Introduction

Leather industry, including leather products, is the second largest export earning sector after textiles.

Currently, this sector is contributing around $700 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.

Currently, leather sector is contributing significantly to the national exports. For the current financial

year ending June, 2008, the total export earnings from Leather and Leather products are estimated to

earn $670 million. This estimate is 5 percent less than the actual target of $704 million set for 2007-

2008.

Although the leather and leather products have ample scope for exports in the international market yet

the industry was suffering from irritants which are hampering its actual growth. Recently, a Korean

business delegation visited Pakistan seeking partners to meet a large order for supply of leather

garments. However, since our industry has not yet reached to the economy of the scale as well as to the

height of quality demanded by the choosey market, that opportunity was missed, it is learnt.

Richa leather is a very famous leather brand in European market, owned by Mr.Rizwan Rashid. He

started this business out of necessity, he had no inspiration like other entrepreneurs but he had

complete knowledge and experience about this industry as he was doing job in the leather industry from

8 to 10 years. It was established in the year 1988. This is a sole proprietor and registered business in

which they manufacture sports goods for the motorcyclist and export them to the European market.

They cater middle market there and generate good amount of revenue. Germany is the main market of

Richa leather. Richa compete mainly with China leather Industry as they also have low labor cost in

manufacturing of leather goods.

Richa Factory:

Manufacturing Departments

Cutting Department:

Sewing Department:

Inspection Department:

Products of Richa

Gloves:

Jacket:

Scope

Richa leather is manufacturing sports goods in which they mainly manufacture sports bike and cars

goods for the rider. They have a scope to expand their selves as leather bag and purse manufacturer,

leather gloves as well.

History of Enterprise

Richa was established in 1988. In 1981 Mr. Rizwan Rashid (owner of Richa ) had idea to start his

own business while he was working for someone else in the same industry. One of his friend

wanted him to start business in India as partner with him but he decline his offer because being

patriotic he wanted to start that business in Pakistan. For this he approached his friend luck

Rigo to join him as a partner. He basically needed a partner for capital investment so both of

them invested on the proportion of 50% but the company was officially registered as a sole

proprietorship on the name of Mr. Rizwan Rashid.

Richa continued to flourish even through the difficult period of political turmoil in Pakistan and

inconsistent government policies. It continued to invest in the Pakistan economy by upgrading

facilities, adding new machinery. Even with the sudden rise in the number of leather factories in

Pakistan, Richa has managed to stand its ground and grow.

Awards

A host of awards own by the company stands testimony to the level of experience that the

company has achieved. It encourages the company to take new initiatives to enhance its

capabilities in all aspects of operations.

In 2006, 2009 they have achieved the award of the exporter of the year.

CSR (CORPORATE SOCIAL

RESPONSIBILITY)

Richa is also one of the most prominent organizations, which has a very strong commitment

towards Corporate Social Responsibility,

They provide scholarship facilities to the eligible students who cannot afford primary,

secondary and higher education.

They provide monthly groceries such as rice, cooking oil wheat etc to his employees.

Business Profile

Business: Richa Leathers

Organization’s address : 1D-4/18, North Karachi, Pakistan

Business Status: Registered

Classification of business: Manufacturing and Export of Manufacturing Clothing.

Business type: Sole proprietorship

Sources of Capital: Mutual fund

Currently operating in countries: In Pakistan as manufacturing leather

Export leather in countries: Germany, Canada

Customers: Middle-middle Class, Middle-upper Class.

Owner of the business: Mr Rizwan Rashid

Export Manager: Kashif Mehmood ( Mastress)

Accounts Manager: Mr Iftekhar Shafique( Bachlors )

Marketing Manager: Shanawaz Rehman ( Mastress )

Profile of the Entrepreneur

Name: Mr. Rizwan Rashid

Age: 55

Nationality: Pakistani

Qualification: Graduated

Marital Status: Married

Previous Experience: 8 to 10 years in the leather company

Year of Inception: 1988

Family members in business: One family member in business who has captured market of leather in Canada

Heritage or personal setup: Personal setup (started from scratch)

Obstacles Faced

Like every new entrepreneur Mr. Rizwan Rashid has also faced many obstacles and challenges

but he handled them with dexterity some of the hurdles Mr. Rizwan faced are as follows:

Financial Problem:

They have faced initial financial problem for that reason Mr Rizwan Rashid searched for a

partner who could help him in capital generation to cope up with the financial problem.

