Topic: Industry Analysis of FMC

Dockyard Limited

Course Code: MGT490

Name ID
Course Title: Strategic
Tausifur Rahman Johan
Management 1821520
Sadia Tahmid Baly 1920076
Submitted
Md. to: Mr Iftekhar 1730857
Sakibur Rahim Mahfuz,
Senior
Md.Lecturer, Department of Management,
Latiful Karim 1921625
SchoolFerdous
Jannatul of Business &
Shorna 1820221
Entrepreneurship,
Shanjana Islam Independent 1830601
Submitted by
Date of Submission: March 28,2022

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 LETTER OF TRANSMITTAL

Date: 27 March, 2022

Mr Iftekhar Mahfuz
Department of Management, School of Business & Entrepreneurship,
Independent University, Bangladesh

Subject: Submission of Industry Analysis Report.

Dear Sir,

With all due respect, it is our pleasure and honor to be your students and to have this

opportunity to present the assignment on FMC shipbuilding industry industry analysis. We

put up our best effort on the task list throughout the report preparation. We feel that our

report will provide a clear understanding of each of the topics because we have provided all

important information about the company. We all did our best to gather the necessary

information, and we will be pleased to answer any questions and completely explain anything

to you. Thank you for all of your assistance and support, which greatly aided us in the

preparation of the report.

Sincerely,

Tausifur Rahman Johan

Sadia Tahmid Baly

Md. Sakibur Rahim

Md. Latiful Karim

Jannatul Ferdous Shorna

Shanjana Islam

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 ACKNOWLEDGEMENT
First and foremost, we would like to express our gratitude to Mr Iftekhar Mahfuz Sir, our

mentor, for his constant support, compassion, guidance, and deep knowledge of the subject

topic under discussion. We were able to complete our report because of his assistance. He is

the most knowledgeable and experienced advisor and guide we have. For the interesting

debates, the sleepless hours spent working together before the deadline, and the overall

enjoyment we've had over the previous few weeks, we would like to express our gratitude to

our colleagues as well as to my mentor. Finally, but certainly not least, we would want to

extend our appreciation to our colleagues for their assistance throughout the report-writing

process.

Thank you.

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 TABLE OF CONTENTS
Letter of Transmittal..................................................................................................................1
Acknowledgement......................................................................................................................2
Executive Summary...................................................................................................................4
Overview of the company: (FMC Dockyard Limited.).............................................................5
Industry analysis.........................................................................................................................6
Industry size and growth trends.............................................................................................6
Maturity of the Ship Building Industry in Bangladesh..........................................................7
External economic factors effect on the industry...................................................................8
Recission............................................................................................................................8
Inflation..............................................................................................................................8
Foreign Exchange...............................................................................................................9
Interest Rate.......................................................................................................................9
Seasonality.............................................................................................................................9
Technological factor...............................................................................................................9
Regulatory, political and legal concerns..............................................................................10
Changes in the competitive environment.............................................................................11
Rivalry among Existing Firms.........................................................................................11
Threat of Substitute products...........................................................................................12
Bargaining Power of Buyers............................................................................................12
Bargaining Power of Suppliers........................................................................................12
Key Challenges Facing the Industry........................................................................................12
Challenges in the Industry....................................................................................................12
Challenges Faced by FMC Dockyard Limited.....................................................................13
Company’s steps to meet one key challenge............................................................................14
Conclusion................................................................................................................................15
References................................................................................................................................16

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 EXECUTIVE SUMMARY
Industry analysis is a tool by which company can understand of it’s position relative to other

companies that produce similar products or services. It helps to develop strong sense about

industry. The important component of strategic planning is understanding market condition

well. This analysis helps to find the strengths and weaknesses in the industry and other

factors. Using these factors carefully, a company can implement properly strategic plans and

achieve goals to procure an edge in the industry. FMC Dockyard is an emerging ship building

and repairing company in the emerging ship building industry of Bangladesh. FMC was

founded recently but they have landed themselves in the industry very well and earning one

of the highest revenues in the industry.

In Bangladesh the size of ship building industry is considerably huge. This industry is going

to a positive outcome with lots of financial growth. External economic factors also play a

huge role in the industry. Seasonal conditions, technological factors, regulatory, political and

legal concerns are all factors that plays a significant role in the industry and can help to

analyze the trends of the ship building industry. By competitive environment it can be known

how intense and high level this industry really the potential has to be.

The industry past 100 years of its inception having just achieved its exponential growth, faces

a lot of challenges which is equally true for the companies in the industry like FMC

Dockyard Limited. Overall, with the given parameters for analysis, ship building is quite a

successful industry with a lot to look forward to.

