FOOTWEAR INDUSTRY

OF BANGLADESH

BIG PROJECT
TEAM MEMBERS
Laboni Aktar Tarana (14, 52D)
Md. Touhidur Rahman(39, 52D)
Anika Rahman (53, 52D)
Md. Shakil Zaman (21, 52D)
Md Rezaul Akhlak (11, 52D)
Md. Golam Sarowar (07,52D)
Noman Sabid (42,52D
Ahmmed Imtiaj (45, 52D)
1 Industry
Overveiw
 Market Size of
Footwear Sector
Engineering
Products Footwear

Footwear sector:
2% 1%

Agro Products
Leather
1%
2%
Others
9%
1%
Jute
5% Woven
37%
Frozen Food
3%

Knit
40%

Source: Lightcastle, 2014

$550 million
Growth

Female Customer
Male Customers, Childrens

Profitable Sector
After RMG, Footwear Positions
 Leather Vs Non Leather

Local market Global market

70 80
60 70
60
50
50
40
40
30 30
20 20
10 10
0 0
Leather Non Leather Leather Non Leather
 Japan

EU
Bangladesh
Countries

USA

Australia

Export to Foreign Countries

Market Share,
2014
BATA
22%
BATA is
the Market Leader

APEX
6%

Others
72%
Source: BRAC EPL Investment
2 Growth
Trajectory
GLOBAL FOOTWEAR
DEMAND (USD Bn)
215
211
210
207

205 203 Projected @1.9% CAGR

200
200
196
195
192
189
190
185
185

180

175

170
2011 2012 2013 2014 2015 2016 2017 2018

Source: Transparency Market Research on Footwear

 Growth of Footwear
Export ( USD mn)

550

Increasing
419
Growth
336
298

204
183
159
123
95

2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Lightcastle, 2014

Strategic Group Mapping
3 Value Chain
Analysis
Profiles of Large, Medium & Small Manufactures

Small Medium Large

Business Subcontracting, Subcontracting & Mostly own
Model Low quality own
manufacturer
Types of Local Local & Imported Imported
Machines Used
Types of Labour Unskilled & Semi Unskilled & Semi Trained
skilled skilled
Channels & Sold to wholesaler Own wholesale Use own channel
Distribution shop & distribution

Export Not all Sometimes Majority exports

fromo this
segment
 Value Chain
Dynamics
Raw material and Manufacturing Marketing, Sales Customers
Leather Supply and Distribution

- Domestic market
- Proper distribution size is growing
-2 types: Leather - Good factory
channel for big - Demanded by
processing & condition
players foreign customers
assembling - Qualified workers
- SMEs sells to - Mostly B2C: low &
- Fluctuations in raw vs. Less qualified
ditributors middle income for
material price affecst - Innovation vs. Les
- Promotions: Ad, SMEs
small scale shoes the innovation
trade fair, warranty - Big players: Upper
most
to middle class
 Value Chain

Additive Machine
Leather imported from
importers
Input Suppliers Importer
(Design/color) Germany, China

SMEs Own factories

Manufacturers (own/rented Own Assembling
Centers (Big players)
factory)

Principal Company owned

Marketing Wholesaler/ Independent showrooms,
Retailer Distributors Sales centers

Buyers B2C:Household B2B:

Direct Export
(Domestic) (Domestic)
4 Tripple Triangle
Framework
Internal Factors
Capabilities
Culture Capital Capabilities of the
Very fast growing Depends upon firm decides which
their market strategy the firm
companies follows.

