Renovation Strategy of Jute Industry

in Bangladesh
Case study: Amana Jute Fibrous Ltd

W650: Business Strategy

Submitted to:

Dr. A. K. M. Saiful Majid

Professor
IBA, University of Dhaka

Prepared by:

Md. Golam Mostafa

ID: ZR1501011
21st Batch, EMBA

Institute of Business Administration

University of Dhaka

May 2019
 March 29, 2014

Dr. A. K. M. Saiful Majid

Professor, Institute of Business Administration
University of Dhaka

Dear Sir,

Re: Submission of Report.

With due respect it is our pleasure to present the term paper entitled ‘‘Renovation Strategy of Jute
Industry In Bangladesh” and subtitle A Case Study and Analysis of Aman Jute Fibrous Limited as part
of our course requirement. This report contains really some interesting features and scenario of the
current situation of the Jute industry in Bangladesh.

The report mainly revolves around the SWOT, PESTEL & Porter’s Five Force Model Analysis of Jute
Industry in Bangladesh and internal Operations Management of “Aman Jute Fibrous Limited”. These
analyses helped us to identify several external and internal factors that affect the overall business
strategy. And in respect to “Aman Jute Fibrous Limited.”

I would like to take this opportunity to thank you for helping us immensely in every possible way to get
this report prepared. However, if any explaining is required, I would be available to answer any question
for clarification.

Sincerely Yours

Md. Golam Mostafa

ID: ZR1501011
EMBA, Batch 21st
IBA, University of Dhaka
Table of Contents

Chapter 1
Introduction

1. Introduction………………………………………………………………………………………1

1.1. Brief History of Jute Industry in Bangladesh ………………………………………….1

1.2. Overview Aman Group Limited ……………………………………………………….2
1.3. Position of Aman Jute Fibrous Limited for case study and strategy Analysis................2

Chapter 2
Objectives

2.1 Vision, Mission and Objectives…………………………………………………………..3

2.1. Methodology......................................................................................................................3
2.2. Data Sources: ....................................................................................................................3
2.3. Objective: ..........................................................................................................................3
2.4. Scope Limitations of the Proceedings: ..............................................................................3

Chapter 3
Situational Analysis

3.1. Strategic Analysis of Aman Jute Fibrous Limited…………..............................................4

3.1. PESTEL Analysis: .............................................................................................................4

3.2. Porter’s Five Forces Analysis ............................................................................................7
3.3. SWOT Analysis…………………………………………………………………………..7

3.4.1 Strategy Group Analysis……………………………………………………………..…11

3.4.2. Business Model of Aman Jute Fibrous Limited……………………………………..…13

Chapter 5
Diversification
5.1. Diversifications and Corporate Strategy……………………………….......……......……14
5.2. Ethical Practices…………………………………………………..………………………15

Chapter 6
Managing Internal Operations…………………………………………………………………….…17
6.1.1. Lean Management- 7-wastage
6.1.2. Process standardization- 7Quality tools
6.1.3. Total Productive Maintenance (TPM)
6.1.4. Worker skill development

7. Conclusion......................................................................................................................................22.

8. References ...................................................................................................................................23
 List of Figures:

Figure 1 : Macro environment forces affecting a firm (PESTEL forces)………………4

Figure 2 : GDP growth of Bangladesh……………………………5
Figure 3 : Inflation in Bangladesh economy…………………..….6
Figure 4 : Exchange rates of Taka in terms of USD……………....6
Table 2 : Daily Production Capacity of Top five jute mills in Bangladesh….10
Table 3 : Product mix costing …………………………………………….…14
.
 Executive Summary:

Aman Jute Fibrous Limited, A sister concern of Aman Group Limited, was established in 2014. The
company manufactures Jute yarn, jute cloth and jute Bag. The Company exports all finished goods in
India, Vietnam, and in African Agricultural countries.

The PESTEL analysis conducted on the Jute industry reveals that irrespective of some minor
complications the political, economic, social, technological, environmental and legal condition for this
industry is favorable. And these facts are supporting the growth of this industry.

According to the porter's five forces analysis, the threat of substitute products, the threat of new entrants
and the bargaining power of both the buyers & suppliers are more. But "Aman Jute Fibrous limited." is
facing a low risk rivalry from largest mills in the Bangladesh since it is exporting all goods in several
countries dealing multiple buyers.

In addition, From SWOT analysis it was observed that, “Aman Jute Fibrous limited." is holding a good
position in the market. But it has some weaknesses that may prove fatal in the future. But if the company
utilizes the opportunities and remain aware of the potential threat, it will not just survive, it can become
one of the market leaders in the industry.

Conversely, the major weakness of Amana Jute fibrous is its Operational inefficiency, shortage of capital
for purchasing raw material during jute harvesting from June –August. Another weakness is its old
version machineries and weekly wages payment system which was implemented during British period in
Jute industries in Indian Sub-continent.

However, to enhance the productivity Management of Aman Jute Fibrous need to take the initiatives of
launching productivity program and upgrade the machinery, and has to set goal to achieve objectives in
2020.

Moreover, to capture international market and to increase turnover the company management decided to
diversify its product lines since government has increased the promotion on export values to boost the
diversified jute products in the international market and company is taking the advantages of government
initiatives.

