Economic Analysis On The Footwear Indust

ECONOMIC ANALYSIS ON THE
FOOTWEAR INDUSTRY OF BANGLADESH
Prepared for:
Dr. A. K. M. Saiful Majid
Ph. D, Senior Fulbright Fellow (USA)
Course Instructor: Managerial Economics Professor
Prepared by:
Md. Arif Mahmud(ZR 48)
Asma Ul Husna (RQ 49)
Abu Salman Mohammad Abdullah (ZR52)
Anika Rahman (RQ 53)
MBA – 52ndDay Batch
Institute of Business Administration

University of Dhaka
November 9, 2015
ECONOMIC ANALYSIS ON THE FOOTWEAR INDUSTRY IN
BANGLADESH
2015
Dhaka University
Dhaka – 1000
November 9, 2015
Dr. A. K. M. Saiful Majid
Professor
Dhaka University
Dear Sir,
With due respect, we are submitting you our project proposal “Economic Analysis on the
footwear Industry of Bangladesh” for the Managerial Economics course instructed by you.
The project is extremely interesting to work on as it will give us the opportunity to have a
detailed insight of the economic factors in real life application.
We would like to take this opportunity to thank you for helping us immensely in almost every
possible way to get our project proposal prepared.
We have done this paper with our utmost sincerity and hope that our proposal will be appreciated
by you. If you need any assistance from us in interpreting our proposal we are always available
at your convenient time. We would be glad, to answer any queries if needed.
Sincerely,
_____________ _____________ ______________ ___________
Md. Arif Mahmud Asma Ul Husna Abu Salman Mohammad Abdullah Anika Rahman
Roll: 48 Roll: 49 Roll: 52 Roll: 53
Batch: 52D Batch: 52D Batch: 52D Batch: 52D

BANGLADESH
2015
Acknowledgement
We are thankful to Almighty God who enables us to accomplish this task with due care.
We are especially thankful to our honorable course instructor Dr. A. K. M. Saiful Majid, Senior
Fulbright Fellow (USA), Professor, Institute of Business Administration, University of Dhaka,
who provided us guidance whenever we felt some difficulty. His knowledge, approach and
professionalism have always inspired us and helped us understand, analyze and solve problems
in a practical manner.
We also want to pay tribute to our worthy teachers who are the main source of enlightenment of
our mind. We are thankful to them as they have prepared me for looking at the matters of life
widely with open minds. This term paper is one of the sources of giving us knowledge about
―Economic Analysis on Footwear Products of Bangladesh: Bata, Apex & Fortuna.‖
We are very much grateful to the honorable bodies of footwear sector of Bata Shoe Company
Ltd., Apex footwear ltd and Fortuna Shoes Limited in Dhaka head office who extended their
whole hearted cooperation during this time.
Last but not the least, we express our overall gratitude to our institution, which actually provides
us the chance of having the academic requirement to prepare such a paper.

BANGLADESH
2015
TABLE OF CONTENT
LIST OF FIGURES ..................................................................................................................................................... I
LIST OF ACRONYMS ..............................................................................................................................................II
EXECUTIVE SUMMARY ...................................................................................................................................... III
1 INTRODUCTION ..............................................................................................................................................1
1.1 ORIGIN OF THE REPORT ................................................................................................................................2

1.2 RATIONALE OF THE STUDY ...........................................................................................................................3
1.3 OBJECTIVES OF THE REPORT .........................................................................................................................3
1.3.1 Broad Objective .......................................................................................................................................3
1.3.2 Specific Objectives ...................................................................................................................................3
1.4 SCOPE OF THE STUDY....................................................................................................................................4
1.5 METHODOLOGY ............................................................................................................................................4
1.5.1 Research Design ......................................................................................................................................5
1.5.2 Research Type ..........................................................................................................................................5
1.5.3 Sources of the Data Collection ................................................................................................................5
1.6 INSTRUMENTS OF DATA COLLECTION ...........................................................................................................7
1.7 SAMPLE DESIGN............................................................................................................................................7
1.7.1 Sampling Techniques ...........................................................................................................................7
1.7.2 Sample Size ..............................................................................................................................................8
1.8 LIST OF NEEDED INFORMATION ....................................................................................................................8
1.9 THE STUDY APPROACH .................................................................................................................................8
1.10 TIMELINE OF THE REPORT .............................................................................................................................9
1.11 LIMITATIONS.................................................................................................................................................9
2 LITERATURE REVIEW ..................................................................................................................................9
2.1 THE FOOTWEAR SUB-SECTOR ................................................................................................................... 21

2.2 MARKET INSIGHT: FOOTWEAR INDUSTRY IN BANGLADESH ........................................................................ 24
3 SECTOR OVERVIEW .................................................................................................................................... 28
3.1 HISTORY ..................................................................................................................................................... 28

3.2 SIZE ............................................................................................................................................................ 29
3.3 GROWTH ..................................................................................................................................................... 29
4 PROFILE OF BATA SHOE COMPANY (BANGLADESH) LIMITED .................................................... 30

BANGLADESH
2015
4.1 COMPANY OVERVIEW ................................................................................................................................. 30

4.1.1 Vision ..................................................................................................................................................... 32
4.1.2 Mission................................................................................................................................................... 32
4.1.3 History: .................................................................................................................................................. 33
5 PROFILE OF LEATHEREX FOOTWEAR INDUSTRIES LTD. .............................................................. 34
6 PROFILE OF APEX FOOTWEAR LIMITED ............................................................................................. 35

6.1.1 Mission................................................................................................................................................... 35
6.1.2 Vision ..................................................................................................................................................... 35
6.2 KEY REVENUE DRIVERS & COMPANY INSIGHT .......................................................................................... 36
6.3 FINANCIAL PERFORMANCE ......................................................................................................................... 36
7 PROFILE OF FORTUNA SHOES LTD. ....................................................................................................... 37

7.2 HISTORY ..................................................................................................................................................... 38
8 BASIC CONCEPTS OF MANAGERIAL ECONOMICS ............................................................................ 39
8.1 MICROECONOMICS AND MACROECONOMICS: BASIC CONCEPT................................................................... 39

8.2 THE CIRCULAR FLOW DIAGRAM ................................................................................................................. 44
8.3 THE MECHANISM OF INVISIBLE HAND ....................................................................................................... 46
9 TEN PRINCIPLES OF ECONOMICS ........................................................................................................... 47
10 IMPLICATIONS OF DEMAND AND SUPPLY ........................................................................................... 52
10.1 FACTORS AFFECTING DEMAND .................................................................................................................... 52

10.2 FACTORS AFFECTING SUPPLY ...................................................................................................................... 53
11 SHIFT IN DEMAND AND SUPPLY CURVE ............................................................................................... 54
11.1 FACTORS RESPONSIBLE FOR THE SHIFT IN FOOTWEAR PRODUCTS DEMAND CURVE ................................. 54
11.2 CONSEQUENCES OF SHIFTS IN DEMAND CURVE OF FOOTWEAR PRODUCTS LOAN ............................................. 57
11.3 FACTORS AFFECTING THE FOOTWEAR PRODUCTS SUPPLY CURVE ................................................................... 57
11.4 CONSEQUENCES OF SHIFTS IN SUPPLY CURVE OF FOOTWEAR PRODUCTS LOAN: .............................................. 60
11.5 FACTORS CUTTING ACROSS BOTH SUPPLY AND DEMAND ISSUES AND AFFECTING FOOTWEAR PRODUCTS
ACCESS TO INSTITUTIONAL FINANCE IN BANGLADESH ............................................................................................. 60
12 ELASTICITY ................................................................................................................................................... 62
12.1 PRICE ELASTICITY OF DEMAND .................................................................................................................. 62

12.2 INCOME ELASTICITY OF DEMAND ............................................................................................................... 63
12.3 CROSS PRICE ELASTICITY ........................................................................................................................... 63
BANGLADESH
2015
12.4 APPLICATION OF ELASTICITY IN THE FOOTWEAR PRODUCTS SECTOR OF BANGLADESH ............................. 63

12.5 EFFECTS OF DIFFERENT DETERMINANTS OF PED IN THE FOOTWEAR PRODUCTS SECTOR OF BANGLADESH 65
13 EFFECT OF GOVERNMENT POLICIES ................................................................................................... 67
14 PRODUCTION THEORY AND COST CONCEPTS .................................................................................. 67
14.1 FACTORS OF PRODUCTION .......................................................................................................................... 67

14.2 ECONOMIES OF SCALE ................................................................................................................................ 69
15 MARKET STRUCTURE ................................................................................................................................. 69
15.1 ESTABLISHED MARKET STRUCTURE ........................................................................................................... 69

15.2 OVERALL MARKET COMPETITION .............................................................................................................. 70
15.3 PRICING STRATEGY CHOICES ..................................................................................................................... 70
16 PRODUCTION POSSIBILITIES FRONTIER ............................................................................................ 74
17 COST STRUCTURE AND APPLICATION .................................................................................................. 75
17.1 COST OF MISSED OPPORTUNITY................................................................................................................. 76

17.2 COST OF BEING UNABLE TO MATCH PRICE ................................................................................................ 76
17.3 COST OF MATCHING RISK WITH RETURN ................................................................................................... 77
18 RECOMMENDATION ................................................................................................................................... 77
19 CONCLUSION ................................................................................................................................................. 79
BIBLIOGRAPHY ...................................................................................................................................................... 81
APPENDIX ................................................................................................................................................................ 83
QUESTIONNAIRE FOR FGD: ...................................................................................................................................... 83

BANGLADESH
2015
List of Figures
Figure 1: Sources of Secondary Data ............................................................................................................ 7

