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CONTENTS
EXECUTIVESUMMARY
SECTIONI: THEGLOBALFOOTWEARINDUSTRY
A. StructureoftheWorldFootwearIndustry
1. GlobalConsumption
2. TheSupplyChain
B. InternationalSupply,ExportAnalysis
1. ShoeExportSupply,Asia1.1 China1.2 Indonesia/Vietnam1.3 India
1.4 Others
2. ShoeExportSupplyEurope(EU15)2.1 Italy2.2 Spain/Portugal2.3 France2.4 Benelux2.5 UK/Germany2.6 OtherEuropeanCountries
3. OtherExporters3.1 Brazil3.2 Mexico3.3 Tunisia/Morocco
4. Conclusions/InternationalSupply
C. InternationalImportMarketAnalysis
1. EU(15)MarketforImports1.1 UK1.2 Benelux1.3 Germany1.4 France1.5 Spain/Portugal
3
Page
5-6
8-29
9
9
11
12
12131416
16
17181919192020
21212121
22
23
232425252626
1.6 Italy2. Conclusions/EUMarketforImports3. USAMarketforImports3.1 TypesofShoeswithMarketPotential3.2 Conclusions-USAMarketfor
Imports
SECTIONII: ANALYSISOFJORDANFOOTWEARSECTOR
1. Methodology
2. Manufacturing
3. LocalMarket3.1 Marketsize
4. BenchmarkingofIndustry
5. SWOTanalysisofIndustry
6. ConclusionsonJordanFootwearSector
6.1 Humanresources6.2 Technologylevels6.3 TheLocalmarket6.4 Optionsforexportmarket
penetration6.5 Typesofshoesforexport6.6 TargetCountries
SECTIONIII:RECOMMENDATIONS
1. StrategyforJordanianShoeManufacturingIndustry
2. ActionPlanforJordanianShoeManufacturingIndustry
2.1 DomesticMarket2.2 DomesticManufacturing2.3 MarketingtoEU2.4 MarketingtoUSA2.5 Training
Annex:FootwearexportsbycountryShoecosting
4
2627272929
32-48
33
33
3637
39
44
45
45464646 4747
49-57
51
52
5253555557
58-6263-64
EXECUTIVESUMMARY
Theobjectiveof this study is to assess the strategicpositioningof the JordanianFootwear Manufacturing Industry in the international market and to determinea strategy and action plan to enhance the competitiveness of exports from thesector.
Footwearisanactiveproductininternationalmarkets.Itisbeingdelocalizedfromdevelopedcountriestodevelopingones.ThebeneficiariesofthisprocessareFarEast nations, in particularChina, India,NorthAfrican countries and theCentralandEasternEuropeancountries(CEEC).ItisworthnotingJordan’snearneighbours;TunisiaandMoroccoarequitesuccessfulinexportingfootweartotheEU.
JordanhasanadvantageininternationaltradeinthatithasagreementswithUSAthroughQualifying Industrial Zones (QIZ) and a FreeTradeAgreement (FTA), italso has an Association Agreement with the EU.These agreements allow dutyfreeaccess to thesemarkets, for footwear,providingcertain stipulationsaremet(and thesearenotonerous).These twomarkets thereforebecame the targets forJordanianexports.
Theworldfootwearmarketisestimatedat12,469millionpairsin2002.Thebiggestconsumersofconventionalfootwear(i.e.withleatheruppers)areUSAandEurope.Betweenthemtheyconsumed5,823millionpairsinthisyear,46.7%ofthetotal.
Chinaproduces6.9billionpairsperyearandrising,itexportsmorethanhalfofthese.Mostoftheseshoesaresynthetic(over60%)andoflowqualityandprice.The average price of exported shoes from China was US$2.46 in 2002. Otherfactories in the Far East producemore leather shoes, in particularVietnam andIndia.ThesetwocountrieswouldbedirectcompetitorsforJordanianshoes(Chinawithitsproductmixandtradingpracticesisimpossibletocompetewithdirectly).
In Europe and the Mediterranean zone, there are significant exporters ofconventionalfootwearnamely;Italy,SpaininEUandTunisia,MoroccoinNorthAfrica.TunisiaandMorocco,inasense,are“tied”toItalyandSpainastheyhavemanysub-contractingagreementswiththesetwocountries.Thesetwoblocksarealso major competitors for Jordan. Among the CEEC, Romania is the strongestcompetitor.
The “sleeping giant” for conventional shoes is India. It has a well-developedindustrialinfrastructureandcompetitivepricing.Ithasnotyetreacheditspotentialas anexporterof footwear.However, the shoes itdoesexport arecompetitivelypricedandofincreasingqualitylevels.
