1.

0 THE INITIATIVE FOR THE STUDY This term paper fulfills the requirements of the specific grounds and objectives. The report is organized through the study of secondary sources of information. We have tried to put the concrete information aside from the limitations we have faced in preparing the paper. The Grounds of Approval and Submittal The report was assigned to us by our honorable course instructor Mr. Gazi Salah Uddin as a requisite of the International Business (ITB301) course to assess our report writing skills and as well as our understanding of the International Business aspects in terms of export orientation of a Bangladesh industry in practical viewpoint. 1.1 Objective of the Report In every study there should be organized and specific purposes and objectives. A careful statement and purpose helps in the preparation of a well decorated report on which others can take right type of decisions. The broad objectives of the study are as follows:

To achieve the difference between theoretical and practical knowledge. Finding out the strategies and structure of this industry for expansion in global market. Investigation of local furniture industry of Bangladesh. Learn about the local and foreign demand for this industry. Have an overall picture of the foreign market for Bangladesh furniture industry. Finding out the presence and strength of major exporters and rivals for the industry. Have a clear idea about the export potentiality of this industry in terms of political, economical and cultural viewpoint.

1.3 Collection and Organization of Information from Interview and Internet The data used in this report were collected from primary as well as secondary sources. Primary sources include a formal interview with a HR manager of HSBC Bank Limited. Secondary sources include the official web site of HSBC and other publications on HSBC.

The report was prepared through some sequential steps. It was compiled into the following stepsi. ii. iii. iv. v. vi. vii. In the first step, we took the guidance and instructions from our honorable instructor through formal materials and meetings for preparing the paper. Then we prepared a list of required data and information and prepared the structure for the paper. The information available on the internet was downloaded and analyzed thoroughly. Information was also taken from some text books, reports and newspapers. After acquiring the data, entire work was allocated among the group members equally. Drafts of the report parts were prepared and mistakes were corrected through modification after consulting with course instructor. Finally, we have completed our paper by arranging the total work with proper care and caution. 1.4 The Inadequacies We Faced The limitations of the report are as follows:

At first we faced the problem of finding the source of information. Limited accessibility to data due to confidentiality reasons. Some concrete information was not provided. Less export related data of Bangladesh furniture industry in the website or in other sources. Finally, we admit our inexperience and less understanding in International Business knowledge.

2.0 INTRODUCTION The Bangladesh furniture industry is one of the most promising growth sectors with high export potential. According to a Household Income and Expenditure Survey of 2005, the domestic consumption growth rate is around 20% and export markets are almost entirely untapped. There are approximately 40,000 furniture SMEs all over the country, employing around 180,000 people, turnover is in excess of BDT 100b (GBP 1b). Furniture industry that has made a significant development as a sector by creating local market of about Tk. 400 crore faces snail space in expanding its markets further due to lack of government support following no entry in the Industry Policy. The self-made sector has been recognized as handicraft in the Export Promotion Bureau. But neither the Industry Ministry nor the Commerce Ministry recognizes it as an industry. The furniture industry is not only capable of meeting the needs of ordinary consumers at home, elegant furniture with higher price tags and, more importantly, greater value-addition, are now capable of being exported successfully from Bangladesh in increased quantity. In Dhaka alone, there are 2000 enterprises producing a wide variety of furniture items and employing over 40,000 workers. In 2007, the total market size was estimated at USD 1.6 billion, with an annual average growth rate of 15-20% over the period of 2000-2005 and a projected growth rate of 23% over the period 2007-2012. Diversity in product portfolio is one of the key strengths of Bangladesh furniture industry. The main varieties are wood, processed wood, laminated board, bamboo, wrought iron and many more. Bangladesh Furniture Industries Owners Association (BFIOA) is playing a vital role to develop this sector from a very small local level to the International market. For doing this in an active and flourishing way they are The Furniture industry of Bangladesh has proved to be one of the most promising sectors with a high export potential. The industry has its members spread all over the country with key players located in Dhaka with an overall number of 80,000-100,000 people. By exploring new opportunities Export promotion Bureau (EPB) of Bangladesh is also assisting this sector for the development as well as global growth and to introduce this sector as a major foreign earning source.

