Manufacturing and Marketing Apex

Footwear Ltd.s products in Sri-Lanka

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 Prepared for:

Syed Kamrul Islam

Lecturer & Proctor

Department of Marketing and International Business

School of Business & Economics

North South University

Prepared by:

1. Raihaan Ali- 1330042030

2. Fariah Afreen Chowdhury- 1311393630
3. Safat Reza Khan- 1330177630
4. Bintu Rahman- 1331287630

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 Letter of Transmittal

Syed Kamrul Islam

Proctor & Lecturer

School of Business

North South University.

Dear Sir,

We are enclosing the report for the project you had instructed us to work for. We have chosen
Apex Footwear Ltd. for our project, which is a leading footwear manufacturer and seller in
Bangladesh.

The report will give its reader an idea of what the organization is about and the experience we
gained while spending time working on the assigned topic.

We would also like to thank you for giving us this opportunity.

Regards

Raihaan Ali

Fariah Afreen Chowdhury

Safat Reza Khan

Bintu Rahman

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 Table of Content

Description Page No.

1. Executive Summary 5
2. Company Profile 6
3. Marketing Strategy 7-8
4. History & Culture 8-9
5. Product Market 10
6. SWOT & PEST Analysis 10-12
7. International Logistics 12-13
8. Recommendations 14
9. Conclusions 14

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 Executive Summary

Apex Footwear Ltd. is a local manufacturer and retailer of shoes, sandals and other footwear
accessories in Bangladesh. It came into existence in the year of 1975. Since then, it has
established itself as a premium retailer of formal and casual footwear for men and women. It
currently produces and exports its products to the foreign markets from Bangladesh.

Our main objective is to produce and market Apex Footwear Products in the Sri Lankan market.
In recent years, the Sri Lankan government is providing incentives to leather based goods
manufacturers. The country is producing numerous leather products from its local tanneries.
However, these tanneries are not being able to fulfill the demand and the government is
attracting investments in this sector. Many renounced brands are establishing their plants there to
gain the local and foreign market segment. To add to that, the government is also providing
subsidies to businesses who wish to invest in this local industry which is booming in recent
times.

Therefore, considering the presence of this opportunity and the added benefit of the existence of
skilled labor with past experience being available, we have considered to prepare a report for
Apex Footwear Ltd. to establish a processing and manufacturing plant in Sri Lanka. The primary
motive would be to provide premium quality shoes to the local consumers and then eventually
proceed towards the foreign markets. Initially, the enterprise would establish itself in the local
market and go into production targeting the upper middle class segment. Once their products
establish themselves, they too can export to other foreign markets in the South African and
Middle Eastern region.

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 Company Profile: Apex Footwear Ltd.

Apex Footwear Ltd. is a private limited company of Bangladesh. The company specializes in
manufacturing and retailing shoes and sandals for men and women. It also has its own signature
and premium brands that produce fashionable footwear products for different market segments.
AFL is also an exporter and provides its products to major shoe retailers in Western Europe,
North America and Japan.

While AFL has earned popularity through export of high quality leather footwear in the
international arena; Apex has pursued to accurately make use of that knowledge to provide
quality & fashionable footwear to the local consumers. Apex has over 191 own retail outlets and
380 authorized resellers nationwide. Apex ensures countrywide coverage of its diverse range of
footwear for its consumers. Through its nine in-house brands Apex carries a huge selection of
shoes, sandals and non-footwear items, ensuring that each potential customer finds the product
that is just right for them. It is a premium choice for white collar individuals who want to smart
footwear for daily use to work.

With labor being widely available and weak regulations in the country, it is easy to keep
production costs low. For this reason, Apex can easily maximize its profits and be competitive.
Its primary competitor can easily be assumed to be Bata which too manufacturers its shoes
locally. Additional competitors may include Jennys and other Chinese shoe retailers.

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 Marketing Strategy

Apex primarily markets its products through its own retail outlets. It however also exports its
product to numerous western countries for resellers to sell. For promotions in the domestic
markets, Apex focuses on the use of Print Media which mainly includes the use of Magazines
and Newspapers to advertise its products for local customers.

Their distribution channel too is managed internally. The footwear is made and designed in their
factories and are then transported to the warehouses. From there, they are sent to the retail outlets
over the country. These are then sold via their own shops to final customers.