Not environment Bank loans are not Not capable of

conscious much available for exporting Footwear to
SMEs cover a big portion of
world market
the bigger the Except the big
company, the bigger players, others not
the capital capable of large scale
export
 Middle Factors
Collaborators
Competitors Large parts are
Customers Fierce
Vary depending located in the
competition country
on the type of the
company Presence of local Roles begin in the
and global very early stage of
Segmented based competitors
on gender and operations
income level and Competitor are
age Vertical
also segmented in integration tends to
terms of their target reduce the
market dependence
 External Factors
International
Govt. Factors Factors
Technology China is going away
Rising export of
footwear has made the from Footwear export
Except Bata, no government interested business
other companies in this sector
are using the latest Negative growth rate
of Romania and Brazil
machineries Actively trying to stop
will help Bangladesh to
environmental pollution
capture more market
This creates a by the tanneries
from US and Germany.
negative impact on
Tannery shifting plan Labor cost is lower
environment is changing the than average labor cost
dynamics of the sector of other countries
5 Porters Diamond
Framework
Nations Competitive Advantage
6 Factors in Porters Diamond
Firm Strategy
and Rivalry
SMEs Large Companies

Exposed to international Constant growth in annual

competition
More flexible
lack investment capability
Often does contract work for
large companies
Intense rivalry among the SMEs
to gain local market
turnover, employability and
profitability
Focused around employing
cheap labor and using low cost
resources
Aside from Bata, all the other
top players are export oriented
Rivalry is high between Bata
and Apex, but the rest dont
Factor Conditions

Availability of Raw materials

Cheap manpower

Cost of production continues to be a challenge

Interrupted electricity supply is a huge burden

Sector requires high investments into equipment, highly qualified

professionals and qualified workers
Demand
Conditions
Market demand of footwear is rising both locally and globally

Rise of dispensable income has created a huge demand for high quality
products

Firms are expected to innovate new designs at a rapid pace

Most local big companies are focused on international market

Less concerned with setting own trends

Local market demand remains unfulfilled

Related & Supporting
Industries

Advantage comes from existing basic industries (leather and soles)

Production of leather is the most important support industry

Tannery industry is very competitive

Close proximity of the tanneries create national advantage

Lack of local machineries manufacturer is an obstacle

Big players have robust backward linkage

6 SWOT Analysis
SWOT ANALYSIS
(1/2)
STRENGTH

Growing footwear exports

Lower wage compared to competitors
Robust backward linkage
Government Incentive
Established International Trading
No import duty on capital machinery for export oriented industry
100% duty free footwear export facility to Japan

WEAKNESS

Lack of skilled designers for product design and development

No institutional support available for the industry (Such as FDDI in India)
Lack of QC system, reliance on foreign certification with penalized lead time
High rate of interest on term loan
SWOT ANALYSIS
2/2
OPPORTUNITY Threats

Asian Market to drive India might stop exporting

demand due to increasing cattle
economic growth Rise of Vietnam in the
Local productions of global footwear sector
sandals and slippers are in Political Instability
high demand in Middle-
East and Southern Africa
China shifting focus from
footwear exporting
BIG
CONCEPT
GAP ANALYSIS
2 Big Questions
Where we are
now?

Market size of footwear sector : 1%

Increasing growth in export
Bata is the market leader in the domestic
Positive market
Sides Apex is the leader in export
Apex is the largest leather shoe
manufacturer
Low labor cost in Bangladesh over China
Where we are
now?

Lack of training facilites for SME

footwears
High Rent
Problems Low innovation for SMEs
Limited leather made accessories
Due to tanneris in Hajaribag, wastes are
dumped into Burganga River
Dependent on Indias Leather
 Where we want to
go?

Market Diversification
Increased Market Share
Increased Export
Jute/cloth made products
Identified Gaps in the
footwear Sector

Limited Leather
01 Made Accessories

Underutilization
02 of SMEs

Lack of training for

03 SME workers

Idenfiying the
04 substitute of
Leather
Framework For Overcoming Gap Analysis

Outcome

Capitalizing
SMES
Leather made
- Product
Product line
Innovation
exention:
-Wrist watch - Jute/Cloth
Training
-Bags made
workers Products
-Jackets

Resource
Innovation Sector Development
Development
Want big impact?

See bigger picture.

Recommendations (1) Increased leather made
products
(2) Taking care of SME
sector
(3) Financial incentives for
SMEs
(4) Supporting Market
Diversification
(5) Shift from hazaribag to
Savar
THANK YOU!