INTERNATIONAL BUSINESS EXPORT

PROJECT

FOOTWEAR EXPORTS

Submitted By
Ganesh Adasul (M12001)
Priyanka Gawande (M12018)
Aditya Pawar (M12102)
Mehul Sheth (M12115)
Vijay Dhakane (P12010)

SYDENHAM INSTITUTE OF MANAGEMENT STUDIES, RESEARCH

& ENTREPRENEURSHIP EDUCATION (SIMSREE)
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TABLE OF CONTENTS
Executive Summary

Business History

Market Research

Marketing Strategy

Legal Considerations

Manufacturing and Operations

11

Personnel Strategies

12

Summary of Financials

13

Questionnaire

16

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EXECUTIVE SUMMARY
AB Footwear Ltd. was established in the year 2011. It was set up with an objective to be one
of the leading footwear traders in Mumbai. The main products in our portfolio include formal
leather shoes and sports shoes for men, women and kids.
We operate out of a facility in Masjid Bandar in Mumbai, which serves as our wholesale
office. Also, we have a 1000 sq.ft. warehouse in the Sandurst Road where unpacking, sorting
and re-packing activities are carried out.
The growing business tourism in Mumbai led to the increased visits from shoe retailers from
foreign countries, especially Sri Lanka & other Asian countries. The growing demand for our
products in the international market led us to give a serious thought of exporting them in bulk
to these countries.
Hence, we are venturing into export of our products, initially to Sri Lanka and later as per our
increasing capacity to other Asian countries. We have our trusted suppliers in Delhi & Agra,
M/s. Baghvati Enterprises and M/s. Paduka Shoes who will continue to supply the export
requirements also.
For export purposes, we will be branding the shoes under our own brand, TROOSH. We will
be trademarking this brand. In this way, our plan for venturing into exports is going to be
carried out.

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BUSINESS HISTORY
History of Company
Our company, AB Footwear Ltd. has presence in the domestic market for last two years. We
source the readymade footwear from our manufacturers based in Delhi, M/s. Bhagvati
Enterprises and M/s. Paduka Shoes. Though not a very well-known brand we have
successfully been able to create demand for the product by giving higher margins to the
retailers. That also ensured more shelf space till the brand was accepted by the buyer.
AB Footware Ltd. is situated in 191-193,Ghee Bhavan,3rd floor,Samuel Street, Masjid
Bandar,Mumbai since 2011. We are whole business for different types of shoes and sandals
catering to changing footware needs of men women and kids
Main market is Mumbai retail market mainly situated in Bandra ,colaba
Product line includes
For men (size 6 to 10)
1. Formal Shoes a. Leather b. Non leather
2. Sport Shoes
3. Sandles
For Women (size 4 to 10)
1. Sport Shoes
2. Sandles
For Kids (size 1 to 5, 6 to 13)
1. Sport Shoes
2. Sandles
For domestic market the business runs on cash and carry basis, retailers visit the shop at
Masjid Bandar select the item and buy in bulk (ie. a pack of 6 items of same colour and type
with different sizes )
Our shoes are manufactured to the highest quality standards, functional comfort,
convenience, design, and durability.
The company has an annual turnover of over Rs. 5 crores

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MARKET RESEARCH
Indian footware Industry
India is the second largest global producer of footwear after China, accounting for 13% of
global footwear production of 16 billion pairs. India produces 2065 million pairs of different
categories of footwear (leather footwear - 909 million pairs, leather shoe uppers - 100 million
pairs and non-leather footwear - 1056 million pairs). India exports about 115 million pairs.
Thus, nearly 95% of its production goes to meet its own domestic demand. The major
production centers in India are Chennai, Ranipet, Ambur in Tamil Nadu, Mumbai in
Maharastra, Kanpur in U.P., Jalandhar in Punjab, Agra, Delhi, Karnal, Ludhiana, Sonepat,
Faridabad, Pune, Kolkata, Calicut and Ernakulam. About 1.10 million are engaged in the
footwear manufacturing industry. Footwear exported from India are Dress Shoes, Casuals,
Moccasins, Sport Shoes, Horrachies, Sandals, Ballerinas, Boots, Sandals and Chappals made
of rubber, plastic, P.V.C. and other materials.
Footwear Global Scenario and Indias share
(In Million US$)
2006
Global import of Footwear
India's export
& Uppers
% Share of India

of

2007

73795.96 81574.25

2008

2009

2010

88731.08

78249.66 91373.82

Footwear 1236.91

1489.35

1534.32

1507.59

1758.67

1.67%

1.82%

1.72%

1.92%

1.92%

Source: ITC, Geneva & DGCI &S, Kolkata

1. Indias Footwear Export Growth over the last Four Decades
Export of footwear from India increased manifold over the last four decades. During
2011-12, Indias footwear export is valued at US$ 2077.27, constituting 42.67% share
in total export of leather & leather products.

