Market Opportunities of Leather Chemical A Study on BASF Bangladesh Limited
CHAPTER ONE INTRODUCTION One of the most significant indicators of our country's growth is considered to be its utilization of leather technology. Third world countries like Bangladesh, India, and Pakistan are doing well in leather technology and have great potentials only because the super powers like USA and UK do not want to get into such business that includes rather filthy atmosphere of the factories. Therefore, it should be our concern to try to expand the leather processing industry as much as possible and hence pull out as much potential from it as possible. The leather industry of Bangladesh can make her more focused in the world and bring enormous foreign exchanges through consistent innovation in the quality Bangladesh may be a little slow in realizing the potential of the leather sector but she is catching up with the world at a considerable speed. Our neighboring countries India and Pakistan both are the leading nations in the leather sector and we can get innumerable support technically as well as other benefits from them. Bangladesh is facing a lot of challenges in the different industry for globalization. Therefore, Bangladesh has a lot of potential in its leather sector that will flourish with rigorous hard work and innovation. The production of
finished leather revolutionized the leather industry as finished leather can be processed in Bangladesh now. Numbers of tanneries are now producing finished leather at an affordable rate, which is an encouragement for the leather sector in general. Initial investment required to start a tannery may range from Taka 4 to 11 million. A major competitive tannery has an estimated investment of around 50 to 120 million. Market of the tanneries is mainly based in foreign exports. The target customers of this industry are mainly the consumers of the Far East and European market and mostly they are middle, upper middle and upper class people who buy their products. Growth rate is rising with a steady increase in demand. From the upcoming year the export seems to increase, as there is a trend in the European fashion industry where they are focusing on leatherwear. The leather industry may grow up to 10% in the coming year. The demand of the leather products is quite huge. In the foreign countries, it is used to make goods as well as body wears. But the only hindrance that is slowing its growth in our country is lack of proper knowledge and foresightedness. The study has been conducted for academic purpose as well as for BASF so that the findings can help to understand the present position of BASF in the market and the competitive position of BASF in supplying the chemicals. The project helped us to understand how BASF is operating and how it has prepared itself to face the upcoming challenges of the ever changing market conditions. The research mainly wants to provide the reader an understanding of how BASF became competitive and to what extent have they been successful in meeting the demands of their customers.
Leather is a sector that has great potential to become the major foreign exchange earner in Bangladesh, and chemical being the backbone of this sector has been brought into the limelight in Bangladesh since long. There are about 200 tanneries operating in Bangladesh but of them around 30 tanneries are proficient, others either operate on some specific part of the year or work on sub contract or does job working. Cutthroat competition exists in this area among the chemical suppliers who are around 25 in number, presently operating in Bangladesh. However, the number of new suppliers is increasing. The criterions on which the suppliers mainly compete are price, service and quality. But the major factors are price and quality. In Dhaka University, internship is a course in which there is a 12-weeks commitment from the host institution, where the host institution is required to assign the student to work on a project. Such a program enables students to make a successful transition to the corporate world and to have an exposure to the practical world after having learned academic knowledge. I have been assigned this course as a partial requirement of MBA curriculum. As a student of this course, I am grateful that I have gotten the opportunity to apply the theories of Marketing Research in practicality. The main purpose of the project from the part of the university was to make the students apply the knowledge that have been acquired in the marketing courses also to compare the work of the practical world and theoretical knowledge acquired from the books. For BASF this project has a gigantic importance. This report has been prepared taking into consideration the viewpoint of a naive person who wants to gather information about the operations and situations of chemical suppliers for leather sector in Bangladesh. The main purpose of the report can be termed as finding and
evaluating the necessary information about the chemical consumption of different tanneries and decide whether BASF is meeting its commitments and whether they posses any competitive advantage over the others. The objective of carrying out this research was also to find out specifically the present sales of the chemicals of BASF, the potential of chemical sales, competitive position, also to find the image of the company in the customers mind. Which means that, this project was undertaken to find out BASF’s position in the market and measure that will help to sustain a strong position against the competitors. Being a manager of Basf Bangladesh Ltd in Leather division this kind of research was unquestionably very important for me and as well as a company like BASF that sells chemicals to the tanneries. First, there are several renowned companies competing for same customers and most of them are doing aggressive marketing. "BASF Bangladesh" is controlled by "BASF Singapore therefore, it was very important for the employers, employees, management practitioners working in Bangladesh to know the company's present and future market stand, as they have to report to Singapore on a routine basis. The previous research did not measure chemical potential tannery by tannery. Previous research firstly measure the common basis (theatrical aspect) of the using chemical for producing leather from raw stock to finishing then on the basis of that theatrical percentage calculating the total chemical market potential. Finally which shows common characteristics of chemical consumptions of the leather industry? But in practically deferent tanneries are consuming different types of raw materials and deferent chemicals according to their final product requirement. In this research paper I tried to measure chemical consumption pattern of individual tannery (major) separately as per
its buyer requirement and accumulated the entire figure to calculate the total chemical market potential of leather market. In measuring Basf Bangladesh Ltd accessible market I consider in which sub segment Basf Bangladesh Ltd is selling its product to sustain its position. By the previous research we can analyze the total chemical consumption trend by the industry but we cannot measure the individual unit contribution to the total chemical consumption trend. In this research paper I tried to indicate which sub segment Basf Bangladesh Ltd should concentrate by measuring BASF performance in that particular sub segment with some relative suggestion. CHAPTER TWO RESEARCH OBJECTIVES & METHODOLOGY The Chemical suppliers are all claiming the fact that they are providing better service, price and quality to the customers. They all try to prove themselves to be different from the rest. However, applying the theoretical framework in the practical field is always a difficult task for any firm, as there are many uncertainties in the internal as well as external environment of the firm. This research paper is conducted with the objectives 1. To find the general commitments the chemical suppliers especially BASF made in order to satisfy the customers. 2. To find out whether BASF has achieved any competitive advantages over the other chemical suppliers or not. 3. A simple review of the market research problem with help to come up with some of the components of the problem, which can be identified from two different aspects. It judges whether the chemical suppliers especially BASF are able to provide Quality and Service at a minimum relative cost, their management capability and performance. These aspects can be termed as performance measure reflecting long-term
profitability. On the other side the focus is on how capable BASF is in attaining Sustainable Competitive Advantage (SCA), which comprise the way suppliers compete (positioning, and distribution strategy) also the basis of competition (assets and competencies). APPROACH TO THE PROBLEM In the project the concept of performance measure, reflecting long- term profitability and sustainable competitive advantage have been taken into consideration. These theories comprise number of components and each of these components will be evaluated individually in terms of BASF and the chemical supply market. The approach will include the analysis of the theories, research questions, and factors that influence the research design. TYPES OF RESEARCH DESIGN In the research process certain set of activities have been carried out directed towards a unique goal that is intended to be achieved in a limited time frame stated in our research problem. Information has been gathered from a given sample of population elements and this work is done only once and not repeatedly. Therefore, this approach confirms to the cross-sectional type of research. INFORMATION NEEDS In the research it has been intended to find out how the chemical suppliers operate, how equipped are they to meet the competition existing in the market and whether they have prepared themselves to meet the pitfalls of this industry and if they have then what measures they have taken to face the aggressive competition.
