Footwear Industry.docx

DYNAMICS OF THE FOOTWEAR INDUSTRY OF BANGLADESHA Comparative Study on the Business Models of Footwear Companies

Prepared forMr. Sheikh Morshed JahanAssociate ProfessorCourse Instructor: Bangladesh Studies (G201)

Prepared byGroup 5, Section A, BBA 20thZR-05 MD. Mazharul IslamZR-08 Abashesh BiswasRH-09 Tashfia Rawnak AnikaZR-15 Fahmin RahmanRH-19 Fableeha Bushra ChowdhuryRH-28 Syeda Shehtaz HasibZR-31 Nishadul Haque NihalZR-32 Rakib KhanZR-39 Sabbir HossenRH-48 Sadia SamiraZR-60 Sajeed AlamZR-62 Ahnaf Ahmed

Institute of Business AdministrationUniversity of Dhaka24 June 2014

June 24, 2014 Mr. Sheikh Morshed JahanCourse Instructor: G201 Bangladesh StudiesAssociate Professor Institute of Business Administration, University of Dhaka

Dear Sir,As commissioned under the term paper submission of your course, we are submitting the attached report titled Dynamics of the Footwear Industry of Bangladesh - A Comparative Study on the Business Models of Footwear Companies. The major areas of analysis in our report include a detailed analysis of six of the major footwear companies operating in Bangladesh (local and international) in terms of manufacturing, sourcing and retail; an analysis of the export-oriented operations and marketing activities of these companies; and some company-specific case studies.In completion of this report, we would like to thank you for the opportunity to work on this assignment as it has helped us explore a key industry in our economy in terms of domestic consumption and international presence. We hope you find this report satisfactory. Sincerely,______________________ ____________________ ________________________MD. Mazharul Islam ZR-05 Abashesh Biswas ZR-08 Tashfia Rawnak Anika RH-09 ___________________ _____________________________ _________________ Fahmin Rahman ZR-15 Fableeha Bushra Chowdhury RH-19 Sabbir Hossen ZR-39 _______________________ _______________ ________________ ________________Syeda Shehtaz Hasib RH-28 Rakib Khan ZR-32 Sadia Samira RH-48 Sajeed Alam ZR-60_______________________ _________________Nishadul Haque Nihal ZR-31 Ahnaf Ahmed ZR-62

Enclosure: Dynamics of the Footwear Industry of Bangladesh - A Comparative Study on the Business Model of Footwear Companies.ContentsExecutive Summary61.Introduction71.1 Purpose81.2 Objective of the Report81.3 Scope81.4 Limitations91.5 Methodology92. Overview of Footwear Industry in Bangladesh102.1 Local Scenario102.2 Export Scenario102.3 Industry Analysis112.3.1 SWOT Analysis112.3.2 Porters Five Forces Analysis122.4 Case: Footwear Industry The Next Big Thing183. Bata203.1 Company Overview203.2 Value Chain Delivery213.3 Supplies213.3 Manufacturing223.4 Distribution233.5 Product Offerings243.6 Batas Leadership Points243.4 Case: Batas Stronghold in the footwear industry of Bangladesh254. Apex Adelchi Footwear Limited284.1 Company Overview284.2 Manufacturing284.3 Supplies284.4 Product Offerings304.5 Distribution314.6 Exports334. Case: Why is Apex Failing to be the Market Leader in the Local Market?345. Arbana375.1 Company Overview375.2 Supplies375.3 Manufacturing375.4 Distribution, Retail Outlets and Exports385.5 Product Portfolio385.6 Case: An Architect of Footwear386. Fortuna Leather Craft Ltd406.1 Company Profile406.2 Supplies406.3 Manufacturing416.4 Exports416.5 Product Offerings426.6 Retail Outlets436.7 Case: Fortuna Leading Bangladeshs Footwear Industry with Visionary Thinking437. Leatherex467.1 Company Profile467.2 Supplies477.3 Manufacturing497.4 Distribution497.5 Exports507.6 Product Offerings507.7 Retail Outlets507.8 Case: Evolution of Leatherex- All the Right Moves518.0 Bay Emporium538.1 Company Profile548.2 Supplies548.3 Manufacturing548.4 Distribution558.5 Exports558.6 Product Offerings558.7 Case: How Bay positioned itself in the market569. Comparison of Business Models57Appendix A: Hazaribagh the Footwear Haven59Appendix B: Questionnaire for Organization Personnel61References64

Executive SummaryThe footwear industry of Bangladesh, due to its rapid growth in demand both in the local and global market, is now considered the next ready-made garments sector. With around 41% of the export earnings coming from the leather-based footwear industry in the fiscal year 2012-2013 (Export Promotion Bureau, 2013), it is not very surprising that entrepreneurs are entering this sector in great numbers. The low entry barrier and the high demand from the consumers, is only facilitating the new ventures, and the industry is well set to expand in the future. Footwear companies like Arbana Fortuna, Leatherex and Bay Emporium have entered the market in a time span of less than a decade. Consequently, the footwear industry has been experiencing an annual growth rate of 21% according to Leather Goods and Footwear Manufacturers and Exporters Association (LGFMEAB). When it comes to the local footwear market, Bata is still considered the family brand and most people believe it to be a local company because of its domestic approach. Starting its journey in 1962, this multinational company with outlets in over 90 countries, enjoys revenue of around 5 million a year. Following Batas lead, Apex started in the early 2000s with a view to take away a sizeable portion of Batas market share. Both the companies employ similar business strategies like offering a wide range of products to reap the benefits of price discrimination and reach out to a larger target market. In a time span of less than a decade, footwear companies like Arbana, Fortuna, Leatherex and Bay Emporium have entered the market with a different aim in mind. These companies chiefly produce leather footwear and other accessories. Their footwear is more customized, hence more differentiated, and cost more than Bata and Apexs footwear. However, customers still tend to value these locally made creative products, and companies like Arbana, boasts their 100% hand crafted designs. Arbana also sells with its own brand name in Middle Eastern countries like Dubai. Vertical linkage in the latter group of companies is a common phenomenon. Backward and forward integration helps these companies coordinate the demands of the production line expansion, actively control production costs, reduce material lead time, and master production cycles to deliver value to its customers. Most of these companies have a zero or one level supply chain, hence, are able to offer their customers competitive prices and superior buying experience. 1. IntroductionThis term paper is prepared with an intention to meet partial requirement of the course Bangladesh Studies. The paper focuses on the dynamics of the footwear industry of Bangladesh. Government of Bangladesh has identified the Leather sector as one of the thrust sectors. Leather sector earns a substantial amount of foreign currency every year through export of leather and footwear. Footwear industry, which constitutes a significant portion of the leather industry, is now playing an important role in the global market. Leather processing is an old manufacturing sub-sector in Bangladesh with a long heritage of over six decades. Availability of indigenous raw material (hides and skins) facilitated the setting up of the industry in early 1940s in the then East Bengal. During Pakistan period (1947-1971), the industry was dominated by non-Bengali migrants from India, who had the knowledge and the know-how of leather processing industry. At that time, leather processing was limited to the production of wet blue leather (semi-processed tanned leather) and the non-Bengali traders exported a large part of the produce to West Pakistan for further processing and production of leather goods. A few small tanning units belonged to Bengali entrepreneurs who processed leather mainly for the domestic market .After the independence of Bangladesh, the government took over the tannery industry abandoned by the departing non-Bengali entrepreneurs but had limited success in operating them under the public sector. Export of processed leather consisted almost entirely of wet blue leather till 1980-81. After 1981, a number of policy support measures aimed at raising the level of value addition in the industry provided incentive for new private investment in leather industry. The ban on export of wet blue leather in June 1990 led to the setting up of modern leather tanning units for the production of crust leather (tanned leather after further processing of wet blue leather) and finished leather and this was followed by new investment in leather goods industry, particularly leather footwear (International Monetary Fund, 2000).There are three broad components of the leather industry (i) Leather tanning (Bangladesh Small and Cottage Industry Corporation, BSIC Code, 1911), (ii) Leather footwear (BSIC Code 1921) and (iii) Other leather products such as handbags, carry bags, wallets, cases etc. (BSIC Code, 1912). According to Export Promotion Bureau, Leather footwear accounted for 41% of export earnings from leather and leather products in 2012-13, while the share of leather and other leather products were 39% and 20% respectively. Thus 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 an exporter of leather footwear and leather goods (Ahmad &Bakht, 2010).1.1 PurposeThis report was done to study the business models of some of the popular footwear companies in Bangladesh in order to understand the overall dynamics of the footwear industry by evaluating their value delivery processes and particular issues true for each of them. 1.2 Objective of the ReportBroad objective: To assess the current position and analyze the dynamics of the footwear industry of Bangladesh.Specific objectives: The specific objectives of this report entail the following- The current position of footwear industry The value delivery process of the established brands Supply chain analysis of the industry Cases focusing on particular issues true to each of the companies Potential of the industry1.3 ScopeThis study encompasses some notable names in the footwear industry of Bangladesh. Because the footwear industry is closely intertwined with the leather industry and products of the two are perceived to be substitutes, the report refers to both these industries in the discussions. Some of the companies studied for this report sells both leather and non-leather footwear, while other solely produce leather footwear, but since all these companies target the same or similar segments, the companies business models are comparable.