Apex Footwear Ltd. must first create some long-term and short-term organizational goals and
marketing strategies. To market its products effectively, Apex must establish a sales plan and
select the one which is most appropriate in Sri Lankan market. They will start with setting sales
goals and activities: They by gathering data from market research can set up a sales target which
should be measurable and specific. Sale activities entail how Apex intends to sell the products to
potential customers. They are going to follow the same measures they use in Bangladesh, using
their own retail shops and ecommerce to sell their products. Apex intends to use its own
manufacturing facilities and wants to sell directly to customers from its outlets, through its
website, classified ads and other ecommerce sites. At first, Apex would have to conduct
aggressive promotional campaigns to spread awareness and for marketing its product. Some
Strength in competitive marketing strategies for Apex:

Differentiation: Apex will use this strategy to offer consumers something different from
that which is offered by its competitors in Sri Lanka, in order to gain competitive edge
over them. The difference can be in terms of something real, difference in the product it-
self, or perceived, as a strong brand identity developed through a promotional campaign.
Apex will mainly focus on providing customers with high quality leather footwear within
affordable range of prices; this will be their competitive advantage.
Focus: Apex by taking focus strategy into consideration would concentrate upon
particular market segments rather than on the market as a whole. They will attempt to
meet effectively the needs of a clearly defined group of customers (men, kids etc.)

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 Some of the likely weaknesses of Apex are:
Cultural difference: Although Bangladesh and Sri Lanka might have similar
tastes, culturally they are very different. Apex may have to tailor some of the
aesthetics and re-design its offering based on the Sri Lankan customers
preference. This will incur additional costs.
Complicated technical procedure and legislations: Apex would have to comply
with the legislations and law of Sri Lankan government. It involves various uses
of important documents. It requires expert services to cope with complicated
procedures at different stages.

History & Culture

The first Sri Lankan ruler of the Anuradhapura Kingdom was Pandukabhaya, ruled in the 4th
century BC. Buddhism was introduced in the 3rd century BC by Arhath Mahinda in Sri Lanka.
The island was divided many times into various kingdoms through those taking after centuries,
united under Chola lead. From the sixteenth century, a percentage of its coastal areas were ruled
and dominated by the Portuguese, Dutch and British respectively. After the Kandyan Wars, the
island was united under British manage in 1815. The uprisings against the British occurred in the
1818.They gained independence in 1948 but the country remained in the British domain until
1972. In 1972 Sri Lanka expected the status of a republic. A constitution was presented in 1978
which aggravated the official President the head of state. The Sri Lankan civil war started in
1983 and after 25-years the civil war ended in 2009. Sri Lanka is now open to globalization and
to the world market. Bangladesh and Sri Lanka both were British colonies and due to the
geographic proximity, people have developed similar culture and preference. Apex, by changing
some of its marketing techniques can sell by using similar techniques strategies. The tastes of
people have changed over these years and are significantly influenced by the Dutch and British.
Marketers can keep these factors in mind while making their market offerings and promotions.

The main island nation of Sri Lanka, is located in the Indian Ocean, southeast of the Indian
subcontinent, in a vital area close to real Indian sea ocean lanes. It has a total area of 65,610 km,
with 64,740 km of land and 870 km of water. Natural resources include limestone, graphite,
mineral sands, gems, phosphates, clay and hydropower. The leather industry of Sri Lanka is
booming and there is availability of labor force. Apex intends to manufacture up-scale footwear

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in Sri Lanka by using its resources such as leather, gum, rubber and export the excess products to
counties in Europe. This will also contribute to the GDP of Sri Lanka.

The culture of Sri Lanka dates back over 2500 years. It is inspired mainly by the two major
religions Buddhism and Hinduism. Sri Lanka is the home to two main traditional cultures: The
Sinhalese and the Tamil. Market research conducted by the marketing team in Sri Lanka found
out that they prefer design and color of shoes which are similar to the choice to Bangladeshi
customers. However, they must precisely tale into account the cultural aspect of Sri Lanka before
marking its product. Some colors may be appealing to the Bangladeshi audiences but may be less
impressive for Sri Lankans.