Figure 2:Gantt chart shows the timeline of the report................................................................................... 9
Figure 3 :Leather industry exports (USD million) ...................................................................................... 14
Figure 4: Growth of exports ........................................................................................................................ 16
Figure 5: Export basket of Bangladesh ....................................................................................................... 17
Figure 6: Leather industry export market structure..................................................................................... 18
Figure 7: Top Exporters of Leather, Leather Goods & Footwear ............................................................... 21
Figure 8: Market Size of footwear sector in Bangladesh ............................................................................ 29
Figure 9: The growth of footwear export of Bangladesh in US Dollar Thousand ...................................... 30
Figure 10: Circular flow diagram................................................................................................................ 44
Figure 11: Revenue ..................................................................................................................................... 45
Figure 12: Production possibilities frontier ................................................................................................ 74
i
BANGLADESH
2015
List of Acronyms
BB: Bangladesh Bank
R & D: Research & Development
MDGs Millennium Development Goals
ATM: Automated Teller Machine
LTR: Letter of Trust Receipt
LC: Letter of Credit
PPF: production possibilities frontier
FD: Fixed deposit
IR: Interest Rate
NPL: Nonperforming Loan
PED: Price Elasticity of Demand
ADB: Asian Development Bank
FDR: Fixed Deposit Receipt
ii
BANGLADESH
2015
Executive Summary
This term paper is basically prepared on the basis of our theoretical learning of
Economics theory in our Managerial Economics course and what really is going on in the
market. Throughout the paper it is tried to find out the linkages between theoretical knowledge of
Economics and practical aspects of footwear products of our companies- Bata Shoe Company,
Apex footwear Ltd, Fortuna Shoes Limited. We have given a brief overview of the selected
nature of business, their milestones and products and services offered by them. For relating it
with the theoretical learning of Economic theory we gathered and analyzed data, which are
mostly secondary in type. Primary data are also collected by personal depth interviews. The
annual reports of the selected companies are analyzed thoroughly for secondary data. The things
which are correlated here are Micro and macroeconomic factors, 10 principles of Mankiw,
demand, supply and elasticity of footwear products at present at the selected companies. Also
what the market structure is and how comparative advantage can help the companies is
expanding their business. Moreover focus was also put on the impact of interest rate ceiling,
interest rate flooring, and their effect on market. Lastly, the effects of tax imposed on borrowers
or lenders and their effects on the market outcome and effects of government and Bangladesh
bank regulations in leather and non leather market are correlated with our theoretical learning.
The findings are that demand of footwear products is increasing although the interest rate is
rising because other factors other than interest rate are also changing. We also found that price
(interest) elasticity of demand for footwear products is inelastic in the short run and elastic in the
long run. Besides availability of close substitutes, importance, durability and time horizon work
iii
BANGLADESH
2015
as price (interest) elasticity of demand‘s determinants for the products of Bangladesh. In the
study of interest rate control it is found that both the ceiling and flooring when binding
negatively influence the footwear market and those who are supposed to get benefit from these
sometimes don‗t get any advantage rather biasness results from. Moreover taxes discourage
market activity. When tax is imposed it moves the equilibrium point and reduces borrowing and
lending. Overall we tried to analyze the footwear products of selected companies from different
economic perspective.
iv
BANGLADESH
2015
1 Introduction
With the development of financial markets, the potential for new businesses and the arrival of
entrepreneurs are increasing. Economic growth has seen a booming landscape in the context of
Bangladesh. Bangladesh has developed its position from lower income country to lower middle
income country. This advancement has been possible with the help of some growing sectors of
Bangladesh. Footwear industry is one of those booming sectors of Bangladesh.
Economic growth, nowadays, largely depends on the entry of innovative business projects. The
country‘s exports of leather products and footwear have been increasing year by year, and the
sector could become the second largest foreign currency earner—after readymade garments
(RMG)—if Bangladesh is able to attract investors by providing them land and capital at
affordable rates. According to the Export Promotion Bureau (EPB), in the first nine months of
the current financial year 2014–15, the country posted a 23.40 per cent growth in footwear
exports, compared to the same period a year ago. Bangladesh earned USD 354.22 million from
exports of leather footwear in the July–March period in the fiscal year. (CPD, 2015)
Footwear is the basis of one of the oldest industries in Bangladesh and plays a significant rolein
the national economy with a good reputation worldwide. This is an agro-based by-product
industry with locally available indigenous raw materials having a potential for export
development and sustained growth over the coming years. Bangladeshi shoes are widely known
around the world for its high quality of fine gain, uniform fiber structure, smooth feel and natural
1
BANGLADESH
2015
texture. Real progress in terms of product development with respect to crust and finished leather
began in the 1990s.
However, in the report published by CPD in 2015, it says that the rising labour costs in China
have made big retailers look to countries like Vietnam, the Philippines, Bangladesh and India.
Leather sector businessmen say Bangladesh is an attractive destination for leather sector
entrepreneurs, as China is facing problems in the sector. When asked what the government
should do at this moment to attract the producers leaving China to come to Bangladesh, Nasim
Manzur, also the managing director of Apex Footwear Ltd and president of Metropolitan
Chamber of Commerce and Industries (MCCI), said the overall cost of business has to be
reduced to attract foreign investors. (CPD, 2015)
The good part of being of this economic growth is that foreign entrepreneurs are interested in
Bangladesh‘s footwear industry. It has been made possible the availability of raw hide, low
labour costs, the very young workforce, and the large market. (CPD, 2015)
1.1 Origin of the Report
Nowadays, footwear industry has become a significant sector for economic growth in
Bangladesh. After ready-made garment sectors, footwear industry has been the main concern of
the investors. As part of the Managerial Economics course, all MBA students of Institute of
Business Administration (IBA), University of Dhaka, are required to prepare a term paper on any
product under the supervision of our honorable course instructor Professor A.K.M Saiful Majid.
The topic we have chosen is ―Economic Analysis of Footwear Industry of Bangladesh.‖
2
BANGLADESH
2015
This study, therefore, will be conducted to fulfill the requirements of 3rd semester MBA program
of the Institute of Business Administration (IBA) and gain an insight about the present condition
of footwear industry sectors.
1.2 Rationale of the Study
The rationale of this study is to understand the applications of economic theories in the footwear
products of the footwear industry. It has been a widely discussed topic in terms of its
contribution to the country's economic growth. However, there are very few studies that
extensively discuss about the application of the economic theories in this sector. This study aims
to contribute in that aspect.
1.3 Objectives of the Report
1.3.1 Broad Objective
The main aim is to relate the theoretical part of Economics that we are learning to the footwear
products of the chosen companies.
1.3.2 Specific Objectives
 To provide an overall idea about how the chosen companies perform their footwear
sectors.
 To highlight the performance of the chosen companies regarding footwear
 To show how the principles of Economics relate to footwear
 To identify the demand, supply and equilibrium point of footwear.
 To analyze market competition structure of the industry
 To point out the factors causing the shifts of demand and supply curve
 To study the elasticity of footwear products
3
BANGLADESH
2015
 To examine pricing strategy followed by the chosen companies in their footwear
products
 To examine the application of Game Theory
 To analyze the policy of Bangladesh governments for footwear sector
 To illustrate the effects of price control and tax and Bangladesh bank policies on
footwear industry.
1.4 Scope of the Study
The report mainly analyzes the existing footwear products of the chosen companies. The
following scopes are targeted to complete this study:
 To cover the footwear products of the chosen companies and analyze the companies‘
present economic condition.
 To focus on different economic principles and concepts practiced in the case of the
chosen companies‘ footwear products
 To learn the economic policies that the chosen companies follow in their business
regarding footwear products
 To show Comparative study between chosen companies in Bangladesh
To fulfill these goals above, we will visit chosen companies‘ footwear divisions and talk with
the officials. The survey on footwear sector can also help us receive an overall image of chosen
companies‘ market of footwear business.
1.5 Methodology
4
BANGLADESH
2015
1.5.1 Research Design
The study will be conducted in two stages. The primary stage will be exploratory in nature.
Firstly, we will review the footwear sectors of Bata Shoe Company (Bangladesh) Ltd., Apex
Footwear Ltd., Leatherex Footwear Industries Ltd. and Bay Footwear Ltd. from their website
and the published report. Secondly, we will read different articles from different newspapers on
current scenario of overall footwear industry. Afterwards, we will talk to the managers and some
other employees of footwear divisions of the selected companies. The second phase of the report
is descriptive, also known as statistical research that describes data and characteristics about the
population or phenomenon being studied, in nature. Here we will try to relate the theoretical
matters with the current practice of the above mentioned companies. For that purpose a fixed
alternative questionnaire will be developed based of the exploratory research done earlier.
Secondly, depth interview will be conducted with the respective respondents to get a clear
picture of the study. Thirdly, data will be gathered and analyzed. And finally, report will be
compiled and completed.
1.5.2 Research Type
―Exploratory Research‖ will be done to collect data and statistics. Under the broad classification
of exploratory research, depth interview will be focused.
1.5.3 Sources of the Data Collection
Both primary data and secondary data will be collected to make this report.
(a) Primary Data:
 Discussion with the respective organization's officials on the basis of questionnaire.
5
BANGLADESH
2015
 Survey on some potential or existing customers of footwear products. Questionnaire
will be designed with both open-ended and close-ended questions. The survey will
be conducted on footwear products of the chosen companies in Gazipur, Gulshan,
Dhanmondi, Banani. The total number of respondents in different areas of Dhaka
city will be around 40. We will also conduct the survey online. The process was like
below:
Questionnaire Development
Data Collection
Data Analysis
Report Writing
For the completion of the present study, we will also collect secondary data.
(b) Secondary Data:
The main sources of secondary data are:
 Annual Reports of the chosen companies.
 Website of chosen companies and Leathergoods & Footwear Manufacturers &
Exporters Association of Bangladesh (LFMEAB)
 Data from published reports of SEC, DSE
 Different Books, Journals, Periodicals, News Papers etc.
6
BANGLADESH
2015
Different
Books, Journals,
Periodicals,
Newspapers etc.
Internet Existing Surveys
Annual Reports of Secondary Statistical Year

Bata & Apex Data Books
Figure 1: Sources of Secondary Data
1.6 Instruments of Data Collection
The major instrument for data collection is the questionnaire. Moreover
explorative study on published reports has also been used to gather data. The major
instruments are:
 Newspaper article
 Published report of selected companies
 Magazine articles & previous research work
1.7 Sample Design
1.7.1 Sampling Techniques
The sampling technique is convenience sampling. The reason behind this is that
the data have to be collected from some selected employees of chosen companies who have
7
BANGLADESH
2015
access and full understanding of footwear sectors. So we can only get that relative information
from the convenient sample.
1.7.2 Sample Size
The sample size will be very low. Getting data from the ultimate borrowers is
pretty difficult since they are not easily identifiable in an area. For the customer survey sample
size will be 40 and for the depth interview of the employees of the chosen companies will be 40.
1.8 List of Needed Information
The information needed was the followings:
 The total demand for footwear products for the set period
 The total supply of footwear products for the set period
 Competition in the market and the market structure
 Pricing Strategies
1.9 The Study Approach
To collect the qualitative data the following three approaches were used:
 Discussion
 Personal interview
 The observation method
While collecting the primary data the instant responses are found and it is possible to
observe the real situation. The information is collected by the way of face-to-face interviews and
discussions with each individual.

8
BANGLADESH
2015
1.10 Timeline of the Report

14-Sep 21-Sep 28-Sep 5-Oct 12-Oct 19-Oct 26-Oct 2-Nov
Research Proposal Submission
Research Design
Literature Survey
Secondary Data Collection Start Date

Designing Primary Data Collection Duration
Contacting Organizations
Data Analysis
Report Writing
Report Submission
Figure 2:Gantt chart shows the timeline of the report
1.11 Limitations
During the study, we may experience some limitations. These are as follows:
 Difficulty in accessing data of selected companies‘ internal operations.
 Some preceding and latest data might not be available.
 Some information might not be disclosed because of the confidentiality of the
organization.
 Due to insufficient amount of research conducted in this field, it was difficult to find
secondary data.
2 Literature Review
Footwear industry in Bangladesh

