Nokshi

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NOKSHI

INTRODUCTION

Nature of Business

We are a manufacturing company, named Nokshi. Our business product is Handicraft bags.
Handicrafts are mostly defined as "items made by hand, often with the use of simple tools,
and are generally artistic and for traditional in nature. We are using jute, bamboo and lether to
make good-looking bags for college girls and working women. We have chosen handicraft
business because right now in Bangladesh handicrafts are demanding and there are few shops
for handicraft. There are few big shops for handicrafts but they are too expensive for the
middle class people, thats why we thought about that if we can sell handicraft products to the
customer at a cheaper price it will be good for our business and also for the customers. In our
Handicraft business; we sell are only selling handicraft bags at cheaper price with good
quality to make lives easier and more pleasurable to young generation. Due to the uniqueness
factor, the designs and craft works really amaze many buyers which satisfy them. If any
consumer needs any repairing service which buys from our shop, we repair his/ her same
product at two or three times without any payment.

Product Details

Our product is handicraft bag. We usually use jute, lether and bamboo to make our handicraft
bags. We buy jute, lether and bamboo from our reliable suppliers. We use bamboo to make
the handle of the bags. Moreover, we use color to make our bags attractive. We use swing
machine to sew the jute and lether bags. We also use needle to sew the bags. We have
efficient labors to produce the bags. Our labors lives in villages. They produce the bags there
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on the basis of our orders. We have agents in the villages. When the labors finished
producing the bags our agent send it to us immediately. Our labors are the house wives of
villages. Their wages are very low. This is why we can sell the bags at cheaper price.
Additionally, we are not keeping a lot of profit like our competitor Aarong. As a result, our
bags are cheaper than theirs.

Company Background

The aim of our business is to ensure good quality handicrafts products to the consumers. For
this reason consumer can completely trust and buy them. The price of our handicrafts
products is cheaper than other handicrafts store. The people especially middle and upper
middle class can easily afford the price of our products. We provide home delivery service to
our consumer.
Objective

Nokshi handicraft is involved in manufacturing, retail, and wholesale of handicrafts. The
entity is a partnership business. We have several objectives, which are given below:
Manufacturing quality product with local materials
Maintain Bangladeshi heritage in our product
Capture a good market share of this industry
Achieving goodwill by providing unique design products to the customers

Mission

Our mission is to continuously provide innovative products which focuses on quality, cost
effectiveness, and unique designs. We see ourselves at the forefront of the handicraft
industry, to serve the needs of the growing domestic markets. It is our desire to make a
contribution to the development of our economy, and to provide benefits and work for the
local community.
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Vision Statement
Our long term commitment is to reach the higher class people of Bangladesh and to go
abroad.
BODY

Handicraft Industry in Bangladesh
The handicraft industry in Bangladesh is made up of small manufacturing units and mostly
located in rural areas, controlled either by the owner themselves or with the assistance of
small work force of 10-20 people. Most enterprises use traditional techniques with the
industry stands approximately over 3 millions of which over three quarters are employed
in textile, jute goods, wood, lather cane and bamboo. Key players in the sector involved in
domestic supplies as well as exporters are:-


Competitors
There are different competitors available in Bangladeshi market for the handicraft products.
Some are small and some are big. We are only focusing on our lead competitors. The lead
competitors for our products are- Aarong, Nogordola and Rong. For this business product
lines different competitors are using different strategy to be sustainable in the market.
Financial capabilities of Aarong has no limit, they reach the sky height in the industry.
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Today, few urban consumers will argue that Aarong is the local Mecca for deshi handicraft.
Aarongs product designs has brought consumer attention back to the products and styles that
are indigenous to Bangladesh, its designers blending the traditional with the contemporary in
a manner that has won instant consumer appeal, starting a revolution in trends that has now
been taken up by countless other boutiques and stores. Aarongs product designs focus on the
diverse types and textures of crafts and patterns that have been passed along from generation
to generation among weavers and artisans in craft hubs around the country.
Rang has good loyal relationship with their target customers. Going beyond the typical point
of commerce and being urged by the values of heritage and a clear sense of commitment
Rang arranges special programs to observe festivals and rituals. At the centre of Rangs
concept of fashion is the spirit of variety and variation in application of colours. The same
urge has been essentially reflected in most of their products. Through the simultaneous
motivation of flourishing handloom and handicraft industry and introducing ever new
products Rang has come to be esteemed as one of the leading fashion entrepreneurs of
Bangladesh. All these shops sell their products at a high price because they focus on how to
earn more money. Additionally, Nogordola is also doing very well in handicraft bag business.
Our business is able to distinguish itself and exhibit real innovation and creativity, a
delightful culmination of color, dream and design. We want to play a vital role in promoting
local brand and to intersperse the new generation in our country.

