FOOTWEAR INDSUTRY FINAL REPORT

Submitted to: Sir Muhammad Zubair

GROUP MEMBERS:

SHIVEETA KUMARI - 21364

ANAND KUMAR - 20757
SANJANA BAI - 20912
MUHAMMAD AMMAR SHAIKH - 20298
ALI BAIG - 20798
Table of Contents
Abstract.................................................................................................................................................3
INTRODUCTION.....................................................................................................................................4
Literature Review..................................................................................................................................5
Research Methodology and Data Description.......................................................................................5
Participants........................................................................................................................................5
Research method...............................................................................................................................5
Sampling............................................................................................................................................6
Findings.................................................................................................................................................7
Limitation............................................................................................................................................11
Conclusion...........................................................................................................................................11
Abstract
The main motive of the study is to find out the impact of inflation on the footwear industry
due to the local and international competition and also our study was conducted to find out
the impact of new tax policy on the footwear industry.
The research study was based on the 25 footwear companies including local and
international both. To understand the market structure and the current market situations,
relevant articles related to the footwear industry of Pakistan were taken into consideration.
To make the study more relevant and understandable, similar research studies were
analyzed as well.
Qualitative interviews were conducted from the floor managers and managers of the
outlets. Then the data was quantified and filled in the forms. Then it was transferred on the
Google docs. The research method was qualitative initially.
To conclude the study and find out the results, the current findings were compared with the
previous available results and concluded the results.
The findings showed the negative impact of taxes on the firms, also the industry was moving
towards competition side. Also, inflation has been affecting the business negatively. The
findings also showed that there is a noticeable decrease in the purchasing power of the
customers which has ultimately decreased the footfall of the customers.
This research study has two limitations. The first limitation is that the sample size was small
and limited. The second limitation faced was that the time was very limited due to which
the detailed analysis could not be done. So due to these reasons, the research couldn’t be
done on the broader and detailed spectrum.

INTRODUCTION
Pakistan is a country blessed with several natural resources. Pakistan’s leather is known for
its quality globally. Each year on Eid Ul Azha millions of animals are sacrificed but the animal
count is still high and it is the main strength of this industry. The skin of these animals
contributes to strengthen the leather industry of the country. The leather jackets, shoes,
belts and footwear products are being manufactured since a long period of time and are
also one of the major exports of the country. This leather is widely used in the footwear
industry locally.
Footwear industry contributes to the country’s economy by exporting several kinds of
shoes which includes sports shoes, formal shoes, and other. This export aids in the stability
of the economic conditions of the country as well. According to the fact, Pakistan’s footwear
industry is contributing 1% to the total world’s footwear industry and has chances for more
contribution as well. Pakistan is currently exporting to around 60+ countries which includes
UK, UAE, Saudi Arabia and others. These exports generate around $110 million each year.
According to the chairman of “The Pakistan’s Footwear Industry “the worth of this industry
is estimated to Rs250 billion and China imports around 100 billion worth of shoes each year.
There are small scale and large scale manufacturing units , most of them are located in
Lahore .The capacity of small scale manufacturing units are 2000 pairs of shoes whereas
large scale manufacturing units can produce up to 10000 each day. Our skilled labour is
enough competitive to compete with international quality standards. One of the most
important problem faced was the energy crisis which now has been controlled. Most of
these production houses are located in Lahore, Punjab. Each year “Mega leather show” is
being organized in Lahore which promotes the value of this industry. People from china and
neighbouring countries also attend this EXPP and are interested in collaboration with the
local brands of Pakistan to grow this industry. This Expo is arranged by “The Pakistan’s
Footwear Association”
Pakistan is also making customized stylish shoes which are being used in various fashion
shows as well. Footwear industry is also using latest machinery technology which has
improved the quality and overall efficiency level as well. Some of the local well established
brands are Bata, service, EBH, aero soft, style wise, Walkeaze and Many others.
This market concentration promotes competition which eventually prevails to better quality
and reasonable rates. While the market is open for the new entrants as well, there aren’t
any hindrances to open a brand in this markets One of the most popular shoe is the
“peshawari chappal” as it is very known for its design and durability nationwide,
Government’s role is favourable for the industry as the duties on importing the machines for
the manufacturing purposes are nominal. The government also supports to participate in
the international exhibitions to promote the exports. However there is a lot of space for
improvements which can help the brands to grow.
Literature Review
Pakistan is doing a remarkable business in footwear industry. It is bringing a positive
change in its performance since last few years, this will in result in higher dollar earning. The
problem with the industry is less focus on quality. If footwear industry of Pakistan focuses
more on its quality, it will become notable industry internationally, as there are no barriers
to entry and large number of prospects. As it is said in business, there is not opportunity
without challenges, same with footwear industry of Pakistan, it has to face many challenges
such as: law and order, political condition, tax policies and foreign exchange to avail the best
opportunity. (Siddiqui, 2001)
Pakistan footwear industry does not maintain good quality of their product by using low
quality leather. It impacts international market of Pakistani footwear. Although products are
trendy but along with the design, quality should also be considered. Producing high quality
footwear will increase cost of production but this will also improve image and reputation of
a brand. (Bashar, 2003)
Technological advancement and innovative machinery have a positive impact on footwear
industry of Pakistan. It has helped industry to grow rapidly. People are trying to bring
technology in designing and manufacturing departments to produce more fashionable and
trendy products. They also trying to improve quality of raw material and these changes will
lead to sustainability of footwear industry. (Masood, 2009)

