BUSINESS PLAN OF LEATHER PRODUCTS

Introduction

The second largest industry in regard to exports is the Leather Industry. With over 22 million
cattle population and 14 million goats/sheep, Bangladesh has traditionally remained an important
producer of finished leather. Quality-wise, the material is in high international demand,
Bangladeshi goat leather remaining particularly popular for its superior fine grain.

The position of the leather industry in relation to some of the major industries in the economy,
ranking seven highest in order of gross value of output in 1984-85. It is apparent that the industry
occupies a very important place in terms of gross output, value added, fixed investment,
employment, and manufactured export. Indeed, the leather manufacturing sector has turned out
to be an important foreign exchange earner, contributing over 11 per cent of the total export
earnings in 1987/88. Only garments, and jute and jute goods were ahead of leather in export
earnings.

According to EPB it contributes more than $1 billion in 2014-15 fiscal years in exporting. This
industry has the potential of delivering more and providing a large number of jobs by
diversifying product range and improving quality. The leather industry in Bangladesh is as old as
the history of the country. During the colonial era just a few number of tanneries were working
in large cities such as Tangi, Savar, Narayanganj.

Leather industry’s core products in Bangladesh are;

 leather garments
 gloves
 tanned leather
 footwear
 bags
 crafts item
 furniture
 jewellery
 safety shoe
 watch band

In the 50s and 60s most of the tanned leather was exported in raw form but soon after the local
tanning industry making semi-finished leather made rapid progress in making finished
products due to availability of raw material, labor and growing demand in the foreign market.
Introduction of Business

The business which we want to start is of leather. Use of leather goods is increasing day by day.
Now-a-days leather goods are being used by the people of even remotest area of our country,
because lifestyle has been changing very fast. Leather products are durable and beautiful to look
at in comparison to other similar products. The leather production consumption chain has three
processing stages, each requiring different combinations of materials, inputs, labor and capital.
The first stage is the recovery of raw materials that has direct links with animal production
activities. Hides and skins are recovered from dairy, draught animals or animals from slaughter
houses. The second stage is leather tanning and finishing, which involves capital intensive
operations. The third stage is the production of leather products, which is a labor intensive
activity. These three processing stages are linked to key commercial components of the chain,
such as the marketing of intermediate inputs, components and end products, trade and
consumption. And our job is to deal with raw materials and supply them to the leather industry.

Name of the business

The name of our business is “FANCY LEATHER” which is indulged in the business of
supplying raw materials to leather industry for manufacturing leather products.

Market Potential

With the development in tanning technology, good quality leathers are coming to market.
Leather products have very high demand in domestic and foreign market. The demand for leather
products like hand bags, wallets, purses & belts etc. is increasing gradually. It brings maximum
unit value realization as compared to other leather products. The main foreign markets for leather
products are Europe, Canada, Japan and USA. There is good scope for expansion of the industry.

Mission

“To become the premier raw material supplying organization in the leather industry, gaining
market competitiveness and diversifying into value added leather with clean, well maintained
and friendly environment”.

Vision Statement

FANCY LEATHER’s goal is to carry on his legacy of innovative thinking, honest growth, or to
create business opportunities that set FANCY apart from the competition and provide value for
our shareholders.
Objectives:

 Our aim is to maximize business without compromising on quality.

 We are committed to meet the changing demands of an evolving organization.
 We aspire to improve quality norms.

Business marketing plan of fancy leather

Situation analysis
First key planning element
Identification of problems and opportunities

Master marketing strategy

Feedback
1. Objectives
Second key planning element and control
2. Target market selection
3. General marketing strategy
plans. Programs. And tactics.

Product Pricing Promotion Distribution

strategy strategy strategy strategy
Third key planning element
Objectives Objectives Objectives Objectives
plans plans plans plans

Integrated marketing plan

Measurement and evaluation of

result
Business ownership

There are three type of structures from which business can be started, which are as follow-

 Sole proprietorship
 Partnership
 Joint stock company

But for starting Fancy Leather we will prefer Partnership because partnership is one of the least
expensive business structures to begin. There are some other factors for choosing this structure
which are-

1) Easy to get started

2) Sharing the burden
3) Better decision making
4) Better knowledge of the market
5) Ownership and control are combined
6) More capital.
7) Easy access to profit.

