Market Opportunities of Leather Chemical

Market Opportunities of Leather Chemical

A Study on BASF Bangladesh Limited

CHAPTER ONECHAPTER 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 TWOCHAPTER 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 in-

depth 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 THREECHAPTER 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® 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

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

From the best Team in the

industry

Ensure Sustainable

Development

Earn premium On their cost of

capital

Help customers to be more successful

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 WEAKNESS

1. Strong market reputation.

2. Skilled managerial workforce.

3. Availability of transportation.

4. Equipped to provide both

standardized and customized

products,

5. Ability to raise capital.

1. To some extent diverted from

innovation due to success.

2. Sometimes cannot supply due

to shortage of products.

3. Sometimes gather unnecessary

inventory.

6. Strong brand image.

7. Responsive customer.

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.

4. Prices are quite high than their

competitors.

OPPORTUNITY THREAT1. There is demand for quality

products.

2. Comparatively competition is

still less.

3. Now business trend is more

towards globalization.

4. Demand for innovative

products.

5. Opportunities in new

tanneries.

1. Price volatility of inputs due to

environmental, political and

international factors.

2. Buyers have more bargaining

power.

3. Competitive products.

4. Threat of new entrants.

5. Existing competitors are very

efficient and well structured.

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 FOURCHAPTER 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


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


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

market size

(kg)

NO Of BASF Market Leader

Soaking Enzyme 1,05,190 1 OUT OF 6 TFL

Detergent 1,11,000 5 OUT OF 6 BASF

Liming Auxiliaries 2,62,340 2 OUT OF 6 CLARIANT/TFL

Batting Agent 4,83,688 MILL CLARIANT

Formic Acid 2,53,708 5 OUT OF 6 BASF

Sodium Format 2,73,700 5 OUT OF 6 BASF

Sodium Chlorite 1,38,848 2 OUT OF 6 BASF/CLARIANT

Chrome

Powder/Pre

Tanning Syntan

13,11,988 4 OUT OF 6 BASF

Implenai DC

Liquor/Di

carboxylic Acid

2,25,496 5 OUT OF 6 BASF

Bactericide/

Fungicide

59,060 MILL BUCKMAN

Market leader in Wet Blue segment: BASF

CHEMICALS USED IN CRUSTName Total market

size

NO OF

BASF

Market

Leader

Basic Chrome

Powder

5,15,896 5 OUT OF

6

BASF

Detergent 63,500 4 OUT OF

6

BASF

Acitic Acid/Formic

Acid

1,48,700 4 OUT OF

6

BASF

Chrome Syntan 1,85,898 MILL OTHERS

Neutralizing

Syntan

2,11,625 3 OUT OF

6

BASF/TFL

Replacement

System

3,77,898 2 OUT OF

6

BAYER

White Syntan 2,80,094 5 OUT OF

6

BASF

Amphotaric Syntan 68,200 5 OUT OF 6 BASF

Natural based Fat

Liquor

85,450 1 OUT OF 6 TFL

Semi Synthetic Fat

Liquor

2,24,396 1 OUT OF

6

CLARIANT/ TFL SMIT &

ZOON

Full Synthetic Fat

Liquor

1,76,498 2 OUT OF 6 CLARIANT/ TFL SMIT &

ZOON

Acrylic Resin 4,03,198 3 OUT OF 6 BASF/SMIT & ZOON

Acrylic Copolymer 5,62,498 3 OUT OF

6

BASF

Melamine Syntan 2,61,898 2 OUT OF 6 BASF

Filler 1,73,998 MILL BUCKMAN

Dye Stuff 2,88,196 3 OUT OF

6

BASF/CLARIANT

Fixing Agent 2,51,760 3 OUT OF 6 BASF

Market Leader In Crust Leather Segment: BASF

CHEMICALS USED IN FINISHED

Name Total

market

size

NO OF BASF Market Leader

Acrylic Resin binder 93,800 2 OUT IF 6 CLARIANT/ALPA

Protein Binder 2,53,696 1 OUT OF 6 CLARIANT/ALPA

Polyurethane

Binder

52,400 MILL ALPA

Filler 37,300 2 OUT OF 6 CLARIANT/ALPA

Wax 19,950 2 OUT OF 6 CLARIANT/ALPA

Oil 19,400 1 OUT OF 6 CLARIANT/ALPA

Metal Complex Dye 22,232 1 OUT OF 6 CLARIANT/ALPA

Organic/Inorganic

Pigment

50,100 2 OUT OF 6 CLARIANT/ALPA

Top Lacquer 1,22,396 4 OUT OF 6 BASF

Cationic Product 88,140 MILL ALPA

Solvent/Finishing

Auxiliaries

39,000 1 OUT OF 6 ALPA/STAHL

Market leader in Finished leather segment: CLARIANT / ALPA

Supplier’s scenario in leather segment in themajor six tanneries Total Quantity in Kg:83,03,135kg

Supplier Total market share

Qty (kg) Value (USD)

BASF 38,29,052 26,45,295.428

ALPA 2,34,825 9,44,043.103

CLARIANT 9,04,000 18,51,246.047

SMIT & ZOON 4,57,000 7,03,879.262

BAYER 14,00,000 16,01,223.712

STAHL 1,24,000 2,71,379.313

BUCKMAN 2,98,500 7,70,017.824

STOPPANI 7,200 93,103.46

CBS 50,000 2,07,068.955

SCHEMER & SCHWAZ 85,000 1,23,534.486

ATC 4,000 55,172.46

TFL 4,72,000 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 FIVECHAPTER 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, Al-