1.4 LimitationsSome restraints that were faced at the time of preparing the report are given below: The insufficiency of information acted as the main constraint of the study Time limitation created obstacles as some of the executives said they will only be available after the deadline of this report Data collected from the secondary sources were often out dated, and possibly did not paint the correct picture of the current footwear industry Organizations were reluctant to disclose sensitive information about their business Only six of around fifty footwear names in the industry, were studied1.5 MethodologyFor preparing this report, information was gathered from the following sources: Primary data: To collect inside information of the footwear industry, we have interviewed personnel from the major footwear companies including Bata, Apex, and Leatherex. Direct interviews with key informants through structured questionnaire have contributed to the credibility of the report. Secondary data: Secondary data and information were collected from various concerned government and non-government organizations and a thorough review was held on their publications, studies, reports, journals, newspaper articles, books, and websites to make this study potential and consequential.

2. Overview of Footwear Industry in BangladeshBangladesh is set to emerge as the next manufacturing hub for the global footwear industry. The cheap labor is prompting top manufacturers to relocate their factories in the country. The good news is that a number of foreign investors as well as buyers have already shown interest in Bangladeshs leather and footwear sector.2.1 Local ScenarioImport dependency on brand footwear for both sexes has come down as local manufacturers are gradually replacing those, thanks to their world class quality and reasonable prices. Most sophisticated and high-end customers now prefer locally-made footwear over imported ones. Following the success of a few entrepreneurs around a decade ago, a number of new industrialists have come forward to take advantage of an emerging market in domestic footwear and thus succeeded in saving a substantial amount of hard earned foreign exchange.Top manufacturers including Apex Adelchi Footwear Ltd., Leatherex Footwear Industries Ltd., Bay Footwear, Jennys Shoes Ltd. and Fortuna Leather Crafts Ltd. are now market leaders for the country for such footwear. The local footwear industry is experiencing an annual growth rate of 21 percent, according to a spokesman from Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh (LGFMEAB). However, to continue the trend, the present level of growth is not only to be maintained; it also has to be taken to a still higher level, if Bangladesh is to match the success of its immediate competitor, Vietnam.2.2 Export ScenarioGrowth in exports is due to the low production cost in Bangladesh compared to its neighboring countries: China, India and Vietnam, who also have a very well entrenched leather and footwear export industry. Orders which earlier used to be given to China or India are now being handed out to footwear manufacturers in Bangladesh because they are able to produce low-priced but quality shoes, which have now found its way in to key markets in EU and Japan. Japan and Germany are now the biggest markets for Bangladeshi footwear but US buyers are increasingly showing interest in sourcing from Bangladesh.This growth in footwear exports has come as a blessing in disguise at a time when leather exports have fallen by a massive 18 percent in the period under review. Experts attribute the growth in footwear exports, thanks to machineries imported from Italy that is trusted for its quality output. In recessionary trends, high-priced products tend to register a negative growth, as consumers tend to shy away from them in preference for value for money items. In this scenario, it is a golden opportunity for the leather and footwear sector to increase its global market share by producing simply day-to-day footwear at affordable rates. Despite the high quality of local animal hides both in raw and finished form, Bangladesh was still trailing behind Vietnam and China in the export of footwear and other leather products in the European and other markets, but this scenario is quickly changing. 2.3 Industry AnalysisSWOT and Porters Five Forces tools have been used to analyze the situation of the footwear industry of Bangladesh.2.3.1 SWOT AnalysisStrengths: Low labor cost Domestic manufacturing facilities are export oriented Standards and quality of products are high Strong vertical value chain linkage Industry well experienced in the production of footwear and well networked by now Similar prices in among shops, hence high competition and better consumer experienceWeaknesses: No longer a High Priority Sector (HPS) Safety standards in the tanneries not met by smaller enterprises Environmental concerns are being raised Designs from company to company do not vary muchOpportunity: Shift of China to High-Tech industries leaves a Demand-Supply gap to be conquered Consumers preference of local, high quality products, over cheap, Chinese and Burmese imports Getting media attention and therefore attracting resources like capital, land and laborThreat: Political unrest Volatility of the world economy and hence demand for footwear manufacture in Bangladesh Maturity of the industry from infancy Government withdrawing aids gradually Threat of removal of international trading aids Vietnam excelling at productivity and low cost footwears Ongoing law suits against the leather cottages in Hazaribagh2.3.2 Porters Five Forces AnalysisThe Footwear Industry of Bangladesh was analyzed with the view point ofPorters Five Forces Model. The analysis of the industry is given below : ANALYSIS ON THE LEATHER FOOTWEAR INDUSTRY OFGLADES

Force 1: Threat of New EntrantsA factor that indicates that the likelihood of entrants coming into an industry and creating competition for existing companies is known as threat of new entrants. It is higher if there is an excessive profit to be earned or entrance barriers are lower. In Bangladesh the leading footwear companies are Bata, Apex Adelchi, Jennys Shoes, Landmark Footwear, Leatherex Footwear, Bay Emporium Footwear, Fortuna Shoes ltd etc. Among them Bata and Apex Adelchi are the organized retail manufacturer and distributor who can boast of sizeable market shares. However, the entrants of new companies can still be observed, which is due to low production cost, high quality, durability and attractive design of footwear from the countries like China, Thailand, India etc. The threat of new entry into an industry depends on the barrier to entry that is present, coupled with the reaction from existing competitors that the entrant can expect.The major sources of barrier to entry include- Economies of Scale: Economies of scale refers to declines in unit costs of a product as the absolute volume produced per period increases. New entrants in the leatherfootwear industry cannot easily take over the existing companies as the existing companies of Bangladesh have low production cost and is enjoying large economies of scale compared to its neighboring countries. So, the new entrants have to come in a large scale and risk strong reaction from existing firms or accept a cost disadvantage. Product Differentiation: Product Differentiation means that established firms havebrand identification and customer loyalties, which branch from past advertising, customer service, product differences, or simply being the first in the industry. The leather footwear industries of Bangladesh such as Bata, Apex are leading the market from the very beginning which has already created their brand name and customerloyalty. Thus new entrants have to invest a lot to build their own brand name. Capital Requirements: They need to invest large financial resources in order to face the barriers to entry particularly if the capital is required for risky or unrecoverable up-front advertising or R&D. Capital may be necessary not only for production facility but also for covering start-up losses. The leather footwear industries currentlyhave lots of financial resources by which they can now even enter any new industries. Such as, Fortuna has already entered in to food industries named Fortuna Fried Chicken (FFC). Access to Distribution Channels: It refers to the access to favorable locations,proprietary technology or proprietary production material inputs which increase the entry barriers and decrease the threat of entry. The more the existing companies have tied up with these things the more the tougher new entry will be. In this case, Bata, Apex and Bay footwear Ltd has their own secured distribution channels which are barriers for the new entrants. So in this sector the new entrants must have strong and secured distribution channels of their own products to enter and compete into the industry. OForce 2: Threats of Substitute ProductsSubstitute products are those products that can perform the same function as the product ofthe industry. There are a lot of substitute products of leather footwear like footwear ofRexine, Plastic, Rubber, and Jute. These substitute products give a great competition to the footwear in many sectors. Such as- Buyers Choice of Substitute: Bangladesh is a country of middle class people. Here, most of the people are not willing to spend a huge amount of money for footwear. Leather footwear is comparatively more expensive than other substituteproducts like, rexine, plastic, etc. Rexine is a product which fulfills almost all there quirements of leather and it looks quite similar. Relative Price-Performance of Substitute: It refers to the cost-effectiveness of the substitute products. Alternative products that provide overall savings to the customers, without influencing the quality of the customers products or services. The substitute products of leather footwear like, rexine is comparatively less costly and also bybuying rexine footwear, consumers can have a taste of leather. Number of Substitute Products Available in the Market: There are many types offootwear in the market but the major substitute of leather footwear is rexine, Plastic,Rubber, Fabric, Jute, etc. Major portion of customer from leather footwear are diverting to Rexine footwear because it looks quite similar to leather but is less expensive.Force 3: Intensity of Rivalry among Existing CompetitorsRivalry among existing competitors takes the familiar form of jockeying for position by using tactics like price competition, advertising battles, product introduction and increased customer service or warranties. Rivalry occurs because one or more competitors either feels the pressure or sees the opportunity to improve position. The leather footwear industry is thus facing such rivalry among existing competitors. Factors that increase competitive rivalry among existing firms include: Numerous Competitors with Roughly Equal Size & Power:If there are more firms within an industry; there is an increased competition for the same customers andproduct resources. There is even greater competition if industry players are equal insize and power, as rivals compete for market dominance. It is seen that in the leatherfootwear industry, most of the companies from 109 firms are of equal size and powerwhich increased competition for the same customers and product resources such as Bata, Apex, and Fortuna etc. Slow Industry Growth: When an industry is growing rapidly, firms are able to increase profits because of the expanding industry. When growth slows down and industries reach the maturity stage of the industry lifecycle, competition increases to gain market share. This is an example for Bata which is leading the market from a very long time. It reached to maturity stage and now competes to gain market share. Apex is also reaching the same stage gradually. High Fixed or Shortage Costs: In industries where the fixed costs are high, firms will compete to gain the largest amount of market share possible to cover the fixed costs. This is what every firm is trying to reach the fixed costs and shortage its costs in the leather footwear industry. High Exit Barriers: When high exit barriers exist; firms will stay and compete in an industry longer than they would if no exit barriers existed. In leather footwearindustries of Bangladesh exit barriers condition varies from company to company. Forexample Bata, Apex and other established existing companies cannot easily cross thebarriers, considering the major sources such as specialized assets, fixed costs of exit strategy, interrelationships, emotional barriers, government and social restrictions. On the other hand exit barrier is low for those new firms entering into the industry.