Finally, the findings of study and analysis of Aman Jute fibrous revealed Company’s corporate strategies
to build a sustainable business, and the spirit of corporate initiatives are cascading down to bottom of
pyramid.
i
 1

Chapter 1
1. Introduction
1.1 Brief History of Jute Industry in Bangladesh

Jute is a natural fibre popularly known as the golden fibre. It is one of the cheapest and the strongest of
all natural fibers and considered as fibre of the future. Jute is second only to cotton in world's production
of textile fibers. India, Bangladesh, China and Thailand are the leading producers of Jute. It is also
produced in southwest Asia and Brazil. The jute fibre is also known as Pat, kosta, Nalita, Bimli or Mesta
(kenaf).
Jute, as a natural fibre, has many inherent advantages like lustier, high tensile strength, low extensibility,
moderate heat and fire resistance and long staple lengths. It is a biodegradable and eco-friendly. It has
many advantages over synthetics and protects the environment and maintains the ecological balance.

Jute is not only a major textile fibre but also a raw material for nontraditional and value added non-textile
products. Jute is used extensively in the manufacture of different types of traditional packaging fabrics,
manufacturing Hessian, sacking, carpet backing, mats, bags, tarpaulins, ropes and twines.

Recently jute fibers are used in a wide range of diversified products: decorative fabrics, chic-saris, salwar
kamizes, soft luggage's, footwear, greeting cards, molded door panels and other innumerable useful
consumer products. Supported by several technological developments today jute can be used to replace
expensive fibers and scare forest materials.

The importance of the jute sector to the Bangladesh economy, in particular, cannot be over-stated, it is a
major cash crop for over three million small farm households, the largest industry, producing about one-
third of manufacturing output, and the largest agricultural export commodity in Bangladesh. The
livelihood of about 25 million people (almost one - fifth of the total population) is dependent on jute -
related activities in agriculture, domestic marketing, manufacturing and trade.

Jute, as a renewable natural fiber, is also bio- degradable and environmentally friendly, it is one of the
few crops, which can be grown in the monsoon season, and can be rotated with rice to restore the soil
fertility and structure. The leaves of jute plants enrich the fertility of the soil for sustained agriculture,
and have good nutrition value as vegetables. Use of jute sticks as fuel and fencing material as substitute
for wood prevents deforestation. Therefore, the increased global concern for the environment, the future
prospects for jute remains high.

Lest we forget, the jute industry was the life blood of our economy for several decades and continues to
be one of the mainstays of our rural economy even today. About 15 million farmers are involved in
growing this cash crop and several million more of our population, perhaps an equal number, are involved
with its processing, transportation, conversion, etc. In order to understand the current state of affairs in
the industry, one must look into the background of the jute industry and the events that took place over
the last several decades.

For brief history of Jute industry, please visit: http://www.bjmc.gov.bd

1.2 Company Profile:

In olden times dating back to late sixties of the last century during Pakistan period the ancestors of the
present Directors of the Group started trading & contractual business on a small scale at their native district
Rajshahi situated at the northern part of Bangladesh. After the emergence of Bangladesh the businesses
flourished a little under the banner of Aman Trading Corporation. But it was in the late 1980s that the
businesses in trading through importing various consumer items and their marketing started witnessing a
 2

steady growth in the business. At some point in the mid-1980s the Group think tank felt that mere trading
business and earning wealth through that activity may bring prosperity to individuals of the family only.
But as a well-placed family in the society the social obligation to the poor rural mass for doing something
for their economic upliftment was pricking their conscience. This greatly influenced to think about
ventures where investment can generate employment for the rural mass population. This led to
establishment of cold storages in the northern Bangladesh. This further continued with the establishment
of a cement industry. Later in 2014 the company started Animal Feed Manufacturing and Ready Made
Garments and Jute Mill to expedited business growth. The Group owned Aman Economic Zone to set up
14 industries to employment 40,000 people.

Now, total turnover of Aman group is 40 million USD per month

1.3. Aman Jute Fibrous Limited at a glance:

Name of the Company : Aman Jute Fibrous Limited

Address : Narikelbaria, Poba, Rajshahi.
Product : Sack, Hessian & Jute Twine
Year of Establishment : 2013
Year of Commercial Production : 2015
Total Area : 50,400 Sqr Mtr.
Total Covered Area : 27,882 Sqr Mtr.
Total Manpower : 3,000 nos.
Production Capacity : 60 MT/day, 15000 MT/year
 3

Chapter 2
2. Methodology:
2.1. Data Sources:
A combination of both primary and secondary was pursued to conduct the aforementioned analysis.
Primary data was mostly extracted from answers of questionnaire surveys with various personnel
from Brothers Furniture Ltd. Secondary data was extracted from sources such as- reputed dailies (The
Daily Star, New Age, Dhaka Tribune, The Financial Express, Prothom Alo, Bangladesh export
Promotion bureau, Bangladesh Bureau of Statistics, and other statistical figures available from
previously published credible market researches available on the web.

Company Vision and Mission Statement:

‘’Vision of Aman Group: "To be a leader in fulfilling Country's basic needs through industrialization with
total quality"
Mission Statement: "Our mission is to establish labor intensive industries blending the latest
technologies upholding ownership by the employees along with conservation of environment with
precise commitment to the society and contribute substantially to GDP through sustainable growth"

2.2. Objective:
Analysis of Jute Industries by strategic tools and Set internal operational objectives to achieve for
competing in the international market.

 Situation analysis of Jute Industry in Bangladesh and find the prospect and future of Aman Jute
Fibrous limited using broadly accepted analytical tools such as -

 PESTEL Analysis
 Porter's Five Forces Analysis
 SWOT Analysis

 Managing internal operations and set target for operational excellence of Aman Jute Fibrous Ltd.

 Increase efficiency to 75% from current efficiency 65% by 2020.

