Академический Документы
Профессиональный Документы
Культура Документы
Prepared By
Nazmus Sakib Plabon
1120281030
1120375030
1120155030
1120420030
1120089030
1120756030
Prepared For
Md. Shahed Alam
Lecturer
Department of Management
School of Business
North South University
Executive Summary
This Report mainly deals with the Leather Industry of the whole world. We have first found out
the Global industry structure and found out that the womens wear is the biggest percentage and
also USA is the biggest in terms of industry value then comes China and Russia. Also the Global
financial condition of the leather industry is increasing but the revenue growth is decreasing, still
the industry is evolving in many countries. Then we found out some of the global issues
including the environmental issues for the leather industry.
Then in the next part we wrote about Bangladeshi leather industry in the global context and
found out that around 95% of the leather products produced in Bangladesh are exported in
foreign countries. Some export issues and also some problems the industry is facing in this
country is also mentioned. Finally we have done the industry analysis- Porters Five Forces
along with SWOT analysis and then the industry life cycle and ended with some
recommendation for improving the sector.
Table of Contents
Executive Summary
Introduction
5-7
8-10
11-13
Analysis
14-17
Conclusion
18
Introduction
The Government of Bangladesh has identified the leather sector as one with considerable growth
and investment potential ranked fifth in the export earning sector. Currently Bangladesh produces and
exports quality bovine and ovine, caprine (buffalo and cow; sheep and goat) leathers that have a good
international reputation for fine textured skins. However, the entire leather sector meets only 0.5% of the
worlds leather trade worth US$75 billion. There are about 113 tanneries in Bangladesh that produce 180
million square feet of hides and skins per year. In addition there are about 30 modern shoe manufacturing
plants engaged in the production of high-quality footwear, with over 2500 smaller footwear
manufacturers also present in the sector. There are around 100 small-to-medium leather goods
manufacturers, and a small number of niche larger manufacturers. The sector directly employs
approximately 558, 000 people. Most of the tanneries do not have proper effluent plants and generate 20,
000m3 tannery effluent and 232 tones solid waste per day. Tannery liquid and solid wastes are a potential
pollutant but also have a potential value. Specific technologies to convert wastes are required. These vary
from crude and simple to highly sophisticated and complex.
A proposed new leather park is expected to bring a clear transformation to the leather industry with
marked increase in production, product diversification and new product lines with increased sustainability
of the sector. Sustainable and cleaner production will be a key issue for the development without placing
burdens on the environment.
The leather industry in Bangladesh is well established and is an important foreign exchange earner.
Leather production is based on the use of indigenous cowhides and goatskins. Two opportunities for
increasing export value of the leather industry are: A) Increasing value addition of the exported products
through exporting only finished leather and leather products; and B) importing raw hides or skins if
necessary, and converting these to leather and leather products to utilize the production capacity as much
as possible.
Percentage of sales
39%
25%
20%
9%
4%
3%
Accessories
Hosiery
4%
3%
Childrenswear
9%
Foot wear
20%
Womenswear
39%
Menswear
25%
The top three market account for 40% of total global sales. These three markets are USA, China
and Russia. The total value of market size and per capita spending:
Country
USA
China
Russia
$67 billion
$52 billion
$21 billion
$212
$38
$145
2010
2011
2012
2013
2014
118.5
122.1
125.3
125.9
126.9
Revenue
Revenue in Dollar
$128.00
$126.00
$124.00
$122.00
$120.00
$118.00
$116.00
$114.00
2010
2011
2012
2013
2014
Revenue growth trend: Though the total value of the industry and revenue increased over the
last five years, the revenue growth rate slowed down than before.
Revenue Growth rate
2010
2011
2012
2013
2014
4.1%
3%
2.6%
0.5%
0.8%
Industry Concentration:
The industry is considered to have a low concentration level. The top five players in the industry
is account for around 12% of total industry revenue. But in future the level of industry
concentration is expected to increase. In the next five years as companies will merge or
consolidate operations the industry concentration level will increase.