Company Analysis
SWOT analysis

As discussed earlier one of our social businesses is related with providing handicraft to the
customers by using jute, lether and bamboo fiber. Our targeted customers are middle class
and upper class people. To operate our business in a more efficient way we have analyzed
SWOT.
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Strength
Cheap price:
Our handicraft products will be sold at a very affordable cost so that middle and upper
middle class consumers can afford it easily. Cheap priced handicraft products will be our
strength as our targeted customer is middle and upper middle class of people.

Skilled labor: All of our labors are well skilled for making bags.

Unique features:
Our handicrafts are preferred by many due to its softness that offers enhanced comfort. It
contains bamboo, mud, jute, glass which is a natural material. It has the ability to use our
natural materials. It also repels bugs, mold, and allergens. This makes all materials healthy
and comfortable option. It would definitely give us a competitive advantage.





STRENGTH
Cheap Price
Skilled Labor
Unique Features
Attractive Colors


WEAKNESS
Lack of Resources
Lack of Experience
Less Interest of Young People in Craft
Industry



OPPORTUNITY
Creation of Employment
Emerging Demand
Cheap Manpower Available






THREATS
Political Instability
Financially Sustainable Competitors
Increasing Inflation Rate





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Attractive colors and sizes:
Handicraft products come in attractive colors and in different sizes. Consumer can choose
from a range of vibrant colors and designs. Small size handicraft products are available in
our shop. Adult size handicraft products are attractive color and size.

Weaknesses
Lack of resources:
It would not be impertinent to state that the resources that are needed to do the business
our business somehow lacks. This can be emerged as a weakness for our social business.

Lack of experience:
We are doing this type of business which we did not try before. High experience is needed
to do handicraft business especially when bamboo element is present.

Less interest of young people in craft industry:
Now-a-days young people dont interest in handicraft products. They are eager to buy
foreign products and branded products. They dont want to buy actual attractiveness and
softy handicrafts. Because most of the shops have to sell handicraft product at a high price
for this they support to buy foreign products.

Opportunities
Creation of Employment :
A large number of people can be employed because of our social business. Most of these
people live under the poverty level. They can get an opportunity to improve the standard
of living. Eventually the GDP of our country will rise.
Emerging Demand:
It is true that potential for growth of the sector is immense. Studies/surveys conducted by
the EPB and BANGLACRAFT (An association of Handicraft producers and exporters)
and ECOTA (Fair trade Forum) provide strong evidence in support of this.
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Cheap manpower available:
Abundance of easily available workers can be seen as an encouraging factor.

Threats:
Political instability:
The existing political instability and turbulence can be seen as a major threat for our
business. Due to excess strike it will be difficult for us to bring the bags from village on
due time.
Competition from existing handicraft:
Competing against the already established handicraft producers can be a threat for our
business as doing handicraft business with bamboo is comparatively a new business idea.
Increasing Inflation Rate:
Inflation rate refers to a general rise in prices measured against a standard level of
purchasing power. Increasing inflation rate may increase our production cost and
eventually increase our product price.

Cost Strategy

We are following the Cost Leadership strategy. Cost leadership is a concept developed by
Michael Porter, used in business strategy. It describes a way to establish the competitive
advantage. Cost leadership, in basic words, means the lowest cost of operation in the
industry. The cost leadership is often driven by company efficiency, size, scale, scope and
cumulative experience (learning curve). A cost leadership strategy aims to exploit scale of
production, well defined scope and other economies (e.g. a good purchasing approach),
producing highly standardized products, using high technology. In the last years more and
more companies choose a strategic mix to achieve market leadership. This patterns consist in
simultaneous cost leadership, superior customer service and product leadership.

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Cost leadership is different from price leadership. A company could be the lowest cost
producer, yet not offer the lowest-priced products or services. If so, that company would have
a higher than average profitability.
We are using this strategy because we are producing and selling in Bangladesh and we know
most of the people living in Bangladesh are middle class people. So, we have targeted the
middle class market segment because we know we have a huge market for our low price and
good quality bags in this country.
Full cost for five years are shown below. We have shown the details of this cost on our value
chain analysis part.
Full Cost
2014 2015 2016 2017 2018
1587000 1636800 1733000 1853080 2035250

Price
Our business product is handicraft bag which is made of jute bamboo and leather. We have
targeted middle class people as our customer. Our strategy is to sell handicraft bag to
customers at cheaper price. The price of the product is $380 per bag. We will sell handicraft
at a cheaper price in order to win the competition. In Bangladesh there is a very few
companies who produce handicraft bag. Their product price is very high and middle class
people cannot afford to buy their product. Since, this industry has few firms we can say we
are in a less competitive market. In this less competitive situation ,we want to gain our
desirable profit by providing our customer quality product at a price which is below the
competitors.


