USHA Silk Industry Sapura Rajshahi

Background of the USHA SILK industry

 Our economy is an agro-based economy. About 80% of the total population is related with this profession. For cultivating sericulture the climate of Rajshahi is mostly affordable. According to the historian, In the Moghal period some small reeling factories had been established in greater Rajshahi in Bangladesh. In 1897 a sericulture school has been established in Rajshahi. In 1889 a silk business association has been established.

After 1947 most of silk was exported to India. During the 16^th decade, under the control of small and cottage industry East Pakistan Gov. established 12 silk nursery, 20 expansion centers, 1 silk factory, 1 silk research and training institute had been established in Rajshahi.

Overall aspects of the USHA SILK Industry

 Al-haj Monjur Faruk Chowdhury, the present owner of USHA SILK industry, wanted to produce silk goods in 1989. He was eagerly interested to build a silk printing industry in his own house by own capital seeing the availability of resources. In 1994 this mill was started to produce main products. Primarily the capital was about TK. 16 lacs and it had only one-show room. Then gradually familiarity and business activity were expanded. Currently its capital is about taka 3.0 crore and it has 3 show rooms.

 Usha Silk Industry at a glance

 That is USHA Silk is situated in the industrial area of Rajshahi. They use raw material for local & foreign sources. They use electricity, diesel, wood and Kerosene as fuel. The number of employees and show room has decreased compared to last five year.

 Situation Analysis

 Market Analysis

Bangladeshi Silk product market is increasing with the passage of time due to total production and humans being fashionable. Silk items are also being exported to foreign countries such as Italy, UK, etc. Consumers belong to the middle, and high class.

 Buying situation

 Sales department of the company has increased its 50% sales during festivals like Bid, Puja, etc.

 Growth rate

 The growth rate of the industry is satisfactory. But USHA SILK is inconsistent to capture the increasing market. In the year 2010-11 the growth rate increased 12% but the industry growth rate increased about 5%. The market growth rates based on sales are given below.

 Table No. 1

 From the above figure and graph, it is clear that the growth rate of USHA silk is higher than other silk industry as a well as whole. This rate increased at an increasing rate during the last 5 years. And for this reasons, it is maintaining a leading position in the silk industry.

Product Analysis

 The firm should ensure the quality of silk products according to the consumer needs and expectations so that the consumer can rely upon these products. Quality of a product is the attribute that consumers expect in a particular product. In case of silk product, these attributes may be longevity, design, color combination, print, comfort-in-use, etc. Different classes of consumer expect different types of quality. One may consider longevity as quality while others may prefer comfortable color, design, print, etc. So, quality should be settled ‘from consumer’s view point. Laundry facilities such as washing and calendaring can be added and offered to consumers.

Usha Silk Factory has three product lines. These are as follows:

a)              Ladies’ item;

b)             Gents’ item;

c)  Than kapor (Pieces of cloths).

At present the firm includes following products in product line:

• Batic print sharee;
• Block print sharee;
• Stripe silk than;
• Afsan serine sharee;
• Art purshian sharee;
• Two piece-three piece;
• Orna, etc.

USHA STLK factory is trying to include new product items in their product line.

Price is a very much sensitive factor. There are various consumers. They measure the quality of product on the basis of price. So, price should be fixed at a reasonable range.

USHA SILK factory follows fixed price. The prices of the products are determined before production. The customer has a huge bargaining power. Also the target consumer generally does not like bargaining.

They follow the mixed pricing policy. Mainly they follow cost base pricing method. The pricing method is very specific and straight according to present market situation.

Price = Cost plus pricing method

Price lists for individual items of the USHA SILK factory

Table No. 2

Source: Office record book.

Source: Office record book.

Table No. 4

From table no. 2 & 3, it is clear that prices of different products vary due to quality and types. Ladies’ items charge higher price. Item prices move between products of gents prices item and charge higher than other lower priced items.

Table No. 5

Sales target and achievement for last five years

 The above table shows the company’s actual sales in company’s strategy. Here the rate of sale is above 99% and the recent target fulfillment was mostly met. So the result is satisfactory.