SAMPLING: DESIGN AND PROCEDURE For the target population of the research work was considered those tanneries whose are contributing major portion of the revenue of total industry earnings. As leather industry in Bangladesh is concentrated in certain place in Dhaka capital of Bangladesh and out of many tanneries a few are playing major role for leather processing segment so I consider that particular major players who are constitute 80% of the market in leather processing chemical segment. Since the research was done for BASF Bangladesh Limited, the management of BASF has identified some selected number of tanneries that they highly prefer and those are indeed the self-sufficient company. SOURCES OF DATA The methodology of the report included the collection of data through primary source and secondary source, but the main source was primary data, which was survey through a questionnaire. PRIMARY SOURCE Information regarding operations of the tanneries has been collected through interviews with the companies' management staffs, and through using questionnaire. SECONDARY SOURCE There was not a lot of use of the secondary data as most of the data collected was through the primary source. The remaining data was collected through some companies Brochures. BASF Bangladesh Ltd previous market survey also treated as a potential secondary sources. QUESTIONNAIRE DEVELOPMENT AND PRE-TESTING
Considerable effort has been given in formulating the research questionnaire. The ideas of BASF has been taken in conducting the research that have been poured in formulating a questionnaire which would best suit the needs of the researcher and that, which would not create any undue hesitation on part of the respondent. After the questionnaire was prepared then respected faculty advisor of this course pre-tested the questionnaire and agreed upon the format of it that has helped me to conduct the research more comprehensively. DATA COLLECTION METHOD DATA COLLECTION FROM SECONDARY SOURCE It is always wise to seek information from the secondary source as it holds several advantages over primary source including time and cost. Moreover, secondary data would help the readers to get a comprehensive idea about the companies we are dealing with. Brochures for the leather association especially recently published magazine on Dhaka International Leather Fair 2005 and brochures from different companies and their websites were used as a source of secondary data. DATA COLLECTION FROM PRIMARY SOURCE Primary data was the main source of information in this research. As previously, I was assigned to have the attitude of major key customers towards the different chemical suppliers. So I had to conduct exploratory research to get an idea about the industry. At later stages of the research, I conducted indepth interviews with the management personals of the company and with industry experts to understand the comprehensive scenario. The decision makers were our main targets for retrieval of information. An extensive questionnaire was used to interview the experts and collect data.
QUALITATIVE RESEARCH As the data collected from the questionnaires was not enough to assist in the research I had to use qualitative research to get an in depth idea about the problem in hand. I conducted in-depth interviews with the management of other chemical suppliers and tanneries. Moreover, I have used nondirective interviews and third- person techniques to get the concrete idea about the problem. Nondirective interview was used because it gives the respondent maximum freedom, with in the bounds of topics of interest. In order to get true feelings about my sample I have used third-person technique by asking friends, neighbors or the average knowledgeable person. SCALING TECHNIQUE The scaling techniques used for this research are the Liker scaling, comparative and non-comparative, rank order scaling. The questionnaires by which I conducted the research included the rank order scaling technique, as I needed to know the aspects where the tanneries were providing more attention than the other was and how the tanneries are evaluating them. It was important for me and required of me to rank their activities to highlight the competitive advantages that each suppliers possessed in their respective fields of importance. FIELDWORK Since the research mostly depended on primary data there fore collection of data through fieldwork was the major tool in the process, I went to each of the assigned tanneries for primary as well as secondary data. While carrying out the research, the method of brainstorming was used to identify that, what question can be asked and how effectively communication can be preceded with them so that they feel less hesitant even to provide with some
confidential data. Convincing the tannery technicians and their higher authorities to reveal confidential information was a crucial job to do. INTERPRETATION OF RESEARCH DATA Most of the research data were presented in the form of tables, bar chart and pie chart. As different kinds of huge quantity of chemicals are being used in the leather processing and different base chemical products are being using in different process system various tannery to tannery. Since only 5% major key accounts are consuming 70% chemical and providing 75% turnover of total industry earnings so it is convenient to furnish individual tannery information by tables, bar chart and pie chart effectively. As Basf Bangladesh Ltd is the prime chemical supplier of leather industry so chemical supply status of Basf Bangladesh Ltd and other related competition could be presented by above means will be suitable. SCOPE AND LIMITATION Due to the positive image of Dhaka University as well as BASF, I did not face many problems in gathering information from the tanneries. Being a manager of Basf Bangladesh Ltd employed in related leather market was also a big support for me as the technicians and the MD's of the tanneries supported me to finish my work in the tannery area as quickly as possible. As we all know that the Hajaribagh Tannery area is not a good place for any new comer to roam around for a long time as leather processing takes complicated and long procedure. Expert guidance from the faculty was a major advantage in conducting the research. The relationship between the Chemical suppliers and tanneries are like helping partners for each other, so it was not a big problem to gather data at any point of time.
I faced some problems from the management, as it was difficult for them to provide me with the time that required. The time taken to complete data collection was also a major drawback as it with held me from making the report more comprehensive. It happened that they did not provide certain data and answer to the questions that I required, for secrecy reasons. Discussions with the decision makers could not be taken extensively because access to the decision makers was difficult and the status of the research was not important to the tannery decision makers. However, it was managed to gather some critical information that was required from them. Industry experts mainly the technicians provided most of the assistance about the leather industry as it was tried to construct good rapport with them. They were able to provide me with the neutral information exposing me to the real picture of each of the tanneries that was under taken in the research. Secondary data was analyzed to assist me in defining the problems. The data was collected from the brochures of different chemical companies and different tanneries as well. The tannery owners were very reluctant to provide with accurate information, so it was very difficult for me to proceed with conclusive research. Consequently, to come up with a valid problem I had to take the help of qualitative research i.e. exploratory research methodology. CHAPTER THREE BASF- AN OVERVIEW BASF GROUP AT A GLANCE • The world's leading Chemical Company • Offers customers intelligent system solution and high-quality products
• Successful due to global presence, Verbund (integration), active portfolio management • Uses changes as an opportunity-renewed strategy: "BASF 2015" DOWN THE HISTORIC TRACK - A COMPANY THAT CAME TO STAY It was like the first pulsating life in the boiling primordial soup holding eternity in its finite blue print. Comprehension - response - adaptation and innovation defined the evolution process. BASF - the world's leading chemical company hardly resembled its present grandeur back in 1865 when Friedrich Engelhorn founded Badische Anilin & Soda Fabrik 'BASF' in Ludwigshafen, Germany, producing coal tar dyes. However, it stood up to dictate history and soon the company gained leading position in the world dyes market. The booming trail tracked by the company during 1865-1901 is dubbed as "Age of dyes", This era of resilient winning instinct was followed by "Age of fertilizers" (1901-1925), "Age of high pressure synthesis" (1925-45), "Reconstruction and new beginning" (1945-53), "The plastic age" (1953-65) and the ongoing episode in the long trek "From Ludwigshafen to the world". BASF deservingly became the world's leading company with a global presence and responsible success. ERA IN BASF'S HISTORY 1865-1901: Founding of BASF-the age of dyes Friedrich Engelhorn founds Badiche Anilin & Soda Fabrik to produce coal tar dyes. Soon thereafter, the company gains a leading position in the world dyes market with methylene blue, alizarin and indigo. 1901-1925: The age of fertilizers The synthesis of ammonia by the Haber-Bosch process paves the way for the production of synthetic nitrogen fertilizers.