TheEuropeanmarketforimportsiswideanddiverse.Themarketineachcountryhasdifferentcharacteristics,someareeasiertooperateinthanothers.OftheEU15,UKasaprimarytargetmarketandHollandasthesecondary,emergedwiththebestpotentialforexportsfromJordan.IntheUSAmarket,becauseofitslargesize,nichemarketingistheonlysensiblewayforwardfortherelativelysmallproducersinJordan.
Althoughthesemarketsareavailableandareimportfriendly,theshoemanufacturingindustryinJordanmustbeinapositioninwhichtoservicethem.Duringthesurvey
5
ofcompanies, itbecameobviousthatnoneofthemwascapableofexportingtosophisticatedmarketswithoutoutsidehelp.
In recent years, shoemanufacturing in Jordanhas gone into sharpdeclinewithfactories closing or converting to importers. This is due to many factors; thecumulativeresultof thesefactorsis that thelocalretail industryisdominatedbycheapimportsfromChina(ItisallegedthatsomeofthemmayhaveenteredJordanbydubiousmeans).Localmanufacturershavenotbeenabletofighttheseimports.As a result, they have a very smallmarket left to them.Nodoubtmanagementhavemademistakesinthepast,nowthereisanopportunitytocorrectthisandre-habilitatetheindustryintoaviableexporter.
Withanestimatedlocalmarketofbetween7and9millionpairs,itisproposedthatthisbesharedwithimportsona50-50basisbyrestrictingtheimportsfromChinathroughtheWTOSafeguardMechanismforaninitialperiodof4years.Controlsshouldalsobeexercisedonpublicisingthematerialcontentandcountryoforiginfortheshoessoldatretail.Thiswillcreateamarketforlocalfactoriestosellinto,theywillbeabletomakeprofitsonceagainandrebuildtheircapitalbase.
During this time, manufacturers must upgrade their manufacturing plants tointernationalnormsbyforginglinkswiththeItalianmachinery,materialsuppliersanddesignstudios.
They must implement programmes for operator training and workshopmanagement.Seniormanagementandownersmustalsoacquireknowledgeofuptodatemarketingtechniquesandtheneedforstrategicthinking.Anassociationisnecessarytodisseminateknowledgearoundtheindustry,tolookafteritsinterestsandtolobbyGovernment.
Theyhavetoreviewthetypesofshoetheymakeandtailorthesetotheinternationalmarketsof theEUandUSA.Helpwith factfinding trips,marketing studies andtheattendanceatinternationalshoefairsasobserversandeventuallyassellersisrequiredfromexportdevelopmentagencies.
PartnershipsshouldbesoughtoutwithEuropeanmanufacturersandmarketerstoactassubcontractors.Licenseeagreementswithsmallerinternationalbrandsforthelocalmarketareanotherpossibilitythatwilleventuallyleadtofullexporting.
Withthedevelopmentofasound-manufacturingbase,foreign(orlocal)investorswillbeattractedtofurtherenhancetheindustry.Jordanhasonlyonetannery,therewillbeopportunitiesfor2–3more.
Providingtheaboveplansmaterialise,thereisnoreasonwhyJordancannothave10–16viableshoemanufacturingplantswithin5yearswhoarenetexporters.
6
SECTIONI:THEGLOBALFOOTWEARINDUSTRY
A.StructureofWorldFootwearIndustry
1 GlobalConsumptionItisaxiomatictosayglobally,thefootwearindustryhasanexpandingmarket.Worldpopulationincreases,livingstandardsrise,sodoesthedemandforfootwear.
The following charts published by SATRA (Shoe and Allied Trades ResearchAssociation,UK)showthetrends.ThelargestmarketforfootwearintermsofpairsisAsiaincludingtheIndiansubcontinent.
Thefigures forglobal footwearconsumption (2002)and forecast to2008areasfollows:
GLOBALFOOTWEARCONSUMPTION(2002)
GLOBALCONSUMPTIONOVER10YEARS
GLOBALCONSUMPTIONPERCAPITAOVER10YEARS
REGION
China
Asia(excludingChina)
Europe(all)
North&CentralAmerica
MiddleEast,Africa,Oceania
SouthAmerica
TOTAL
%OFTOTAL
22.2
21.7
20.4
19.1
9.4
7.2
100
MILLIONSOFPAIRS
2,768
2,706
2,544
2,381
1,172
898
12,469
9
CONSUMPTION(MillionsofPairs)
Asia(all)
Americas
Europe(all)
RestoftheWorld
TOTAL
1998
4,744
3,011
2,239
1,086
11,080
2000
5,222
3,274
2,396
1,187
12,079
2002
5,474
3,279
2,544
1,172
12,469
2004
5,840
3,433
2,717
1,317
13,307
2008
6,528
3,611
2,886
1,399
14,424
CONSUMPTION(Pairs/capita/year)
Americas
Europe(all)
Asia(all)
RestoftheWorld
WORLDAVERAGE
1998
3.8
3.1
1.4
1.1
1.9
2000
3.9
3.3
1.5
1.1
2.0
2002
3.9
3.5
1.5
1.1
2.0
2004
4.0
3.7
1.6
1.1
2.1
2008
4.1
4.0
1.7
1.1
2.2
Intheyear2003thefollowingwasthemarketinfinancialtermsforexportersoffootwear,i.e.themajorimportingareas
Source:ICONGroupLtd.www.icongrouponline.com
ThemarketinmonetarytermsshowsadifferentpicturewithAsialyingapoorthirdbehindEuropeandNorthAmerica,reflectingthedegreeofsophisticationineachmarket.
