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Prepared for
Mrs. Syeda Rownak Afza Lecturer BRAC Business School

Course: BUS 301; Section 1 BRAC University

Prepared By
Rubaiya Afreen Huq
ID: 05204013

A.S.M Moshiur Rahman


ID: 05204014

Noor Ahmed Naveed


ID: 06104003

Rahib Maruf Iftekhar


ID: 06104053

Date of Submission: 29th November, 2008

Table of Contents

Acknowledgement

We would like to start by thanking our course instructor, Ms. Syeda Rownak Afza for giving us this opportunity to work on such an interesting topic. While working on this report we actually had to explore and learn how companies really export their products, which is affected by various internal and external factors. We had learnt all these facts in theory and when we started working on this paper, we discovered the practicality of the topic. We would like to thank her for her excellent guidance through valuable lectures, personal advice and support.

Sometimes we got confused on how to proceed with report but the innovative ideas contributed by all group members helped overcome these problems. We would also like to drop a word of thanks to each other, among our group, for our well managed coordination and division of work. Through group cooperation and hard work were able to prepare this project report.

We are also very thankful to Subrata Kumar Chakraborty, Deputy Manger, Export of Otobi Ltd. for helping us with all the necessary information that could not have otherwise been obtained.

Finally and above all, we would all like to thank God, the Almighty for giving us great strength and patience to work together to prepare this report on International Operations Otobi Limited.

Executive Summary
The report, International Operation of Otobi Limited has been prepared for the course International Business. The report takes an in-depth look into how Otobi Limited is conducting their business outside the borders of Bangladesh. With the Number One tag in the furniture industry in Bangladesh, Otobi Limiteds venture outside the border has not yet proved fruitful. The unnerving strives for quality, have allowed competitors to stake a claim in their market share, both locally and in the international arena. Recent modifications were made in their market strategy and their customary product line to address the ever evolving international market. The report further includes our recommendations which would help Otobi Limited retain its market share in the international arena.

30th November, 2008 Ms. Syeda Rownak Afza Course Instructor Course: Organisational Behaviour (MGT 201) BRAC University 66 Mohakhali, C/A Dhaka, 1212 Subject: Report submission on International Operations Otobi Limited. Dear Ms. Afza, Please accept the accompanying report entitled as International Operations Otobi Limited. The report is a complete study which has been conducted to understand how Otobi Ltd. is doing conducting business outside Bangladeshs borders and they can expand their business. The report was assigned to us as a term paper which is a part of our course curriculum. The purpose of this report is to understand how companies export their products, what factors influence their choice of markets and their performance in those markets, and how organisations deal with those factors. Hard work was required to gather information through an interview with Subrata Kumar Chakraborty, Deputy Manager, Export Otobi Ltd. We must thank you maam for your patient guidance and suggestions that have made it possible for us to complete this report. For any clarification required, we are there to provide you with an explanation. We hope that you will enjoy going through our report. Thank You Yours Sincerely, ______________________
Rahib Maruf Iftekhar

________________________
Rubaiya Afreen Huq

______________________
Noor Ahmed Naveed

________________________
A.S.M Moshiur Rahman

Introduction
International Business is a term used to collectively describe the topics relating to the operations of firms with interest in multiple countries. Such firms are called multinational corporations. Such firms areas of study include topics which differ from their countries such as political, economy, language, living standards, etc.

International business by its nature is a primary determinant of international trade. One of the results on the increasing success of international business is ventures is globalization. In todays fast moving world, the next step towards expansion is going global.

Expansion outside the borders, facilitate companies to find new market for their product. It helps them to expand to market where there is demand for their product, or to achieve economies of scale. In other cases many other companies may expand internationally due to adverse economic conditions, or cultural shock. Companies in todays world cannot afford to stay at one place for too long. If they do so, they risk being over-run by competitors.

Otobi Limited, like many others see the international market as a bottomless pit of opportunities. Expansion in other territories would help Otobi Limited diminish the advantage their competitors hold over them and also help them to gain a competitive edge over their competitors. Although they are yet to set an example of themselves in the international arena, one can only predict that it is just a matter of time.