Force 4: Bargaining Power of BuyersBargaining power of buyers mean the buyers/customers have little power to set the terms and conditions under which they will buy. Basically it is an advantage to consumers that comes from gathering together to put collective pressure on producers to lower prices or improve quality. Bargaining power of buyers in the leather footwear industry is increasing day by day as new footwear companies with optimistic future plan and changing trend and quality consciousness is increasing day by day. Individual consumers of leather products in this industry have much bargaining power in negotiating price concession or other favorable terms with seller, hence, the individual buyers mostly pay the sellers posted price. People want durable shoes as well as modern designs, so to satisfy customers the companies have tokeep up with the trend as well. In our country Bata and Apex are the main footwearindustry but the substitute products are many more. These substitutes are fulfilling the samedemands with some extra features. The entrance of foreign brands like Nike, Reebok does notmake the scenario easier. More international buyers are moving towards Bangladesh as it hascost competitiveness in terms of gas supply, cheap labor cost, skilled labor. As the number ofsellers, both in local and international market, is growing, the bargaining power of buyers isbeing strong. Buyers are particularly powerful when- Buyers are Concentrated or Purchase Large Volumes Relative to Seller Sales: The leatherfootwear sellers are supplying footwear to a large number of consumers. Theconsumers who are fond of leather, always use or purchase leather footwear and alsoleather footwear are also use as a formal dress-up. In this scenario, the purchasers aremuch larger and so can exert pressure on the suppliers. The products Purchased from the Industry are Standard or Undifferentiated: Customer bargaining power is greatly increased when alternative suppliers are easy to find and competitors are played against each other. People can now easily evaluate which type of footwear is good for them and also they can compare prices by assessing the market or through Internet. This particularly happens when the footwearare not that much different from the others. Buyers Faces Few Switching Costs:The customers can easily switch to an alternativefootwear company because they do not have to have any disadvantage for switching.Anyone wearing footwear of BATA can easily switch to APEX at their convenience.

Force 5: Bargaining Power of SuppliersWhere very few products are chased by a large number of buyers there poses a bargainingpower of supplier. In Bangladesh, there are many leather footwear industries. As we all know there are many steps needed to prepare the leather before manufacturing. This increases theproduction cost. Besides there are some other barrier like water effluent treatment plants delay in payment by the buyers, slow process in sanctioning funds by bankers, unauthorized labor absenteeism, poor quality of equipments, political condition and government restrictions. Sometimes it is harder to fight back with all these problems. As a result the price of the product either increases or become stable at previous price. On the other hand the substitute products, they do not have to face all these problems. They are independent to set the price at a lower rate and consumers find the substitute product with the same features with a lower cost, which grab the leather market customers and divert them to other substituteproduct market. The conditions making suppliers powerful are largely the inverse of those making buyerspowerful. A supplier group is powerful if: The Supplier Groups Possess a Credible Threat of Forward Integration: It provides a check against the industrys ability to improve the terms on which it purchases. The threat of forward integration by the suppliers is high as brand identity is not a critical issue in the leather footwear industry in many cases in Bangladesh. The Supplier Groups Product is Differentiated or It has Built Up Switching Cost: Differentiation or switching costs cut off buyers options in playing one supplieragainst another. The bargaining power of supplier is moderate but the number ofsuppliers is huge. Moreover, 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. For Example Bata not only provide good quality at reasonable pricebut also it gives warranty for its products.

2.4 Case: Footwear Industry The Next Big Thing With Bangladesh having developed a strong position amongst European and US buyers, many countries are already having eager to evaluate the future potential of this country.(Bangladesh Ready Made Garments Landscape: The Challenge of Growth) with this statement in mind it can be said that Bangladesh is going through a booming phase where not only can it expand its RMG sector but also venture into new sectors to reach the big market.Currently Bangladesh exports leather, leather goods and footwear is valued at around $1 billion a year which is about only 0.05% of the global market. Some of the companies already export standard quality products which are highly appreciated by the export countries. As a result the potential for this sector to grab a large share in the global market is very promising.Some say that after RMG, Footwear Industry will be the next best thing for Bangladesh. Bangladesh RMG is the second largest exporter of RMG which is approximately 80% of the total export. But it is evident that the condition of the RMG sector has grabbed the attention of millions of people around the world and sadly their perception about Bangladesh RMG is somewhat negative especially after the Rana Plaza incident. It has been evident for the policy makers that it will be difficult for us to move on to the next phase of Bangladeshs economic progress without developing new industries. Ifty Islam, Managing partner at AT Capital.This is where Footwear comes in. Some of the factors that will highly help this sector to grow is the availability of the elements, raw materials and cheap labor (high working age population). But the major drawback that is stopping this sector to flourish are the nonexistent environmental friendly tanneries. According to some analysts, Bangladesh will be able to earn at least $5 billion in exports from leather, leather goods and footwear in the next decade if it can properly address health, environment and compliance issues in the sector. The only solution to this is the relocation of the tanneries. This step will help the footwear industry to go through a boost.

The benefits that the footwear industry at the moment poses are immense. The benefits as a whole will be able to take the country to the next phase in the global market. Studies show that if the desired export amount is reached then the country will be able to increase domestic manufacturing output by 9.2 percent and agricultural output by 6.7 percent according to a 'simulation exercise' conducted by Khondker and M Abu Eusuf, a professor at the development studies department at DU. The reason of increase in agricultural units will be because of the future increase of the demand of livestock. Also according to this study it shows that approximately 4.4 million jobs will be created and this will lead to a high economic growth.The high potential of footwear industry has already been addresses to. Due to relocation Tannery owners require money and for this reason government is asked to take necessary steps to help the owners. First step could be long- term loans with single digit interest.Tannery owners also urged the government to provide long-term loans at single digit interest rates. In par with that the owners are also urged to maintain the standards from the beginning. Each tanneries also need proper equipments to increase quality and efficiency. A total of 127 tanneries out of 155 already submitted their factory layoutto Bangladesh Small and Cottage Industries Corporation (BSCIC), the implementing agency, of which 85 of them are approved. After approval these factories are subjected to loans from the government. If the footwear industry is given importance by solving problems from the core with a fresh start then the future of this industry will hold a strong position in the economy of Bangladesh.

3. BataThe Bata Shoe Organization was established in August 24, 1894 in Zlin, Czechoslovakia by Tomas Bata, along with his siblings Antonin and Anna. Although a new venture, the Bata family had been involved in eight generations of shoe making which spanned over three hundred years. The Bata business aimed at becoming one of the first modern shoe manufacturers, a team of stitching workers and shoemakers creating footwear not just for the local town, but also for distant retail merchants. This departure from the centuries-old tradition of the one-man cobblers workshop was a brand new concept, creating an entirely new industry. This industry has developed exponentially over the years and currently Bata operates in over 70 countries under three strategic business units: Bata Europe (based in Italy), Bata Emerging Market (Latin America, Africa and Asia Pacific) and Bata Protective (worldwide B2B Operations).Bata estimates that it serves more than 1 million customers per day, employing over 30,000 people, operates more than 5,000 retail stores, manages 27 production facilities and maintains a retail presence in over 90 countries. Although the company originated in Czechoslovakia, family migration to Canada has shifted the company heritage and culture to a Canada based company. The global headquarters of Bata are in Lausanne, Switzerland. Thomas G. Bata, grandson of Tomas Bata currently heads the organization and the Bata family still maintains a majority of company ownership.3.1 Company Overview

Bata started its operations in Bangladesh in 1962 and has grown to become the market leader in the local footwear industry. Bata Bangladesh is a public limited company, with a 51% to 49% share with the Bangladesh government. The company is also one of the largest taxpaying corporate bodies contributing Tk. 1.2 billion in 2009, which represents approximately 70% of tax paid by the entire footwear sector of Bangladesh. Currently Bata Bangladesh 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 with a turnover for the year 2009 of Tk 5 billion.