Difficulties in Capturing Market:

They are basically indulge in export business for that reason they had to capture international

market which was not very easy task for them, because initially they had limited funds so his

brother in law helped him through his public relation contacts to capture the foreign market.

Challenges Faced

Absence of Advanced Technology and Shortage of Skilled Manpower:Absence of Hi-tech for quality products and the shortage of skilled manpower to cater to the

needs of the world market is a serious issue that needs to be addressed as early as possible.

There is a growing need to prepare labor force having capacity to produce leather garments on

scientific lines and comply with the demands of international market to compete. There is an

immediate need to training our labor force on modern pattern to upgrade our end product to

enhance credibility of leather garment industry in Pakistan.

High Cost of Production:

Cost of production is also very high in Pakistan as compared to the competitors like China and

India. The high cost of various inputs especially utilities and taxes make Pakistan's products

uncompetitive in international markets. Pakistan can capture the lost market share provided

the industry is enabled to reduce cost of production

Strength and weakness

Competitive Advantages:

They have competitive advantage of low cost because the market they are catering such as

Germany and European region they have high labor cost which increases the overall price of

the product.

Strengths:

They emphasis on continuous product development and design up gradation. They also have

awareness of international standards.

Weakness:

They don’t have latest equipment due to which their productivity and efficiency will be

affected. They have other weaknesses like Lack of warehousing support from the government;

International price fluctuation; Lack of strong presence in the global fashion market.

Conclusion

According to Mr. Rizwan Rashid there is not much scope left in the leather industry as large

amount of animals are smuggled to Afghanistan and Iran due to which meat prices are raising

day by day which is causing severe impact on this industry because leather which is used as

main raw material are not available in the market at enough amount to fulfill the customer’s

need. The crises on the leather industry can be judged in this way that in the last 5 years there

is no new entrants in the market and two of the companies NASCO and LEATHER UP which

were among the top five exporters of leather are now out of the industry.

Recommendation

To survive in this industry the new comers should come up with some innovative and creative ideas don’t try to do what everyone is doing.

Instead of doing mass marketing they should try to detect niche market for their product.

New entrants should start from small scale and then according to the environment grow themselves.

Do all the work with hard work, commitment, firm determination and above all honesty.

Always try to love your work.

Bibliography

www.leathermagzine.com www.pakistaneconomist.com www.google.com www.in.com.pk

APPENDIX

Article 1 (International Scenerio)

Leather and the leather industry have been around a long while - there are those who claim it is the second oldest profession in the world. Going back a few millennia, when our earliest ancestors decided that sitting on hard rock wasn't a soft option, they turned to other materials to create more comfortable seating, as well as warmer bedding and some more acceptable form of clothing to go out in.

Animal skins became the fabric of choice and, at some time or another, they discovered that various treatments applied to the raw hides and skins helped to stop the destruction, through bacterial action, of the by-product of their food supply.

The reputation of the leather industry across the centuries could be described as one of tolerated usefulness, with a wonderful end product. As the industry enters the 21st Century, it is now recognised as a major industry of great economic importance on an international scale. Yet there are those who still wish to tar it with a negative brush, unwilling to recognise it as a modern, even high tech, sector.  The industry, as well as its national and international associations, needs to make the public aware of just how seriously it takes its responsibilities while producing a host of products in one of the world's finest natural materials.

As the last century came to a close, the worldwide industry had gone through a period of fundamental change. The enactment of environmental legislation in countries across the world had become faster, stricter and more restrictive. It was applied to industry in general and in some cases to the leather sector in particular. Those tanners who could not cope with the new legislation went out of the industry, those who remained invested heavily in order to meet new standards and prosper. Machinery builders introduced new technology to the advantage of the leather producers and the result has been the creation of an industry which, in general, can be proud of its achievements.

To those who work in the sector, it may seem trite to remind people that the raw material of the leather industry is based on the premise of turning the food industry's waste product into a desirable, useful and sustainable range of end products. Despite this truism, there are vocal minorities who wish to disseminate the idea that the tanning industry rears cattle for their hides.

