistan’s footwear exports in the world’s total footwear exports is about0.18% while it is 1.6% for India and 29% for China in the year 2006. For Pakistan it rose from0.16% to0.23% in 2005 and decreased to 0.18% in 2006. Footwear exports share in Pakistan’s total exports rose to 1% in 2005 from 0.7% in 2002 and it accounts for about 0.8% in 2006 of Pakistan’s total exports. India’s footwear exports account for about 1.6% of total exports while for China the same is 2.2% in the year 2006.The current industry structure is monopolistic competitive. The industry has entered into mass production especially local industry. There are 306 manufacturing sites in Lahore which are 59%of total Pakistan and 44 manufacturing units in Karachi which are 8 % of total in Pakistan. In footwear industry price is the dominant force these days both for manufacturers and buyers because of bad economic and political situation. For manufacturer cost is issue

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and for buyer income issue. Asian economies such as China and India are enjoying a notable growth in changing circumstances across the world. Pakistan also has great potential for higher growth However, the political threats, socio economic environment and lack of updated technologies are obstruction in the way of progress. This sector has pivotal importance in terms of providing and creating jobs, earning of foreign exchange with the help of exports and fulfilling the local consumption requirements. Both in Pakistan and around the globe, the demand for footwear is increasing. Pakistan is one of the most populous countries in the World and according to an estimate with an average population growth of 2.25 %, about 3 million children have been born during the year 2005-06,signaling the growing demand for footwear in Pakistan. It is also estimated that about 60 percent of the World’s total consumption consists of simple footwear made entirely of nonleather materials and that for the remaining 40 percent only the upper part of the shoe is made of leather. In the manufacturing of footwear, most frequently used material consists upon leather, manmade materials, rubber / canvas / synthetic and textile along accessories. Different type of shoes are being produced by the local industry e.g. sportsmen, army, disabled persons and safety shoes for the industrial workers etc. The population of Pakistan is expected to be about 172 million in the year 2010. Keeping in view the growth in population, the growth in the demand of footwear industry is also anticipated. Footwear industry is changing rapidly. Industry is moving towards high competition because of overcapacity interims of supply and manufactures are offering similar kind of product to almost same target market. Because of local manufactures and imports of footwears from china.

We can also see the growth trends with the help of table that how footwear industry varies in the past: Pakistan’s share in the international market is hovering at about 1.5% from the last five years, earning an average foreign exchange of US$ 681 million per annum. According to Federal Bureau of Statistics data, Pakistan exports for the year 2001 were about US$ 763million. Out of total leather exports, leather footwear accounts for 50.93%, which makes leather footwear extremely significant.

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Industry growth trends and challenges in respect of very critical points: Shoe industry in Pakistan is growing rapidly and a lot of companies are competing for market share so the rivalry among the firms is intense.

Overcapacity Production: 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: Most shoe companies are 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 competitive advantage to most companies in overall industry.

Switching Costs: Lots of companies are fulfilling the needs of buyers on low prices ultimately switching cost is low so the overall industry suffers because imported shoes are cheaper and more famous among the young people.

Concentration and Balance: In these aspects there is intense rivalry among competitor because many companies trying to chase same customers.

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Diversity of Competitors: Local companies are implementing more diverse strategies on distribution and retail channel, so overall industry is not stable. The reason is that many local companies are entering very quickly and vice versa because they could not stay for long time in the market.

Industry Analysis:

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Political Trends:          

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Political instability is affecting badly to the footwear industry. Energy problem (high cost and power failure) is the main issue in these days, because it leads to increase in production cost. The import of underpriced shoes was badly hitting the domestic footwear industry, especially hundreds of cottage industry footwear units working across the country. 5% concessional duty on raw materials of footwear Exporters of footwear are allowed to import duty free footwear samples to meet their export commitments. Leather footwear is also provided R&D support at 6% 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. There are no many difficult formalities to import or export, any dealer can import in Pakistan and sell by the fulfilling the certain formalities required by the law. Government should take measures to check the inflow of foreign footwear into Pakistani market through the tactics of under-invoicing and miss-declaration Countries provide services to other countries by the using of labor of that country, as China is providing the services to the Pakistan .Main advantage of it is, that manufacturing cost of the products come down (cost reduction), like the electricity bills, other factory overheads, taxes etc, so this is the reason that Pakistan prefer to outsource mostly products from China even in the finished form. To establish a plant for this industry is not so much easy, one has to fulfill certain rules and regulations, and also the huge investment is required. Political stability and importance of Retail sector in the country's economy. Risk of military invasion Level of corruption - especially levels of regulation in Consumer Services sector. Bureaucracy and interference in Retail industry by government. Legal framework for contract enforcement

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Intellectual property protection Trade regulations & tariffs related to Consumer Services Favored trading partners Anti-trust laws related to Retail Pricing regulations – Are there any pricing regulatory mechanism for Consumer Services Taxation - tax rates and incentives Wage legislation - minimum wage and overtime Work week regulations in Retail Mandatory employee benefits Industrial safety regulations in the Consumer Services sector. Product labeling and other requirements in Retail