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Pricing strategy
We have mainly followed cost-based approach for our pricing strategy. Cost-based approach
mainly focused on cost then customers and competitors. We have chosen cost-based
approach because we want to decrease our product costs . By decreasing product cost we can
sell our handicraft bag to the customers at a cheaper price. Our main competitors like Rong ,
Aarong and Nogordola are also selling handicraft bag but their price is too expensive. We
want to use this advantage by following cost-based approach and decrease cost in order to
sell our product at $380 per bag, which is below the competitors product price.
Yes , we think our pricing is appropriate. Our main goal is to maximize sales, earn minimum
profit. We want to sell our products to the customers at a lower price and by this we can
increase our sales. If we can increase our sales we can also increase our profit. Our
competitors like Aarong , Nogordola , Rong, they are selling the handicraft craft bag around
$450 and $550 . There material cost and direct labor cost are the same as ours. But they are
charging higher price because they want to earn huge profit. We know that rural people or
village people are the key human resource for these companies. At a very few wage rate,
rural people make handicraft bags for these companies. But these companies are charging
higher prices, while their labor cost is very low. And another reason for their charging high
price are fixed cost and advertising or promotion cost. Competitors spend a lot money in
their products display, stores including air condition system, rent for huge stores, TV
advertising , salaries of attractive sales person etc. In that case we are minimizing cost by
opening simple store (not include air condition), small stores, simple product display , instead
of TV advertising ,we will use newspaper, magazine etc, we will hire few sales person as we
require small store. In that case we are minimizing our cost while maintaining product
quality. Because these fixed cost are not related to product quality. By doing these things we
can charge $380 per bag below competitors price and gain competitive edge.
In the table below profit margin are shown:-
Profit Margin(Profit per unit)
Year Selling Price(BDT) COGS(BDT) Profit(BDT)
2014 380 227 153
2015 380 224.5 155.5
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2016 380 225 155
2017 380 224.2 155.8
2018 380 223.5 156.5

Value Chain
Manufacturing companies create value by acquiring raw materials and using them to produce
something useful. The value that's created and captured by a company is the profit margin:
Value Created and Captured Cost of Creating that Value = Margin
The more value an organization creates, the more profitable it is likely to be. And when we
provide more value to our customers, we build competitive advantage.
Understanding how our company creates value, and looking for ways to add more value, are
critical elements in developing a competitive strategy. Michael Porter discussed this in his
influential 1985 book "Competitive Advantage," in which he first introduced the concept of
the value chain.
A value chain is a set of activities that an organization carries out to create value for its
customers. Porter proposed a general-purpose value chain that companies can use to examine
all of their activities, and see how they're connected. The way in which value chain activities
are performed determines costs and affects profits, so this tool can help us understand the
sources of value for our organization.
In the diagram below we have shown the value chain diagram that we are doing for our
company. We are mainly adding value to our raw materials. We are buying high quality raw
materials( jute, bamboo and lether) to produce our bag. As a result, we incur more cost for
raw materials. Moreover, we are doing R&D and design which are not that much necessary
for our product but still we are doing it just to add some more value to our bags. This makes
our bags unique and attractive. We do not show the customer service cost because we have
not yet incurred that cost so we could not predict it beforehand. Additionally, we have shown
the full cost below that we will incur for five years.

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Total Fixed Cost
Year FMOH
(BDT)
Fixed
Marketing &
Distribution
(BDT)
Total Fixed
Cost
(BDT)
2014 120000 225000 345000
2015 124800 234000 358800
2016 132000 247500 379500
2017 141600 265500 407100
2018 156000 292500 448500


Total Variable Cost
Year Direct
Materials
(BDT)
Direct
Labor
(BDT)
Variable MOH
(BDT)
Variable
Marketing &
Distribution
(BDT)
Total Variable
Cost
(BDT)
2014 475000 315000 225000 210000 1225000
2015 488800 327600 226200 218400 1261000
2016 517000 349250 239250 231000 1336500
2017 551650 375830 253700 247800 1428980
2018 604500 412750 279500 273000 1569750