Chinaproducesandexportsmoreshoes thananyothercountryby far. It isalsothebiggestconsumerof footwearbyvirtueof thesizeof itspopulation.On theotherhanditspercapitaconsumptionislow–onaparwithdevelopingcountries.Afurtherbreakdownofthemajorconsumingcountriesandareasisasfollows:
SourceFDRA
FootwearproductionisthereforeconcentratedinAsiaandfootwearconsumptionintheUSAandEurope.
*Figuresareanestimatebasedonofficialstatistics.Seepages37–38formoredetails.
REGION
Europe
NorthAmerica
Asia
LatinAmerica
MiddleEast
Africa
Oceania
TOTAL
%OFWORLD
50.15
33.74
9.14
2.19
1.94
1.48
1.35
100.00
US$000
23,362,091
15,718,585
4,256,841
1,022,423
903,873
689,675
629,106
46,582,594
COUNTRY
USA
Japan
EU
Canada
Taiwan
Australia
Korea
Brazil
Thailand
Mexico
China
India
Indonesia
*JORDAN
CONSUMPTIONMILLIONS/PAIRS
1,939.7
584.4
1,666.5
122.4
82.7
72.0
165.4
483.0
144.4
180.4
2,768.7
1,687.0
350.0
8.4
POPULATIONMILLIONS
290.3
127.2
380.2
32.2
22.6
19.7
48.3
182.0
64.3
104.9
1,286.9
1,049.7
234.9
5.4
PERCAPITAPAIRS/PERSON/YEAR
6.68
4.60
4.38
3.80
3.66
3.65
3.42
2.68
2.25
1.72
1.71
1.61
1.49
2.25
10
2 TheSupplyChainThesupplychainoftheindustrystartswithAgroIndustriesandprogressesthroughthechemicalindustryandtanningtomanufacturing.Leatherisaby-productofthefoodindustry.Itisacommodityandassuchissubjecttomarketforcesinasimilarwaytotea,sugar,coffee,etc.
11
B.InternationalSupply,ExportAnalysis
1 Shoeexportsupply,AsiaWorld footwear manufacturing is notorious for its pursuit of so called “cheap”labour.Inthe1960’sJapanwasthemainsourceofsupplyoflowcostfootwear.JapanwasthefirstFarEasternsupplierofNikeSportsshoes.(NikeistheGreekgoddessofvictory).Lowlabourcosts,suppliesofleatherandatraditionofshoemakingmadeJapan the launchpad for the Far East shoemanufacturing industry.The industrythenmoved toTaiwanas labour costs in Japangrew. It in turnmoved to SouthKorea,thentoIndonesiaandThailand.TaiwanandSouthKoreanolongerhaveanysignificantshoemanufacturingindustries.
The economic problems in the late 1990’s had amajor negative impact on thefootwear industries of Indonesia andThailand. This created many problems inthesupplychain,particularly inUSA,with the result the industries in these twocountrieshaveneverfullyrecoveredbecausebuyerslostconfidenceinthefactoriesabilitiestomaketimelydeliveriesatstableprices.
Meanwhile China was liberating its economic policies. Taiwan Chineseentrepreneurswerelookingforanewmanufacturingbase.HongKongbecameanewcapitalisticpartofChina.OperatingthroughHongKongforpoliticalreasons,theTaiwanese industrialistssetupshoe factoriesdirectlyoppositeTaiwanon theChinesemainland,wherethereweregreenfieldsitesandlabourwasplentifulandcheap.ThustheindustrythenmovedonagaintoChinaasthelowestlabourcostcountryintheregion.
This left China emerging as the dominant player because of it’s high capacitiesinstalled(atleastfortheUSA),infrastructure,andcomponentsupplyindustry.
ItisdifficultforanonFarEastcountrytocompeteheadtoheadwithChina.TheymustfindmarketnichesChinadoesnotdoparticularlywell.Forexampleleathertrumocs,sidewallstitch,McKaystitch,StCrispin,safetyshoesetc.TheseshoesareabitmoredifficulttomakeanddonotlendthemselvestotheautomatedproductionlinesprevalentinChina.Theyarealsoinconstantdemandinthemarket.
ItisclaimedthatVietnamisanevenlowercostproducerthanChina.VietnamisbuildingupitsinfrastructureaimingtobecomeaseriousplayerbutithasadifficultrelationshipwithUSA.
