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Transcript of Mrp Footwear
1. Introduction
1.1 Overview
The Indian Footwear Industry is gearing up to leverage its strengths towards maximizing
benefits. Strength of India in the footwear sector originates from its command on reliable supply
of resources in the form of raw hides and skins, quality finished leather, large installed capacities
for production of finished leather & footwear, large human capital with expertise and technology
base, skilled manpower and relatively low cost labor, proven strength to produce footwear for
global brand leaders and acquired technology competence, particularly for mid and high priced
footwear segments. Resource strength of India in the form of materials and skilled manpower is a
comparative advantage for the country.
Leather footwear in India are dress shoes, casuals, moccasins, sport shoes, horrachies, sandals,
ballerinas, boots. Non-leather footwear in India is Shoes, Sandals and Chappals made of rubber,
plastic, P.V.C. and other materials. With changing lifestyles and increasing affluence, domestic
demand for footwear is projected to grow at a faster rate than has been seen. There are already
many new domestic brands of footwear and many foreign brands such as Nike, Adidas, Puma,
Reebok, Florsheim, Rockport, etc. have also been able to enter the market.
The footwear sector has matured from the level of manual footwear manufacturing methods to
automated footwear manufacturing systems. Many units are equipped with In-house Design
Studios incorporating state-of-the-art CAD systems having 3D Shoe Design packages that are
intuitive and easy to use. Many Indian footwear factories have also acquired the ISO 9000, ISO
14000 as well as the SA 8000 certifications. Excellent facilities for Physical and Chemical
testing exist with the laboratories having tie-ups with leading international agencies like SATRA,
UK and PFI, Germany.
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One of the major factors for success in niche international fashion markets is the ability to cater
them with the latest designs, and in accordance with the latest trends. India, has gained
international prominence in the area of Colors & Leather Texture forecasting through its
outstanding success in MODEUROP. Design and Retail information is regularly made available
to footwear manufacturers to help them suitably address the season's requirement.
The Indian market for footwear includes all producers of non-cleated, rubber and plastic
footwear designed in style or for use. The industry is a collection of smaller, segmented, yet
often overlapping markets, defined by both the price and the purpose of the shoes.
For instance, there are mini-markets for shoes designed for each of many sports and other
purposes: basketball, running, walking, tennis, and casual wear. The greatest overlap between
these categories is between performance shoes and casual wear. Therefore, there is some degree
of overlap between most segments. The industry is dominated by a few large firms, while the
majority of other players have less than 5% market share.
These firms fight for market share through non-price competition, on strategies such as
strengthening brand image and increasing product proliferation. The success of each firm is
greatly dependent upon its marketing campaigns. The brand image of the major firms is created
by extensive marketing campaigns and celebrity endorsements. Consumers associate themselves
with a particular brand and tend to stick with the brand with which they are comfortable. Entry to
the industry is difficult as brand loyalties are high.
Standing on the threshold of a retail revolution and witnessing a fast changing retail landscape,
the Indian footwear market is set to experience the phenomenal growth in coming years. In past
few years too, the market has seen robust growth, says “Indian Footwear Industry Analysis”
report. This report provides extensive research and in-depth analysis on the Indian footwear
market. The detailed data and analysis given in the report will help the client to evaluate the
leading-edge opportunities critical to the success of the footwear market in India.
The forecasts and estimations given in this report are not based on a complex economic model,
but are intended as a rough guide to the direction in which the market is likely to move. This
forecast is based on a correlation between past market growth and growth of base drivers.
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1.2 History of Footwear
Footwear is estimated to have started its long history of human use during the Ice Age some 5
million years ago. Unkind weather conditions are said to have created the necessity for footwear.
Other evidences show that footwear came to use at the end of the Paleolithic Period, at about the
same time the early humans learned the art of leather tanning. Early pieces of footwear were made
of wrappings, usually made of leather or dried grasses. Later on pieces were developed from an
oval piece of leather which is bound by a piece of strong leather thongs. Sandals, which are the
first crafted footwear, are the successors to these wrappings.
In Egyptian funeral chambers, paintings show the different stages in the preparation of leather and
footwear. The images also show that in Egypt, footwear depicted power and class. The Pharaohs’
sandals were distinguished by the turned up toes, a characteristic which is missing in the
commoners’ footwear. Egyptian sandals were crafted using straw, papyrus, or palm fiber. Later
on, Egyptian women adorned their footwear with precious stones and jewels.
Material evidences showed that the Greeks loved and took good care of their feet by using
different footwear for different activities. Greek women began wearing sandals to signify their
social class. Their footwear signified beauty, elegance, refinement, and extravagance. It has been
said that Greek women of bad reputation attracted men by wearing elevated sandals. These
sandals create a “clacking” sound when the wearer moves, and this sound was considered as a
symbolic flaunting of sexual charms. In Mesopotamia, leather wrappings are tied to the feet by a
strip of the same material.
Romans, on the other hand, created durable leather thongs so their legions can travel to places on
foot. It is also believed that foot fetishes began with the Romans when Senator Lucius Vitellus
frequently kissed the shoe of his mistress which was hidden in his tunic. In Rome, footwear also
exhibited social class. The consuls wore white shoes, the senators wore brown shoes, and the
uniform footwear for the rest of the region was a short pair of boots that uncovered the toes.
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But in all of these early civilizations, footwear indicated social status. Footwear consists of
garments that are worn over the feet. They are worn mainly for protection and hygiene, but also
for fashion and adornment. Footwear items come from a wide range of materials including
leather, rubber, canvass, wood, and plastic. But early pieces were made from available materials
like straw, leather, cowhide, and grasses. When footwear is assembled, the main components are
adhesives, cushion, counter fort, heel, hook, insole, laces, sole, steel shank, tack, toe puff, tread,
and welt. Generally, footwear is classified into: boots, industrial footwear, shoes, and sandals.
Boots are available as cowboy boots, galoshes, ski boots, thigh length boots, and so on. Industrial
footwear includes plastic boots and rubber loafers which are used in laboratories, construction
sites, and production lines.
Shoes include athletic shoes (or running shoes), climbing shoes, clogs, high heels, mary janes,
moccasins, mules, loafers, tap shoes, and cross-training
shoes. Sandals, on the other hand, include espadrilles,
flipflops or thongs, slide-ons, and slippers.
Footwear is considered an extension of one’s personality.
Well-maintained footwear says things about the owner,
with cleanliness as the most important concern. Although
the intricacy of this craft may have been
Lost to modernization, their influences are still present in shoes today. The moccasins worn in
early times by people in cold countries are still being worn there, while the sandal patterned after
the Egyptians’ creation is still frequently used in hotter countries.
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Production Technology:
The production of the industry starts with Agro Industries and progresses through the chemical
industry and tanning to manufacturing. Leather is a by-product of the food industry. It is a
commodity and as such is subject to market forces in a similar way to tea, sugar, coffee, etc.
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2. Indian Footwear Industry
2.1 Regional Segmentation
i) Geographic: ( City or Rural areas)
Companies focus more on metro cities because people believe in trying innovative, new and
better products. In different regions different people have different preferences for the type of
footwear. Urban people go for more stylish footwear than rural people. Rural people concentrate
on durability rather than giving preference to style and look.
ii) Demographic:
Gender: Male sector of footwear industry have limited categories like shoes, chappals and
sandals. Footwear is chosen according to their frequency of usage. Female sector includes variety
of range as it is the most fashion oriented sector.
Age: Various age groups are targeted by the industry. Footwear is the product that each and every
individual will use till its lifetime.
Income: Here industry needs to find out that how much expenses are incurred by the people
regarding their footwear. Various range of footwear is available targeting every income group.
iii) Psychographic:
It depend on the requirement of the consumer that which particular segment they need to
approach for the products available in the market by the different players. Eg: A Professional goes
for purchasing for Formal Shoes, Student goes for Casual Footwear.
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2.2 Market Performance and Exports
Nearly 75% of India’s Export of Footwear is to the European Countries and the USA. The Indian
Footwear Industry provides employment opportunities to a total of 1.1 million people, mostly
from the weaker sections of the society. Out of this, about 0.2 million are employed in the
organized sector, 40% of who are women. Remaining 0.9 million people are engaged in
unorganized footwear sector like rural artisans, cottage and household units etc.