1925-1945: New high-pressure syntheses BASF becomes part of I.G. Farbenindustrie AG. Advances in high-pressure technology enable the production of synthetic gasoline & rubber and products from acetylene. 1945-1953: Reconstruction and new beginning Reconstruction after the severe damage during the Second World War takes a number of years. BASF was established again as an independent company in 1952. 1953-1965: The beginning of plastics age Germany's economic miracle paves the way for the plastics era. BASF expands into markets with products such as polystyrene, Styropor速 nylon and polyethylene. 1965-2004: From Ludwigshafen to the world BASF develops into a transnational company with production sites in Europe, North & South America and Asia. BASF's VISIONS 2015-Paths to Value-adding growth o Earn a premium on their cost of capital o Help their customers to be more successful o Form the best team in the industry o Ensure sustainable development o Use state-of-the-art technology BASF'S MISSION
"To innovate and apply measures that will help us to maintain The Chemical Company' status for perpetual succession" THE UNDERLYING MEANING OF THE LOGO BASF's new corporate design is the visible expression of the path to the future. They have added a symbol to the basis of their logo-the four letters BASF: The two squares stand for mutual success in partnership with their customers, employees, investors, neighbors and society. A further addition to the logo reflects their claim to be the world's leading chemical company: BASF-The Chemical Company. BASF STRATEGY
Earn premium On their cost of capital
Help customers to be more successful
From the best Team in the industry
Ensure Sustainable Development
GOAL OF BASF BASF’s goal is grow profitably and further increase the value of their company. THE VALUES TO UPHOLD Six values describe BASF's philosophy and the way in which they want to achieve their goal: Sustainable profitable performance Innovation for the success of our customers
Safety, health and environmental protection Personal and professional competence Mutual respect and open dialogue Integrity AN OVERVIEW ON BASF BANGLADESH LIMITED BASF Bangladesh Limited (herein referred to as "BBL") was initially established in 1967 in the name of "Chemdyes Pakistan Limited". In 1970, it was renamed as "BASF Pakistan Limited" (as a branch office). The name was changed again in 1972 to "BASF Bangladesh Limited". BBL is an affiliate (subsidiary) company of world-renowned number one multinational chemical conglomerate BASF Aktiengesellschaft (BASF AG) of Germany. The head office is located in Dhaka, with a branch office in Chittagong. In 1985, BBL started local production of process chemicals at Tejgaon Industrial Area, Dhaka - the first of its kind in Bangladesh to serve the domestic market. BBL have been producing sophisticated textile and leather process chemicals of world-class quality that are used almost all the major industries in this sector. It is a private limited company incorporated in Bangladesh. It has authorized capital of 20,000,000 divided into 2,000,000 ordinary shares of Tk. 10 each. The issued and paid up capital is Tk. 12,275,840.00 of which 76.41% is held by BASF AG and Bangladeshi shareholders hold the balance 23.59%. BBL is also the number one chemical company in Bangladesh having business in textile and leather process chemicals, plastics and polystyrenes,
pharmaceutical chemicals and crop protection agents and various other chemicals since pre-independence days. In BBL the Managing Director Mr. Saria Sadique holds the supreme authority although the company has given extensive discretionary authority to the officers. They have in total five directors who are responsible for handling different departments. Two of the directors are for marketing, one for the finance department one for Chittagong office and the other one are responsible for handling some light production or laboratory test carried out in Bangladesh. Then again, the six departments of BBL have their own managers, assistant managers who report to the marketing directors. In total there are 44 people working for BBL, which competes with companies who has more than 300 people working. A company like Novartis is one such example. For the leather sector Mr. Abdus Sattar is the key decision maker and Mr. Kamrul Islam (myself) the manager and Mr. Nazimul Haque assist him. It is surprising that how these few numbers of people run BBL in such efficiency. BASF'S SET UP IN BANGLADESH Structure: A private limited company Equity: BASF holds 76.41% share Number of employees: 44 (2003) Activities:
Local production-Textile and Leather auxiliaries :
Ex-stock-Crop protection, textile & leather auxiliaries: Agency business-BASF's whole range of products
OBJECTIVES • To maintain as number 1(one) chemical company in the country. • To establish themselves as a reputed and dignified corporate citizen
• To position BASF as a technical service oriented partner to the customers. PRODUCTION PLANT: A MILESTONE IN BBL'S HISTORY In 1985, BBL started local production of process chemicals at Tejgaon Industrial Area, Dhaka -the first of its kind in Bangladesh to serve the domestic market. BBL have been producing sophisticated textile and leather process chemicals of world-class quality that are used almost all the major industries in this sector. SAP IMPLEMENTATION: A MILESTONE IN BBL'S HISTORY BBL has recently implemented an ERP software-SAP (a number one ERP software in the world) for which a Wide Area Network (WAN) and VPN are established to connect Regional headquarter in Singapore, Factory office at Tejgaon connected with head office through Radio Link and sales office at Chittagong directly with Singapore. WATER TREATMENT PLANT: A MILESTONE IN BBL'S HISTORY In the month of May 2004, BBL has successfully set up a water treatment plant in their Tejgaon factory. The set up of the plant has created awareness among the society. The inauguration of the plant was greatly acclaimed by the government as well by the society. This water treatment plant will help to purify and make useable of the used water. VISION 2015: BBL We are a reputed and result-oriented transnational company in Bangladesh. We are the number 1 (one) chemical company in the country. Our basic strength is state-of-the art technology. Our products meet rigorous standards determined by our parent company.
We strive our best for achieving excellence in each and every step in production, marketing, distribution and technical support in order to ensure highest customer-satisfaction. A high return on equity is our cherished goal. Our strength is a well-trained, highly qualified and dedicated workforce who cares for highest values. MISSION STATEMENT "To innovate and apply measures that will help us to maintain The Chemical Company' status for perpetual succession." VALUES • Sustainable Profitable Performance • Innovation in the Service to Our Customers • Safety, Health, Environmental Responsibility • Intercultural Competence Respect and Dialogue • Integrity ACHIEVEMENT BBL has achieved so far the following: ISO 9002:2000 certification ISO 14001 certification SAP implementation. BBL’S OUTLOOK BBL has come a long way since its inception. In line with BASF's global objectives, the company has planned to allocate its resources and focus on key strategic areas to maximize its market share. As BBL consolidates its presence and improves profitability, more resources will be available for deployment in other areas.With that, BBL stands to gain the edge required to compete
effectively in this intensely competitive market. Despite the depressed economic situation in Bangladesh, BBL is performing exceptionally well. To meet growing demand, the company has already undertaken measures to relocate the production plant to a larger site at Jatramura, Rupgonj in a land of 14 bighas soon. MD'S SLOGAN "We produce high quality product for a better output of our users helping our customers' to produce better product for humankind/society." BASF’S FUNCTION IN BANGLADESH In Bangladesh, the major function of BASF is marketing. They mainly focus on selling their products. The chemicals mainly come from Germany. Marketing policies are very strong in BASF. However, the competitors of BASF have similar types of products yet through aggressive marketing BASF identifies the market need and serves accordingly. The promotion campaign is also significant. BASF gives the dealers trade promotions and souvenir like calendar, diary, wallet, pen, mug, etc to the tannery owners and other related important personnel. They assist the tannery owners in preparing new articles. SWOT ANALYSIS OF BASF STRENGTH 1. Strong market reputation.
WEAKNESS
2. Skilled managerial workforce.
1. To some extent diverted from
3. Availability of transportation. 4.
Equipped to provide both standardized and customized products,
5. Ability to raise capital. 6. Strong brand image.
innovation due to success. 2. Sometimes cannot supply due to shortage of products. 3. Sometimes gather unnecessary inventory. 4. Prices are quite high than their
7. Responsive customer.
competitors.