Total Capital Requirement

The total capital requirement including fixed capital and working capital is estimated at TK: 10
lac.

Situation Analysis

Market Trends
Market trends are the upward or downward movement of a market, during a period of time. The
market size is more difficult to estimate if one is starting with something completely new. In this
case, we will have to derive the figures from the number of potential customers, or customer
segments. Market potential of leather products is considerably high in Bangladesh as well as in
foreign also.

Target Market
1) Local market
 ABC Footwear Industries Limited.
 Apex Leather craft Limited.
  Ananta Leather Collections.
 Bata (co.) BD Limited.
 Best Leather Company Ltd.
 Earth Footwear Limited.
 Globe Gloves (BD) Mfg. Co.
 Alpha Sports Gear Bangladesh.
2) Foreign market

Competitive Analysis

Competitor analysis in marketing and strategic management is an assessment of the strengths and
weaknesses of current and potential competitors. This analysis provides both an offensive and
defensive strategic context to identify opportunities and threats. The market for leather is highly
competitive. Competitors are very strong in this business.

MARKETING MIX:

The marketing mix and the 4 Ps of marketing are often used as synonyms for each other. In fact,
they are not necessarily the same thing. "Marketing mix" is a general phrase used to describe the
different kinds of choices organizations have to make in the whole process of bringing a product
or service to market. The 4 Ps is one way – probably the best-known way – of defining the
marketing mix, and was first expressed in 1960 by E J McCarthy.

The 4Ps are:

 Product (or Service)

 Place
 Price
 Promotion

Products Or Services
Product or service must meet customer requirements whatever these might be. For example, an
important aspect is function - products should do what they say they can do and what they are
expected to do. Our company is offering leather jackets & gloves.
Types of leather categories-

1. Single and double shoulders cowhide

2. Suede
3. Water buffalo

Price
Price needs to be relevant to the product/service and the market. A manufacturer should seek to
provide to its business with products at affordable prices. A firm's pricing decision is often aimed
at attracting a particular market segment. The prices for our products are following:

SIZE PRICE
Single and double shoulders cowhide per sq.ft 2000-8000
Suede per sq.ft 3500-5000
Water buffalo per sq.ft 2500-4500

For export we determine below prices-

Dress Grade White Suede per sq.ft $6.12
Single hide. Full grain suede per sq.ft $ 3.81
Solid metallic $ 6.88
Fashion Garment $5.35

Pricing Strategies

Pricing strategy is an important part of the marketing mix. The price of a product should reflect
its image and the need to give a consumer what they want. We will use following pricing
strategies for selling my products.

 Cost-Plus Pricing.
 Penetration

Pricing Factors

Pricing factors are

 manufacturing cost
 market place
 competition
 market condition
  quality of product.

Place

Roughly one fifth of the cost of a product is spent getting it to marketers. Of course, the actual
figure varies widely from place to place but generally distribution is a very important element in
the marketing mix. Different organizations use different approaches to reaching their customers.

Distribution Channels

Fancy Leather will distribute its raw materials to local manufacturers and local brands. After
penetrating into the leather market we will also start selling directly to foreign market.

Promotion

It is the process of communicating with leather product manufacturer. For marketing purposes,
communication of products and services contributes to the persuasion process to encourage
consumers to avail themselves of whatever is on offer. The key processes involved in promotion,
include:

 Branding - creating a distinctive image and character to an organization/and or its

products and services
 Personal selling
 Discounting before the holidays

Objectives of Promotion

However, there are three basic objectives of promotion. These are as follows:

o To present information to manufacturers as well as others.

o To increase demand.
o To differentiate a product.

Following marketing technique is used for our business.