The company also maintains a diverse brand portfolio with each brand catering to a specific consumer segment. These include: Bata, Ambassador by Bata, Bata Comfit, Dr. Scholl, Hush Puppies, Marie Claire, Nike, Bubblegummers, Sandak, Weinbrenner, Bfirst and Power. Based on local demand, personalized brands are also created such as Mocassino by Bata and the company is continually developing marketing intelligence to consolidate its market position. 3.2 Value Chain Delivery As a global organization, Bata maintains an extremely coordinated and efficient supply chain starting from sourcing to distribution and retailing. Along each horizon of the supply chain, the company continually adds value to the process involved, along with increasing the strategic fit between product responsiveness and cost efficiency. The value addition starts from the core values of Bata categorized as the Bata leadership points. Furthermore, each segment of the supply chain (sourcing, manufacturing, distribution and retailing) focuses on continuous value addition. 3.3 SuppliesBata Bangladesh procures leather from two sources: Tannery facility at Hazaribagh Batas own modern tannery facility located at DhamraiAbout 20 to 30 per cent of raw materials are sourced from Batas Dhamrai facility. This accounts to about 5 million square feet of leather annually. Also, the specific tannery facility at Hazaribagh that Bata contracts with maintains an efficient delivery system of leather within 7 days of order. In the case of inventory management, Just-in-time inventory management practice is followed.Artificial leather, plastic and rubber materials are procured from foreign sources, mainly Thailand and China, on a contractual basis.

3.3 ManufacturingBata Bangladesh has four different sources of manufacturing: own facilities, satellite facilities, outsourcing and imports.

i. Own facilities:Bata Bangladesh has two factories, one in Tongi and the other in Dhamrai. The combined capacity of the factories is 110,000 shoes daily. All the rubber and related materials production and assembling is done in the Tongi factory, whereas, leather products are been manufactured in the Dhamrai factory. About 92% of all Bata products are produced in these two factories. These production facilities not only have state-of-the-art manufacturing equipment imported from Singapore and China, but they also maintain environmental safety through effluent treating plants (ETPs). ii. Satellite:There are some satellite production factories, which produce solely for Bata with the production facility of those factories set up by Bata Bangladesh itself. About 4% of footwear production is from satellite sources.

iii. Outsourcing:Bata Bangladesh outsources a very small part of its production to different small shoe industries mainly from the Dhaka region. The quality and the specification at these production facilities are ensured and strictly evaluated by the Bata technical team. The participation of outsourcing in the companys business is 4%.

iv. Import:Bata imports part of its products, mainly the global flagship brands like Hush Puppies and Nike, to keep up with the market trend and demand. In spite of high import duties of around 101%, imports for such products are still conducted.

In terms of manufacturing efficiency, Bata Bangladesh uses ERP (Enterprise Resource Planning Software) Version 2002. ERP coordinates between resources and the marketing, finance, planning, strategy, design and merchandising departments.3.4 DistributionThe distribution channel of Bata Bangladesh operates as follows:1. The physical distribution starts from sourcing the raw materials and delivering them to the production facilities at Tongi and Dhamrai.2. From there, the manufactured shoes are sent to the CDC (Central Distribution Center) located in the Tongi factory. Product packaging is done at the Tongi facility.3. After receiving the products, completing the packaging and allocating quantities based on the destination, the products are delivered from the CDC to the respective destinations via Batas own transportation vehicles. Bata has trucks, pickup vans and covered vans for transportation. The CDC gets the daily update and the last situation of retail stores. In case special orders are placed on demandable products, an area manager ensures the availability of the products into the specific stores through proper channeling. For instance, if products are needed within 24 hours it is usually informed to the area manager and based on the information, he/she informs distribution manager at CDC. The CDC then supplies the product lot to retail stores over the phone. Another way is to follow the inter-transfer system, which involves getting the products from a nearby store. There is a separate process for distributing to Batas own retail stores and to those of the wholesalers and dealers. An equally extensive network of depots and dealers supplements this extensive retail network.The goods for agencies and stores gone straight to the store headquarter and goods for others gone to the 13 depots around the country from where they collect the goods.Bata has 13 Wholesale depots covering Bangladesh. Under these depots 453 RWD (Registered Wholesale Dealers) and 670 DSP (Dealer Support Program) stores are operating.

In retail, Bata Bangladesh operates through a chain of exclusive own and franchise stores.Ithas a network of 265 retail outlets located strategically in different parts of the country at prime locations.70% of Batas sales are from its own retail outlets. Besides there is a network of about 500 exclusive wholesalers who service about 300 retail stores all over the country.This increases widespread availability of Bata products and increases efficiency in distribution and delivery of value to the end consumers.

3.5 Product OfferingsProduct designs are mostly imported from regional Bata subsidiaries. However, Bata Bangladesh maintains a market intelligence wing to monitor demand patterns. In fact, one of the notable activities of the market intelligence include introduction of Mocassino by Bata, a range of loafers in order to meet the growing demand of loafers in Bangladesh. In terms of brands, Bata maintains brands in three broad categories: children, women and men. Following are some of the notable brands offered by Bata Bangladesh: B-first: shoes for school-going children Bubblegummers: shoes for children aged between 3 and 6 years North-Star: stylish and trendy canvas shoes and sneakers for teenagers Bata range of formal leather footwear for men Ambassador by Bata: a premium range of leather footwear for men Power: athletic shoes of the Bata Brand Marie Claire: shoes for women Dr. Scholl: comfortable premium shoes for men and women Hush Puppies: premium leather footwear for men3.6 Batas Leadership PointsIn spite of maintaining operations in different economic and cultural environments globally, Bata maintains a consistent value chain delivery in all of its global operations. The common elements in this value chain delivery are coined as the Bata Leadership Points. These elements, according to the company are categorized as follows: The best product: Bata companies offer customers fresh, fashionable footwear and accessories, designed specifically for the needs of the local market. The shoes are made from quality materials. In Bangladesh, high quality leather from Batas own tannery and selected tanneries is used. Furthermore, even manufacturing equipment is state of the art and sourced from China and Singapore. Plastic and non-leather items for shoe manufacturing are imported from selective companies in Thailand and Singapore. The best service: Across all horizons, Bata strives towards maintaining excellent consumer service. Sales representatives receive frequent training on customer satisfaction and product knowledge building. In fact, Bata follows a 5-step customer policy for sales representatives. This includes the following steps:i. Welcome every customer.ii. Ask him or her about the need.iii. Show him or her three types of demanded product: Customers own choices Similarto that choice Highest pricing productiv. Try to add-on selling (Socks, shoe polishand leather rmade bag).v. Thanking the customer to revisit.

The best value and quality: Through the efficient sourcing and distribution of Bata products, cost and quality are firmly regulated. Bata maintains a Central Distribution Center (CDC), which regulates efficient delivery systems across the 300 outlets of Bata nationwide. The best locations: Bata stores are modern, attractive and located at convenient and prime locations. Furthermore, the company operates 265 retail outlets strategically located across the nation, and these are also segmented based on the customer demand: Bata Bazar, Bata Family Stores and Bata City Stores. The company also maintains franchising and wholesale dealership to increase product availability. 3.4 Case: Batas stronghold in the footwear industry of BangladeshIt is rather impressive for Bata to remain the market leader in the footwear industry of Bangladesh for decades. Leather manufacture and exports have risen sharply and a growing number of footwear companies have established themselves in the marketplace. Namely, Apex, Jennys, Leatherex, Bay and Fortuna have sizable portions of the market share. There are also various independent shoe manufacturers due to the widespread availability of cheap leather and footwear material. These independent shoes can be further categorized in the price range of high to low, thus, catering to customers of all economic segments. Surprisingly, the nature of the footwear industry is very much dependent on the aesthetic appeal of the footwear, particularly for women. Furthermore, the industry is highly price sensitive, which leads customers to compromise quality (genuine leather) for better looking and affordable footwear. This has presented a host of challenges to Bata Bangladesh. However, with effective strategic planning and implementation, Bata Bangladesh has retained its market stronghold. As the market leader, Bata Bangladesh is already effectively positioned into the consumer mindsets as the family brand with high reliability, quality and convenience. Due to its affordable pricing, a diverse portfolio of brands to cater to a wide range of customers, and the Bata brand promise, it retains a market stronghold. In fact, Bata is widely perceived as a local brand despite its foreign roots, because of the heavy integration with the consumer culture of Bangladesh. Also, its diverse product portfolio ensures maximum reach to all sorts of target consumer segments in the footwear industry. Effective campaigns such as First to Bata, then to school, make the product a definitive for school going students and in terms of quality; none dismiss the authenticity and craftsmanship of Bata footwear. In the case of catering to the aesthetic factor and appeal that drives footwear purchase decisions in consumers, Bata has a market intelligence wing, which analyzes consumer trends and market demographics. On the basis of that, the results are forwarded to the design and strategic divisions, which then decide what range of products to import and design. For instance, the increasing demand for loafers in Bangladesh has led to the introduction of Mocassino by Bata, Batas very own chain of loafers. When globally, the Converse All-Star shoes became a fashion icon among the youth, Bata introduced its own range of canvas shoes, North Star, to tackle competition. Also, with growing consumer purchasing power and demand for premium footwear, Bata has had immense success through the introduction of Hush Puppies. In fact, Hush Puppies also has its own retail outlets due to increasing demand for the brand. Bata also frequently introduces trade promotions and brings in new product designs to keep consumer inflow intact.One of the greatest successes of Bata has been its geographic reach. It is the first footwear company to have introduced wholesaling and dealership programs to allow franchising of the brand. A lot of outlets in the rural areas have thus been established by these franchisees, increasing the scope of market coverage of Bata, something which none of its competitors possess. Also, Bata is the only footwear company to conductthe segmentation of retail outlets according to profiles of different market segments and the introduction of novel concepts such as Bata City Stores. These selective outlets, in conjunction with other types of outlets such as Bata Bazar and Bata Family Stores, are adding a new level of consumer satisfaction. The City Stores incorporate spacious floor space allowing a comfortable shopping experience, modern interior dcor enriched with novel shelving systems, fittings, fixtures and lighting that can be found in the large retail shops in the Far East and Europe.Overall, the company is not only building its brand by covering as many diverse consumer segments as possible and keeping up to the pace of consumer trends, it is also increasing accessibility to the brand. The segmentation of outlets has also led to marked success in brand coverage, which has provided it an immense competitive advantage over its biggest competitors, who have almost no commercial activity within Bangladesh outside the capital and Chittagong. Bata hence, continues to retain its stronghold over the Bangladesh footwear industry.