In parallelwith these developments Indiawas also targeting its large somewhatinformal leather sector tomodernise.ThroughGovernment legislation the sectorhasnowbecomeoneofthedominantleathershoesupplyingcountries.
TodaythemaininternationalsuppliersoflowcostfootwearfromAsiaareChina,IndonesiaandIndia;VietnamandThailandfollow.
AccordingtoSATRA(ShoeandAlliedTradesResearchAssociation,UK),in2002,India, China, and Indonesia accounted for about 75.2%, 9.4 billion pairs, of aglobalproductionof12.5billionpairsofshoes.
In monetary terms footwear exports of the “big three” present the followingpicture:
12
“BIGTHREE”GLOBALEXPORTSOFFOOTWEARU.S.$‘000
Theabovefiguresare indollarvaluesasopposed topairs.Chinahasamassiveproductioncapability,however itsex factorypriceaveragesat$2.50perpair, in2003,upfrom$2.46in2002.Indiaismoreupmarketandhasanexfactorypriceon average nearer $10-12.00 per pair as 60% of its exports are leather shoes,exactlythereverseofChina.Indonesiatraditionallymakes“white“shoesforthelikesofNike,ReebokandAdidasthathaveahigherexfactoryvalue.
Buyerslookingforshoesupplies,tendtolookatthesecountries.HowevertherearesomeproblemsassociatedwithdealingwiththeAsianregion. Intoday’smarket,retailers are looking for production flexibility, i.e. the ability to react quickly tomarketdemands.Theyalsolookatthetotalprocurationcosttogetshoesintotheirwarehouses.Thisincludesacalculationoftransportationcosts,deliverytimes(costoffinance)fastturnroundofrepeats(keepsstocksdown),traveltoforeignfactories,ratherthan,inthepast,justtheprice.Thiscanputthelargevolumeproducersinthe Far East at adisadvantage.Chinaand Indonesia arenot soflexible, India ismoreflexible.FarEastproducerstraditionallyhavedemandedlargeorders(50,000to 100,000) pairs per style; they are far away from themainmarkets,USA andEurope.
Largeordersarefineforlargeglobaldistributors.However,thereisamarkettrendtodaytobemoreindividual,requiringmoreoftensmallerordersofdifferentstyles.LargeFarEastfactoriesarepresentlynotgeareduptothisnewtrend.
1.1ChinaIthastakenChina20yearstoreachthestageitisattodayintheglobalfootwearindustry. Production figures in pairs, from ITC and China customs say thefollowing:
BILLIONSOFPAIRS
Chinaproduced55%ofallworld footwear in2002. Itsbiggestexportmarket istheUSA followed by Europe. Exports toUSAwere 5.1 billion dollars in 2002,representing 45.6% of the total exports. Europe imported 1.2 billion dollars
COUNTRY
China
Indonesia
India
TOTAL
RestofWorld(72countries)
Big3%shareofworldexports
SourceITC,UNComtrade
2000
9,850,226
1,672,110
651,382
12,175,718
27,760,714
31.3
2001
10,095,769
1,505,580
662,511
12,265,861
28,136,539
30.5
2002
11,090,084
1,148,052
622,590
12,862,728
25,858,232
33.3
YEAR
Exportpairs
Domesticpairs
Totalpairs
2000
3.9
2.0
5.9
2001
4.2
2.4
6.6
2002
4.4
2.5
6.9
13
representing 11.1% of the total (See annex). China production of shoes withnon-leather uppers is about 60% of the total, the balance being leather.Thesenon-leather shoes, although cheap are of, at best, indifferent quality.There areover20,000shoefactoriesinChina.Ofthefactoriesengagedinexports80%areownedbyTaiwaneseinvestors,theothersbyHongKongandlocalinvestors.WithhelpfulgovernmentpoliciesandTaiwaneseknowhow,theindustryhasprogressedtowhereitistoday.
ItisoftenoverlookedthatChinaalsohasalargedomesticmarket,over2.0billionpairsandexpanding.Itcurrentlyconsumeslessthan2.0pairspercapita.Thisstabledomesticbasegivesitasecureplatformonwhichtoexport.
Therearealsoproblemsloomingintheindustry.ChinaisnowasignedupmemberofWTOwhichwillseetariffbarriersfalling,thereducingoreliminationoftradesubsidiesandtheopeningupofthedomesticmarkettoimports.
Thereis increasedovercapacityintheChinesefootwearmanufacturingindustryleading to intensecompetitionandveryfinemarginsorevennomarginsat all.(One can understand this when told of the buying prices of shoes imported toJordanfromChina).Costoflivingincreasesinthecoastalareas,wheretheindustryisestablished,hasdrivenupwages.Chinesefactories,becausetheyrelyonlargevolumestobreakeven,haveaveryhighbreak-evenpoint.Ifthevolumesdeclinethefactoriesquicklyfallintooperatinglosses.