The Footwear Sector is now de-licensed and de-reserved, paving the way for expansion of
capacities on modern lines with state-of-the-art machinery. To further assist this process, the
Government has permitted 100% Foreign Direct Investment through the automatic route for the
Footwear Sector.
INDIA ’S FOOTWEAR EXPORT GROWTH OVER THE LAST FOUR DECADES
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Footwear export has increased from US$40.15 million in 1977-78 to US$ 1475.83 million in 2007-08
CHART SHOWING GLOBAL IMPORT OF FOOTWEAR VS INDIA ’S EXPORT OF FOOTWEAR
India’s Exports of Footwear – Country-wise Share in Total Exports (2007-08) – Source: DGCI& S
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Indian Footwear Industry in a Nutshell: -
- Second largest footwear producer after China
- 2.06 billion pairs produced in an year
- 16 % of the global production is produced in India
- Contract manufacturers supply to leading global brands
- 644 Member produces situated as clusters at Chennai, Ambur, Ranipet, Kanpur, Agra, Mumbai,
Delhi and Karnal.
3. Key Players of the Industries.
3.1 Domestic Players:
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Bata:-
Bata India is the largest company for the Bata Shoe Organization in terms of sales pairs and the
second largest in terms of revenues. With 1250 stores across the country, it also has the widest
retail network within the BSO.
By the time Bata had come to India in 1931, it was already recognized as a leading shoe brand.
Its manufacturing and marketing operations heralded the rise and the development of a modern
footwear industry in India. Before Bata, footwear was produced primarily in the handicrafts and
small enterprise segments. Bata, over the decades, used the ‘current knowledge' from its
international experience to create adaptive and innovative baseline standards for the shoe
businesses in India.
Incorporated as Bata Shoe Company Private Limited in 1931, the company was set up initially as
a small operation in Konnagar (near Calcutta) in 1932. In January 1934, the foundation stone for
the first building of Bata's operation - now called the Bata. In the years that followed, the overall
site was doubled in area. This township is popularly known as Batanagar. It was also the first
manufacturing facility in the Indian shoe industry to receive the ISO: 9001 certification.
The Company went public in 1973 when it changed its name to Bata India Limited. Today, Bata
India has established itself as one of Asia's largest footwear retailer. It has cornered around 35
per cent market share in the organized sector (and approx. 8.5% of the total footwear market)
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Almost 98 percent of the company's revenue is from the domestic market while the rest is from
exports. The company currently sells over 45 million pairs of shoes every year and has an annual
sales turnover of more than Rs 8000 million (USD 178 million).
Over the years, Bata India has established a leadership position in the footwear industry and is
easily the most trusted name in branded footwear. Its retail network of 1250 stores gives it a
reach/ coverage that no other footwear company can match. The stores are present in good
locations and can be found in all the metros, mini-metros and towns
In terms of products, the company has now built a good, market-oriented collection that is in line
with fashion trends and offers a good quality to price ratio. Its product range now encompasses
classic shoes such as Ambassador for Men and comfort shoes such as Comfit for ladies, as well
as a more trendy collection for ladies in the Marie Claire range and a sporty fashion collection
for young adults in the North Star range.
Bata's smart looking new stores supported by a range of better quality products are aimed at
offering a superior shopping experience to its customers. And the new face of Bata India is now
visible to the industry as well as its customers. Today, backed by a brand perception of
experience, the company is working towards positioning itself as a vibrant and contemporary
young brand. It has significantly transformed its retail formats to become more lifestyle-oriented,
which has helped change consumer perceptions to a large extent.
Achievements
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AMITY CORPORATE EXCELLENCE
Bata India has been awarded the AMITY CORPORATE EXCELLENCE AWARD on 21st
February 2008. This award has been given for Bata's excellent performance and retail growth
during the past year.
IMAGES Retail Award
This award was received in the footwear category on on 6th September 2007. This award was a
part of Reid & Taylor Awards for Retail Excellence presented during India Retail Summit 2006.
Super Brands Award
It is awarded to the 1st top ten Super brands of India. Super brand signifies the recognition that
the consumer is giving to the Brand Image, Brand Value and Brand Delivery. The award
ceremony was held in Mumbai on 12th April 2007
FMCG Consumer Reaction Award
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Bata won FMCG Consumer Reaction Award in Fashion & Specialties (Shoes) on March 2007.
The Award was presented by: Bharati Vidyapeeth's Institute of Management Studies & Research
(BVIMSR).
Lycra Images Fashion Awards
Bata is honoured for 3 consecutive years as Most Admired Brand of the year in Footwear
Category on 25th January 2007.Awards - 2006
Retailer of the Year Award
This award was received on 24th Nov 2006 in the footwear category. This award was a part of
Reid & Taylor Awards for Retail Excellence presented during India Retail Summit 2006.
Amity Corporate Excellence Award
This award was given to Bata by Amity International Business School on 22nd – 24th Feb 2006
for having achieved an enviable position of one of the best and most admired company of the
world with their unparalleled performance.Awards - 2005
Super Brands Awards
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It is awarded to the 1st top ten Super brands of India on 23rd Sept 2005. Super brand signifies
the recognition that the consumer is giving to the Brand Image, Brand Value and Brand Delivery
Retail Asia Pacific Top 500 Awards
Bata won the Top Retailer 2006-India Bronze award on 7th Sept 2005. This award is given by
Retail Asia Pacific TOP 500.
Bata has a worldwide reach, with operations across 5 continents managed by 4 regional
meaningful business units (MBUs). Each unit benefits from synergies specific to their
environment, such as product development, sourcing or marketing support. Each MBU is
entrepreneurial in nature, and can quickly adapt to changes in the market place and seize
potential growth opportunities.
Bata today…
Serves 1 million customers per day
Employs more than 40,000 people
Operates 4,600 retail stores
Manages a retail presence in over 50 countries
Runs 40 production facilities across 26 countries
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Incorporated as Bata Shoe Company Private Limited in 1931 in India, the company went public
in 1973 when it changed its name to Bata India Ltd.
Bata India today…
Serves 1 Lakh customers per day
Employs more than 8000 people
Operates 950 retail stores
Runs 5 production facilities across India
Our first factory was set up in Konnagar in 1931 which was then shifted to Batanagar.
At the five factories - Batanagar, West Bengal (1936);Bataganj, Bihar (1942); Faridabad,
Haryana (1951); Peenya, Karnataka (1988); Hosur, Tamil Nadu (1994) - the Company
manufactures quality leather, rubber, canvas and PVC shoes in wide-ranging designs and styles
at affordable prices. Bata India has a in-house tannery at Mokamehghat in Bihar, which is the
second largest in Asia.
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Liberty:-
Liberty Shoes Ltd. is the only Indian company that is among the top 5 manufacturers of leather
footwear in the world with a turnover exceeding U.S. $100 million.
Company produces more than 50,000 pairs of footwear a day covering virtually every age group
and income category. Products are marketed across the globe through 150 distributors, 350
exclusive showrooms and over 6000 multi-brand outlets, and sold in thousands every day in
more than 25 countries including fashion-driven, quality-obsessed nations like France, Italy, and
Germany.
Liberty has developed a spectrum of 10 exclusive brands, each of which has been given that
extra edge to cater to a specific target group. Today, the new range from Liberty is all about
style, design, and comfort. The range imbibes the spirit of fun and is trendy to the core.
Liberty has something for every occasion, for every income bracket & every age group. It
pampers its customer by keeping pace with global footwear fashion trends and by going that
extra mile which is why, special care has been taken to make sure that the outlets' design meets
the specific needs and taste of the target groups.
Apart from the existing brands, Liberty is busy fashioning the look of the future in footwear.
Introducing new designs that redefine styles and comfort associated with the finest in
workmanship. These are the brands of Liberty
Steeped in a philosophy that has at its core innovation, technology and advancement, we at
Liberty, pride ourselves over and above everything else on our healthy and heart-felt respect for
the human ethos, which projects itself in the expectancy and excitement with which one greets
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the arrival of the new combined with a sincere and deep regard for the old, which is appreciative
of and adopts at every stage the unique balance between modernization and tradition.
Liberty as a brand is constantly evolving to keep pace with the changing trends, styles, beliefs,
and aspirations of people while maintaining the sanctity of certain traditions like workmanship
and good value.