8. Effective promotional program. 9.
Maintains good customer relationship.
10. Parallel state with competitors. 11. Financial strength is good. 12.
Market
leader
in
some
products. 13. Efficiency in marketing. 14. Quality assurance. 15. Proper knowledge about their products. 16. Created strong entry barrier. OPPORTUNITY THREAT 1. There is demand for quality 1. Price volatility of inputs due to products.
environmental,
2. Comparatively competition is still less. 3. 4.
2.
Buyers have more bargaining power.
3. Competitive products.
Demand for innovative 4. Threat of new entrants. products.
5.
and
international factors.
Now business trend is more towards globalization.
political
5.
Opportunities in new
Existing competitors are very efficient and well structured.
tanneries. STRATEGIC AND OPERATIONAL ISSUES OF BASF Corporate strategies: "To maintain and increase the present market share and penetrate into the finished segment of leather production."
Business level strategies: "To attain cost leadership along with some differentiation." Functional level strategies: "Come up with innovative products that will initiate the works of R&D." PROBLEM FACED AND COPING ACTIONS The unique problem in Bangladesh is corruption and coping with such is almost inseparable to the business people here. BASF is also badly suffering from this cursing effect. Since BASF has to import goods from Germany, so bribing becomes inevitable. Very little could be done to cope with this problem. Nevertheless, the management tries to keep good relation with the concerned authorities so the effect can be minimized. Then again, sometimes due to the delay of government procedures, some products are spoiled and to avoid such situation BASF Germany takes further preservative measures while producing them. COMPANY'S CURRENT STATE AND FUTURE DIRECTIONS In Hazaribagh where most of the tanneries are situated, BASF is still considered to be one of the best chemical supplier. People in general have the impression that BASF is the company that has pioneered the chemical supply in Bangladesh. The financial strength of the company is well talked about, in some of the products of the leather segment like wetting agent, formic acid, chrome powder, sodium meta bi sulfate, etc BASF is enjoying sort of monopolistic situation. Most of the tanneries are quite satisfied and are Iran quelled with the marketing activities of BASF. However, some complain that BASF needs innovation. BASF is capable enough to identify their flaws that come up their ways. In the last few months, they have brought three experts from Germany, Singapore
and India to improve their product quality and technical skills. They are also trying to penetrate with their products in the finishing part of leather processing. CHAPTER FOUR ANALYSIS INDIVIDUAL TANNERY INFORMATION APEX TANNERY Apex tannery is the largest tannery in Bangladesh. It has started its operation in the year 1974. It has earned very good reputation in finish part of leather production. It has total employees of 800 and runs 3 shifts in a day. The major productions of them are crust and finish production. The company's yearly revenue is $30 million. They have a production capacity of 25 million sq.ft per year. They prefer to consume chemicals from: Wet blue: 70% from BASF, 10% from BAYER and others. Crust: 40% from BASF, 10% from BAYER, 10% from ZIMMER and others. Finished: 70% from ALPA, 20% from CLARIANT, and 10% from BASF. Overall their preferred chemical company is ALPA. DHAKA HIDES AND SKINS Dhaka hides and Skins have started its operation in the year 1981. They claim to be the 2nd largest hide-finishing tannery in Bangladesh. It
has total
employees of 250 and runs 2 shifts in a day. The major productions of them are crust (60%) and finish (40%) production. The company's yearly revenue is
$13.39 million. Their yearly production capacity is approximately 5.00 million sqft. In the three stages of hide processing, they prefer: Wet Blue; 60% from BASF, 20% from CLARIANT and others. Crust: 90% from BASF, 5% CLARIANT, 5% SMIT & ZOON. Finished: 50% from ALPA and 50% from CLARIANT Overall their preferred chemical company is BASF. BAY TANNERIES LTD In processing quality leather, Bay Tanneries Ltd has earned much fame amongst its competitors in Hajaribagh. It has started its operation in the year 1978. It has total employees of 500 and runs 3 shifts in a day. The major productions of them are crust and finish production, shoe upper, bag leather and garments. The company's production in the year 2000-2001 was 80, 60,809 sqft then again they have a production capacity of 100 million sqft. Their preferred chemical suppliers are: Wet blue: 50% BASF, 20% BUCKMAN and others. Crust: 55% BASF, 40% HODGSON, 5% TFL. Finish: 80% BASF, 10% ALPA, 10% EARNSHAW. Overall their preferred chemical supplier is BASF. KARIM LEATHER Karim leather is quite popular in Hazaribagh. It has started its operation in the year 1982. It has total employees of 200 and runs 2 shifts in a day. It emphasizes more on quantity export rather than quality. The major productions of them are crust and finish production. Their total revenue per year is $83 million and their production capacity is about 14 million sqft per year. The company's preferred chemical suppliers are:
Wet blue: 20% BASF, 50% QIUNEE, 30% TFL. Crust production: 60% BASF Finish products: 40% TFL, 40% QIUNEE Overall, their preferred chemical suppliers are TFL & QUINEE. BENGAL LEATHER COMPLEX This leather complex has started their operation since 1986. Their production capacity is almost 13.2 million sqft per year. In the year of 2003-2004, they have processed 12.5 million sqft raw hides. They have 120 workers and run 2 shifts a day. Their main production includes crust and finish processing. Their preferred chemical company in the three stages of hide processing is: Wet Blue: 40% from BASF, 20% TFL, 20% CLARIANT and others. Crust; 30% from BASF, 20% from BAYER and others. Finished: 20% ALPA, 20% CBS, 20% STAHL and others. Overall, their preferred chemical suppliers are ALPA and ICL. SOMOTA LEATHER COMPLEX Somota leather has started its operation in the year 1990. It has total employees of 150 and runs 2 shifts in a day. The major productions of them are crust and finish production and softy shoe upper. The company's production in the year 2001 and preferable chemical companies are respectively: Wet blue: 8225732sft with BASF, TFL. Crust production: 8225732sft with TFL, BASF, BAYER Finish products: 725732sft with ALPA AL-MADINA TANNERY
AI-Madina tannery has started its operation in the year 1979. It has total employees of 35 and runs 2 shifts in a day. Their major production is crust production. The company's production in the year 2001 and preferable chemical companies are respectively: Wet blue: 3OOOOOOsft with BASF, STAHL, BAYER. Crust production: 3000000sft with BASF, TFL, ALPA Finish products: 75000sftwith STAHL, ALPA, BASF. SAMINA TANNERY Samina has started its operation in the year 1980. It has total employees of 200 and runs 2 shifts in a day. The major productions of them are crust and finish. The company's production in the year 2001 and preferable chemical companies are respectively: Wet blue: 4000000sft with TFL, BASF, INCAMICA Crust production: 4000000sft with INCAMICA, BASF, TFL. Finish products: I 5OOOOOsft with ALPA, BASF. PROGOTI TANNERY Progoti has started its operation in the year 1972. It has total employees of 100 and runs 2 shifts in a day. The major productions of them are crust and finish. The company's production in the year 2001 and preferable chemical companies are respectively: Wet blue: 4000000sft with TFL, HODGSON. Crust production: 4000000sft with SMIT & ZOOM, TFL, ATLAS. Finish products: 3OOOOOsft with ALPA, STAHL. VULUA TANNERY
Vulua has started its operation in the year 1990. It has total employees of 100 and runs 2 shifts in a day. The major productions of them are crust and finish production. The company's production in the year 2001 and preferable chemical companies are respectively: Wet blue: 4800000sft with BAYER, TFL, HODGSON. Crust production: 4800000sft with BAYER, SMIT & ZOOM, TFL. Finish products: 1200000sft with SYAHL, EARNSHAW, BASF. ROMA LEATHER Roma leather is a part of Fortuna group. It has started its operation in the year 1986. It has total employees of 120 and runs 3 shifts in a day. The major productions of them are crust and finish production. The company's production in the year 2001 and preferable chemical companies are respectively: Wet blue: 5500000sft with BASF, ALPA, TFL. Crust production: 5500000sft with BAYER, BASF, TFL. Finish products: 2000000sft with ALPA, STAHL, HODGSON. RELIANCE TANNERY Reliance tannery has started its operation in the year 1980. It has total employees of 200 and runs 2 shifts in a day. The major productions of them are crust and finish production. The company's production in the year 2001 and its preferable chemical companies are respectively: Wet blue: 10000000 sqft with TFL, BASF, NEOCHEMICA Crust production: 10000000 sqft with BASF, HODGSON, TFL Finish products: 3000000 sqft with BASF, BUCKMAN Overall, their preferred chemical supplier is BASF, TFL.
