SOURCES AND METHODOLOGY
To prepare this report we did different analysis to identify the strength, weaknesses, opportunities, threats, political, technological, social and economical factors of this business in Bangladesh. Secondary sources were used to complete this report.
Primary sources:
An observational study of the jewelry business in Bangladesh.
Secondary sources:
Published surveys and different web sites related to jewelry are the secondary sources, which were used to prepare the report with extensive information.
LIMITATIONS:
We faced certain limitations both in report preparation and also regarding licensing of Tanishq in Bangladesh.
Restrictions that we faced
- Unavailability of some materials
- Limited time which is very short.
- Absence of some information regarding the project.
2. PEST ANALYSIS
P = Political, E = Economical, S = Social, T = Technological
Pest analysis helps to know about the condition of a country. It gives an inside image of a countries economical, environmental and political condition. Doing this analysis one can take the decision or can analysis the opportunity to weather to launch a product by exporting, licensing or franchising. This analysis helps to know the resources of a country, labor cost and political stability. So Pest analysis is very important.
2.1 POLITICAL ANALYSIS:
Political analysis helps to know about countries political condition. If the condition are stable than it is suitable other wise it wont give profit. After independence in 1971, the country had to follow the rules and regulations of the then Pakistan government. Even soon after 1971, the same rules and regulations were followed with slight modification. Before 1982, the government did not effectively control the sector to the extent now it is. Most of the company wants to invest in the peace country though some other things are also in considerable such as labor cost, natural resources etc.
2.1.1 System of government: In Bangladesh the system is democratic. Government type is parliamentary democracy. Here citizen elects the government by voting power. The head of the country is President and the head of the political party is the Prime Minister. This prime minister leads the country for development of Bangladesh.
2.1.2 Government policies: Bangladesh has some policies regarding investment, export, import, and tax. All theses policies encourage the investor to invest in the country.
FDI policy framework: Bangladesh has adopted a very liberal industrial policy to attract foreign investment. No limitations pertaining to equity participation i.e. up to 100 percent foreign private investment allowed. Foreign direct investment is encouraged in all industrial activities in Bangladesh excluding those on the list of reserved industries such as production of arms and ammunitions; forest plantation and mechanized extraction within the bounds of are served forest, production of nuclear energy and printing and minting fresh currency notes. No permission of the government required to set up new industries. For obtaining industries facilities like procurement of land, electricity, gas and sewerage connection, importation of capital machinery and raw materials tax rebate, duty drawback facilities etc. industries need only to be registered with the board of investment (BOI) in a simple prescribed from.
Facilities and Incentives to foreign Investors:
- Tax holiday 5-10 years depending on location of Industries.
·15 years tax holiday for private power generation companies.
· Facilities for repatriation of invested capital, profit & dividend.
· Exemption of tax on interest on foreign loan.
· Tax exemption on royalties, technical know- how & technical assistance fees.
· Avoidance of double taxation on the basis o f bilateral agreements.
· Six month multiple
Intellectual property rights and investment protection: The government recognizes the importance of intellectual property rights for attracting FDI and is making efforts to update its legislation and improve enforcement. The Foreign Private Investment (Promotion and Protection) Act of 1980 guarantees protection against expropriation. If a foreign investor becomes subject to a legal measure that has the effect of expropriation, adequate compensation will be paid to the investor.
On the whole, Bangladesh has taken considerable steps to reform and liberalize all its economic policies including FDI. With low labor costs and almost no restrictions on the entry and exit of foreign investors, Bangladesh on the track toward becoming an attractive destination for FDI in the South Asian region.
Concessionary duty on imported capital machinery: An import duty, at the rate of 5 percent is payable on capital machinery and spares imported for initial installation. For 100 percent export oriented industries, no import duty is charged in the case of capital machinery and spares. Duties and taxes on the import of goods that are produced locally are higher than those applicable to imports of raw materials for the production of such goods
2.1.3 Political stability: Political environment is quite unstable which effected the investment. Most of the time political war exists. Sometimes the strike and hartal goes in the country, this decreases the chance of investment by the investor of other country. Frequent change happens in government policy regarding tax, import, and export. The changes also cause decrease in the profit of a company. There are also complexities related to law and regulations. They are mainly concerned with the environmental impact, political stability and a sound environment for business.
Following political conditions can affect industry in different manner:
- Political corruption like strike, hartal, etc. can negatively affect
- Government rules and regulations that are ever changing in our country can interfere in the success.
- Trade barrier can create a lot of problem for bringing raw materials from other country.
- Importers are facing problems while importing various types of parts for lack of transport security, unexpected interference of customs department, etc.
2.2 ECONOMIC ANALYSIS
Economic analysis shows the position of the country in the world though the GDP, GNP, Employment rate etc. This helps to know the condition of a country, which helps to take decision weather to invest or not.
2.2.1 Economic indicators: To know the economic conditions the indicator are GDP, GNP, Employment rate, FDI inflow and outflow etc.