Liberty Shoes, a manufacturer of footwear, is broadening its market by establishing specialized
retail stores called “Revolutions”. The introduction of an entirely new product range to cater to a
wider income group along with diversifying their focus from men’s shoes and children school
shoes to catering to the entire family which will help increase Liberty’s addressable market. The
company has introduced shoes for fashion conscious consumers.
Liberty Shoes, a manufacturer of footwear, is broadening its market by establishing specialized
retail stores called “Revolutions”. We expect the company to increase its presence in a more
diversified income group. Higher sales combined with expansion in profit margins are expected
to drive earnings. Current valuations do not discount these positive developments.
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Pantaloon-Liberty JV: Pantaloon and Liberty Shoes entered in to a JV in September, 05 to set
up a chain of large format footwear retail stores ranging between 10,000-15,000 square feet.
Liberty Shoes will invest Rs.122.5mn for 49% stake and Pantaloon will invest Rs.127.5mn for
51% stake. The JV will set up 45 stores by 2008. The details of this venture are still under
discussion; therefore we have not factored any upside from this JV into our projections.
Benefits from expansion in Uttaranchal Plant: To avail of the promotional incentives available at
Uttaranchal, Liberty has set up a plant with capacity of 480,000 pairs. The plant commenced
operations in June 04. The excise duty savings from this plant were Rs.15mn in FY05 and are
expected to be Rs.30mn in FY06. The company is also expand-
ing capacity to 1.18mn pairs. This expansion will be completed by June-July, 06. Therefore
excise duty savings in FY07 will be Rs50mn.
VAT and reduction in raw materials cost: The implementation of VAT @ 12% has enabled the
company to revise their prices taking a long term view of their strategy. Backward integration
will contribute to reduction in raw material cost. Both these factors will increase operating
margins from 12.2% in FY05 to 14.9% in FY06 and 15.9% in FY07.
Valuations: We expect turnover of the company to grow from Rs1780mn in FY05 to
Rs.2197mn in FY06 and Rs2618mn in FY07 along with EPS growth of 78% CAGR over the
next 2 financial years. RoCE is also expected to increase from 16% in FY05 to 21% in FY07. At
CMP of Rs262, the stock trades at a PEG of 0.28xFY06 and 0.20x FY07. Based on PEG of
0.25x FY07, we expect 26% growth in price to Rs330.We recommend BUY on the stock.
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Khadim:-
The Rs 120-crore Khadim group of companies, one such player now emerging as a market leader
in the region, has already gone into manufacture, along with 100 per cent outsourcing, and is
now poised to expand in a big way, particularly in eastern region and South, mainly Tamil Nadu,
Andhra Pradesh and Karnataka.
Established in Kolkata in 1953 by a Bengali businessman, Mr Satya Prosad Roy Burman, as a
small trading outfit involved in footwear wholesale business, Khadims has grown steadily and
today commands brand premium in several States.
Khadim have grown mainly through our outsourcing strengths and today have as many as 27
retail outlets in both urban and semi-urban centers and some 150 franchisee shops. The Khadim
group of companies, with a significant presence in the footwear segment, especially in the east
and south regions, has redefined its business plans to leverage the Khadim's brand and register a
major presence in lifestyle retailing in the semi-urban markets.
The company plans to launch 10 superstores initially in district towns, under `Khadim's Khazana'
brand entailing an investment of Rs 50 crore in the next three years.
The first such store, housed in 30,000 sq ft and spread over four floors, has been launched at
Kanchrapara town in North 24 Paraganas district.
The particular store concept being adopted by Khadim's - to make it suitable to a semi-urban
target audience with an ethnic quotient.
Mission: Ensuring customer delight and stakeholders return by delivering quality product at affordable price through extensive retail network Vision: To be in every Indian step.
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Lakhani:-
Mr. K.C. Lakhani started this commendable journey in 1966 with the inception of Lakhani
Rubber Works, a small venture to manufacture rubber components. His hardship and
commitment made Lakhani Rubber Works an acclaimed name in the industry. Eight years later,
he expanded his vision further when the group diversified into the manufacturing of Beach
Slippers and that signaled a new dawn in the history of Indian Shoe Industry. And three years
later, the Canvas Shoes followed.
His endeavor and systematic approach helped the group expanding its horizons to sports shoes
manufacturing in the year 1982.
This never ending saga of success continued with their tie-up with Adidas India for the
manufacturing of sports shoes.
Today, the group is the largest manufacturer of beach slippers in India with a production capacity
of 40 million pairs per year. Also, it is the largest manufacturer & largest exporter of canvas and
vulcanized shoes in India, with a production capacity of 3.5 million pairs per year.
Lakhani Armaan group is the largest producer of Sports Shoes, PU Injected Sports Shoes, PVC
Injected Sports Shoes and Leather Shoes with a total capacity of 5.4 million pairs per year. It
also manufactures high fashion ladies and gents leather shoes for the European Union Market.
The eminence of the company, in the International Footwear Industry, is apparent from the fact
that it has been manufacturing sports shoes for the global sports apparel manufacturing giant,
adidas.
For over 80 years the adidas Group has been part of the world of sports on every level, delivering
state-of-the-art sports footwear, apparel and accessories. Today, the adidas Group is a global
leader in the sporting goods industry and offers a broad portfolio of products.
Lakhani Armann group has been manufacturing sports shoes for adidas for the last 10 years and
it is the only suppliers in India. The group is manufacturing more than 1 million pairs per year
for the brand adidas including all the latest high tech shoes.
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Beside this, the group also has the distinction of being the largest suppliers of rubberized auto
components to major automobile players in the Indian market. Year of tracking key industries
extensive experience and knowledge coupled with primary research has enabled the group to
deliver specified products to their customer. The company has been awarded by the President
Giani Jail Singh for its commitment to quality.
Today, after this success in domestic market Lakhani Armaan has expanded its horizon by,
exporting its range of quality products to the international market in UK, Germany, France,
Spain, Switzerland, Holland, Italy, Mexico, Japan and South Africa.
The company has also been awarded by the Prime Minister Mr Atal Bihari Vajpai for its Export
Excellence.
Products
Sports
The sports Shoes manufacturing facility is equipped with high end machinery for producing top
of the line sports shoes. Skilled manpower and superior technology has enabled the company to
produce shoes known for comfort and better performance. Over the years, the company has
immensely upgraded itself in terms of quality and production capacity.
Leather
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Lakhani Armaan has world-class facilities at its leather shoe manufacturing unit. It’s a perfect
blend of man & machines to achieve world-class quality standards. At Lakhani Armaan, special
care has been taken to ensure that the leather footwear developed at its manufacturing facility
combines the right balance of fashion and comfort.
Canvas
At Lakhani Armaan canvas Shoes are manufactured in the state of the art facility. The facility is
well equipped to manufacture premium-quality Premoulded Canvas Shoes, Rolled Sole Canvas
Shoes and Unlined Vulcanized Shoes. The division is producing more than 11000 pairs per day
for the domestic and export market.
EVA
Lakhani Armann has ultra modern facility for the manufacturing
of EVA and Beach Slippers. The group has made the best use of
the EVA injection technology by substantially increasing the
product line and the production capacity. The company is again
geared up to install two color EVA injection machines in its
facility.
Lakhani Armaan group is the largest manufacturer of beach slippers in India with a production
capacity of 40 million pairs per year. Also, it is the largest manufacturer & largest exporter of
canvas and vulcanized shoes in India, with a production capacity of 3.5 million pairs per year.
It is the largest producer of Sports Shoes, PU Injected Sports Shoes, PVC Injected Sports Shoes
and Leather Shoes with a total capacity of 5.4 million pairs per year. It also manufactures high
fashion ladies and gents leather shoes for the European Union Market.
The eminence of the company, in the International Footwear Industry, is apparent from the fact
that it has been manufacturing sports shoes for the global sports apparel manufacturing giant,
adidas.
23
For over 80 years the adidas Group has been part of the world of sports on every level, delivering
state-of-the-art sports footwear, apparel and accessories. Today, the adidas Group is a global
leader in the sporting goods industry and offers a broad portfolio of products.
Lakhani Armann group has been manufacturing sports shoes for adidas for the last 10 years and
it is the only suppliers in India. The group is manufacturing more than 1 million pairs per year
for the brand adidas including all the latest high tech shoes.