Consequently, the foreign owned companies are now looking for higher valueitems,namely leather footwear, tosurvive.Thecheapsynthetic footwearwillbelefttolocalfactoriestomake.Thereisalsoareportedshortageofskilledoperativesinthecoastalareas. It isalsopredictedthat therewillbeamoveawayfromthecoastalareasintotheinteriorbecauseofloweroperatingcosts.ThishoweverwillputpressureonlogisticsandmaynotbeasattractivetoUSbuyers.
OneofthemajorweaknessesoftheChineseindustryisthatitisnotaninnovator,itmakestoorder,orcopiesEuropeanstyling.ThisisbeingrecognisedandmovesarebeingimplementedtotrainindigenousChinesedesignersandcreateChineseglobalbrandnames.Whethertheywillsucceedinthisisamootpoint.Thedemandforhighvolumeordersisalsobeingaddressedwithfactoriesnowacceptingordersforafullcontainerasaminimum,ofanexistingdesign.
Nomatterwhathappens,Chinawillremainthedominantforceinfootwearsupplyfor the foreseeable future.However,costsandconsequentlypriceswill increasefrom China. As living standards increase around the world there will be moreemphasisonleatherfootwear.ThiswillprovidemorecompetitiontotheChineseindustry fromother countries, especially fromquality brand names that are notwidelyavailableinChina.
1.2Indonesia/VietnamIndonesia has had for some time an unstable economic and political climate,causinggreatconcernforinternationalshoesourcingcompanies,particularlythosefromtheUSA.TheshoemanufacturingcompaniesinIndonesia,manyofwhichareforeignowned,realisethisandareactivelyconsideringmovingtoVietnam,IndiaandChina.
14
Already 5 toy and 10 textile factories have recently moved out of Indonesia.TheTaiwanFootwearManufacturersAssociation (TFMA)says thatup to12shoecompaniesarelikelytoleaveIndonesia. Itwillbeinterestingtoseewherethesefactorieseventually relocate.MainlandChina iscertainlyoneoptionbutmaybesavvyTaiwaneseinvestorsmaylookatVietnamorevenfurtherafield(Jordan?)asChinaisbecoming“crowded”withshoecompanies.
Indonesia’sshoeexportshavebeenonthedeclineforthelastfewyears(Seeannex).In2000theywereUS$1.7billion,1.5billionin2001,andin20021.1billion.TheirbiggestmarketsarethesameasChina,USAandEurope.BoththeseareasareshowingdeclinesduemainlytoChinesecompetition.
Indonesia, incommonwithmanyotherexportingcountries,has to importupto80%oftherawmaterialsneededforshoemaking.TherapiddeclineinthevalueoftheIndonesiandollarhasmadethesematerialsmuchmoreexpensive.IndonesiahasbeenformanyyearsamajorsuppliertoNike,Reebok,Adidas,Converse,Fila,etc;all“white”sportsshoes.Withexfactorypricesescalating,thesecompaniesaredriftingawayfromthecountry.ThemainbeneficiaryofthisisVietnam.However,Indonesiaisdoingitsbesttore-groupandre-establishitsindustry.Itisaggressivelycuttingpricestogetmarketshare,pushingupthenumberofpairssoldbutleadingtoadeclineinexportrevenue.
It isalso interesting tonote that the IndonesianShoeManufacturingAssociationclaimsthat,illegalimportsofChineseshoesare“floodingtheIndonesianmarketandisseriouslyhurtingshoemanufacturers”.
Indonesiatherefore,becauseofitsinternalproblems,isbecominglessofaplayerintheglobalfootwearmarket.
Vietnamincontrast,in2003,exportedindollarvalueterms,morethanIndonesia.Mostoftheseexports(63%)goingtotheEU,13%toUSAand3%toJapan.ExportsrosefromUS$1.5billionin2000to2.2billionin2003(Seeannex).
Vietnamhasaggressiveplanstomoderniseits industrywithnewequipmentandtechnologies,trainingandtradepromotionactivities.Itisorganisingleatherclustersandencouragingtheinvestmentinprimarymaterials,namelyleathertanning.
Currentlyitimports75-80%ofallrawmaterialsrequiredforshoeproduction.Fromthis, it is obvious that the cost structure is based on importedmaterials,whichmakessettingacompetitivepricedifficult.Hence,theplantodevelopindigenousmaterials.
Much of the export business, (80% according to theVietnam Leather FootwearCorporation)isontheCMTprinciple,leavingverysmallprofitsfortheproducers.Governmentandindustrypolicyistomoveawayfromthisandselldirect.
In 2000,Vietnam had a problemwith the EU.A specialmethod ofmonitoringfootwearoriginatinginVietnamwasintroducedtopreventshoesoriginatingfromathirdcountryleavingVietnamandenteringtheEuropeanmarketfraudulently.