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Target Market - Sri Lanka :

"At present Sri Lanka footware industry produces 75 percent of all shoes sold in the island.
About 95 percent of the local shoes are made from non-leather (synthetic) materials or
rubber. The remaining 25 percent of shoes sold in Sri Lanka are imported. This amounts to
circa 10 million pairs per year. The local industry suffers from five major problems, which
limit its ability to compete.
1.

Poor and insufficient leather,

2.

Poor supply base for most material and components which are unsuitable for
exported products,

3.

Inadequate provision of training for operator and technical skills,

4.

Poor mechanization and practices in production,

5.

No marketing strategy or brand identity for the industry.

Sri Lanka is strategically located in close proximity to major sea and air tracks. As a result,
time consumed for logistics will be less compared to other Asian countries like Vietnam and
Thailand. Since the competition is tough for fashion oriented products in American and
European markets, Sri Lanka might have an advantage over the other East Asian countries
due to this reason.
Product development in footwear industry is virtually non-existent compared to the
international footwear companies. SME sector cannot focus much on this aspect because of
financial constraints. Even though, product development is important for continuous
improvement, even the large scale manufacturers are reluctant to focus on product
development. Local manufacturers are not interested in getting feedback from the customers
for products they put into the market.
The communication between the marketing and production departments is poor. This may
lead to failure in identifying customer preferences. Hence, local footwear has not been able to
achieve customer satisfaction. As a consequence, local customers have gradually accepted
imported footwear. Also, a lot of designs have failed to achieve the target marketing bench
marks.
Future Trends: - Keeping in view its past performance, current trends in global trade, the
industrys inherent strengths and growth prospects, the footwear industry aims to augment
production, thereby enhancing its exports from the current level of US$ 2.07 billion.

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Competitors
1. Brands sourced from India
Footwear
Acme, Ann Taylor, Bally, Charter Club, Clarks, Coach, Colehann, Daniel Hector, Deichmann,
DKNY, Double H, Ecco, Elefanten, Etienneaigner, Florsheim, Gabor, Geoffrey Beene, Guess,
Harrods, Hasley, Hush Puppies, Kenneth Cole, Liz Claiborne, Marks & Spencer, Nautica, Next,
Nike, Cole Haan, Nunn Bush, Pierre Cardin, Reebok, Rockport, Salamander, Stacy Adams,
Tommy Hilfiger, Tony Lama, Versace, Yves St. Laurent, Zara, Johnston & Murphy, Docksteps,
Timberland, Armani, Geox, Diesel, Ted Baker, Lacoste, Kickers, Calvin Klein, Sioux, Brasher,
Zegna, Massimu Dutti, Buggatti, Lloyd, Christian Dier, Salamander, Camper, Bata, Espirit,
French Connection, Legero, Mercedez, H & M and many more famous brands
2. Other countries exporting footware to Srilanka
Country
China
Italy
Hong Kong
Vietnam
Belgium
Germany
Spain
Indonesia
Netherlands
France
Portugal
Brazil
India

