EXECUTIVE SUMMARY

Abul Khair Steel Products Limited has been around since 1998 as private

company in Bangladesh. The company has long before achieved the summit of their

success in the domestic market but it has refused to stop there. In this era of globalization

the company realizes that it can no longer be immune to its effect.

This report evaluates the potential market for the company’s product namely,

Galvanized Plain (GP) sheet and Corrugated Iron (CI) sheet. After carefully reviewing

the market conditions it was found that Sri Lanka will prove to be an ideal market for

these products for initial exporting.

The target market consists mainly of industrial buyers who use GP sheet as their

raw materials. But the potential consumer market has not been completely ruled out

because CI sheet is used by the villager to build sheds and roofs of their houses.

Last but not the least; AKS would be the pioneer in Bangladesh to export GP/CI

sheets to Sri Lanka. In addition to easy market penetration the company expects little

threat from the local competitors because AKS can manufacture these products at a much

lower cost.

The report discusses each aspect of the market in detail; analyzing the strengths of

the company and also its weaknesses and threats which it might face in the foreign

market.

1

Company profile

Abul Khair Steel (AKS) Industries Limited was incorporated on 21st October,

1998 as a private company limited by the shares in Bangladesh under the companies act

of 1994. It is a sister company of Abul Khair group of Companies.

Nature of business: the principal activities of the company throughout the year

were manufacturing and marketing of CR coils, GP coils Corrugated Iron (CI) sheets and

Galvanized Plain (GP) sheets.

Board of directors: the company is run by board of directors consisting of eleven

members of whom there is a chairman, managing directors, deputy managing directors

and other directors with specific responsibilities.

AKS maintains an amicable relationship with a number of well established banks

in Bangladesh. Among these banks are EXIM, Standard Chartered, City and Pubali Bank.

AKS has acquired extensive credit lines form the City Bank and the Pubali Bank, giving

them a competitive edge over their competitors.

The company is based in Chittagong and has good hold of the market all over

Bangladesh. They have a large share of market in some of the most important districts

and sub districts such as, Chittagong, Feni, Barishal, Rangpur, and Mymensingh. They

control 60% of the overall market in the GP/CI sheet industry.

2

Marketing Strategy

AKS primarily manufactures what is known as ‘dheu tin’ in Bangladesh. These

are used mainly for building roofs and sheds for rural huts. They are more popular among

the rural parts of Bangladesh. AKS’s product is more popularly known as ‘Goru Marka

Dheu tin’.

AKS has based its operation in two places namely, Chittagong and Feni; where

they have a good control over the market share. However, they have divided the whole of

Bangladeshi market into 3 broad divisions and 14 territories. They have the divisional

and regional sales officers (also known as RSO) for the respective divisions and regions.

AKS owns 1900 traders all over Bangladesh and depend primarily on their

distribution channels to make their presence felt in the local market. Furthermore, they

have their own formidable transport facilities that allow them to supply their product

efficiently. In fact, AKS boasts that within 24 hours of placing order they are able to

complete the delivery to any parts of Bangladesh.

In addition to such advantages of AKS, it also has close relationship with many

well known banks around Bangladesh. These banks provide it with useful information

and advice and also help the company out with extensive credit lines. AKS’s reputation

has earned them trust from many banks which are ready to do business with the firm.

AKS advertises their product through broadcast and print media. They have

emphasized more on the broadcast media because most of their target audience is from

the rural parts of Bangladesh where literacy rate is low. So, it is more appropriate for

them to advertise their product through visual demonstration instead of written

information. In essence AKS has managed to acquire significant ground for them self in

3

the local market. They follow a sound strategy of all of their departments. Each SBU’s

coordinated effort has taken this company to the pinnacle of their success.

4

Sri Lanka’s History

The name Sri Lanka was taken formally by the island of Ceylon when a new

republican constitution was adopted in 1972. From Sri Lanka, ancient Sanskrit for the

‘resplendent isle’, Rama rescued his wife Sita who had been abducted by its king, as

recounted in the great Hindu epic Ramayana. The first historical Sinhalese king of Lanka

was Vijaya, who arrived in 483 B.C. The last great king was Prakrama Bahu in the 12th

century A.D. Thereafter the island became the prey of many invaders: Tamils, Arabs

(who called it Serendib), Portuguese (who called it Zeylan), Dutch, and British (who

modified the Portuguese name to Ceylon).

The Sinhalese arrived in Sri Lanka late in the 6th century B.C., probably from

northern India. Buddhism was introduced beginning in about the mid-third century B.C.,

and a great civilization developed at the cities of Anuradhapura (kingdom from circa 200

B.C. to circa 1000 A.D.) and Polonnaruwa (from about 1070 to 1200). In the 14th

century, a south Indian dynasty seized power in the north and established a Tamil

kingdom. Occupied by the Portuguese in the 16th century and by the Dutch in the 17th

century, the island was ceded to the British in 1796, became a crown colony in 1802, and

was united under British rule by 1815. As Ceylon, it became independent in 1948; its

name was changed to Sri Lanka in 1972. Tensions between the Sinhalese majority and

Tamil separatists erupted in violence in the mid-1980s. Tens of thousands have died in an

ethnic war that continues to fester. After two decades of fighting, the government and

Liberation Tigers of Tamil Eelam began a ceasefire in December 2001, with Norway

brokering peace negotiations.

The Sri Lankan gained independence in 4th February 1948 from UK. The country

is run by a republican government, the capital being Colombo.

5

Location:The country is located to the south of India as an island in the Indian Ocean

(Geographic co ordinates: 7 00 N, 81 00 E). The land covers an area of 65,610 sq km.

Climate:It’s a tropical monsoon climate with the northeast monsoon prevailing from

December to March; and southwest monsoon from June to October.

Terrain and Natural resources:Except for the mountains in the south central interior the terrain is mostly plain

and low. The country has been endowed with limestone, graphite, mineral sands, gems,

phosphates, clay, and hydropower natural resources.

Population:The total population figure of Sri Lanka amounts to 19,905,165. However, since

the outbreak of hostilities between the government and armed Tamil separatists in the

mid-1980s, several hundred thousand Tamil civilians have fled the island; as of yearend

2000, approximately 65,000 were housed in 131 refugee camps in south India, another

40,000 lived outside the Indian camps, and more than 200,000 Tamils have sought refuge

in the West.

Age Structure:

0-14 years: 24.8% (male 2,526,143; female 2,414,876)

15-64 years: 68.2% (male 6,589,438; female 6,976,487)

65 years and over: 7% (male 655,636; female 742,585)

The young aged population ranging from 0-14 years constitutes 24.8% of the total

population while the adult population, ranging from 15-64 years, is 68.2%. The rest of the

population includes people above 65 years of age.

6

The population growth rate is 0.81% and a birth rate of 15.88 births per 1000

population. The death rate is 6.47 deaths per 1000 population. However, the total infant

mortality rate is as high as 14.78 deaths per 1000 live births.

A person is expected to live on average of 72.89 years.

Ethnic groups:The Sinhalese include the majority of the population taking up 74% of the total

population, followed by the Tamil which constitute 18% of the population. The Moor

constitutes 7% and the Burgher, Malay and Vedda account for the remaining 1% of the

population.

Religions:Majority of the Sri Lankan, about 70%, are Buddhist followed by the 15% Hindu

population. Christianity and Islam prevail about 8% and 7% respectively.

Languages:The official and national language of Sri Lanka is Sinhala. Other languages

spoken in Sri Lanka are Tamil and about 10% of the population can speak English

competently, which is also commonly used in government.

Literacy rate:The literacy rate of Sri Lanka is quite impressive which is 92.3%. The population

of 15 years and up can read and write.

Economy:In 1977, Colombo abandoned stasis economic policies and its import substitution

trade policy for market-oriented policies and export-oriented trade. Sri Lanka's most

7

dynamic sectors now are food processing, textiles and apparel, food and beverages,

telecommunications, and insurance and banking. In 2003, plantation crops made up only

15% of exports (compared with 93% in 1970), while textiles and garments accounted for

63%. GDP grew at an average annual rate of 5.5% in the early 1990s until a drought and

a deteriorating security situation lowered growth to 3.8% in 1996. The economy

rebounded in 1997-2000 with average growth of 5.3%, but 2001 saw the first contraction

in the country's history, -1.4%, due to a combination of power shortages, severe

budgetary problems, the global slowdown, and continuing civil strife. Growth recovered

to 4.0% in 2002 and 5.2% in 2003. About 800,000 Sri Lankans work abroad, 90% in the

Middle East. They send home about $1 billion a year. The struggle by the Tamil Tigers of

the north and east for a largely independent homeland continues to cast a shadow over the

economy.

GDP:The purchasing power parity is $73.49 billion while on the per capita basis it

amounts to $3,700. The real GDP growth rate is 5.2%. The GDP composition by sector is

illustrated in the graph below:

GDP- Composition by sector

19.2%

25.3%

55.5%

Agriculture

Industry

Services

8

The inflation rate is 9% and the unemployment rate is 8%. The main Sri Lankan

industries are rubber processing, tea, coconuts, and other agricultural commodities;

clothing, cement, petroleum refining, textiles, tobacco.

Rice, sugarcane, grains, pulses, oilseed, spices, tea, rubber, coconuts; milk, eggs, hides,

beef comprise the country’s agricultural products.

Exports:Their exports amount to $5.269 billion and the commodities of exports are textiles

and apparel, tea, diamonds, coconut products, petroleum products.

Imports:Their imports however, exceed their export amount to $6.626 billion and the

commodities of import are textiles, mineral products, petroleum, foodstuffs, machinery

and equipment. The importing partners of Sri Lanka are shown in the chart below:

Import Partners of Sri Lanka

0.0%2.0%4.0%6.0%8.0%

10.0%12.0%14.0%16.0%

Countries

Perc

en

tag

e o

f Im

po

rt

9

As can be seen from the graph most of Sri Lankan imports come from the Asian

countries, especially India.

Culture

Music and DanceThe Sri Lankan tradition of folk drama includes the kolam, a masked drama, and

the sokari and nadagam, stylized dramas with song and dance. Sinhalese classical dance

includes the highly athletic Kandyan form, which originated in the central highlands

when the region was part of the kingdom of Kandy from the ad 1500s to 1815. The

Kandyan performances include representations in dance of animals and birds, as well as

stories from the Ramayana, a Sanskrit epic of ancient India. The dances are accompanied

by complex drum rhythms. Tamil classical dance includes bharata natyam, a highly

stylized form that originated in southern India. Baila, a style of song and dance

introduced by the Portuguese in the 1500s, is widely popular in Sri Lanka.

LiteratureEarly Sinhalese literature was primarily religious. Buddhist monks compiled what

are considered the earliest texts of Sri Lanka. The Mahavamsa (Great Chronicle), written

in the ad 500s in Pali (the language of Theravada Buddhism), chronicles the rise and fall

of successive Sinhalese kingdoms in Sri Lanka, beginning with the legendary colonizer

of the island, Prince Vijaya, in the 500 B.C.

Poetry flourished as the earliest literary form in the Tamil language. After

Sanskrit, Tamil is the oldest literary language of the Indian subcontinent (see Indian

Literature). This strong Tamil literary tradition was part of the cultural heritage of Tamils

who migrated to Sri Lanka in ancient times. The earliest known Sri Lankan Tamil poet

was Eelattu Poothanthevanar, whose poems were included in the Tamil cankam (sangam)

10

poetry anthologies compiled in southern India before 250 A.D. A distinctly Sri Lankan

Tamil literary tradition first developed in the 1940s with the works of the so-called

marumalarchi (renaissance) writers Mahakavi, A. Kandasamy, and Varadar. The poetry

of Mahakavi, in particular, helped distinguish the literature of Sri Lankan Tamils from

that of Tamils in southern India.

11

Product market

Product life cycle is a concept that provides a way to trace the stages of a

product’s acceptance, from its introduction to its decline.

Introductory stage: the full scale launch of a new product into the marketplace.

Growth stage: The second stage of the PLC when sales typically grow at an increasing

rate, many competitors enter the market, large companies may start acquiring small

pioneering firms, and profits are healthy.

Maturity stage: A period during which sales increase at a decreasing rate.

Decline stage: A long run decrease in sales.

12

AKS had been manufacturing GP (Galvanized Plain) sheets and CI (Corrugated

Iron) sheets according to JIS G3141 SPCC1B international specifications quite

successfully for the past few years. Exploring the market potentials in Sri Lanka, which is

explored on the later parts of the report, we propose exporting both GP sheets and CI

sheets to Sri Lanka.

GP sheet is used widely on a variety of products. Some of the technical

specifications of the GP sheet produced in AKS are given below:

Zinc Coating 100 to 275gms/sqm

Base metal thickness 0.11-0.50 mm

Width 750-1000mm

Quality Hard

GP sheet is a thin metallic sheet with a zinc coating that is manufactured from HR

coils. GP sheet is used in textile, furniture, construction, decorations, and poultry-just to

name a few.

CI sheets can best be described as the processed form of GP sheets. Most of the

times CI sheets are given the form of wave like pattern for rain waters to run down easily.

Sri Lanka had been importing CI sheets for the last twenty five years. CI sheet is

one of the most important materials in constructing a rural house. At the same time, most

of the manufacturing plants in Sri Lanka, including the edible oil processing plants,

extensively use CI sheets in constructions of the plants. Hence CI sheets have long past

the introduction stage in Sri Lanka. However, the handful of CI sheets manufacturers in

Sri Lanka can hardly meet the local demand. Hence Sri Lanka had been importing CI

13

sheets for a long time. Considering the present market condition it is safe to conclude that

the CI sheet in Sri Lanka is still in the growth stage.

On the other hand, it’s not long since Sri Lanka starting importing GP sheets in

large volumes. Most of the industries that use GP sheets were not around five to seven

years ago. However, small industries and cottage industries had been importing small

volumes of GP sheets for quite some time now. Hence we came to the conclusion that GP

sheet have just passed the introduction stage in Sri Lanka.

How much the GP sheet and CI sheet market worth is tough to determine. There

had not been any reliable market study concerning the matter by any Sri Lankan

organization. One or two Indian companies, who used to export GP sheets to Sri Lanka

conducted small scale market surveys of their own; but they were reluctant to share any

of their findings. Form the data that we have gathered, we estimate an annual demand of

600,000 metric tons of CI sheets in Sri Lanka; a market worth of approximately

$371,400,000. For GP sheets the annual market demand stands at 800,000 metric tons.

The market is worth around $450,000,000.

14

Competitive Analysis

Fortunately enough, no other companies in Bangladesh have taken the initiative to

export CI and GP sheet to Sri Lanka yet. If AKS can manage itself to take up this

decision quickly enough then market penetration for the company will not require a great

deal of effort. It will later be discussed in our SWOT analysis that the Indian government

has put a restriction on exporting GP sheet to Sri Lanka, making Bangladeshi companies’

effort much easier.

However, if AKS succeeds in this industry in Sri Lanka then it is surely to attract

attention of the domestic companies. Therefore, it becomes a necessity to study the local

competitors and be aware of their potentiality.

AKS may face its biggest competition from the PHP group of industries. The two

companies have been formidable rivals of each other in the domestic market. Although

AKS has managed often to get the upper hand in different markets, PHP is not far lagging

behind.

AKS has its strongholds in certain districts and sub districts of Bangladesh such

as Chittagong, Feni, Rangpur, Barishal and Mymensingh. It enjoys 60% of the total

market share in Bangladesh. However, PHP is known to have strong relationships with a

number of banks and insurance companies that assist them with extensive credit lines.

Such incentives give the company, among other competitors, a competitive edge over the

AKS group.

Among other competitors of AKS the more competitive ones are Islam steel mills,

Chittagong steel mills and Paragon steel mills, all based in Chittagong. It is difficult,

however, to solicit information about their company strategies and their market share.

15

SWOT Analysis

Strength

First time exporting is always full of uncertainty. At the same time, first time

exporting is also more expensive and exhausting. In the past, some of the local companies

incurred considerable amount of loss exporting for the first time to a foreign country. For

any company, first time exporting warrants strong financial condition of the exporting

company. AKS, being the sister company of one of the most profitable group of

companies in Bangladesh-namely Abul Khair Group of Companies, has got the financial

blessing to carry on such venture.

Fortunately, most of the top level managerial personnel of AKS have previous

experience in exporting to neighboring countries. They were previously involved in

exporting both consumer and industrial goods to India, Thailand, and Myanmar and so

on. Even though the company previously never exported heavy industrial goods to Sri

Lanka, as a result of their previous business with the country they have successfully

developed contacts that could help them get inside information on market of CP Sheet

and GP Sheet. Again, due to the financial backing the company can easily send or hire

agents who would conduct an extensive market research for them- a privilege that most

of its local competitors would not be able to afford.

Incidentally, AKS is currently the biggest importer of HR coils in Bangladesh.

Three years ago AKS has bought two machines from Japan, one from Germany and one

from Canada that gave them the ability to process HR coils here in Bangladesh. Hence

while a number of its competitors are buying the CR coils from Japan, AKS is producing

them locally. As a result, they have been able to produce CI sheets/GP Sheets at a lot

16

lower cost, which already gave them a competitive advantage here at home, helping them

to obtain lion’s share of local market. And now they can use the same advantage when

exporting CI sheets and GP sheets to Sri Lanka. Even if their competitors eventually

decide to follow them to Sri Lanka it would be very difficult for them to match the

competitive price that AKS would be able to offer.

Achieving such a decisive competitive edge is no walk in the park for any

industry in today’s competitive world. One of the primary reasons for AKS to become the

market leader in Bangladesh is their high quality products. The company always has high

regard for quality. A highly trained quality control unit is always checking up the quality

of the products against international standards. The company hopes to acquire ISO9001

certificate by 2006, which will serve as another testimonial of their quality products.

Weakness

First time exporting rarely generates any considerable profit. Ironically, profit

earned in first time exporting seems to work as an important motivator for managers who

would think of carrying on the exporting business in the future. What happens in case of

most of the first time exporters is that they can hardly justify the exporting cost. Most of

the companies exporting for the first time dreams of earning a profit which is in a word

irrational. Hence when the exporting is done and the real profit is counted, they simply

come to the decision that exporting is too much of a hassle generating too less of a

revenue to repeat the process. The same phenomenon might come to haunt AKS decision

making authorities.

17

Currently AKS is manufacturing according to market demand. However, they do

have excess capacity to produce more. However, exporting CI sheets and GP sheets to Sri

Lanka would require manufacturing more than what is currently possible using the

installed machineries. While buying the required extra machineries should not present

itself as a problem, operating them might. Most of these machines are complex to operate

and maintain and requires a degree of training. While recruiting non-skilled labor is not a

problem in this country, hiring skilled labor is. Thus training non-skilled labor into

skilled one to operate the machines would be the best alternative. However, the process is

time consuming.

Furthermore, upon interviewing some of the personnel of managerial position we

come to realize that the company is currently more interested in focusing on the domestic

market rather than going for exporting to foreign market. As mentioned before, due to the

company’s unique competitive advantage regarding HR coils, AKS has been selling its

high quality products at a lower cost, thus becoming the dominant player in the market.