 Increase yearly turnover to 8 million USD from present turnover 5.6 million USD

2.3. Scope:
This strategic analysis task given to us the following opportunities:

 To get a brief overview of the Jute industry in Bangladesh.

 To identify the external and internal factors of macro and micro environment that has effect on a
Jute Industry.
 To make a qualitative evaluation of AJFL’s strategic position in jute sector.
 To identify the internal and external factors that are favorable and unfavorable to achieve the
stated operational objectives of “Aman Jute Fibrous Limited”.

2.4. Limitations of the Proceedings:

Limitations that were confronted while preparing this report are as following:
 Inadequate primary data due to improper response of personnel of the concerned
organization
 Insufficient source of secondary data since there is little studies conducted on Jute industries
 Absent of explicit legislative statements regarding various facts in various legal acts
 4

Chapter 3
1. Strategic Analysis of Jute Industry in Bangladesh

3.1. PESTEL Analysis:

PESTEL analysis is a simple and effective tool used for situation analysis to identify the key external
(macro environment level) forces that might affect an organization. These forces can create both
opportunities and threats for an organization. Therefore, the aim of doing PESTEL analysis is to:

 Find out the current external factors affecting an organization

 Identify the external factors that may change in the future
 To exploit the changes (opportunities) or defend against them (threats) better
than competitors would do.

Figure 1: Macro environment forces affecting a firm (PESTEL forces)

Macro
Environment
Political

Industry Economic
Industry
Firm Scio- cultural
Legal

Ethical
Demographic

Environmental
Technological

PESTEL analysis of Jute industry of Bangladesh gave us the following proceedings:

The Jute industry grew out of the industrial revolution in the 18th Century as mass production of clothing
became a majority industry. Until the economic liberalization of Bangladesh economy, the Bangladesh
Jute industry was primarily unorganized industry. The opening up of Bangladesh economy post 1990s led
to a stunning growth of this industry. But now Industry has influencing by many factors as political factors,
economical factors, social factors, technical factors, legal factors, and environment factors. Here we will
describe all those factors affected to Jute Industry.

The Working Group on Textiles & Jute Industry for the 11th Five Year Plan (2007-2012) has studied the
major problems being faced by the Jute industry.

3.1.1. POLITICAL FACTORS

The management of business enterprises and their policies are considerably influenced by the existing
political systems. And Bangladesh is a democratic country, there are probably problem of stability in
 5

politics. The reservation of production for very small companies that was imposed with an intention to
help out small scale companies across the country, led substantial fragmentation that distorted the
competitiveness of industry. However, most of the sectors now have been de-reserved, and major
entrepreneurs and corporate are putting-in huge amount of money in establishing big facilities or in
expansion of their existing plants.

Secondly, the foreign investment was kept out of Jute production and some motivating step taken by the
government. But now the Bangladesh government has introducing measures such as the national
technology up gradation fund and removing the differential taxation scheme which discriminated against
large units.

Terrorism and political unrest in the Middle East badly affected the international market demand of Jute
products because 35% Bangladeshi Jute products are exported in the Middle East.

As India is the second largest importer of Bangladeshi jute products (17.5% of total exports), anti-dumping
duty imposed by Indian Govt. on Bangladesh Jute products marked another menace on jute sectors of
Bangladesh.

Considering overall political situations, it is difficult to boost jute sector in Bangladesh.

3.1.2. ECONOMICAL FACTORS

Economic factors such as per capita income, national income, resources mobilization, exploitation of
natural resources, infrastructure development, capital formation, employment generation, and industrial
development influence jute industry.

Jute industry provides one of the most fundamental necessities of the people with huge value-addition at
every stage of processing. Today jute sector accounts for nearly 2.69% of the total exports following RMG
and Leather & Leather goods. This conveys that it holds potential if it is ready to innovate. It generates
massive potential for employment in the sectors since it directly links agricultural to industrialization.

Economic factors of Bangladesh analysis are following:

3.1.2.1GDP growth:
The GDP growth of Bangladesh is little bit unpredictable, it has experienced many ups and downs since
2005. GDP shows a cyclic up and down mostly due to cyclic political instability.

Figure 2: GDP growth of Bangladesh

3.1.2.2. Inflation:
The Bangladesh economy is experiencing a continuous rise in inflation.
 6

Figure 3: Inflation in Bangladesh economy

3.1.2.3. Exchange Rates

Value of Taka against US Dolars has decreased. This is favoring the export of Jute

Figure 4: Exchange rates of Taka in terms of USD

(Source: Ministry of Finance Bangladesh)

3.1.2.4. Labor Cost:

Labor cost in jute industry is comparatively low. In short, the economic condition of Bangladesh is
mostly favorable for the growth of jute industry in our country.
3.1.2.5. Attitudes towards Product Quality
Along with rapid urbanization, increase in awareness and changes in lifestyle from united and
conventional families to fragmented and professional families, peoples' attitude towards commodities
has also changed. Preference towards sustainable products has noticeably increased due to lack of spare
time for thorough self-inspection in product purchasing.

Also inclination towards congenial and sincere customer service has grown vastly due to competitive
and strenuous urban lifestyle which allows minimal time in elsewhere engagements.

In the light of this facts, diversified and decorative jute products have good prospect to enrich.
 7

3.1.3. SOCIAL FACTORS

Managers and policy makers cannot disregard social variables like education, knowledge, rural community
norms and beliefs which are predominant in Bangladesh, especially in the rural society while cultural
differences are unthinkable for any international manager or even an urban Bangladeshi manager. Jute
industry of Bangladesh based on Jute Fibre as the agriculture product, which found in rural areas. So the
social responsibility, especially woman employment and empowerment, of the Jute industry plays a vital
role in rural societies.