3.0 FACTOR ENDOWMENTS FOR FURNITURE PRODUCTION There are some factor endowments or input factors for the production of furniture. These economic factors of production are similar for every type of production industry but the requirement varies from industry to industry. General factor endowments for any production are land, labor, capital, raw materials, technology and infrastructure. 3.1 Land Requirement for Production Capacity For building a furniture manufacturing house, one does not need a huge amount of land. However, if a big company wants to produce massive production and wants to achieve economic of scale then definitely it will require a good amount of land. So, the small non-brand companies can find land for production facility conveniently but big brand companies require large land which is not available in our capital and so they would have to bear high transportation cost. 3.2 Labor and Their Skills It does not require highly skilled or expert labor. Semi skilled labor can easily work in this sector. Bangladesh will definitely get advantage in this sector because we are (low-skilled) labor intensive country. 3.3 Capital for Investment If a company wants to establish a manual furniture manufacturing factory then it will not require a huge amount of investment. However, export oriented furniture manufacturers require a good amount of capital to support their production plant, warehouse, transportation, packaging, marketing and exporting activities. 3.4 Required Raw Materials The main material used by the furniture making industry is pre-processed wood or wood products, specially agglomerated wood products, plywood and veneer supplied by the woodworking industry. The production is characterized by a high material intensity, which accounts for up to 80% of total costs. The use of new equipment and technology, as well as respect for required legislation, means that the products of the different sectors contain virtually 4

no dangerous or harmful substances hazardous to people or the environment. Furniture product ranges include seating furniture, living room, nursery, and bedroom furniture, furniture for other living quarters, kitchen furniture, furniture for the fitting out of offices, banks, hospitals, health and other facilities, shops, as well as other furniture, such as metal, solitaire, and complementary pieces. To produce furniture both in manual or automated way some common components required they are basically Wood, ply wood or laminated board for the main surface. Industrial glue adhesives, screw pins for jointing several parts of furniture. Color coating, polishing and other decorative work.

3.5 Use of Technology In our country, a major factor for furniture sector is that it is not technology oriented rather it is labor intensive. So Bangladesh has the advantage for its cheap labor. However, to gain competitiveness, some brand furniture firms like Otobi, Hatil, Partex etc are using modern technology to prepare goods within less time in more efficient way. Like, they use highly equipped wood cutting machine to give better finishing and stylish look. 3.6 Infrastructure to Back Furniture Industry Up A countrys infrastructure facilitates the activities of any industry. As far as Bangladesh is concerned, our overall infrastructure has always been unfavorable for any kind of business. Furniture industries do need the energy sector for utility and use of technology, which our country is not just lack of but in crisis of. We also do not have a very good transportation facility within our country. However, we do have some infrastructural facility to back our furniture industry up. We have modern communication technologies. Now we also have easy banking procedure for loan. But the most important thing is that Bangladesh has sea port which is crucial for export orientation.

4.0 DEMAND CONDITION IN DOMESTIC MARKET Population of Bangladesh, especially of Dhaka, is increasing rapidly and so it has also geared up the demand for furniture. New commercial and non commercial firms, schools, universities and offices are opening at a high rate and all of them require furniture. The demand for local products is growing at 10 percent a year. There are around 20 small, medium and large furniture manufacturers in the market with Otobi the leader. 4.1 Types of Furniture in Local Market There are various types of furniture in our local market. Demand for household furniture has always been there but the demand for other types is also increasing day by day. 4.1.1 Household furniture These are movable furniture such as chair, table, sofa, wardrobe, bed etc. Bengal furniture drew motifs of designs and ornamentation from two sources: ancient Hindu culture and medieval Muslim culture. In addition, general oriental techniques of carving and inlay on ivory and wood also worked as common motifs.

4.1.2 Office furniture Since Bangladesh is drifting toward industrialization, lots of industries have been growing up along with their administrative offices. And thus the need for office furniture is growing as well. The use of desks, rolling chairs, computer desks, meeting table etc have a lot of demand in the current market. Administrative buildings of other institutions are also using such office furniture.

4.1.3 Hospital furniture Locally made hospital furniture is gradually getting on well in market, now meeting around 3035 percent of the total demand of the mushrooming hospitals and clinics across the country. Manufacturers are now producing more than 50 types of hospital furniture ranging from waiting room chairs to mechanical beds, and saline stands to ICU (intensive care unit) beds. Now the market of locally produced hospital furniture is worth around 40-50 crore taka.

4.1.4 Furniture for other uses There are other uses of furniture too which is increasing the demand for it. Aquarium, reading table, studying chair, racks are the extensive uses of furniture. Bookshelf and different types of artifacts are also growing the demand for local furniture. 4.1.5 Wooden furniture It is made of wood, or to put it botanically, the xylem tissue that forms the bulk of the stem of a woody plant. Chairs, tables, beds, wardrobes and racks are major furniture items most commonly made of wood. Other items such as almirahs, chests of drawer, dressing tables, sofa sets are also made of wood. Woods used in making good quality furniture include mahogany, segun, garjan, chapalish, chikrashi, shilkarai, gamari, walnut, and cherry.

