You are on page 1of 12

Industry Analysis: Leather Industry of Bangladesh

Present By
Adnan & Nasief
Overview- Leather industry of Bangladesh

Leather is a durable and flexible material created by tanning animal rawhide and skin, often
cattle hide. It can be produced at manufacturing scales ranging from cottage industry to heavy

People use leather to make various goods—including clothing (e.g., shoes, hats, jackets, skirts,
trousers, and belts), bookbinding, leather wallpaper, and as a furniture covering. It is produced
in a wide variety of types and styles, decorated by a wide range of techniques.

The leather industries are differentiated by the manufacturing importance of the raw materials
used to make the wares. In the leather industry, the skin and rawhide is commercial valuable
product. It is an intermediate industrial product, with applications in downstream sectors of the
consumer goods industry.

Key Point about Leather Industries of Bangladesh

 Bangladeshi leather is the best in the world after the French product.

 Leather industry is the 2nd largest export sector in Bangladesh

 Bangladesh’s overall export earnings at $1.23 billion in FY’ 2016-17

 Prime Minister Sheikh Hasina announced leather and leather products as ‘products of
the year’ in January 2017

Page | 1
Current scenario of leather industry

Tanneries 220
SMEs 3500
Large Farm 110
Employment (Direct and Indirect) 850000

Major players in the arena of leather industry in Bangladesh

Janny’s footwear Ltd. Apex Tannery Ltd.

Bata Shoe Bengal Leather Complex Ltd.
Crescent Tannery Ltd. H & H Leather Industry Ltd.
Akij footwear Ltd. Kid Leather Industry Ltd.
Lexco Ltd. Bay Tannery

Tools used in Industry Analysis

We used 3 major tools for our industry analysis. Tools are-

1) SWOT Analysis
2) PESTEL Analysis
3) Porter’s Five Force Model Analysis

Page | 2
SWOT Analysis- Leather Industry of Bangladesh

SWOT Analysis is a useful technique for understanding your Strengths and Weaknesses, and for
identifying both the Opportunities open to you and the Threats you face.

Strengths identify of Leather Industry of Bangladesh

 Governments declared “Thrust sector” highest priority is Footwear & Leather Goods.
 Renewable natural resources.
 The growth rate of Bangladesh’s livestock population has been steadily increasing.
 90% materials locally available.
 Unique grain pattern and fiber structure of cattle, high quality and reputation of natural
 Availability of labor and low labor cost.
 Comparative price advantage in international market.
 Unbeatable price offer as basic raw materials are locally available and low overhead
 Favorable geographical location.
 Reputation of Bangladesh’s premium grain leather.
 Reduced interest rate for industrial credit to leather sector to (7-8%) since it is
considered as thrust sector by the government.

Page | 3
Weakness identify of Leather Industry of Bangladesh

 Selective and limited access to finance.

 Lack of skilled workforces.
 Lack of access to latest technology and machinery facilities.
 Lack of education, training from Government.
 Absence of entrepreneurial skill, rent seeking mentality.
 Poor linkage and coordination among SMEs and lead firms.
 Absence of market information and promotion, inadequate marketing knowledge of
local leather entrepreneurs.
 Poor R&D, laboratory facilities.
 No international brand image.
 Poor compliance practice.
 Poor infrastructure, power of the industry.
 Skilled designers and facilities for product design and development are unavailable
 High rate of interest on term loan and working capital, and many limiting factors to
have access to finance.
 Footwear accessories (such as tapes, trims, buckles, linings, shoe-last, etc.) are not
locally available.
 Complicated rules and regulations which affect lead-time and acquisition of inputs.

Opportunities identify of Leather Industry of Bangladesh

 Increasing global demand for value added, diversified products.

 Scope of developing backward linkage business.
 Impose high tax on competitors by major leather products importers.
 Labor intensive; employment opportunities.
 Low wage workers convertible to skilled ones.
 No duty on shoes, leather products made and exported from Bangladesh.
Page | 4
 Establishing by-product industry with solid and liquid waste through proper R & D.
 Local and Foreign Direct Investment opportunity in value added leather products sector.
 Future Leather estate to raise brand image.
 Backward linkage development.
 Investment in the value added leather goods and footwear sector.
 Government policies toward leather exporters; GSP, Cash Incentive; etc.
 Already big players like Young-one, Blue Ocean, Venturini, Tata invested in BD signaling
many more to follow.
 Increasing International and Local demands for value added leather products.
 International Fashion and sourcing houses in BD for RMGs showing interest in leather

Threats identify of Leather Industry of Bangladesh

 Absence of integrated policy; no long term policy regarding Common Facility Center
(CFC), SME cluster development, promoting Bangladeshi leather products.
 No dedicated skill development institute training center for workers and supervisors.
 Political instability, corruption.
 Lack of backward linkage industry for chemicals/accessories and substandard quality of
the products.
 Increasing import of low priced synthetic products.
 Illegal export of raw hides/skins.
 Smuggling and under invoicing of products.
 Intensive competition for gaining market because of strong competitors like: china, India
and Pakistan.
 Insufficient measure to address the environment pollution, health and safety issues by
the tanneries.