Critics who target the raising and husbandry of livestock and the meat industry in general blithely ignore the realities of different cultures and the needs of developing countries. In many

of the world's poorest economies, domesticated animals - cattle, goats and sheep - frequently represent the wealth and well being of local populations. Sustaining those animals is of crucial importance, even to being the line between living and starvation. In the year 2000, for instance, the havoc in Mongolia wreaked by the failure of the rains and the resultant lack of grazing has been devastating, with the loss of hundreds of thousands of animals. The drought has effectively crippled the country's people and economy. Those who target the food and leather industry, damning businesses which trade at any level in both sectors, often justifying their arguments and actions on isolated instances of poor or unacceptable practice, should beware the consequences of their actions in their zeal to promote a lifestyle based on a world without meat, dairy products or leather.

Trade and employment

The number of people employed in the tanning industry worldwide is estimated at well over 500,000 and the numbers employed in downstream manufacturing sectors would increase this number substantially.  The leather industry is very much an international industry - with raw hides and skins, part processed leather, finished leather, leather components and leather products widely imported and exported. FAO quote figures which demonstrate how important the leather sector is in international trade terms - much bigger than meat and other commonly recognised commodities.

On these figures, the value of the international trade in meat, tea, coffee, rice and sugar needs to be added together to surpass the value of the leather and leather footwear sector. At the same time, the table highlights the beneficial economic importance of the industry, adding genuine value to the raw hides and skins which would otherwise be wasted.

The environment

Significant steps have been made by the global leather industry with regard to environmental matters. In the manufacturing stages, a high level of quality control ensures that the best use is made of hides and skins and the chemicals required in their conversion into leather. Overall chemical and water use has thus been reduced, reducing the level of waste for treatment.

Many new techniques have evolved specifically to reduce pollution before any form of treatment. Specifically JIT techniques and alternative methods of preservation are used to reduce the use of salt for preservation. Biotechnology is employed in process to reduce the levels of chemicals and energy used. There has been a significant move away from non-biodegradable products, and the phasing out of products suspected of causing environmental damage.

Pollution is also being reduced by making use of previous wastes as a source of new raw materials. Hair, off-cuts, and other manufacturing wastes are being converted in fertilisers, added value products and energy. Products that were not taken up in processing, such as residual chromium from tanning, are being reprocessed to create new tanning materials. Even waste waters from some sections of manufacture are being recycled and used again within manufacture.

The industry is strongly regulated regarding emissions such as waste water, solid wastes and air emissions. Comprehensive effluent treatment systems ensure that waste water discharge limits set by relevant authorities are met. Treated effluents are scrutinised by regulatory authorities, and every tannery needs to meet stringent discharge parameters to both surface waters and sewers. Any solid wastes for landfill from direct manufacture, or from treatment of effluents, are also regulated. Disposal is carefully controlled, with emphasis on alternative uses with gasification techniques and energy generation moving to the fore.

Air emissions have also been closely addressed. The use of solvents has plummeted over the last ten years, being replaced by newly developed water based auxiliaries. For degreasing operations, solvents have been replaced by aqueous degreasing technology. Odour, overspray and air borne particles can all be treated by specialized extraction, chemical and biological treatment systems.

The industry is proactive in addressing environmental issues and in investments in clean technology. The use of best available technology continues to reduce the use of water, chemicals and energy  in process, convert waste into new raw materials, and treat residual waste to international standards.

The issue of chrome

The use of chromium in the leather industry merits a separate article on its own, and this is planned for a future issue. However, as part of the overview of the industry, the use of chrome is also considered.

Chromium III salts are used extensively in the tanning process. Approximately 90% of the leather manufactured is tanned using chromium III. This is because chromium is the most efficient and versatile tanning agent available, and it is relatively cheap. It has been used in the leather industry for almost 100 years and when it was introduced as an alternative to vegetable tanning extracts from oak bark and similar sources, it heralded a new era for the leather industry. It reduced the time taken within the tanning process from months to days, and offered leathers with properties that were previously unattainable - for example tolerance to heat - without which it would be almost impossible to make leather shoes by mechanical means.