2006
21014.63
8246.51
5692.82

2007
24181.69
9712.94
5639.64

2008
28115.96
10218.75
5666.05

2009
26571.20
8189.14
4502.49

2010
33665.11
8754.52
5243.74

2960.28
2607.89
2147.74
1514.63
1577.03
1535.21
1465.11
1863.07
1236.91

3375.63
2999.19
2440.47
1567.05
1811.96
1840.51
1695.88
1911.74
1489.35

3680.80
3611.90
2670.35
1828.44
2240.70
2015.13
1797.00
1881.30
1534.32

3464.10
3194.69
2487.12
1688.35
2235.80
1800.70
1552.74
1359.98
1507.59

3716.77
3443.61
2449.73
2428.72
2412.14
1969.58
1719.67
1472.42
1732.04

Source http://www.leatherindia.org/products/footwear.asp
3. Local Market competition
The footwear industry in Srilanka is facilitated by many supporting industries which
are well established such as the leather and last manufacturing, but these industries
have not developed over time. Sri Lanka holds a name for craftsmanship in the global
market. This excellence has come from agricultural products (e.g. Tea) to finished
apparel products. This image can be a bonus for even footwear products, to compete
in the local and international market. Quality may be promoted to gain the
competitive advantage over footwear coming from other countries
4. Local Competition from India
Traders from Mumbai who are exporting similar products to Srilanka in the same
price range
Eg. Abdul Razak footware
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MARKETING STRATEGY
We have created a marketing plan that would enable us to generate and sustain Footwear
Business in Sri Lanka.
Segmentation
As Sri Lankan customers are more price conscious, for export purpose we have broadly
classified the market into 3 main segments - high end, medium priced & low priced.
Targeting
We will be focusing on the medium priced segment, or the biggest segment, where the
customers are looking for a value for money product but with better quality, durability and
reliability.
Positioning
Value for money is the image we will be creating about our product in the customers mind by
emphasizing the best cost strategy, which says provide little extra than what customer expects
at the same price as that of competitors product.
Differentiation
Primary differentiation will be that better reliable product but at much lower price. To the
customer it means all the qualities of an established brand along with the affordability.
Price
Price range will be around 300 to 600 rupees much lesser that same quality competitors
products produced by the domestic players in Sri Lanka. This is mainly because of the low
import duty charged by Sri Lanka on footwear. Selling our product at lower price should soon
give us the larger volume orders which will further reduce per unit cost and increase profits.
Placement
Orders will be placed by the agents based in Sri Lanka, who are the suppliers of the retailers
spread across Sri Lanka.
Promotion
Building relationship with these agents will require quality product with higher margins
which will ensure that the agents push the product into market.
Also trends keep on changing and so life cycle of each of the product can vary from 3 months
to 1 year. So we need to stay updated on the latest trends, track the sales volume of each of
the product, and accordingly send a product in to the Sri Lankan market.
Giving visibility to our brand by participating in Sri Lanka footwear and leather fair.
IFCOMA is the sole national Association of shoe component manufacturers representing the
component sector in India. IFCOMA has long standing relations with Sri Lankan companies.
In Sri Lanka, IFCOMA has organised four buyer seller meet in the years 2003, 2009, 2010 &
2011. They also participated in the Sri Lanka Footwear and Leather Fair organised in 2007.

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LEGAL CONSIDERATIONS
Registrations Required
1) Registration with Director General of Foreign Trade (DGFT)
For every first time exporter, it is necessary to get registered with the DGFT (Director
General of Foreign Trade), Ministry of Commerce, Government of India.
DGFT provide exporter a unique IEC Number. IEC Number is a ten digits code required for
the purpose of export as well as import. No exporter is allowed to export his good abroad
without IEC number.
Application for IEC number can be submitted to the nearest regional authority of DGFT.
Application form which is known as "AayaatNiryaat Form - ANF2A" can also be submitted
online at the DGFT web-site: http://dgft.gov.in.
While submitting an application form for IEC number, an applicant is required to submit his
PAN account number. Only one IEC is issued against a single PAN number. Apart from PAN
number, an applicant is also required to submit his Current Bank Account number and
Bankers Certificate.
A amount of Rs 1000/- is required to submit with the application fee. This amount can be
submitted in the form of a Demand Draft or payment through EFT (Electronic Fund Transfer
by Nominated Bank by DGFT.
IEC Code is unique 10 digit code issued by DGFT Director General of Foreign Trade,
Ministry of Commerce and Government of India to Indian Companies. Full Form of IEC
Code is Importer Exporter Code. To import or export in India, IEC Code is mandatory.
2) Registration with Export Promotion Council
Registered under the Indian Company Act, Export Promotion Councils or EPC is a non-profit
organisation for the promotion of various goods exported from India in international market.
EPC works in close association with the Ministry of Commerce and Industry, Government of
India and act as a platform for interaction between the exporting community and the
government.
So, it becomes important for an exporter to obtain a registration cum membership certificate
(RCMC) from the EPC. An application for registration should be accompanied by a self
certified copy of the IEC number. Membership fee should be paid in the form of cheque or
draft after ascertaining the amount from the concerned EPC. The RCMC certificate is valid
from 1st April of the licensing year in which it was issued and shall be valid for five years
ending 31st March of the licensing year, unless otherwise specified.
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3) Registration with Income Tax Authorities

Goods exported out of the country are eligible for exemption from both Value Added Tax
and Central Sales Tax. So, to get the benefit of tax exemption it is important for an exporter
to get registered with the Tax Authorities.