3.1.5. TECHNOLOGICAL FACTORS

Technology is considered to be one of the most important factors of Jute industry. That is why the
government, in its industrial policy resolutions, industrial licensing policies, regulation, and in
liberalization policies, assigned great importance to sophisticated technology and technology transfer.
Today all jute industries in Bangladesh are facing low productivity and poor quality due to outdated
version of jute mill machineries.

3.1.6. Legal
Government always encourages Jute industry by its supportive hands most of the time. As a result, a large
number of companies have been established here and there in the country. But recent fire in some notable
Jute industries has drawn the sight of the government. It has increased some legal and compliance issues.
The workers do not get proper wages and remuneration, good working environment and safety from the
companies. So government has intervened on this issue by enforcing the law and order system.

3.1.7. Environmental
Jute, is a renewable, bio- degradable and environmentally friendly natural fiber. So, it is one of the few
crops, which can be grown in the monsoon season, and can be rotated with rice to restore the soil fertility
and structure. The leaves of jute plants enrich the fertility of the soil for sustained agriculture, and have
good nutrition value as vegetables. Use of jute sticks as fuel and fencing material as substitute for wood
prevents deforestation. Therefore, the increasing global concern for the environment, the future prospects
for jute remains high.

In a nut shell, it can be said that increase in government favor of export promotion of jute and jute
products, environmental concern of biodegradable products, employment facilities and social obligation
and so on all together favors the scope of developing and diversifying this industry.

3.2. Porter’s Five Forces Analysis

Named after Michael E. Porter, this model identifies and analyses 5 competitive forces that shape every
industry, and helps determine an industry's weaknesses and strengths. Three of Porter's five forces refer
to competition from external sources. The remainders are internal threats. Porter referred to these forces
as the micro environment, to contrast it with the more general term macro environment.

Porter's five forces include - three forces from 'horizontal' competition:

of new entrants
of substitute products or services
of competitive rivalry

And two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining
power of customers.

power of customers
power of suppliers
 8

The porter’s five forces analysis for “Aman Jute Fibrous Limited.” gives us the following
results,

4.2.1. Intensity of Competitive rivalry:

Rivalry among existing Firms in the Jute industry is intensified by the following factors:

SUPPLIER POWER

 Primarily the suppliers of raw jute to end consumers are farmers in small villages. They yield
comparatively less supplier power because their scale of operation is low and they have an
incentive to switch to growing rice on the same fields. This might altogether stop production of
jute and create a havoc for mill workers and dependents

 Supplier power in case of middleman is reasonably from medium to high. They perform the
essential functions like assembling and storing the crop, transporting it to the secondary market
and financing various transactions related to it.

 In cases of paucity of raw jute for mills, they draw a hard bargain in their favor.

BUYER POWER
 The buyers’ power is collectively significant as to mostly the price of jute is set depending on the
demand • Of thirty major primary commodities traded internationally, only about six have as much
price and supply instability as jute.

 Jute has lost a major part of its market share to synthetics and therefore demand is very sensitive
to price increases, but not nearly as sensitive to price decreases.

 Due to relatively high packaging cost of jute as compared to its substitute products buyers are
buying jute more as a lifestyle product and ‘

ENTRY BARRIER
 Low profitability due to declining market. Not much research and development has gone into this
sector and therefore advanced technical know-how is missing.

 Government has been taking active steps to revive the industry by introducing regulatory measures
and prescribing reservation of commodities to be packed in Jute. The Government attempts to
provide as much reservation as possible to utilize the jute crop that is produced in the country,
without creating the bottleneck in the supply-distribution chain of the commodities. (Jute
Packaging Material Act 1987).

 JCI (Jute Corporation of India) was set up in 1971 as an official agency by the Government of
India with the aim to provide minimum support price to jute cultivators and also work as a helping
hand in raw jute sector.

SUBSTITUTES
 The threat of substitutes is very large because jute is mainly used as a fibre in the production of
the end product and there are a number of manmade ad-natural fibres that can act as very close
substitutes.

 Jute is a flexible packaging material. It faces being substituted by other flexible packaging
materials like plastic; nylon and other manmade fibre and also forms non-flexible packaging
materials – boxes, cartons, and aluminum. latest innovations like modified atmosphere packaging
cans, which seal in the air to retain freshness, or smart materials that can “breathe” selective gases
and keep food unspoilt are being introduced which pose a big threat to using jute as agro product
packaging.
 9

 Considering that currently all over the world, there is an over capacity of cotton production and
falling demand, downward trend of cotton prices will tend to lower demand for jute textiles as it
is the closest substitute having the same natural appeal.

Plastic – either very low cost or comes free with purchases since it is more economical for companies to
use plastic bags for promotional purposes.

COMPETETION
 Low market share causes firm to fight for market share; with synthetic fibre eating up the major
chunk of the market share competition has intensified amongst the rivals within the industry.

 Low switching costs increase rivalry. When a customer can easily switch from one product to the
other there is a struggle to capture customers; with alternatives to fibre products that are available
at cheaper rates, switching cost for customers is significantly low and hence, existing industries
have to fight for the market share.

 The eco-friendly wave engulfing the public and government supporting use of jute products
investment in this field has become significantly profitable. This has attracted the attention of new
players who are willing to invest in this industry and thus increase the competition for existing
manufacturers for existing manufacturers.