Beside this, the group also has the distinction of being the largest suppliers of rubberized auto
components to major automobile players in the Indian market. Year of tracking key industries
extensive experience and knowledge coupled with primary research has enabled the group to
deliver specified products to their customer.
Relaxo:-
The Company such is the story behind the creation and flourishing of Relaxo Footwear, the company
that has established itself as one of the most stalwart, quality conscious and avant-garde footwear
companies in the Indian economy today.
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Headquartered in New Delhi, India, it maintains a fine combination of comfort, style, and workmanship
and is embarking upon appreciable growth plans for the future. The company began as a small
enterprise in the year 1976 and was officially incorporated in 1984 and further went into public listing
in 1995. According to the 2008 Business Survey, it has now emerged as the second largest footwear
producer in India.
Relaxo Footwear commenced its journey with the manufacture of Hawaii slippers. It has now grown
into a large-scale entrepreneurship catering to the basic needs of the quintessential Indian citizen. From
a modest sale figure of Rs. 1 million in 1977 to more than Rs. 5000 million last year; the company has
experienced a record-breaking growth since inception. Today, the company manufactures over 3 lakh
pairs of footwear per day, which approximately adds up to over 10 million pairs per year. Each pair is
given thorough attention by the dedicated and skilled employees working at the 10 state-of-the-art
manufacturing units in Northern India. Thus, it is no small wonder that the annual turnover has
multiplied 2.4 times in the last 3 years from Rs. 305 crore in 2007-08 to a whopping Rs. 550 crore in
2009-10.
What’s more, with over 30 years of experience and 100 million satisfied customers, Relaxo keenly
looks forward to achieving an estimated annual turnover of Rs. 1000 crore by the year 2012.
Vision & Mission :
Relaxo Footwear was conceptualized with a lot of hope and hard work by an outstanding pilot team of
brilliant Indians, headed by the enterprising Dua family. Likewise, the company’s vision and mission
were as powerful as its personality.
Vision: Achieving an annual turnover of Rs 1000 crore by the end of 2012.
Mission: Ensuring customer satisfaction in keeping with the company’s motto of "Quality Par Excellence".
Core Values
The Core Values that Relaxo lives by are exclusive in their overpowering simplicity and
absolute effectiveness. They are:
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1. Corporate Citizenship
2. Honesty
3. Transparency
4. Employee Satisfaction
5. Customer Orientation
6. Team Orientation
Hawaii: Hawaii is the most popular brand in the Relaxo portfolio. It comes in diverse shades and
styles and its comfort value makes it a favorite among all age groups. With an output of 3,00,000
pairs a day, Relaxo is the largest manufacturer of Hawaii in India.
Flite: Flite is Relaxo’s most exclusive brand. Its unique “fashionable and light” quality is ensured
by its manufacturing process, involving cutting-edge EVA technology. Available in an array of
colours and designs, it is among the popular products in the casual footwear industry
Sparx: Sparx is a range of sports shoes, sandals and Hawaii slippers that embodies the spirit of
today's generation. Available in awe-inspiring colours and designs, it reflects verve and
dynamism as an iconic youth brand and is symbolic of a wholehearted zest for life.
Schoolmate: Schoolmate is a range of school shoes for boys and girls and is an expression of
Relaxo’s faith and commitment towards the young leaders of tomorrow. Made with special care
to pamper thousands of tiny feet, each pair bears the mark of superb workmanship and adaptable
design.
3.2 Global Market:
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Adidas:-
Adidas Ltd. is a major German sports apparel manufacturer and part of the Adidas
Group, which consists of Reebok sportswear company, Taylor Made- Adidas golf
company, and Rockport. Besides sports footwear, the company also produces other
products such as bags, shirts, and other sports and clothing related goods. The company is
the largest sportswear manufacturer in Europe and the second largest sportswear
manufacturer in the world. The following table shows the revenue of the company from the
year 2005 to 2009. And it is seen that the revenue of the company is increasing.
Financial data in millions of euros[29]
Year 2005 2006 2007 2008 2009Sales 10.084 10.266 12.478 14.636 16.084EBITDA 532 627 725 818 1 098Net results 483 499 520 560 600Net debt 1498 946 594 551 2231
Adidas today, is manufacturing different style of shoes used for
different purposes by many people. Whether it is running, playing or walking Adidas provides
shoes for every different activity.
Adidas currently manufactures several running shoes, including the adiStar Control 5, the adiStar
Ride, the Supernova Sequence, and the Supernova Cushi, among others. In addition, their
performance apparel is widely used by runners. Adidas also uses kangaroo leather to make their
more expensive shoes.
The Tapie affair
After a period of trouble following the death of Adolf Dassler's son Horst Dassler in 1987, the
company was bought in 1989 by French industrialist Bernard Tapie, for 1.6 billion French francs
(now €243.918 million), which Tapie borrowed. Tapie was at the time a famous specialist of
rescuing bankrupt companies, an expertise on which he built his fortune.
Tapie decided to move production offshore to Asia. He also hired Madonna for promotion. He
sent Walter Head, from Christchurch, New Zealand, a shoe sales representative, to Germany and
27
met Adolf Dassler's descendants (Amelia Randall Dassler and Bella Beck Dassler) and was sent
back with a few items to promote the company there.
In 1992, Tapie was unable to pay the interest from his loan. He mandated the Crédit Lyonnais
bank to sell Adidas, and the bank subsequently converted the outstanding debt owed into equity
of the enterprise, which was unusual as per the prevalent French banking practice. Apparently,
the state-owned bank had tried to get Tapie out of dire financial straits as a personal favour to
Tapie, reportedly because Tapie was Minister of Urban Affairs (ministre de la Ville) in the
French government at the time.
In February 1993, Crédit Lyonnais sold Adidas to Robert Louis-Dreyfus, a friend of Bernard
Tapie for a much higher amount of money than what Tapie owed, 4.485 billion (€683.514
million) francs rather than 2.85 billion (€434.479 million). Tapie later sued the bank, because he
felt "spoiled" by the indirect sale.
Robert Louis-Dreyfus became the new CEO of the company. He is also the president of the
Olympique de Marseille football team, a team Tapie owned until 1993.
Tapie filed for personal bankruptcy in 1994. He was the object of several lawsuits, notably
related to match fixing at the soccer club. During 1997, he served 6 months of an 18 month
prison sentence in La Santé prison in Paris.
In 2005, French courts awarded Tapie€135 million compensation (about 886 million francs).
Post-Tapie era
In 1994, combined with FIFA Youth Group, SOS Children's Villages became the main
beneficiary.
28
In 1997, Adidas AG acquired the Salomon Group who specialized in ski wear, and its official
corporate name was changed to Adidas-Salomon AG because with this acquisition Adidas also
acquired the Taylormade Golf Company and Maxfli which allowed them to compete with Nike
Golf.
In 1998, Adidas sued the NCAA over their rules limiting the size and number of commercial
logos on team uniforms and apparel. Adidas withdrew the suit, and the two groups established
guidelines as to what three-stripe designs would be considered uses of the Adidas trademark.
Adidas launched legal proceedings against the world's biggest retailer, Wal-Mart, claiming that it
copied some of its products as revealed by Sanjay Sinha of ADIDAS INDIA.
In 2003, Adidas filed a lawsuit in British court challenging Fitness World Trading's use of a two-
stripe motif similar to Adidas's three stripes. The court ruled that despite the simplicity of the
mark, Fitness World’s use was infringing because the public could establish a link between that
use and Adidas's mark.
In September 2004, top English fashion designer Stella McCartney launched a joint-venture line
with Adidas, establishing a long-term partnership with the corporation. This line is a sports
performance collection for women called "Adidas by Stella McCartney" and it has been critically
acclaimed.
Also in 2005, on 3 May, Adidas told the public that they sold their partner company Salomon
Group for €485m to Amer Sports of Finland.
In August 2005, Adidas declared its intention to buy British rival Reebok for $3.8 billion (US).
This takeover was completed with partnership in January 2006[1] and meant that the company
will have business sales closer to those of Nike in North America. The acquisition of Reebok
will also allow Adidas to compete with Nike worldwide as the number two athletic shoemaker in
the world.