4.1.6 Cane furniture It is adorned with creative design and artistry and subtly bears testimony to the glorious tradition of handmade artifacts in Bangladesh. Such furniture ranges from dining tables to dressing tables or easy chairs to rocking chairs or from dress hangers to shoe racks.
ARTISAN

, gifted with artistic

bent of mind, employ combination of manual and mental labor in making high quality cane furniture like chairs, tables, sofa sets, book shelves, beds, corner shelves, partitions, wardrobes, almirahs, showcases, plantation cases, glass frames, trays, trolleys and show pieces.

4.1.7 Metallic furniture It is made of an alloy or mixture of iron or metals and includes innumerable furniture items such as chairs, tables, mechanical beds and wardrobes. It has not been very long since Bangladesh developed specialized steel or metallic furniture forms. During the British period, the upper strata of the society had become accustomed to use of imported metallic crafts such as sinduks, almirahs and wardrobes. Steel made furniture is relatively expensive, but is pleasing to the eye and durable and can incorporate new designs. Normally poor and low-income groups of people do not use steel made furniture. Yet, the demand for steel made furniture is increasing and its cost gradually decreases with production in larger volumes.

4.2 Local Furniture Producers There are many brand and non-brand furniture producers in our country. Although non-brand producers operate the majority of the industry, the brand producers have gained a high reputation for their standard furniture products with standard price. Otobi, Hatil, Navana and Partex are the most significant brand names in our furniture industry. 4.2.1 Otobi Brand furniture has curved out a niche among the people as some manufacturers led by Otobi are holding more than 50 per cent of the countrys furniture market worth about Tk. 1,500 crore. Starting in a tiny tin-shed factory in the citys Topkhana area in mid 1970s with the annual turnover of only Tk. 60,000, it now holds 70 percent share in the branded segment. Establishing 13 show rooms in the capital and employing 300 dealers across the country in less than one decade, Otobi has proved that organized marketing campaign was the secret of its success. 4.2.2 Hatil Since its inception in 1989, Hatil has been a trend setter in innovation, design, management practices and quality in Bangladesh. It is the market leader in household wooden and processed wood furniture segment. In 2005, they had major expansion and are currently operating around 80 outlets in Bangladesh. 4.2.3 Navana Navana Furniture is the Brand Name of the Furniture unit of Aftab Automobile Ltd. which is part of Navana Group. Founded in 2002, NAVANA Furniture possesses capabilities that are fully integrated, from designing, prototyping, material selection and molding through testing, assembling and distribution. 4.2.4 Partex group PARTEX Furniture manufactures a diversity of solid timber as well as timber-substitutes products maximizing the resources of both ends. They offer a combination of timber, special particleboard, and decorative plywood making the best quality and cost effective substitute for natural timber for custom-made innovative and stylish furniture. 9

Chart 4.1

Market Share of Brand Furniture in Bangladesh

Table 4.1

Market Share of Brand Furniture Otobi Hatil Navana Partex Others 54% 16% 12% 9% 9%

Source: Export Promotion Bureau (EPB)

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5.0 ASSOCIATED AND SUPPORTING INDUSTRIES Apart from structural wood preservation measures, there are a number of different (chemical) preservatives and processes (timber treatment or lumber treatment) that can extend the life of wood, timber, wood structures or engineered wood. Firms doing such activities are related to furniture industries. There are also other industries like wielding industry, cutting machine industry, and color industry etc which are associated with furniture industry for support. There are also several sectors to support furniture making procedure. 5.1 Wood Sector Wood has adequate properties for many uses. In Bangladesh, it is widely used for furniture, cabinet, house, boat, ship, railway sleeper, electric transmission poles etc. In the comminuted and reconstituted form, it can provide materials with a wide range of properties. 5.2 Plywood Sector Plywood is a type of manufactured wood made from thin sheets of wood. It is then glued together for greater strength. A common reason for using plywood instead of plain wood is its resistance to cracking, shrinkage, twisting/warping, and its general high degree of strength. Also, plywood can be manufactured in sheets far wider than the trees from which it was made. It has replaced many dimensional lumbers on construction applications for these reasons. 5.3 Adhesive Sector An adhesive or glue is a mixture in a liquid or semi-liquid state that bonds items together. They are very important in furniture industry for joining several parts of furniture together. 5.4 Joinery Sector It is a part of woodworking that involves joining together pieces of wood, to create furniture, structures, toys, and other items. Some wood joints employ fasteners, bindings, or adhesives, while others use only wood elements. Among all of these supporting industries, Bangladesh is self sufficient in all except in adhesive industry as this sector is entirely dominated by china. 11

6.0 STRATEGY, STRUCTURE AND RIVALRY Bangladesh is an emerging exporting country in prospect of furniture industry. The strategies and structure of this industry to grow its expansion in global market is mainly focused on labor intensiveness. It also needs to consider the strengths of its rivals in this industry. 6.1 Strategies The strategic intervention areas as follows

Enhanced marketing for both local and export market o Development of furniture export road map and following it through o Capacity building of exporters' association Improved productivity through o New production technologies o Access to skilled workforce o Access to better quality inputs o Production consultancy o It prove hazardous working conditions through dust reduction mechanisms, measures of improved working conditions and EMS (Environmental Management System).

