Industry chosen: Footwear Industry 1a.

Company chosen: Bay Emporium

The industry that I have chosen is Footwear Industry. It is obvious to say globally, the footwear industry has an expanding market. World population increases, living standards rise, so does the demand for footwear. Footwear is an active product in international markets. It is being delocalized from developed countries to developing ones. The beneficiaries of this process are Far East nations; in particular China, India, North African countries and the Central and Eastern European countries (CEEC). The world footwear market is estimated at 20,000 million pairs in 2012. The biggest consumers of conventional footwear (i.e. with leather uppers) are USA and Europe. Between them they consumed 9,100 million pairs in this year, 45.5% of the total. China produces 9.7 billion pairs per year and rising, it exports more than half of these. Most of these shoes are synthetic (over 60%) and of low quality and price. The average price of exported shoes from China was US$4.46 in 2012. Other factories in the Far East produce more leather shoes, in particular Vietnam and India. In Europe and the Mediterranean zone, there are significant exporters of conventional footwear namely; Italy, Spain in EU and Tunisia, Morocco in North Africa. Tunisia and Morocco, in a sense, are tied to Italy and Spain as they have many sub contracting agreements with these two countries. Among the CEEC, Romania is the strongest competitor. The sleeping giant for conventional shoes is India. It has a welldeveloped industrial infrastructure and competitive pricing. It has not yet reached its potential as an exporter of footwear. However, the shoes it does export are competitively priced and of increasing quality levels. The following charts published by SATRA (Shoe and Allied Trades Research Association, UK) show the trends. The largest market for footwear in terms of pairs is Asia including the Indian sub -continent. The figures for global footwear consumption (2002) and forecast to 2008 are as follows:
GLOBAL FOOTWEAR CONSUMPTION (2012)

REGION China Asia (excluding China) Europe (all) North & Central America Middle East, Africa, Oceania South America TOTAL
Source: ICON Group Ltd. www.icongrouponline.com

MILLIONS OF PAIRS 6,434 3,871 4,544 2,081 1,172 1,898 20,000

% OF TOTAL 32.2 19.4 22.7 10.4 5.9 9.5 100.0

GLOBAL CONSUMPTION PER CAPITA OVER 10 YEARS CONSUMPTION (Pairs/capita/year) Americas Europe (all) Asia (all) Rest of the World WORLD AVERAGE
Source: ICON Group Ltd. www.icongrouponline.com

2004 3.8 3.1 1.4 1.1 1.9

2006 3.9 3.3 1.5 1.1 2

2008 3.9 3.5 1.5 1.1 2

2010 4 3.7 1.6 1.1 2.1

2012 4.1 4 1.7 1.1 2.2

The market in monetary terms shows a different picture with Asia lying as poor third behind Europe and North America, reflecting the degree of sophistication in each market. China produces and exports more shoes than any other country by far. It is also the biggest consumer of footwear by virtue of the size of its population. On the other hand its per capita consumption is low on a par with developing countries. Footwear production is therefore concentrated in Asia and footwear consumption in the USA and Europe. 1b. Global Value Chain (GVC) for footwear industry The supply chain of the industry starts with Agro Industries and progresses through the chemical industry and tanning to manufacturing. Leather is a by-product of the food industry. It is a commodity and as such is subject to market forces in a similar way to tea, sugar, coffee, etc.

Related and Support Industry

Leather Industry Plastic Industry Rubber Industry Textiles Industry Wood Industry Jute Industry Metal Industry

1c. Dynamics of the footwear industrys GVC Footwear industry, in recent time, has undergone a lot of changes. With the time footwear has turned into a fashion product which was a necessity once. There a few key market player operating throughout the world right now. Adidas, Nike, Puma, Reebok are some of the market leaders. Footwear industry, with its own development, has been contributing to the development of some other business also. As leather, rubber, plastics, Jute etc are used to produce footwear, these industries are also developing. Some developing countries are carrying out the sole responsibility of supplying raw materials to the producing countries.

1d. To pick a company from the chosen industry mentioned above I would like to go for Bay Emporium. Bay Emporium Ltd was established in 2006. It is a footwear marketing company with wide range of products for men, women & children. Its target customer is medium to medium high income groups. Today Bay Emporium is one of the major shoe retailing companies operating in Bangladesh. The brand is getting popular very fast. New shops are opened in strategic locations. It is Famous for leather shoes & leather sandals. Bay Emporium Ltd has a dedicated management team working hard for market expansion, product sourcing & marketing. Bay Emporium Ltd has vision to position the company as one of the leading marketers of family footwear for medium to medium high income group of customers in Bangladesh. SWOT Analysis The potential growth of Bay Emporium Ltd is mainly because they have a very small number of competitors in Bangladesh as there are very few export based Footwear Companies. It is now one of the leading export-based footwear companies in Bangladesh. Maintaining this upward trend needs absolute dedication to understanding and fulfilling

their customers demand with the appropriate mix of standard service, reliability, improved technology and skilled as well as dedicated manpower is necessary.