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 OVERVIEW OF THE COMPANY: (FMC DOCKYARD
LIMITED.)
FMC Dockyard Limited is a shipbuilding and repair company based in Chittagong,

Bangladesh, which was founded in 2009. The shipyard does construction of a variety of

vessels, including ocean-going multipurpose cargo vessels, passenger vessels and boats, oil

tanks, pontoons, boats, fishing boats, boats, oil tankers, box ships, and so on. FMC Dockyard

in Chittagong is located on the east bank of the Karnaphuli River and employs about 1900

people, including skilled and unskilled workers. In addition, the shipyard uses many marine

professionals. Experts come from a variety of backgrounds, such as marine technicians,

mechanical engineers, electrical engineers, shipbuilders, and others. "Variety of growth and

innovation" FMC Dockyard business strategy as announced by Company. Despite being only

12 years old, the company’s status is currently rivaling large shipbuilding companies in the

country.

FMC Dockyard Limited is now the largest shipping port in Bangladesh, with an area of 45

hectares, and the world's only port with its own forward and backward links to the industry.

In addition, the FMC Dockyard provides repair services that will improve the ship efficiency

with low operating costs as part of their important separation strategy industries by setting up

their offices in countries where repair work is more common forcibly. FMC Dockyard

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produces a wide range of industrial vessels, including maritime operations, port services,

fishing, ship operations, public transport and towing jobs. Dredging is one of their most

important services but due to its relatively small size the company's revenue, not mentioned

at all.

Most of the FMC revenue comes from shipbuilding equipment, and ship repairs and finally

dredging. FMC has become the fastest growing shipbuilding company industry with a total

profit of $ 426.2 Million at the end of the 2nd quarter of the financial year 2021, while the

total cost of FMC was only $ 7.6 Million by the end of 2020. The company includes

Bangladesh Government institutions such as the Chittagong Sea Port, Bangladesh Fishery

Union Corporation, etc. Local companies are also included in their own customers like AKG

and Petromax. FMC also works with Foreign Governments such as India, Canada, UAE, UK,

USA and several other countries with their maritime vessels.

INDUSTRY SIZE ANDINDUSTRY

GROWTH TRENDS
ANALYSIS
The shipbuilding industry in Bangladesh is a developing and powerful industry contribution

to the economic sector. Bangladesh state construction companies focusing on Dhaka,

Chittagong, Narayanganj, Barisal and Khulna. Bangladesh Khulna Shipyard Ltd, Western

Marine Shipyard Ltd, Ananda Shipyard ltd, Chittagong Dry Dock Ltd, FMC Dockyard Ltd,

Karnaphuli Shipyard Ltd and Ready Point Shipyard Ltd 7 shipbuilding power companies in

Bangladesh industry. Otherwise in them, there are 120 registered shipping sites and 100 other

existing companies’ shipbuilding and repair industry.

After the textile industry, the shipbuilding industry has been offering the 2nd largest GDP.

The industry contributed 32.42% to GDP at the end of the 2017-18 financial year. The

growth rate of the industry has also been increasing at an 8% annual rate. The years of

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recession have affected the growth rate of the shipbuilding industry but the industry has

managed to recover just after the end of the recession. Current status of industry that, all

roads lead only to significant growth.

Bangladesh 's shipbuilding industry has seen annual growth of 456.88% export revenue for

the first half of the 2017-18 financial year according to data published by Export Promotion

Office (EPB). Bangladesh shipbuilding sector accounts for 0.84% of revenue from the

international shipbuilding industry. Inside the industry hopes for that Bangladesh could reach

at least 1% of the shipbuilding market, valued at $ 4 billion a year. The Bangladesh

shipbuilding industry has the potential to exploit growth the need for small vessels in the

international market like other countries especially in Europe small vessels are not produced.

Figure 01: Ship Building Industry Life-cycle

The Bangladesh Shipbuilding Industry is currently experiencing significant growth of

MATURITY OF THE SHIP BUILDING INDUSTRY IN
BANGLADESH
industry after being able to establish itself as a high-quality and reliable industry. Growth rate

grows over 450%. Although the global economic downturn caused by Covid-19 the epidemic

has reversed the entire growth rate of the industry almost to its former level revenue, the

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launch of the 2021 financial year returned the growth rate to 50% industry within just 2

quarters. This proves that the company is in its growth stage. The strength of the Bangladeshi

shipbuilding industry puts the country on a par with countries such as China, Japan and South

Korea. By reference to a growing export value transactions obtained by shipbuilding

companies and the cheap labor available at in the country, experts suggest that Bangladesh

could be a major competitor in the world the market for small and medium vessels once it has

reached its maturity stage.

The strength of the Bangladeshi shipbuilding industry puts the country on a par with

countries such as China, Japan and South Korea. By reference to a growing export value

transactions obtained by shipbuilding companies and the cheap labor available at in the

country, experts suggest that Bangladesh could be a major competitor in the world the market

for small and medium vessels once it has reached its maturity stage.