Penetrating the ship building industry as a component for deemed export. 6.2 Structure Trade fairs have been an effective tool in entering the export market. However, it is also important to have an effective promotion strategy and good branding to gain the international attention to Bangladesh furniture. The quality of furniture with proper certification is also very important for export. In order to increase export, following are some of theareas that need to be addressed: Improving quality, particularly related to finishing and packaging. Improving the image of Bangladesh on the social and environmental issues. Increasing the design capacity in the country. Branding of Bangladeshi furniture. 6.3 Rivalry China, Malaysia, Thailand and Vietnam have ramped up production in recent years. They are accounting for some 60% of the global furniture market. These countries are now looking for new markets, such as East Europe, to offset the impact of global downturn. 12

The Indonesian Furniture Producers Association has welcomed the government's reaction to its request for consideration to be given to delaying the full implementation of the FTA with China amid fears that hundreds of thousands of Indonesian workers in the wood processing sector could lose their jobs. According to the Association, cheap furniture imports from China could overwhelm local manufacturers. They quote an example where a computer table made locally from particleboard sells for about US$65 while an imported Chinese made table of similar material could sell for about US$45. The Association added that the FTA between ASEAN and China could result in huge job losses at major Indonesian furniture manufacturers. So the increased production of cheap furniture in China is not only threatening the importing countries but also threatening the emerging exporting countries like Bangladesh. The important fact is that China and Bangladesh are countries of cheap labor resource. And since the furniture industry is mainly labor intensive, China has become the most dangerous rival for Bangladesh furniture industry and its growth in international market. Table 6.1 Furniture Market of China

Source: China Furniture Market Report

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7.0 DEMAND CONDITION IN INTERNATIONAL MARKET Furniture industry has changed over the years. It no longer restricts itself to production of a chairs, tables or bed but includes manufacturing a range of furniture and home furnishings and designed interiors which spell class and elegance. There is a boom time for furniture industry. Every country sports a string of furniture showrooms of all kinds and sizes. Changing lifestyle, disposable incomes, economy growth, increasing migration to urban areas have all contributed to the demand for furniture and in turn the growth of the furniture industry as whole. 7.1 Factors Influencing Demand for Furniture There are various factors that have impact on the growing demand for furniture worldwide. Most significant factors include economic variables, demographic variables, infrastructure etc. 7.1.1 Demand elasticity Generally the estimated elasticity changes from country to country. But the average elasticity has been found to be 1.5 that effectively means, if the income increases by 1, the demand for furniture is going to rise by 1.5 and vice versa. 7.1.2 Economic scenario This translates into consumers' confidence in the economy of the nation, growth of the Gross National product, the purchasing power, and also factors like level of unemployment. People in a sustainable economy tend to expend more on products like furniture. 7.1.3 Infrastructural consideration It includes transportation and communication facility, energy sector, financial strength and easy access to financial matters, resources etc. in countries. It includes level of investment as well. 7.1.4 Evolution of loan If the interest rate is hiked, the consequences are higher costs for borrowing for purchasing furniture and housing; and vice versa if the interest rate falls. Easy access to loan and financial help is another factor that influences people to feel to purchase furniture.

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7.1.5 Demographic variables Factors like marriage, gender, generation, the composition of age and income class etc. have a great impact in pursuing people go for furniture products. 7.1.6 Distribution of wealth It is quite obvious that demand for furniture would be higher in countries where wealth is more evenly distributed than in countries where wealth has a tendency to be concentrated. 7.2 Foreign Demand Trend As the world economy has been developing fast for the past 10 years, the furniture markets have opened up more and the world furniture industry has been growing fast. Traditional furniture making countries have taken up more than 70% of the global market. This is possible because of their long established production capacity, advancement in science and technology, solid funds and rich management experiences. Meanwhile, developing countries and regions like China, Southeast Asia, Poland and Mexico, with China taking the lead, have built upon their respective competitive advantages and gradually have covered almost 30% of the world market. The furniture industry in such countries is developing strongly and showing great potentials. And this growing trend of global furniture industries shows the upward trend of demand for furniture worldwide. Since the number of buildings for household, apartment and office is increasing, the need for furniture to arrange these with is increasing as well. Furthermore, now-adays furniture has become more than just a necessary product for household or office. It also signifies fashion and art, and fulfills ones fashion sense by filling the space with furniture of a variety of design.