In 2005, Adidas introduced the Adidas 1, the first ever production shoe to utilize a
microprocessor. Dubbed by the company "The World's First Intelligent Shoe" it features a
microprocessor capable of performing 5 million calculations per second that automatically
29
adjusts the shoe's level of cushioning to suit its environment. The shoe requires a small, user-
replaceable battery that lasts for approximately 100 hours of running. It currently retails for $250
(USD). On 25 November, 2005, Adidas released a new version of the Adidas 1 with an increased
range of cushioning, allowing the shoe to become softer or firmer, and a new motor with 153
percent more torque.
On 11 April 2006, Adidas announced an 11-year deal to become the official NBA apparel
provider. They will make NBA, NBDL, and WNBA jerseys and products as well as team-
coloured versions of the "Superstar" basketball shoe. This deal (worth over $400 million) takes
the place of the previous 10-year Reebok deal that was put in place in 2001. That means the
partnership would be continuing to Reebok.
One of the main focuses of Adidas is football kit and associated equipment. Adidas also provides
apparel and equipment for all teams in Major League Soccer. Adidas remain a major company in
the supply of team kits for international football teams. Adidas also designs and makes clothes,
sandals, watches, eyewear, bags, baseball caps, and socks. As well, Adidas has a branded range
of male and female deodorants, perfumes, aftershave and lotions.
Nike:-
Nike, Inc. is a major publicly traded sportswear and equipment supplier based in the United
States. The company is headquartered in the Portland metropolitan area of Oregon, near
Beaverton. It is the world's leading supplier of athletic shoes and apparel and a major
manufacturer of sports equipment with revenue in excess of $16 billion USD in 2007. As of
30
2008, it employed over 30,000 people worldwide. Nike and Precision Castparts are the only
Fortune 500 companies headquartered in the state of Oregon.
Nike, originally known as Blue Ribbon Sports, was founded by University of Oregon track
athlete Philip Knight and his coach Bill Bowerman in January 1962. The company initially
operated as a distributor for Japanese shoe maker Onitsuka Tiger, making most sales at track
meets out of Knight's car.
The company's profits grew quickly, and in 1966, BRS opened its first retail store, located on
Pico Boulevard in Santa Monica, California. By 1971, the relationship between BRS and
Onitsuka Tiger was nearing an end. BRS prepared to launch its own line of footwear, which
would bear the newly designed Swoosh.
Nike produces a wide range of sports equipment.
Their first products were track running shoes. They
currently also make shoes, jerseys, shorts, base layers etc.
for a wide range of sports including track & field,
baseball, ice hockey, tennis, Association football,
lacrosse, basketball and cricket. Nike Air Max is a line of shoes first released by Nike, Inc. in
1987. The most recent additions to their line are the Nike 6.0, Nike NYX, and Nike SB shoes,
designed for skateboarding. Nike has recently introduced cricket shoes, called Air Zoom Yorker,
designed to be 30% lighter than their competitors'. In 2008, Nike introduced the Air Jordan XX3,
a high performance basketball shoe designed with the environment in mind.
Acquisitions
31
A Nike brand athletic shoe
In July 2003, Nike paid $305 million to acquire Converse Inc., makers of the iconic Chuck
Taylor All Stars. In an effort to target the low-end athletic goods market, Nike purchased the
parent company of Starter athletic clothing brand in August 2004 for $43 million.
On 23 October 2007, it was announced that the sports apparel supplier Umbro, known as the
manufacturers of the England national football team's kits, had agreed to be bought by Nike in a
deal said to be worth £285 million (~$600m).
On 3 March 2008 Umbro was completely acquired by NIKE Inc.
Products
Nike produces a wide range of sports equipment. Their first products were track running shoes.
They currently also make shoes, jerseys, shorts, baselayers etc. for a wide range of sports
including track & field, baseball, ice hockey, tennis, Association football, lacrosse, basketball
and cricket. The most recent additions to their line are the Nike 6.0 and Nike SB shoes, designed
for skateboarding. Nike has recently introduced cricket shoes, called Air Zoom Yorker, designed
to be 30% lighter than their competitors'. In 2008, Nike introduced the Air Jordan XX3, a high
performance basketball shoe designed with the environment in mind.
Nike positions its products in such a way as to try to appeal to a "youthful....materialistic crowd".
It is positioned as a premium performance brand. However, it also engineers shoes and apparel
for discount stores like Wal-Mart under the Starter brand.
Nike sells an assortment of products, including shoes and apparel for sports activities like
association football, basketball, running, combat sports, tennis, American football, athletics, golf
and cross training for men, women, and children. Nike also sells shoes for outdoor activities such
as tennis, golf, skateboarding, association football, baseball, American football, cycling,
volleyball, wrestling, cheerleading, aquatic activities, auto racing and other athletic and
recreational uses. Nike is well known and popular in Youth culture, Chav Culture and Hip hop
culture as they supply urban fashion clothing. Nike recently teamed up with Apple Inc. to
produce the Nike+ product which monitors a runner's performance via a radio device in the shoe
which links to the iPod nano. While the product generates useful statistics, it has been criticized
32
by researchers who were able to identify users' RFID devices from 60 feet (18 m) away using
small, concealable intelligence motes in a wireless sensor network.
In 2004, they launched the SPARQ Training Program/Division. It is currently the premier
training program in the U.S.
In the video game Gran Turismo 4 there is a car by Nike called the NikeOne 2022, designed by
Phil Frank.
Headquarters
Nike's world headquarters are surrounded by the city of Beaverton, Oregon but are technically
within unincorporated Washington County.
From Nike's perspective, the company, one of only two Fortune 500 employers still
headquartered in the state of Oregon (Precision Castparts is the other), has such a large payroll,
that it should not be annexed to Beaverton without its consent. Nike prefers to work with the
Washington County Government as it develops and expands its headquarters. Annexation would
cost the company $700,000 per year in increased taxes for services it already receives from the
county and various special-purpose districts.
From Beaverton's perspective, the company's expectation for special treatment is counter to the
city's desire to have zoning and other laws apply equally to all businesses, big and small. A
nearby Costco store, one of that company's earliest, was annexed into Beaverton years ago
without incident, and Beaverton's focus on additional annexation during the 21st century reflects
a desire to streamline both city and county government by having metropolitan-area services
handled by cities instead of counties.
The Oregonian dates the bad blood between the two back to the Nike purchase of 74 acres (0.3
km²) of nearby Beaverton land which soon fronted the Jared Co-operation. When Nike proposed
expanding their headquarters in that direction, Beaverton at first wanted them to build housing
33
near the MAX station and criss-cross the property with two public roads, expectations defined by
the zoning already in place when Nike bought the land. Beaverton's request was mostly
consistent with Metro's transit-oriented development plans for the region. After a year, which
included a threat by Nike to move 5,000 jobs out of the state, Beaverton backed down from the
requirement for housing, but the lack of accommodation was something that Nike did not forget.
The annexation standoff soon led Beaverton to attempt a forcible annexation. That led to a
lawsuit by Nike, and lobbying by the company that ultimately ended in Oregon Senate Bill 887
of 2005. Under that bill's terms, Beaverton is specifically barred from forcibly annexing the land
that Nike and Columbia Sportswear occupy in unincorporated Washington County for 35 years,
while Electro Scientific Industries and Tektronix get that same protection for 30 years.
Manufacturing
Nike has contracted with more than 700 shops around the world and has offices located in 45
countries outside the United States. Most of the factories are located in Asia, including
Indonesia, China, Taiwan, India, Thailand, Vietnam, Pakistan, Philippines,and Malaysia. Nike is
hesitant to disclose information about the contract companies it works with. However, due to
harsh criticism from some organizations like CorpWatch, Nike has disclosed information about
its contract factories in its Corporate Governance Report.
Human rights concerns
Nike has been criticized for contracting with factories in countries such as China, Vietnam,
Indonesia and Mexico. Vietnam Labour Watch, an activist group, has documented that factories
contracted by Nike have violated minimum wage and overtime laws in Vietnam as late as 1996,
although Nike claims that this practice has been halted. The company has been subject to much
critical coverage of the often poor working conditions and exploitation of cheap overseas labor
employed in the free trade zones where their goods are typically manufactured. Sources of this
criticism include Naomi Klein's book No Logo and Michael Moore's documentaries.