EXTERNAL ECONOMIC FACTORS EFFECT ON THE INDUSTRY

There are several economic factors that helps to examine the effect of external factors on

industry performance. However, some factors rather have a large influence on the industry.

RECISSION
The only obstacle in the road of the industry’s success is recession. The ship building

industry naturally loses all its growth and more during any recession. e. Revenues drop to an

all time low as recession does not leave any room for opportunity for the industry.

INFLATION
Inflation will lead to higher purchasing power of foreign raw materials and higher number of

productions in the industry. Consequently, too high of an inflation that is estimated to be

more than twice the inflation rate of 5.56% will lead to earning less from repairing and

constructing and selling ships as the initial cost would increase and demand would decrease.

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FOREIGN EXCHANGE
Earnings and Revenues in the ship building industry can be highly affected based on the

value of foreign exchange. The value will fluctuate proportionally to the fluctuation of the

rate of foreign exchange.

INTEREST RATE
The Ship Building Industry is subjected to high interest rates as Government Banks do not

give out loans as the industry is considered risky and volatile. Private Banks do give out the

necessary loans but charge high interest rate. High Interest Rate is a challenge for this

industry. However, Government is slashing the interest from 13-14% to 6-7% to make the

interest rates more plausible and effectively remove this obstacle.

SEASONALITY
Seasonality refers to changes that occurs based on calendar season or commercial season or

consumer demand. It is used to help analyze stocks and economic trends.

Shipping is a seasonal business. From a supply and demand perspective, both producers and

consumers of commodities are affected by weather patterns that affect the flow of

commodities. For dry bulk cargo, seasonality is primarily focused on weather-related shocks,

seasonal construction needs, inventory periods, heating days, and grain crops. These types of

industry players know that the first calendar quarter of each year is the weakest period of the

year. FMC's work confirms this, although it does not apply to all asset classes. Over the past

10 years, on average, market participants underestimated the intensity of market seasonality,

but the potential returns were great. The shipbuilding industry believes that the negative bias

caused by spot activities, of course, is the lack of "arbitrage trading" as the main reason for

this difference. So close attention needs to be paid to the seasons and prepare accordingly.

TECHNOLOGICAL FACTOR

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Technological factors help to know how a company operates it’s business, sells products, it’s

supply chain and competitors.

The shipbuilding industry relies heavily on technology. Drawing the necessary basic design

drawings, engineering drawings, and building the vessels all require technology. Without

specific agreements in place, any company in the industry will be forced to purchase basic

design drawings at a cost of $200,000 or more. Given the importance of this technology in

shipbuilding, if the government consider subsidizing technology acquisition, such as by

agreeing to pay a certain percentage of the cost of acquisition. As a result, the benefits to the

shipbuilding industry will boost its growth in the international market. Technological

resources are somehow sufficient but the infrastructure for the technology is still clearly

lacking. In addition, the technological advancement in ship building industry lacks compared

to other ship building industry due to inflexibility of the national industry to construct various

ships besides the small ships. Skilled technological experts are also lacking in the industry.

REGULATORY, POLITICAL AND LEGAL CONCERNS

The ship building industry is growing industry in Bangladesh. Bangladesh has a long history

in shipping industry. The Government and its Regulatory board have multiple regulations set

in place to support the Ship Building Industry of Bangladesh without harming the ecology

and the environment. The industry requires a lot funding to grow, as such the Regulatory

Board made it easier for the foreign investors to invest in the local companies, effectively

influencing the economy as all restrictions and criteria for investing that made it extremely

difficult to invest was lifted. Political concerns for this industry are very significant as the

trend towards national policy has started to widely favor the ship building industry.

Government is allowing zero tax rate to maiden ship building companies for the first 10

years.

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The Tax Rate has been reduced on export income: 5% for the publicly listed companies and

10% for the non-listed companies. There is also tax reduction of 5% on import duties on raw

materials and 10% export subsidy on exporting ships. Government has also taken to

proactively train human resource for the employment of skilled labor in the ship building

industry where there is a significant lack of skilled human resource. The Legal Complications

for the ship building industry is pretty complex. Ship Building companies need to

communicate with different governments, maritime laws and follow many other policies.

Currently, export-oriented associations of multiple countries are communicating with various

government and institutions to make the process not feel like jumping through a hoop dowsed

in fire.

CHANGES IN THE COMPETITIVE ENVIRONMENT

The competitive environment is comprised of the forces that propel industry competition. The

group is referred to as the Porters Five forces. They include the following:

THREAT OF NEW ENTRANTS

New entrants pose a moderate threat. Although the financial barrier to entry is large, the

government provides a tax advantage to new entrants in the shipbuilding business, providing

them with a full corporate tax exemption for the first ten years. However, it remains difficult

for new entrants due to the substantial expenditure required.