The prevailing opinion in the company is that if they concentrate enough on the local

market, with the help of their strong sales force they could easily penetrate deep into the

market,. As a result, when their unique advantage will eventually be lost, it would be hard

for the competitors to regain the lost market shares. Hence some of the upper class

managers hold that they should postpone any exporting process for at least two years.

However, it might be so that within these two years other companies may take over most

of the market share in Sri Lanka, making market penetration a difficult task.

Opportunity

A destructive civil war had been plaguing Sri Lanka for more than twenty years

Most of the victims of the civil war are the Tamils- people belonging to a demography

18

consisting of inherently poor rural people. The age long civil war has left hundreds of

villages completely or partially destroyed. Now that a cease fire agreement has been

signed, the destroyed houses are expected to be rebuilt. The Lankan government also

promised to help rebuilt most of the effected villages. Being a tropical country, rooftops

of most of the houses of Sri Lanka are made of CI sheets.

At the same time, due to the civil war Sri Lankan industries sustained significant

damage. The development of the industrial sector of Sri Lanka had been repeatedly

hindered by the civil war. Taking advantage of the cease fire agreement it is expected that

the Sri Lankan industries will try to flourish. Most the industries of the subcontinent use

CI sheets extensively for rooftops and as fences. They also often use GP sheet to make

smooth floors, especially in the warehouses. Thus given the present condition the demand

for GP sheets and CI sheets in Sri Lanka is expected to go up dramatically.

Previously India was the biggest exporter of CI sheets and GP sheets in Sri Lanka.

However, India is currently one of the fastest growing countries in the world. Naturally

there is a huge demand of CI sheets and GP sheets in India. The central government is not

interested in importing either of them, rather it believes that it would be best to

manufacture them locally and meet the demand. Still, due to a number of reasons, some

of the Indian industries are more interested in exporting CI and GP sheets rather than

selling them in the domestic market. Thus to discourage such behavior, the Indian

government has recently imposed high tariff on exporting CI sheets and GP sheets to

foreign countries. Previously India was the chief supplier of the products in Sri Lanka.

However, now that the price of CI and GP sheets have gone up, Sri Lankan importers are

looking for cheaper alternatives. Hence the new tariff has opened a window of

opportunity for our country, or to be more precise, for AKS; since AKS is still the biggest

manufacturer of CI sheets and GP sheets in Bangladesh. In the light of the facts we

believe its high time AKS seriously thought of starting exporting CI sheets to Sri Lanka.

19

Once the company has secured the market, it can easily reap off the profit of a timely

decision.

In addition to India’s tariff on exporting GP sheets and CI sheets to Sri Lanka,

Bangladesh government has recently declared duty drawback and other incentives on

export of CI sheets and GP sheets. Hence for every metric ton of CI sheets and GP sheets

exported, the exporting company will be returned the tariff that it had to pay when it

imported the raw materials and the chemicals needed to manufacture those sheets. Thus

AKS is in a position to export CI sheets and GP sheets to Sri Lanka at a cheaper price

than some of its foreign competitors located in countries such as India, Thailand or

Myanmar where GP sheets and CI sheets still don’t enjoy any duty drawback.

While looking for more opportunities in Sri Lanka we came across an interesting

fact; unconfirmed sources have reported that Sri Lankan government is considering

manufacturing ammunition locally. The government intends to import all the necessary

accessories needed and then assemble them locally, utilizing the cheap labor. Considering

their limited capability it would not be irrational to speculate that Sri Lankan government

will manufacture ammunitions mostly for handguns and semi-automatic and automatic

weapons. The outer shells of most of the varieties of these weapons use GP sheet to do

the final coating. As with most of the ammunition assembling countries it is expected

that the Lankan government would be interested to produce the outer shells locally.

Hence if AKS can acquire a significant amount of GP Sheet market in Sri Lanka, chances

are very good that they will be able to get the contract to supply GP Sheets to Sri Lankan

government, which should generate a handsome amount of revenue every year.

20

Threats

Sri Lanka had been fighting the civil war for nearly twenty years. Even though

there is a cease fire agreement going on between the two fighting parties, many fear that

the fighting may erupt again at any time. Hence Sri Lanka has always been considered a

risky place to do business at. If the war does start again, AKS might face a substantial

loss due to it. Even though we don’t fear that all the exporting activities that AKS would

have with Sri Lanka would be ceased, (since Sri Lanka had been importing CI sheets

from India even when the war was still going on) it would be quite natural to expect that

most of demand for CI sheet will be gone at least until the next long term cease fire

agreement. And also there is a chance that some of the importers of Sri Lanka may

default due to the war.

There might be trouble at home too. As we all know, export businesses always

need to maintain its schedule very strictly. Due to political restlessness nature of

Bangladesh, maintaining schedule is often an impossible task. This phenomenon has

made some local companies loose export contracts in the past and it may come to haunt

AKS in the same way.

21

Recommendations

In order to start exporting CI sheets and GP sheets to Sri Lanka we recommend

contacting N. Vaitilizgan & Company. N. Vaitilizgan & Company is the biggest importer

of industrial materials in Sri Lanka, and the sole importer of CI sheets in the country. At

the same time, the company had been importing CI sheets from India before the

imposition of higher tariff. Presently all the small industries that use GP sheets are

entirely depended on its imports.

We came to know from AKS that recently N. Vaitilizgan & Company has shown

great interest in importing AKS’s product, namely CI sheet and GP sheet that AKS

produces. N. Vaitilizgan & Company has a long business relationship with Nowrasia

Container Lines Ltd., a very reputed container line company in the South East Asia.

Ironically, or to be more precise, naturally, Abul Khair group of industries in the course

of business has dealings developed a good relation with the container lines company.

Abul Khair group of industries had been utilizing their services for importing chemicals

and other industrial raw materials for the different industries that it operates. Recently N.

Vaitilizgan & Company has placed an unsolicited order for a small quantity of CI sheets

and GP sheet. Apparently the agents of Nowrasia in Sri Lanka had recommended AKS to

N. Vaitilizgan & Company. Naturally, the company has insisted that the export should be

made through Nowrasia Container Lines Ltd.

22

Target market

We believe that most of the buyers of AKS GP sheets would be small to medium

size business ranging on buying capacity of high to moderate .There are a number of

packaging companies in Sri Lanka that use GP sheets for producing various kinds of

containers. We expect about 65% of the buyers of GP sheets would belong to such

category. Another type of potential customers of exported GP sheets are cottage

industries. They are expected to buy GP sheets in small volumes. And like most of the

industrial products that are sold in small volumes, selling GP sheets to them should

involve a long distribution channel involving various categories of wholesalers and

retailers.

Another category of buyers that we expect to buy GP sheets are industries that

produce CI sheets. As mentioned before, CI sheets are the primary materials that are used

as rooftops on both manufacturing industries and rural houses. So far we could find five

such companies that would be interested to buy GP sheets in order to process them into

CI sheets and sell them in local market. Before the Indian tariff imposition, they would

buy the imported GP sheets from N. Vaitilizgan & Company. These companies should be

the primary buyer for the exported GP sheets. They have medium to high inventory

carrying capacity and should buy high volume of sheets.

We believe that most of the CI sheets would be bought for commercial purpose

rather than for personal consumption. As mentioned before, Sri Lankan manufacturing

industry, especially the edible oil processing industry is expected to flourish in the

upcoming years. Considering the construction patter of the existing edible oil processing

plants, we concluded that CI sheets would be used extensively to construct the upcoming

plants as well. Other than the edible oil processing plants, other manufacturing plants that

will very soon emerge taking the advantage of the cease fire agreement, should also be

23

using CI sheets for their constructions. Considering the reputation that AKS CI sheets

have on Bangladeshi market and the quality and price they can offer, we can safely infer

that these potential clients will choose AKS CI sheets if they have it available.

There should be good number of households too who would be willing to use CI

sheets for their homes. Hence CI sheets exported would act as both consumer and

industrial product. However, in this case AKS would be indirectly competing against

itself. The GP sheets that we propose to export to Sri Lanka would be processed into CI

sheets and then would compete against AKS CI sheets. We do not expect these locally

processed CI sheets to compete against AKS CI sheets when it comes to industrial

buyers, since AKS can sell the CI sheets to industrial buyers at a much lower cost. Not to

mention that the industrial buyers would place a very high confidence on AKS CI sheets

due to the company’s wide spread reputation on the Bangladeshi market. Besides there is

currently no GP sheet processing company in Sri Lanka that has the capacity to supply

the amount of CI sheets that each industrial buyers would require.

As for competition on the local market, it should not even remotely be

threatening. First of all, none of those local GP sheet processing industries can supply

enough to cover the entire market. They are known for producing low quality products.

During the civil war, a large portion of Sri Lankan market share was occupied by Indian

CI sheets, not the locally produced CI sheets. If the Indians can beat the Lankan on their

own ground, we are confident AKS could do the same. Besides, if those local companies

every pose any serious threats, AKS can always cut off its supply of GP sheets to them

and thus leaving them with scarcity of raw materials which is sure to hike up their

products cost; rendering the products incompetent against AKS CI sheets.

24

Promotion

Even though this would be the first time AKS is exporting GP sheets and CI

sheets to Sri Lanka, we do not feel any extensive market penetrating promotional

activities are necessary. Moreover, Sri Lankan market is more accustomed to the dealer

conducting the promotional activities rather than the original manufactures. Since AKS’s

primary target market is industrial users, we feel a different approach would be more

appropriate.

