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Tanvir M H Arif
MSc.IBM (UWL, UK); MBA-Finance (CU, BD)
Associate Professor, Department of Finance and Banking
University of Chittagong

Investment opportunities in Bd.
A critical study on-''HANDICRAFT INDUSTRY



Farhana Ferdous Romana

Tamanna Khanm
Morzina Akter
Sabrina Naznin
Khaleda Perven
Hosne Ara
Md. Razu Ahmed


Group Leader:
Farhana Ferdous Romana
Mobile: 01933757980
Date of Submission: 27-12-2014


Handicraft products have high prospect in the global market. But there is no
reliable data on an international level in relation to handicrafts because this
sector is not identified separately in H.S Codes. According to an extensive study
conducted by US AID in the 2006 on Global Market Assessment for Handicrafts
it identified that handicrafts are the part of the largest home accessory market,
which includes handcrafted, semi handcrafted and manmade machine goods.
The study also mentioned that the global demand for handicraft as part of the
home accessory US has a large size of demand. China, India and Vietnam are
the prominent exporters and United States and United Kingdom are the key
importers of handicrafts mainly home accessory commodities.
Key Export Market:
China holds a dominant position as an exporter in the global home accessory
market and most industry experts believe that this trend will not change in the
near future. Because of high production capacity and low labor cost, exporters of
other countries can hardly compete on price and volume. These companies excel
at mechanizing production process and using advanced technologies for
machine finishing and coloring. Such innovation enables Chinese producers to
make near exact copy of handicraft design by machine and many buyers think
that any sort of product can make more cheaply and efficiently in china than
other countries in the world.
Vietnam is treated as an alternative to China as pricing is comparable, labor is
skilled and cheap, quality and delivery are good. This country has seen a high
growth rates with an average 25-30% and increased revenue of 13-15% per year
recently. Vietnam handicrafts exporter are exported to over 163 countries. The
Ministry of Agriculture and Rural Development has taken plan to export
handicrafts and have set a target to reach a turnover of US$ 1.6 billion by the
end of 2015. An increasing number of Chinese companies are investing and
setting up their business operation in Vietnam and others have transferred
manufacturing operation from Philippines, Indonesia and Thailand because of
political issues of Thailand and poor labor cost and high production capacity of
Vietnam. Recently Vietnam exporters have faced very high transportation cost for
both airfreight and waterborne-freight. According to a report of the Georgetown
University, US: For transporting 50 containers from Vietnam to other countries
by waterborne-freight costs US$322,000 over 17-35 days, whereas it only costs
US$136,000 in China and 11 days.
Key Import Market:

The global market demand for home accessory products is estimated to be at

least $100 billion. And the markets for that product are United States, United
Kingdom, Canada, Germany, Italy, France, Japan, Spain, Netherlands, Hong
kong and some other West European countries. According to the USA Statistical
Department, USA has a demand for handicrafts more than US$15 billion per
year. The EU also has a large demand which import US$7 billion in recent year.
United States is the largest importer in the global market. Although it is difficult to
estimate the demand of EU because categories for data collection is differ,
collectively Europe is regarded as the second largest market, not far behind the
USA. The global market is not confined only in USA and UK but has a great
prospect for the Asian countries. According to the market expert the greatest
increase in consumer purchasing power is expected to occur in Asia over the
next decade. According to the Mckinsey Global Institute The consumer position
and capacity will change and expand significantly and almost a billion new
consumers will enter the global marketplace. From now to 2015, the consumers
purchasing power will increase from $ 4 trillion to more than $9 trillion-nearly the
current spending power of Western Europe. In china, interest is growing for
European home accessory and some believe it will become a strong handicraft
market from developing countries as Chinese are becoming very sophisticated
and interested in unique products for them. These changes mean that in the
future handicrafts buyers will need to think more globally. In trade shows buyers
are no longer coming from UK and USA, increasingly from China, Japan and
Eastern Europe. This indicates exhibiters require to prepare product information
and pricing in multiple languages and currencies and to be ready to ship
anywhere in the world.
India is becoming a powerful exporter in the field of decorative products. India
contributes 1.2% to the world market for handicrafts. This comprises 1.5% of the
countries over all exports. Indian handicrafts have shown 20.8% increase in
terms of rupee FY 2011 over FY 2010 due to increased demand for them in
traditional western markets and new markets. (Source: EPCH & CEPC). One of
the very interesting developments taken place during the last few years has been
the growth in export of handicraft from India to china. Indian handmade items are
more demandable rather than machine made items of china. This indicates that
Indian hand made products is gaining the demand in global market including
china. According to the international buyers, India is facing difficulties with
shipping and delivering goods on time compared to international exporters. This
is only because of poor infrastructural facilities.
Trends for the upcoming decades:

The world markets are becoming increasingly integrated due to the advanced
technology, lack of trade barriers, infrastructural development and so on. Today
with the advancement of globalization the artisans are facing difficulties because
of mass production of craft goods, global competitiveness, rapid change of taste
and fashion, shortening of product life cycle. A key characteristic of global home
accessory market is rapid change in trends, fashion, taste, color, resulting in
increasingly shorter product life cycles. Some years ago products could be kept
in stock for one year but now the product cycle is only six months. Market
researchers predict that in the future the cycle could be shortening to as little as
only three months. To keep pace with these changes, producers have to
introduce new technology and design very frequently. This will put more pressure
on all producers to deliver sample and products as early as possible lest they
should out of style. For the developing countries producers it is very challenging.
Here it becomes an urgency to make high investments to comply with these
External Analysis
External analysis, particularly of the macro environment, assists in identifying
those industries and markets where the competences can be applied.
Industries are centered on the supply of a product
Markets are concerned with the demand.
Factors in the environment, the industry and market, will drive the enterprise
toward one type of international strategy either one that is fully global or one
that makes concessions to localized customer needs.

Yips Globalization Drivers (George yip-1992)

There are four categories of drivers which must be analyzed in order to
determine the degree of globalization within an industry
Market globalization drivers:
Now global market for handicraft industry is around 100 billion. Its expanding day
by day. People of developed country and urban people of all types of countries
have a demand for handicraft products. There is a growing market for home
accessory products, particularly in the high-end segment. This trend suggests

that there are numerous and expanding opportunities for artisans in developing
countries to create products for these markets.
Customer needs:
Many buyers and consumers seek unique and handmade products made by
artisan of different cultures. They look on quality of the Products and
authenticity of the Products and products that combine ethnic elements
with contemporary designs.
Customers and channels:
Consumers of the handicraft products are generally upper class local people
and people of developed countries. But in case of day to day usable products
consumers are from all classes.
In case of global trade, in the suppliers country, products go from artisan to
wholesaler or retailer or, marketing organization, then to retailer and then to
exporter. So here is a long channel.
But in case of buyer county, Distribution channels in markets are increasingly
shortening, mid-size retailers are importing, while small (and many of the
mid-size) retailers continue to purchase merchandise principally, or entirely,
from domestic wholesale importers.
Marketing: High international trade is online marketing. International
fair and local fair is another widely used tool used to attract foreign as
well as local buyer.
Leading countries: China, India and some other Asian countries like
Vietnam, Philippine, Pakistan, Indonesia are the leading suppliers.
Developing countries are most successful in this sector because of
their availability of skilled and low cost labor

Cost globalization drivers:

Economies of scale & scope: Economies of scale is high where
connections of artisans are high and planned production is ensured
according to demand. Production cost will be lowest when volume will
be high. There is good scope of this sector because of growing
demand of handmade, semi handmade product in the west.
Experience curve: As being the products of rich peoples this
industries success became lower during global economic downturn
except this the industry is growing subsequently, and low possibility of
losses due to price-cut.

Sourcing: Strategic Sourcing is an integrated business process for

developing and executing comprehensive sourcing plans that ensure
the availability of materials and services at the right time and quality at
the lowest total costs. (
Logistics: Logistics is the management of the flow of goods between
the point of origin and the point of consumption in order to meet some
requirements, of customers or corporations
The integration of information flow, material handling, production,
packaging, inventory, transportation, warehousing, and often security
to minimize the cost and to make timely delivery and to motivate for
import and export is low in the maximum supplier countries. If
integration is possible then cost will be lower.
Country costs, productivity and skills: in maximum suppliers
countries cost of production as well as productivity is lower because of
using traditional production technology. Skill is genetically inherited by
artisans of distinct cultures and not available to everywhere.
Product life cycle and product development costs: product life
cycle except textile handicraft maximum handicraft products life cycle
is relatively higher and product development cost is relatively low.