Page | 5
PESTEL Analysis- Leather Industry of Bangladesh

A PESTEL analysis is a framework or tool used by businesses to analyze and monitor the macro-
environmental (external marketing environment) factors that have an impact on an industry.
PESTEL stands for:

 P – Political
 E – Economical
 S – Social
 T – Technological
 E – Environmental
 L – Legal


 The political environment is highly volatile with frequent strikes and clashes between
the major political crises.
 The government policies are highly favorable with the sector being declared a “Thrust”
sector, whereby enjoying (7-8%) interest rate for loans, bonded warehouse facility, 15%
cash incentives, Generalized System of Preference (GSP) facilities etc.
 Trade policies fixed by the government has always been favorable to businesses though
bureaucratic red tape has always hindered the smooth operations of business.

Page | 6
 EPZs provide excellent environment throughout for smooth operations of the business.
 The government has set highly attractive incentives for the foreign investors to lure in
FDI, including 100% foreign ownership, 100% profit transfer to country of origin and that
too without prior permission from the central bank.


 The economy has been growing at over 5 percent over the last decade and is set to
continue this trend for years. This has increased the number of middle to high income
group in the economy who can afford leather goods with higher than average
 Interest rates have been set at the minimum possible level by the government whereby
ensuring cheap source of capital for the business.
 Exchange rates are heavily monitored by the central bank, and is always favorable to the
exporters. However, the relatively devalued local currency makes imports of chemicals
used in the processing of raw hide and machineries used in the production process


 Social factors like the acceptability of leather goods by the vast majority of the
population helps the sector gain popularity.
 The trend of the present generation to lean towards fashionable and expensive
products like leather belts, side bags, jackets etc. increased the prospect of the sector.

Page | 7

 The local companies are lacking behind major international brands in terms of
innovation and quality.
 The small firms in the local market are overshadowed by the bigwigs producing in large
scale allowing for them to be able to afford expensive technologies.


 The long awaiting shift of the tanneries to Savar from Hazaribagh is yet to see any light
of day. When done, it will mean expensive relocation for the tanneries, and even more
burdensome costs to the small businesses who will not be allocated any land in the
selected area.
 The ETPs in Savar will allow to increase the value and acceptability of the local leather
whereby allowing for premium pricing and entry into previously untapped market due
to restrictions.


 Health and safety rules in Bangladesh are barely monitored and controlled.
 Labor rate is the lowest in the world and there seems to be no interest in the
government to push the bar higher in the foreseeable future.
 There are no major restrictive laws in place that hamper the smooth operations of the

Page | 8
Porter’s Five Forces Model Analysis- Leather Industry of Bangladesh

We have analyzed the Leather Industry of Bangladesh with the view point of Porter’s Five
Forces Model. The analysis of the industry is given below-

Threat of new Entrants-

A 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. For example, In Bangladesh the
leading footwear companies are Bata, Apex, Jenny’s Shoes, Landmark Footwear, Bay Emporium
Footwear, Fortuna Shoes ltd. etc. among them Bata and Apex are the organized retail
manufacturer and distributor who can boast of sizeable market shares. However, the entrants
of new company 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.

Threats of Substitute Products-
Substitute products are those products that can perform the same function as the product of
the industry. There are a lot of substitute products of leather goods like Rexine, Plastic, Rubber,
and Jute. These substitute products give a great competition to the leather goods in many
Intensity of Rivalry among Existing Competitors-
Rivalry 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 goods industry is also thus facing such
rivalry among existing competitors.
Bargaining Power of Buyers-
Bargaining 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 industry is increasing day by day as new 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 seller’s posted price. People want durable shoes as well as modern designs, so
to satisfy customers the companies have to keep up with the trend as well.
Bargaining Power of Suppliers-
Where very few products are chased by a large number of buyers there poses a
bargaining power of supplier. In Bangladesh, there are many leather goods industries. As we all
know there are many steps needed to prepare the leather before manufacturing. This increases
the production 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 equipment’s, 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 found the substitute product with the same features
with a lower cost, which grab the leather market customers and divert them to other
substitute product market.

10 | P a g e

 Basically it’s a seasonal business for SMEs clients.

 Need huge working capital on season for collecting & processing raw materials.
 Accounts Receivables & payables days may be higher because of excess credit
 Net Profit Margin- Low
 Lower Stock available in off season.
 Higher Stock available in on season.
 Corporate Marketer dominates SMEs Marketer.


The leather goods market in the country is very small, concentrating mostly on the corporate
gift sector. Major segment of the leather market consists of small enterprises at 57%. These
enterprises mostly sell directly to corporate clients and to major consumer brand shops, who
then sells these products to the consumers at high profit margin. There is a lack of strength of
the small enterprises to compete with these leading brands.

11 | P a g e