Objective:
The objective of the study is as follows: - To enrich knowledge about the exporting methods of Otobi Ltd. - To know the International and global market for furniture and home dcor products - To know what are the internal and external factors that affect international business of a company - Find out ways to exploit the factors that present opportunities and overcome the ones that pose threats

Methodology:
Two sources had been used to collect the required information, which are as follows:
Primary

Source: An interview was conducted on the Subrata Kumar

Chakraborty, Deputy Manager, Export Otobi Ltd.


Secondary Source: Basic theoretical information was collected from the course

text book and by searching through the internet.

Scope of the Report:


- To study international business methods, and internal and external factors that could affect them. - Practical experience was gained by working in a group for collecting information and compiling it into a report. An insight on international business was received and experience gained by all while working in a group for a simple institutional project. - Knowledge gathered about how internal and external factors of a company affect its business, thus teaching us methods to deal with these factors later in life.

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Company Introduction

Background of Otobi Ltd.

Otobi Limited started its journey sometime back in the year 1975. Bangladeshi made furniture. entrepreneur.

The

entrepreneur of this business was Mr. Nitun Kundu who conceived the idea of He was a Bangladeshi artist, sculptor and finally

Nitun Kundu was known to be the pioneer for integrating metal and wood designs in furniture for which Otobi Ltd. gained its popularity in the market. Kundus artistic skills were highly reflected in those furniture pieces making them a world apart. They had a kind of simplicity which distinctly marked Otobis character. Today Otobi Ltd. is one of the biggest furniture manufacturers in Bangladesh and it has traveled a long way since its commencement. Initially the company manufactured mainly chairs and steel tables, in the office furniture section. Since the year 2000, Otobi Ltd. started the manufacture of a variety of furniture like beds, cabinets, conference desks, book shelves, etc all using melamine laminated boards and medium density fibre boards. From then Otobi Ltd. has been operating at a new level, and providing products to the international market mainly in South East Asia. In 2008 Otobi decided to break out of their tedious furniture line to focus on a wider range of products. The introduction of candles, cushions and table lamp, which complements the furniture, has been a huge success in the market. Their products are backed by warranty along with after sales services which contribute to their goodwill. Bengali people always prefer wood to melamine boards, but Bangladesh is short on this crucial resource, which is why the furniture manufacturers are all turning to this substitute for production. Nowadays furniture is more about design and

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quality, rather than type of raw material used, and in this market, Otobi Ltd. still dominates in Bangladesh.

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Overview of the Bangladesh Market


Before we take any further look into the Otobis international business, let us take a look in to the national market. Domestically Otobi Ltd. has been the leading company for many years. None of its competitors has been able to possess any major threat to their market position. The products quality and outlook, which is their major asset for their rise to the top, has been the major problem for their competitors to replicate.

Obstacles Faced in Bangladesh

In the home market of Bangladesh Otobi Ltd. faces a few minor challenges. Even though these challenges are minor, they need a lot of tending; otherwise these can pose a great amount of threat to the company. The obstacles faced are:

There is a certain degree of uncertain competition in the Bangladeshi market. This is because no competitor is actually equivalent to Otobi in terms of size and product line, but there are certain seasonal and occasional set backs due to these competitors.

Imported products available at shops such as Koncept Furniture, Studio 45 and many other furnishers pose a threat to Otobis market share. This is because Otobi Ltd. is trying to compete in terms of quality and design with imported furniture. Therefore when customers prefer imported goods than to Otobis local products, this posses a threat to the company.

Price competition is a major setback for the company. Otobi Ltd. has many small and medium competitors in various parts of the country especially in Dhaka. Panthapath is a prominent location to get melamine laminated board furniture which also uses the concept of Otobi to blend metal & wood designs. These products are less durable, but a lot cheaper than Otobis products. They also dont provide any warranty. Still there is a large group of the population willing to sacrifice quality for price and make purchases from such places.