Distribution Analysis

 USHA SILK Factory generally uses director channel for distributing their products. But out of the Rajshahi City they appoint agents to sell their products. The distribution channel of the USHA SILK is shown below.

a)              Factory ® show room ® consumer

b)             Factory ® retailers ® consumer

c)              Factory ® wholesalers ® retailers ® consumer

 Number of showrooms

Source: USHA SILK administration department

 Sales volume by distribution method

Source: Usha administration department

 The table sales target through showroom was not meet with the actual sales. It is a matter of concern as to why it was not met. The industry closely achieved its target sales during the last five years. They target two ways, i.e. Show room target and middleman target. The achieved rate of show room is higher than middleman. This may have appened due to promotional problem.

 Environment Situation

 There are two types of environment which are micro and macro. But our discussion here is about the macro environment.

 Demographic environment

 The population growth of Bangladesh is very high which is about 2.48% (2007). It is the great opportunity to create demand of silk of the customer. As we know, the growing population means the growing human needs. Most of the people expect high standard of living. This conscious pattern is changing day by day in the silk industry. So, we want to give quality silk to the customer.

 Economic Environment

 The per capita income of the people of Bangladesh is increasing day by day. But it is comparatively very lower to the developed countries’ income growth. But customers are very much eager to spend their money for buying clothes. The company has to consider changes of major economy variables such as.

1.  Income ;

2.  Savings ;

3.  Interest rate ; and

4.             Savings patterns have large impact on the market place.

And also company has to consider these variables for forecasting economic condition. They are always time bound to buy clothes when they fulfill any needs.

 Technological environment

 => The technology is changing very rapidly

=> The technology of garments sector is also changing very rapidly.

=> There is a great opportunity to innovate.

=> The R&D budget is high.

=> The Usha Silk production technology is a satisfactory medium to fulfill the domestic market.

 Political & Legal

 A company or business organization maintains here is regulated for business and management by legislation. Some Acts are:

=> Trade Mark Acts – 1940

=> Design Acts- 1972

=> Essential Commodity Acts – 1956

=> Bangladesh Product Control Acts – 1956

 Socio-cultural Environment

 Due to the educational development and consciousness for higher standard of living, the people of Bangladesh want modern and better silk service and quality silk products.

Strategy Analysis General Approach

There are some few competitive firms that do not control the quality. They do not have good will and registered brand name and they sell their products in lower price. Besides these, some products come through smuggling and also sell in low price. As a result, the factory has lost some of its permanent consumer, especially the price sensitive consumers.

But most of the competitors’ positions are alike. The industry is fragmented where there is no leading company. At present, many non-dominant companies are staying in the market and they produce same quality, design, and price them approximately similarly.

Future Goal:

Future goal of the firm is to graph the maximum market share and expand the present market. It analyses the competitors by reviewing various publication.

 Current strategy:

 The 2^nd component of competitor analysis is finding the competitor’s current strategy. Here USHA SILK conducts research work to identify the strategy taken by its competitors.

Assumption:

The other crucial component of competitor analysis is identifying each competitor’s assumption. Here the firm analyses two types of assumptions i e. assumption about itself and assumption about industry and other companies in it.

Capabilities:

In this sector the firm analyses its strength and weakness and also those of its competitors. The market share of USHA SILK Industries are 11%, Sapura Silk Industry 14%, Doel Silk Industry 9%, Molina 7.5%, Adarsha Silk Factory 7%, Antar Silk Industry 8.5% and Sunflower Silk Factorv is 7%.

Market share of competitors

Source: BSCIC handbook 2011

[Note-some other companies who are in the industry hold the total share of 46%]

The above table shows the position of the USHA SILK in the industry. It contains 8.5% share which is the second best of the industry. That means, we have to consider us as a challenger.

[Note-some other companies who are in the industry hold the total share of 46%]

Generic Strategy:

 The fundamental basis of above average performance in the long run is sustainable competitive advantage. A firm can take three types of competitive strategies, i.e.

a.  Cost leadership;

b.  Differentiation;

c. Focus.

Competitive advantages

Lower cost                 Differentiation

 Fig: Generic strategy and relative competitive advantage (Source: M.E. Porter Competitive advantage.)

 Cost leadership:

In it a firm sets out to become low cost producer in its industry. USHA SILK industry tries to maintain cost leadership by managing all the factors related to it.

Differentiation:

USHA SILK maintains differentiation with its competitors by using various color, design, brand and packaging. Focus: USHA SILK mainly focuses on low cost production to meet the competitive challenges.