Strength 1. Best quality provider 2. Packaging design 3. Export Experience Opportunity 1. Economic growth 2. Large potential market 3. Potable for all aged group 4. Easy to collect raw materials 5. Chance to create a new demand

Weakness 1. Diversified product 2. Limitation of offering 3. Price structure 4. Distribution channel strategy Threat 1. Government regulation 2. Shortage of technical person 3. Price war 4. Potential competitor 5. Deflation of money

Triple Triangle Framework (TTF) Model

Firms internal or micro-level factors The factors that constrain growth and expansion of firms, include: i) lack of trained and experienced human resources, particularly designers, machine operators, and skilled technicians for the repair and maintenance of machines; ii) limited access to formal institutional loans and a requirement of bank guarantee for bonded import of raw materials; and iii) limited current operational activities aimed at survival, lack of plans for future expansion and growth. Industry-level factors Competition: Currently, competition in the footwear industry is getting upward. Previously there were only a few players in the market but in last 8 years quite a few names have been added which caused the pace in the competition. Designs along with pricing have become one of the main parts.

Collaboration and quality certification: Due to a lack of proper standardization and quality certification facilities, footwear products in Bangladesh are unable to attain recognition in international markets. Though there are institutions willing to assist in quality improvements and certification, but due to the absence of formal collaborative long-term arrangements, the possibilities are yet to be explored. Improved recycling practices: Poor collection of waste materials and improper recycling practices has been responsible for the poor quality of recycled materials and hence poor quality products. This in turn forces the footwear industry SMEs to rely on expensive virgin raw materials raising the cost of production. Innovation in production and marketing: There is a huge opportunity to create new demand in the domestic market by introducing new footwear products. Also, large B2B customer segments could be captured if plastic items that are currently imported could be produced locally. Technological upgrading: Technology transfer and technology upgrading are necessary to maintain and promote competitiveness. There are enormous technological lags in designing and recycling in Bangladesh. Macro-level factors Macro-level factors affecting the company emerge from a complex interrelationship among the factors that are beyond the control of any specific industry or its constituent firms. The outcome of this interplay influences all the firms in the industry. These factors mainly linked to governance and state support, globalization dynamics and the interaction of international forces are the major determinants of the macroeconomic environment in which the industry and its constituent firms operate. State support: Although Bangladesh offers a predictable policy direction involving the role of market vis--vis state (Jahan 2008b), the footwear industry needs a comprehensive and consistent policy guideline from the government to keep up and accelerate the existing rate of growth. The footwear industry needs a proper government arrangement of an uninterrupted power supply,, the single most important obstacle affecting industry growth. Furthermore, the government should introduce favorable tax policy, establish of specialized industrial zones and increase government purchase. These initiatives would certainly give a huge boost to growth in this sector.

1e. Strategic Issues faced by Bay Emporium Capacity Utilization Currently, Bay Emporium has not been able to use its total capacity as it does not have that much of market coverage to have all its products sold. Bay Emporium needs improve its total market coverage. In order to attain that Bay Emporium needs to increase the number of outlets thorough out the country. Thus they will be able attract a new customer base. As their target market is mainly middle and upper-middle class people, it will be quite easy for them to capture the untapped market. Innovation in Design Another segment Bay Emporium need to focus on is innovation. In our country, innovation is not that much practices in footwear industry. Bay Emporium can get a competitive edge if they focus on innovative design.

1f. My recommendation 1. Reducing the Intermediaries: By introducing their brand to other countries they can create a new market. Participation in the international trade fairs, exhibitions will create a brand image and eventually they will be able to market their own product without intermediary. 2. Skilled and trained employees: BE needs to provide necessary training in technical and practical field for their employees to develop skilled manpower. 3. Automated system: Need to introduce an automated system for tracking the exports, freight, C&F fee etc which will be efficient. 4. Backward integration: Besides leather they have to rely on every other raw material for importing. They need to establish a backward linkage which will run down the production time and the costs. 5. Number of outlets BE must increase the number of outlets they have so that they can capture a fair portion of market share which will be helpful for them to ensure a healthy revenue. 6. Focus on innovation

In this competitive era, it is innovation which is a must for every company to stand out from other. Bay Emporium should have their focus on innovation too.

1g. Model: