p



On the Leather Industry of Pakistan

Pakistans Industries
Course: Analysis of Pakistan
Faculty: Mr. Aftab Abro
Presented By:
Uzair Sheikh 6950
Danish Riaz 5639
Talha Waqas 6987
Ghulam Moinuddin 6999
 ]   p


ort--Oriented for several decades
m
ort
m Until 1970
1970s, s, Pakistan had been e
orting raw hides and
skins and semi-
semi-rocessed leather in the form of crust
leather
m In 1980
1980s,s, Pakistan started e
orting finished leather
and leather roducts
m Tanning method used is CHROM
m egetable tanning method is secondary
m A small imort of raw skins and hides does sometimes
takes lace when the demand is not met
 p 


m Introduction
m Second largest
ort arning Sector
m One of the Major Foreign
change arners for Pakistan
m Contributes atleast 5% to manufacturing GDP & 8% to
e
orts
m Tremendous Imrovement for growth with Quality and
diversification
m
orts increased $77
$77 million in 1978 to $671
$671 million in
2001--2002
2001
m Pakistan has a natural advantage in the area of livestock
oulation
m The imort of Hides are mostly not because of shortage but
rather roduct secifications
 p 


m Introduction
m It rovides emloyment to a very large segment of the
industry, emloyees around 500,
500,000 eole
m The industry has evolved from e
orting raw hides and
skins to value-
value-added leather roducts like aarel, gloves,
footwear etc.
m There are 725 registered tanneries, total Tanneries above
2500
m Concentrated in a few clusters like Kasur(180
Kasur(180)) Karachi
(170)
170) and Sialkot (135
(135))
m Main
ort Market for leather aarel is USA ((19 19%)
%)
 p 


m The industry witnessed a decline of 29 29%% in
e
orts in fiscal year 2008-
2008-09
m There was a consistent growth before that.
m
orts droed from $$19 19..1 billion in 2007
2007--08
to $17
$17..8 billion in 2008
2008--09

    p

m Pakistan Tanners Association
m Pakistan Leather Garments Manufacturers

orters Association
m Pakistan Footwear Manufacturers Association
m Pakistan Gloves Manufacturers Association
m Federation of Pakistan, Chamber of Commerce
Industry
 !   p

m Tanneries
m Inut Raw hides
m Process Treated with chemicals (Tanning)
m Outut Tanned Leather
m Processing
m Processed into various shaes and roduct forms
m Retail
m Selling of transformed goods takes lace
m Focus of Marketing and Services
 !  
 
m Use of High-
High-Technology for Quality Products
to comete in the international market
m Availability of skilled manower
m The absence of energy efficient technologies and
lack of roer maintenance of steam ies,
steam tras and insulation are causing wastage
of significant amount of energy in most leather
rocessing units
     
p  
m Facilities from
ort Investment Suort ( IS) Fund for
rocurement of e
ert advisory services
m stablishment of Research and Develoment Centers in Karachi
and Sialkot
m Schemes to accommodate inland freight costs to e
orters of
leather garments
m Imroving the electricity suly, the government announced that
agreements between water, ower and electricity distribution
countries and a cluster of industries including leather industry
should be done
m Less than 1% rebate on e
orts comared to 15 15%% rebate of
Asian Countries
 ^     
m The Industry cometes on rice to cater the
Local and International market
m Machinery for roduction is imorted, High
caital cost incurred in Setu
m ew Technology in the International arena
makes it hard for foreign layers to leave the
Industry.
m Local Manufacturers do not osses a Brand
quity
Hence the Threat of ew ntrants is High
 a     a
m Large number of manufacturers in the Industry,
catering the same market
m The switching costs are negligible between
manufacturers
m Low local demand makes it hard to sell
m Threat of backward-
backward-integration
m The industry has generic variety of Products
Hence, the Buyer Power is High
 ^  
m Artificial leather and even Te
tile form a
substitute for some of the varieties
m Substitute demand growing world-
world-wide
m Substitutes rovide clothing needs while the
roduct rovides esteem need
Hence, Threat of Substitutes is HIGH
 a     
m Abundant raw-
raw-material available
m Threat of backward integration
m Suliers are in a large number so there are no
monoolies
m Suliers are heavily deendant on
manufacturers
m High Profit Margin
Hence, Bargaining Power of Suliers is LOW
 0
m The Industry has slow growth
m Big retailers fighting for market share in the local market
e.g Jafferjees, Hub leather, BH, Bata
m Brand Identities In local market with low demand,
generic roducts in International market with High
demand.
m Cometitors are diversified
m Pakistan ossessing a Quality advantage
Chinas double advantage; chea Labor and chea leather
m China
Hence The Rivalry is HIGH
 0
 
m Above average Profit Margin can be utilized in the
following ways:
m Research and Develoment: Quality differentiation
m Adot a generic strategy of Cost leadershi International market
m Diversification and/or Forward Integration: Creating Brand Identities In
the International Market
m Increasing share of value-
value-added leather roducts in the
total e
ort market. (Currently 60
60%)
%)
m Train the labor force and make them technology oriented
to ugrade our end roducts to enhance credibility in the
international market. (Korean Technicians famous for
Leather rocesses)
 0
 
m Comrehensive Study of the Suly Chain in
the Industry to lower Production and Setu
Costs.
m Creating unions with International brand
roducers of footwear sector. Other brands sell
e
tensively with Pakistani leather used. Pakistan
needs to develo local brand identities in this
sector