global project full and final

8/6/2019 Global Project Full and Final

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Global Marketing

2011

Final Project

Exports of Leather Shoes

Submitted to:

Prof. Ahmad-Ur-Rehma

Submitted by:

FAIZAN AHMAD AFZAL

L1F08MBAM2075

REHMAN AFZAL

L1F08MBAM2065

AATIF ILYAS

L1F08MBAM0074

Date of Submission:

07 June 2011


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LEATHER INDUSTRY

OVERVIEW OF INDUSTRYLeather industry, including leather products, is the second largest export earning sector after

textiles. Currently, this sector is contributing around $800 million a year but has the potential

to multiply volume of exports with the improvement of quality and diversification in

different range of products, specially garments and footwear.

Basically, it is a job-oriented sector providing employment to a very large segment of the

society besides earning foreign exchange for the country.

The leather finishing and made ups industries represent an important sector in Pakistan,

contributing almost more than half a billion US dollars in foreign exchange earnings to the

national exchequer. The leather industry consists of six sub-sectors namely, Tanning,

Leather. Footwear, Leather Garments, Leather Gloves, Leather Shoe Uppers, and Leather

Goods. The Tanning industry plays a vital role in the progress of these sub-sectors by

providing the basic material i.e. leather. Today, Pakistanis among the leading countries in the

production of Leather Garments and Gloves. The leather and leather made-ups industry plays

a significant role in the economy of Pakistan and its share in GDP is 4%. Ten years ago, it

was the fifth most important export industry in the manufacturing sector, and now it is the

second.

HISTORY

The history of leather industry in Pakistan is as old as the country itself. At the time of

independence there were only a few tanneries producing sole leather and that too at a very

small scale. However, since then this industry has been flourishing and has never looked

back. During 1950s, some well-equipped tanneries were set up at Karachi and Lahore, while

during 60s and 70s more units were established at Hyderabad Kasur, Sialkot, Multan,

Sahiwal and Gujranwala. Starting with the production of picked and vegetable tanned hides

and skins, the tanneries, today, are producing not only wet blue and crust, but also fully

finished leather.

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In the early days of independence some tanneries were established in Karachi. In 1950's

some were established in Lahore and adjoining areas.

The entire production of hides and skins were being exported in a raw form. Thereafter the

local tanning industry making at first semi-finished leather made rapid progress due to

favorable raw material situation, cheap labor and the existence of growing demand and

foreign market.

PRODUCTION CAPACITY

PARTICULARS PRODUCTION

CAPACITY

Tanned Leather 90 million Sq meter

Leather garments

/Apparels

7 million

Leather gloves 10 million

Leather footwear 200 million

Source: Pakistan Tanneries Association

NOTE: Against a capacity of producing 90 million square feet of tanned leather, the

tanneries are presently producing only 60 million square feet tanned leather per year.

Presently, there are some 461 leather garments/apparels making units, which annually

produce some 5.0 million pieces against a capacity of producing 7.0 million pieces. The 524

footwear units in the country are currently producing 100 million pairs against a capacity for

producing 200 million pairs, while 348 leather gloves units are producing 5.0 million pairsagainst a capacity of making 10 million pairs annually.

These statistics clearly show that the capacity of this sector remains highly under-utilized and

with a little extra effort Pakistan can substantially increase the production and exports of its

shoes and other leather products.

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PRODUCT

Leather Shoes

MARKET

UK (England)

SIGNIFICANCE OF PAKISTAN IN LEATHER SHOES: Pakistan`s Leather shoes are on number 2 in world leather shoes market

Cost of labor is low in Pakistan

There are less environmental laws

Price is low as compare to Italy and providing supreme quality leather shoes

There is no Quota restriction on Pakistan related to leather shoes exports

BARRIERS:

First off all Pakistani exporter have to get the contract form the company in UK

ISO 9002 and 9000 certifications

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Machining Department, Lasting & Making Department, Finishing Department and the Shoe

Room.

CLICKING OR CUTTING DEPARTMENT

In this department, the top part of the shoe or the "upper" is made. The

clicking operative is given skins of leather, mostly cow leather but not

restricted to this type of leather. Using metal strip knives, the worker cuts

out pieces of various shapes that will take the form of "uppers". This

operation needs a high level of skill as the expensive leather has to be wasted at the

minimum level possible. Leather may also have various defects on the surface such as barbed

wire scratches which needs to be avoided, so that they are not used for the uppers.