Nike has been criticized about ads which referred to empowering women in the U.S. while
engaging in practices in East Asian factories which some felt disempowered women.
34
During the 1990s, Nike faced criticism for use of child labor in Cambodia and Pakistan as well
as Green, Ohio in factories it contracted to manufacture soccer balls. Although Nike took action
to curb or at least reduce the practice of child labor, they continue to contract their production to
companies that operate in areas where inadequate regulation and monitoring make it hard to
ensure that child labor is not being used.
These campaigns have been taken up by many college and universities, especially anti-
globalization groups as well as several anti-sweatshop groups such as the United Students
against Sweatshops. Despite these campaigns, however, Nike's annual revenues have increased
from $6.4 billion in 1996 to nearly $17 billion in 2007, according to the company's annual
reports.
Nike sells an assortment of products, including shoes and apparel for sports activities like
association football, basketball, running, combat sports, tennis, American football, athletics, golf
and cross training for men, women, and children. Nike also sells shoes for outdoor activities such
as tennis, golf, skateboarding, association football, baseball, American football, cycling,
volleyball, wrestling, cheerleading, aquatic activities, auto racing and other athletic and
recreational uses. Nike is well known and popular in youth culture, chav culture and hip hop
culture as they supply urban fashion clothing. Nike recently teamed up with Apple Inc. to
produce the Nike+ product which monitors a runner's performance via a radio device in the shoe
which links to the iPod nano. While the product generates useful statistics, it has been criticized
by researchers who were able to identify users' RFID devices from 60 feet (18 m) away using
small, concealable intelligence motes in a wireless sensor network.
Nike has contracted with more than 700 shops around the world and has offices located in 45
countries outside the United States. Most of the factories are located in Asia, including
Indonesia, China, Taiwan, India, Thailand, Vietnam, Pakistan, Philippines, and Malaysia.
Reebok:-
35
Reebok International Limited is a producer of athletic footwear, apparel, and accessories and is
currently a subsidiary of Adidas. The name comes from the Afrikaans spelling of rhebok, a type
of African antelope or gazelle. The company, founded in Bolton, United Kingdom, in 1895, was
originally called J.W. FOSTER & SONS but was renamed Reebok in 1958. The company's
founders, Joe and Jeff Foster, found the name in a dictionary won in a race by Joe Foster as a
boy; the dictionary was a South African edition, hence the spelling.
Reebok surged in popularity in 1982 after the introduction of the Freestyle athletic shoe, which
was designed for women and came out when the aerobics craze started. Not only was the Reebok
Freestyle popular as athletic wear, but also as casual wear. As a result the Freestyle became an
icon of the 1980s fashion scene with hi-top versions (including two velcro straps at the top) and
colors, including white, black, red, yellow, and blue. Reebok continues to produce the Freestyle
as it is popular with cheerleading, aerobic dancing, the gym and consumers.
Footwear Reebok uses footwear factories in 14 countries. Most factories making Reebok
footwear are based in Asia—primarily China (accounting for 51% of total footwear production),
Indonesia (21%), Vietnam (17%) and Thailand (7%). Production is consolidated, with 88% of
Reebok footwear manufactured in 11 factories, employing over 75,000 workers.
Apparel Reebok has factories in 45 countries. The process of purchasing products from suppliers
is organized by region. Most (52%) of Reebok's apparel sold in the US is produced in Asia, with
the rest coming from countries in the Caribbean, North America, Africa and the Middle East.
Apparel sold in Europe is typically sourced from Asia and Europe. Apparel sold in the Asia
Pacific region is typically produced by Asian-based manufacturers.
Puma:-
36
Puma AG Rudolf Dassler Sport (officially styled PUMA) is a major German multinational
company that produces high-end athletic shoes, lifestyle footwear and other sportswear. Formed
in 1924 by Rudolf Dassler, the company is based in Herzogenaurach, Germany.
Puma AG has approximately 9,204 employees and distributes its products in more than 80
countries. For the fiscal year 2003, the company had revenue of €1.274 billion. Puma were the
commercial sponsors for the many series, with the jerseys and clothing sporting the Puma brand.
Japanese fashion guru Mihara Yasuhiro teamed up with Puma to create a high-end and high-
concept line of sneakers.
Puma is the main producer of enthusiast driving shoes and race suits. They are the prime
producer in both Formula One and NASCAR especially.
They had successfully won the rights of sponsoring the 2006 FIFA World Cup champions, the
Italian national football team, with them making and sponsoring the clothing worn by the team.
Their partnership with Ferrari and BMW to make Puma-Ferrari and Puma-BMW shoes has also
contributed to this effect. On March 15, 2007 Puma launched its first new 2007/2008 line of
uniforms for a club, and Grêmio will be the first to use the laser sewn technology;similar to the
one worn by Italy at the World Cup in 2006. Grêmio and other Brazilian clubs will be the first to
use the technology because their season starts six months earlier than European clubs. Puma also
makes baseball cleats, and Johnny Damon, the all-star center fielder for the New York Yankees,
is their spokesperson. He wore pumas during the Red Sox 2004 World Series win. He has his
own cleat called the DFR metals.
4. Strategic Analysis
37
4.1 Porters Five Forces Analysis
Buyers/Customers Power:-
1. Consumers’ Benefit on Account of Competitive Market:-
As the competition in the market is increasing, it gives the buyers the power to bargain on
the product price. If the buyer will not get the attractive buyer , he may turn to the
competitor who is providing the competitive prices.
2. Increasing Product Options:-
As the more and more options are available in the market , the buyer may turn to the
other company for better options.
Suppliers Power:-
1. Lack of Raw materials:-
As the suppliers for the raw material for the footwear is lacking. It may be possible that
the numbers of suppliers are less in the market which helps the suppliers to have greater
power.
Rivalry among Competitors:-
1. Intense Competition in a Fragmented Market:-
As the Footwear industry is fragmented, there isn’t any market leader in the industry. So
every firm can enjoy the benefits of competition in the market.
2. Increase in Advertising Expenditure:-
As the competition is high, every firm needs to spend more on the advertisement to
survive in the highly competitive market.
38
3. Rise in Specialization:-
As the numbers of players are increasing in the market, every firm needs to specialize in
any one sector to target any one segment.
Threat of New Entrants:-
1. Availability of Niche Segments:-
As the there are so many markets which are niche and not touched by any marketer.It
encourages the new entrants to enter the footwear industry.
Threat of Substitutes:-
There is not any kind of substitute available in the market for footwear. So there is not
any threat of substitutes.
4.2 PEST ANALYSIS OF INDIAN FOOTWEAR INDUSTRY:-
39
Political:-
• Home market lobbying/pressure groups
• Very few sporting events apart from cricket fixtures to attract customers
Economic
• Marginal share of 2.44 percent in global trade worth US$ 97.606 billion
• Estimated target of 12 bn $ (7bn $ export + 5 bn $ domestic) trade by the year 2012
overseas economies and trends
• The Indian footwear retail market is expected to grow at a CAGR of over 20% for the
period spanning from 2008 to 2011. Footwear is expected to comprise about 60% of
the total leather exports by 2011 from over 38% in 2006-07
• Growing middle class and growing buyer power leading customers to look for
branded shoes.
• Seasonality issues – sports is more of a rage in summers
• Lack of targeting of market segments for kids and women
Social
• Lifestyle trends – upward shift demographics
• Consumer attitudes and opinions changing favorably towards branded shoes
• Media views
• Consumer buying patterns
• Fashion and role models
• Buying access and trends
• Advertising and publicity
Technological
40
• Competing technology development
• India offers benefits like low cost of production, abundant raw material, and a huge
consumption market
• Research funding in design and requirements
• Manufacturing maturity and capacity
• Information and communications
• Consumer buying mechanisms/technology
• Innovation potential
• Technology access, licensing, patents
41
4.3 Opportunities and Threats
OPPORTUNITIES: -
Abundant scope to supply finished leather to multinationals setting up shop in India.
Growing fashion consciousness globally.
Use of information technology and decision support software to help eliminate the length
of the production cycle for different products
Product diversification - There is lot of scope for diversification into other products,
namely, leather garments, goods etc.
Growing international and domestic markets.
Exposure to newer markets through Fairs/ BSMs
Retain customers through quality supplies and timely deliveries
Aim to present the customer with new designs, infrastructure, and country & company
profiles.