H&H LEATHERS H & H Leathers has started their operation since 1981. They have a turnover of $5.26 million per year. Every year their cost of production is almost $1.52 million. They have a production capacity of 5 million sqft per year. In the year of 2003-2004, they have processed 3.80 million sqft. Their main production is finished leather. Their preferred chemical companies are:« Wet Blue: 50% BASF and others. Crust: 27% BASF, 40% ALPA and others. Finished: 10% BASF, 40% ALPA, 30% STAHL, 20% CLARIANT. Overall, their preferred chemical companies are BASF and STAHL. RIFF LEATHERS This leather industry is one of the biggest in Bangladesh, which is located in Chittagong. Their main productions are equally divided as 50:50 among crust and finished. Around 20% of their finished leather is sold in the local market, rest of them are exported. Their preferred chemical companies are: Wet Blue: 60% BASF, 20% CLARIANT, 20% BUCKMAN. Crust: 70% BASF, 20% SMIT & ZOON, 5% CLARIANT, 5% BUCKMAN. Finished: 50% BASF, 40% CLARIANT, and 10% CBS. Overall, they prefer to buy their chemicals from BASF. Total market potentials of chemicals in the major six tanneries and the no of times BASF's chemicals has been used • Apex Tannery • Kctrim Leather • Bcry Tannery +Dhaka Hide & Skins ^Bengal Leather C. • Riff Leathers
CHEMICALS USED IN WET BLUE Name
Total
NO Of BASF Market Leader
market size (kg) Soaking Enzyme 1,05,190 Detergent 1,11,000 Liming Auxiliaries 2,62,340 Batting Agent 4,83,688 Formic Acid 2,53,708 Sodium Format 2,73,700 Sodium Chlorite 1,38,848 Chrome 13,11,988
1 OUT OF 6 5 OUT OF 6 2 OUT OF 6 MILL 5 OUT OF 6 5 OUT OF 6 2 OUT OF 6 4 OUT OF 6
TFL BASF CLARIANT/TFL CLARIANT BASF BASF BASF/CLARIANT BASF
Powder/Pre Tanning Syntan Implenai DC 2,25,496
5 OUT OF 6 BASF
Liquor/Di carboxylic Acid Bactericide/
59,060
MILL
Fungicide Market leader in Wet Blue segment: CHEMICALS USED IN CRUST Name Total market NO Basic
size Chrome 5,15,896
Powder Detergent
63,500
BUCKMAN BASF
OF Market
BASF Leader 5 OUT OF BASF 6 4 OUT OF BASF
Acitic Acid/Formic 1,48,700
6 4 OUT OF BASF
Acid Chrome Syntan Neutralizing
6 MILL OTHERS 3 OUT OF BASF/TFL
1,85,898 2,11,625
Syntan Replacement System White Syntan
3,77,898
6 2 OUT OF BAYER
2,80,094
6 5 OUT OF BASF 6
Amphotaric Syntan 68,200 Natural based Fat 85,450
5 OUT OF 6 BASF 1 OUT OF 6 TFL
Liquor Semi Synthetic
Fat 2,24,396 1 OUT OF CLARIANT/
TFL
SMIT
&
Liquor Full Synthetic
6 ZOON Fat 1,76,498 2 OUT OF 6 CLARIANT/
TFL
SMIT
&
Liquor Acrylic Resin Acrylic Copolymer
ZOON 4,03,198 3 OUT OF 6 BASF/SMIT & ZOON 5,62,498 3 OUT OF BASF
Melamine Syntan Filler Dye Stuff
6 2,61,898 2 OUT OF 6 BASF 1,73,998 MILL BUCKMAN 2,88,196 3 OUT OF BASF/CLARIANT
Fixing Agent
6 2,51,760 3 OUT OF 6 BASF
Market Leader In Crust Leather Segment: BASF CHEMICALS USED IN FINISHED Name
Total
NO OF BASF Market Leader
market size Acrylic Resin binder 93,800 2 OUT IF 6 CLARIANT/ALPA Protein Binder 2,53,696 1 OUT OF 6 CLARIANT/ALPA Polyurethane 52,400 MILL ALPA Binder
Filler Wax Oil Metal Complex Dye Organic/Inorganic
37,300 19,950 19,400 22,232 50,100
2 2 1 1 2
OUT OF 6 OUT OF 6 OUT OF 6 OUT OF 6 OUT OF 6
CLARIANT/ALPA CLARIANT/ALPA CLARIANT/ALPA CLARIANT/ALPA CLARIANT/ALPA
Pigment Top Lacquer Cationic Product Solvent/Finishing
1,22,396 4 OUT OF 6 BASF 88,140 MILL ALPA 39,000 1 OUT OF 6 ALPA/STAHL
Auxiliaries Market leader in Finished leather segment:
CLARIANT / ALPA
Supplier’s scenario in leather segment in the major six tanneries Total Quantity in Kg: 83,03,135kg Supplier BASF ALPA CLARIANT SMIT & ZOON BAYER STAHL BUCKMAN STOPPANI CBS SCHEMER & SCHWAZ
Total market share Qty (kg) Value (USD) 38,29,052 26,45,295.428 2,34,825 9,44,043.103 9,04,000 18,51,246.047 4,57,000 7,03,879.262 14,00,000 16,01,223.712 1,24,000 2,71,379.313 2,98,500 7,70,017.824 7,200 93,103.46 50,000 2,07,068.955 85,000 1,23,534.486
ATC TFL
4,000 4,72,000
55,172.46 11,89,014.137
The above tables certainly show that BASF has proved to be the market leader in both the WET BLUE and CRUST segment. However unfortunately BASF has
been defeated to ALPA in the FINISHED segment of leather processing, which is, suppose to be the major cash-earning segment of all. If BASF can increase their range of products and can frequently come up with innovative and quality products then they might also capture the FINISHED segment. CHAPTER FIVE PERFORMANCE MEASURES REFLECTING LONG-TERM PROFITABILITY • PRODUCT SERVICE QUALITY, GLOBA ASSOCIATION, COST, HUMAN RESOURCE, NEW PRODUCTS For the leather industry, chemical suppliers are concerned with the following aspects 1.
Rapidity of product arrangements to individual tannery.
2.
Help provided (technical support) to the customers instantaneously and with enthusiasm to satisfy the customer needs.