9
BANGLADESH
2015
The Footwear Industry in Bangladesh has started since the colonial era, although its
modernization took place only in the late 1980s. During the British period, there was no footwear
manufacturing firm producing on a mass scale in East Bengal. However, a traditional cottage
type footwear industry with limited production facilities existed in a skeleton form in the district
towns during that time. Various types of footwear were imported, mainly from Calcutta. After
the partition of Bengal in 1947, foot wears were imported from West Pakistan.
When Bata Shoe Company established its manufacturing plant at Tongi in 1962, it was the first
manufacturing plant to produce shoes on a large scale in East Pakistan. In 1967, Eastern
Progressive Shoe Industries (EPSI) established its production plant. It began exporting footwear
to USSR, Czechoslovakia and England. Both Bata and EPSI held major shares in the local
footwear market. The footwear industry suffered a major setback during the war of liberation but
was rehabilitated after independence. New footwear manufacturing units have recently been
established. Among them are Apex Footwear, Excelsior Shoes, and Paragon Leather and
Footwear Industries.
Japan and Germany are now the biggest markets for Bangladeshi footwear but US buyers are
increasingly showing interest in sourcing from Bangladesh. Bangladesh could have a billion
dollar footwear export sector by 2013, claim local shoe manufacturers on the basis of both the
current growth in shipments and the increased production capacity in factories under
construction. If their assessment is correct, in a three-year period the level of exports can
increase five-fold from the $205 million worth of shoes that were exported in the last fiscal year
that ended in June 2010.
Multitude of products
10
BANGLADESH
2015
Bangladesh has a host of potential products that can earn substantially large amounts of foreign
exchange, if only the necessary patronage from the overseas buyers is given for the sake of
expanding the country‘s export base and thereby reach a sustainable status for the country‘s
export trade.
Recently, a new opportunity has opened up to further diversify the range of Bangladesh‘s export
base by including footwear and other leather goods in the list of exports particularly to the
European Union (EU) market.
However, the country has already been exporting finished leather and different kinds of leather
products to the overseas markets. These products also enjoyed considerable demand because of
their high quality. The main reason for this was the natural advantage of leather that Bangladesh
produces. Despite the high quality of local animal hides both in raw and finished form,
Bangladesh was still trailing behind Vietnam and China in the export of footwear and other
leather products in the European and other markets.
Manufacturing Hub
Bangladesh is set to emerge as the next manufacturing hub for the global footwear industry. The
cheap labor is prompting top manufacturers to relocate their factories in the country. The good
news is that a number of foreign investors as well as buyers have already shown interest in
Bangladesh‘s leather and footwear sector.
Recently, the president of the Bangladesh Finished Leather, Leather Goods and Footwear
Exporters Association (BFLLGFEA) informed all concerned that three large investors in the
footwear sector from Taiwan would set up footwear factories in the Dhaka and Chittagong
11
BANGLADESH
2015
Exporting zones. The buyers from EU, as well as other very highly developed industrial nations
like Japan have reportedly been showing importance in Bangladeshi leather products. All these
developments look promising for the local footwear industry.
The Export Processing Zones at present have 18 shoe and leather goods factories but there are at
least seven large factories under construction, mostly owned by big manufacturers in the shoe
world. The factories under construction include Korean company Young one‘s footwear complex
which is said to be the largest in Asia. The company started construction of its mega shoe
complex in Chittagong six months back. The first part of the complex will go into production by
the middle of next year, and the company‘s executives said they would be able to manufacture
about 30 million pairs of shoes by 2013.
In addition, Taiwanese shoe manufacturer Pau Chen, which employs about 4,00,000 workers in
its factories in China and 50,000 in Vietnam, is also building a large manufacturing facility in
Chittagong. Australian manufacturer Bonbon Shoe, a supplier to Hugo Boss, and Xen Chen and
Genford of Taiwan., are also building footwear factories in Bangladesh. Apex-Adeichi also has a
new factory that will soon start production. With an annual turnover of about $100 million, the
Bangladesh-Italy joint venture is now the largest exporter of footwear. However, with a new
joint venture factory, Blue Ocean Footwear, due to go into production by February 2011, Apex
will get involved with a turnover of nearly $200 million of footwear export by 2013.
Growth rate
The local footwear industry is experiencing an annual growth rate of 21 percent, according to a
spokesman from another apex organization, Leather Goods and Footwear Manufacturers and
12
BANGLADESH
2015
Exporters Association of Bangladesh (LGFMEAB). However, to continue the trend, the present
level of growth has not only to be attained; it also has to be taken to a still higher level, if
Bangladesh is to match the success of its immediate competitor, Vietnam.
According to a newly released statistics from the Export Promotion Bureau of Bangladesh,
footwear exports from the country grew from US$61 million in the period of July-November
2007 to $85 million in the same period of 2008, recording a growth of 39 percent. In the first
four months of the 2010 fiscal year there has been $98 million worth of exports, a 65 per cent
increase from the same period last year. Taking this rate of growth into account, shoe industry
executives estimate that the current fiscal year‘s footwear export is likely to cross $300 million.
Though in the next two years the existing factories are likely to export more shoes, it is the new
capacity that will come on stream from early 2011 that is expected to cause the huge spurt in
growth.
Growth in exports is due to the low production cost in Bangladesh compared to its neighboring
countries: China, India and Vietnam, who also have a very well entrenched leather and footwear
export industry. Orders which earlier used to be given to China or India are now being handed
out to footwear manufacturers in Bangladesh because they are able to produce low-priced but
quality shoes, which have now found its way in to key markets in EU and Japan.
This growth in footwear exports has come as a blessing in disguise at a time when leather
exports have fallen by a massive 18 percent in the period under review. Experts attribute the
growth in footwear exports, thanks to machineries imported from Italy that is trusted for its
quality output. In recessionary trends, high-priced products tend to register a negative growth, as
consumers tend to shy away from them in preference for value for money items. In this scenario,
13
BANGLADESH
2015
it is a golden opportunity for the leather and footwear sector to increase its global market share.
(Footwear Industry Bangladesh)
Bangladesh’s Footwear Export:
Despite the political unrest in the country, previous fiscal years have exhibited remarkable surge
in exports of leather and leather goods, particularly of footwear, among the Bangladesh export
basket. Combined export of leather, leather goods, and footwear (leather and non-leather) went
up by 42 percent in FY2010-2011, 17.5 percent in FY2011-2012, 28 percent in FY2012-2013,
and 8.6 percent in FY2013-2014. Total leather industry export has marked a record with over
USD 1 billion in FY2013-2014; footwear alone accounted for around 71 percent of this.
Figure 3 :Leather industry exports (USD million)
14
BANGLADESH
2015
Source: Export Promotion Bureau (EPB) and Keystone Analytics
The rising trend of exports in this industry is shown in figure 1. Footwear export value is
projected to rise to USD 820 million by FY2019-20, while export of leather and other leather
goods alone is likely to cross USD 1 billion in export value in FY2017-18. Exporters, however,
targets USD 5 billion by the next four years, which will require high growth.
After RMG, leather industry is the largest in earning foreign exchange but with export share of
only 4.29% percent of the country's total exports. In the world leather market, it accounts for a
mere 0.56 percent of export share.
Although Bangladesh export basket is heavily skewed towards RMG export, several new sectors
have cropped up over the last decade. Footwear is one such sector which has tremendous
potential to significantly boost country‘s export while diversifying the economy‘s export basket.
Bangladesh‘s footwear export has doubled during 2010-13 and continues to rise further as
illustrated below. Bangladesh is involved in export of components at various stages of footwear
value chain ranging from raw materials to work-in-progress such as soles and finished goods like
shoes.
Although Bangladesh export basket is heavily skewed towards RMG export, several new sectors
have cropped up over the last decade. Footwear is one such sector which has tremendous
potential to significantly boost country‘s export while diversifying the economy‘s export basket.
15
BANGLADESH
2015
Bangladesh‘s footwear export has doubled during 2010-13 and continues to rise further as
illustrated below. Bangladesh is involved in export of components at various stages of footwear
value chain ranging from raw materials to work-in-progress such as soles and finished goods like
shoes. (Bangladesh Footwear Export)
Figure 4: Growth of exports
Growing necessity of export diversification:
Product Composition: The highest exported item, apparel clearly has dominance over the
country's exports, accounting for more than 80 percent of total exports in the country. The product
composition thus varies largely making the export basket highly unbalanced. Woven garments
and knitwear as shown on figure 2, captures around 80% of export market (around 24 billion
USD among a total export of worth 30 billion).
16
BANGLADESH
2015
Source: Export Promotion Bureau (EPB)
Figure 5: Export basket of Bangladesh
Among a total export value of USD 30.17 billion, only 3 sectors individually account for more
than USD 800 million mark (800m is only about 2.6% of total export): RMG, Leather and Jute.
Export diversification hence is crucial for the economy at this stage for effective participation in
the global trading system and easing the pressure on balance of payment situation.
Market Composition: Bangladesh exports leather products mainly to Italy, New Zealand, Poland,
the UK, Belgium, France, Germany, the US, Canada and Spain. Some emerging potential
importers include Japan, India, Nepal, and Australia. Of the total exports from the leather
industry, 60 percent go to the European Union (EU), 30 percent to Japan and 10 percent to the
rest of the world (see Figure 3). This high dependency on one region has caused significant
damages to export earnings due to the recent Euro crisis.
17
BANGLADESH
2015
Source: Export Promotion Bureau (EPB)
Figure 6: Leather industry export market structure
Majority of leather industry products are exported to EU as a result of which, the current Euro
devaluation crisis has led to a 20 per cent erosion of leather export values. This has made leather
products in Bangladesh relatively more expensive in the European market, discouraging
European importers. As a result there has been a substantial loss in market shares. Market
diversification therefore becomes essential for the economy at the present.
Competitive advantages of leather industry in Bangladesh
Bangladesh is increasingly becoming a preferred destination for leather and footwear sourcing. A
number of Chinese firms have already relocated in Bangladesh because of its competitive
advantages within the value chain which includes:
Low Labor Cost: Increasing production costs in China, the largest exporter of footwear, boosts
Bangladesh's export. Labor input cost is considerably higher in China compared to Bangladesh.
The production costs will increase more since the Chinese government has recently asked their
factory owners to provide pension and health schemes for workers. Bangladesh, thus, have a
18
BANGLADESH
2015
strong competitive advantage in terms of low cost input, which can be utilized to capture much of
China's export share, particularly of footwear.
High Supply of Rawhides: The industry is also adept in utilizing locally made high quality
finished leather to convert into more value added leather products, including footwear and other
leather goods such as bags, belts, purses, wallets, travelling kits, jackets, etc. Annually, around
250 million square feet of leather is produced in Bangladesh with supply peaking during the
religious festival of Eid. Rawhide supplies have been soaring, hovering around 7 million
pieces, with the tanneries struggling to keep up with the supply. Further enhancement in leather
production is expected once the construction of 200 acre Tannery Industrial Estate in Savar has
been completed. The leather industry, which is concentrated at Hazaribagh, will be relocated to
Savar. The park will include advanced Effluent Treatment Plants (ETPs) for treating the waste
generated while processing the leather in the tanneries. Half of the construction process is
complete.
Duty free and GSP facilities: The leather industry also enjoys certain incentives from the
government. The government has relaxed policies for the leather industry in order to shift to
Savar. The industry enjoys tariff and quota-free access to major markets such as EU under the
Generalized System of Preferences (GSP) coverage. The footwear sector receives benefits such as
bonded warehouse facilities, 100 percent duty drawback for re-exported inputs, 1.5 percent
income tax (compared to 15 percent for non-priority sectors), and tax-free import of capital
equipment. Leather footwear exports receive a 12.5 percent export subsidy targeted toward the
export of finished leather goods.
Major Exporting Companies in Bangladesh
19
BANGLADESH
2015
The leather and footwear industry primarily consists of SMEs which are the heart of the sector.
Over 3,500 SMEs and around 100 lead firms drive export, controlling over 90 percent of the
export market. However, the large firms are increasingly dependent on the SMEs as outsourcing
business is on the rise. Among the large firms, major exporters are mainly exporters of leather
footwear. Apex-Adelchi Footwear Limited is the market leader (accounting for 45 percent of the
total footwear export earnings). Among other major exporters are Jennys Shoes, Landmark
Footwear, Leatherex Footwear, Bay Footwear, etc. Leather footwear is the major exported item in
these companies besides other leather goods.
Global Exporters
China has been the leading exporter of leather goods and footwear with 45 percent and 41 percent
export share, respectively, at the end of 2013. Bangladesh had a 0.9 percent share in export of
leather (raw hides and finished leather), 0.4 percent share in footwear export, and 0.1 percent
share in leather goods export in the world market in 2013.
Source: International Trade Statistics (2013)
20
BANGLADESH
2015
Figure 7: Top Exporters of Leather, Leather Goods & Footwear
2.1 The footwear sub-sector
The footwear sub-sector requires special attention, given the rising demand of footwear in global
market and the value chain advantages that Bangladesh enjoys. The exports of footwear alone
accounts for the most part of total industry export. The major exporting companies all mainly
export leather footwear. Besides leather, footwear sourcing is also bringing in increased foreign
earnings for the country. The low input cost and supply side advantages boost the exports of this
sector as well. Several orders which earlier used to go to China and India are now coming to
Bangladesh. World famous brands such as Gucci, Nike, Timberland, Reebok, and ABC Mart
have been sourcing footwear from Bangladesh. Some of them are now even considering setting
up their own factories in Bangladesh.
The compliance issues, particularly criticism regarding the environmental hazards caused by the
tanneries at Hazaribagh, however, have dented the image of leather products in Bangladesh. The
non-leather footwear sector, which is free of such compliance issues, has thus recently emerged
as a high export sector. The input costs for non-leather footwear is even lower. A pair of non-
leather shoes costs USD 3.2, whereas leather shoes cost around USD 9. Synthetic substitutes for
leather and several other low cost materials such as jute and plastic are being used to manufacture
these products. The non-leather footwear sector has been exporting high quality, low priced
footwear to a number of leading global retailers including H&M, Decathlon, Kappa, Sketchers,
Fila, and Puma. Exports from this sector stood at USD 171.57 million last FY, 13.3 percent of the
leather industry's total export.
Challenges ahead
21
BANGLADESH
2015
The major challenges that this sector faces can be summarized as follows:
 The delay of movement of the tanneries from Hazaribagh to Savar is impeding the
progress of the leather industry. A number of foreign buyers have cancelled orders due to
the environmental issues at Hazaribagh.
 Lack of knowledge about international quality standards is a major challenge for the
leather industry. The industry is unaware of measures such as eco-labeling and
packaging, occupational standards, and environmental management requirements and
their growing importance to foreign buyers.
 The industry lacks adequately trained human resources in both factory and managerial
personnel.
 Access to the local market for exporters is limited, making them highly vulnerable to the
perils of stock lots and cancellations. In China and India, up to 50 percent of the total
output can be sold onto the local market, whilst still enjoying exporter status. In contrast,
local sales are taxed in Bangladesh at high rates of duty, making them too expensive for
the local market.
 Creating international brand image is challenging for the country given the lack of skilled
personnel in product innovation, design, and branding.
 There is an inadequacy in the diversification of leather products. For example, only
jackets are manufactured under leather apparel section.
 Lack of adequate financing hampers the growth of the small and medium enterprises
(SMEs).
 Loss of the GSP facilities from USA is detrimental for the footwear sector since USA is
the largest importer of footwear.
22
BANGLADESH
2015
Way forward
Following measures, if undertaken, can enhance the performance of the leather and footwear
sector and help achieve the target of USD 5 billion:
 A swift shift of the tanneries from Hazaribagh to Savar.
 Introducing financial incentives for SMEs and providing other necessary supporting
policies to raise productivity, improve quality, and make this sector globally competitive.
 Ensure sound environmental, occupational safety, and labor compliance measures to keep
up with international standards.
 Rationalized tariffs and access to the local market for exporters so that the sector does not
suffer from stock lots and cancellations.
 Supporting efforts for both product and market diversification (expanding market in the
countries other than EU and Japan).
 Establishing world-class training and research facilities such as a Leather Research
Institute, Footwear Development and Design Institute and manning these with highly
experienced and trained instructors and consultants to ensure development of this sector.
 Establishing design, product development, and product testing capabilities for this sector.
 Taking initiatives to make Bangladesh a member of international conferences to let the
country have a voice in the global market.
23
BANGLADESH
2015
2.2 Market Insight: Footwear industry in Bangladesh
24
BANGLADESH
2015
25
BANGLADESH
2015
(Footwear Industry of Bangladesh)
The list of some popular footwear companies of Bangladesh:
 Alliance Footwear & Leather Industry Ltd
 Akij Footwear Ltd
 Apex Footwear Ltd, B M Kings Ltd
 B.W. International Footwear Ltd
 Bata Shoe Co. (BD) Ltd
 Bengal Shoe Industries Ltd
26
BANGLADESH
2015
 BANBIZ (Pvt) Limited
 Blue Ocean Footwear Ltd
 Leatherex Footwear Ind. Ltd
 Patenga Footwear (Pvt.) Ltd
 Royal Shoes
 Tropical Shoes Ind. Ltd.
(Export Association of Bangladesh)
Some other emerging companies:
The Export Processing Zones at present have 18 shoe and leather goods factories but there are at
least seven large factories under construction, mostly owned by big manufacturers in the shoe
world.
The factories under construction include Korean company Youngone‘s footwear complex which
is said to be the largest in Asia. This year Youngone produces sportswear for Nike and other
leading brands, estimates that it will export $56 million worth of footwear. However, when the
new factory is completed next year the company expects to increase exports to at least $250
million by the end of 2013.The company started construction of its mega shoe complex in
Chittagong six months back. The first part of the complex will go into production by the middle
of next year, and the company‘s executives said they would be able to manufacture about 30
million pairs of shoes by 2013.
27
BANGLADESH
2015
In addition, Taiwanese shoe manufacturer Pau Chen, which employs about 4,00,000 workers in
its factories in China and 50,000 in Vietnam, is also building a large manufacturing facility in
Chittagong.
Australian manufacturer Bonbon Shoe, a supplier to Hugo Boss, and Xen Chen and Genford of
Taiwan, are also building footwear factories in Bangladesh. Apex-Adelchi also has a new factory
that will soon start production. With an annual turnover of about $100 million, the Bangladesh-
Italy joint venture is now the largest exporter of footwear. However, with a new joint venture
factory, Blue Ocean Footwear, due to go into production by February 2011, Apex will get
involved with a turnover of nearly $200 million of footwear export by 2013. (Foorwear sector
awaits a boom, 2010)
3 Sector Overview
3.1 History
Footwear processing is an old manufacturing sub-sector in Bangladesh. Availability of
indigenous raw material (hides and skins) facilitated the setting up of the industry in early 1940s
in the then East Bengal. During Pakistan period (1947-1971), the industry was dominated by
non-Bengali migrants from India, who had the knowledge and the know-how of leather
processing industry. A few small tanning units belonged to Bengali entrepreneurs who processed
leather mainly for the domestic market.
28
BANGLADESH
2015
After the independence of Bangladesh, the government took over the tannery industry abandoned
by the departing non-Bengali entrepreneurs but had limited success in operating them under the
public sector. Export of processed footwear consisted almost entirely of wet blue leather till
1980-81. After 1981, a number of policy support measures aimed at raising the level of value
addition in the industry provided incentive for new private investment in leather industry. The
ban on export of wet blue leather in June 1990 led to the setting up of modern leather tanning
units for the production of crust leather (tanned leather after further processing of wet blue
leather) and finished leather and this was followed by new investment in leather goods industry,
particularly leather footwear. (Bangladesh Institute of Development Studies, 2010)
3.2 Size
According to the Export Promotion Bureau Footwear was 8th Position (figure 3) which given in
the following table and the chart:
Woven
2%
1%
1% 2% Knit
9%
5% Frozen Food
37%
3% Jute
Leather
Agro Products
40% Engineering Products
Footwear
Others
Figure 8: Market Size of footwear sector in Bangladesh
3.3 Growth
29
BANGLADESH
2015
From international trade statistics it has been found that Footwear export increased of year 2011
than the year 2010 is 42.33%. So, we can say that it is raising sector of our country‘s growing
economy. The Footwear sector plays a significant role in the economy of Bangladesh in terms of
its contribution to export and domestic market. Figure 4 shows the growth of footwear export in
Bangladesh.
400,000
350,000
300,000
250,000
200,000
Growth
150,000
100,000
50,000
0
2007 2008 2009 2010 2011
Figure 9: The growth of footwear export of Bangladesh in US Dollar Thousand
4 Profile of Bata Shoe Company