For attracting potential GP sheets buyers, AKS should work its promotional

activities in co ordinance with N. Vaitilizgan & Company. Most of these promotional

activities should be focused on the wholesalers and retailers who would sell the products

to small industries. The wholesalers and retailers exercise immense influence over the

buying decision of most of the industrial buyers. Hence they should be convinced that

promoting AKS products would be most profitable for them. With that end in view, with

the help of N. Vaitilizgan & Company, AKS may introduce modest volume discounts for

the wholesalers. Later on, when the exporting business is up and fully operational AKS

can introduce other promotional activities such as raffle draws and sweepstakes. At the

same time N. Vaitilizgan & Company, being the importer of AKS products, is expected

to exercise its influence over the wholesalers to carry and promote AKS products. As for

the few commercial buyers who usually buy directly from N. Vaitilizgan & Company

through their own agents, we recommend personal selling approach. AKS might consider

sending two to three members of its well trained sales force to Sri Lanka. Before

approaching the companies, the sales team should be thoroughly briefed by N.

Vaitilizgan & Company about the differences in “ways of doing things” between

Bangladesh and Sri Lanka. However, considering the degree of similarities between the

target markets of the two countries, we do not suspect the sales team would face many

difficulties in Sri Lanka.

25

As mentioned before, we believe that AKS should focus more on industrial

buyers rather than on final consumers for selling CI sheets to Sri Lanka. As with the GP

sheets AKS should use a sales team, with the help of N. Vaitilizgan & Company, to

penetrate the target market. However, AKS should try to make its brand of CI sheets a

popular name among the normal population. Let’s not forget that the industrial buyers

also belong to the Sri Lankan population. Hence, if they find AKS’s brand of CI sheets a

popular and assuring name, it would take little convincing by the sales team to make

them opt for AKS CI sheets.

Hence as we can see, even though AKS’s target market is the commercial users,

in order to easily convince them AKS should popularize its brand name among the

common people. It must create an image of prestige and confidence among the people.

They very brand name should convey a perception of class, reliability and quality. AKS

has extensive knowledge in conducting promotional activities in Bangladesh. It has been

successful in making its brand out-shine a wide array of CI sheets of other brands.

Considering the similarities of market characteristics of the two countries, AKS should be

able to successfully use the same promotional strategy in Sri Lankan market. However, it

would be wise if all the promotional activities are coordinated with N. Vaitilizgan &

Company. Given the in depth knowledge the company has on Sri Lankan market, they

can help AKS fine tune their promotional activities to better suit the Sri Lankan market.

26

Distribution channels

The distribution channel that AKS has been able to set up in Bangladesh is undoubtedly

one of the most efficient distribution channels of the country. The company has divided

the entire country into three divisions with fourteen territories. Each territory is

maintained by one territorial sales manager who works under the guideline of the

territory’s corresponding divisional sales manager. There are a total of nineteen hundred

traders throughout the country that sell the CI sheets to the final consumers. The

company has got its own transport fleet capable of delivering goods within 24 hours from

any of its two bases of operations.

However, setting up the same kind of distribution channel is quite impossible for

a company like AKS. Instead, at least for the time being AKS can help N. Vaitilizgan &

Company to have a more efficient distribution channel, taking advantage of the

experience that AKS has in setting up such channel in Bangladesh. However, AKS

should keep in mind that any importer may feel threatened when an outsider try to

modify its distribution channel. Hence AKS should not consider taking any other actions

to modify the channel in Sri Lanka other than occasional friendly advices, at least until

AKS’s products is dominating the Sri Lankan market.

27

28

Abul Khair Steels

N. Vaitilizgan & Co.

Nowrasia Continers Line Ltd

Wholesaler GP sheet

Wholesaler CI Sheet

Small industries

Agents

Retailers

Final Consumer

Commercial users

The expected distribution channel in Sri Lanka

Budget

Chalking up a budget for an export activity is a very hard one, even for

professionals. The task gets even harder when one is not a member of the company; thus

lacking access to relevant information. Hence the budget drawn here should be

considered as a framework to estimate an approximate cost and revenue.

Since this would be the first time AKS is exporting to Sri Lanka, it is justified to

export only a small quantity of its product. In this way the company can monitor all the

channels its products have to go through in order to reach the target market. Hence we

would recommend exporting 400 metric tons of both CI sheets and GP sheets. The reason

for recommending exporting both CI and GP sheet is that if it is found that the Sri

Lankan market has demands for both the product (which is very likely) then AKS can

enjoy economy in all the steps of exporting.

Since AKS manufactures according to market demand, it usually have a high rate

of inventory turnover. Hence Exporting 400 metric tons of CI sheets and GP sheets

would mean that AKS would have to produce this extra amount of product. After

consulting with the operations manager of AKS, we gathered that AKS can produce 400

metric tons of CI sheets and GP sheets without facing any extra pressure. However,

instead of producing the products at the same time, it would be wise to produce such

amount of products over a period of one month time. In this way the workers don’t have

to be under any extra pressure and at the same time the chances of drying up the raw

material too quickly too soon would be minimized. Since storing CI sheets and GP sheets

do not require any extra caring and AKS already has a storehouse big enough to store the

extra amount of products that would be produced over the month, storage cost should be

a minimum.