Research Methodology and Data Description

Participants
25 outlets were chosen from different locations of Karachi. Most of them were from Tariq road

Research method
The purpose of this research is to know the market situation of footwear industry, to identify the
impact of competition on footwear industry and to identify the impact of inflation and tax policy.
Most of the data collected is through questionnaires. Secondary data is also taken in case of finding
out additional information. Various methods are used to collect the data that includes qualitative
and quantitative both. Causal research design is used in quantitative approach and in quantitative
data exploratory research design is used.

The data collection method that we used is we made an open ended questionnaire and went to
different footwear outlets that includes both local and international we took the interview of
managers or assistant managers on those outlets. Managers were very hesitant before giving any
interview as the question were mostly based on tax policies and its impact.

The data collection for the survey was done by making notes of all the responses of the respondents
for qualitative questions. The collection of data was done by the personal interaction with
respondents.

After collecting the data we analysed the data through Google docs and made the graphs for the
data we collected to get estimates and summarized results.
A definitive conclusion was drawn from our research regarding how brands are facing issues of
demand and taxes. We also incorporated elements of a Constructive Research in our project, where
after the problems that existed with ‘new policies’ was identified. The current over all challenges
were also identified.

Sampling
The purpose of research was to find out effect of tax policies on demand and competition in
footwear industry. So for this we chose firms at random to get information from all sorts of footwear
industry. Sampling frame was of 25 shops and we did research on convenience sampling basis.

Interviews were conducted from managers or assistant managers. All the observational technique
was used to find out how brands are facing issues of employee’s behaviour towards customers, and
how employees are satisfied with their job.

Findings
The companies we chose are Bata, Ndure, Stylo, Insignia, Walkeaze, Sir Moiz, 1st step, Servis,
Modilla, Metro, Hobo, Hush Puppies, Sputnik, Sulafah, Shoe Planet, ECS, EBH, De Jour, Habib
shoes, Borjan, Heels, Urban Sole, Bali’s, Aerosoft, and Regal shoes.

Most of the companies from

our sample are local. 74%
companies are local and 24%
are multinational companies.

Out of all the brand we chose the least branches a brand has is one and the most branches a
brand has are 500. However newly established brands are more focused on online website
because nowadays consumers prefer to shop online. That is why they have less branches.
Least employees that a brand has are 15 and the most employees that a brand has are 2500
throughout Pakistan. Because employees are needed on the basis of number of outlets a
company has. The brands with more branches have more employees than the brands with
less branches.

Out of 25 sample size, 20% were

running by partners, 28% brands were
owned by sole owners, 20% as a
corporation, and the largest portion that
is 32% is operated as a company.

Export of footwear industry is not up

to the mark. We found out from our
research that only 40% of our sample
size is exporting rest of 60% are
selling products locally.
 Despite being rich in leather
and handicraft products,
Pakistan still import large
amount of footwear. 72%
respondents told us that they
import their product from
abroad and due to dollar
depreciation and import
restriction they had to face
huge losses.

Almost 60% of our sample purchase

raw material locally and rest of the
40% imports it. That 40% include
mostly MNC companies.

Most of the companies assemble products

locally. Although some of the brands
admitted that they their assembling is also
done internationally.
Each brand has its own target audience, but most of our chosen brands’ target audience
was Gents and Ladies. Some of our brands’ also targeted kids as well.

Footwear industry is highly competitive.

They face high competition. 92%
respondents agrees that they are facing
competition and they have to make
constant changes to sustain in the
market.

Technology in footwear industry is

increasing at high pace. 96% of our sample
thinks that technology impacted our
business positively.

How is inflation affecting their business?

Almost all the brands that we visited expressed a very negative affect of inflation on their business.
Their sales has decreased due to increase in prices also the footfall on their outlets has decreased.

Tax and demand analysis

All the businesses had a very negative impact of tax on demand. Consumers are very conscious
about that tax price they are paying. Sometimes consumer after selecting the products when checks
the bill and tax amount that they have to incur, doesn’t buy the product and leave it on counter.so it
has become challenging for brands to convince customers from new tax policies.