4. Apex Adelchi Footwear LimitedApex Adelchi Footwear limited one of the oldest footwear industries in Bangladesh. It starts its journey in January 04, 1990 as Apex Footwear limited; Later on in December 27, 2006 it changed its name in to Apex Adelchi Footwear Limited.4.1 Company OverviewApex Adelchi Footwear Limited is a fully export oriented company. Now-a-days it is leading manufacturer and exporter of leather footwear from Bangladesh to major shoe retailers in Western Europe, North America and Japan. AAFL has equity, technical and marketing participation from La Nuova Adelchi one of the largest footwear manufacturers of Italy.4.2 Manufacturing Apex Adelchi Footwear Bangladesh Ltd has total 304,545 square feet of factory area complied with Global Standards of Footwear Production and imported machinery from Germany, Italy and Taiwan. In the year 2012, Apex Adelchi Footwear Bangladesh Ltd utilized its 92.03% of the whole production capacity. It manufactures 5000 pairs of leather shoes everyday while its competitor Bata produces only 4000 pairs. 4.3 SuppliesRole of suppliers in the Competitive StrategyThe level of efficiency and responsiveness the supply chain can achieve is affected by the sourcing decisions taken, which makes it crucial to the production process. Most of the leather is procured from Apex Tannery Ltd. to ensure best quality and increase responsiveness. When located within Dhaka City, Apex uses private carrier to deliver product from central distribution center (CDC) to Gallerie Apex. On the other hand if it is located outside of Dhaka city, it uses package carriers or rent transports from third party. For export, it also uses third party, like Cost and Freight Forwarding Agents, to achieve economies of scale.Purchasing StrategiesA firms competitive advantage no longer depends solely on its competency in providing a competitive range of offerings. It also depends on the firms skill to establish superior purchasing strategies in complex inter- organizational settings of numerous suppliers. Firms are no longer able to develop major product or service innovations alone because of the dispersion of knowledge and technological resources driven by organizational specialization. In addition, the growing need for greater effectiveness to focus on its core competencies leads to the externalization of the activities to partners.Apex Adelchi Footwear maintains both single and multiple sourcing strategies. It looks for single sourcing strategies when it has only one supplier for each product and service. It seeks scale advantages through lower cost products in a dyadic relationship. Multiple sourcing strategies are adopted when the buyer systematically utilizes several suppliers for each product and service. Apex considers quality foremost here. Those who maintain quality gets most of the business from Apex.Apex Adelchi Footwear procures its raw materials from both local and foreign sources. It collects leather from Apex Tannery Ltd. It imports soles, line lather, stickers or ornaments, glue, shoelace, and yarn from China and India. It import directly from the manufacturers of raw materials who meets quality and its requirements. It also imports by using local third parties. In case of procurement of raw materials, it only focuses on the quality. It does not maintain partnering, relationship buying or collaborative network with its suppliers. It maintains transactional exchange through the following strategies: Single purchase Focus on quality One time purchasing event Significant purchase After sales experts Maintaining servicesQuality is always prioritized, and Apex Adelchi Footwear is ready to procure leather from suppliers at a relatively higher cost if the high quality is assured. When suppliers maintain their reliability in ensuring high quality over a long time, then it repurchases from these suppliers for a longer duration. Apex Adelchi Footwear always maintains its relationship strategy through the following terms: Long term orientation Repetitive purchase Dyadic partner Diminishing price Win- win situation Research and development projectsOtherwise, it purchases from different suppliers in from time to time by direct bargaining. It maintains the following strategies here: Strategic procurement Key partner network Decreased no suppliers Better knowing of chosen suppliers Updated product versions Mutual knowledge transferIt takes two months to get raw materials arrived its factory from any country since it was ordered. It uses both air and ocean for importing raw materials.Eid ul Adha provides a high amount of the leather used in the production of Apex Adelchi Footwear. Most of the leather used during the year is obtained during this period, and it is absolutely essential to utilize all the available resources in gathering leather from as many sources as possible.4.4 Product OfferingsApex Adelchi Footwear Bangladesh Ltd has a wide a range of collection of shoes / sandals available for selling. Currently, the company has around 2500 different types of designs of products at its disposal. This products are mainly classified into two categories; laced and without lace. There are some other types of designs and they are; Back Belt, Slippers, Sandal, and Sports. Apex Adelchi Footwear Bangladesh Ltd manufactures all of its leather products in Bangladesh. But the sports shoes are imported from China and India and then marketed here in Bangladesh under the Brand name. Apex Adelchi Footwear Bangladesh Ltd concentrates on producing various designs of leather products and they are listed below: Mens dress and formals Mens Casual Mens Dress and Casual Boots Ladies Boots Mens and Ladies Hand stitched MoccasinsIn the recent times, Apex Adelchi Footwear Bangladesh Ltd is concentrating on designing new and innovative products. As a result, it has come up with a new athletic shoe named Aetrex Performance Footwear. This sports shoe is very comfortable and at the same time uses top class design performance using state-of-the-art technology and materials. Apex Adelchi Footwear Bangladesh Ltd designs its products based on the following categories; Category A: The best Category B: Better Category C: Good Category D: Moderately goodApex Adelchi Footwear Bangladesh Ltd also sells some high end footwear products representing the brand. Some of these products are; IT (Italian) Project, ID Shoe, Franco and HW (hardy worker).4.5 DistributionOrdering SystemGallerie Apex orders its required products to the Central Distribution Center (CDC), situated at Tejgoan in Dhaka City, by completing a Special Requirement Form. Store manager fill up this form mentioning the code of the product, quantity and other things. The order is made on a weekly basis and placed early enough to avoid running out of stock. This form is sent to CDC either by the sales force or a courier service. CDC accumulates several requirement forms of Gallerie Apex and sends it to the factory. The lead time varies from one month to two months depending on the situation and nature of the product. If the required products are available in the CDC or factory, the products are sent within a very short time. In order to digitize its process through electronic medium, Apex Adelchi Footwear is going to start internal online ordering system within a few days.Distribution SystemApex Adelchi Footwear distributes its products to Gallerie Apex by using own distribution channels with in the Dhaka City. For distributing its products outside the Dhaka City it uses Courier services or rented truck. Its products come to CDC from the factory, and then they are delivered to Gallerie Apex from CDC. Distribution strategyApex Adelchi Footwear follows selective and Intensive distribution.Selective Distribution: When a new product is introduced in the market, it first appears in the divisional outlet only.Intensive Distribution: If the new product best fits with the customer demand and if the sales growth of the new product is high enough in the divisional outlets, then Apex decides to go for intensive distribution. It then makes the product available in all the Gallerie Apex.Value Creation Stages in the Supply ChainWhen marketing to local consumers, a 2 level Marketing Channel is maintained. In the primary stage, value creation begins with new product development, which creates design and specifications for the product. Marketing and Sales generate demand by publicizing the customer priorities that the product will satisfy. Marketing and Sales also brings customer input back to new product development. Using these new product specifications, the manufacturing unit transforms inputs to outputs to create the product.On the first level, the Central Distribution Center delivers the product to various sales centers (Gallerie Apex) to make the product available to the customers.Gallerie Apex then displays the product and sells it to the customers. It also provides after sales services.

4.6 ExportsApex Adelchi Footwear started exporting in 2000. Below is the list of the major countries where Apex Adelchi Footwear Bangladesh Ltd exports its products. Japan Germany Italy France Austria Scandinavian region and Switzerland Other EU countries USA CanadaOn an average, 75% of its total revenue generated from export mainly to EU (Internatinal Leasing Securities Limited, 2013). Below is a graph representing export of Apex Adelchi Footwear Ltd.