(Bangladesh) Limited
4.1 Company overview
In Bangladesh, Bata Shoe Company (Bangladesh) Limited started its operation in 1962. The
company is one of the largest tax–paying corporate bodies contributing Tk. 1.2 billion (year
2009) which represents approximately 70% of tax paid by the entire footwear sector of
30
BANGLADESH
2015
Bangladesh. Currently Bata Shoe Company (Bangladesh) Limited Shoe Company (Bangladesh)
Limited operates two manufacturing facilities – one in Tongi and the other in Dhamrai. With a
production capacity of 110,000 pairs of shoes daily, the company also has a modern tannery
facility with an output of 5 million square feet of leather annually. Annual shoe sales currently
stand at slightly more than 30 million pairs with a turnover for the year 2009 of Tk 5 billion.
Bata Shoe Company (Bangladesh) Limited is playing a pivotal role in developing the leather
industry of the country. Bata Shoe Company (Bangladesh) Limited has a firm commitment to
eco-friendly business and a state of the art Effluent Treatment Plant (ETP) has been set up to
provide a pollution free environment for both workers and the locality.
Fashion would never be complete without a well designed pair of shoes. This marketing insight
has prompted Bata Shoe Company (Bangladesh) Limited to introduce a number of designers‘
collections for men, women and children. Internationally renowned brands such as Bata Shoe
Company (Bangladesh) Limited Comfit, Marie Claire, Hush Puppies, Scholl, Nike,
Bubblegummers, Sandak, Weinbrenner and B‘first are a few names that testify to the momentous
change towards branded shoe marketing in Bangladesh. Specialized shoe categories such as
athletic shoes have been targeted through development of the Power brand. Uncompromising
quality with striking designs have put Bata Shoe Company (Bangladesh) Limited shoes in a key
position to appeal to different segments of consumers.
Another major change in the Bata Shoe Company (Bangladesh) Limited business policy is the
segmentation of retail outlets according to profiles of different market segments and the
introduction of novel concepts such as Bata Shoe Company (Bangladesh) Limited City Stores.
These selective outlets, in conjunction with other types of outlets such as Bata Shoe Company
31
BANGLADESH
2015
(Bangladesh) Limited Bazar and Bata Shoe Company (Bangladesh) Limited Family Stores, are
adding a new level of consumer satisfaction. The City Stores incorporate spacious floor space
allowing a comfortable shopping experience, modern interior décor enriched with novel shelving
systems, fittings, fixtures and lighting that can be found in the large retail shops in the Far East
and Europe. Bata Shoe Company (Bangladesh) Limited has a network of 265 retail outlets
located strategically in different parts of the country. These retail outlets are an integral part of
our brand marketing. This extensive retail network is supplemented by an equally extensive
network of depots and dealers. Bata Shoe Company (Bangladesh) Limited has 13 Wholesale
depots covering Bangladesh. Under these depots 453 RWD (Registered Wholesale Dealers) and
670 DSP (Dealer Support Program) stores are operating. Bata Shoe Company (Bangladesh)
Limited Bangladesh has already developed its vision up to 2015 showing significant business
growth as well as increased market share.
4.1.1 Vision
To make great shoes accessible to everyone
4.1.2 Mission
To help people look and feel good
To be the customer's destination of choice
To attract and retain the best people
To remain the most respected Footwear Company
32
BANGLADESH
2015
4.1.3 History:
The Bata Shoe Organization was founded in 1894 by Czech businessman Tomas Bata in the city
of Zlin, what was then Czechoslovakia. Coming from a family of shoemakers with a long
heritage of eight generations and over three hundred years, Tomas Bata capitalized on
knowledge, expertise and skills to propel his newly founded company forward. The introduction
of factory automation, long distance retailing and modernized shoe making ensured the
profitability of the company from the very beginning. It is now the world‘s largest manufacturer
and marketer of footwear operating across the globe.
Since its founding, Bata has been at the forefront of innovation; not only in the production and
design of new styles, but in the creation of business models that permit a quick response to the
ever-changing wants and needs of our customers. As a result, Bata enjoys a long history as a
leading manufacturer and retailer of quality footwear, and proudly serves some one million
customers each day.
Today the Bata Shoe Organization is a sprawling geo-centric company encompassing operations
in more than 70 countries around the world. It serves over 1 million customers per day, employs
more than 30,000 people, operates more than 5,000 international retail outlets, manages retail
presence in over 70 countries and runs 27 production facilities across 20 countries.
Bata‘s reach is worldwide; its presence is local. Our novel international manufacturing structure
allows Bata facilities around the globe to respond to the unique needs and wants of local
customers. As a result, Bata is honored to be a local company in every country it serves. Bata
33
BANGLADESH
2015
continues to be guided by the same core principle it has followed for over one hundred years: to
know its customers and to create the best possible products to meet their needs.
In Bangladesh, Bata started its operation in 1962. Currently Bata Shoe Company (Bangladesh)
Limited operates two manufacturing facilities – one in Tongi and the other in Dhamrai. With a
production capacity of 160,000 pairs of shoes daily. Annual shoe sales currently stands about 30
million pairs.
5 Profile of Leatherex Footwear Industries

Ltd.
A 100% export oriented leather footwear industry has been working continuously with inherited
expertise and know-how. It is now a leading footwear industry in Bangladesh, catering to the
footwear needs of a global clientele.
Founded in March, 2000; Leatherex has utilized most modern state state-of-the-art machinery for
production of footwear and all its manufacturing operations are automated and manual both. This
permits a yearly production of up to 800,000 pairs pf shoes and sandals. Leatherex is operated
under technical collaboration with Japan, Italy and Taiwan.
Working Experience of a decade in the field of leather chemicals, processing of raw-hides to
finished leather, producing shoe upper to footwear, all contributed to shape the company to what
it is today.
34
BANGLADESH
2015
6 Profile of Apex Footwear Limited
6.1 Company Overview
 Apex Footwear Limited (AFL) is the leading manufacturer and exporter of leather
footwear from Bangladesh to major shoe retailers in Western Europe, North America and
Japan.
 The local retail wing was established in 1997.
 The company has revenues of USD 150 million in 2014.
 Apex provides high quality, fashionable footwear to the Bangladeshi consumers.
 With over 191 own retail outlets and 380 authorized resellers, it ensures nationwide
coverage of its diverse range of footwear for its consumers.
 Apex has nine in-house brands; namely Venturini, Apex, Sprint, Maverick, Moochie,
Nino Rossi, Sandra Rosa, Twinkler and SchoolSmart and one international brand i.e. Dr.
Mauch.
6.1.1 Mission
‘Honest Growth’
6.1.2 Vision
Through all its activities, AFL is committed to productivity and quality to attain its objective of
being a leading footwear manufacturer of Asia.