Competition Analysis

Major Players in the industry (Bangladesh)

The entire jute industry, which is geographically concentrated in Khula, Jessore, Noapara, Faridpur and
Rajshahi is dominated by a few key players, as can be easily seen from Table 1.1. A brief introduction of
the operations and major strategies followed by these players is given below.

Table 1.1 Major Players

Mill Association Ownership No of Mills Production / year (ton)

BJMA Private sector 81 360500

BJMC State owned sector 17 156500
BJSA Private sector 43 146000
Total 205 663000

Aman Jute Fibrous, Privately owned company, Producing Sacking, Hessian and Twine. So the company
is a member of Both BJMA and BJSA

The Players of BJMA are following:

Capacity (Production/day)

Table 2: Daily Production Capacity of Top five jute mills in Bangladesh

 10

Company Name Production (ton)/day

Janata Jute Mills 180
Akij Jute Mills 250
Karim Jute Mills 150
Partex Jute Mills 110
Noapara Jute Mill 90

3.3. SWOT ANALYSIS OF THE BANGLADESHI JUTE INDUSTRY

Strength
The following are the strengths of the jute sector:
 Jute is a biodegradable and the environmental friendly natural fibre
 The jute industry has the larger employment capability
 Demand of increasing diversified products if the international markets
 The best and the finest jute grows in Bangladesh

Weakness
 The obsolescence of the machinery in the jute industry affects its productivity and efficiency very
seriously and erodes its profits
 The R&D efforts in the jute industry are very poor
 Lack of proper marketing activities to catch the demand of ecofriendly products in the western countries

Opportunity
All the weaknesses in the jute industry as mentioned above, also presents a large number of opportunities to make
the sector a sustainable one. For example:
 The lack of modernization presents a huge opportunity to replace plant, machinery and systems with more
modern ones so as to conserve industry’s resources and improve its productivity, efficiency as well as the
quality of the products. This will also enhance their cost competitiveness in domestic and international
markets.
 The unskilled labor force and not fully qualified managers, presents a huge opportunity to run large scale,
skill development programs and also presents a huge opportunity of Skilling their manpower so as to
improve their efficiency and productivity
 The use of jute in making its diversified products is increasing day by day, mainly due to its bio
degradability and its Eco friendly character

Threat
 Although jute is fully natural, Eco friendly and biodegradable material, but still due to its higher cost it
faces tough competition from cheap synthetic materials.
 In case of bulk packaging or container based packaging in large scale shipping/ transport of goods, jute is
not found to be cost effective.
 The indifference of the owners of the jute mills towards modernizing the jute industry and their
dependence mainly on government subsidies for modernization gives rise to a huge threat to the jute
industry.
 Shrinking global demand due to strike in Middle East, and imposition of anti-dumping duty by India have
threatened Bangladesh's export of jute goods, industry players
 11

3.4. Strategic Groups and Mobility Barriers

Janata Akij Jute

Jute Jute Mill
goods Mill

Categories Aman Jute

Mills

Karim Jute
Mill
Small
Raw jute fragmented
Players

Low High
Capacity Utilization

Figure: 5: Strategy Group

3.4.1. Company Strategy and Business Model of Aman Jute Fibrous Limited
Diversification into value-added jute products like jute bags, footwear etc. seems to be the profit pool in
this industry. As observed in the diagram above, the companies with the highest profitability are the ones
who operate entirely in the diversified jute goods market. Since production of raw jute is a commodity
industry and prices are regulated there is not much differentiation between players. But, in the production
of value-added jute products, the major players are trying to differentiate themselves from the rest either
through proving superior quality (ISO9002) or through technological superiority. However, according to
us there are two main issues that will have to be addressed by these companies in the future:

1. Profit based on the parameters mentioned above (capacity utilization and diversification) does not
lead to sustainable competitive advantage as these can easily be imitated. Capacity utilization in
fact deals with operational efficiency and not with strategic positioning of a firm. As shown by
the data, firms like Howrah Mills which are diversifying into high-end product and at the same
time bringing in efficiency through layoffs and technological improvements an easily pose a threat
to Cheviot in the future.

2. The generic demand for jute products may be a good option for the existing players. This can be
done through exhibitions, fairs, product differentiation, improving productivity.
 12

3. Diversification: In order to enable jute-based products to make successful inroad into the textiles
sector, jute has been largely experimented with. In view of challenge faced from cheaper prices
of synthetic substitutes, more thrust has been given on diversification of jute products.
Major thrust areas of value-added diversified jute products include Jute Handlooms and
Handicrafts, Non-woven and Industrial Application, Jute Rigid Packaging, Decorative products
and Geo-Jute etc.
4. Future Strategy: At the margin, any growth in the jute industry will stem from growing exports.
The top ten jute importing countries across the world are Belgium , USA, Egypt, Turkey ,UK,
Japan, Saudi Arabia, Australia, Italy, and Syria
5. Jute Geo-Textiles: Geotextiles have seen unrivalled growth with a forecast by the United Nations
International Trade Center (UNITC) of 1,400 million m2 produced by the new millennium. Europe
and North American markets each account for 40% with the remaining 20% attributed to Japan,
Asia and Australia. The main applications are separators in earth works, drainage and linings as
well as controlling soil erosion and establishing plant growth. As jute accounts for such a small
proportion of geotextile use in the western countries, there is enormous scope for increasing usage.
Most land managers in Europe are generally unaware of the relevance of jute products, as they
consider textiles as the main output of the Industry.

Jute accounts for less than 1% of total geotextile use, despite the technical advantages and low
cost of jute geotextiles, which has been demonstrated by research and the results of full-scale use.
A promotion program that aims to provide product information in readily useable form has been
initiated by UNITC, UNDP and JMDC.