R&D Design Production
Marketing &
Distribution
Customer
Service
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Production Cost
Year Direct
Material
(BDT)
Direct
Labor
(BDT)
Variable MOH
(BDT)
Fixed
MOH
(BDT)
Total
Production
Cost
(BDT)
2014 475000 315000 225000 120000 1135000
2015 488800 327600 226200 124800 1167400
2016 517000 349250 239250 132000 1237500
2017 551650 375830 253700 141600 1322780
2018 604500 412750 279500 156000 1452750

Full Cost(Fixed + Variable)
Year R&D (BDT) Design
(BDT)
Production
(BDT)
Marketing
&
Distribution
(BDT)
Full Cost
(BDT)
2014 12000 5000 1135000 435000 1587000
2015 12000 5000 1167400 452400 1636800
2016 12000 5000 1237500 478500 1733000
2017 12000 5000 1322780 513300 1853080
2018 12000 5000 1452750 565500 2035250

Company Riskiness

Year 2014 2015 2016 2017 2018
Targeted
Contribution
Margin per Unit
BDT
135.00
BDT 137.50 BDT 137.00 BDT137.80 BDT 138.50



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Year 2014 2015 2016 2017 2018
Breakeven point
( Unit) (BEP)
2,556 2,610 2,771 2,955 3,239

Year 2014 2015 2016 2017 2018
Breakeven Revenue
(BER)
BDT
971,280
BDT
991,800
BDT
1,052,980
BDT
1,122,900
BDT
1,230,820

Year 2014 2015 2016 2017 2018
Margin of Safety
( Unit)
2,444 2,590 2,729 2,945 3,261

Year 2014 2015 2016 2017 2018
Margin of Safety BDT
928,720
BDT
984,200
BDT
1,037,020
BDT
1,119,100
BDT
1,239,180


We can state whether a company is risky or not by measuring the companys break-even
point. Our company will be increasing its production every year. In first year, we will sale
5000 units, then, in second year, we will sale 5500, then 5900 in third year. So, our break-
even point (BEP) in units will be increasing every year; like in 2014, we will have 2,556 units
then, 2,610 in 2015 and so on. We know that if break-even point increases from time to time,
it is not good for business when company producing same output every year. But we will
increase our production every year, so, higher break-even point will not associate so much
risk for our company. Then consider break-even revenue (BER), since our BEP will be
increasing every year, BER will be also increasing. This does not constitute to company
riskiness. Our targeted contribution margin per unit in 2014, 2015, 2016, 2017, and 2018 will
be BDT 135, BDT 137.50, BDT 137.00, BDT 137.8 and BDT 138.5. Increase in targeted
contribution margin per unit constitutes to increase in net operating income every year. So
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there is less risk associated with our company. Margin of safety represents the strength of the
business. Higher the margin of safety, the more the company can defend against change in
sale. Every year our margin of safety in unit will be increasing like 2,444 units, 2,590 units,
2,729 units, 2,945 units, and 3,225 units in 2014, 2015, 2016, 2017, and in 2018. This
constitutes lower risk. Operating leverage is another criterion in measuring whether a
company is risky or not. Higher the operating leverage, riskier the company. Our companys
operating leverage in 2014, 2015, 2016, 2017, and 2018 will be 2.05, 2.01, 2.01, 2.00, and
1.99. Operating leverage will be gradually decreasing over the five years which indicates that
our company is less risky.
Key Performance System(KPI)

Key performance indicators are measurement to reflect the heath of organizations. It is a
measurement tool of business accuracy. As we have a handicraft bag business where our first
target is to satisfy the customers and make them loyal. We are also following some KPIs to
measure our performance growth.
The KPIs that are followed in our company is given below-
Cost Leadership: As, we are going to a less competitive market. So, cost leadership is our
main key performance indicator. We are trying to produce a very qualitative product with a
low price as well as to reduce the cost at least 5%.
Increase market share by 10%: We want to capture the market as soon as possible.
Thats why we target that every year our market share should be increased by 10%.By
following this we can easily fulfill our goals.
Profit increase minimum 20%: One of our key performance indicators is to increase
profit minimum 20%.In every year our sales volume is being increased as well as profit is
also increased in a high level. We want to increase profit to cover all costs of the business
Sales person performance: Sales person performance is used to measure the company
performance. We measure the employee performance into five categories-(Excellent, better,
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good, medium bad) and give them points according to their performance. We use this KPI
because companys customer relationship totally depends on employee performance.
Product Quality: We believe that customer will buy our product if we offer a very
qualitative product. Thats why we follow a quality rank process to identify the product
quality of all types of products.
So, these are the main KPIs that we are following in our company. There are also many KPIs
used, as we are starting now we are using these to improve our performance.
Yes we need some performance reward systems.
Though we are starting a very small scale, there are some incentives (rewards) are used to
increase the sales. Sales persons get a percentage on the price of product. The reward systems
we are following are given below.
There are two types of reward systems to motivate the employees.
Financial
Non-financial

Financial- Most of the time we prefer to give financial rewards. Our employees will be
motivated through these types of rewards systems and give their full attention in company
progress.