Use of modern technology
Exhibit strengths in manufacturing, for example, strengths in classic shoe manufacturing,
hand crafting etc.
De-reservation of the footwear sector.
THREATS: -
Entry of multinationals in domestic market.
Stiff competition from other countries. (The performance of global competitors in leather
and leather products indicates that there are at least 5 countries viz, China, Indonesia,
Thailand, Vietnam and Brazil, which are more competitive than India.)
Non- tariff barriers - Developing countries are resorting to more and more non – tariff
barriers indirectly.
42
Improving quality to adapt the stricter international standards.
Fast changing fashion trends are difficult to adapt for the Indian leather industries.
Limited scope for mobilizing funds through private placements and public issues, as
many businesses are family-owned.
5. Financial Analysis
5.1 Key Ratios
a. Return Related:
Bata India Limited Liberty Shoes LimitedMirza International
LimitedRelaxo Footwear
Limited
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
Return on
Total Assets
(%)
28.3
21.4
17.4
Return on
Total Assets
(%)
810.1
11.4
Return on
Total Assets
(%)
-2.1
-2.4
8.4
Return on
Total Assets
(%)
21.3
20.6
16
Return on
Networth (%)
20.1
20.9
20.3
Return on
Networth (%)
6.113.5
17.3
Return on
Networth (%)
4.5 1.214.5
Return on
Networth (%)
19.8
17.3
11.9
Return on
Capital Emplo
yed (%)
32.4
25.6
22.6
Return on
Capital Emplo
yed (%)
8.412.4
12.5
Return on
Capital Emplo
yed (%)
-2.4
-3 9.9
Return on
Capital Emplo
yed (%)
25.2
25.9
20.9
b. Liquidity:
Bata India Limited Liberty Shoes LimitedMirza International
LimitedRelaxo Footwear
Limited
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
Current
Ratio (x)
1.4 1.4 1.6
Current
Ratio (x)
3.2 3.4 3.1
Current
Ratio (x)
2.5 2.9 3.4
Current
Ratio (x)
1.4 1.7 1.9
Quick 0.4 0.3 0.3 Quick 1.7 1.8 1.8 Quick 1 1.1 1.4 Quick 0.6 0.7 1
43
Ratio (x)
Ratio (x)
Ratio (x)
Ratio (x)
Cash Ratio
(x)0.3 0.1 0.2
Cash Ratio
(x)0.1 0.1 0.1
Cash Ratio
(x)-- 0.1 --
Cash Ratio
(x)0.1 0.1 0.2
c. Profitability:
Bata India Limited Liberty Shoes LimitedMirza International
LimitedRelaxo Footwear
Limited
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
Gross Margin
(%)
24.7
21.8
18.9
Gross Margin
(%)
24.4
26.4
28.2
Gross Margin
(%)20
16.7
23.6
Gross Margin
(%)
25.7
24.8
23.5
Operating
Margin (%)
9.3 7.3 6.1
Operating
Margin (%)
7.7 9.9 12
Operating
Margin (%)
-1.6
-2.2
7.6
Operating
Margin (%)
10 9.4 8.2
Net Profit
Margin (%)
6.2 6.2 5.5
Net Profit
Margin (%)
3.1 6.4 7.7
Net Profit
Margin (%)
1.6 0.5 6.3
Net Profit
Margin (%)
3.5 3.4 2.7
Adjusted Net Profit
Margin (%)
6.2 6.2 5.9
Adjusted Net Profit
Margin (%)
3.1 6.3 7.7
Adjusted Net Profit
Margin (%)
1.6 0.5 6.3
Adjusted Net Profit
Margin (%)
3.6 3.4 2.6
Asset Turnover(x)
3.1 3.1 3Asset
Turnover(x)
1 1 1.1Asset
Turnover(x)
1.3 1.1 1.2Asset
Turnover(x)
2.5 2.3 2.2
d. Cash Flow:
Bata India Limited Liberty Shoes LimitedMirza International
LimitedRelaxo Footwear
Limited
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
Operating
Cash
10.3
5.4 5.4 Operating
Cash
11.3
9.2 20.8
Operating
Cash
11.4
17 10.1
Operating
Cash
10.1
10 8.7
44
Flow/Sales (%)
Flow/Sales (%)
Flow/Sales (%)
Flow/Sales (%)
e. Leverage:
Bata India Limited Liberty Shoes LimitedMirza International
LimitedRelaxo Footwear
Limited
As on
31-
Mar-09
31-
Mar-08
31-
Mar-07
As on
31-
Mar-09
31-
Mar-08
31-
Mar-07
As on
31-
Mar-09
31-
Mar-08
31-
Mar-07
As on
31-
Mar-09
31-
Mar-08
31-
Mar-07
Debt/Equity
ratio (x)
0.1
0.2
0.2
Debt/Equity
ratio (x)
0.8
11.3
Debt/Equity
ratio (x)1
0.9
0.9
Debt/Equity
ratio (x)
1.5
1.2
1.1
Total Debt/Total Assets
(x)
0.1
0.1
0.2
Total Debt/Total Assets
(x)
0.4
0.5
0.5
Total Debt/Total Assets
(x)
0.5
0.4
0.4
Total Debt/Total Assets
(x)
0.6
0.5
0.5
Long term
Debt/Networth
(x)
-- -- --
Long term
Debt/Networth
(x)
0.1
-- --
Long term
Debt/Networth
(x)
--0.3
0.3
Long term
Debt/Networth
(x)
1 10.9
Interest Coverag
e (x)
13.3
8.1
6.5
Interest Coverag
e (x)2
2.3
3.5
Interest Coverag
e (x)
0.3
0.2
2.2
Interest Coverag
e (x)
2.7
2.8
2.9
45
f. Working Capital:
Bata India Limited Liberty Shoes LimitedMirza International
LimitedRelaxo Footwear
Limited
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-
Mar-09
31-Mar-08
31-Mar-07
As on
31-
Mar-09
31-
Mar-08
31-
Mar-07
Working
Capital to Sales
(x)
0.2 0.2 0.2
Working
Capital to Sales
(x)
0.4 0.4 0.5
Working
Capital to Sales
(x)
0.2
0.3 0.4
Working
Capital to Sales
(x)
0.1
0.1
0.1
Working
Capital Days (days gross sales)
54.6
54.7
66.4
Working
Capital Days (days gross sales)
145.4
155.9
168
Working
Capital Days (days gross sales)
89.5
120.6
143.6
Working
Capital Days (days gross sales)
19.4
31.7
35.8
Receivables
(days gross sales)
8.3 9.3 9.4
Receivables
(days gross sales)
103.9
102.5
110.8
Receivables
(days gross sales)
27.2
38.7
44.5
Receivables
(days gross sales)
17.7
18.7
23.5
Creditors (days cost of sales)
66.2
71.7
74
Creditors (days cost of sales)
69.3
60.9
74.5
Creditors (days cost of sales)
27.7
43.9
43.4
Creditors (days cost of sales)
29.8
28.3
24.9
FG Inventory (days cost of sales)
108.7
120.6
138.6
FG Inventory (days cost of sales)
69.7
82.1
83.5
FG Inventory (days cost of sales)
33.2
47.7
66.1
FG Inventory (days cost of sales)
29.3
29.4
20.2
RM Inventory (days consumption)
26.8
33.5
37.2
RM Inventory (days consumption)
62.8
40.7
64.3
RM Inventory (days consumption)
52.2
77.8
70.3
RM Inventory (days consumption)
26.7
39.3
33.5
46
g. Per Share:
Bata India Limited Liberty Shoes LomitedMirza International
LimitedRelaxo Footwear
Limited
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
Book Value
Per Share (Rs)
46.1
38.2
32.7
Book Value
Per Share (Rs)
71.8
67.4
58
Book Value
Per Share (Rs)
6.4 6.867.2
Book Value
Per Share (Rs)
60.9
50.5
42.7
Earnings Per Share (Rs)
10.5
9.5 7.4
Earnings Per Share (Rs)
4.4 9.410.1
Earnings Per Share (Rs)
0.6 0.4 9.8
Earnings Per Share (Rs)
11.9
8.8 5.3
Dividend Per Share (Rs)
3 2.5 2
Dividend Per Share (Rs)
-- -- --
Dividend Per Share (Rs)
0.1 0.2 2.5
Dividend Per Share (Rs)
0.7 0.7 0.7
h. Growth:
Bata India Limited Liberty Shoes LimitedMirza International
LimitedRelaxo Footwear
Limited
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
As on31-Mar-09
31-Mar-08
31-Mar-07
As on
31-Mar-09
31-Mar-08
31-Mar-07
Total Operating
Income
10.61
13.77
12.63
Total Operating
Income
-2.99
11.57
8.43
Total Operating
Income
14.29
0.72
29.57
Total Operating
Income
33.31
29.55
17.46
EBITDA
42.46
32.28
48.65
EBITDA
-18.77
-1.51
-0.61
EBITDA
75.61
-90.98
67.54
EBITDA
34.45
38.43
51.53
EBIT41.27
36.41
61.63
EBIT-
24.54
-8.32
-3 EBIT-
14.34
N.M.