3.4.2. Business Model of Aman Jute Fibrous Limited

A company’s business model sets forth the logic for how its strategy will create value for
customers and at the same time generate revenues sufficient to cover costs and realize a profit.

Customer Value (V)

Customer's Share
(customer value
Proposition)
Product Price (P)
Firm's Share
(Profit formula)
Per -unit cost ( c )

The two elements of a company’s business model are (1) its customer value proposition and (2)
its profit formula. The customer value proposition lays out the company’s approach to satisfying
buyer wants and needs at a price customers will consider a good value. The profit formula
describes the company’s approach to determining a cost structure that will allow for acceptable
 13

profits, given the pricing tied to its customer value proposition. Indicates, the customer value
proposition can be expressed as V – Which is essentially the customers’ perception of how much
value they are getting for the money. The profit formula, on a per-unit basis, can be expressed as
P – Plainly, from a customer perspective, the greater the value delivered (V) and the lower the
price (P), the more attractive is the company’s value proposition. On the other hand, the lower
the costs (C), given the customer value proposition (V – P), the greater the ability of the business
model to be a moneymaker. Thus the profit formula reveals how efficiently a company can meet
customer wants and needs and deliver on the value proposition. The nitty-gritty issue surrounding
a company’s business model is whether it can execute its customer value proposition profitably.
Just because company managers have crafted a strategy for competing and running the business,
this does not automatically mean that the strategy will lead to profitability—it may or it may not

Business Model of Aman Jute Fibrous Limited describe in below chart

 Meet the predetermined quality parameters with zero

Customer Value Proposition
Profit formula
tolerance
 On time delivery
 Improve the Value Chain across the supply chain
 Improve Quality of product
 Improve the productivity
 reduce wastage
 Improve worker's skill
 Improve workplace safety
 Improve Machine productivity
 Improve supply chain efficiency
 Profit Margin mainly depends on utilization of 5M:
 Man, Machine, Materials, money and minute
 Proper pricing and negotiation with Buyers
 14

Chapter 5
5.1. Diversification
Aman Jute Fibrous Limited started its business for supporting its agro Business of potato storage
in cold storage. Every year Aman cold storage need 2 lac pieces potato Bag. So The Company
Chairman decided to start new business of Jute Industry. From inception the company was
producing Only Three products like Sacking bag, Hessian Bag and Twine (Jute yarn). After
meeting the internal demand the company exports 6000 ton jute products in the international
market.

Recently the price of raw hike at extreme level and the production cost of Sacking bag and
Sacking quality yarn has increased significantly for example cost of goods sold is tk750000/ton
and selling price is tk73000/ton plus govt. Incentives of sales is 12%. Still this sacking quality is
loss for Aman Jute Fibrous Limited.

Now, The Company is planning to diversify the product ranges in value added items because
government promotion of Jute diversified production is also 20%. Whereas this promotion is 12
% for Sacking and Hessian bag

But the international Production Capacity of diversified production is fully utilized and to go for
new diversified product the company need to purchase new machinery for increasing capacity
into diversified products.

Now, the management conduct a study of allocating resources for new machinery and payback
period, the existing capacity of sacking product lines, raw jute prices and product of raw jute
which is the pivoting point of cost controller.

Now, the new diversified items added with existing product lines are following
1. Food Grade items.
2. Fancy items for promotional items.

In both cases market attractive is higher than the existing product of Aman Jute Fibrous
Limited.

The cost of Entry barrier is less because Aman Jute Fibrous has already entered into target
market. Now, need only new buyers of new products. Diversifying into a new business must
offer potential for the company’s existing businesses and the new business to perform better
Together under a single corporate umbrella than they would perform operating as independent,
stand-alone businesses—an effect known as synergy.

This diversification is related to existing business portfolio.

5.1.1. Financial Analysis of Product Diversification

Capacity increased by purchasing Rapier Loom and Payback period for new Capital Machinery

Table 3: Product mix costing

Hessian Sacking Yarn-

Particulars cloth bag Hessian
Sales/ton Average Sales per ton (After tax) 95000 70000 70000
 15

Sales incentive (12% on cloth,

7% on yarn) 11400 8400 4900
Tax on sales revenue (0.6%) 57 42 42
Total revenue/ton 106343 78358 74858

Cost/ton Raw Jute cost/ton 57173 52312 57173

wages/ton 23350 15000 9760
Other overhead/ton 13397 13397 13397
Total cost per ton 93920 80709 80330

Margin/ton Net Margin/ton before interest 12424 -2351 -5472

Set up cost 20 Rapier Loom

Cost of Machinery 12367500
Commissioning cost 433500
Total cost of 12801000

Production/month by 20 set
machines
Production/hour/machine 11 kg
Production/hour by 20 machines 220 kg
Production/day (20hours) by 20
m/c 4400 kg
Production/month (25days) by
20 m/c 110000 kg
= 110 ton
Revenue/month by 20
machines 1366585 BDT

Payback period 9 Month

The Analysis results for diversifying into value added jute products.

5.2. Ethics, Corporate Social Responsibility, Environmental

Sustainability, and Strategy

Aman Group is focusing on establishing worker incentive industry in the country to employed
and utilize the underprivileged, needy and unskilled man and special focus on powerless women
in Rajshahi Division. So to develop the unskilled work force, Aman Group has endeavored the
corporate strategies on training and development, energy efficiency, green environment and
social welfare
Internal Management also enthusiastically focus on building fare grading of worker, behavioral
changes to loyalty. And Digitalization of supply chain management including daily operations
management to prevent theft, damage, mistrust, unethical practices and long term relationship
between suppliers and customers.