In the year 2008, Apex Adelchi Footwear Bangladesh Ltd exported shoes worth Bdt. 5.07 billion . The export of Apex Adelchi Footwear Bangladesh Ltd got a new dimension after the affiliation with the Italian footwear producer La Nuova Adelchi Footwear. The primary joint venture capital provided by La Nuova Adelchi Footwear was Bdt. 150 million. So, it is evident that the capital contribution was not that significant. But the main benefit of the affiliation was that Apex Adelchi Footwear Bangladesh Ltd got recognition in the European countries and its export has boosted since then. Apex Adelchi Footwear Bangladesh Ltd now designs its products using Italian product development & technology. At the very first year of operation (after the affiliation), the annual export was expected to be Bdt. 900 million and later on Bdt. 2 billion. Currently, Apex Adelchi Footwear Bangladesh Ltd is responsible for exporting almost two-third of the countrys whole footwear export. 4. Case: Why is Apex failing to be the Market leader in the Local Market? Apex Adelchi Footwear started its business through exporting in the year 2000. As of now, it exports to Italy, Germany, Western Europe, Japan, and North America. It exports directly from its factory, and is the biggest footwear exporter of Bangladesh.Apex Adelchi Footwear is the market follower in the country market. It just follows the country market leader Bata Shoe Company and tries to achieve the equal market share that Bata holds. It has not set its sights on surpassing Bata in the local market yet. However, it maintains a strong foothold through more than 106 outlets all over the country, which makes it the second largest shoe retail chain after Bata. Its market share is growing fast along with the emerging middle income population of the country. Bata and Apex Adelchi, two of the country's leading shoe manufacturers and retailers, are set to intensify its battle for customers with both companies sharply increasing its number of stores. Comparisons between them are shown below:Apex Adelchi Footwear LimitedBata Shoe Company Limited

It has more than 106 retail outletsIt has 237 retail stores.

It plans to set up some 20 new retail outletsIt will set up 40 different stores this year 10 city stores, 11 super stores, 14 family stores and 5 franchise stores

It aims to cater to the footwear needs of the middle class to upper middle class in the urban and semi-urban areas across the countryIt caters to the demands of all income groups

Its main objective is to provide customers enough choices in a fairly narrow price range.It will focus on providing products within a price range that is affordable for different types of customers. It focuses on providing wider price-ranged products than Apex Adelchi.

Its strategy is sustainable growth through delivering high product standardsIts strategy is rapid expansion through delivering products of all qualities

It wants to set up some complete family stores enabling its customers to have a pleasant shopping experienceIts biggest focus now is on the city and super stores

Apex Adelchi Footwear Ltd(in 1000s)Bata Shoe Bangladesh(in 1000s)

Revenue5992.55273.2

Gross Profit719.11821.6

Gross Margin12%35%

Net Profit247.3476

Net Margin4%9%

ROE32%53%

Source: Annual ReportsFrom the above table, it can be observed that the annual net margin of Apex Adelchi Footwear Bangladesh Limited is much lower than its counterpart Bata, though its annual revenue is higher than that of Bata. All these issues are not letting the company to excel in the local market and need to be addressed if Apex is to come anywhere near the market leader, Bata.

5. ArbanaWhen it comes to making Products, they make handmade shoes which are made out of 100% leather. Moreover, as mentioned earlier, their shoes are contemporary and fashionable. They basically make Footwear for both Men and Women. Apart from producing shoes, Arbana also makes Belt, Office Bag, Womens Bag, Money bag and Key ring.5.1 Company Overview

Arbana is a contemporary footwear brand. Their mission is to develop new footwear architecture in Bangladesh. It was founded in 8th May 2011 as a local Footwear style brand. Its image stands for freshness, spontaneity and youthfulness. Its customers are modern men and women who enjoy underlining their personality with a contemporary look. It is a local brand with global attitude. They make rigorous testing for better design, better comfort and not to forget better quality. They aim for perfection, thereby, assuring the best for their customers. They use generations of accumulated craftsmanship, combined with todays modern techniques to create individual shoes with an exclusive "Arbana" personality. That is why they term themselves as Footwear Thinkers. 5.2 SuppliesArbana buys the small components for shoes like insole, cushion material, buckles, outsole and other tools and materials like glue, sturdy threads and cutting tools from Puran Dhaka. The suppliers of that region normally charge lower prices for these raw materials which is cost effective for Arbana.5.3 Manufacturing They have their own manufacturing department and tannery in Hajaribagh, Puran Dhaka. They say it cost them more if they buy tannery from suppliers. So they set up their own tannery to save cost and moreover this backward integration has also made it more accessible to supply leather to their manufacturing department on time without any delay in the production process.

All the shoes in the manufacturing department are handmade, as mentioned earlier. Thus, the process is labor intensive. Bangladesh being a developing country has abundant cheap labor supply which is a major contribution for Arbana, mentioned one of the employees of the company. 5.4 Distribution, Retail Outlets and ExportsArbana makes its own shoes and distribute them to its own retail outlets. However, they also sell its shoes to Ecstasy and Doors. They have a very good relationship with these companies which help Arbana sustain a healthy supply of their products.Arbana has many retail outlets in some of the happening zones in Dhaka city. The shopping malls which the company has chosen are Simanto Square, Dhanmondi-2; Elephant Road; Plaza AR, Sobhan bagh, Dhanmondi-19; RAK Tower, Uttora, Sector-3 and many more. They market in these malls so that they can better capture their target customers and tackle their competitors effectively.Arbana is not only local; it is also successful in being global for its ultra sophisticated shoes. Currently it exports its product to Dubai, Malaysia and Italy with its own brand name. 5.5 Product PortfolioShoes of Arbana are self designed by the Managing Director of the company. He is an architect who gives voguish designs and chic styles to the looks of different varieties of shoes. It is asserted that their footwear is fashionable and all the designs are up-to-date. Overall, Arbana has succeeded in becoming a well established fashionable footwear company which sells its produce to men and women not only of Bangladesh, but also of other countries. It is doing its business well and hopes to prosper much more in the future.5.6 Case: An Architect of FootwearThe footwear industry of Bangladesh has been traditionally being dominated by Bata in almost all customer segments, as the market leader; while organizations like Apex as the market challenger, and Bay Emporium, Jennys, Zeils and Leatherex as market followers are continuously fighting to retain and increase their existing market share. All of them have significant export revenue to back up their reputation and local sales. They have their unique and strong supply and value addition chain. Also, there are lots of other local manufacturers who are operating the market not only as suppliers of the big brands, but also with their small-medium and meager number of outlets. Therefore, the footwear industry of Bangladesh is quite competitive; and successful emergence of a new player in this field is surely going to be challenging.Arbana emerged in this saturated competition on May 8, 2011 with their mission is to Develop new footwear architecture in Bangladesh. Founded by Mr. Mahim Rashid, an architect of refined taste, the Arbana staffs proudly introduces themselves as the Footwear Thinkers. Arbana is a local brand with global attitude. Besides operating in the local market, it exports to a few countries like Dubai, Malaysia and Italy. Its customers are modern men and women of the medium and upper income class who enjoy underlining their personality with a contemporary look that combines freshness, spontaneity and youthfulness. They make footwear for both Men and Women. Apart from producing shoes, Arbana also makes Belt, Office Bag, Woman Bag, Money bag and Key ring. The company boasts about its footwear which is 100% leather made and they exhibit the traditional line of hand-crafted footwear. This gives the customers a sense of superior quality and artistic sophistication. This feature has been very effective as Arbanas point of difference for competitive advantage. People who purchase the products of Arbana get an antique feeling of class. This makes them consider Arbana product to be worth the money spent and repeat purchase. Therefore, keeping the supply wheel rotating and maintaining the quality are what keep Arbana is business.Although Arbana hasnt yet been able to capture enough market shares to significantly challenge the likes of Bata, Apex or Bay, it has successfully achieved a good number of loyal customers with its unique design, promised comfort and quality. The aristocracy and uniqueness of the footwear design has the point of parity for Arbana from the very beginning. All the designs are the creation of the Managing Director Mr. Mahim Rashid, who himself is an architect and renders the footwear with artistic touch and at the same time trendy as the go.

6. Fortuna Leather Craft LtdFortuna shoes is a sister concern of Fortuna Bangladesh Group which was established in 1984. It is a major industrial conglomerate in Bangladesh and its strategic business units sell products ranging from fast food items to footwear and IT services. Fortuna initially started its venture as a garments unit with only 140 sewing machines and 250 workers in its own 120,000 square feet facility. The footwear unit was later established in 2010, with the vision of Fayaz Taher (CEO of Fortuna) to become one of the leading footwear exporters in Asia. A company that started with only 140 sewing machines and over 2,000 workers in its 120,000 square feet factory facility, is now one of the leading footwear exporters in Bangladesh. It has also attracted domestic consumers with its world-class shoes and other accessories which are made from quality leather sourced from Fortunas own tannery in Hazaribagh.6.1 Company ProfileThe Fortuna group started with the vision of M. Abu Taher, who has years of experience in the industrial sector. The management team of Fortuna, has over 40 years of entrepreneurial business experience both in the domestic and international market. The group is a privately held company that is open for strategic partnerships and joint ventures for its business.