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GDP-real growth rate: 6.1% (2006 est.)
GDP per capita annual growth rate: Annual GDP growth per person. Least squares annual growth rate, calculated from constant price GDP per capita in local currency units.
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FDI in Bangladesh: Foreign direct investment is net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. This series shows net inflows in the reporting economy.
- FDI inflow in Bangladesh:
- Position of the country in world competitiveness ranking:
2.2.2. Purchasing Parity:
Per Capita Income:
Per capita Income of Bangladesh is $300
GDP: Purchasing power parity - $330.8 billion (2006 est.)
GDP-per capita: Purchasing power parity - $2,200 (2006 est.)
Living Cost:
Population below poverty line: 45% (2004 est.)
In present as the price of necessary things increase but income doesn’t increase that’s why the living cost become high in Bangladesh.
Population living below $1 a day:
2.2.3. Human Development:
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Unmployment Rate: 2.5% (includes underemployment) (2006 est.)
- Life expectancy at birth:
total population: 62.46 years
male: 62.47 years
female: 62.45 years (2006 est.)
Health Facilities: there are a good number of private hospitals with different modern health facilities in Bangladesh. There are also many government hospitals so that every people get access to the medical facility.
2.3. SOCIAL ANALYSIS
2.3.1. Language
Language is critical to culture as it is the primary means of communication.. Bangladesh’s official language is known as Bangla or Bengali and is spoken by the vast majority of the population. Due to the British colonization of the country, English is also a widely spoken and commonly understood language in Bangladesh. The people related to the business should understand both Bangla and English too.
2.3.2. Religion
This is also an important factor for the business because religion influences lifestyles, beliefs and attitudes. The main religion in Bangladesh is Muslim. Islam is he official religion in Bangladesh and is practiced by some 88 percent of the country's inhabitants. Other religions, which are active in Bangladesh, include Hinduism, Christians, Buddhism, animism and tribal belief systems. Bangladesh has one of the biggest Muslim communities in the world. Jewelry has always an important role in life regardless to the religion.
2.3.3. Education
Education is also a very important factor of this purpose. As we are targeting higher and upper middle class people we have to concern about their education level. If the customers are educated enough they are going to see whether it is providing quality product and enough facilities or not, since there are lots of local jewelry manufacturers who are our competitors. Even there is Shoppers World too. So to gain competitive advantage we have to be concerned about this matter.
2.4. TECHNOLOGICAL ANALYSIS
2.4.1. Infrastructure
Bangladesh is a country full of human resources which is not actually skilled labors. In the international world the jewelers industry uses special technology for designing the jewelers. But in Bangladesh there is not actual machinery for designing the jewelers. And if there is that is too expensive for all level of customers. So selling designed jeweler product in a country like this will be hard for us to attract the customer. So the industry has to rethink about licensing in Bangladesh.
In present there are 1.07 million (2005) telephone main line users and 9 million (2005) mobile phone users and 300,000 (2005) Internet users in Bangladesh. Moreover, the transport facilities are also very good in Bangladesh. So we can say that the technological infrastructure in Bangladesh is good for the business.
In Bangladesh they normally export the jewelers from other countries. And if anyone needs the customized product the customer have to wait for at least 1 to 3 months. So for the development of our jeweler industry in Bangladesh we have to open a production house in this country with skilled labor and special technology in which a customer don’t have to wait for their jewelers which can be bought by all level of customers. By this we can attract many customers for the jewelers of our company.
3. ANALYSIS OF NATIONAL COMPETITIVENESS USING PORTER’S MODEL
Before going to international business it is very important to analysis the country where a company is going to enter. The country has to have some certain things to fulfill. That’s why porter has given a model of four key factors, which we consider before entering a new market.
The key factors are:
- Factor Endowment
- Demand Condition
- Related and Supporting Industries
- Firms Strategy, Structure and Rivalry
3.1. FACTOR CONDITION
we are bringing a jewelry brand it would be in the form of a retail outlet. This is because in Bangladesh we do not have the natural resources like diamond, gold, etc. needed to produce jewelry. And also we do not have the skilled labors who are specialized in producing such high quality products. The factors that we can use from Bangladesh are its infrastructure like picking up a good location for the store and sales and marketing people. It is not a difficult job to find a good location for the store since there are many high-class shopping malls in Dhaka city now. As for sales people we want to use the native people of Bangladesh because then it would be easier for the local customer as a local salesperson would know how to interact with the customers, understand their language, culture and needs better.
3.2. DEMAND CONDITION
There has been always a demand for jewelries in Bangladesh. No matter 20 or 30 years before who got married and when our children or grandchildren would marry they will not stop buying jewelry. That’s why it has become an indispensable part of our culture also. Getting married is about making the perfect choice, of the perfect man, the perfect time and the perfect place.