3.
Most importantly supplying pure quality chemical.
4.
Global network to ensure various chemicals from different places of origin (ex BASF Germany, BASF India).
5.
Price of chemicals.
6.
Personnel to assist technically and commercially.
7
Promptness of introducing new products.
The way these factors are dealt by the chemical suppliers especially BASF are discussed below: ROMA LEATHER Roma leather has a special space for BASF products. In the part of Wet blue even though ALPA and TFL are strong competitors of BASF, but still for chemicals like wetting agent (LD 600), sodium meta by sulphate, formic acid
etc BASF is almost market leader and Roma is a regular customer of BASF. For the crust section, Roma prefers BAYER more and for finished section, ALPA plays the big role. For BAYER and ALPA the common complain of Roma is that their chemical delivery lead-time is high. Roma is completely satisfied with BASF concerning product delivery, technical help and purity of chemicals but Roma complains that BASF is not coming up with new and innovative products like the others. MADINA TANNERY Al- Madina is BASF's regular customer. From Wet Blue to Crust production, AlMadina finds that BASF is best in terms of their product quality, availability, technical advice and help. Prices of the chemicals are satisfactory to them but they want more innovative products from BASF. STAHL and TFL are strong competitors against BASF in AL-Madina tannery and the tannery does not have any complain against them. Therefore, BASF's competition is with STAHL and TFL in this tannery. KARIM LEATHER In Karim Leather BASF has failed to achieve the first position for Wet Blue (TFL) as well as Finished products (QUINEE) but they are the number one in the Crust section. The main criticism that BASF has received is their product is of average quality. Even though TFL and QUINEE taken the first place but still both of them has service and promotional problem for Karim. BASF is better placed here as its price is comparatively less and in Karim, they give high priority to price. RELIANCE TANNERY
In Reliance Tannery BASF has grabbed the Crust and Finish section quite strongly. However, in the Wet Blue section TFL is preferred more. The tannery says that the price charged to them by BASF is quite high, other than that, they do not have any problem with BASF. For TFL they face some marketing strategy problems, also some of the TFL products are highly priced. SAMINA TANNERY Although Samina is a regular customer of BASF, yet in no section Samina thinks that BASF is the best. Samina did not talk of any problems regarding BASF except high price of the chemicals but at the same time gave preference to TFL, INCAMICA and ALPA. Indeed the company has found out that TFL asks high price for some products and the products are not always available. INCAMICA did not put them into any trouble so far. SOMOTA LEATHER BASF has a very good business relationship with Somota tannery's management. Somota does not have any problem regarding BASF. Even though BAYER is a strong competitor of BASF, yet BAYER is not much efficient in their marketing plans. HB TANNERY H B is a regular customer of BASF. However, for HB, TFL and ALPA has grabbed the first position in all the stages of hide processing positioning BASF in the second. Major complain of HB against BASF is that they do not supply in due time other than BASF, HB does not have any major complains regarding TFL and ALPA. BAY TANNERY
Analysis shows that Bay tannery is a fan of BASF. They mostly use the products of BASF in all the stages of hide processing. ALPA is a strong competitor against BASF in Bay. Even though Bay prefers BASF but says that, the price of BASF is high and that they should bring in more variety. Since availability in right time is a problem for ALPA and technical services are not given properly to Bay, therefore BASF is better placed. PROGOTI LEATHER As a chemical supplier, BASF has little access to Progoti. TFL, SMIT & ZOOM, ALPA has captured all of the Progoti's business. Still the company complains about its present suppliers. TFL's marketing policies are not satisfactory, for Smith & ZOON the quality is average. The company prefers chemical at lower price and asks for technical assistance always. APEX TANNERY BASF is the first preference in APEX for the Crust production but it is second to TFL in Wet Blue. Moreover, for finished production they prefer ALPA. For BASF their complain is that BASF does not have much variety of chemicals for the Wet Blue section. However, the general complain against all the suppliers is that they do not have quality consistency. In the Crust section, Bayer is BASF's major competitor. VULUA TANNER Vulua tannery's best choices are BAYER and STAHL. BASF is not playing any significant role in the company. Their complain against BASF is that the chemicals do not dilute and precipitate properly. Vulua's complain against BAYER and STAHL is that they want newly produced and easily available chemicals in a reasonable price from the suppliers.
DHAKA HIDES AND SKINS LTD. In the context of preference, BASF is the first choice in Wet Blue section but second to BAYER in Crust and in the Finished section they prefer ALPA. The company says that BASF does not have a wide range of chemicals and not all the chemicals are so good. The price of BASF also seems to be much high to them. Even though BAYER and CLARIANT are strong competitors to BASF but still they are not fully satisfied. They say that the products of BAYER are costly and not easily available. BENGAL LEATHER COMPLEX The close competitors of BASF in BLC in the Wet Blue Section are TFL and CLARIANT. But gradually BLC has lost its interest from BASF. The more we move from Wet Blue to Crust we can see that BASF holds 30% of this section. In this section, BLC mostly uses chemicals from BAYER and TFL. In the Finished section, BLC does not use any chemical from BASF. Here the market leaders are ALPA, STAHL and CBS. The major reason that BLC shows behind this is that they think BASF has lost its quality standard after the Indian plant has been set and chemicals have started to come from India. A simple review of the components of performance measure reflecting longterm profitability shows that BASF is in good position in most of the company by being the tanneries either first or second choice. However, it is found that in some of the big tanneries BASF is comparatively less preferred as they do not have wide variety of chemicals, they do not come up with innovative products, or even because BASF's price is high. These are the common complains against
BASF coming from the tanneries. There fore to ensure best performance and become profitable BASF needs to work on these issues. From the above analysis, it became quite perceptible that BASF, even though having some drawbacks, does hold the wining position in the leather chemical field. BASF has definitely been successful in making themselves inevitable for the tanneries. With their product range and technical assistance and good customer relationship maintenance, BASF is still the prime choice for most of the tanneries. Mr. Nazim and myself from BASF are always there to provide any kind of technical and marketing assistance required by the tanneries. Mr. Sattar being the manager of the leather sector in BASF looks after the commercial issues. Till today BASF did not receive any complains about the purity of its chemicals and its global network is also enjoyed by the customers. Recently two important criticisms have been heard about BASF which are firstly, BASF's prices are quite high and they are unable to bring out innovative products in regular intervals. It was also heard that their product quality has deteriorated due to the establishment of their chemical plant in India. Tannery technicians believe that the quality was fine when BASF used to import the chemicals from Germany. RESULT Judging the performance measuring tools that will reflect long-term profitability, it can be said that criticism against price and innovation are quite significant. Even though BASF seems to be handling its business and competitions perfectly yet to sustain its competitive advantage and maintain their leading position in the market they should work up to it. Its long-term
profitability may be at stake if the company does not take appropriate care on its weaknesses. SUSTAINABLE COMPETITIVE ADVANTAGE Sustainable competitive advantage may be enjoyed by the company that has a lot of resource available and exploits its resources in the best possible manner to gain a higher market share by positioning itself in a superior or different manner than its competitors. The positioning is very important here because a good business may go down just due to its wrong positioning to its customers. THE WAY THEY COMPETE a) Positioning Strategy All the chemical companies have positioned themselves a bit differently from each other in the minds of the consumers. The main companies that are often come to the consumers mind are BASF, HODGSON, BAYER, ALPA, CLARIANT and TFL. BASF is known almost to anyone and everyone in Hazaribagh, this is because many people say and indeed it is fact that BASF is the first chemical company that has landed in Hazaribagh. In addition, people involved in leather industry have general weakness for German chemical company. BASF has created a very intimate business relationship with the clients through its quality, service as well as country of origin. Also for some of the quality products BASF is the only name that is frequently uttered. HODGSON is comparatively a new company, it has earned very good name in Bate powder with its quality. BAYER's quality is indeed very good and people