IthasalsoconcludedabilateraltradepactwiththeUSAallowingtariffratestofalltobetween0and20%.ItexportedoverUS$851millionworthoffootwearinthefirstsixmonthsof2002toUSAalone.
Thereare233 footwearproducerswithacapacityof380millionpairsperyear,
15
makingmostly sports shoes,48.5%.Othersarecanvas18%andasmall leatherfootwearproductionof1.5%.76ofthesecompaniesarestateowned,and77areforeigninvestors,themajoritybeingTaiwaneseandSouthKorean.
In the future,Vietnamwill emergeasa significant supplier in theglobalmarketplaceespeciallywhenitdevelopsitscapacitytomakeleathershoes.ItwillneverbeasbigasChinaor Indiabutcouldbecome thenumber three supplier in theregion.
1.3IndiaIndia has emerged in recent years as a relatively sophisticated low tomediumcost supplier toworldmarkets –The leather industry in India has been targetedbytheCentralGovernmentasanengineforeconomicgrowth.Progressively,theGovernmenthasproddedandlegislatedareluctantindustrytomodernise.Indiawasnotedasasupplierofrawhidesandskinssemiprocessedleatherandsomeshoes.Inthe1970’s,theGovernmentinitiallybannedtheexportofrawhidesandskins,followedthisbylimiting,thenstoppingtheexportofsemiprocessedleatherandencouraging local tanneries tomanufacturefinished leather themselves.Despiteprotestationsfromtheindustrialists,thishasresultedinamarkedimprovementintheshoemanufacturingindustry.IndiaisnowamajorsupplierofleatherfootweartoworldmarketsandhasthepotentialtorivalChinainthefuture(60%ofChineseexportsaresyntheticshoes).
Indiaisoftenreferredtoasthesleepinggiantinfootwearterms.Ithasaninstalledcapacityof1,800millionpairs,secondonly toChina.Thebulkofproductionisinmen’sleathershoesandleatheruppersforbothmenandladies.Ithasover100fullymechanised,modernshoemakingplants,asgoodasanywhereintheworld(includingEurope).ItmakesforsomeupmarketbrandsincludingFlorsheim(US),Lloyd(Germany),Clarks(UK),MarksandSpencer(UK).
Indiahashadmixedfortunesinitsrecentexportperformance.In2000,exportsofshoeswereUS$651million,in2001theseincreasedto663millionbutdeclinedin2002to623milliondollars(Seeannex).
ThemainmarketsforIndianleathershoesareUKandUSA,whichbetweenthemtakeabout55%oftotalexports.
Indiahasnotyetreacheditsfullpotentialintermsofaworldsupplier.Thisisduemainlytolocalcowleatherthatalthoughplentiful,hasamaximumthicknessof1.4–1.6mm,andthesocio/political/ infrastructureofthecountry.However,Indiaisanexcellentsupplierofleatheruppers,afactthatJordanianshoemanufacturerscould takeadvantageof. Importationofuppers fromIndiadoesnot infringeFTAwithEuropeortheUSA(ItmightbeaproblemintheQIZsystembecauseofthestipulationofvalueadded).
Thepotentialissettochangealbeitslowly,butwithapopulationrivallingChinaforsize,thereisnodoubtthetussleforworlddominationinfootwearsupplywillbebetweenthesetwocountries.
1.4OthersOthercountriesthatoperateintheregionareMalaysia,Thailand,PhilippinesandHongKong.
16
Malaysia traditionallymadeshoesbasedon the rubber industry.Thishas largelybeenreplacedwithnewereasyprocessingsyntheticpolymers,whichhasledtothedeclineoftheshoemanufacturingindustryinthecountry.Itisnowasupplieroflowvolumespecialityproductsthatrequirerubberfortechnicalreasons.
Thailand does export footwear. However, it has a very well developed tanningindustry.Thereareover130tanneriesinthecountrythatexportlargelytotheregion.Footwearexportsarenotassignificantas theyonceweredueto theincreaseinlabourcosts.Theindustrythatsurvivesismovingupmarkettohigherqualitynichemarketproductswithbetterqualityleather,producedbylocaltanneries.Thailandalsoexportsasignificantamountofleathergoods.
ThePhilippinesare reallyno longeraplayer in theglobalmarket.Theysufferedthe same fate asTaiwan and South Korea. Chinese imports are penetrating themarket.Since1997,thedomesticindustryhaslostanestimatedUS$142,000,000inrevenue.
HongKong is amajor factor in the region althoughnot a producer of shoes. Itprovides marketing, banking and logistical services. It is a stabilising influenceinsomeofthedifficultpoliticalproblemsintheregion.Itactsasafacilitatorforproducersandbuyers.TheAPLFisheldthere(AsiaPacificLeatherFair),amajormeetingplaceforbuyersandsellersfortheregion.