35
BANGLADESH
2015
Apex Adelchi Footwear Limited, the largest exporter of leather footwear from Bangladesh, was
incorporated on January 04, 1990 as a Public Limited Company. In 2006, it was renamed to
Apex Adelchi Footwear Limited after a collaboration deal with La Nuova Adelchi. The company
is an export oriented leather shoe and shoe components manufacturer, producing and selling
leather shoes and other leather products in the international market. The company is also selling
products in the domestic market through its more than 150 own retail outlets under the brand
name ―Gallerie Apex‖.
6.2 Key Revenue Drivers & Company Insight
Backward linkage with Apex Tannery helps the company to maintain superior product quality.
Also, collaboration with Adelchi has improved operational efficiency. The company is now
targeting to increase its market share in both thelocal and international retail market. With this
view, it has been opening large scale shops every year in the ountry and trying to increase its
exports in Japan and USA. The company has the capacity to produce 6.5 million pairs of shoes
and sandals a year. Currently, 92% of total capacity is utilized.Export income contributes about
74% of APEXADELFT‘s total revenue. The biggest export destination for the company is
European Union (EU).
6.3 Financial Performance
2012 was a challenging year for APEXADELFT. Declining consumer confidence and spending
in EU and difficult trading condition in the domestic country due to escalated cost and weaker
demand dampened business growth. Revenue grew a mere 2.62% YoY in 2012 compared to a
37% YoY in 2011. Meanwhile, Profit Margins remained stable, keeping NPAT almost flat.
36
BANGLADESH
2015
However, the company achieved significant growth in revenue and profits in Q1, 2013. Revenue
inc
reased by 43% on a Quarter to Quarter basis while NPAT grew by 58%.
Recently, the Company has reported consolidated net profit after tax
(excluding non-controlling interests) of Tk. 48.43 million with consolidated EPS of Tk. 4.31 for
the period of three months (January'13 to March'13) as against Tk.30.59 million and Tk.
2.72respectively for the same period of the previous year
7 Profile of Fortuna Shoes Ltd.
7.1 Company Overview
 Fortuna Shoes & Bag Ltd is one of the leading footwear companies in Bangladesh.
 It is a fast growing footwear and leather products manufacturing company.
 It has established country's first shoe mould manufacturing factory.
 Fortuna opened its first outlet in Gulshan in 2010. It now has 16 stores across the country
and has plans to take the number to 100 in future.
 They have four lasting lines.
 Fortuna makes more than 10,000 pairs of shoes a day, with a vision to take the production
to 40,000 pairs in a year or two.
37
BANGLADESH
2015
 The company exports 2 lakh to 2.5 lakh pairs of fabric footwear every month to various
countries.
 Fortuna was the first Bangladeshi company to supply footwear to Swedish retail-clothing
giant H&M.
 Another unique thing about Fortuna is that it recruited garment workers and trained them.
More than 85 percent of its workers came from the garment sector.
 Fortuna has investments in IT, insurance, financial leasing, digital marketing, market
research and start-ups.
7.2 History
Fortuna is a privately held entrepreneurial and innovative company located in Dhaka,
Bangladesh. The fortuna management team has over 40 years of entrepreneurial business
experience and has assets operating in different market sectors internationally. Our team of
managers at fortuna led by the highly experienced industrialist M. Abu Taher, possess years of
experience and technical acumen.
Bangladesh footwear & bag industry has developed much in recent years. Fortuna Shoes & Bag
Ltd is one of the leading footwear company in Bangladesh. The state of the art footwear & bag
manufacturing plant has a capacity to produce 6000 pairs of shoes & 500 bags per day. We have
four lasting lines. The 40,000-sqft factory in Unit 1 and 30,000 sqft Unit 2 is located in Fortuna
Park, Kunia, Gazipur Bangladesh.fortuna is open to strategic partnerships and joint ventures that
will help both sides to develop further and prosper in the long run. fortuna is currently looking
for joint ventures in their shoe, bag, agro and fast food project.
38
BANGLADESH
2015
8 Basic concepts of managerial economics
8.1 Microeconomics and Macroeconomics: Basic Concept
The distinction between micro and macroeconomics is important to understand the business
environment. Mostly the theories and tools of microeconomics are important for understanding
the logic behind the business strategies pursued by the organizations. However, macro-economic
concepts are also important because understanding the overall economic condition and impact of
parameters such as monetary policy, inflation, GDP, influence the business decisions.
Microeconomics is basically the study of individual economic entity such as household, firm and
unit of government. The rationale behind the decisions of any individual entity is the prime
concern of microeconomics. Bata Shoe Company (Bangladesh) Limited is a single business unit
operating in the shoe sector. As a single entity in the sector, it takes its decision based on the
profit seeking motives. Bata Shoe Company (Bangladesh) Limited has its own resources and
always try to maximize the output by ensuring efficient usage of those resources. It always
monitors the market demand and supply and offers the best competitive price to be a strong
participant. It also gives taxes to the government and does many welfare activities. However, all
the activities are directed toward making a good profit out of the market.
Bata Shoe Company (Bangladesh) Limited also makes decisions by examining the market
condition as a whole. It monitors the inflation rate, GDP of the country, and monetary policy to
set its business activity accordingly. National income, the unemployment rate, decrease/increase
in the price level, and many such parameters affect the business environment both positively and
negatively. Ultimately, they try to minimize the negative effect of any changes related to those
39
BANGLADESH
2015
macroeconomic factors. Economic growth and other social advancement help them to charge
high prices for the activities provided by Bata Shoe Company (Bangladesh) Limited and thus
ensure sizeable profit.
Marginal and Total Utility
The measure of satisfaction that is derived by consumers from the consumption of goods
Utility is. It so often happens that after continuous and successive consumption of units of the
same goods, the satisfaction that is experienced by a consumer starts decreasing. This often
results in short-term or long-term fall in sales. Some organizations prepare for the launch of
another brand, before the fall in utility and sales is experienced. The launch of new brand ensures
that the revenue trend of the business does not fall. Diminishing utility is among the external
factors affecting business.
Money and Banking
Our selected companies provide services which are highly affected by the banking
facilities, monetary and fiscal policies. These also affect business and the customers of the
business. Money in circulation dictates the purchasing power or rather the demand of the
consumers. On the other hand, the banking facility dictates the borrowing capacity of individuals
as well as the business. The banking policies play a decisive role in affecting the prices of goods
and interest rates along with investment and asset prices. The monetary policies of countries also
influence the economic activities and inflation. This whole dynamic process is also known as
monetary policy transmission mechanism.
Economic Growth and Development
40
BANGLADESH
2015
Economic growth dictates the amount of finances that the society at large is earning and
development indicates the volume of money that is being invested into channels of long-term up
gradation. Among all the economic factors, development is the most important one, as a business
has to cater to the demands of an economically dynamic society. For example, the luxury brands
perform well during an economic upturn, much more than the companies which produce
essential offerings.
The footwear products of our selected companies also play an important role for economic
growth and development of the country. The loans provided by companies to the small and
medium enterprises help them to flourish which results in economic growth and development.
Income and Employment
Other important aspects of the economy that affects the operation are the employment
density and income of the consumers. The per capita income and density of employment
determines the rate of demand, density of demand, and also the purchasing power of the people.
For example, during an economic upturn, there are employment opportunities which generate
income that enables people to possess a stronger purchasing power. On the contrary, as the
employment density and income rate go down during recession period, the purchasing power of
the people also diminishes.
General Price Level
Another very important aspect of the economy that plays a part in the growth of business
is the general price levels of products & services. Costs of raw materials, paying power of
people, cost of production, and cost of transportation are some of the most important components
that determine the general price levels of the products and services and profit margin of a
business.
41
BANGLADESH
2015
Trade Cycles
A trade cycle plays a part in fluctuation of the costs of products and services in an
economy. Economic boom, recession, depression, and recovery are the phases of a business
cycle that affect the demand and supply of all goods. Also, trade cycles often affect the general
price levels of essential and non-essential commodities.
Inflation
Inflation is a phenomenon that occurs when there is too much supply of money in the
economy that is not supported by the output of goods and services. As there is a lot of money
floating around, the prices of goods also increase in order to sustain the businesses, resulting in
the increase of costs of raw materials which are needed for production. A hike in the prices of
raw materials, thus, also increases the cost of a product.
In simple words, the buying capacity of people decreases, when their incomes remain
constant but the prices of products and services increase. This affects the demand for the goods.
For example, in 2008, Zimbabwe faced the worst case of inflation, which proved disastrous for
its economy and led to the abandonment of its currency.
Recession
During recession, companies face a decrease in sales revenues and profits. To curtail cost,
they resort to cutting back on hiring new employees, making capital expenditure, marketing and
advertising expenditures, research and development activities, etc. This not only affects large
organizations, but also the small ones which act as vendors to these big companies. Smaller
organizations may find it difficult to survive in recession due to lack of financial funds or
availability of loans. Also, people may shift their preferences to slightly affordable products
during recession or may not spend on luxury items at all. This will also have a negative impact
42
BANGLADESH
2015
on the demand for these products. Factors like falling stocks, lack of dividends, below par
quality, employee lay-offs, bankruptcy, etc. during recession may also affect the business
adversely. For example, in 2007, when the banking industry was unable to face the meltdown of
the mortgage market, it inadvertently led to a free fall of the stock market and a decrease in
consumer spending. It also set into motion a chain of events that resulted into a global recession
within a year.
Exchange Rate
When a company buys certain goods from a US-based organization, it will have to
convert its currency into US dollars for making the payment. If the currency of the buyer is
stronger than the US dollar, it will be beneficial for the company. However, if it is weak, the
company will have to shell out more money. This was an example of an export business. A
similar logic will also be applicable to the import business. Moreover, price competition in the
international market often leads to fluctuating prices.
Government Regulations
There are several government agencies that regulate businesses for the safety of humans,
animals, and environment. Some industries are heavily regulated and introduction of new laws
discourage uncontrolled growth of factories and plants. For example, a coal-powered power plant
may be asked to be shut down because of an environmental threat it poses. This may affect a
business drastically.
Every changing factor in an economy affects the working of businesses. Hence,
companies need to have a foolproof strategy and contingency revenue reserves to cope with such
dynamic changes. It is best to take calculated risks and expand a business when the rates of
interest are low and the demand is high.

43
BANGLADESH
2015
8.2 The Circular Flow Diagram
Revenue Spending
Market for Bata shoes
 Bata sells
Shoes sold  Households buy
Shoes bought
bought
Household/Customers
Bata Shoe Company
(Bangladesh) Limited
Circular  Buy & consume
 Produce & sell shoes Flow shoes

 Own & sells
 Buys/hires factor of Diagram factors of
production production
Factors of Market for Factor of Land, Labor,

Production Production & Capital
 Household sells
 Bata Shoe Buys
Wages, Rent, Profit Household Income
Figure 10: Circular flow diagram
From the circular flow diagram, we can see that the household supplies the factors of production
which are land, labor, and capital and also receives the income from the services provided to
44
BANGLADESH
2015
Bata Shoe Company (Bangladesh) Limited. On the other hand, Bata Shoe Company
(Bangladesh) Limited acquires the necessary people/human resources as well as the land for
office buildings, and capital by selling share in the stock market. Household receives the shoes
from Bata Shoe Company (Bangladesh) Limited and pays for the shoes and Bata Shoe Company
(Bangladesh) Limited earns the revenues. The revenue stream is shown in the following chart:
Revenue of Bata
9,000,000,000
8,000,000,000
7,000,000,000
6,000,000,000
Revenue in Taka
5,000,000,000
4,000,000,000
3,000,000,000
2,000,000,000
1,000,000,000
0
2008 2009 2010 2011 2012 2013
Year
Figure 11: Revenue
45
BANGLADESH
2015
8.3 The Mechanism of Invisible Hand
The concept of individual hand helps to understand the underlying motives for any organization
to do business. Invisible hand concept was first introduced by Adam Smith, the father of
economics, in his revolutionary book ―The Wealth of Nations‖ in 1776. This concept has
relevance in all the business operations because society is influenced by the invisible hand and
ultimately does the welfare of the society. It is discussed briefly in the following section.
Bata Shoe Company (Bangladesh) Limited started its business with the motive of making profit
because of several factors such as low employee cost, low infrastructure development and
maintenance costs, and so on. It was successful in making profit in the initial years and even
now. Hopefully, in future, their business will provide benefit to the stockholders.
However, the organization is actually making good for the society too. First of all, the
organization provides tax to the government and Bata Shoe Company (Bangladesh) Limited
consistently have become one of the top tax payers in Bangladesh. Bangladesh government use
the tax, paid by the company, in various sector: from construction of roads to education. Thus,
the country is getting indirect benefit from the operations of Bata Shoe Company (Bangladesh)
Limited.
Bata Shoe Company (Bangladesh) Limited also employs lot of people in Bangladesh. The
company pays a competitive salary to the employees and thus money is flowing to the
households. The standard of living of the employees is increasing and they are living a better life.
This company also increased the average salary level of the shoes industry.
Bata Shoe Company (Bangladesh) Limited actually depends on the price signals which they get
form the market. This price signaling is the main determinant of the invisible hand. Both the
46
BANGLADESH
2015
company and the household react to the price signals. Company expand its operations, employs
more people, provide more tax as well as households demands money from the signals they get
from the market.
9 Ten principles of economics
Ten principles of economics are the guiding policy for of the each firm and business units and
most important areas in the field of economics. In every step taken by the business unit, at least
one of the principles is behind that. In the following sections, those guiding principles will be
discussed with the essence of business strategies of Bata Shoe Company (Bangladesh) Limited.
PEOPLE FACE TRADE OFF
One of the most popular notion in the business arena is ―There is no thing as a free lunch‖ and
this notion is very important in the business world. Everybody is trading something in exchange
of something else. This exchange is the underlying principle of doing business.
Bata Shoe Company (Bangladesh) Limited could be doing any other business with the capital
invested in Shoe industry in Bangladesh or even do the same business in some other countries.
Therefore, a revenue earning potential in doing business in Bangladesh is exchanged with not
doing business in other potentially profitable countries.
Sometimes, to ensure the efficiency, the company need to trade off the equity of the investment.
For example, when there is tremendous need to aware customers more about a product in order
to earn revenue, company needs to invest more in advertising. On that particular time, company
may need to invest in finance division to prepare a good budget and to hire employees to do that.
So, this kinds of trade offs are taking place in everyday business.
47
BANGLADESH
2015
THE COST OF SOMETHING IS WHAT YOU GIVE UP TO GET IT
Opportunity cost concept is so important in business because sometimes opportunity cost can
offset the existing profit of business. When company takes an initiative to invest in project
(e.g.for retaining market leadership, the company focuses product development to meet the needs
of the market), then it may have to forgo the investment of paying dividend to the shareholder.
Shareholder‘s dividend may increase the image of the company in the stock market. Bata Shoe
Company (Bangladesh) Limited is taking the risk of forgoing the dividend because they think
that this investment in product development will earn more revenue than the increase in the
stock price. So in every aspects of the business, opportunity costs are involved.
Opportunity costs are also involved on customers‘ life because when they buy a product (e.g.
buying a pair of shoes); they need to forgo the opportunity to use other companies‘ product
which may involve some of the important features that Bata Shoes lack.
RATIONAL PEOPLE THINK AT THE MARGIN
Not only people but also organizations think at the margin because when marginal benefit is
greater than marginal cost, it can avoid severe loss in the business. An example is Bata sells its
old products at a discount from 20% to 80%. The older the design, the higher the discount.
PEOPLE RESPOND TO INCENTIVE
This principle can be viewed from point of customer as well as from the point of Bata Shoe
Company (Bangladesh) Limited itself. First of all the customers perspective of incentives works
when they get some discounts. Every now and then, Bata Shoe Company (Bangladesh) Limited
offers various customer benefit programs such as discounts in price, buy certain amount to get
free product offer. When customers get these benefits, they usually respond to this by buying
more shoes of Bata Shoe Company (Bangladesh) Limited.
48
BANGLADESH
2015
On the other hand, when Bata Shoe Company (Bangladesh) Limited receives more revenues
from the customers; they usually invest more for developing the infrastructures and products to
provide superior product to the customers. This response also occurs when government put less
pressure on tax and regulations in doing business. These incentives boost the motivation of doing
business which actually earns profit in turn.
TRADE CAN MAKE EVERYONE BETTER OFF
Trading activities are not zero-sum game where one party makes a loss against a gain of another
party. Trading actually gives every party in the system to earn something while making the
economy strong. Trading affect the economy in several ways and some of the ways are described
in the following segments.
Bata Shoe Company (Bangladesh) Limited operates in the country with manpower collected
from Bangladesh. Although they make profit in doing business here, this does not mean that only
they are making profit. They pay salaries to the local employees and also provide tax to the
government. This salary and tax helps to contribute in the economy and also impacts in the
growth of gross domestic products. Bata Shoe Company (Bangladesh) Limited is consistently
being one the top tax paying organization in Bangladesh.
On the other hand, Bata Shoe Company (Bangladesh) Limited also makes profit by doing
business here because the manpower cost is less here compared to many other developed
countries. The cost of infrastructure development is also low in our country which makes the
business more profitable. Therefore, the business activities carried out by Bata Shoe Company
(Bangladesh) Limited is providing a two-way benefit to all the parties involved.
MARKETS ARE USUALLY A GOOD WAY TO ORGANIZE ECONOMIC ACTIVITY
49
BANGLADESH
2015
According to the concept of invisible hand, markets are guided by the self-interest. Market
usually responds to the signal which is price and helps buyer and seller to decide their course of
actions. The demand for shoes and the supply of those shoes actually is coordinated by the
market. Bata Shoe Company (Bangladesh) Limited obtains information from the market about
how much supply the market need according to the price and customers also buy the products
according to the price. So, market is the main place where these economic activities are
organized.
Bangladesh is a marketplace where government regulates some aspects of the business and
majority of the activities are determined by the sellers and buyers. The market usually works by
the concept of invisible hand.
GOVERNMENTS CAN SOMETIMES IMPROVE MARKET OUTCOMES
Government intervention is always seen in today‘s market because government can help to
improve the market structure by removing imperfections and also by eliminating the negative
externalities.
The commerce ministry is working to fix the minimum price of leather before the festival so that
sellers at the grassroots get fair price and can be saved from price manipulation by a section of
seasonal merchants.
According to the data from the Department of Livestock, The commerce ministry put a bar on
export of rawhide from 2012 to meet the demand of the local leather industry, although many
traders applied to the ministry seeking permission for export.
Since Bangladesh has also a big leather industry and export market for leather and finished
leather goods, the government and the industry owners in particular are critically opposed to
50
BANGLADESH
2015
smuggling of rawhide across the border. The government has therefore decided to ban the
movement of raw hide to border areas after to the Eid-Ul-Azha festival for a limited period of
time.
A COUNTRY'S STANDARD OF LIVING DEPENDS ON ITS ABILITY TO PRODUCE GOODS AND
SERVICES
Bata Shoe Company (Bangladesh) Limited produces and sells footwear products which helps the
country‘s standard of living to increase. A lot of people are directly employed by this company
and get a very good salary. Some of the vendors established in the country to provide many
services which Bata Shoe Company (Bangladesh) Limited typically outsource for low cost.
Ultimately the overall business arena is improving as the standard of living is also improving due
to the scope of doing new businesses by the help of Bata Shoe Company (Bangladesh) Limited.
PRICES RISE WHEN THE GOVERNMENT PRINTS TOO MUCH MONEY
Inflation is an increase in the overall level of prices in the economy. One cause of inflation is the
growth in the quantity of money. When the government creates large quantities of money, the
value of the money falls. Because of inflation, purchasing power of money decreases and it
causes price to go up. Average price of the shoes has increased over time due to inflation.
SOCIETY FACES A SHORT-RUN TRADEOFF BETWEEN INFLATION AND UNEMPLOYMENT
Increasing the amount of money in the economy stimulates the overall level of spending and thus
the demand. Higher demand over time causes the Bata to raise the price, but in the meantime, it
also encourages hiring more workers and producing more shoes. And this hiring more workers
51
BANGLADESH
2015
lowers the unemployment. Thus, society faces a short-run tradeoff between Inflation and
unemployment.
The Phillips Curve was only applicable in the short-run and that in the long-run, inflationary
policies will not decrease unemployment. The long-run Phillips Curve is now seen as a vertical
line at the natural rate of unemployment, where the rate of inflation has no effect on
unemployment.
10 Implications of demand and supply
10.1 Factors affecting demand
 Seasonality of demand: The demand for shoes increases during winter. In summer the
demand for sandal rises and in rainy season demand for plastic made sandal/ shoes rises.
 Price: if average price can kept low, then quantity demanded increases.
52
BANGLADESH
2015
 Income: the demand for shoes increases when average income of people increases.
 Festivals: during the major festival-- Eid, Pohela Baoshakh, Durga Puja-- of Bangladesh
the demand for shoe rises.
 Global Economy: demand for Bata shoes is directly related to the global economy. It is
quite natural that a healthy global economy will produce higher demand for shoes.
 Shocks: Natural disaster and other shocks that impact the economic system affect the
demand adversely.
 Quality: when the quality of any specific design falls, then demand of that specific
design also falls.
 Population: As the population of the world increases, the demand for shoes is also
escalated.
 Price of substitutes and complementary goods: when buyers get same quality product
at cheaper price from other brands or source, then the demand of Bata shoes falls.
10.2 Factors affecting supply
There are several factors that affect the supply of the shoes which helped the company to earn
the desired revenue per year. Some of the factors have been described in the following section.
 SEASONS: During the rainy season the supply decreases due to hindrance in
transportation.
 FESTIVALS: As demand increases in festivals, hence supply also increases in festivals.
 COST: When cost increases, then shoes supply decreases.
53
BANGLADESH
2015
 POLITICAL UNREST: During hartal, oborodh and other violent political activities the
supply of shoes decreases.
 PRICE OF SUBSTITUTES:When demand for sandal increases then more sandals are made
as a result less shoes are supplied. On the other hand when demand for shoes increases
then more shoes are supplied and less sandal are made. This happens as the production
capacity is limited.
 Production capacity: Supply of shoes is directly related to production capacity. More
the production, more the supply.
 Other input prices: Prices of other industry inputs such as labor, logistics etc. also act as
determinant of supply function of shoes.
 Competitor offer: Competitor activities and offers affect supply of Bata shoes.
 Government policies: when tax increases on shoes then supply decreases.
 No of shop: With the increase in no of shop supply usually increases.
 Technology: technological advancement in the sector will increase the supply of shoes.
11 Shift in Demand and Supply Curve
11.1 Factors responsible for the shift in FOOTWEAR PRODUCTS Demand Curve
During the primary interview to collect data, The respondents of the selected Selected
companies referred some factors of increasing demand. There are many variables that can shift
the demand curve. Here are the most important -
54
BANGLADESH
2015
Income Opportunity
If the income opportunity from doing business increases, the demand for FOOTWEAR
PRODUCTS loan increases. For example the entrepreneurs are assuming that a particular
product of their making has very high demand in the market. So they will borrow more from the
banking sector as the return from the investment they made will be higher than the cost of
interest rate.
Cost of Other Loans
The shift of the demand curve is also for the increasing of the cost of borrowing other
type of loans. To start a new business, the borrower must have to borrow under the FOOTWEAR
PRODUCTS department of IDLC, Midas, ULC or IFIL. So as the rate of interest in other loans
increases the demand for FOOTWEAR PRODUCTS fund increases because it is relatively less
costly.
Liquidity Crisis
In the year 2012 govt. borrowing from the commercial banks was very high which caused
the liquidity crisis. This shortage of liquidity increases the cost of borrowing fund of any type.
For this reason the interest rate increased and demand also increased.
Future Expectations
The expectation about the future may affect the demand for FOOTWEAR PRODUCTS
loan. If the entrepreneur expects that the demand for his/her product will increase in the coming
month, s/he will be eager to borrow more to increase production. If s/he expects sluggish demand
in the coming month then the demand will fall.
Number of Buyers (Borrowers)