CLOSING OR MACHINING DEPARTMENT

Here the component pieces are sewn together by highly skilled machinists

so as to produce the completed upper. The work is divided in stages. In

early stages, the pieces are sewn together on the flat machine. In the later

stages, when the upper is no longer flat and has become three-dimensional,

the machine called post machine is used. The sewing surface of the machine is elevated on a

post to enable the operative to sew the three dimensional upper. Various edge treatments are

also done onto the leather for giving an attractive look to the finished upper. At this stage

only, the eyelets are also inserted in order to accommodate the laces in the finished shoes.

LASTING &MAKING DEPARTMENT

The completed uppers are molded into a shape of foot with the help of a

"Last". Last is a plastic shape that simulates the foot shape. It is later

removed from the finished shoe to be used further in making other shoes.

Firstly, an insole to the bottom of the last is attached. It is only a temporary

attachment. Sometimes, mostly when welted shoes are manufactured, the insole has a rib

attached to its under edge. The upper is stretched and molded over the last and attached to

the insole rib. After the procedure completes, a "lasted shoe" is obtained. Now, the welt- a

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strip of leather or plastic- is sewn onto the shoe through the rib. The upper and all the surplus

material is trimmed off the seam. The sole is then attached to the welt and both are stitched

together. The heel is then attached which completes the "making" of the shoe. That was the

process for heeled shoes. When a flat shoe is in the making, there are considerably fewer

operations. The insole in this case is flat and when the uppers are 'lasted', they are glued

down to the surface of the inner side of the insole. The part of the upper that is glued down is

then roughed with a wire brush to take off the smooth finish of the leather. This is done

because rough surface absorbs glue to give a stronger bond. The soles are usually cut,

finished and prepared as a separate component so that when they are glued to the lasted

upper, the result is a complete and finished shoe. Soles can also be pre-molded as a separate

component out of various synthetic materials and again glued to the lasted upper to complete

the shoe.

FINISHING DEPARTMENT AND THE SHOE ROOM

The finishing of a shoe depends on the material used for making it. If made

of leather, the sole edge and heel are trimmed and buffed to give a smooth

finish. To give them an attractive finish and to ensure that the edge is

waterproof, they are stained, polished and waxed. The bottom of the sole is

often lightly buffed, stained and polished and different types of patterns are marked on the

surface to give it a craft finished look. A "finished shoe" has now been made. For shoe room

operation, an internal sock is fitted into shoe which can be of any length- full, half or quarter.

They usually have the manufacturers details or a brand name wherever applicable.

Depending on the materials used for the uppers, they are then cleaned, polished and sprayed.

Laces and any tags that might have to be attached to the shoes, such as shoe care instructions,

are also attached. The shoes, at last, get packaged in boxes.

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PRICING STRATEGIES

The leather grading system employed by leather upholstery manufacturers and suppliers is

used as a means of differentiating and marketing individual types of leather by price, based

on quality or style.

The grading system is the method manufacturers use to present their pricing structures to

retail dealers. Leather suppliers also use a grading system to distinguish their leathers and

prices to manufacturers.

PRICE PER SHOE

Price per Shoe (article)

Article 1 Article 2

Details PKR PKR

Thread cream 10 11

Thread 30 32

Sole 100 200

Foam 14 23

Inner sole pad 25 50

Sheet 20 40

Buckle 30

Banwer (0.3mm) 25 45

EVA sheet 14 23

Cloth 11 21

Leather

Cow leather 200 363

Sheep leather 105 133

Total Material Cost 554 971

Overhead 10% 55 97

Total Cost of Shoe 609 1,068

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Inward carriage cost 6 10

Shoe Box 31* 31*

Cost of Shoe sold 646 1,109

* Shoe box calculation is in the next table

PACKAGING COST

Packaging cost

PKR Per

Shoe

Positive 3.5/inch

828

Plate 600/p 2,40

0

Printing 800/p 3,20

0

Total Fix Cost 6,42

8

3

Art card 23x36 20/shee

t

20

Lamination 1.5/ft 6

Box maker 2/box 2

Variable cost per

Box

28

Total Cost/box 31

COMPETITORS

LOCAL COMPETITORS

Urbansole

o Owned byShafi (Pvt.) Limited

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o Estabilished in 1998

o Outlets in europe

o 48 dealers

o Licensee for Pierre Cardin (Paris) in Pakistan

Elegant

o Estabilished in 1994

o Global player

o Parada (most popular brand)