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8.0 LOCATION OF THE FOREIGN MARKET Now it is time to take a brief look on Bangladesh point of view regarding the international market of furniture. This portion basically emphasizes trade of Bangladesh with SARRC and also with other countries in terms of furniture products. 8.1 Trade between Bangladesh and SAARC This graph below analyzes the determinants of trade flows between the countries of the South Asian Association for Regional Cooperation (SAARC) and Bangladesh through furniture prospective. The results show that while the high intensity of bilateral trade of these countries is not explained by high complementarily, a policy of non discriminatory import liberalization in India would significantly benefit the SAARC countries in terms of export expansion. Chart 8.1: Bilateral Trade between Bangladesh and SAARC (Product: Wood and articles of wood, wood charcoal)

Sources: ITC calculations based on COMTRADE statistics. 16

8.2 Trade between Bangladesh and India The Indian Furniture industry is poised to expand to meet the surge in demand. Almost every international furniture manufacturing country is looking to enter this vibrant market. Henceforth, Bangladesh Furniture Owners Association backed up by the Bangladesh High Commission and Export Promotion Bureau is all set to foray into the Indian Subcontinent with its 2 leading brands of Furniture, Hatil and Navana, by showcasing Modern contemporary furniture with unique and stylish furniture designs to express individual style at very affordable prices. The company offers best quality furniture with latest 7 contemporary designs at very affordable prices. The range includes office furniture, home furniture, medical furniture, lab furniture, industrial furniture and also interior designing furniture. Since furniture and furnishings form one of the most important ingredients in the interior decoration of a room, the demand is more for stylish furniture and such furnishing materials that enhance the look of a room. Keeping this in mind, the leading furniture brands of Bangladesh with their exotic Ranges of the most stylish products have entered India through the Panelexpo 2009 thus proving to be an excellent platform to leave their mark in the minds of the Indian customer. Chart 8.2: Bilateral Trade between Bangladesh and India

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(Product: Wood and articles of wood, wood charcoal)

Sources: ITC calculations based on COMTRADE statistics. 8.3 Trade between Bangladesh and Japan In 2009, Export Promotion Bureau (EPB) of Bangladesh selected the International Furniture Fair in Tokyo (IFFT) for furniture trade promotion. Katalyst and EPB jointly supported five firms, namely; Akhtar Furnishers, Hatil Complex Limited, Furnitec, Partex and Quality Agro Forestry Limited (QAFL) to participate in this fair. Katalyst appointed Csil, a Milan based consultancy firm to help in product selection, pricing, understanding Japanese business culture and other technical details. The consultant also advised 18

the firms on maintaining environmentally and socially responsible business practices. Katalyst also worked with the Bangladesh Embassy in Japan to organize a reception for the business Community to meet. After the fair, the participants received orders worth USD 2.1 million. Prospective companies like Nitori, Tokyo Hands, Francebed, Korimoku were interested in visiting Bangladesh in 2010. Significant number of Japanese furniture retailers and manufacturers expressed interest to import furniture and parts from Bangladesh. Japan External Trade Organisation (JETRO) expressed their interest to work with BFEA (Bangladesh Furniture Exporters Association). Chart 8.3: Bilateral Trade between Bangladesh and Japan (Product: Wood, articles of wood, wood charcoal)

Sources: ITC calculations based on COMTRADE statistics.

8.4 Trade between Bangladesh and Malaysia Malaysia has vast scope to invest in Bangladeshs furniture industry and both countries will benefit from such investments, Bangladesh Commerce Ministrys Secretary Firoz Ahmed said on last month. Malaysian entrepreneurs can set up furniture companies in Bangladesh through joint ventures or direct investments, he said at the opening of Malaysia Fitec Furniture Showcase 2009 in Dhaka. On the trade between Malaysia and Bangladesh, Ahmed said: During 19

the last five years the volume of bilateral trade has increased by 82 percent to US$500 million, but it is largely in Malaysias favor. The event is expected to attract around 1,000 furniture industry players from the two countries. The furniture manufacturers of these two countries are agreed that the trade gap could be reduced through cooperation between the traders and entrepreneurs of both countries to increase the volume of bilateral trade. Chart 8.4: Bilateral Trade between Bangladesh and Malaysia (Product: Wood and articles of wood, wood charcoal)

Sources: ITC calculations based on COMTRADE statistics.

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9.0 MARKET ACCESS ISSUES Bangladesh furniture industry is predominated by a large number of SMEs, but it is in a transition phase towards industrialization. In the local context, inadequate supply of necessary production technology & consultancy services, limited access to quality inputs, absence of skilled workforce and limitations in local and international marketing are some of the main problem areas. Despite all these problems, the significant potential of this industry has been evident through the rapid growth and numerous successes of the local companies. Recently, Bangladesh furniture industry opened up its opportunities mainly in Japan through Katalyst. 9.1 Major Opportunities In January 2010, Katalyst and EPB signed a Memorandum of Understanding to develop a 3 years national plan to promote furniture export. A steering committee has been formed comprising of furniture exporters to ensure sustainable export to Japan. The new partnership is expected to scope out further prospects of the sector, now growing at 20 percent a year, taking some steps to reach the goals. A memorandum of understanding (MoU) between the two sides will allow them to go into some initiatives. These measures include training for artisans, providing technical supports, putting all efforts to remove barriers to its flourishing and formulating a roadmap for exports. Under the MoU, EPB will organize more trade shows for furniture manufacturers to explore new international markets and facilitate its exports. The sector's contribution to the gross domestic product is 0.29 percent on an average, according to Katalyst. Based on the paper and other things, a national roadmap will be formulated for furniture export. 9.2 Co-facilitators and Partners Katalyst works with BAFIOA (Bangladesh Furniture Industries Owner's Association) and its chapters for local market interventions and BFEA (Bangladesh Furniture Exporter's Association) for export market activities. Katalyst also partners with the Export Promotion Bureau of Bangladesh under the Ministry of Commerce for collaboration in facilitating export market penetration. Other than these, Katalyst partners with different private and public authorities for different interventions. 21

9.3 Progress in Furniture Industry EPB data shows that Bangladesh fetched $3 million from exports of wood and furniture in FY 2008-09, $2.4 million in 2007-08, $1.8 million in 2006-07 and $2.2 million in 2005-06. Chart 9.1: Progress in Furniture Industry

Source: EPB (Export Promotion Bureau)

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10.0 MAJOR EXPORTERS IN THE WORLD MARKET The global furniture industry has shown a growth rate of 8% in 2005.The industry was valued at around US$76 billion from US$70 billion in the year 2004. In 2004 Italy was able to narrowly beat China. Italy's exports were US$10.5 billion compared to China's US$10.3 billion. Others that made it to the list as top five furniture exporting countries were Germany, Poland and Canada. While the top five importing nations of 2004 were the US, Germany, UK, France and Japan the solitary Asian nation. Table 10.1: Global Furniture Production Global Furniture Production in million Dollars Amount of market share 95421 42.69% 57064 25.53% 51445 23.01% 9020 4.03% 5163 2.31% 1825 0.81% 3550 1.58%

Economic Bloc EU NAFTA ASIA Other Europe Latin America Africa Others

Chart 10.1: Global Furniture Trade

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10.1 European Union The European Union furniture industry accounts for about half of the world's furniture production. The production value of this industry in this region is around 82 billion. Among the European countries, Germany takes the lead as the largest furniture producing country, accounting for about 27% of total EU production. This is followed by Italy (21.6%), France (13.5%) and the UK (10.4%). In 2004, the European Union furniture manufacturers were able to export 34.9 billion Euros of furniture. It was around 52.1% of the world total. Chart 10.2: UK Furniture Market

Chart 10.3: German Furniture Exports in First Half of 2009 24

10.2 North American Free Trade Area North American Free trade association zone comprising the USA, Canada and Mexico accounted for about25.8% of the global production or 57.1 billion Euros. The countries of the NAFTA zone have become the largest furniture importing zone. Their total imports were 22.3 billion Euros with USA's share valued at 18.1 billion Euros. 10.3 Asia Asia also emerged as the fastest growing furniture producing area. Major producers in this sector have been China with 19.4 billion Euros up 12% and Japan with 16.2 billion Euros. A fact that is emerging is that the manufacturing hub of furniture is quietly shifting to Asia particularly to China. This change of world furniture manufacture to Asia and China first started in the 1980s and the nineties of the last century. In the year 2004, the total output of China's furniture was roughly valued at about US$33.7 billion with exports touching US$10.353 billion that is nearly 31% of the total output. From 1994 to 2001 the Chinese furniture industry has been able to increase exports by a phenomenal 335%. It is beyond doubt that China has emerged as the largest exporter of furniture to U.S.A market. In 2001 the figure of total export was $2.8 billion. The exports to US have shown an annual growth rate of more than 35 percent. The Asian countries are now the second largest furniture exporting region, with China taking the lead for the number one spot.