Agreement with Supplier:

1. We would first of all require M/s Bhagvati Enterprises & M/s Paduka Shoes to be
ISO 9000 Certified to be able to get the materials accepted in the International
Market.
2. We would be having a blanket purchase order of supply of 60,000 shoes every year
from Pioneer Creations, i.e. 5000 shoes every month. Size 25 onwards for kids.
Weighing not more than 200 Grams per pair,
3. We require the shoes to be unlabelled for Export purposes.
4. Goods must have a Quality Inspection Seal approved by a reputed quality inspector.
5. In Case of faulty shipment a fine of purchase cost + 12.5% per faulty piece needs to
be given out.
6. Documents to be submitted along with the cargo of is: Quality Certificate, Invoice,
Bill of Transport

ISO 9000:
Both our suppliers, M/s Bhagvati Agencies and M/s Paduka Shoes already have ISO 9000
certificates and hence no issues would arise on the certification front.

Dispute Resolution:
All the disputes arising out of Goods, Funds etc. are going to be solved in the country of India
under the sections of the IPC.
Disputes arising out of Sri Lankan shall be contested in the Sri Lankan embassy situated in
India.

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MANUFACTURING & OPERATIONS

Suppliers manufacturing facilities
With a perfect management system, professional technical personnel and advanced
equipment, our suppliers have a perfect manufacturing procedure. Having a huge in-house
production capability, they can produce any quantity of order ensuring best quality.
The total workforce of the company is divided under:
Finishing & Quality Assurance
Production Store
Accounts & Administration
The suppliers each have a manufacturing unit spread over 35000 sq.ft. area employing over
100 workers and having a monthly production of 150-200 metric tons of finished product.

Activities done at WarehouseUnpacking of the consignment received from the supplier is done to break bulk. Later the
shoes are sorted according to customer order requirements and packed as per need to
accommodate in the container.
Before packing, the shoes are labelled to give them our brand name TROOSH.
While packing of goods for transit, handling and storage, goods may have to endure bad
weather and extreme temperatures. So, they need special packing so as to avoid any corrosion
or damage.

Marks and labels

Markings on containers must include following:
the buyer's name or some other form of agreed identification;
the point/port of entry into the importing country;
the gross and net weight of the product in kilograms and pounds;
identification of the country of origin;
the number of packages;
appropriate warning or cautionary markings; and
a packing list, plus one copy in each container, itemizing the contents
It must also include a packing list identifying the contents of each container, and all markings
must agree with those on the bill of lading or other shipping documents.

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PERSONNEL STRATEGIES
Personnel needed to manage exports1. At office:
A person will be needed to handle customers and queries. He will also manage and
keep records of warehouse.
Qualification required: BBA or commerce graduate
Assistant person will required in office for clerical work in office
Qualification required: any graduate
2. At warehouse:
Two persons will be required at warehouse to handle cargo in and out of warehouse.
Their responsibility will be loading unloading of cargo, packaging and storing. In case
labour requirement is more due to high volume of order, then additional labour can be
hired on daily wage basis.
Qualification required:10th /12th pass
(For daily wage workers no qualification required.)
3. At Delhi/Agra:
One employee will be required in Delhi. He will co-ordinate orders between
manufacturers and suppliers. He will ensure the orders are shipped as per the contract.
And ensure that there are no discrepancies in quantity and quality of the orders.
Qualification required: any graduate person who has previous experience in foot ware
industry

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SUMMARY OF FINANCIALS
1) P & L Statement:
Year End
Gross Sales Domestic
Gross Sales Export
Net Sales
EXPENDITURE :
Increase / Decrease of stock
Employee Cost
Other Expenses
Total Expenditure
PBIDT
Interest
PBT
Provision for Tax
PAT
Profit Margin

in Crores Rs
FY '12 FY '13 FY '14 FY '15 FY '16 FY '17
5.00
2.20
2.50
2.85
3.24
3.69
0.00
3.41
3.88
4.42
5.03
5.72
5.00
5.61
6.38
7.27
8.27
9.41
3.50
0.10
0.50
4.10
0.90
0.18
0.72
0.16
0.56

3.98
0.11
0.55
4.64
0.97
0.20
0.77
0.18
0.59

4.53
0.13
0.62
5.28
1.11
0.05
1.06
0.20
0.86

5.16
0.14
0.71
6.01
1.25
0.05
1.20
0.23
0.97

5.87
0.16
0.81
6.84
1.42
0.05
1.37
0.26
1.12

6.69
0.18
0.92
7.79
1.61
0.05
1.56
0.29
1.27

11%

11%

13%

13%

14%

14%

Current sales in the domestic market stand at 5cr Rs. We will be exporting 75% of our
products and remaining 25% sell in the domestic market. We expect the sales to grow at 13%
YOY. We hope to continue maintain our profit margin at 11-15% for the initial 5 years and
hope to improve it further by expanding capacity or diversifying.