Madina 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 long-

term 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 TFLCLARIANT HODGSONBAYER

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 SIXCHAPTER 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 SEVENCHAPTER SEVEN

RECOMMENDATION

OVERVIEW & RECOMMENDATIONS

INTERNAL ENVIRONMENT

EXTERNAL ENVIRONMENT

RECOMMENDED STRATEGY

STRUCTURE

Strong marketreputation Skilled ManagerialWorkforce. Availability ofTransportation.Strong brand Image.Customer responsive. Effectivepromotionalprogramme.Parallel state

There is Demand for quality products, Competition is still less comparatively, Globalization trend. Demand for innovative products; Opportunities in new tanneries,Price volatility ofinputs due toenvironment,

CORPORATESTRATEGIES 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 structure as BASF has only marketing department in Bangladesh.

withcompetitors.Financial strength.Market leader insome products.Efficiency inmarketing. Quality assurance. Knowledge about the product. Created strong entry barrier.Sometimes cannotsupply due toshortage of products.For quality have toreport to Germany.High price.

political, international1 factors.Buyers have morebargainingpower. Competitive products, New entrants. Existingcompetitors are f very efficient and well structured.

FUNCTIONAL LEVELSTRATEGIES Come up with innovative products(R&D, practicable in Germany). Product development. Market penetration. Price reduction. Product proliferation.More intensive distribution.

ADVANTAGES OF STRATEGIES

IMPLEMENTATION CONTROL

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 moreproducts in a range willgive more option to the

Product development:Do more for & D in Germany.Market penetration:Throughmore Advertisement,associate with moredealers.Product proliferation:R&D in every sector of leather chemicals can ensure product

Behavioral control:Establish system of rules to direct action of different activities.Convert inputs intoMonetary terms, output into monetary terms and compare input output ratio.Output control:Forecast appropriate performance goals for

customers.Can have large productline to deter entry of thecompetitors all niches.Price reductionImportant as unlikely to succeed without price reduction.More intensive distribution.Will halp to penetrate newmarkets.Create entry barrier. Willhelp to spread the productfaster.

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

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 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

Production

Total

Export

%

Exported

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:

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 Quantity Price Supplier

Soaking Enzyme

Detergent

Liming Auxiliaries

Batting Agent

Formic Acid

Sodium Format

Sodium Chlorite


Chrome Powder/Pre

Tanning Syntan

Implenal Dc Liquor/Di

carboxylic Acid

Bactericide/ Fungicide

Preferred Supplier:

Crust:

Name Quantity Price SupplierBasic 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

Preferred Supplier:

Finished:


Acrylic Resin binder

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:

Traditional Suppliers:

Suppliers % supplied v.poo

r

poo

r

averag

e

goo

d

v.goo

d

BASF 1 2 3 4 5

ALPA 1 2 3 4 5

CLARIANT 1 2 3 4 5

SMIT & ZOON 1 2 3 4 5

BAYER 1 2 3 4 5

STAHL 1 2 3 4 5

BUCKMAN 1 2 3 4 5

STOPPANI 1 2 3 4 5

SCHILL+SEILACHER 1 2 3 4 5

SILVA TEAM 1 2 3 4 5

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:

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 Quantity

1 FLESHING MACHINE(COW)

2 FLESHING MACHINE(GOAT)

3 FLESHING

MACHINE(BUFFALO)

4 SCUDDING MACHINE

5 LIME SPLIT MACHINE

6 LIME SPLIT MACHINE

7 SAMMYING MACHINE

8 SPLITTING MACHINE

9 SHAVING MACHINE

10 SHAVING MACHINE

11 SHAVING MACHINE

12 SHAVING MACHINE

13 SETTING MACHINE

14 SETTING MACHINE

15 SETTING MACHINE

16 SETTING MACHINE

17 VACCUM DAYER

18 VACCUM DAYER

19 SLOW COMB STAKING

MACHINE

20 ROTARY STAKING MACHINE

21 VIBRATION STAKING

MACHINE

22 HAND TOGGLE MACHINE

23 ROTARY IRONING MACHINE

24 ROTARY IRONING MACHINE

25 PLATEN IRONING MACHINE

26 PLATEN IRONING MACHINE

27 ROLLER COATER M/C

28 ROLLER COATER M/C

29 AUTO SPRAY MACHINE



32 GLAZING MACHINE

33 GLAZING MACHINE

34 BUFFING MACHINE

35 BUFFING & DEDUSTING M/C

36 BUFFING & DEDUSTING M/C

37 POLISHING MACHINE

38 POLISHING MACHINE

39 TESTING DRUM

40 MEASURING MACHINE



43 OH DRYING CONVEYER

44 TOGGLE DRYER M/C

45 RETAINING DRUM

46 RETAINING DRUM

47 HP WASHING MACHINE

48 COMPRESSOR MACHINE



51 AIR DRYER MACHINE



54 BOILER

55 POWER GENERATOR

56 POWER GENERATOR

57 POWER SUBSTATION

58 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.

Documents

Market Opportunities of Leather Chemical