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Competition in Bangladesh

Navana Furnitures: It is the brand of the furniture unit of AFTAB Automobile Ltd, founded in 2002. Since then it has been regarded as the leading competitor for Otobi Ltd.s market share. However it has never been able to match Otobis product quality and variety. Although it may seem that Navana Furniture does not possess a direct threat to Otobis market share, the company must remain vigilant to outwit Navana in all ways possible.

Aarong and Local Private Brands: The recent inclusion of wider range of home decor has seen their competition base increase significantly. The likes of Aarong provide stiff competition in Otobis bid to increase their customer base. Their home decor products such as candles, cushion, table lamps, etc have already created a position in the peoples mind, thus making it hard for Otobi to capture their potential market.

Local Traders: Traders who occupy the streets of Panthopath, Science Laboratory, Hatirpool and other key areas around Dhaka city are providing uneven competition for Otobi Ltd. They are price competitive, but they compromise on quality. Consumers, who have budget constraints, are easily attracted to such products and this is eating away Otobis potential market share.

Foreign Threat: Furniture from China and Malaysia, and also Europe are regarded as major threat for Otobi Ltd. Both the countries have abundant factor endowments for being able to produce furniture at competitive prices. European furniture is preferred very much by the upper crust of the society for its elegance and quality. This is the reason why imported furniture has been able to penetrate markets in Bangladesh.

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Background of Export
How, When & Why Export?

In mid 2003, between July and August Otobi Limited started its export journey to India. During that time, the company attended an industrial fair at Kolkata, India. Through this fair, Otobi Ltd. made contacts with a lot of Indian customers who were very interested in the Bangladeshi furniture products. The main idea of the company to attend the industrial fair was to expand their market globally. Otobi Ltd. has been operating in Bangladesh for the past 33 years, and in 2003 it saw the opportunity to go global, which is why the company took the initiative to attend an international industrial fair.
Selecting Export Markets

Otobi Ltd. did not begin searching for their market, because they were focused on exporting to India and it was a part of their plan. The company is currently exporting to the eastern provinces of India such as West Bengal, Shillong, Tripura, and Assam. Otobi Ltd. provides dealership to Indian retailers in those provinces and through them the company is making sales in India. Initially, the company was not in a position to choose dealers because they had to accept any offer that came their way, but 5 years into the export business Otobi Ltd. now chooses carefully whom itll give the dealership contract in India to. Otobi does not have a specific target from a income level perspective. It chooses to market to all furniture and home dcor customers. This makes it a difficult for them as their goods a premium priced and best suited to higher income level customers.

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Intermediaries and Transport Used

The intermediaries used for selling the products into the Indian market are the Indian dealers themselves. As for sending the goods to India, Otobi Ltd. uses special trucks which have been hired for the purpose of exporting the companys furniture. They are like containers in ships, and are very protective and sealed for ensuring the quality of Otobis products. Regionally within Bangladesh, local trucks are used to transport goods to regional outlets, and within Dhaka city Otobi Ltd. has its own pick up van to distribute products from warehouse to showroom.
C&F Agents, Insurance Company & Banks

Otobi Ltd. exports its products to India through the land ports of Bangladesh which goes to include Benapol, Burimari, Akhaora and Shewla. At each land port, there are clearing and forwarding agents from both the Bangladeshi side and the Indian side. These agents check whether all the necessary documents have been fulfilled by the exporter & importer on both borders. The particular C&F agent used by Otobi Ltd. has not been disclosed for the purpose of this report for which it cannot be mentioned. Since Otobi Ltd. is the exporter, the company is not required to It is the importer of the furniture who prepare arrange for any insurance.

arranges for the insurance of imported goods. This is also another reason why Otobi Ltd. could not provide this particular information for this report. All export transactions carried out by Otobi Ltd. as an exporter is handled by AB (Arab-Bangladesh) Bank Ltd. Importers usually send their TT (telephonic transfers) or LC (letters of credit) from their Indian banks to AB Bank Ltd. to process for Otobi. The company usually prefers receiving TT compared to LC because it is a more direct form of payment, and requires much lesser time to process and receive the fund.