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2) Balance sheet:

Year End
SOURCES OF FUNDS
Owner's Capital
Reserve
Total Debts
Total Liabilities

in Crores Rs
FY '14 FY '15

FY '12

FY '13

0.20
0.10
0.10
0.20

0.20
0.11
0.11
0.21

0.20
0.12
0.11
0.21

0.11

APPLICATION OF FUNDS
0.10
Investments
Current Assets, Loans & Advances
Inventories
0.05
Sundry Debtors (Debtors)
0.10
Cash and Bank
0.05
Total Current Assets
0.20
Less : Current Liabilities and Provisions
Current Liabilities
0.10
0.10
Net Current Assets
Total Assets
0.20

FY '16

FY '17

0.20
0.13
0.12
0.22

0.20
0.15
0.12
0.22

0.20
0.16
0.13
0.23

0.12

0.13

0.15

0.16

0.06
0.11
0.06
0.22

0.06
0.12
0.06
0.24

0.07
0.13
0.07
0.27

0.07
0.15
0.07
0.29

0.08
0.16
0.08
0.32

0.11
0.11
0.21

0.12
0.12
0.21

0.13
0.13
0.22

0.15
0.15
0.22

0.16
0.16
0.23

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Method of Payment for Buyer

As we are just starting with our business we would like to have payment by advance payment
method. With this method we can avoid credit risk, since payment is received prior to the
transfer of ownership of the goods. In initial phase even a small amount default from buyer
can prove to be fatal for our company.
However, we are aware of the fact that insisting on payment in advance is the least attractive
option for the buyer, as this method creates cash flow problems for them. Thus, we might
find ourselves losing out to competitors who may be willing to offer more attractive payment
terms.
We feel its much better to take some hit on order inflow rather than risking whole business
in initial years. After trust is built with customers we are planning to ask 25% of order
amount as advance from buyer and remaining 75% after order reach the destination port (Bill
Of Lading would be released after receiving remaining amount from buyer).

Mode of Finance
To execute any received order we would require stock available with us. In our business
major cost is involved in procuring shoes from manufacturer. We being the old customers the
suppliers are asked for 30 days credit from the time the order is placed to supplier. Hence we
take payment from customer and pay to our supplier.
Financing options:
1) Pre-shipment financing:
Pre-shipment financing are provided by bank against the received orders. Pre-shipment
financing can go up to 70% of the order amount. This being export order banks give loan
with interest rate charge of 200bps lower than prevailing domestic market.
For new customers banks generally asks for security cover of two times loan amount. We
being small company, it would not be possible for us to provide a security and hence preshipment financing is not a viable option for us.
2) Other Banking Finance facilities:
There are other bank financing facilities like overdraft, CC. But, even these facilities are not
offered to new customers.
3) Family, Friends:
That leaves us with option of financing from family and friends. Repayment can be very
much flexible here, though interest charged could be on higher side. Money can be raised in
small time with very less hassles.

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QUESTIONNAIRE
1. Why u decided to export / How do u Identification for need to export?
2. Which countries do u export to?
3. Why not expansion in other markets in India?
4. What all are the payment terms from start of the business?
5. What are the storage facilities you are using?
6. What is the breakup of expenses?
7. Why from Delhi and not from Mumbai kurla market?
8. What is the documentation requirement?
9. What is the bargaining power available with you and on what basis?
10. How do you forecast need?
11. What are the ways of inventory management?
12. Benefits from government for export?
13. Financial needs and future sources?
14. What are the potential Risks?
15. What is the logistics you use?
16. What all are possible other ways to import?
17. Do you hire people temporarily?
18. Do you consult with anyone?
19. Do you provide training to hired
20. Any tax consequence is involved?
21. What is the distribution strategy?
22. What is your Promotion Strategy in target country?

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