Here demand conditions refer to Bangladeshi market demand for our products or services. Home demand is conducive to international competitiveness when such demand gives internationally competing, local companies a clearer picture of emerging buyer needs, and where pressures companies toward innovation and to become more sophisticated than demand foreign rivals. Demand conditions are very helpful for our product. Also if we can give the branded foreign item with competitive price with the local industry we can be able to capture the market easily.
Despite the poor economy of Bangladesh, demand conditions are quite favorable for the gold and diamond jewelry industry. Since the population size is huge, and there is growing by lateral trade and tourism, the present demand as well as potential future demand seems to be quite strong relative to the size and economic power of the country.
3.3. RELATED AND SUPPORTING INDUSTRIES
Related and supporting industry means the presence or absence in the nation supplier industries and related industries that are internationally competitive. In that term we will not face any problem in Bangladesh. It is like the culture of Bangladesh. The people of Bangladesh like gold and white gold jewelries. In the wedding ceremony, people must have different set of gold jewelries, it’s a culture. We also have very good segment in gold sector in Bangladesh. Bangladeshi gold good but not very high quality so when we need raw materials then we can get it from home country’s suppliers with very competitive price.
Related and supported industry is lacking in Bangladesh. For Example, for gold jewelry there are no stones producing industry in Bangladesh. For purchasing some expensive material from abroad, the jewelry company has to go abroad. Acids needed for the production of gold jewelry are supplied from host country’s licensed pharmaceuticals company.
3.4. FIRM’S STRATEGY, STRUCTURE AND RIVALRY
Firm strategy, structure and rivalry mean those conditions in a country that govern or influence how companies are created, organized and managed, as well as how domestic rivalry is conducted. We will have strategic planning for general direction and specific guidance in carrying out our activities.
Rivalry wise, we will have a good number of strong competitors who are running their business successfully. The direct rivals in Dhaka may be Dia Gold, Purabi Jewelries, Amin Jewelers, Venus Jewelers and so on. But we can get competitive advantage over these competitors by innovating new and exclusive design. Diamond World can be a strong competitor but we can gain competitive advantage as we will sell not only diamond but also gold and white gold. Just to take in consideration that buying power matters, we will offer a very competitive price for the jewelries.
Competition is high for the local companies from the foreign ones. The strategies of the local firms are dependent on the Government regulations. They try to follow the cost leadership strategy, as tax of importing Gold is very high. Government gives license to many small companies, but as the rules for importing gold is very restricted, and for higher tax, these small companies can’t survive for a long period.
3.5. ROLE OF CHANCE AND ROLE OF GOVERNMENT
Government has a big role to play in the fate of the Bangladeshi Jewelry Industry. If government provides loans for this business in Bangladesh, the small gold Jewelry companies can survive in the long run. Increased competition among the companies can reduce the price of the product and creates values in customers’ mind. Government can take a part in expanding the business of Gold Jewelry.
A SNAP SHOT OF PORTER’S MODEL
4. SWOT ANALYSIS:
5. DECISION: DECION FRAMEWORK
Low
High
No
Yes
Yes
No
No
Yes
5. DECISION
We analyze the decision framework for Foreign Direct Investment. We have also done a SWOT and PEST analysis to understand the Bangladesh’s jewelry industry better. and after doing all analysis we reach in a decision to do licensing.
LICENSING IN BANGLADESH
A firm in one country licenses the use of some or all its intellectual property (patents, trademarks, brand names, copyrights or trade secrets) to a firm in second country in return for a royalty payment- is called licensing.
Whenever a product does very well in home country we have to think about taking it to the international market. we decided to go for licensing in jewelry industry in Bangladesh. There is a good demand for jewelries in Bangladesh and their designs attract the customers here a lot. The company has various products at different price range that customers with different income level can choose from. That is why licensing in Bangladesh will be successful, from both customers’ and seller’s perspective.
We have also done a SWOT and PEST analysis to understand the Bangladesh’s jewelry market better.
6. RECOMMENDATION:
- Company should be concern about continuous improvement once it has entered Bangladesh’s market.
- Quality of product should be constant from the beginning
- People employed should be highly trained in customer service because their behavior with customers would determine whether anyone would come back to the shop or not.
7. CONCLUSION
Finally, we came to the end of this report, and before we wrap up this entire project, we would like to say a few things.
After identifying the mission of the company and its objectives, Porter’s diamond model and Porter’s five competitive forces have been helpful to identify the product’s competitiveness in Bangladesh. A simple SWOT analysis was done in order to identify the strengths, weaknesses, opportunity and threats. While doing the analysis, certain strengths, opportunities, threats as well as some weaknesses were unfolded. The strengths of the industry will definitely improve its position in the upcoming future. After entering the jewelry industry of Bangladesh it have to overcome all those weaknesses that have been identified. The opportunities, if properly utilized, will definitely lead to a new step of success.
Bibliography:
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Competing in the Global Marketplace, 4th edition, Charles W.L. Hill
