Overview of current industry condition

Bangladesh has a large leather industry. These industries make leather based products, such
as shoes, belts, bags, and jackets. These products are sold both in the domestic and foreign
markets. Leather Footwear is the fastest growing segment of the leather industry. Bangladesh
meets the demand for about 10% of the worlds total leather market. The main benefit of the
leather industry of Bangladesh is the ample supply of raw materials. Footwear is more
important in terms of value addition. This is the fast growing sector for leather products.
Presently Bangladesh produces between 2 and 3 percent of the world's leather market.The
exporters in the sector shifted their focus from finished leather to leather goods exports. The
exporters see a bright future of the leather products of Bangladesh as the sector is now
competing with China and India and the competitive edge of the local industry is increasing.
Leaders of the sector said entrepreneurs were now more interested to produce leather
products than to export leather and the trend was the main cause of the significant export
growth. They also said that many tannery owners were now going for more value addition
which increased the export of leather products. In a news report of NEW AGE BD Md.
Nazmul Hassan Sohail, senior vice-president of Leathergoods and Footwear Manufacturers
and Exporters Association of Bangladesh, said that the competitiveness of the sector had been
increasing and the exporters preferred goods export to finished leather. Nazmul said, It is
possible to earn five times foreign currency by exporting leather products instead of
exporting finished and crude leather.

Bangladesh can be a potential offshore location for leather and leather products
manufacturing with low cost but high quality.
Nature of source

1) Use differentiation to increase value

2) Increase no. of finished products and create increased product line

3) Market segmentation and specialisation

4) Establish brand image by collaboration with companies you export to

5) Export goods and promote personal brand at the same time

6)Utilise existing knowledge and skilled workers to the max, and focus more on development
of this sector

7) Get hold of better technology and chemicals, so that you can make a larger variety of
finished products

8) go into a joint venture or collaboration so that your brand is promoted

Lower order advantages

- Cheap labour Bangladesh is utilising its source of cheap labour efficiently in the leather
industry already. To further utilise this resource, the workers need to be specialised for
different production techniques, and also their skills need to be further honed.

- Cheap raw materials- The abundant supply of raw leather easily gives Bangladesh a distinct
competitive advantage. To, sustain it, chemicals used to alter the leather into finished goods,
needs to be of better quality, along with better knowledge of how to care for it

Higher order advantages

- The major lacking in the Bangladesh leather industry is the absence of global brand names.
Bata, Aarong, Bay, and other such leather goods producing industries have established their
brand names well enough in Bangladesh, but their brand image is still unknown globally.
Bangladesh already produces and exports leather finished products for famous companies
like hush puppies. What it needs to do is form collaboration with foreign companies, in order
to establish their own brand names. The industry should start promoting their own brands,
since there is already a strong foundation to build on. By utilising the already abundant
source of raw material and cheap labour force, exporting their own brands of leather finished
goods would not be so difficult. Going into some sort of joint venture with the companies
they export to, they can promote their own brand, while producing goods for the already
established brands, hence, finding a leverage to make their own brand known world-wide.

- Industry segmentation also needs to be focused on. Not only the no. of finished goods
produced needs to be increased, but also the product mix. This would open up many different
target markets. Specialisation is the key in sustaining competitive advantage.

Increasing value through Differentiation

The concept of being unique of different is far more important today than it was ten years
ago. The key to successful marketing and competing is differentiation. Leather companies of
Bangladesh can increase the value of their products by following some differentiation
strategies.

Differentiation among their own products: They can make their leather products different
from their competitors by creating differentiation among their own products based on size,
color, components, styles, combinations etc. Thus they can increase the value of their
products which will attract more customers.

Highly standardized products: Though they are using good qualities of raw materials but
some of them are not emphasizing on the qualities of their final goods. By using high quality
leathers, they may charge premium price and can create high demand in many fashion
houses. Thus they can have highly standardized leather goods and they can export it to many
foreign countries.

Providing guarantee: If they can produce highly standardized leather products, those
products can be extremely robust. In this way, they can provide long or lifetime guarantee of
their leather products to the customers. This will attract more people to buy leather goods
from them.
Easy to clean: Their products should be easy to clean and maintain. Then their customers do
not need to spend more time to clean it. So people will be more comfortable to use their
leather goods.

High quality chemicals: Bangladeshi leather belts and bags producers should use high
quality chemicals in their products, which result in a consistent, long-lasting leather product.
If they use low quality chemicals for lowering the production costs then their products wont
last so long.

Distinct smell & Silky: They can increase the value of their products by giving their leather
products a distinct smell and there shouldn't be any smell of chemicals which is a sign of bad
quality. Beside this, their leather belts, briefcase and wallets should feel smooth and silky to
the touch.

Other strategies of value addition

Hybrid strategy: Bangladesh manufacturer can apply the hybrid strategy to compete with
the global competitors. They have the cheap and efficient labours, it would not be hard for
them to gain the economics of scale when they increased their production of leather products,
and when they can achieve the above points on producing their products, customers will
automatically go to buy their products.

Differentiation strategy: When the Bangladesh leather products enter the global markets,
the need to promote their products in more efficient ways otherwise there might be a lot of
barriers for them to enter the markets. They may identify and understanding their competitors
strategies and they can imitate the good parts of them and create the new strategies to help
their products penetrate the market as soon as possible. Choose and cooperate with the
strategic customers might be useful which means they may find out which large international
corporations need the large supply of leather products or they could attract the international
superstar to buy their products so that they will get the margins to reinvestment and the
followers will also be attracted.

Identify the comparative advantage: Bangladesh might have ample sources of raw
materials of leather products. However, instead of process them, they may consider to import
part of the semi-produced or finished leather form outside in order to spare the sources of
processing and thus put the sources in the production of leather products if they can gain the
profit by doing so. They may also identify the other parts in which they could gain the
comparative advantages aiming to maximum the production with the lowest costs.

The constant improvement and upgrading is a very important factor of maintaining the
competitive advantage. Familiar with the electronic device industry, the leather production
industry also needs to improve and upgrade in both the technology and the style of the
products. Bangladesh leather industry although have the skilled labours and know-how, it still
to import the ideas of new technologies from the competitor countries continuously and the
styles and qualities should also be upgrade and adapt to the local markets where they export
their products to. The Bangladesh leather industry wont be fallen only by continuous
investigation, learning and trial.

Conclusion

Government of Bangladesh supports leather industry to make it more successful. The

standard and quality of leather is competitive and lower price in the international market.
During the time of EID-UL-AZHA the production of leather increases very high. On that
time the supply of leather of also increases. With this abundant supply of raw material export
markets for footwear and leather goods can develop. The exporters of leather mainly export
the raw leather from Bangladesh. However leather footwear, garments and other leather
products like bags, wallets, belts, purses etc.have potential to be exported.The world's
demand for fine leather can be influenced as much by its appeal as a status symbol as by its
utilitarian value.