2 Shoeexportsupply,Europe(EU15)Itisarguablethatthe“heart”oftheshoeindustrystillliesinEuropeandnotAsia(China/India),manyshoemakingcountriesinEuropearemajorexportersofshoes.Thecreativeprocessesoffashionandtechnologyarecertainlycentredhere,Asiadoes not create fashion or decide colours for a coming season. ShoemachineshavebeendevelopedinEurope.ThemachinesmadeinAsiaareinthemaincopiedfromEuropeanideas.EuropedevelopedtheCADsystemsnowusedinmanyshoecompaniesaroundtheworld.
Possiblythedevelopmentof“white”shoeshasbeendevelopedinparallelinUSA,withbrandslikeNikeandNewBalance.However,itshouldberememberedthatReebok andHitec started inUK,Adidas andPuma, inGermany, Lotto andFilain Italy, Le Coq Sportif, in France.These brands still havemajor tieswith theiroriginatingcountries.
Italyistheworldleaderintermsoffashionanddesign.Italsohasavibrantshoemachinerymakingindustrybasedonprogressivetechnology.Itisamajorsupplierofshoecomponents totheworld.Othercountries inEurope,particularlyFranceandSpainalsocontributetothisconcentrationofknowledgeanddevelopment.InEurope,thereisavastsupplyindustrysupportinglocalmanufacturers(aswellasexportingtoAsia).
Because of this accumulation of experience over many years, Europe is still asignificantexporterofshoes.This isconcentratedonthemediumtohighendoftheleathershoemarket,itsuppliesthedemandsofmoresophisticatedconsumers,intraEuropeaswellastherestoftheworld.YoucanseeupmarketItalianshoesinjuxtapositionwithcheapChinesefootwearinmostinternationalcities,includingAmman.EvenBritishmadeexpensive($350perpair)goodyearweltedshoesareinhighdemandinItalyandFranceaswellasUSAandtheGulfStates.
17
However,althoughtheEuropeanfootwearindustryisfightinghardtosurvive,itisstillloosingmarketshareinexports.From1999to2002,exportsdeclinedby5.5%withafurtherdeclinein2003(Overthesameperiodimportsroseby20.5%).
FootwearexportsfromEuropepresentsthefollowingpicture:
FOOTWEAREXPORT‘000PAIRS
The largest market for EU produced footwear is North America, followed bySwitzerland,RussiaandJapan.ApartfromRussia,marketshareisdecliningintheseareas.Penetrationdeclinedfrom1999to2003by34.2%inUSA,(exchangerateproblem),7.9%inSwitzerland,30.5%inJapanandincreasedby28.9%inRussia.
ThebiggestexporterandthemostsignificantisItaly,followedbySpainandtoalesserextenttheothercountries.
2.1ItalyItalyisthedrivingforceoftheEUfootwearindustry,astheleadingexporterandproducer. Its main export markets (extra EU) are USA, Romania, Switzerland,Russiaand Japan.The industry isgeared towards leather footwearofmediumtohigh qualitywithmany international, though smaller, brand names.Average exfactorypriceisUS$22–25.ExportshavebeenholdingsteadyforthelastfewyearsataroundUS$7.5billionperannum(Seeannexfordetails).Exportsin2003were320millionpairs.
Italian flair and styling is well known, it is the innovator in the market place.Consequently,isusuallythefirsttooffernewproducts,ensuringatleastthebulkofinitialorders.Inthismanner,itmanagestohangontomarketshare.Inasense,thefactthatitsexportshavedeclinedonlyby6%since1999,isquiteacreditableperformance.Muchofthisdeclinemustbearesultofcurrencyfluctuations,whichinturndistortsexportprices.However,withtheintensecompetitionnowprevalent,itisdifficulttokeepaheadofthefollowerswhomanagetobringsimilarproductstomarketnotsofarbehindtheItaliansatlowerpricesandacceptablequality.
PartofthestrengthoftheItalianindustryisitsstructure,whichistheexactoppositeof China.The Italian industry is composedmostly of small firms employing 12–20people(Ofcoursetherearesomelargercompanies,Filanto,Effietc).Therearemore than7,000firms in the sector900ofwhichare shoeproducers.Theyco-operatetogether,sharingmanufacturingprocesses,andmarketingplans.Theyare very flexible, have quick reaction times, lowminimum ordering quantities,elastic production capacities and an imageof goodquality.They can easily actas subcontractors for the bigger companies, this satisfies the needs of themoreupmarket retailers and distributors. In this way they keep overheads and coststo aminimumandmanage to compete internationally in theirmarket segment.It isaunique Italian structure thatworkswell in Italyduemainly to thecultureandtraditionofshoemakinginthecountry.Itisanongoingquestionanddebatewhetherthissystemcanbereplicatedinothercountries.