55
BANGLADESH
2015
In addition to the preceding factors, which influence the behavior of the individual
borrowers, market demand depends on the number of these buyers (borrowers). If the number of
borrowers increases the demand will be high. Moreover the number of borrower is also
increasing because of the low interest rate of borrowing fund mandated by central bank.
(Bangladesh Bank)
Expectations
Consumer and corporate expectations of key economic factors such as inflation or
expected future income can cause the aggregate demand curve to shift. Unknowns about an
individual's or company's economic future can spur higher saving and low spending, which
would decrease the amount of demand and thus shift the curve. On the other hand, higher
anticipated profits or paychecks can increase spending and boost the aggregate demand curve.
Consumer confidence and expectations are an important indicator as to whether the demand
curve will shift and in what way.
Government Spending
When government spending or fiscal policies change, the aggregate demand curve is
impacted. Changes in government spending that shift the demand curve include increased or
decreased taxation, social service benefits, government debt, military spending or overall
spending. For example, how much the government taxes your income could affect how much
disposable income you have to spend, and will therefore either spur or reduce consumer
consumption and shift the curve.
Interest Rates
56
BANGLADESH
2015
A high or low interest rate can shift the aggregate demand curve. For example, if Selected
companies lower interest rates on various types of loans, consumers and corporations are "more
likely to borrow money. This increases the amount of investment and spending that will take
place, which shifts the demand curve. The inverse can happen with higher interest rates in that if
rates rise, spending and investment falls, which also shifts the demand curve.
Fluctuating Economies
Economies and variances in economic stability can shift the aggregate demand curve.
These variances can include the strength or weakness of a certain currency, the exchange rate
across currencies, the foreign income of specific countries, and an increase or decrease in
international demand of a good or service.
11.2 Consequences of shifts in Demand Curve of footwear products Loan
Because the market demand curve holds other things constant, it is not stable over time.
If something happens to alter the quantity demanded at any given price, the demand curve shifts.
Any change that increases the quantity demanded at every price shifts the demand curve to the
right and is called increase in demand. Any change that reduces the quantity demanded at every
price shifts the demand curve to the left and is called a decrease in demand. For instances, if the
interest rate changes from 12% to 14% the demand of loan increased. So there are influences of
other factors that cause the shift of the demand curve.
11.3 Factors affecting the footwear products Supply Curve
Because the market supply curve holds other things constant, the curve shifts when one
of the factors changes. Any change that raises the quantity supplied at every price shifts the
57
BANGLADESH
2015
supply curve to the right and is called an increase in supply. Similarly, any change that reduces
the quantity supplied at every price shifts the curve to the left and is called a decrease in supply.
There are many variables that can shift the supply curve. Here are some important factors:
Input Costs
Input costs are a major factor that affects production costs and, therefore, supply. Input
costs are the price of the resources needed to produce a good or service. For example, an
entrepreneur makes nutrition bars that contain peanuts. If the price of peanuts increases, his costs
increase. He cannot afford to produce as many nutrition bars, and his supply curve shifts to the
left. When the price of peanuts decreases, his costs decrease. He is willing and able to increase
the quantity he can supply at every price, so he will borrow more, and the curve shifts to the
right.
Labor Productivity
Labor productivity is the amount of goods and services that a person can produce in a
given time. Increasing productivity decreases the costs of production and therefore increases
supply. For example, a specialized division of labor can allow a producer to make more goods at
a lower cost. If the productivity of the businessperson increases then s/he will be interested to
borrow more funds to increase the production opportunity, regardless of the cost of fund, if the
income offset the cost of funds. On the other hand decreased productivity will shrink borrowing
and leftward shift of supply curve.
Technology
One way that businesses improve their productivity and increase supply is through the
use of technology. Technology involves the application of scientific methods and discoveries to
58
BANGLADESH
2015
the production process, resulting in new products or new manufacturing techniques. Influenced
by the profit motive, manufacturers have, throughout history, used technology to make goods
more efficiently. Increased automation, including the use of industrial robots, has led to
increased supplies of auto-mobiles, computers, and many other products. Improved technology
helps farmers produce more food per acre. It also allows oil refiners to get more gasoline out of
every barrel of crude oil and helps to get that gasoline to gas stations more quickly and more
safely. In addition, technological innovations, such as the personal computer, enable workers to
be more productive. This, in turn, helps businesses to increase the supply of their services, such
as processing insurance claims or selling airline tickets.
Government Action
Government actions can also affect the costs of production, both positively and
negatively. An excise tax is a tax on the production or sale of a specific good or service. Excise
taxes are often placed on items such as alcohol and tobacco— things whose consumption the
government is interested in discouraging. The taxes increase producers‗ costs and, therefore,
reduce the borrowing from banks, and decrease the supply of these items. Government
regulation, the act of controlling business behavior through a set of rules or laws, can also affect
supply. Banning a certain pesticide might decrease the supply of the crops that depend on the
pesticide. Worker safety regulations might decrease supply by increasing a business‗s production
costs or increase supply by reducing the amount of labor lost to on-the-job injuries.
Producer Expectations
If producers expect the price of their product to rise or fall in the future, it may affect how
much of that product they are willing and able to supply in the present which ultimately
determine the amount of fund required. Different kinds of producers may react to future price
59
BANGLADESH
2015
changes differently. For example, if a farmer expects the price of corn to be higher in the future,
he or she may borrow to invest more, thereby increasing supply. A manufacturer who believes
the price of his or her product will rise may run the factory for an extra shift or invest in more
equipment to increase supply.
Number of Producers
When one company develops a successful new idea, whether it‗s designer wedding
gowns, the latest generation of cell phones, or fast-food sushi, other producers soon enter the
market and increase the supply of the good or service. When the demand for a particular product
or service increases, and many new business person come to invest in it, the supply of funds
increases.
11.4 Consequences of shifts in Supply Curve of footwear products Loan:
Because the market supply curve holds other things constant, the curve shifts when one
of the factors changes. Any change that raises the quantity supplied at every price shifts the
supply curve to the right and is called an increase in supply. Similarly, any change that reduces
the quantity supplied at every price shifts the curve to the left and is called a decrease in supply.
11.5 Factors cutting across both supply and demand issues and affecting
footwear products access to institutional finance in Bangladesh
A complex of factors interacting on both supply and demand side parameters act as
barriers to adequate flow of institutional funds to the FOOTWEAR PRODUCTS sector of the
country. Some specific contexts that are affecting the demand and the supply curves to shift are
listed below:
60
BANGLADESH
2015
(i) The conspicuous absence in Bangladesh of the innovative credit schemes and financial
instruments called the ―best practices‖ used to accelerate flow of institutional funds in different
countries.
These are:
- Credit guarantee funds
- Venture capital
- Leasing
- Factoring
- Credit Rating/scoring
In fact, other than limited term loans of medium to short run duration and working capital
loans, overdraft facilities and high-cost trade credits, limited lease finance and hire purchase
facilities offered by selected private sector banks and leasing companies, the financial products
offered by the institutional lenders in Bangladesh are very limited.
This restricts the FOOTWEAR PRODUCTS borrowers from shopping around for sustainable
loan products of their own choice and convenience.
(ii) Banks‘ pre-occupation with conventional unmovable collateral-based lending
practices;
(iii) Perceived high risks about FOOTWEAR PRODUCTS lending resulting from
conservative mind-set, inertia, and various institutional rigidities.
(iv) Banks‘ lack of know-how, i.e. credit scoring and rating systems, and risk
management capacities etc. to use innovative lending practices.
(v) Information asymmetries creating knowledge and information gaps for the banks
about the FOOTWEAR PRODUCTS borrowers and vice-versa.
61
BANGLADESH
2015
(vi) High rates of interest charges constitute one of the major demand side bottlenecks
impeding FOOTWEAR PRODUCTS access to institutional financing in Bangladesh.
Other demand side barriers are absence of well conceived loan proposals, standard
accounting procedures, and cash-flow information from the FOOTWEAR PRODUCTS
borrowers. Thus both supply and demand side complexities combine together to keep the
FOOTWEAR PRODUCTSs underserved by the institutional lenders.
12 Elasticity
The elasticity concept is also important to know about the business strategies put forward by the
market players. Elasticity helps to understand the responsiveness to the various parameters such
as demand, income of the consumers, demand for other products and services and so on. In the
following segments, these elasticity concepts are discussed in light of the Bata Shoe Company
(Bangladesh) Limited‘s business initiatives.
12.1 Price Elasticity of Demand
The Price Elasticity of demand measures the rate of response of quantity demanded due to a
price change. The demand is more prices inelastic when the product is more of a necessary item.
In case of shoes, customers who use brand shoes are dependent on shoes by different companies.
When there were fewer companies on the shoe market of Bangladesh, the demand for Bata Shoe
Company (Bangladesh) Limited services was inelastic in response to price changes. But,
entrance of new players made the demand elastic since customers now have options to switch to
a brand with a cheaper price but same quality.
62
BANGLADESH
2015
12.2 Income Elasticity of Demand
It measures the responsiveness of the demand for a good to a change in the income of the people
demanding the good. A negative income elasticity of demand is associated with inferior goods;
an increase in income will lead to a fall in the demand and may lead to changes to more
luxurious substitutes. Since Bata Shoe Company (Bangladesh) Limited is popular for its good
quality shoes, the demand for its shoes will be increased along with an increase in income. With
the augmented income, people will move from local or non brand shoes to superior shoes Bata
Shoe Company (Bangladesh) Limited and make demand more elastic.
12.3 Cross Price Elasticity
The Cross-Price Elasticity of Demand measures the rate of response of quantity demanded of one
good, due to a price change of another good. If two goods are substitutes, we should expect to
see consumers purchase more of one good when the price of its substitute increases. Similarly if
the two goods are complements, we should see a price rise in one good cause the demand for
both goods to fall. When other brands started reducing price, the demand for Bata shoes has been
reduced to some extent.
12.4 Application of Elasticity in the footwear products sector of Bangladesh
According to the law of demand, a fall in the price of a good raises the quantity
demanded. The price elasticity of demand measures how much the quantity demanded responds
to a change in price. Demand for a good is said to be elastic if the quantity demanded responds
63
BANGLADESH
2015
substantially to changes in the price. Demand is said to be inelastic if the quantity demanded
responds only slightly to changes in the price.
In the finance industry, elasticity for the supply of fund and elasticity for the demand of
fund behaves in a different way. Deposit customers are highly price sensitive. They look for the
best deal in terms of interest rate. There are other factors that have huge impact on depositors
purchase decision. Convenience, service quality often creates huge impact on customers mind.
Another important factor is relationship with the firm and lack of information about the market.
Due to these factors, depositors might not switch to other financial firms. Moreover if customers
deposit their savings once then they can‘t withdraw the fund for at least six months. This is
because the customers will miss the interest accrued if they encashes the term deposit and they
will incur the service charge twice. This will increases their cost in comparison to his benefit.
But once the instrument is matured customers usually tend to switch for a better rate which
creates the relation elastic.
For these reasons, if a firm increases interest rate, shift in demand is not significantly
visible. This creates inelasticity for short term. But if a firm offers lower interest rate on deposit
for a longer period then customers tend to shift to the higher deposit offer.
Moreover, the demand side of the market is highly price sensitive. Since cost of fund
increases business cost significantly, lending customers tend to look for a low cost solution for
their capital need. Due to the competitive structure of the market, Firms can‘t charge more than
its competitors on the lending capital. Due to high switching cost, lending customers are not able
to switch in the short term but if a company continues to charge very high in the market without
any value addition, they will definitely lose some market share. Thus market is highly elastic for
the lending institution.
64
BANGLADESH
2015
12.5 Effects of different determinants of PED in the footwear products sector of