Direct Selling

For the promotion of our businesses we will use direct selling. Direct selling is a type of sales
channel where products are marketed directly to customers, wholesalers and retailers eliminating
the need for middlemen. We will conduct Direct selling in one-on-one, in a group or party
format, or online.
STP (Segmentation, Targeting and Positioning)

 Segmentation

Dividing the marketing into distinct groups. We segment the market into following categories

 leather garments
 gloves
 tanned leather
 footwear
 bags
 crafts item
 furniture
 jewellery
 safety shoe
 watch band

We will use following market research methods to identify target customer for Fancy Leather

 Sales analysis and buying patterns

 Questionnaires
 Focus groups
 Face-to-face interviews

We will use above mentioned methods to know the;

 Potential business market
 Consumption habits of customers
 Expectations & expirations
 Priorities

 Targeting

Deciding which of these groups to communicate with, and how to talk to them

 Local market

 ABC Footwear Industries Limited

 Apex Leather craft Limited.
  Ananta Leather Collections.
 Bata (co.) BD Limited.
 Best Leather Company Ltd.
 Earth Footwear Limited.
 Globe Gloves (BD) Mfg. Co.
 Alpha Sports Gear Bangladesh.

 Foreign market

 Positioning

For giving our competitors tough competition we will go for following positioning strategies:

 Branding and messaging

 Corporate identity

To the manufacturer “FANCY LEATHER” is a leather business that ensures quality leather.

OPERATIONS MANAGEMENT:

Operations management is an area of management concerned with overseeing, designing, and

controlling the process of production and redesigning business operations in the production of
goods or services. It involves the responsibility of ensuring that business operations are efficient
in terms of using as few resources as needed, and effective in terms of meeting customer
requirements. It is concerned with managing the process that converts inputs (in the forms of
materials, labor, and energy) into outputs (in the form of goods and/or services).

Manufacturing Process

The proposed items are manufactured by units in different methods. The main operations are
pattern making, economical layout of patterns, clicking of components, and skiving decoration
by embossing machine or hand, folding, coloring, assembling, stitching, fitting and finishing.

RAW HIDES

PRETANNING

MAIN TANNING
 WET-BLUE
WET FINISHING

CRUST

FINISHING AND
OPERATIONS

LEATHER

Personnel hiring:
We will hire people who can sew leather. For hiring purposes, we will give add in newspaper
and by printing banners? We will hire 50 people for our business with special sewing skill vested
in them.

Equipment/ machinery:

Equipment Expense
1.Cylinder bed sewing 1 x TK35,000/- TK 35,000/-
machine
Complete with motor
2.Upper Leather skiving 1 x TK 25,000/- TK 25,000/-
machine
Complete with motor
3.Misc. tools & equipment’s TK 15,000/-

Supply Chain Management

Supply chain is the sequence of organizations facilities, functions and activities that are involved
in producing and delivering a product and service. It also refers to movement of materials and
information within a facility and outgoing shipment of goods and materials in supply chain.

 Need for supply chain management

 Improve operations
 Increasing levels of outsourcing
 Increasing transportation cost
 Competitive pressures
 Manage inventories

 Benefits of supply chain

 Lower inventories
 Higher productivity
 Greater agility
 Shorter lead times
 Higher profits

Product Design:

Product design is one of the crucial stages in Operations Management. The design of a product
or a service is one of the most important steps. This will definitely affect the earnings from the
product.

The basic limiting characteristics of the production system design are set during the product
design phase. In designing the product, or the item to be processed in non-manufacturing
systems, the product designer specifies materials, tolerances, basic configurations, methods of
joining parts and the like, and through these specifications sets the minimum possible production
cost.

 First of all process begins with purchasing rough or unfinished leather.

 This leather is put into a boiler of wood containing high quantity of concentrated
chemicals to convert it into soft material for 3-4 hours.
 Then the leather is dried and pressed, after that cutting is performed of different designs.
Proposed Capacity

Our business capacity is greatly dependent on the market size and the number of potential client
or no: of orders one can attract/get. Leather products will be designed and stitched by the tailors.
On average, our business having variety of design made in our tannery and we also prepare
orders according to manufacturers demand and requirements. The expected number of orders we
receive will be 2-3 orders.