Hush Puppies

o Global player

o Outlets all over the world

INTERNATIONAL COMPETITORS

Fermo (brand names)

o Marc by marc jacobs

o CK

o Tod

o Mans Fermo AGO

Buyers/Importers

B & S Shoes Inc.:

Company Profile:

B & S Shoes Inc. in Drexel Hill, PA is a private company categorized under Shoe Stores. It

was established in 1982 and incorporated in Pennsylvania. It is offering leatherwear shoes of

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all kinds as well as foot repair as an additional customer service. The company is in business

from 29 years, having a prior experience of U.K market. Current estimates show this

company has annual revenue of $500,000 to $1 million. Companies like B & S Shoes Inc

usually offer: Kids Shoes, Evening Shoes, Jordans Shoes, Simple Shoes and Best Running

Shoes.

Company contact:

Address: 5100 State Road # 1 Drexel Hill, PA 19026-4627

Phone: (610) 284-107Website:www.bsshoes.comEmail:

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http://www.bsshoes.com/http://www.bsshoes.com/


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Nicos Shoes:

Company Profile:

Nico's Shoes works as Nicos Buster Brown Shoes in Woodland Hills, CA is a private

company categorized under Shoe Stores. It was started in 1977 and registered in

Pennsylvania. The companys core product is leather shoes. It is in business of import from

34 years. The sources of imports are Far East countries. Numbers of Pakistani companies are

exporting finished leather shoes to Nicos shoes from years. Companys major import is from

china but Pakistan has a great chance to grab market by increasing quality of production as

raw leather of Pakistan is best and renowned worldwide.

Company Contact:

Address:21761 Ventura Boulevard Woodland Hills, CAWebsite: www.nicos.comPhone: (818) 340-6281

Email:

Newmans Footwear:

Company Profile:

Newmans Footwear is a major UK importer of footwear, handbags and fashion accessories.

Based in Blackburn, Lancashire, and supplying many of the UK's leading retailers. The

company is a mature player as it has an experience of over 70 years. The company is highly

quality conscious and imports products from countries with excellent manufacturing

facilities. China is leading exporter to the company but few Pakistan companies are also

working to improve their share. High quality raw leather is one strength for Pakistani

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companies and have a room for improvement in production quality and increasing their

global market share.

Company Contact

Address: Newman's Footwear Ltd Garden Street Blackburn BB2 1TZ

Phone: 01254 296540Fax. 01254 296541

Website:www.nfw.co.uk

E-mail:[email protected]

Negotiation Process

Negotiation Process is start with the sampling of the product. Exporter Company sends its

product samples to Importer Company along with all the specifications of the product. If the

sample of the product is approved by the importer company then the process of costing and

pricing starts. Both the parties negotiate in order to make a best deal which can provide

benefit and profits to both of them.

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http://www.nfw.co.uk/mailto:[email protected]:[email protected]://www.nfw.co.uk/mailto:[email protected]


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After setting up the prices the terms and conditions of the trade process is decided. Terms

and conditions include the:

The delivery process

Time of the delivery

Mode of payment

Etc.

When all the terms and conditions of the sale process are completed then order letter is

placed by the importer company which includes all the specifications of the product, quantity

of the product etc. After the acceptance of the of the order letter by the exporter company the

manufacturing process of the products is start and the products go for the shipment.

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LEGAL DOCUMENTS

FBR CERTIFICATE LAHORE CHAMBER OF COMMERCE

MEMBERSHIP

SALES TAX CERTIFICATE

LETTER OF CREDIT COPY

SHIPPING LETTER

BILL OF LADING

DECLARATION CERTIFICATE CERTIFICATE OF ORIGIN

PACKING LIST

PERFORMA INVIOCE

PURCHASE ORDER

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