Fortuna footwears mission is to provide the optimal blend in style, quality, and affordability in footwear and accessories. The company sells shoes, leather bags, etc, in its 20 or so retail outlets around Bangladesh. It also exports to countries in European Union and United States. It has a cutting edge web portal installed by Infrablue Technology. an award winning IT division of Fortuna group that started in 2008.

6.2 SuppliesFortuna has its own tannery unit which sells to both its footwear unit and other clients. Ruma Leather Industries Ltd was bought in 1991 by the Fortuna group as a strategic unit. The tannery is located in Hazaribagh on a three quarter acre plot of land. It has state-of-the art equipment in its tannery with a capacity of producing 500,000 square feet of finished leather per month. Ruma is targeted to reach $12 million in exports, annually, by leveraging its experience technicians and management team.Other materials are sourced from China, India and Taiwan. 6.3 Manufacturing Fortuna Park is the manufacturing department of Fortuna shoes. It is located in Kunia, Gazipur and was set up in 2010. The manufacturing plant, which required an initial investment of Tk 56 crore to set up, has a capacity to produce around 6000 pairs of shoes and 500 bags per There are four lasting lines - the 40,000 square feet factory in unit 1 and 30,000 square feet in unit 2. The factory produces footwear products mainly for the international market, but also manufactures shoes and accessories for the domestic market. Fortuna also has its own shoe moulding factory. The moulding factory sources plastic from China and India, and ensures the shoes are perfectly shaped.

6.4 ExportsFortuna closed down its garments unit in 2009. By opening Fortuna Park the next year in 2010 and establishing Bangladeshs first shoe mould manufacturing factory, Fortuna entered the international footwear industry. It started with the aim to earn around Tk 200 crore in foreign currency a year. The reason Fortuna closed down its garments manufacturing plant in 2009, was because of the anticipated growth in the shoe and leather industry. Even though the demand for fashionable and high quality leather shoes had declined in the international market due to the recession at the time, there was still an opportunity to leverage the demand for simple but necessary shoe products. At the time, shoe industry was in the early stages that is similar to the early days of the readymade garment industry. The CEO Fayaz Taher, marked this opportunity and quickly grasped it. Now, Fortuna is one of the leading footwear exporters in Bangladesh.

As Chinas labor cost is increasing, foreign buyers are looking for other places where they can outsource their manufacturing department. Countries like China and India are unable to produce high quality leather shoes at a low-cost. Foreign buyers are nowadays seen shifting their manufacturing strategy and locally producing the shoes. This gives Bangladesh the potential to meet the demand of foreign buyers. With its own leather manufacturing department, Ruma Leather Industries Ltd, Fortuna is vertically integrated and is able to enjoy a competitive edge in sourcing its supplies. The company also partners up with foreign companies. For instance, it had teamed up with a chinese company to establish the countrys first shoe mould factory. This sets Fortuna apart from other footwear companies, most of which uses wooden moulds that are not as accurate. In addition, the company is in a joint venture with a Spanish company to make outsoles. It collects over 100 different outsole styles from Spanish sources. Fortuna also has state-of-the art management team, and undertakes public relation move to promote its factory compliance, environmental standards and ethical work culture. Buyers usually inspect Fortunas plant facilities and retail outlets before placing order on the company. Fortuna has worked with foreign companies like H&M, Melillo and Anto Harness. It makes ballerina shoes, boots, sandals, etc for ladies, men and children to meet the orders set by its foreign buyers. 6.5 Product OfferingsThe Fortuna shoe factory is overseen by foreign personnels which includes Chinese professionals who look after the technical and production side. An American fashion designer supervises the designing department to help Fortuna stay at par with its foreign clients demands. Following are the types of shoes Fortuna sells - Womens Shoes: Fortuna produces heels and flats for women. Most of these footwear are made of leather and are have a fusion of both local and foreign designs. Its prices range from around 600 Tk to around 3000 Tk for womens footwear in the local markets. Mens Shoes: Fortuna has a wider range of mens shoes than womens. It sells converse, sandals, shoes, EVA sandals, etc, for men. It terms its mens shoes as intelligent, confident, stylish, creative, relaxed, driven, modern and out of the box. Shoes for men has a higher average cost with minimum price starting from around Kids Shoes: Alongside selling women and mens designs, Fortuna also specializes in producing kids shoes. Kids shoes range from lightweight to medium weight to provide extra support for the kids. Other Items: Fortuna also sells bags, wallets and other leather accessories.

6.6 Retail Outlets Fortuna is a brick and click type company. It has both physical outlets and online marketplace for its shoes. Retail Shop: It has around 20 retail outlets around Bangladesh, 15 of which are in Dhaka, others are located in Sylhet, Tangail and Kushtia. Over the years, consumers are increasingly being attracted to the local designer shoe stores like Fortuna. With its attractive store design, and quality assurance by its shopkeepers, Fortunas domestic sales have been growing ever since its inception in 2010. Online Shop: In response to the growing footwear demand, Fortuna has opened an online marketplace to make the buying experience more convenient for its consumers. Its e-store gives home delivery services and packages are generally dispatched within 2 days after receipt of payment and are shipped via USP with tracking. Consumers are hence, able to track their package online. Consumers are also given the option of replacing their bought product within three days of payment.

6.7 Case: Fortuna Leading BANGLADESHS FOOTWEAR Industry with Visionary ThinkingThe chief executive officer of Fortuna, Fayaz Taher is set out to promote Bangladesh as the Next Footwear Destination in the US Business Delegation trip. His vision is to make Fortuna the best footwear manufacturer in Asia. It is a challenge Mr Fayaz has undertaken but through continuous improvement, and with one of the best management teams in Bangladesh, this visionary CEO is hopeful about reaching this goal. Sometimes people look at me and say - why dont you just be the best in Bangladesh? remarked Mr Fayaz on how people are resistant to setting high goals. But I say, why would I do that? Why cant I be the best in Asia? he continued explaining how he would not let negative thinking keep Fortuna from becoming the best in Asia. Back in 2009, it was Mr Fayaz who sensed the potential of the footwear industry of Bangladesh. We wanted to be a part of the next boom and opportunity and we feel footwear is the next one, explained Mr Fayaz. Chinese manufacturers are now producing shoes at a higher cost because of the increase in labor wages. Many of the foreign buyers, as a consequence, are shifting from an outsourcing strategy and are now producing locally. But if Bangladesh is able to leverage its vast leather industry coupled with cheap labor and high-tech imported machinery, then it can well be the next footwear destination in the international market. The ready made garments industry, which started to boom in the 1980s, was able to put Bangladesh at a recognizable position in the foreign market. With this in mind, Mr Fayaz believes, that footwear industry will have an upper hand due to the countrys reputation of producing quality products for its foreign clients.With the Ruma tannery in Hazaribagh, Fortunas vertical linkage gives it an additional competitive edge. The high-tech web portal set by its sister concern Ifrablue, which has won accolades from foreign buyers, also sets Fortunas footwear apart from its competitors like Bay Emporium and Jennys in Bangladesh. Fortuna also aims to have an online presence and uses third party B2B websites like Alibaba to showcase its products to foreign buyers. Even though the recession hit the countries in the west quite hard, there is a demand for day-to-day footwear at an affordable price. This is where Bangladeshs capabilities comes in and Mr Fayaz hopes to leverage these opportunities to help Fortuna move forward. We want to continuously improve, he believes. His young team who has been with the footwear unit since its inception, are a mixture of young, ambitious and capable employees who share the same vision as their boss. Mr Fayaz has also set quantifiable goals for its footwear unit. He believes that Fortuna will reach China standard some day. Currently China makes 400-500 pairs of ballerina shoes per hour, whereas Fortuna makes 250-275 per hour. The target is to make 300-325 ballerina shoes per hour by the end of this year, and keep increasing its capabilities in the years to come. Apart from Fortunas advantage of being a large conglomerate with an established brand name, Mr Fayaz believes that its young team is the biggest asset of the company. Nashad Moyukh, who is the assistant factory manager of Fortunas footwear unit, joined in 2010 right after graduating in engineering from University of Dhaka. With on-the-job-training from his seniors, Mr Nashad now believes that he has become fully capable of handling the factory work. He boasts Fortunas fully compliant factory which foreign buyers always inspect before placing orders at Fortuna. Altogether, Mr Nashad envisions that Fortuna will be able to get to the next level by increasing its plant capacity and productivity. Fortuna also maintains its business by employing the values of Total Quality Management. As Ashraful Alam, the quality manager of Fortuna explains, the company follows all the requirements of the foreign buyers and has state of the art lab facilities for its moulding unit in the factory. Shoes are checked at every level and a final inspection is done to make sure the end-product meets all the requirements of the buyer. Furthermore, Ashiq Iqbal, head of planning, explains how Fortunas customized excel sheet helps to maintain good production flow in the factory. There are plans to build a cloud system so that the work can go digital and communication is enhanced. This will help to monitor and share planning reports, production reports as everything will come under one platform. Consequently, deadlines can be met more smoothly when such digitization has been installed. With his entrepreneurial vision and the passion and commitment of the young team, Mr Fayaz Taher strongly believes in taking Fortuna, and ultimately Bangladeshs footwear industry to a higher level through continuous improvement and forward thinking. Its advanced factory facilities, public relations and brand name, are only some of the tools and Mr Fayaz believes in leveraging his young team to achieve the ambitious vision.