The demographics, age structure, socio- economic status and the consumption patter of people
has made Sri Lanka a lucrative and a promising market for Apex. Sri Lanka is the 57th most
populated country in the world, with 20,277,597 people, a yearly population growth rate of 0.
73%. Sri Lanka has a birth rate of 17.6% births for every 1,000 people. Population is most
elevated in western Sri Lanka, particularly in and around Colombo, its capital city. Apex will
initially focus in Colombo and from there expand to other Sri Lankan markets. Sri Lankan
Tamils are the second major ethnic group in the island. With a literacy rate of 92.5% Sri Lanka
has one of the worlds most educated people. Its youth literacy rate stands at 98% and computer
literacy rate at 35% and primary school enrolment rate at over 99%. With an economy worth
$80.591 billion (2015), and a per capita GDP of about $11,068.996 (PPP), Sri Lanka had strong
growth rates in recent years. The Sri Lankan economy has seen a significant annual growth of
6.4% over the course of 2003 to 2012.

With high education level comes with a high income level. This means customers have a high
disposable income and purchasing power. Marketers can make several categories of offerings,
targeting the upper class and the middle class Sri Lankans. They can aim to target these specific
target groups for profitability and enhance market growth and share. Businesses are likely to
target these types of potential countries to maximize their profitability. If Apex can be successful
in selling, exporting to other countries from Sri Lanka and can sustain its operations, it will most
likely have a prosperous future.

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 Product Market

Apex Footwear Limited is known to provide its consumers with high quality footwear that are
both fashionable and high in comfort. With its nine in-house brands, namely, Venturini, Apex,
Sprint, Maverick, Moochie, Nino Rossi, Sandra Rosa, Twinkler, schoolSmart and one
international brand, i.e, Dr Mauch, it has the ability to cater to a diverse range of consumers.
Even with these selling points, Apex Footwear Limited must have a clear idea about its product
market before entering a new market.

Now, a product market is referred to when pitching a new product to the general public. It
focuses on the product type, customer type and needs and the geographic area where the product
is being offered. Identifying and having a distinct idea about the target audience and their needs
will help Apex Footwear Limited gain a better insight on marketing and customizing its products
to the full potential.

The country we have selected is Sri Lanka. With its booming leather industry and growing
demand, with the addition of relaxed political policies for leather manufacturers, it is indeed an
ideal market for Apex Footwear Limited to venture in. The target audience will be the people
from the upper-middle class, given Apex Footwear Limited s premium quality and pricing
strategy. From toddlers, young kids, rebellious teenagers to the more mature audience such as a
homemakers, business executives to the older generations of grandparents, Apex Footwear
limited is targeting people from all age groups both male and female who are looking for stylish
yet comfortable footwear. To conclude, we can say that Apex Footwear Limited will be targeting
a broader range of audience from the upper-middle class.

SWOT Analysis

Before venturing into the Sri Lankan arena, Apex Footwear Limited must analyze the
environment in which it will be operating its business, bearing in mind the potential barriers to
be encountered and the available opportunities.

Strengths: Strengths of Apex footwear Limited include its past successful experience, advanced
technology and skilled manpower with which they are able to make high quality footwear,
bonded warehouse license which enables Apex Footwear Limited to import any materials from

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anywhere in the world Duty free for re-export, sourcing knowledge and experience with long-
term relationships with Global leaders in shoe components from Italy, Germany, Taiwan and
India. Also, with the nine in-house brands, it already has mastered the ability to cater to varying
tastes and preferences of the customers.

Weaknesses: Apex Footwear Limiteds products are quite expensive comparatively. Given its
premium quality, it is only targeting the upper middle class and hence, lacks affordability for the
rest. Their products are not something that price sensitive consumers will consider purchasing.
Furthermore, Apex Footwear Limited has to depend on imports for raw materials, which further
add up to the high prices.

Opportunities: All the positive external environmental factors make up the opportunities of an
organization. In which case, Apex Footwear Limited has been blessed with the premium quality
leather that is found in both Bangladesh and Sri Lanka and access to a potentially large market
with cheap labor.

Threats: Escalating leather prices due to high demand is a threat for Apex Footwear Limited
because consumers tend to be more price sensitive these days. Electricity crisis is a major
concern in Southeast Asia, which might hamper production. And given the relaxed government
policies, it is only likely that there will be added competition.