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Products of Export

Furniture: Otobi Ltd. initially exported very basic furniture to the Indian market that consisted mainly of chairs and tables. Once they were established in the market they introduced bedroom set, dining room set, and general office furniture. All the products were of economy range because Indians want good quality products at economical prices. Therefore in order to capture the fancy of the Indian market Otobi Ltd. exports cheap, but good quality and modern designed furniture.

Now they are exporting a wide range of multi-purpose furniture all within the economic price range such as a cabinet that serves as a tv stand, a CD rack, a stand for decoratives etc, all of which were to cater to more specific Indian demands.

Their newer product lines such as office furniture, hospital furniture etc are in high demand in the corporate market. Their furniture line has evolved over the years since they commenced their business in India.

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Home Decor: As of 2008, Otobi expanded their product line to include other interior decorations. They first introduced these new products in Bangladesh to observe customers reactions. They started with cushions to complement their home furniture. These were quickly accepted by the Bangladesh market and perceived as stylish and trendy. Due to the similarities between the Bangladeshi and Indian culture Otobi decide to export it to India. The cushions captured the market quite quickly.

To build on the success of the cushions they decided to make more products that could complement their existing product line. They thus started on lamps and candles. They started test marketing these in the first quarter of 2008 in Bangladesh. Although they did not create the same buzz as the cushions, they have nonetheless been deemed a success. Otobi have now started exporting the lamps and candles to India, but on a small scale.

However, Otobis focus on good quality products at economical prices was not enough for the Indian market. Conducting further business in India revealed that the Indian people were not particularly attracted to Otobis products (challenges faced have been included in the report). Thus Otobi altered their product line of home decor so as to capture the illusive Indian market.

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Obstacles Faced in India

The Indian market is very hard to penetrate and government rules and regulations are known not to be too flexible to allow outsiders to enter. The obstacles are:

A very ethnocentric market which does not accept foreign made products. Indians are very patriotic when it comes to the purchase of locally made products which is why Otobi products are not entirely accepted by the Indians.

Otobis largest contender in India is Godrej.

The company produces

furniture and provides the same product line like that of Otobi. India has its own stock of raw materials, and does not require importing, which is why Godrej is able to offer its furniture at competitive prices. Whereas Otobi imports many of its raw materials from Malaysia, the cost of production is slightly higher for Otobi Ltd.

Another major problem with the Indian customers is that they are very biased in believing that the products of Otobi Ltd. are not actually Bangladeshi made. The customers are very critical and are reluctant to believe that Bangladesh is capable of making such high quality furniture.

Moreover, the Indian customers are highly price & design sensitive. They also desire having furniture that has a multi-purpose function.

Competition in India

Local Producers: Indian people multipurpose furniture which are economical and also allows a variety of choice. Indians are very conservative in making any investment decision therefore they are very precise about everything they purchase. As mentioned earlier, in India, Otobis main competitor is Godrej in terms of providing the right kind of furniture to its people.

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Foreign Competition: Otobi also faces stiff competition in India form other companies that are from China, Japan, Taiwan, etc. These are basically the same foes that it competes against in Bangladesh. They answer the Indian markets need through their low priced and multi-purpose products.

Competitive Advantage of Competitors: The competitive advantage of Otobis

competitors home and abroad includes:


Cheaper Furniture A Variety of Designs which are Attractive Multi Purpose Furniture

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SWOT ANALYSIS

Strengths:

It is quite ironic how certain competitive advantages of Otobi Ltds competitors are also its own competitive advantage. They include:

High Quality Furniture using Melamine Boards, and Chairs Product Durability Product Warranty Many Attractive Designs which is quite unconventional for Melamine Board Furniture

The Goodwill of Otobi Ltd.

Otobi Ltds precision for quality is termed as their major asset. The unhindered need to provide its customers with the best product doubled with features and variation, they are still the leading company in the industry in Bangladesh. Using their goodwill, they have been able to gain local customers, who live abroad thus gaining a competitive edge over its rivals.