2011
2012
2013
2014
Units (Million)
2,768
2,706
2,544
2,381
1,172
898
12,469
Percentage of total
22.2%
21.7%
20.4%
19.1%
9.4%
7.2%
100
In terms of global per capita consumption the top three markets are America (3.9), Europe (3.5),
and Asia (1.5).
Top ten Companies with their sales (2014):
Company
Nike (USA)
Adidas (Germany)
Reebok (UK)
Puma (Germany)
Converse (USA)
New Balance (USA)
Fila (Italy)
K-Swiss (Switzerland)
Asics (Japan)
Li-Ning (china)
Sales (million)
27.79
14.53
11.79
9.97
6.75
4.37
4.09
3.67
2.46
2.33
Technology Developments
The quality of finished leather depends on a combination of the original properties in the natural hide, and
the chemical and physical components added during the manufacturing process. New technologies are
being invented every year that make leather more versatile, more colorful and more appealing as an
alternative to woven fabrics and plastic.
Trending new: Special chemical treatments can enhance the fireproof qualities of leather to
supplement its natural heat resistance properties. This increases the safety of using leather in
applications where fire resistance is important like movie theatres, salons, cars, aero planes and
upholstery. Fireproof leather can even be used for common products like potholders that adhere
to any surface for a better grip.
A rainbow of choices: Purple leather? Advancements in the finishing processes make it possible
to produce leather in any color you can imagine in addition to traditional shades of brown and
black. Many internationally recognized designers are choosing leather to replace synthetic and
dyed fabrics in stunning new designs. From futuristic chic to natural glamour, leather is fast
becoming the first choice for apparel thats soft, stunning and sexy. Even protective clothing
made from leather has become stylish, with a fit and finish thats as appropriate on a Parisian
fashion runway as an airport runway.
Designers are also using leather for their latest products, working closely with tanneries to
develop leather with unique new properties like water resistance, not to mention a rainbow of
colors, textures and finishes that look and feel right in any room.
A new kick: When it comes to sports equipment, nothing can match the strength, abrasion
resistance, durability and flexibility of leather for footballs, equestrian harnesses, sport gloves,
baseball mitts and the safety equipment worn by athletes everywhere from the jogging track to
the ski slopes. Its no accident that motorcycle enthusiasts rely on leather for their
outerwearits the ultimate in protection from the elements, not to mention the asphalt.
Just like mom: When babies are born, the infants are often laid on a blanket made
ofleather! The soft, warm qualities of leather are far superior to other materials for the critical
moment when the child is first separated from its mother. This particular kind of leather must be
baby-proof through careful selection and processing to make it soft, safe and comfortable.
New Markets
The African leather sector is bursting with potential, but there is a wide gap between resources and
production. ITC's development program has galvanized the sector. The numbers tell the story: African
countries have 15% of the world's cattle and 25% of its sheep and goats, but produce only 14.9% of
global output of hides and skins - 8% of bovine hides and 14% of sheep and goat skins. Exports of hides
and skins have fallen in recent years to below 4%, yet leather is ranked very high as an export commodity
in several African countries. The countries' tanning capacity has fallen from 9.2% to 6.8%. At the same
time, the livestock population has jumped about 25% over the last decade, faster than the world trend.
The numbers tell the story: African countries have 15% of the world's cattle and 25% of its sheep and
goats, but produce only 14.9% of global output of hides and skins - 8% of bovine hides and 14% of sheep
and goat skins. Exports of hides and skins have fallen in recent years to below 4%, yet leather is ranked
very high as an export commodity in several African countries. The countries' tanning capacity has fallen
from 9.2% to 6.8%. At the same time, the livestock population has jumped about 25% over the last
decade, faster than the world trend.
Regulatory Issues
The personal leather goods and footwear manufacturing industries are regarded as environmentally
friendly ones. Very little problem waste is generated in the manufacture of products. Many thermoplastic
materials are recycled including the newer developments in toe puff and counter materials. Solvents are
used in sprays and cement attaching. However these are being replaced by water based finishes and
adhesives. The result of this clean technology is that there are few extra regulations imposed on the
industry.