Gov. Globalization drivers:

Trade policies: Bangladeshi trade policy regarding handicraft sector is

supportive, as govt. encourages industrial development in rural areas
and rural employment. There is the opportunity of tax exemption in
opening new industry and further tax exemption in opening industry in
underdeveloped area. But in globalization perspective governments do
not pay much attention.
Technical standards: Bangladesh doesnt have enough technology,
machines or equipment to meet global demand timely. Governments
dont have any plan to develop this sector whereas the leading
exporter like china are developed a combination of modern technology
and traditional technology used by artisans.
Marketing regulations: no specified marketing regulation regarding
the sector

Gov.-owned competitors: there is no government owned competitors

in Bangladesh of this sector.
Gov.-owned customers: there is no govt. owned customers in bd.
Host Gov. Concerns: government encourages all rural based
industries, governments have low concern about the promotion of this
sector, and rather Govt. is concentrating more on industrial

Competitive globalization drivers:

Exports and imports: the basic importers are Canada, Canada, Chile,
France, Germany, Italy, Spain, the United Kingdom, and the United
States, Switzerland, Japan, Saudi Arabia, Netherlands,. and the
important suppliers are china, India, Pakistan, Tanzania, Iran, and
Vietnam, Ecuador, Malaysia etc.
Competitors: if a country want to capture world handicraft market then
it have to compete with giant exporter china and India.
Interdependence of countries: interdependence among competitors
is low.
From the above analysis its found that,
Cost globalization drivers are high
Markets globalization drivers are high
Government globalization drivers are low
Competitive globalization drivers are medium
PESTLE Analysis:
PESTLE, the abbreviation stands for Political, Economic, Social,
Technological, Legal, and Environmental factors. PESTLE analysis is a macro
level analysis which shows the environmental effect on business operation. This
tool is used for the purpose of strategic decision making. After understanding
appropriately these environments it is possible to maximize the opportunities and
minimize the threats of a firm or industry. Now we will discuss all the factors of
PESTLE analysis briefly and try to create a linkage between these environmental
factors and handicraft industry of our country.

Environmental factors refer to ecological and environmental aspects such as
weather, climate, and climate change. Climate change is a hot topic these days
and organizations are restructuring their operations thus giving space to
innovation and concept of Green Business. Our environment is congenial to
handicraft industry proportionately. Ours has a fertile land for producing jute
which a most important for handicraft industry. Environmental issues basically
deal with the question whether the business is environment friendly or not. There
is no doubt that handicraft industry produces eco friendly products that are
biodegrable, recyclable and reusable. Our handicrafts are mainly jute based and
it is 100% bio degradable. And natural fiber does not need any dying and color
and does not use any chemicals. Here another crucial point that needs to be
mentioned. There is a negative correlation between technology and environment.
The industry which is mainly technology based is not environment friendly
because this industry pollutes environment deadly. As handicrafts mean
handmade products or using of simple tools, this industry is not technology
based and environment friendly.
Technology is a crucial factor of industrial development. Our technology is
growing rapidly. Industries are using high technology which gives the products
different looks with a low cost. For example, textile industry adopts new
technology with new design and creates a high prospect for this industry.
Unfortunately our handicraft industry is very lag behind in this case. There is no
improved technology is used as a result it is so tough to produce sophisticated
design and product within a short time. But worlds fashion and trends are
changing frequently. Thats why our exporters cant fulfill the demand of
international buyers though our handicrafts are highly demandable in the world
market. This is one of the main reasons of falling our handicrafts. We have very
talented artisans but they do not get any sort of technological support eventually
we are losing our tradition.
We have a diversified culture since this is the place of different cultures people. It
may be a power for our country if we enable to uphold our culture to the world
people. For example, Jamdani one of the finest Muslin textiles of the Bengal is
very demandable from the Mughal emperors. It is a charm for the foreigners and
they are interested to pay high amount for it. UNESCO has been declared the
traditional art of weaving Jamdani as an Intangible Cultural Heritage of Humanity.

Though our handicrafts are highly demandable, there is less career development
opportunity. Most of the artisans are rural people who paid very poor. Thats why
young people do not want to build their career in this industry.
The legal factors deal with the legal restrictions and rules by which an industry is
controlled or regulated. If the legal factors work positively the industry remain
safe and developed. For example, a new act was passed in the national
parliament in November 2013, named Geographical Indicative Act (GI) 2013 to
protect our own traditional products. Before that our products were vulnerable to
abuse by other parties. But our govt. has taken the decision recently. In the
meantime India has registered some items with its GI Regime that distinctively
originated in our country. One of the significant items includes Jamdani of Dhaka
is registered by India as Uppada Jamdani. However, the legal environment of our
country is very favorable for handicraft industry. Govt. adopts so many rules,
regulations and incentives to promote industrial development and export. It is a
good sign for handicraft industry. And it is very easy to set up a handicraft
business in our country with a very small capital. There are no hard and fast rules
for it. The rules and regulations are almost same as small and cottage industry.

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