29

For exporting AKS have two types of containers to choose from: twenty feet

containers and forty feet containers. Some sources have reported that dealing with twenty

feet containers is complicated and physically difficult at Colombo port. Hence we

recommend using twenty feet containers. Each twenty feet container is capable of

carrying twenty to twenty two metric tons of CI and GP sheets.

Various cost related to exporting per metric ton of CI and GP sheets is shown below:

The cost of exporting four hundred (400) metric tons of CI sheets and GP sheets in given

below:

Container handling(per 20 ft. container) 1,000Tk

Labor charge (per metric ton) 115Tk

C&F commission (per metric ton) 110Tk

Miscellaneous expenses (per metric ton) 275Tk

Total 1,500Tk

Material cost (400m.t.*31,700Tk) 12,680,000Tk

Container handling (20containers@1,000Tk/container) 20,000Tk

Labor charge (400 m.t.@115Tk/metric ton 46,000Tk

C&F Commission (400 m.t.@110Tk/metric ton 44,000Tk

Miscellaneous Expenses (400 m.t.@275Tk/metric ton) 110,000Tk

Total Cost 12,900,000Tk

30

Selling one metric ton@ 36,000Tk the total revenue that would be generated from selling

400 metric tons is 14,400,000Tk. This gives rise to a profit of approximately

1,500,000Tk, which is of course, is subjected to radical changes.

The budget does not contain any promotional cost for the sake of simplicity.

TERMS OF SALE

Ideally for any exporter the “cash in advance” method of payment is the least risky. This

method, however, is rarely used. Cash in advance is preferred over other modes of

payment when the exporter has reasonable doubt on the importer’s ability to pay.

For AKS the Sri Lankan market is new and it would be more favorable for them to opt

for cash in advance method. However, the cash in advance as a mode of payment is as

difficult for the importer as it is convenient for the exporter. Cash in advance as a mode

of payment is a good and safe choice only when the importer has no other way but to

comply with any demands of the exporter. Since this is not the case here, cash in advance

as a mode of payment is out of the question.

Other options that are available to AKS are:

1. Free on board (FOB)

Under this term of sale, AKS has the option to quote a price covering all

expenses up to, and including, delivery of goods on an overseas vessel provided

by or for the Sri Lankan importer.

31

2. Cost and freight (CFR)

Under this term of sales, AKS can quote a price of the goods including the

cost of transportation to Colombo port. The cost of insurance and the choice of

insurance are left to the importer.

3. Cost, insurance and freight (CIF)

In this case AKS can quote a price including insurance, all transportation, and

miscellaneous charges to the point of debarkation from the vessel.

We would recommend choosing either FOB or CFR. Both of the methods relieve

AKS from the burden of insurance. However, AKS can opt for any one of the three; since

it has a history of dealing all of them.

32

CONCLUSION

AKS being the first company from Bangladesh to export GP/CI sheets to Sri

Lanka definitely has the upper hand. As we have seen in our SWOT analysis, the

company has previous experiences in the foreign markets, which will go a long way to

bring success for this company in the international arena.

AKS has a better chance of surviving in the foreign market because it can produce

the sheets at a much lower cost. This is because, where the domestic competitors have to

buy the HR coils, from which these sheets are manufactured, from Japan AKS can

manufacture them locally.

The local market will pose little threat to the company because after being torn

apart by a long lasting civil war, the country is not in a better position for the time being

to compete against AKS. Furthermore, the Indian tariff on exporting GP/CI sheets to

foreign countries has opened up a whole new window of opportunities for AKS.

AKS intends to team up with the local distributor to establish an efficient

distribution channels. The channel is expected to be less complex because the company

aims at the industrial buyers more than the end - consumers.

After determining the budget for the whole campaign, it was estimated that the

company’s rise in profit is projected at 1,500,000Tk. This may be far from the exact

profit the company may earn; however, this gives a good incentive to take up the

initiative take on the Sri Lankan market by the horns!

33

Bibliography

1. The New Caxton Encyclopedia. Vol. 17. London. The Caxton Publishing

company

2. Lamb, Charles.W. Marketing. 5th Ed. South Western College Publishing

3. Encarta Reference Library 2004

4. The virtual Library of Sri Lanka. www.lankalibrary.com

5. CIA Factbook. http://www.cia.gov/cia/publications/factbook/geos/ce.html

6. USGS Mineral Resources Program.

http://minerals.usgs.gov/minerals/pubs/country/2000/9303000.pdf

7. http://www.barighar.com/Steel/STEELMILLS.htm

8. Czinkota, R. Michael and Iikka A. Ronkainen. International Marketing 6th

Edition, Harcourt College Publishers, 2001.

9. Stevenson, William J., Production Management, 8th Edition, McGraw-Hills, 2002.

34