Some brands also have to bear more import cost due to taxes on imports so this is also one
challenge that they are facing after new government.

Because of all the above reasons footwear industry is going towards competition.
Limitation
This research is a part of our course project requirement hence there are some limitations
to it. The first limitation is that due to resource and time constraints, we cannot do this
study extensively with broader scale which will include a great sample size done at bigger
level in order to maximize the accuracy of the study.
Another limitation is that this study makes use of qualitative research which is difficult to do
considering the time constraints and resources. This resource would result to some
extraneous factors that might affect our result and eventually it will make our report
confusing and incomplete which we don’t want. We need only personal interpretation of
data to reach conclusion. However we tried to keep our research subjective by using only
primary research data and deriving conclusion based on it.

Conclusion
Concluding the above research, the main purpose is to provide inside out of the existing and
new firms of footwear industries of Pakistan. Our research will help the brands that how
consumers see their product and their market share they hold in this particular industry. We
can see few common trends like few of companies have their own brand strengths like
product quality, customer satisfaction, brand name etc. We also saw how inflation has
affected the industries like increase in prices, revenue and the brands are facing tough time
in order to overcome this problem, and also costumer purchasing power has decreased.
Moreover new tax rate policy has also affected the business negatively as brands have no
choices but to increase prices. We can see that the industry is going towards tough
competition and attaining monopoly is difficult now on.
Analysis

API FOOTWEAR INDUSTRY ANALYSIS:-

We chose 25 companies as follows:

Bata, Ndure, Stylo, Insignia, Walkeaze, Sir Moiz, 1st step, Servis, Modilla, Metro, Hobo, Hush
Puppies, Sputnik, Sulafah, Shoe Planet, ECS, EBH, De Jour, Habib shoes, Borjan, Heels, Urban
Sole, Bali’s, Aerosoft, and Regal shoes.
We conducted a survey of all the above mentioned companies and it was very qualitative
survey.
We went to these branches and interviewed the managers and assistant managers at those
outlets. The questions we asked were general and specific both.
We also conducted a questionnaire survey.
The questionnaire contained 3 parts. 1st part was of general information of the brand, 2nd
was competitive analysis and 3rd was demand analysis.
Through our survey, we saw that the brands that we chose were established from 1894 to
2012. Some brands exist even before the independence and some established in recent
time.
Most of them were Local and few of them were Multi-National Companies.
The least branches a brand has is one and the most branches a brand has are 500.
Only few branches are owned by single owner, others are either in partnership, corporation
or company.
Least employees that a brand has are 15 and the most employees that a brand has are 2500
throughout Pakistan.
Almost half of the companies export their products and half of them don’t export their
products.
While most of the companies purchase the raw material internationally and import their
products and almost all of the companies assemble their products locally.
Each brand has its own target audience, but most of our chosen brands’ target audience
was Gents and Ladies. Some of our brands’ also targeted kids as well.
This was the analysis of our research’s first part which is general information.
The second part was related to competition. Almost all of the brands are facing local
competition. There were few international branches who responded that they aren’t facing
any local competition.
There was a question regarding inflation affecting the business, so most of them said
inflation has affected their business negatively and it has negative impact on their business.
There has been a lot of negative impact due to which sales has decreased and the total
revenue has been declining and also the demand has also reduced.
Technology has a very positive impact on the footwear industry, the production has
increased and also the efficiency has increased.
We found out in our research that most of the brands have been thinking to expand in the
interior side, and most of them were expanding their product line and few of them
responded that they will not expand because of the uncertainties in Pakistan.
Respondents were asked about the top strengths of their brands, some of them said their
price is the strength, some said quality, trends according to fashion, customer service etc.
The weaknesses that we evaluated in our survey were staff’s training. Every outlet had
responded that their staffs isn’t trained well, they lack the basic knowledge of their
responsibility. Some of them do not know how to control their attitude and anger and how
to behave with customers. And few of them said their price is their weakness, because the
prices are not for masses and for specific classes.
Third part of our questionnaire was regarding tax and demand analysis. Almost all of them
responded that the new tax policies have increased the inflation and the brands have been
suffering since then. Because tax has increased the prices and consumer mind set has also
changed. The footfall has also decreased. Some said the footfall is same but consumer’s
purchasing power has decreased. And almost all the brands said that there is no positive
impact of tax on the business. Few of them said there will be a positive impact in long term
on over all brand and overall economy.

CONCLUSION:

Concluding the above research, we can see few common trends like few of companies have their
own brand strengths like product quality, customer service, brand name etc. We can see that overall
inflation had a negative impact on industry. Prices have increased, revenues have decreased, and
brands are facing tough time and also the customers’ purchasing power has decreased. That’s why
industry is going towards competition side and there is no chance that it will go towards monopoly
side for now.