The overall political trend is negative for industry. The government may ask coalition partners to facilitate training of trainers for various leather technical institutes of Pakistan. The government may announce various industrial parks as announced by the Indian government for leather, leather footwear, leather garments and leather goods. These parks may be equipped with all facilities and infrastructure and handed over to the SME and large size exporters on easy terms, he added The market share of the domestic industry was decreased from 83% in 2002 to 61% in 2004. The market share of imports under bound tariff lines was 0.12 percent in 2002, which increased to0.30 percent in 2003 and decreased to 0.10 percent in 2004. The market share of imports under unbound tariff lines increased from 17 percent in 2002 to 31 percent in 2003 and in 2004 it was39 percent. Domestic market grew by 28.99% and 1.2% in the years 2003 and 2004 respectively. The expansion in the domestic market is largely due to increase in imports, as the sales of domestic industry are almost constant. It is evident from the figures that market share of domestic industry has decreased from 83% to 61% because the domestic industry was unable to increase its sales

Economic Trends:      

Economic crisis hit badly on footwear industry especially raw material to manufacture footwear. One of the most important problems in the growth of footwear industry is higher energy prices. Increasing energy and inputs prices leads to an increase in the cost of Production that influences the expected production of the industries and the exports Pakistan footwear exports for the year 2006 were about US$ 135 million. Out of total footwear exports, leather footwear accounts for 43.15%, which makes leather Footwear extremely significant. Pakistan’s footwear industry manufactures around 120 million pair annually for local Consumption and it exports 2 million pair per annum roughly and the average price charged for each pair stands around $10. Its share in Pakistan’s total exports is about to touch the figure of$200 million. So economic downward trend is badly affecting the industry.

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Type of economic system in countries of operation – what type of economic system there is and how stable it is. Government intervention in the free market and related Consumer Services Exchange rates & stability of host country currency. Efficiency of financial markets – Does Shoe Zone Plc needs to raise capital in local market? Infrastructure quality in Retail industry Comparative advantages of host country and Consumer Services sector in the particular country. Skill level of workforce in Retail industry. Education level in the economy Labor costs and productivity in the economy Business cycle stage (e.g. prosperity, recession, recovery) Economic growth rate Discretionary income Unemployment rate Inflation rate Interest rates

Impact of international Competition: Local footwear dealers confirm of their business getting a big setback because of what they say flooding of the footwear from China and Korea. “These are of pig leather”, well-known local footwear with a popular brand name informed this correspondent. “But you cannot say that China has dumped footwear in Pakistan market”, another leading footwear manufacturer from Lahore said. He said the bulk of Chinese footwear are either being under-invoiced or are beings through known routes. Chinese have set up big warehousing facilities in Ali in Sharjah from where a lot of goods are making their way into Pakistan. The official import figures of Chinese footwear is very small and insignificant and therefore cannot be called ‘dumping’ is one explanation. The Lahore footwear manufacturer explained that local production cost is high because the import tariff on shoes and components of shoes is by and large equal. The principle of cascading has been totally disregarded in matter of footwear imports and government refuses to offer a protective margin to the local shoe industry.

Social Trends: In Pakistan the life style of people is changing with a fast pace. Their life has become more money and time oriented. There is a major shift in the values of the people of Pakistan. People now prefer western life style rather than the traditional one. Everyone

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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 trendier and more fashionable. So, it overall 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. Footwear is the basic necessity of life. Due to evolution there is a huge change in 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 industry. People are becoming health conscious day by day and people think more as compared to past on confront and quality of footwears. Fashion industry is growing rapidly in Pakistan now people think footwear in terms of fashion like their other fashionable items.    

Discretionary income Unemployment rate Inflation rate Interest rates

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Demographics and skill level of the population Class structure, hierarchy and power structure in the society. Education level as well as education standard in the Shoe Zone Plc ’s industry Culture (gender roles, social conventions etc.) Entrepreneurial spirit and broader nature of the society. Some societies encourage entrepreneurship while some don’t. Attitudes (health, environmental consciousness, etc.) Leisure interests

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Technological Trends:

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ew technology trends also effecting footwear industry in Pakistan. Multinational competitors are introducing innovative techniques to manufacture footwear. Like 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

Some Major Threats: Absence of advanced technology, shortage of human power Absence of high-tech quality products and the shortage of skilled manpower to cater to the needs of the world market. There is a growing need to prepare labour force having capacity to produce leather garments on scientific lines and comply with the demands of international market to compete. 1234-

Competing technology development Consumer buying mechanism Innovation potential Lack of exposure

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Opportunities: 1234-

Increase in the use of commerce conducted electronically. Increase in the use of mobile commerce. Social media systems becoming increasingly popular for marketing to consumers. New technologies emerging that allow corporations to become more energy efficient as well as reduce manufacturing costs.

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INTRODUCTION OF THE COMAPNY:

As we all know that Bata is a well reputed brand providing its services and products since many years. Serving in the line of footwear, Bata has now decided to make some amendments and also introduce some new products in the field of cosmetics.

GAP ANALYSIS:

No doubt that the cosmetic industry has flourished a lot but still they are using inorganic means. Bata as always considered as a hub of quality has decided to introduce organic beauty products for the customers. Instead of having re owned beauty brands we have few organic beauty brands in the market few of them are Kishmish organic and Lepur and Mana Beauty.

Following are the main reasons of gap analysis: University of Management & Technology

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Providing quality

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Making woman feel more confident about their skin.

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Trying to make organic beauty products more common.

 Replacing inorganic with organic as inorganic cause diseases.

Target market and segmentation analysis:

Segmentation analysis is the process of analyzing appropriate consumer to which a product should be targeted. Segmentation analysis helps to understands customer demographics ...