The tanning industry produces large amount of chemical and waste which is very bad for environment
and in some countrys regulations do not allow this. Regulation from government are very strict under
this circumstances.
PETA (people for the ethical treatment of animals) have lobbied hard in the leather goods industry to the
extent that some buyers refuse to order shoes made with Indian leather particularly in Germany. For some
years the EU has been pushing for an eco-label to be used on all footwear signifying its ethical and nonpolluting origins. This is a voluntary code at present.
Don't buy leather goods from Bangladesh. Save River Buriganga from Hazaribagh Tannerieswas the
core of the slogans by Human Right Watch (HRW)--the international right organization--which organized
the campaign alleged that leather tanneries in Dhaka city have been releasing toxic effluent into a densely
populated neighborhood for decades. It urged foreign buyers at the fair not to buy products from
companies that don't abide by labor and environmental laws meant to protect people. The
environmentalists still hold the same position on Bangladesh leader products.
10
Amid the 1990s, the export market for Bangladeshi leather developed at a normal of 10 - 15% for
every annum. The normal yearly fares represented $225 million. Fine grain leather of Bangladesh
appreciates particular request in Western Europe and Japan. Low wage level and the boycott on
trading wet blue leather helped the business get another push in the nation. Natural concerns
emerging out of the high convergence of creation units in a little range of the more seasoned piece
of Dhaka city are being tended to with arrangements for their movement outside the city.
Around 40% of the supply of hide and leather originates from animals butchered during the yearly
Muslim celebration of eid-ul-Azha. Notwithstanding every day utilization of meat, celebrations,
Muslim weddings, and different festivals yield a significant supply of hide and leather. The tanning
business got a major support taking after the administration choice to advance more esteem
expansion in fares. The introduced limit for hull leather creation expanded. At present, it is twofold
the local supply of crude shroud and leather. Speculations are additionally made in putting in new
completing limit. The patterns urge more tanneries to deliver completed leather on a business
premise.
The producers accept Bangladesh's yearly $550-million footwear industry may develop to a $15billion division inside of a couple of years, if the open door is seized. Leather sector representatives
say outside business visionaries are occupied with Bangladesh's footwear, because of the
accessibility of crude conceal, handling foundation, low work expense, and a large number of
government motivators including obligation free machinery imports. At least 51 foreign
organizations had effectively communicated enthusiasm for building up joint-venture footwear
units in Bangladesh.
11
As indicated by the Export Promotion Bureau (EPB), Bangladesh earned $ 1.29 billion from fares
of leather, leather products and footwear in the 2013-14 fiscal. The sum represents 4.2 percent of
the nation's aggregate exports. Footwear alone gotten $550 million in outside trade of the leather
part's aggregate fare earnings. In the 2012-13 FY, the footwear division's fare income remained at
$419.3 million. Bangladesh has kept up the development in the fare of leather and leather
merchandise in the current 2014-15 FY, too. In the initial eight months of the FY, the nation posted
a 7 percent development in leather products sends out and 22.16 percent in footwear trades.
12
exporter status. In difference, in Bangladesh nearby deals are saddled at such high rates of
obligation which makes the cost too high for the mass market.
9) Disparity in the import strategy where the import obligation on completed shoes and on
shoe parts and embellishments is just about the same, in this way there is no point of
preference for producers. Today the nearby shoe industry is in effect extremely undermined
by shabby imports that are being carried and dumped from neighboring nations, for
example, Myanmar and India. For this many of the manufacturers are losing interest in the
leather industry.
10) No familiarity with global quality benchmarks, for example, Eco- labeling and packaging,
occupational standards and environmental management requirements and their growing
importance to foreign buyers.
13
Intensity
Competitive rivalry
High
Medium
Medium
Entry barriers
High
High
The structure of the industry is oligopoly, which means there are numerous and equally
balanced competitors in producing luxury leather goods .Especially some famous big
companies which have their brand equity.