talks about it very highly but it is a bit expensive. Recently TFL has earned greater value as this company is now a combination of three companies that have merged. Therefore, they are very cautious about supplying quality product. ALPA is simply the best for the Finishing stage. They have made themselves almost inevitable for all the tanneries with its wider range of shades. B. DISTRIBUTION All the chemical companies that are existent in Bangladesh carry out only marketing function here. Distribution is very important in achieving a desired market share. If the company is a good one with its quality products and sales people, yet it has to distribute its products to its customer on time otherwise the company will lose its reputation. If at the right time a competitor comes up with similar products and good distribution policies then the other company is sure to lose its market share to the new one. Arranging the product right at time to the consumers sometimes becomes difficult as importing them includes much documentation. However, in respect to distribution in Bangladesh BASF is well structured as it has its country office located here in Dhaka for quite a long time. Although delay supply happens to most of the companies due to local or international rules or other issues but tannery owners specifically have a common complaint against TFL and BAYER, also to some extent against ALPA that they cannot distribute the products right in time. C. BASIS OF COMPETITION Asset and competencies
Most of the companies that are competing in Bangladesh are multinational. Therefore assets wise most of the companies are self-sufficient. Since BASF group is an old company and it has a portfolio of almost 10,000 products and also it entered the Bangladesh market before any other company so asset wise BASF is better placed than the others in Bangladesh. Nevertheless, to sustain this goodwill BASF needs to work hard and prove themselves competent in the eyes of the tanneries. BASF has superior know how and it is willing to utilize its resources in every possible way. The problems that BASF Bangladesh is presently facing are that they need more support from the BASF Germany in terms of innovation and variety of products that will make them more competitive. In addition, there are some limitations that more or less all the suppliers face due to the bureaucracy in our government, which delays all the activities. In some of the products like wetting agents, formic acid, sodium meta by sulphate, there are companies who almost fear to enter into the competition. BAYER, HODGSON and TFL are lagging behind due to their poor marketing policy and this has made them a bit in comparative against BASF whose marketing activities are simply superb. BASF has involved themselves into social activities like setting up water treatment plant. These types of activities actually create awareness among the public, which helps BASF to earn a good reputation. This reputation then creates awareness in BASF to give a better service to its customers. ALPA is the most competitive chemical supplier in the Finished section of leather production.
Indeed ALPA's variety of products and shades has made the other companies substandard in comparison to it. If a big company like BASF can understand what their lacking are and can bring in more assortment of innovative products then there will be no close competition to BASF in Bangladesh. RESULT BASF is fortunate enough to enter Bangladesh before any other companies. It has positioned itself very well in the mind of its consumer. All most everyone involved in leather business knows BASF and for some of the products some people cannot even think any company other than BASF. In both asset management and distribution, BASF's stand is satisfactory. After all these, BASF's competitive position might be at risk because other companies seem to be coming up rapidly with more innovative products where BASF is lagging behind. If this continues then BASF may not enjoy sustainable competitive advantage for a long time. ETHICAL ISSUE Ethical issues arise if the process of defining the problem and developing an approach is compromised by the personal agendas of the decision makers and for the researchers. Since this research is conducted for internship purpose, so not much question of personal agendas of the decision maker arises. Consequently, I have tried my best to avoid ethical issues related to data collection, right of respondents, etc. I also tried to reveal the nature of the research problem to the companies. STRATEGIC GROUP FOR WET End
QUALITY (HIGH) BASF TFL CLARIANT HODGSON BAYER
PRICE (HIGH) From the perceptual mapping, it is clearly seen that in the WET BLUE segment BASF is well ahead in business. Though their price is higher than any other companies, yet their market size is bigger than others also. BASF is doing well in this section due to their good quality and range of products. STRATEGIC GROUP FOR FINISHED PRODUCTION QUALITY (HIGH) ALPA CLARIANT STAHL BASF EARNSHAW
PRICE (HIGH) In the finishing stage of hide processing ALPA and CLARIANT have taken majority of the market share. Actually, they compete parallel. Their prices are similar as well as their quality. In this segment, BASF could not play any significant role. However, they are trying to penetrate the finish section slowly.
Tannery like BAY has always been a BASF fan in all the sections. If BASF can satisfy the needs of BAY, then it can be expected that BASF will be able to satisfy other tanneries as well. This requires the development of the R&D of BASF. CHAPTER SIX Conclusion New chemical suppliers in Bangladesh are coming up every now and then with promising new and better services, as the competition is fierce. This research paper focuses on finding out how the chemical suppliers operate and to find out whether the suppliers are able to cater to the demand and need of the tanneries and the kind of competitive advantage one supplier posses over the other especially. My first hypothesis was based on BASF's current performance through which the measurement was done that whether current performances reflect long-term profitability or not. It was found from the study that BASF is doing fine but not perfectly to have long-term profitability. According to the other hypothesis, will the present work of BASF ensure sustainable competitive advantage over other chemical suppliers? Here also it has been found that BASF is now enjoying competitive advantage but that may not sustain if it does not take some corrective actions to gain the finished segment. BASF has already been informed about the fact in the beginning of my program and it has been found that three leather and chemical experts have visited BASF Bangladesh in the last three months. Therefore it is expected that BASF will overcome its weaknesses through its strengths. CHAPTER SEVEN RECOMMENDATION OVERVIEW & RECOMMENDATIONS
INTERNAL ENVIRONMENT Strong market reputation Skilled Managerial Workforce. Availability of Transportation. Strong brand Image. Customer responsive. Effective promotional programme. Parallel state with competitors. Financial strength. Market leader in some products. Efficiency in marketing. Quality assurance. Knowledge about the product. Created strong entry barrier. Sometimes cannot supply due to shortage of products. For quality have to report to
EXTERNAL ENVIRONMENT There is Demand for quality products, Competition is still less comparatively, Globalization trend. Demand for innovative products; Opportunities in new tanneries, Price volatility of inputs due to environment, political, international 1 factors. Buyers have more bargaining power. Competitive products, New entrants. Existing competitors are f very efficient and well structured.
RECOMMENDED STRATEGY CORPORATE STRATEGIES To maintain and increase present market and penetrate finished segment of leather production. BUSINESS LEVEL STRATEGIES To attain cost leadership along with some differentiation. FUNCTIONAL LEVEL STRATEGIES Come up with innovative products(R&D, practicable in Germany). Product development. Market penetration. Price reduction. Product proliferation. More intensive distribution.
STRUCTURE Functional structure as BASF has only marketing department in Bangladesh.
Germany. High price.
ADVANTAGES OF STRATEGIES Product development: Important as minimize treat from competitors. Can identify as innovator, More profit. Market penetration : To grab more market share by BASF. Product proliferation: Important as more products in a range will give more option to the customers. Can have large product line to deter entry of the competitors all niches. Price reduction Important as unlikely to succeed without price reduction. More intensive distribution. Will halp to penetrate new markets. Create entry barrier. Will help to spread the product faster.