Location Of Production Facilities

The production activity should be located where a firm can be most productive and yield the
highest revenues per unit of investment.

 A Highly Productive Business Unit:

 Is one that is near to the market, so that the demand for units of output is high relative to
costs of making that input?
  Is one that close to a skilled labor force? The easier it is for the firm to attract labor with
appropriate skills the more likely it is to produce high value outputs and low costs per
unit of output.

 One that locates close to high value raw materials. The further materials have to travel the
lower the productivity of the plant will be.

For Fancy Leather the location which we will prefer is Tangi. We choosing this location
because of many factors;

 Electricity rates in that area are cheaper

 Industrial area

FINANCIAL PLAN

Financial planning is the task of determining how a business will afford to achieve its strategic
goals and objectives. Usually, a company creates a Financial Plan immediately after the vision
and objectives have been set. It describes about the activities, resources, equipment and materials
that are needed to achieve these objectives, as well as the timeframes involved.

Basically, the financial plan section of the business plan consists of three financial statements,
the income statement, the cash flow projection and the balance sheet and a brief
explanation/analysis of these three statements

The expenses which we incurred before opening of the shop are:-

1. Initial investment

 Machines &equipment’s= 90,000

 Storage cabinets & stools= 20,000
 Cartons= 20,000
 Stationary materials= 1,000

Salary of the employees:-

1. Full-time workers= 8,000 per month

2. Part-time workers=4,000 per month

Profit And Loss Analysis

We have assumes the profits and losses which will be incurred by me in the running course of
business. We have estimated the profits and losses for these years.

Profit & loss account:

Rs:
Sales 5,90,000
C.G.S 3,70,000
Gross margin 2,20,000
Expenses
Depreciation 4,000
Start-up-cost 50,000
Workmen’s compensation 5,500
Packing material 5,000
Telephone 2,000
Utilities 15,000
Salaries 50,000
Repairs 1,000
operating expenses 2,550
Profit before interest 84,950
Tax expenses 2,000
Interest expenses 1,500
Net profit 81,450

SWOT ANALYSIS

Strength

 High quality leather is used as raw material

 Leather can be treated as renewable source.
 Efficient use of colors and lining material
 Quick response to Changing business needs and demand
 Having large variety of quality raw materials
 Offers raw materials at affordable prices
 Availability of integrated production chain from raw materials to tanneries and leather
goods.
 Price advantage of Bangladeshi leather in international market.
Weaknesses

 Lower profit margins to compete with already existing leather businesses.

 Limited capital for marketing.
 Start-up establishment which will take time to implement systems and policies.
 Insufficient research and development facilities.
 Limited access to financial institution.
 Lack of professional training institute to improve skills of workers at all levels.
 Unavailability of chemicals and accessories locally and no provision for local chemical
industry.

Opportunities

 Raise brand profile through connections to retailers & local brands

 Increasing global demand for leather products
 Availability of cheap labor force inside the country
 GSP facilities to exporter
 Location advantage.
 High potential for quality raw materials and maximum value addition inside the country.
Threats

 Time required penetrating market of established

 Competition from other leaders in market
 Market saturation
 Economic recession
 Leather sector growth was stagnant in some years because of political instability.
 Huge dependency on high priced imported chemicals and accessories.
 Insufficient measure to address the environment pollution, health and safety issues by the
tanneries.

Conclusion:
The leather goods market in Bangladesh has huge potential with the increasing disposable
income of the middle and upper class families. The GDP growth at over 5% the last decade
shows the strength of the economy and its resilience. Strong export growth despite the global
decision shows the competitive advantage of the entire industry, thanks to mostly the availability
of the superior quality raw materials and cheap labor. The leather goods market in the country is
very small concentrating mostly on the corporate gift sector. Major segment of the leather market
consist of small enterprises at 57%.