Child labor is strongly prohibited across the company.

 16

Long-term community programs support access to education, health care, and sustainable family
incomes. Aman has been able to maintain its core strategic principles even when they seem to be
at odds: low costs, great design, adherence to its ethical principles, and a commitment to a better
world.
Amna Corporate Strategies for building safe workplace, Sustainable development and CSR
 17

Chapter 6

6. Managing Internal Operations

Aman Jute Fibrous are facing low productivity, lack of proper maintenance of Plant machinery, poor
monitoring of process quality parameters. So to boost the productivity, product quality, employee
development and real-time production tracking system, The company internal management has
endeavor to launch productivity improvement program.

The program primarily focused on waste management, Quality control system and Proper maintenance
of Plant Machinery.

6.1. Lean Management (Eliminate 7 Wastages)

Eliminating wasteful activities is one of the most important prerequisites for building a successful
company. This concept is an integral part of Lean Thinking and it helps to increase productivity and
profitability. The idea of eliminating waste originates from the Toyota Production System. Taiichi Ohno,
who is considered as one of the founding fathers of lean manufacturing, dedicated his career to establish
a solid and efficient work processes.

During his journey, Ohno described three major roadblocks that can influence a company’s work processes
negatively: Muda (wasteful activities), Muri (overburden) and Mura (unevenness).

Based on his observations and deep analysis, he categorized the 7 types of waste (7 Mudas), which later
became a popular practice for cost reduction and optimizing resources.

In Lean, waste is any activity that consumes resources but brings no value to the end customer.
In reality, the activities that indeed create value for the customers are only a small portion of the whole
work process. This is why businesses should focus on reducing wasteful activities as much as possible.
By doing so, companies can identify significant opportunities to improve their overall performance. Don’t
make a mistake. Not all wasteful activities can be eliminated from your work process. Some of them
are a necessity.

For example, testing a software is not an activity that your customers are willing to pay for. However,
without it, you may deliver a low-quality product that will have a negative impact on your economic
performance. Therefore, there are two major types of waste:
Necessary waste – non-value adding, but necessary to get things done in a quality manner. Such activities
can be testing, planning, reporting, etc.

Pure waste – non-value adding, and unnecessary. Anything that doesn’t bring value and can be removed
from the process immediately.

Brief description of 7 Wastes of Lean

Eliminating wasteful activities is crucial for the success of your company. They can lower the profitability,
increase customer costs, decrease quality and even employees satisfaction. For this reason, you need to
identify the non-value adding activities and try to improve the process where they appear or ultimately
eliminate them.
 18

The Lean theory describes 7 major areas where you can identify Muda activities, more popular as the
seven wastes of Lean.
1. Transportation
This type of waste is when you move resources (materials) and the movement doesn’t add value to the
product. Excessive movement of materials can be costly to your business and cause damage to quality.
Often, transportation may force you to pay additionally for time, space and machinery.
2. Inventory
Excessive inventory is often the result of a company holding “just in case” inventories. In such cases,
companies overstock themselves in order to meet unexpected demand, protect from production delays,
low quality or other problems. However, these excessive inventories often don’t meet customer’s needs
and don’t add value. They only increase storage and depreciation costs.
3. Motion
This kind of waste includes movements of employees (or machinery) which are complicated and
unnecessary. They can cause injuries, extended production time and more. In other words, do whatever is
necessary to arrange a process where workers need to do as little as possible to finish their job.
4. Waiting
This is probably the easiest waste you can recognize. Whenever goods or tasks are not moving, the waste
of waiting occurs. It is easily identifiable because lost time is the most obvious thing you can detect. For
example, goods waiting to be delivered, equipment waiting to be fixed or a document waiting for approval
from executives.
5. Overproduction
Having in mind that waste is anything that the customer is not willing to pay for, it is easy to realize why
overproduction is Muda. Producing more means that you exceed customer’s demand, which leads to
additional costs. Actually, overproduction triggers the other 6 wastes to appear. The reason is that excess
products or tasks require additional transportation, excessive motion, and greater waiting time and so on.
Furthermore, if occasionally a defect appears during overproduction, it means your team will need to
rework more units.
 19

6. Over-processing
This type of waste usually reflects on doing work that doesn’t bring additional value or it brings more
value than required. Such things can be adding extra features to a given product that nobody is going to
use, but they increase your business costs. For example, if a car manufacturer decides to put a TV screen
in the back trunk of a vehicle, probably nobody will use it or find value in it. Even more, it will cost
resources and it will increase the end price of the product for something that customers are not willing to
pay for.
7. Defects
Defects can cause rework or even worse, they can lead to scrap. Usually, defected work should go back to
production again, which costs valuable time. Moreover, in some cases, an extra reworking area is required
which comes with additional exploitation of labor and tools.

As these 7 types of waste are toxic, Aman Jute Fibrous is striving to implement waste management
program to boost productivity.

6.2. Plant Maintenance Program.

As the machinery of Aman Jute Fibrous Limited is old, outdated and operated by unskilled and
semi-skilled operators, proper maintenance of Plant Machinery plays important roles for capacity
utilization.

6.2.1. Objectives of Plant Maintenance:

(i) The objective of plant maintenance is to achieve minimum breakdown and to keep the plant in good
working condition at the lowest possible cost.