7. LeatherexLeatherex Footwear Industries Limited, which is 100% leather based Footwear Company, is registered in Bangladesh as an SME. It has been working continuously with inherited expertise and know-how. It is now a leading footwear manufacturer in Bangladesh, catering to the footwear needs of a global clientele alongside local demand. It manufactures and exports all kinds of Leather Footwear and footwear components. 7.1 Company ProfileFounded in March 2000, Leatherex has utilized most modern state-of-the-art machinery for production of footwear. All its manufacturing operations include both automated and manual components. This permits a yearly production of up to 800,000 pairs of shoes and sandals. Leatherex is operated under technical collaboration with Japan, Italy and Taiwan. The main advisor for Leatherex Footwear Industry Limited is Japanese and because of good relationships, most exports are made to Japan and a lot of assistance is also obtained from Japan. Its main products are leather casual, basic and formal shoes, mesh shoes, pumps, men's and ladies sandal and boots.Working Experience of a decade in the field of leather chemicals, processing of raw-hides to finished leather, producing shoe upper to footwear, all contributed to shape the company to what it is today. Leatherex Footwear Industries Limited has been awarded as one of the top 16 companies in Bangladesh in 2010. It has also won numerous other awards and accolades over the years in lieu of its excellence, including D&B Corporate Award 2010, The Financial Mirror Business Award 2005, and National Export Trophies for the years 2008-09, 2005-06 and 2001-02. Leatherex Footwear Industries Limited is associated with five other companies, namely Impex InternationalImpex, founded in 1999 is an expert and experienced in handling leather sector for more than a decade. Impex International is a buying agent on behalf of many world famous companies; Sannyo Leather Co. Ltd., Himeji, Japan being one of them.

Catalyst PolymerCatalyst Polymer Industries Limited is a 100% export shoe component manufacturing industry in Bangladesh. Founded in 2001, it is now manufacturing following Shoe components :TPR Sole Mid Sole Heel Lift Different WedgesThe technology of Catalyst is adopted from Japan, Italy and Taiwan. Catalyst exports for the footwear of Europe, Japan and Korea. Catalyst imports raw materials from reputed suppliers globally. Catalyst has its own design development and processing lab (R&D), it can develop products according to the design of the buyers, new ideas, new creations, new inventions to the reality. Nazmul Food Ltd.It is a sister concern of Leatherex Footwear Industries Limited.Scarpe e Moda Ltd.An Italy-Bangladesh joint-venture leather footwear manufacturer, Scarpe e Moda Ltd. operates under Italian technical know-how and to produce hi-tech and top Italian brands in Bangladesh, those of which are sold in Europe, USA and Australia. The company has started its commercial production from 2nd May, 2011. Scarpe e Moda Ltd. is the sister concern of Leatherex Footwear Industries Limited. In order to gain a better understanding of Leatherex, we must look at six components that make up a footwear industry - suppliers, distributors, manufacturing, designs, exporting and retailing.

7.2 SuppliesLeatherLeather is one of the main, and most important component of a footwear product for Leatherex. Leather for shoes and sandals is obtained from:1. Local tanneries of Hazaribagh - Ninety percent of Bangladesh's shoe leather is made in the Hazaribagh district. Leatherex also obtains nearly all of its leather for processing into footwear from one of the 200 tanning factories in Hazaribagh district. 2. Impex International Limited - Impex is an association and sister concern of Leatherex, owned by the same owner Mr. Nzamil Hassan. It is engaged in the manufacturing and exports of Crust, Lining and Finished leather of Cow, Goat and sheep in Bangladesh. The company has a lot of experience in trading of raw hide and processed leather.3. Lastly, if the demand for leather is still not met then Leatherex imports from India, Pakistan or Italy.OutsoleThe outsole is the layer in direct contact with the ground. Dress shoes often have leather or resin rubber outsoles; casual or work-oriented shoes have outsoles made of natural rubber or a synthetic material like polyurethane. The outsole may comprise a single piece, or may be an assembly of separate pieces, often of different materials. On some shoes, the heel of the sole has a rubber plate for durability and traction, while the front is leather for style. Outsole is obtained from:1. Manufacturers located in Gazipur supply the plastic and TRP soles.2. Catalyst Polymer Industries Limited, a sister concern of Leatherex manufactures outsoles, TRP soles, mid soles, heels and other components of the outsole. This is used by Leatherex in the manufacture of their footwear.InsoleThe insole is the interior bottom of a shoe, which sits directly beneath the foot under the footbed (also known as sock liner). The purpose of insole is to attach to the lasting margin of the upper, which is wrapped around the last during the closing of the shoe during the lasting operation. Insoles are usually made of cellulosic paper board or synthetic non woven insole board. Insole is obtained from:1. With the use of imported shank boards and sheets, Leatherex manufactures their own insoles in house.2. If demand requirements cannot be met, insole is imported from Japan, Italy, Korea or Taiwan.Molds Molds for shoes and sandals are imported from Taiwan, Japan and Korea.Other required materials such as Glue/Adhesive, Zippers/Buckles, Primer, Chemicals, Synthetic Linings, Cotton Linings, Toe Puff, Different Sheets may be locally sourced or imported. The packing inner box, master carton and silica gels, and wrapping paper are also locally sourced and imported.The company has a Supervisory Bond License and imports of all of its raw materials duty free covering GSP regulation.7.3 Manufacturing Leatherex Footwear has a factory facility of 75,000 square feet with 1200 employees, 3 assembly lines and a capacity utilization of 60-70%. Currently it can produce up to 800,000 units per year depending on the design and article, but the expansion of production and production capacity is possible. Production facility components comprise of insole and components, cutting section, sewing section, lasting section, outsole section - leather, jute or plastic, TRP sections, finishing section and finally packing section.7.4 DistributionLeatherex is mainly export oriented; they take orders from buying agents and marketing companies working for large overseas clients such as Japan, UAE, USA and European Union. The buying agents represent these clients and price negotiations, negotiations of payment, terms and conditions are all done through them. In order to be certain that the factory is compliant with rules and regulations, these buying agents also make regular visits on behalf of their clients. Furthermore, the agents are responsible for product inspection and supervision of packing and container stuffing to ensure that the footwear does not get damaged during shipment.Leatherex has also recently opened a retail outlet for the domestic consumer market where they sell their products directly to the consumers. There are no intermediaries and a 0-level supply chain is followed.7.5 ExportsAs previously mentioned, Leatherex is more export focused. The owner Mr. Nazmul Hassan is vastly experienced in international leather products training and because of his good trade relations is able to export to Japan, Korea, USA, UAE, Germany and Italy. Leatherex is well equipped as per GSP regulations and KPT (for Korean market) for duty free access and duty free raw materials import. An Annual revenue of 35 million USD is made from exports only. The main exporting companies are B.Z. Moda by Everybody, Italy, Regal, Alfredo Bannister In, ITO-Yokado and Fitfit.7.6 Product Offerings The designs are made as specific instructions from buyer companies and clients. For exporting purposes Leatherex is associated with Dongguan - Honk Kong Multi trade for designing and sample development. Since they have also opened a retail outlet, there is also an in house innovation team that is working on research and development (R&D) for manufacturing footwear better suited to consumer needs in Bangladesh.7.7 Retail OutletsTo offer genuine and fashionable leather goods to the Bangladeshi people, Leatherex Fashion and Footwear which is a sister concern of Leatherex Footwear Industries Limited started its journey two years ago in 2012. They have four outlets at Gulshan, Dhanmondi, Farmgate & New Elephant Road.Mens sandal, casual, formal, womens sandal, pumps, and boots are their main products. Mens sandals are priced from Tk 1,000 up to Tk 7,000 whereas womans sandal starts from Tk 700. Starting from Tk 1500 mens shoe can go up to Tk 12,000. The outlets remain open every day from 10.00 am-8.00pm, except the weekend Tuesday.'I have shopped here for some time and wouldnt buy my shoes from anywhere else now. Leatherex offers first rate goods at a very competitive price, said Karin Ashraf a student of a private university while she was buying her shoes from Leatherex.Every product of Leatherex is strength tested and we emphasize on quality. We never compromise with the genuineness of leather, said Nazmul Hassan, the managing director of Leatherex.They have divided their shoes into sections for women, men and kids, and the shop organizes their inventory in multiple ways: one can shop by cate