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Chart 10.4: Growth Rate of China Furniture Industry

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11.0 STRENGTH OF THE PRESENT EXPORTERS The furniture sector saw a big drop in exports for the second consecutive year. Brazilian furniture exports ended 2009 with a fall of 28.5% compared to the previous year. The sector's foreign sales totaled US$ 706.9 million. US imports of Brazilian furniture declined 41% in 2009, dropping to a value of only US$ 95 million in 2009. Nevertheless, the US continues to be the main importer of Brazilian furniture, accounting for 13% of the total exports of the sector. Argentina follows in second place with an 11% share of the total Brazilian furniture sector exports, but sales were down 37% in 2009 to US$ 75.7 million. In third place was the UK which accounted for a 10% share of furniture exports from Brazil. This business was worth around US$ 72 million in 2009, representing 1.2% drop compared to 2008. Cuba was the country with the highest growth in purchasing Brazilian furniture, despite having only a minor share of Brazils exports at only 2% of total export sales. Exports to Cuba increased some 60% in the period, and the Southern state of Rio Grande do Sul was the main exporter. As mentioned before, Asia has been emerging as one of the largest exporters in the world, with China leading the process. China has emerged as the largest exporter of furniture to U.S.A market. In 2001 the figure of total export was $2.8 billion. The exports to US have shown an annual growth rate of more than 35 percent. The production and export of EU countries are always in the high mark. With well-established quality brands in German and Swedish Furniture industries, EU has been the largest producer and also a large exporter as a whole.

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12.0 POSSIBILITIES OF MATCHING STANDARD IN GLOBAL MARKET Bangladesh is looking forward to grab some market share in the international market. At present the main furniture trade relationship of Bangladesh is with India, Japan and Malaysia. As far according to our research we have found that the international market of furniture is really big and large and our country has also have a vast scope to use our own potentiality to achieve a handsome amount of a market share with high standard and fair market price that match with the global market. Before looking out our potentiality lets have a quick look to the overall global market of furniture. 12.1 Production Method in Global Market Here, we will see the types of materials and processes uses in global production method for furniture. We are only focusing on wood and wood type materials for furniture production. Important thing to notice here is that in global production for standard quality and price, hardwood lumber, hardwood plywood and particleboard are mostly used. Table 12.1: Production Methods in Global Market

Wood Type Hardwood lumber Hardwood plywood Particleboard MDF (medium density fiberboard) Softwood plywood Softwood lumber LVL (laminated veneer lumber) LSL (laminated strand lumber) Total

Amount 42.60% 21.30% 13.80% 8.50% 7.40% 4.30% 1.10% 1.10% 100.00%

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Chart 12.1: Production Method in Global Market

Source: FOREST PRODUCTS JOURNAL VOL. S1, No. 9 12.2 Production Method in Bangladesh Our research reveals that Bangladesh furniture manufacturers mostly use hardwood lumber, hardwood plywood and particleboard for production of furniture. Especially the brand manufacturers like Otobi, Hatil and Partex board are renowned for producing furniture with hardwood lumber, hardwood plywood and particleboard. Since these are the major furniture exporting firms in our country, we find that our furniture in foreign market have serious competitiveness in terms of standard as our previous data shows that the major global production processes are based on these things too. On the other hand, ours is a country of cheap labor. Thus, we can offer cheaper and competitive price for furniture in the foreign market as compared to the other exporters of furniture. In this case, China could be our only competitor. So overall, our production materials and processes are competitive enough to match the international standard for exporting furniture products. Also, with our competitive advantage of cheap labor, we can come up with competitive price to match the standard in global market. 29

13.0 MODE OF TRANSPORTATION Mode of transportation depends on a countrys geographical location and facilities. It also depends on the technological and economical development of the country. The major modes of transportation for trading and export are Air and Sea. Bangladesh is a country which is attached to sea. So the major mode of transportation for export purpose has always been the sea. Our country has an extreme benefit of having sea port in the major trade area Chittagong. There is also a very potential sea port for trading at Mongla. Furniture products are generally of large size and weight. So the best way to transport these products overseas is through sea. And since our country has port facility, we can utilize it for large export of furniture products. 14.0 PACKAGING Packaging and branding of products is one of the core marketing strategies for any business, be it small, medium or large business entities. It is also the primary source of information for the consumers to know product specific information. In actual terms, packaging refers to the process of design, production, and its use by the businesses to distribute and sell their products. Its primary purpose is to enclose or protect products for improved distribution, effective storage, stimulate sale through better informative marketing, and appropriate use of product. Additionally, enterprising business can further benefit from providing better and critical product information through packaging, e.g., directions for product usage, expiry date for consumable products, standardization information, certification information, business/company related information or just by sharing socially responsible messages. In this way, any enterprising business can easily get to an advantageous position against its competitors. Bangladesh furniture industries take assistance from different organizations for packaging of the products. The packaging is mostly done with care for the purpose of preserving the suitable weather for the product inside, along with its easy movement purpose and additional materials such as add-ons or manuals.