(ii) Machines and other facilities should be kept in such a condition which permits them to be used at their
optimum (profit making) capacity without any interruption or hindrance.
 20

(iii) Maintenance division of the factory ensures the availability of the machines, buildings and services
required by other sections of the factory for the performance of their functions at optimum return on
investment whether this investment be in material, machinery or personnel.

6.2.2. Importance of Plant Maintenance:

(i) Equipment breakdown leads to an inevitable loss of production.

 If a piece of equipment goes out of order in a flow production factory, the whole line will soon
come to a halt. Other production lines may also stop unless the initial fault is cleared.
 This results in an immediate loss in productivity and a diminution of several thousand rupees per
hour of output.
(ii) An un-properly maintained or neglected plant will sooner or later require expensive and frequent
repairs, because with the passage of time all machines or other facilities (such as transportation
facilities), buildings, etc., wear out and need to be maintained to function properly.
(iii) Plant maintenance plays a prominent role in production management because plant breakdown creates
problems such as:
 Loss in production time.
 Rescheduling of production.
 Spoilt materials (because sudden stoppage of process damages in-process materials).
 Failure to recover overheads (because of loss in production hours).
 Need for over-time.
 Need for subcontracting work.
 Temporary work shortages-workers require alternative work.
Types of Plant Maintenance:

6.3.3. Maintenance may be classified into following categories:

(a) Corrective or breakdown maintenance,
(b) Scheduled maintenance,
(c) Preventive maintenance, and
(d) Predictive maintenance.
(a) Corrective or Breakdown Maintenance:
Corrective or breakdown maintenance implies that repairs are made after the equipment is out of order
and it cannot perform its normal function any longer, e.g., an electric motor will not start, a belt is broken,
etc. Under such conditions, production department calls on the maintenance department to rectify the
defect. The maintenance department checks into the difficulty and makes the necessary repairs. After
removing the fault, maintenance engineers do not attend the equipment again until another failure or
breakdown occurs.
 21

(b) Scheduled Maintenance:

Scheduled maintenance is a stich-in-time procedure aimed at avoiding breakdowns. Breakdowns
can be dangerous to life and as far as possible should be minimized. Scheduled maintenance
practice incorporates (in it), inspection, lubrication, repair and overhaul of certain equipment
which if neglected can result in breakdown.
Inspection, lubrication, servicing, etc., of these equipment are included in the predetermined
schedule. Scheduled maintenance practice is generally followed for overhauling of machines,
cleaning of water and other tanks, white-washing of buildings, etc.

(c) Preventive Maintenance:

A system of scheduled, planned or preventive maintenance tries to minimize the problems of
breakdown maintenance. It is a stich-in-time procedure. It locates weak spots (such as bearing
surfaces, parts under excessive vibrations, etc.) in all equipment, provides them regular inspection
and minor repairs thereby reducing the danger of unanticipated breakdown. The underlying
principle of preventive maintenance is that prevention is better than cure.

6.3. THE 7 BASIC QUALITY TOOLS FOR PROCESS IMPROVEMENT

Another important functions for sustainable development of an industry is the high standard of quality
system to ensure customer need at each and every stage. The scientific way of quality improvement tools
are describe below

Quality pros have many names for these seven basic tools of quality, first emphasized by Kaoru Ishikawa, a
professor of engineering at Tokyo University and the father of “quality circles.” Start your quality journey
by mastering these tools, and you'll have a name for them too: "indispensable."

1. Cause-and-effect diagram: (also called Ishikawa or fishbone chart): Identifies many possible causes
for an effect or problem and sorts ideas into useful categories.
2. Check sheet: A structured, prepared form for collecting and analyzing data; a generic tool that can be
adapted for a wide variety of purposes.
3. Control charts: Graphs used to study how a process changes over time. Comparing current data to
historical control limits leads to conclusions about whether the process variation is consistent (in
control) or is unpredictable (out of control, affected by special causes of variation).
4. Histogram: The most commonly used graph for showing frequency distributions, or how often each
different value in a set of data occurs.
5. Pareto chart: Shows on a bar graph which factors are more significant.
6. Scatter diagram: Graphs pairs of numerical data, one variable on each axis, to look for a relationship.
7. Stratification: A technique that separates data gathered from a variety of sources so that patterns can
be seen (some lists replace “stratification” with “flowchart” or “run chart”).
 22

Conclusion:
The thorough strategic business analysis on “Aman Jute Fibrous Limited in context of Jute industry in
Bangladesh.” has revealed that despite of some complications the total jute industry in Bangladesh is
facing a favorable condition for its growth. In case of “Aman Jute Fibrous Limited.”, it entered into the
market with medium industry profits which are associated with weak suppliers, weak buyers, low entry
barriers, high chance of substitutes but various objection from green environmentalist, and little rivalry.
At present, worldwide demand of biodegradable jute products and jeo textiles need to be caught by
providing diversified jute goods as soon as possible. And this company is lagging behind from its near
competitors due to its poor operations management, out dated machinery and financial shortage. So
Successful implementation of Productivity improvement programs like waste management program,
Maintenance schedule and Quality Production will help the organization to reduce operating cost. And
for sustainable development the corporate strategy for safe work place with high ethical standard will
assist to achieve its long term objectives
 23

7. References
Bangladesh Economy Website. (2014, March 29). Retrieved from
https://bdbanijjo.wordpress.com/tag/industry-of-bangladesh/

Aman Group Limited. (2014, March 29). Retrieved from Aman jute Fibrous Limited.:
http://www.amangroupbd.com.

Daily Prothom-alo. (2011, June 9). Fiscal Budget Speech 2011. Daily Prothom-alo. Retrieved from Daily
Prothom-alo.