RIVALRY AMONG EXISTING FIRMS

Due to the industry's rapid growth, competition amongst current firms is strong, as evidenced

by the bidding process for ship building contracts.

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THREAT OF SUBSTITUTE PRODUCTS
There is no substitute for the industry's products and services. As a result, there is no threat of

alternative items.

BARGAINING POWER OF BUYERS

Buyers do not have adequate bargaining power to influence or compel connected enterprises

to modify their prices. As a result, buyers' bargaining power is limited.

BARGAINING POWER OF SUPPLIERS

Suppliers' bargaining strength is pretty unpredictable in this industry. Suppliers typically have

considerable power, as supplies must be transferred across national borders. Suppliers, on the

other hand, may have less bargaining leverage in some circumstances due to the growth of

the shipbuilding sector and its associated industries.

In the ship-building business, there are a lot of things that can go wrong. As there are
KEY CHALLENGES FACING THE
opportunities to earn billions of dollarsINDUSTRY
in foreign exchange, the sector must overcome the

challenges. Otherwise, the industry's rapid growth could be slowed down or even stopped. In

fact, the Bangladesh ship building industry isn't the only one that's seeing big changes in the

number of ships being built.

i)CHALLENGES
Companies in the United StatesINDUSTRY
have to pay a lot of money to get raw materials from
IN THE
other countries. This causes a lot of problems for them. It raises the cost of making things,

which

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raises the price of things to make. In Bangladesh, this is bad news for the industry, which is

still in its early stages of growth.

ii) There is also a big problem with money in this field. Furthermore, the bank invests

more money. Sometimes they have to delay the delivery of the ship because of money.

However, the government is on the verge of making the financial barrier less of a problem.

iii) The supply chain process is slowed down by bureaucratic problems in Bangladesh.

This slows down the industry, and having different facilities for selling products in the

international market makes it more difficult for the industry to grow.

iv) If you don't promote your ship-building business in the international market, it gives the

businesses of other countries a better chance of winning in the global market.

v) The international buyer can cancel an order that isn't certain because of a confidentiality

agreement.

vi) There aren't enough ancillary businesses in other industries to make raw materials and

sourcing more expensive.

vii) There isn't enough skilled labor in the area, especially skilled labor at the local shipyard.

viii) It costs a lot for the company to train its employees.

i) The company has to compete with other international and national companies when they
CHALLENGES FACED BY FMC DOCKYARD LIMITED
bid for a tender. Sometimes, they have to work with other people.

ii) It hurts the company's image and makes it hard to make important contacts.

iii) Difficulties in building the right infrastructure.

iv) In here, there is a lot of competition because this is a new field that is still growing.

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Other problems in the industry that aren't as big but still happen are high insurance premiums,

a lack of enough and expert design firms, regulators who don't know enough about the

shipbuilder company and its industry, and so on.

COMPANY’S STEPS TO MEET ONE KEY CHALLENGE

One of the biggest problems for the shipping industry is that there isn't a lot of infrastructure.

There is a limit to the rivers and the sea for people who want to start a business making ships.

There is a lot of pressure on foreshore charges, which aren't very low. In some cases, double

charges are also levied. However, there is a lack of electricity and gas in Bangladesh, which

makes it hard to start shipbuilding businesses there. Shipbuilding industries need a lot of

parts, components, and accessories, which leads to the need for emergency imports while the

ship is being built. So, existing facilities can't meet the needs of people who need to import

things in an emergency.

However, the answer is to form a proper association of Bangladeshi shipbuilding businesses

that export. There isn't a government-owned dock. There must be enough space for these

things. FMC, a shipping company, makes a dockyard near the sea, like the coastal area of the

district, like Bhola Patuakhali and Chittagong, in the district. FMC Shipping should work

with the Bangladesh Shipping Association on this (Aeosib). FMC needs to talk to the

Bangladesh government to make sure that export-oriented shipbuilding has a good place in

the industry.

To be able to compete with the international market, FMC Company needs to move their

facilities to the coast. There must be proper efforts made by the government and FMC

Company to improve the infrastructure. FMC Company can use some strategies, like

defenders who want to improve efficiency and analyzers who want to look at service

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innovation and market opportunities. Finally, FMC Company can use an industry matrix. It's

called an "industry matrix," and it lists the things that make a business successful.

The shipbuilding industry is growing at an exponentially faster rate than before. Companies
CONCLUSION
like FMC should look into the shipbuilding industry and come up with a plan. Even though

the study above gives some insight into the current state of things, it is hard to come up with

effective plans because of the parameters that have been set. A lot of work needs to be done

in this case in order to come up with a rational and effective plan for taking advantage of the

business's current growth boom.

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shipbuilding-in-10-months

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shipbuilding-1513607474

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shipbuilding-industry/

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Bangladesh-Shipping-Industry-A-Comparative-Overview.pdf

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