The leather industry only uses chromium in its safest and most stable form - chromium III. However, due to misconceptions about chromium and a failure to recognise the distinctions between chromium III and chromium VI, which is generally understood to be toxic, the tanning industry has often been placed under unwarranted pressure by regulatory bodies with regard to both the use and disposal of chromium and chromium-containing materials. Chromium VI compounds are not used by the tanning industry.

The toxicity of chromium III is similar to that of common salt, and standard chemical references quote: "Chromium III compounds show little or no toxicity." Much of the chromium III used in the tannery is recycled or reused, and most of the chromium III which enters the tannery waste streams is removed on-site by precipitation as the insoluble chromium III hydroxide which may then go to landfill. Chromium will only exist in the environment as chromium III. In soil, chromium VI is rapidly reduced to chromium III by its oxidative action upon organic material.

The EC recently considered and rejected a proposal to include tannery wastes containing chromium in the European Hazardous Waste List on the basis that the wastes did not possess the characteristics necessary for classification as a hazardous waste.

Article 2 (Pakistan Scenario)

Environmental Impacts of Leather Industries in Pakistan:

Leather tanning has been ranked as one of the most polluting activities compared to other manufacturing sector activities. It also has one of the highest toxic intensity per unit of output.

Converting hides into leather is a heavily chemical intensive process utilizing roughly 130 chemicals. In the course of processing of hides into leather, roughly 50-150 liters of water is used per one kilogram of converted leather. Thus effluents discharged from tanneries are voluminous, highly colored, contain a heavy sediment load including toxic metallic compounds, chemicals, biologically oxidizable materials and large quantities of putrefying suspended matter.

In the Pakistani Punjab tanneries if not properly controlled can directly contaminate prime agriculture land. Research has shown that the crop?yield along with food can be adversely affected and contaminated if proper steps are not taken with respect to tanneries. Most of the tanneries in Punjab and NWFP in Pakistan are located in residential neighbor-hoods, which have the potential of causing direct threat to the health of the urban population.

Relocation of Industries:

Local leather industry may have to face stiff competition in the WTO scenario as export prices can reduce significantly due to relocation of industry from the developed countries to Asia.

The leather industry is the second largest export industry of the country. During the last fiscal year, leather exports stood at $744 million, exceeding the annual target of $715 million set by the Export Promotion Bureau, (EPB).

Pakistan's exports to Europe can be affected due to relocation of industries:

Moreover, regulations with regard to environment in the WTO scenario are also a cause of concern for the industry. It has been informed that most of the European countries have re-located their leather garments and accessories industry to China, South Korea and other Asian countries because of low cost

of production in these countries. Even the shoe-manufacturing industry is also currently being shifted to China and India. The cost incurred on local production would have to be reduced in order to compete in the international market. Chinese and Indian markets may buy Pakistan's leather sheets at lower rates than Europeans therefore cost of production needs to be reduced.

While demand for leather is expected to rise in India after setting up some new factories but status of leather exports to India in coming months is still unclear. Therefore, there is a need to begin a major up-gradation program in Pakistan and to focus on technological improvements.

Shortage of Finished Leather :

The exporters of leather garments claim that they are face severe hardships in exporting leather garments due to the shortage of finished leather and the ever increasing prices. They report that the tanneries export finished leather in excessive quantities while the leather garments manufacturers suffer at home. According to them exports of leather garments have decreased by 28 per cent to $132 million from $185 million during the six month period July-December 2004 as compared to the corresponding period of last year, whereas the exports of leather have surged by 16 per cent to $135 million form $117 million during this period. It is being claimed that due to this shortage, the prices of raw hides/skin, split and wet blue leather in the local market are rising sharply and it is becoming difficult for leather garment exporters to compete in the international market to fulfill their export orders. The garments factories have to import more leathers now and are forced to become dependent upon imported leathers. They have been urging the imposition of export cess on export of finished leather to discourage the export of raw material from the country.

According to exporters of leather garments the reduction in export of leather made-ups and increase in the export of leather is an `alarming’ situation and will inevitably lead to unemployment. Leather made-ups including leather garments, leather footwear, leather gloves and leather goods constitute nearly two third of the total leather industry’s export.