IMPLEMENTATION
CONTROL
Product development: Do more for & D in Germany. Market penetration: Through more Advertisement, associate with more dealers. Product proliferation: R&D in every sector of leather chemicals can ensure product proliferation. Price reduction: More production in Germany may provide economies of scale to reduce price. Reduce operation cost in Bangladesh and balance with price. Intensive distribution: Through Skilled managerial workforce, transportation, sound financial strength and appointment of new dealers by giving them extensive trade promotions
Behavioral control: Establish system of rules to direct action of different activities. Convert inputs into Monetary terms, output into monetary terms and compare input output ratio. Output control: Forecast appropriate performance goals for each employees and measure actual Performance relative to goals after every quarter.
Therefore, in order for BASF to be successful in Bangladesh and to their ensure long-term profitability and develop sustainable competitive advantage, the company should take the above measures. Otherwise, BASF may end up in crucial competition if other chemical companies get strict in their competitive strategies. From the survey, it was found that BASF has been the prime choice for BAY TANNERY in all stages of hide processing. They use the chemicals of BASF in their finishing stage as well. Whereas BASF is losing its market only in the Finished stage to most of the tanneries. ALPA and CLARIANT mainly capture this market. If BASF can satisfy the needs of BAY TANNERY then why cannot they serve the other tanneries? With BASF's strong marketing policies and innovative chemicals and at the same time with a wide range of products, BASF can certainly remain the market leader. CHAPTER EIGHT APPENDIXES Questionnaire Prospect of Bangladeshi Leather in the Overseas Market Company Name (pvt/pub Ltd./partnership/joint venture): Year of establishment: Contact Person(s): Total revenue (per year) in million$: Total cost of production (per year): Position in the market: 1. Yearly Production
Square Feet in million per year 2000-2001 2001-2002 2002-2003 2003-2004(estm) 2. Yearly Export: (Square feet in million per year) Year
Crust
Finished
Total
Total
Production Export 2000
-
2001 2001 -2002 2002 -2003 2003 -2004(estm ) 3. Yearly capacity of production in figure: Capacity Utilization in %: Capacity unutilized in %: Gross export value: Raw Hide cost: Chemical cost: Other related costs: Profit margin: 4. Manpower Management a) No. of permanent technician: b) No. of non-technician: c) No. of temporary technician:
% Exported
5. Ratios of one year’s export oriented production: a) Natural Crust : Dyed Crust= b) {Of the Dyed Crust} Black : Others= c) {Of the Natural Crust} Full Chrome : semi Chrome : Full Vegetable d) {Of the Finished} Resin : Glaze : Corrected Grain 6. Total cost of chemical used in production per square feet (in taka): Up to Wet Blue: Crust: Finished: 7. List of Chemicals used: • Wet Blue: Name Soaking Enzyme Detergent Liming Auxiliaries Batting Agent Formic Acid Sodium Format Sodium Chlorite
Quantity
Price
Supplier
Name Chrome
Quantity
Price
Supplier
Powder/Pre
Tanning Syntan Implenal Dc Liquor/Di carboxylic Acid Bactericide/ Fungicide Preferred Supplier: • Crust:
Name Basic Chrome Powder Detergent Acitic Acid/Formic Acid Chrome Syntan Neutralizing Syntan Replacement System White Syntan Amphotaric Syntan Natural based Fat Liquor Semi
Synthetic
Fat
Liquor Full Synthetic Fat Liquor Acrylic Resin Acrylic Copolymer Melamine Syntan Filler Dye Stuff Fixing Agent
Quantity
Price
Supplier
Preferred Supplier: • Finished: Name Acrylic Resin binder
Quantity
Price
Protein Binder Polyurethane Binder Filler Wax Oil Metal Complex Dye Organic/Inorganic Pigment Top Lacquer Cationic Product Others
Preferred supplier: 8. List of the company’s chemical suppliers. 9. Suppliers position according to the company:
Supplier
Traditional Suppliers: Suppliers
% supplied v.poo r 1 1 1 1 1 1 1 1 1 1
BASF ALPA CLARIANT SMIT & ZOON BAYER STAHL BUCKMAN STOPPANI SCHILL+SEILACHER SILVA TEAM
poo averag goo
v.goo
r 2 2 2 2 2 2 2 2 2 2
d 5 5 5 5 5 5 5 5 5 5
e 3 3 3 3 3 3 3 3 3 3
10. Do you suggest any specific supplier to be the best? 11. Do you have any non-traditional supplier? 12. Major problems faced while operating: • Dealing with suppliers, are they a) Punctual
b) Not Punctual
• What is your level of material management • Do you trade with local traders? a) Yes
b) No
• Does local traders ask high price suddenly? a) Yes
b) No
• Do they have quality consistency? a) Yes
b) No
• Does a Government regulation act as barrier? a) Yes
b) No
• When do you receive the Tax rebate? 13. Success factors:
d 4 4 4 4 4 4 4 4 4 4
• Your Competitive advantages are: a) Quality b) Quantity c) Skilled HR d) Time Mg • What else should be done 15. List of machineries: Wet Blue, Crust, and Finished. SL.NO NAME OF MACHINES 1 FLESHING MACHINE(COW) 2 FLESHING MACHINE(GOAT) 3 FLESHING 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
MACHINE(BUFFALO) SCUDDING MACHINE LIME SPLIT MACHINE LIME SPLIT MACHINE SAMMYING MACHINE SPLITTING MACHINE SHAVING MACHINE SHAVING MACHINE SHAVING MACHINE SHAVING MACHINE SETTING MACHINE SETTING MACHINE SETTING MACHINE SETTING MACHINE VACCUM DAYER VACCUM DAYER SLOW COMB STAKING
20 21
MACHINE ROTARY STAKING MACHINE VIBRATION STAKING
22 23
MACHINE HAND TOGGLE MACHINE ROTARY IRONING MACHINE
Quantity
24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58
ROTARY IRONING MACHINE PLATEN IRONING MACHINE PLATEN IRONING MACHINE ROLLER COATER M/C ROLLER COATER M/C AUTO SPRAY MACHINE AUTO SPRAY MACHINE AUTO SPRAY MACHINE GLAZING MACHINE GLAZING MACHINE BUFFING MACHINE BUFFING & DEDUSTING M/C BUFFING & DEDUSTING M/C POLISHING MACHINE POLISHING MACHINE TESTING DRUM MEASURING MACHINE MEASURING MACHINE MEASURING MACHINE OH DRYING CONVEYER TOGGLE DRYER M/C RETAINING DRUM RETAINING DRUM HP WASHING MACHINE COMPRESSOR MACHINE COMPRESSOR MACHINE COMPRESSOR MACHINE AIR DRYER MACHINE AIR DRYER MACHINE AIR DRYER MACHINE BOILER POWER GENERATOR POWER GENERATOR POWER SUBSTATION POWER SUBSTATION
Bibliography & References 1.
Facts and figure BASR Group
2.
International Leather Edition 2004-2005
3.
Bangladesh Leather Edition 2004-2005
4.
Honk Kong Leather Fair Booklet
5.
Financial Report of BASF 2005
6.
Annual Report of Different Tanneries 2005
7.
M.A. Sattar, BASF Bangladesh Ltd.
8.
Md. Nazrul Islam, Apex Tannery Ltd.
9.
Mr. M.A. Baten, Bay Tanneries Ltd.
10.
Mr. Tarque, Dhaka Hide & Skills
11.
Marketing Research, an applied orientation, 4th Edition, Narash K. Malhotra.