 General strategy

The product manager now outlines the broad marketing strategy or a game plan to accomplish the objectives incorporated in the plan. In developing the strategy, the product manager talks with the purchasing and manufacturing people to confirm that they are able to supply enough material and produce enough units to meet the target sales volume levels. The product managers also need to talk to the sales manager to obtain sufficient sales force support and the financial officer to obtain sufficient funds for advertising and promotion. We know that marketing strategy starts from the identification of the customers’ needs that will be satisfied and ends it through the customers’ satisfaction. To meet demand, Usha Silk arranges its marketing strategies. The marketing strategies of Usha Silk contain the factors below:

 1.  Target customers:

The main target group of USHA SILK is upper income and middle group.

2.    Positioning:

USHA SILK will position its quality products in the mind of customers against competitors (Sapura Silk, Doel, Mohua, and Sunflower).

3.    Pricing:

The pricing system of Usha Silk follows cost base pricing.

4.    Distribution outlets:

Increase 7 outlets in Dhaka, Sylhet and Chittagong.

5.     Sales force:

Company will provide   5%   incentives   on   sales   for  their respective volume increases.

6   Advertising:

Increase advertising budget

7. Sales promotion: Increase promotion.

Opportunity and Issue Analysis

SWOT Analysis

It is either positive or negative. First, we analyze the opportunity and threat which exist outside the company and secondly we analyze flip-strength and weakness which exist in internal activities.

 Opportunity

Opportunity arises when the environmental trends create the potentials for the company to make greater profit. Here the USHA SILK Industries opportunity analysis are shown below:

 New entry barrier:

New entry in an industry for a company is very tough because it depends on brand loyalty, absolute cost advantages and economics of scale. So it is the opportunity.

USHA SILK industry

Barriers and profitability matrix

Profitability/Exit barriers

Strong competitive position

USHA SILK industry has the uniqueness in considering its competitors. Though it has 11.5% of market share, it has a great reputation in the market. This reputation becomes one of the important opportunities for this industry.

 Price Sensitive

Our target customers are the middle and upper class people. The target customers are not much prices sensitive. So it is an opportunity for USHA SILK.

Latest Technology

Usha Silk Industry has some latest technologies. It helps to earn competence.

 Threat

Threat arises when the environmental change endangers the integrity and profitability of the company. Here USHA SILK Factory’s threats are shown below:

Collection of Raw Materials:

USHA SILK procures 65% of raw materials from abroad which is so tough.

 Substitute Products:

 The price of USHA SILK product is high and fixed. So customers have no bargaining power. For this, they purchase another substitute product.

 Inflation Rate:

 Inflation rate has great impact on company to collect raw materials because USHA SILK procures 70% of raw materials from abroad.

 Political Instability:

 Though the government of Bangladesh is elected by the people, there exists political instability for a variety of reasons. It has its impact upon the market. So it becomes a threat for the company.

 Strength

 Strength means the factors that create competitive advantages for the company. The strengths of USHA SILK Company are:

 Experience and Skilled Manpower:

 USHA SILK has many experienced and skilled manpower which show the company’s strength.

 Production System:

 By using some latest technology, USHA SILK produces systematically.

 Quality Product:

 USHA SILK ensures the product quality. It is an important difference from other competitors. So it is also the company strength.

 Control of distribution Channel

 USHA SILK reaches its customers by exposing its products by using show rooms, wholesalers, and retailers to the customer. For this, it has full control of distribution channel.

 Current Ratio

 We know that the standard value of current ration is 2:1 and the current ration of USHA SILK is 1.36:1. So it is good for USHA SILK.

Its standard value is 1:1. That means, it has capacity to pay for the liabilities instantly.

Weakness

Weaknesses are the factors that increase cost and decrease the company’s profitability position against competitors. Weakness influences the company’s failure in the market. The weaknesses of USHA SILK Factory are:

 Dearth of Raw Materials

 The raw material of USHA SILK product is not available in every tune. So it shows the weakness of the company.

 Selective distribution channel

 USHA SILK uses some distributors in some major districts on a highly selective basis. For this, company can not increase its volume as per its expectation.

 No. Research and Development

 MNC’s innovate new products and add value with their products through research and development whereas USHA SILK does not give attention to this matter.

 Weak information

 Basically show room oriented business closes the door of mass awareness.