There have already exist many good brands which have long history and impressive brand
stories behind it, such like Louis Vuitton,Chanel,Gucci,Dior.etc. Which have already
occupied a large amount of market share and have good brand effect among customers. So it
can be very hard to get the market share for the participants of the industry.
Leather products of differentiation counts a lot. The target customers of the industry is the
wealthiest people who purchase higher buying experience so the goods need to be
distinguished enough which influence their view towards the brand.
High exit barriers. Emotional barriers some brands may not break even but continue operating
due to a small number of loyal customers. Also the specialized supply chain components to
produce leather goods are hard to sell or cant be easy to put it into other usage
The bargaining power can be week, when the target customers have high brand loyalty and
they tend to have high emotional switching costs, which decide their consuming behaviors
towards one brand.
The buyers of the industry has low concentration, and the bargaining power of the buyers is
week.
Because of the products of the luxury industry are unique designed and most of them are done
in-house. So, the buyer has poor information about demand, actual market prices and even
supplier cost so that the bargaining power is week.
But the bargaining power also can be strong when the target customers focus on the
14
luxury itself, which means they just care about whether the products are luxury or not .And
there are a lot of other alternatives like cars, watches etc. for them to choose from besides
luxury leather products ,which also show the public their wealth and fame.
-Bargaining power of suppliers
The bargaining power of suppliers is strong when the resources are special and only from
some specific areas. The leather of LV is resourced from the cattle from the northern Europe
area.
The bargaining power of suppliers is week when the resources are general and there are a lot
of supplies to provide the material.
-Entrance barriers
The barriers of the entrances are strong, there already exist top brands in the industry.
Hard to get the market share for new entrants, because of many competitors.
Also the large amount of capital is needed enter the industry to make up with the brand equity.
More and more exclusive access to suppliers and hard to get a market share.
The target customers have many other choices to pursue the luxury products, the treat can be
very strong.
High
High
Medium
High
Medium
15
16
High Growth
Policy
initiatives
taken
by
the
Threats
Government
Continuous
emphasis
unorganised
on
product
Opportunities
are family-owned)
borrowing
products
High
competition
from
East
Weaknesses
From the above analysis and the information provided, it is clear that the industry is in growth
stage. Form the SWOT analysis, we saw that there is still a threat of new entrants and only a
growth market has the most capability to get threats of new entrants. We see every now and then
that new companies are coming to the markets with their leather goods and footwears. Not only
the big brands but also some small and medium size non-brand companies are also coming to the
markets, especially the tanneries are opening their own leather goods outlets just to enter into the
leather goods and footwear market directly from the raw tanned leather market.
17
Conclusion
Developed countries are treating Bangladeshs leather sector as a secure for investment.
However, the sector has a rather constrained demand structure in the domestic market due to the limited
national purchasing power. Nevertheless, industry insiders are expecting a growth in the domestic market
in consideration of the fact that approximately 10% of Bangladeshs total population (around 15 million)
is estimated to have an income level comparable to that of the developed countries. Hence, there appears
to be a large unexplored domestic market for footwear and other leather products for Bangladesh with an
estimated demand for 30 million pairs per year. The footwear sub-sector of Bangladesh earned revenues
in excess of US$250 million in 2010-2011. The European Union (EU) is the biggest destination for
footwear exports with a 60% share, followed by Japan with 30%, and the rest of the world accounting for
10%. Bangladesh has only a 1% share of the world footwear market.
There are about 49, 300 tons of solid waste generated every year from tanneries in Bangladesh. The
government should try to facilitate growth in industries which can use these wastes to make other value
added products. A by-product manufacturing unit (chrome and protein recovery) and energy generation
could be useful options.
Bangladeshi leather products will have no access to developed countries, including those of European
Union if the government fails to set up the CETP by June 2014. The industry in Bangladesh as a whole
faces considerable concerns with regard to end-of-life, recycling and re-use of leather and leather products.
To make progress, the Government is keen to relocate tanneries from Hazaribagh to Savar, this gives the
unique opportunity to adopt sustainable practice in a suitable environment.
18