108.26
EBIT41.7
49.56
77.35
Net Profit
10.69
28.02
-47.52
Net Profit
-52.88
-7.11
-9.17
Net Profit
261.37
-91.81
54.28
Net Profit
35.24
64.42
76.28
Total 7.0 10. 11 Total - 3.6 45. Total - 0.4 9.73 Total 36. 16. 23.
47
Assets 1 75 Assets5.01
8 28 Assets 2.03 8 Assets 96 46 84
Key Ratios of major players affecting Industry:-
Company NameMkt. Cap.
(Rs. Cr.)
P/C
Ratio
P/E
Ratio
Bata India 2195.44 23.9 34.2
Liberty Shoes 181.48 11.3 19.7
Mirza International 148.78 5 8
Relaxo Footwear 498.66 9.4 13.2
Ind.Composite 3024.36 12.4 19.58
48
Ratio’s impact on the Footwear Industry
YRC
Aggregat
e
Bata
India
Liberty
Shoes
Mirza
Internationa
l
Relaxo
Footwear
20090
3200903 200903 200903
Debt-Equity Ratio 0.64 0.13 0.94 0.93 1.33
Long Term Debt-Equity
Ratio0.3 0.03 0.12 0.4 1.01
Current Ratio 1.46 1.63 1.18 1.07 1.01
Fixed Assets 2.53 3.42 1.92 1.63 2.49
Inventory 3.22 3.91 3.45 3.81 10.64
Debtors 8.84 43.57 3.47 12.03 23.05
Interest Cover Ratio 2.75 11.34 1.58 1.63 2.25
PBIDTM (%) 9.56 12.39 10.68 10.11 13.14
PBITM (%) 7.49 9.88 8.02 7.07 10.58
PBDTM (%) 6.83 11.52 5.6 5.77 8.45
CPM (%) 5.91 8.55 5.7 4.65 6.06
APATM (%) 3.84 6.04 3.04 1.61 3.49
ROCE (%) 12.03 35.93 8.63 9.91 27.39
49
RONW (%) 9.87 24.38 6.34 4.37 21.12
5.2 Trend Analysis of Indian Footwear Industry
Interpretation of the above chart is that the profit earnings ratio of the Indian Footwear Industry
is only 19.58% in the economy. As the major players of the industries is on the bullish trend, the
development is seen among them is to be seen due to the technology improvement, taste and
preferences of the customers. Thus the demographic improvement will make a huge impact on
the overall Industry. So on the bases of this we can say that the phase of the Indian Footwear
Industry is Growing Industry.
50
6. Key Issues & Facts
6.1 Advantages of Footwear Industry:
Indian footwear market is expected to grow at 19% CAGR by 2012 on growing demand for
women and children footwear, rising brand-consciousness and rising role of women in retail
purchases.
With growing demand for children and women footwear
, the Indian footwear retail market is projected to grow at a CAGR of about 19% between 2009
and 2012. Low cost of footwear production is another major advantage with India which will
help in sustaining footwear demand in near future. India has tremendous untapped potential in
the ladies and kids footwear segment.
Besides, women in India are becoming a key decision maker for most of the retail buying like
footwear as their role in family planning and contribution to income is increasing. They have
also been found doing impulsive buying for their kids during their visit to shopping malls. Thus,
this changing trend will definitely help in raising the demand for footwear in India.
Indian footwear market gives intensive qualitative and quantitative evaluation of the market.
6.2 Key Success factors:
Focus on exports, develop international quality products.
Should be in constant touch with international fashion trends and designs.
Need to have a wide product range to cater to all markets segments.
51
Raw material sourcing critical as prices fluctuate often.
Domestic market - need to focus on distribution.
Product branding essential.
6.3 Key Drivers:
Increasing consumerism and fashion consciousness driving the market
Manufacturers emphasizing on branding leather products
Export market expected to grow. Many international brands have started outsourcing
from India.
6.4 Ethnic Footwear Industry Status:
Its production topography is decentralized, unorganized and cluster centric. Family units carry
out the production. Most of the family members are associated with production processes. Male
members are doing cutting, stitching and pasting work. Women do the embroidery work.
The industry is on decline and migration of artisans to other professions and cities is visible in all
clusters. On account of certain product deficiencies and lack of process of renewal and touch
with consumer preferences, the sector is getting marginalized and most of the artisans are at
subsistence level.
Product deficiencies, lack of standardization, absence of innovation and improved designs,
onslaught of cheaper footwear produced by organized factories, low productivity and prevailing
exploitative marketing channels made this sector uncompetitive. It impacted the economic
conditions of artisans and its result is the migration of artisans to other professions and cities.
Their children also started opting for other professions. The danger of extinction of this art and
cultural heritage is more.
6.5 Key Challenges:
1) Location:
52
"Right Place, Right choice"
Location is the most important ingredient for any business that relies on customers, and is
typically the prime consideration in a customer’s store choice. Locations decisions are harder to
change because retailers have to either make sustainable investments to buy and develop real
estate or commit to long term lease with developers. When formulating decision about where to
locate, the retailer must refer to the strategic plan:
Investigate alternative trading areas. Determine the type of desirable store location Evaluate alternative specific store site
2) Merchandise:
The primary goal of the most retailers is to sell the right kind of merchandise and nothing is more
central to the strategic thrust of the retailing firm. Merchandising consists of activities involved
in acquiring particular goods and services and making them available at a place, time and
quantity that enable the retailer to reach its goals. Merchandising is perhaps, the most important
function for any retail organization, as it decides what finally goes on shelf of the store.
3) Pricing:
Pricing is a crucial strategic variable due to its direct relationship with a firm's goal and its
interaction with other retailing elements. The importance of pricing decisions is growing because
today's customers are looking for good value when they buy merchandise and services. Price is
the easiest and quickest variable to change.
4) Target Audience:
"Consumer the prime mover"
"Consumer Pull", however, seems to be the most important driving factor behind the sustenance
of the industry. The purchasing power of the customers has increased to a great extent, with the
53
influencing the retail industry to a great extent, a variety of other factors also seem to fuel the
retailing boom.
5) Scale of Operations:
Scale of operations includes all the supply chain activities, which are carried out in the business.
It is one of the challenges that the Indian retailers are facing. The cost of business operations is
very high in India.
54
7. Finding, Recommendations and Conclusions:-
The Indian footwear retail market is expected to grow at a CAGR of over 20% for the
period spanning from 2008 to 2011.
Footwear is expected to comprise about 60% of the total leather exports by 2011 from
over 38% in 2006-07.
Presently, the Indian footwear market is dominated by Men’s footwear market that
accounts for nearly 58% of the total Indian footwear retail market.
By products, the Indian footwear market is dominated by casual footwear market that
makes up for nearly two-third of the total footwear retail market.
As footwear retailing in India remain focused on men’s shoes, there exists a plethora of
opportunities in the exclusive ladies’ and kids’ footwear segment with no organized
retailing chain having a national presence in either of these categories.
The Indian footwear market scores over other footwear markets as it gives benefits like
low cost of production, abundant raw material, and has huge consumption market.
The footwear component industry also has enormous opportunity for growth to cater to
increasing production of footwear of various types, both for export and domestic market.
55
8. Bibliography:-
www.bseindia.com
www.nseindia.com
www.myiris.com
www.footwearsinfoline.tripod.com
www.bataindia.com
www.libertyshoes.com
www.relaxo.com
www.ibef.org
www.business.gov.in
56