PEST Analysis

It is vital to assess all the external environmental factors before entering a new market. For this
pest analysis, we will be looking into the political, economic, social and technological factors
that will help us analyze the pros and cons of this new venture.

Political Factor: Incentives provided by the Sri Lankan government as well as the subsidies to
the leather manufacturers according to their new policy to attract investors to their leather
industry is a favorable factor for Apex Footwear Limited. The relaxed policies of the Sri Lankan
government are a major driving factor to invest there. Political unrest might be an issue to
consider that might hamper production and sales, but nothing that they can overcome.

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Economic Factor: Due to the relaxed government policies, feasible exchange rates and
economic growth, Sri Lanka can be considered to be a safe and profitable investment for Apex
Footwear Limited. But increasing inflation rates is likely to affect the prices.

Social Factor: Since Sri Lankas culture is very different from our culture, Apex Footwear
Limited will have to customize its products according to their culture and lifestyle.

Technological Factor: Apex Footwear Limited is already well-equipped with advanced

machines and technology. It has its own website and Facebook page to communicate with its
target audience. With improved internet facilities, it will be easier to manage and communicate
with its target audience in a completely new market.

International Logistics

It is very important to choose a suitable mode of entry into the foreign market. Apex, will be
using the Foreign Direct Investment (FDI) method, establishing a whole new branch in Sri
Lanka, since they want to produce and sell their products there. This would mean they would
have to transfer technology, capital and even personnel from the country of origin to the point of
sale.

Just like any other mode of entry, there are some pros and cons to this mode of entry as well.

As of advantages, increased competition and reduced costs will result in more affordable prices
and uncompromised quality, in turn being beneficial for the local people of Sri Lanka. FDI will
also be advantageous for the government in terms of increased employment opportunities, as
mores jobs are going to be created during the opening of new outlets, factories etc., favorable
balance of payments position, regional development and an increase in the standard of living as a
whole.

Along with advantages, come disadvantages too. FDI will be disadvantageous to the local
business in Sri Lanka. Since there will be an increase in competition, they will have to lower
prices in order to maintain and acquire customer base. If some businesses are not able to do so,
they may even lose customers, resulting in a loss in their business. As a result of FDI, in some

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cases local firms are even driven out of business as result of not being able to survive the
competition.

With FDI being our main mode of entry, we will also use the export method, depending mostly
on waterways and side-by-side air cargos too, for the transportation of the products.

Managers will be hired and trained in Bangladesh, while the sales people can be locals of Sri
Lanka. Employees of all ranks will undergo intensive training about the products, potential target
market, and all other aspects related to marketing and selling the products. This will enrich their
knowledge and increase their input. Since their target market is a small yet significant portion of
the total population, Apex will be using selective coverage distribution in order to reach their
potential customers, where only a few outlets will be set in each geographic location.

Point of Origin (Bangladesh)

Point of Point of Point of Point of Point of

Sale (Sri Sale (Sri Sale (Sri Sale (Sri Sale (Sri
Lanka) Lanka) Lanka) Lanka) Lanka)

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 Recommendations

Therefore, after thorough analysis and in-depth interpretation of the research and study executed
we believe that setting up a subsidiary in Sri-Lanka would be a feasible decision for Apex
Footwear Ltd. They have the capital and capacity to do so and can expect a promising return on
their investment as well. The reason for this is they will not only sell in the local markets of Sri-
Lanka but also export to other potential markets. This will also be convenient for them since the
country is a hub for sea freight. The leather that their processing plant produces can be sold off in
the local market adding to the profitability. It will also maintain the economies of scale of the
project since the cost would be at minimum. Most importantly, Sri-Lanka is providing incentives
to investors in the shoe manufacturing industry to boost the sector. Many renounced
manufacturers already produce and export as well. This competition will also help improve the
quality and standards of the brand as well. Therefore, Apex should proceed to invest in Sri-
Lanka to market its products.

Conclusion

With the opportunities in the leather market of Sri Lanka, and the incentives provided by the
government to leather based goods manufacturer of the country, it seems like Apex is heading
towards the direction of success. It is important that Apex keeps up with the high quality and
standard their goods for this venture to be a success. We think that this will be a great approach
to expand their business.

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