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15.0 VALUE TO WEIGHT RATIO The furniture industry is an example of an industry that did not lend itself to globalization before the 1960's. Because furniture has a high bulk compared to its value, and because furniture is easily damaged in shipping, transport costs traditionally were high. Government trade barriers also were unfavorable. The Swedish furniture company IKEA pioneered a move towards globalization in the furniture industry. IKEA's furniture was unassembled and therefore could be shipped more economically. IKEA also lowered costs by involving the customer in the value chain; the customer carried the furniture home and assembled it himself. IKEA also had a frugal culture that gave it cost advantages. IKEA successfully expanded in Europe since customers in different countries were willing to purchase similar designs. 16. VALUE ADDITION True value of its furniture lies in the sense of comfort, the touch of romance and the possibility of self-expression it provides. Business + Design = Value Addition A global brand is one which is perceived to reflect the same set of values around the world. Global brands transcend their origins and create strong, enduring relationships with consumers across countries and cultures. Global brands are brands sold to international markets. Brands are used to sell the same product across multiple markets, and could be considered successful to the extent that the associated products are easily recognizable by the diverse set of consumers. Image is everything. A big part of building a quality furniture brand is defining and creating your image, and our designers and art directors are passionate and fully dedicated to the cause. After all, Furniture is Fashion, why not make a bold statement with it. Image speaks volumes about companys values, thus the brand design and development is key to communicating companys vision to the end consumer. Successful branding requires We approach. For banding success, companies need to work like families. Without having sustainable brands, sales at any business may grow for a time being but hard to sustain.

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In all, there are 5,000 registered furniture houses in the country, according to the Bangladesh Furniture Association. Almost 90 percent of them are categorized as non-brand operators. Although these non-brand operators hold almost half of the market their share is diminishing day by day, thanks to aggressive marketing campaign by the branded companies as they boom up the market competition. Local consumers are feeling comfortable with the brand items, Otobi chief executive officer Sabbir Hasan Nasir told New Age. Chart 16.1 Brand & Non Brand Furniture Manufacturer Table 16.1

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Furniture Manufacturer

Non brand manufacturer Brand manufacturer Source: Export Promotion Bureau (EPB)

90% 10%

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17.0 POLITICAL, ECONOMIC AND CULTURAL SYSTEMS A political system integrates the parts of a society into a viable, functioning unit. One of the major reasons for international growth of business is the cross-border movements or global free trade policies which are shaped by political forces and figures. Bangladesh furniture industry can benefit from the political decisions of integrating the economic and trade policy with other countries and regions. For example, Bangladesh has a major impact on trade policies among the SAARC nations and that is why the most trade of furniture takes place between Bangladesh and SAARC. Economic influence of any country is crucial for any industry within the country. In terms of furniture industry in our country, we can think of the influence in two perspectives. One is, because of global demand and export orientation, this industry is growing to mass production and thus it is gaining the economies of scale. This substantially decreases the price of the product and increases the demand for it. Another viewpoint is that, the overall standard of living is increasing day by day and people are getting the motive to purchase furniture products. Culture consists of specific learned norms based on attitudes, values, and beliefs all of which exist in every nation. Yet controversy surrounds these differences because people disagree on what they are, whether they are widespread or exceptional differences, and whether the differences are deep-seated or superficial. Further, culture cannot easily be isolated from such factors as economic and cultural factors. Furniture industry is almost as old as the civilization itself. People needed furniture for their household use as well as for the commercial enterprises. One difference that marks the modern furniture is that whereas in the distant past they used largely localized styles, with the immense development in modern technologies, they have assumed a global stature today. Our furniture generally made from wood with different Nokshi design which reflects our cultural values, beliefs etc. Such designs create foreign attraction of our furniture products in world market. Sometimes wooden furniture refers as it has drastic bad effects of environment due to cutting down of trees. So substitutes of wooden furniture have emerged like metal furniture, plywood, plastic furniture etc. In Bangladesh perspective if we consider cutting the trees then it is helpful for our environment and economy. Some people illegally transfer our woods for their own interest and thus our economy and environment both get hampered. 34

BIBLIOGRAPHY www.asiatradehub.com www.bangladesh-bank.org

www.bizbangladesh.com/export_policy_bangladesh.php

www.epb.gov.bd www.intracen.org www.unescap.org www.wikipedia.com

CBI MARKET SURVEY: THE DOMESTIC FURNITURE MARKET IN GERMANY

Daniels John D and Sullivan P Daniel, International Business: Environment and operations, 12th Edition.

FOREST PRODUCTS JOURNAL Hill Charles, International Business competing in the Global market place, 5th Edition, The McGraw Hill Companies. The Financial Express

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