 Issue

 USHA SILK industry must consider the follow issues:

1.  Improve the product competence;

2.              The internal marketing should be incorporated;
* The market cument is so vital.

Projected Profit and Loss Statement

 We know that action program allows the product manager to build a supporting budget. The budget is the basis for developing plans and schedules for material procurement, production scheduling, employee recruitment and marketing operations. On the revenue side, the budget shows the forecasted sales volume in units and the average price. On the expense side, it shows the cost of production. Physical distribution and marketing are broken down into finer categories, and the difference between revenues and sales is projected profit. USHA SILK Industry’s targeted net sales will be TK. 9, 37, 31, 200.00. Reduced cost of goods sold will be TK. 5, 14, 57, 020.74. The marketing general and administrative cost will be TK. 2,04,40,979.26. By considering the cost of goods sold company’s gross profit will be TK. 3,22,74,179.26 and by considering the other expenses, its net profit before tax will be TK. 68,33,200.

By considering the above revenue and cost, we can prepare the projected profit and loss statement of USHA SILK in the following way:

 Projected Profit and Loss Statement

USHASILK Industry

Projected Profit and Loss Statement

From the above income statement of USHA SILK, we find that the company’s gross profit will be TK. 57298.2 thousand and deductive expenses net profit before tax will be TK. 10935.12 thousand. The sales volume, gross profits and net are determined by considering company’s resources, production capacity, and trend of sales revenue, gross profit and net profit of previous years of the USHASILK.

Control

It is the last step of marketing plan. In this step, the company’s marketing activities are monitored. Through the monitoring of marketing activities, the deviation between estimated performance and actual performance is monitored and then recommended to recover the deviation. USHA SILK Industry will follow three types of plan control:

1.  Annual plan control;

2.              Profitability control; and

3.              Efficiency control

Through the Annual Plan Control, the Company will perform the activities ensuring that the company is achieving its current sales profits and other goals.

Through the profitability control, the company will perform the task of measuring the actual profitability of product, customer group, trade channels, and order size. Company’s accounting system is seldom designed to report the real profitability of different marketing activities.

 To control the marketing activities of USHA SILK Industry, efficiency control plan should be used. The efficiency control plan Company will try to determine how various marketing activities could be operated upon more efficiently.

 Moreover, to control the marketing activities, it is required to collect data from various sources Here the feedback of customer is very much important. So, the company can collect data from channel members and customers by using following process.

So, at the end of the discussion, we can say that USHA SILK Industry will monitor and control the marketing activities through the annual control plan, profitability control, efficiency control and collect data from various sources in above ways.

Recommendations

To overcome the difficulties the USHA SILK industry can follow the following recommendations:

•         Aiming to establish competitive price. For that reason, the company is offering optimal price for the product.

•         It will  take  more  incentives  in production activities.  The promotion activities include arranging seminar, symposium, greetings and gifts item distribution to take the customers on
cooperate in special occasions.

•         Companies   have   to   operate   promotional   activities   in   all districts.

•         It needs to attend in various fair to build up the image.

•         For   establishing   better   organizational   culture,   company ensures sound corporate culture.

•         For smooth distribution system and decorate high class show
room, the company requires to take diversities strategy.

•         Updated    information    system    will    be    adopted    in    all
management   level   of the   company.   As   a  part   of this,
Transaction Processing System (TPS) will be introduced this
year.

Questionnaire Survey

Questionnaire for internship Company information

Name and address of the company

Year of the establishment

Ownership pattern

Date of starting production

What is the amount of production at the first time?

What is the organizational structure of the factory?

What is the number of labor starting period?

How many numbers of employees are there in your organization
at present?

Product Related question

From where do you collect raw material?

What factors do you consider for selection of raw materials?

What types of attributes do you have?

Do you want to add any new attribute to your product?

Do you engage in product differentiation?

If yes, what basis do you differentiate?

What are the sources of new product idea?

Price related question

What factors would you consider to determine the price of your
product?

What type of method do you follow to pricing?

How would you consider your close competitors to determine
price of your products?

How you set the price of new product?

Distribution related question

What types of distribution channel are you using?

How many depots you have?

What are the transportation and warehouse facilities of your
company?

Did you face any problem for using companies own showrooms?

How you motivated control your channel members.

Promotion related question

What are your current promotional tools?

Which tools you are emphasize more?

What is your current slogan?

What is your promotional cost?

Do you have any new promotional strategy?

Market related question

Who are your nearest competitors?

What is the price frame of your product?

Please narrate your competitive advantages.

Sales related question?

Do you achieve your target sales?

If not, what are the reasons?

Would you take any steps to achieve your target sales

If yes, what are those?

How many problems you face for selling the products?