Sales commission- When our sales persons sales the products individually we give
them a certain percentage which is out of their regular salary. It is way to encourage the
employees to work hard as well as to increase the sales volume.
Incentives- There is five branches of Nokshi in whole Bangladesh. These are
situated in much repudiated areas (Dhanmondi, Gulshan, Bonani, Moghbazar, and
Mirpur). When branches individually perform very well, we give them a special
incentive. Most of the time we give them a percentage of profit which is distributed
among the employees.
Special Bonus- According to the company rules, we give bonus in the festivals. But if
someones performance is better than the others we give her an extra amount as a reward.

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Transportation- We provides a transportation benefit for our employees to motivate
them. We give them a bus service for their better communication.

Non-Financial- There are some non-financial rewards used to encourage the
employees. In many cases employees need some non-financial things. It is not necessary
that everyones demand is same. Sometimes people expect something more than money.
Thats why we prefer to give some non-financial rewards as well as financial.
Promotion- Based on performance level we give promotion to the employees.
Suppose- if a salesperson performs well then according to his performance we promote
him as a head of sales executive.
Delegation- Delegation is a very honorable thing for the employees. When an
employee performs a very excellent job as well as ability to handle a heavy job, we give
them an extra responsibility as a reward. It is also an opportunity for them to prove own
self.
Rewarding for business performance- To motive a employee we give her a
reward for her good job. It is a way to encourage her also makes her different from
others. It will encourage his confidence level.
Flexible benefit- We believe that if employees work very hard for the company,
authority should consider them in some cases for giving them some benefits. Like- our
company has rule that employees get 15 days as a sick leave. If someone becomes sick
for three weeks then we look his performance and based on this we try to consider the
situation.

Nokshi is a new handicraft company in the competitive market. So though we want to
give many rewards both financial and non-financial, it is our limitation that we cannot use
huge reward programs at now.




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Recommended Strategy

Noksi is new handicraft company in a less competitive market. To achieve our target we
follow some strategies to attract the customers. The strategies we are following given
below-
Increase customer equity- As our business is in a very competitive position, we
focus on the customers. Based on the customers the future revenue we earn is called
customer equity. We consider the customers and give preference as much as possible.
Promotion- Most of our competitors follows mass media but we prefer local
promotion. Like- advertising on local papers, billboards, wall poster etc to inform the
customers about our products. Since we are producing handy bags, so most of our
customers are girls. Thats why we promote our products in college bus, public
transports, girls hostels, universities where our target customers.
Latest Design- Nokshi company always conscious about the style, pattern, design,
color combination as people are very aware of dressing. Though we are providing only
the handicraft bags, we try to our best to maintain the new and exclusive collections.
Discount- If we compare our products with our competitors then at the question comes
to mind that Why customers buy our products. Customers get a high quantities
product with a high discount from us. We are now offering 20%-25% discount to our all
products.
Customer service- We are very conscious about the customer relationship and want
to make loyal customers. Thats why we provide high customer service as well as
warranty program. Besides we have a very protective websites where people can easily
give orders through the sides. We also have home delivery service where customers get
their desire products in their home within a very short time. It will save their valuable
time.
Customaries Product- Our Company always tries to fulfill customers demand.
Thats why we follow customaries where customer choice is the main matter. In most of
the time we provide products if they specially order.


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Others- Our Company has some links with some repudiated banks. If people buy with
the credit cards of that banks can purchase on credit. Sometimes we try to give them a
special discount if they have membership card.

Conclusion

Overall we think that our business have less risk and also it will be proved to be very
profitable in future. Our first goal is to gain minimum profit with lower cost. We are mainly
focusing on cost-base system and cost leadership for our cost strategy in order to capture the
market share. Additionally ,we will do something good for our society which is beyond the
profit. We will hire maximum amount of labor from village and it will make village
economic condition more strong. Our labor force also include huge amount of female ,which
will increase women self-employment. Our estimated BEP, BER, targeted CM, all constitute
to positive situation of our company. Nokshi is a very innovative handicraft bag company in a
competitive market. Though we have lots of big competitors, we are trying our best to
capture the market with a qualitative product on a reasonable price. Because of some
political, financial, economic crisis we have to suffer a lot, but we try to use our strength to
overcome the situation. All of we work together to satisfy the customers and make a good
customer-relationship.








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