Bangladesh
The FOOTWEAR PRODUCTS market is also affected by different determinants of the
PED. These effects are discussed below:
Availability of Close Substitutes
Availability of close substitutes affects price elasticity of demand. In general we will find
demand becomes more responsive as the number of substitutes increases. This would be where
we would see the influence of loyalty. When a firm successfully creates brand loyalty what it is
doing is effectively reducing the availability of substitutes in the minds of buyers. Because the
buyers no longer believe the other products are close substitutes, the increase in price is less
likely to lower demand for the product.
In case of our analysis the close Substitutes of products are consumer loans or corporate loan.
But corporate loans are not distributed to the footwear finders. So the close substitute of this
product is somewhat low.
Necessities versus Luxuries
Necessities tend to have inelastic demands, whereas luxuries have elastic demands. When
the price of a doctor‗s visit increases, people will not dramatically reduce the number of times
they visit to the doctor, although they might go somewhat less often.
In our case footwear is either luxuries or necessities is a subjective matters. For example a person
whose business growth stage s/he has the highest necessity of loan. But one who is just going to
start the business may not feel the necessity so much.
Definitions of the Market

65
BANGLADESH
2015
The elasticity of demand in any market depends on how we draw the boundaries of the
market. Narrowly defined market tends to have more elastic demand than broadly defined
markets because it is easier to find close substitute for narrowly defined goods.
Time horizon
Time matters. If people are given longer to adjust their behavior, they will be able to
make larger adjustments. For example, if the price of gas rises rapidly then our initial reaction is
likely to be minimal. We will still buy the same amount of gas because our driving habits will
not have changed. If we are given a longer period to adjust, however, you may find that you buy
a new, more gas efficient car which will lower your demand for gas. The generalization to be
drawn from this is that elasticity increases with the time horizon.
In case of footwear, the entrepreneurs whose business are in the growth stage they change
their habit of borrowing slightly. But in the long run they may adjust their business by borrowing
from another low cost source.
So to summarize it can be said that:
 Availability of substitutes
o more substitutes - more responsive
 Importance
o smaller expense - less responsive
 Durability
o more durable - more responsive
 Time
o more time to adjust - more responsive
66
BANGLADESH
2015
13 Effect of Government policies
Bata Shoes is facing some problems, such as high value-added taxes. The company pays VAT
twice on its finished products. It pays VAT when the product comes out of the factory and again
when it is sold. It paid $ 22.5 million in tax and VAT to the government last year.
On the other hand some government policies are helping Bata. Footwear (leather and non
leather) was designated a priority sector by the Bangladesh government in 2009. As such is
entitled to the following benefits:
 bonded warehouse facilities
 Tax free import of capital equipment.
14 Production Theory and Cost Concepts
14.1 Factors of Production
Bata has two factories in Bangladesh from where it produces all kinds of shoes. One of which is
at Tongi and other one at Dhamrai. The second factory at Dhamrai has state of the art technology
and facility with leather treatment to leather processing to waste treatment plants, which is the
only one of its kind in the country. Bata Bangladesh produces daily around 80,000 pairs of shoes
of various descriptions in its two manufacturing units located at Tongi and Dhamrai. It has a
modern Tannery with the latest technological facilities to process approximately 19,000 square
67
BANGLADESH
2015
feet of leather daily, which comprise a wide range of products and finishes. The Tannery is also
equipped with a modern effluent treatment plant to ensure a pollution free environment. The
Company‘s marketing network is consolidated through its own retail outlets, distributors,
franchises, agencies, wholesale depots and a large number of registered distributors and dealers.
Bata Bangladesh has four different sources of production:
Own:
Bata Bangladesh has two factories in Tongi and Dhamrai. All the rubber and related production
has been done in Tongi factory. Every type of leather products are been manufactured in the
Dhamrai factory. About 92% of all Bata products are produced in these two factories.
Satellite:
There are some satellite production factories which produce solely for Bata with the production
Facility, which has been, step up by Bata Bangladesh. 4% of Bata production is from satellite
Sources.
Outsourcing:
As related and supporting industries are growing in shades of the massive structure of Bata
Bangladesh. It also does outsourcing with different small shoe industries mainly from the Dhaka
region. The quality and the specification have been ensured by the Bata people. The participation
of outsourcing in the company‘s business is 4%.
Import:
With high import duty it is hard for Bata to import a substantial amount from different
subsidiaries and other outside suppliers. It can be mentioned that the duty for importing complete
68
BANGLADESH
2015
shoe here in Bangladesh is 101%. Even though Bata Bangladesh import shoes to keep up with
the market trend, which is around 1% in every year.
14.2 Economies of Scale
The company is operating in the industry for more than 50 years and now they have some control
on the process of producing shoes the company is in the business for many years and knows the
mechanisms to decrease cost now. Recently they have introduced artificial leather and advanced
technology to keep the cost minimum.
15 Market Structure
15.1 Established Market Structure
There are generally four types of market structure:
1. Monopoly,
2. Oligopoly,
3. Monopolistic Competition and
4. Perfect Competition.
For the footwear products of Bata the Monopolistic competition market structure is applicable.
Monopoly market structure is absolutely not applicable as the number of companies providing
footwear products in Bangladesh is not just one. As there are numerous suppliers of footwear
products so it cannot be called an oligopoly market structure.
Conditions of monopolistic competitive markets match with Bata products. Firstly, there are
many producers and many consumers in the market and no business has total control over the
69
BANGLADESH
2015
market price. Secondly, there are few barriers to entry and exit. thirdly, Consumers perceive that
there are non-price differences among the competitors' products.finally, Producers have a degree
of control over price.
15.2 Overall Market Competition
Bata Bangladesh is the largest player in the footwear industry with around 9-10% volume share
and a 60% market-share in the organized segment. BB (Bata Bangladesh) has a market share of
70% in canvas shoes segment while it has a share of 60% in leather shoes. BB manufactures
about 10% of the total Hawaii‘s sold in the country. BB competes in manufacturing low priced
Hawaii‘s.
Leading competitor in the popular segment of the organized market is Apex Shoes. Other
organized sector players are liberty shoes, Apex Footwear, Jennys Shoes, Landmark Footwear,
Leatherex Footwear, and Bay Footwear. Most global players like Adidas India, Reebok, Nike,
etc are operating through their Bangladeshi subsidiaries with main focus on premium sports
shoes segment, which has an insignificant volume share.
15.3 Pricing Strategy choices
FOR NEW PRODUCTS:
 Skimming Pricing
 Penetration Pricing
At times Bata Shoe Company in Bangladesh used 'Penetration Strategy' which is characterized
by the following:
Definition: Setting a relatively low price during the initial stages of a products life.
70
BANGLADESH
2015
Objectives: To discourage competition from entering market by quickly taking large market
share and by gaining cost advantage by realizing economies of scale.
Requirements:
 Products must appeal to a market large enough to support the cost advantages.
 Demand must be highly elastic in order for firm to guard its cost advantage.
Expected Results:
 High sales volume and large market share.
 Low margin on sales.
 Lower unit costs relative to competition due to economies of scale.
FOR ESTABLISHED PRODUCTS CHOICES
1. Maintaining the price
2. Reducing the price
3. Increasing the price
When the products of Bata Bangladesh were established in the market they used 'Maintaining
the price Strategy' which is characterized by the following:
Objectives:
 To maintain position in the market place (i.e. market share, profitability, etc.).
 To enhance public image.
Requirements:
 Firm's served market is not significantly affected by changes in the environment.
 Uncertainty exists concerning the need for or results of price change.
71
BANGLADESH
2015
 Firm's public image could be enhanced by responding to government requests or public
opinion to maintain price.
Expected Results:
 Status quo for the firm's market position,
 Enhancement of the firm's public image.
PRICE-FLEXIBLE STRATEGY CHOICES
1. One-Price Strategy
2. Flexible-pricing Strategy
3. Product-Line Pricing Strategy
4. Leasing Strategy
5. Bundle-Pricing Strategy
6. Price-Leadership Strategy
7. Pricing Strategy to build market Share
One-Price Strategy:
Definition: Charging the same price to all customers under similar conditions and for the same
quantities.
Objectives:
 To simplify pricing decisions.
 To maintain goodwill among customers.
Requirements:
72
BANGLADESH
2015
 Detailed analysis of the firm's position and cost structure as compared with the rest of the
industry.
 Information concerning cost variability of offering same price to everyone.
 Knowledge of the economies of scale available to the firm.
 Information on competitive prices; information on the price that customers are ready to
pay.
Expected Results:
 Decreased administrative and selling costs.
 Constant profit margins.
 Favorable and fair image among customers.
 Stable market.
Pricing Strategy to build market Share:
Definition: Setting the lowest price possible for a new product.
Objectives: To seek such a cost advantage that it cannot ever be profitably overcome by any
competitor.
Requirements:
 Enough resources to withstand initial operating losses that will be recovered later through
economies of scale.
 Price-sensitive market.
 Large market.
 High elasticity of demand.
Expected Results:
73
BANGLADESH
2015
 Start-up losses to build market share.
 Creation of a barrier to entry to the industry.
 Ultimately cost leadership within the industry.
16 Production Possibilities Frontier
Production possibilities frontier is a graph showing the combinations of output that an
economy can possibly produce given the available factors of production and the available
production technology.
Most economic models, unlike the circular-flow diagram, are built using the tools of
mathematics. Here we see one of the simplest such models, called the production possibilities
frontier, to illustrate some basic economic ideas.
Amount of
footwear
products
Amount of other products
Figure 12: Production possibilities frontier
74
BANGLADESH
2015
As we can see, in order for this company to provide footwear products, it must give up
some amount of lending of other loans (point A). If the company starts producing more to
corporate and other sectors (represented by points B and C), it would have to divert resources
from other products and. As the chart shows, by moving from point A to B, the economy must
decrease lending products by a small amount in comparison to the increase in other loans.
However, if the economy moves from point B to C, footwear products output will be
significantly reduced while the increase in cotton will be quite small. We should remember that
A, B, and C all represent the most efficient allocation of resources for the economy; the
companies must decide how to achieve the PPF and which combination to use. If more products
are in demand, the cost of increasing its output is proportional to the cost of decreasing other
loans output.
17 Cost Structure and Application
In Economics we consider two types of costs.
(1) Implicit costs incorporate all opportunity costs and rate of returns into cost function.
(2) Explicit Costs are costs that must be paid; anything that the selected companies
actually receive a bill for is an explicit cost. Explicit costs are broken down into two categories;
all costs are either Fixed or Variable. Fixed costs are costs that must be paid regardless of
production or output. These can be leases on cars, salaried employees, buildings, cell phones,
copy machines etc. More times than not these costs are contractual obligations (which is what
makes them unavoidable). Variable costs are costs that change with the level of production; these
75
BANGLADESH
2015
are usually costs that are in some way directly associated with output, such as electricity, paper,
steal, packaging etc. Adding together Fixed Costs and Variable Costs will give Total Costs.
Fixed + Variable = Total Costs
There are some costs that are incurred by the selected companies, but they are not included in
their accounting cost. There are many opportunity costs.
17.1 Cost of Missed Opportunity