Weakness: Weaknesses refer to the internal limitation of a company. Despite all its strength there are no shortages of weakness for Otobi Ltd. They are as follows:

Country of origin Price.

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Lack of information for foreign customers. Time management.

Otobis main disadvantage is its image its country of origin carries. Bangladesh is not perceived to producer quality products, which is why Otobi finds it difficult to position itself based on its quality, which unfortunately happens to be its biggest asset in Bangladesh. Otobis uncompromising focus on quality has made their products too expensive for the target market. Combined with the lack of information - such as no website, infrequent advertisement, etc - makes attracting new customers very difficult. At the same time, their poor customer service adds to their woes.

Opportunities: Over the years Otobi has achieved significant success in the market, and the products are being widely accepted. This presents the opportunity to expand their product line.

It has also been seen that Otobi has been generating some buzz in the international market. Private importers from Denmark and England are creating a market for Otobis product through their own businesses. This gives Otobi the opportunity to expand to these countries and perhaps many others.

Threats: Threats for Otobi are no different from other companies conducting business in this industry. They face threats from new competitors who can provide its target market with low price products. China and Malaysian exporters have already taken a huge

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market share from Otobi. Their cost effective manner of producing the products have penetrated the market.

With Otobis new wooden product line it might so happen that the government may impose restrictions upon such furniture, due to its adverse effect on the economy.

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Future Plan

Domestically Otobi Ltd. intends to introduce wood furniture product line. They have established a factory dedicated to producing such products. Some of the wooden furniture is already available retail outlets around Dhaka city, but a full commercial launch in expected in the 2009 Dhaka International Trade Fair (DITF).

Internationally Otobis main aim is to spread its business all over India within the up coming years. Already it has established a showroom in Kolkata, which it will use as a stepping stone to gain access to others parts of India. Once they have captured India, they intend to divert their attention to others markets in Asia. Countries such as Nepal, Indonesia and Bhutan are being seen as potential targets. Extensive surveys are being conducted to get in depth information regarding markets in South Africa, which will be platform for multinational status.

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Recommendations

First and foremost Otobi should be more selective about their target market as it will allow them to position themselves better, especially when they export. It could consider expanding to other home dcor products. This may include chandeliers, lights, etc.

It should also consider offering more variety in its existing product line. Some more innovative designs could easily attract a lot of attention and quickly boost their long term sales while also strengthening their image. Some possible examples are given below:

Titan Table

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Transforming sofa set

Lizard Chair

Kube Table Ying Yang Table

Oval Table

Folding wall

chair

aero ball chair

Tri layer table

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Apollo chairs

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demand in many foreign markets. Finally, Otobis market potential in other foreign countries is limitless and we recommend that they exploit it to the fullest

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Conclusion
Since its inception Otobi has been very successful in the market, both in the furniture, and in the home dcor industry. Despite many shortcomings, the company has done well for itself, and has great potential as a global furniture and home dcor company. There is however still a lot of room for improvement in its present condition.

Bibliography
1. Cateora, Phillip. R and Graham, John. L, International Marketing, 12th

Edition 2. Internet Websites:


http://en.wikipedia.org/wiki/Nitun_Kundu#Furniture_Pioneer http://www.evistatech.com.au/otobi1/home.asp

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http://www.probenewsmagazine.com/index.php?

index=2&contentId=4239

http://mocoloco.com http://weburbanist.com/

Support from the Bangladeshi Government

There is no particular assistance that Otobi Ltd. receives from the Bangladeshi Government. The benefit that the company reaps is due to the different trade agreements for SAARC countries such as SAFTA (South Asian Free Trade Agreement) and SAPTA (South Asian Preferential Trade Agreement). This allows the exporter (Otobi Ltd.) to enjoy certain VAT exemptions and the importer (Indian Dealers) to benefit from tax rebates. Other than that, there is no help from the government of Bangladesh that Otobi Ltd. is capable of acquiring benefit.