One of the main implicit costs of the selected companies is the missed opportunity to
sanction loan to worthy customer. Very frequently, because of no past record they do not give
loan to potential borrower. But their business plan might be very profitable. But in these selected
companies each loan must be authorized by 2 teams. The first evaluation might be very good, but
in final selection that loan can be rejected by the board. But, that loan could be very profitable
for these selected companies.
Bata can no longer enjoy the benefits of operating lease. As a result their tax is becoming
higher. And this is also reflecting in their accounting profit. But, there is another opportunity cost
of not being able to provide operating lease. That is, by using operating lease, borrower could
increase their ROA (return on asset) ratio. (Because the lease is not their asset, they can discard
the lease rent as expense and increase their asset turn over ration). Now, as only financial lease is
used, borrower has to show each lease as their asset, and their ROA ratio is reduced. So, one of
the reason customer where interested to lease, are no longer available.
17.2 Cost of being Unable to Match Price

The price offered by the selected companies is very much dependent on the market. As
generally on average they take 60% from deposit, 30 % from money market and 10% from other
76
BANGLADESH
2015
sources, the selected companies‘ total cost is quite variable, and high. Companies can offer
prices, but it is around 17-20% for the selected companies. So, many credit-worthy customers go
to bank rather than the selected Selected companies.
17.3 Cost of Matching Risk with Return

One of the major reasons behind the recent global economic downturn was the credit
bubble and over-financing of the retail clients. The selected companies mitigate this risk through
keeping a threshold limit of customers maximum asset exposure limit.
To match risk with return, a risk based pricing method is under consideration. This
method automatically provides asking price for a particular customer depending on the client‘s
market position, repayment behavior and risk grading. But again, by doing this, the selected
companies are losing some profitable customers.
18 Recommendation
 Creating Brand Awareness
Many people have a misperception about footwear companies. Due to lack of
knowledge and some recent financial scandal, many people consider companies as MLM
institute or co-operative societies. Being unaware of the security features, many people are
unwilling to deposit their hard earned money at companies though they are offering a higher
interest rate on term deposit than banks. Companies need to promote themselves as a secured
source of investment.
 Promoting the products to target customers
77
BANGLADESH
2015
Many people don‘t know about the products of companies. There are a lot of people
who consider an company as a merchant bank or a broker house or a leasing company. Due
to lack of awareness, customers don‘t take the service of companies. So, Selected companies
should promote their products to the target customers. A wide array of promotional tools like
TV commercials, bill board ads, and Print ads should be used to promote the product of
Selected companies. Direct promotion through sales agent can be an effective tool.
 Developing close tie with the footwear products customer
Relationship with the customers is a crucial factor in financial industry. Customers
prefer to do business with a financial organization which they found more reliable, and close
to them. In order to strengthen the footwear products business segment, selected companies
should build a strong and close relation with this customer segment. there is lot of scope to
work in this segment. Footwear products segment is flourishing. Bangladesh Bank is also
trying to develop this sector. Due to shortage of capital, FOOTWEAR PRODUCTS
businesses often failed to use their full capacity and thus unable to grow. If a financing firm
give support to this segment when they are in dire need of capital, it will be easy for the firm
to make a strong loyal base of customer. It is also imperative to understand the need of this
segment better. If Selected companies build a strong and close relation and maintains a
healthy relationship with footwear products segments, they will be able to build a strong
loyal base of customer which will positively affect their long term profit.
 Strengthening Women entrepreneur cell
Women now a-days are participating in the economy like never before. It is high time
for us to help them grow. There are many women entrepreneur who is introducing new
78
BANGLADESH
2015
product for the customers. By focusing meticulously on customers need and their usage
behavior, Selected companies can introduce new products. A successful new product can
bring competitive advantage for the company which again will bring positive impact on the
bottom line.
19 Conclusion
Economics‘ theory and practices are important in making business decisions and operate
business in daily basis. The theme of marginal cost, understanding the demand-supply
equilibrium, gaining the economies of scale, understanding government‘s actions, also
understanding the elasticity demand is so important in business area. A little misunderstanding in
those areas can have significantly negative impact in revenue and profit. In the long run, the
company may even go out of the business.
As we have seen the practices undertaken by Bata, it is pretty much clear that the company is
always cautious in making business decisions. They also try to make those decision based on the
economics‘ tools and application along with the help of market data. They always rely on the
economics‘ theory and tools to make efficient and effective business decisions.
One more thing to include here is that most of the market players do business in a traditional way
and try to follow others‘ business strategies and policies. They do that intentionally because they
know that the leading firm takes decisions in calculated and in scientific manner. They also know
that the leading firm also oversees the economics tools and knowledge to make their decision
perfect. Bata‘s competitor sometimes follows Bata‘s strategy just to survive in the market. That
decision is also related to the behavior that can be described by the theories of economics.
79
BANGLADESH
2015
80
BANGLADESH
2015
Bibliography
Export Association of Bangladesh. Retrieved from http://lfmeab.org/member-area/member-list
Foorwear sector awaits a boom.
(2010).https://bangladesheconomy.wordpress.com/2010/11/30/footwear-sector-awaits-a-
boom/
Bangladesh Footwear Export. (2014). Retrieved from
http://lightcastlebd.com/blog/2014/11/footwear-sector-bangladeshs-next-export-tiger
Footwear Industry Bangladesh. (2015). Retrieved from
http://www.assignmentpoint.com/business/organizational-behavior/footwear-industry-
bangladesh.html
Bangladesh Institute of Development Studies. (2010). Retrieved September 2015, from Leather
Footwear Industry in Dhaka: A Case Study: http://www.ihdindia.org/Formal-and-
Informal-Employment/Paper-8-Leather-Footwear-Industry-in-Dhaka-A-Case-Study.pdf
Center for Policy Dialogue. (2015, April). Retrieved 2015, from ‗Promising future‘ for leather
products, footwear exports: http://cpd.org.bd/index.php/cpd-mustafizur-rahman-leather-
footwear-export-2015/
Govt. puts ban on movement of rawhide to border belt. (October 5, 2014). Retrieved from
http://www.bangladeshchronicle.net/index.php/2014/10/govt-puts-ban-on-movement-of-
rawhide-to-border-belt/
Saha, S. (October 9, 2014). Tanners profit, traders lose. Retrieved from
http://www.thedailystar.net/tanners-profit-traders-lose-44814
81
BANGLADESH
2015
Bata. (n.d.). Retrieved from http://www.batabd.com/
Report on Marketing Strategies of Bata Shoe Limited. (n.d.). Retrieved from
http://www.assignmentpoint.com/business/marketing-business/report-on-marketing-
strategies-of-bata-shoe-limited.html
Corporate Strategy of Apex Adelchi Footwear. (n.d.). Retrieved from
https://www.scribd.com/doc/44850685/Strategic-Marketing
82
BANGLADESH
2015
Appendix
Questionnaire for FGD:
• How often do you buy shoes? (once/twice a month, year etc)
• What is your most favorite brand?
• What are the other favorite brands?
• How about Fortuna footwear, Jenny‘s Shoes Brands?
• Do you like to try different brands? Or stick to your most favourite?
• What is your preferable price range for normal use?
• What is your preferable price range/budget for occasional use?
• Normally how many pairs do you buy at a time?
• During occasion how many pairs do you buy at a time?
• Do you buy shoes for your family members as well, when you buy yours?
• Do you try/use different types of shoes? Or only one or two types?
• What type of shoes do you prefer?
• On what occasion you buy shoes? How many pairs?
• Are you normally satisfied with your brand‘s shoes? If not, what do you miss?
• Anything else you like to add regarding the topic? (open ended)
83

Economic Analysis On The Footwear Indust

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Economic Analysis On The Footwear Indust

Uploaded by

Copyright:

Available Formats

ECONOMIC ANALYSIS ON THE

FOOTWEAR INDUSTRY OF BANGLADESH

Dr. A. K. M. Saiful Majid

Ph. D, Senior Fulbright Fellow (USA)

Course Instructor: Managerial Economics Professor

Md. Arif Mahmud(ZR 48)

Asma Ul Husna (RQ 49)

Abu Salman Mohammad Abdullah (ZR52)

Anika Rahman (RQ 53)

MBA – 52ndDay Batch

Institute of Business Administration

Institute of Business Administration

Dr. A. K. M. Saiful Majid

Institute of Business Administration

_____________ _____________ ______________ ___________

Roll: 48 Roll: 49 Roll: 52 Roll: 53

Batch: 52D Batch: 52D Batch: 52D Batch: 52D

Fulbright Fellow (USA), Professor, Institute of Business Administration, University of Dhaka,

―Economic Analysis on Footwear Products of Bangladesh: Bata, Apex & Fortuna.‖

whole hearted cooperation during this time.

us the chance of having the academic requirement to prepare such a paper.

LIST OF FIGURES ..................................................................................................................................................... I

LIST OF ACRONYMS ..............................................................................................................................................II

EXECUTIVE SUMMARY ...................................................................................................................................... III

1.1 ORIGIN OF THE REPORT ................................................................................................................................2

2 LITERATURE REVIEW ..................................................................................................................................9

2.1 THE FOOTWEAR SUB-SECTOR ................................................................................................................... 21

3 SECTOR OVERVIEW .................................................................................................................................... 28

3.1 HISTORY ..................................................................................................................................................... 28

4 PROFILE OF BATA SHOE COMPANY (BANGLADESH) LIMITED .................................................... 30

4.1 COMPANY OVERVIEW ................................................................................................................................. 30

5 PROFILE OF LEATHEREX FOOTWEAR INDUSTRIES LTD. .............................................................. 34

6 PROFILE OF APEX FOOTWEAR LIMITED ............................................................................................. 35

6.1 COMPANY OVERVIEW ................................................................................................................................. 35

7 PROFILE OF FORTUNA SHOES LTD. ....................................................................................................... 37

7.1 COMPANY OVERVIEW ................................................................................................................................. 37

8 BASIC CONCEPTS OF MANAGERIAL ECONOMICS ............................................................................ 39

8.1 MICROECONOMICS AND MACROECONOMICS: BASIC CONCEPT................................................................... 39

9 TEN PRINCIPLES OF ECONOMICS ........................................................................................................... 47

10 IMPLICATIONS OF DEMAND AND SUPPLY ........................................................................................... 52

10.1 FACTORS AFFECTING DEMAND .................................................................................................................... 52

11 SHIFT IN DEMAND AND SUPPLY CURVE ............................................................................................... 54

12.1 PRICE ELASTICITY OF DEMAND .................................................................................................................. 62

12.4 APPLICATION OF ELASTICITY IN THE FOOTWEAR PRODUCTS SECTOR OF BANGLADESH ............................. 63

13 EFFECT OF GOVERNMENT POLICIES ................................................................................................... 67

14 PRODUCTION THEORY AND COST CONCEPTS .................................................................................. 67

14.1 FACTORS OF PRODUCTION .......................................................................................................................... 67

15 MARKET STRUCTURE ................................................................................................................................. 69

15.1 ESTABLISHED MARKET STRUCTURE ........................................................................................................... 69

16 PRODUCTION POSSIBILITIES FRONTIER ............................................................................................ 74

17 COST STRUCTURE AND APPLICATION .................................................................................................. 75

17.1 COST OF MISSED OPPORTUNITY................................................................................................................. 76

QUESTIONNAIRE FOR FGD: ...................................................................................................................................... 83

Figure 1: Sources of Secondary Data ............................................................................................................ 7

BB: Bangladesh Bank

R & D: Research & Development

MDGs Millennium Development Goals

ATM: Automated Teller Machine

LTR: Letter of Trust Receipt

LC: Letter of Credit

PPF: production possibilities frontier

FD: Fixed deposit

IR: Interest Rate

_______ _ ___