EXPORTS(EXTRAEU-15)
SourceEurostat,CEC
2000
245,897
2001
241,198
2002
223,245
2003
190,773
18
2.2Spain/PortugalSpainisverysimilartoItalyinexportprofile.Theindustryismuchsmaller,about50%insize,oftheItalianindustry.Generallyitsproductsareabitcheaperforverycomparablequality. ItsmainmarketsoutsideofEUareUSA,MexicoandJapan.Becauseofthiscompetitiveedge,SpanishexportshaveincreasedinrecentyearsfromUS$1.9billionin2000to2.1billionin2002.
SpainistryinghardtocaptureexportmarketsandisprovingaveryfastfollowertoItaly.ItisexploitingitsSpanishconnectionwithMexicoandtosomeextentintheUSA.
PortugalisevensmallerthanSpain,itsmainmarketstendtobeintraEurope.ItsonlysignificantoutsidemarketisUSA.AccordingtotheFootwearAssociation,in2002Portugalhad1,350smallcompaniesmaking99,000,000pairsof shoesofwhich87,000,000wereexportedtoneighbouringcountries.
The fact that Portugal still supplies largemarketers of footwear, Clarks,UK andEcco,Denmark,withshoes,isanindicationofitscompetitiveness.
2.3FranceFrance tends to have exportmarkets that are francophone in nature or in closeproximity. Its biggest exportmarket isGermany followedbyBelgium (Benelux),afterthistheUSAcomesthird.ItalsoexportstoNorthAfricancountries(Tunisia,Morocco,Algeria)whereithascloserelationships.ExportsroseinmonetarytermsfromUS$0.9billionto1.0billionin2002reflectinganincreaseininflationratherthanpairs(Seeannex).
There are 173 small and medium sized companies producing shoes. France isparticularlystronginsafetyfootwearandchildren’sshoes.Ittendstoproduceinthetopendforallitsmarketsegments.IthasstrongbrandssuchasMephisto,CharlesJourdan, Kickers and Babybotte. Jallate and Lemaitre are well known in safetyfootwear.
ManufacturinginFrancegenerallyisgoingthroughadifficulttimecausedbynewEU legislation, which France has enthusiastically adopted, namely the 35-hourworkingweek.OtherEuropeancountrieshaveoptedoutofthis.In1992therewere278shoecompaniesinFrance.In2002,thishadreducedto175,adeclineof37%.ManycompaniesrelocatingoffshoretoNorthAfrica(TunisiaandMorocco).
With the difficult manufacturing environment, the decline in manufacturing inFranceisinevitable.
2.4BeneluxTheBeneluxcountriesofNetherlands,BelgiumandLuxembourgproducevirtuallynoshoesbetweenthem.However,theyhaveagreattraditionintrading.HollandandBelgiumactasre-exportersandsupplymanycountriesinEU(15)andtheCEECcountriesplusRussia.Theymanagetointroducegoodqualitymediumtolowendshoestothemarketsourcedfrominternationalsuppliersatcompetitiveprices.TheyhaveapermanentinternationalsalonsetupnotfarfromAmsterdamwherebuyersareoffered“onestopshopping”.Exportswereupby23.8%fromUS$2.1billionin2000to2.6billionin2002
19
2.5UK/GermanyThese two countries have suffered themost in a decline inmanufacturing.Thecompanies that are still active, produce shoes for niche markets. These theysuccessfullyexportusuallyatthetopendintermsofpricing.TheUKhasalongestablishedmensgoodyearwelttraditionandproduceshighqualityfootwearsuchasChurch,Barker,Grenson,whichareexportedtoUSAandtheEU(15).GermanyhasareputationofproducingcomfortshoesformenandladieswithsuchbrandsasJosefSeibel,Gabor,Romika,Salamanderetc.mostlyexportedintraEurope.
Germany’smainexportmarketsareAustria,followedbyHolland(forre-export)andFrance.ThesecondarymarketsareFrance,SwitzerlandandUK.Therewere127shoefactoriesinGermanyattheendof2002,andbytheendof2003thisnumberhaddeclinedto109.
UKmarketsareUSA,thebiggest,followedbyFrance,ItalyandGermany,withasmallproportiongoingtoHollandforre-export.Exportshavedeclinedby14.3%intherecentyear.
These twocounties,byvirtueof the typesof shoes theymake,wouldnot reallybe international competitors for the types of shoes Jordanwould be capable ofproducing and would not feature in any strategic marketing plans in terms ofcompetingwiththeproducersformarketshare.
2.6OtherEuropeanCountriesMany of the countries applying to join or have joined the EU are significantproducersoffootwearandhaveadistinct,shortterm,advantageinwageratesovertherestof theEU.ThesecountriesdoexportshoestotheEU,usuallyundersubcontractmanufacturingforItalianandGermancompanies,althoughTurkeytendstobemoreindependent.
PRODUCTIONMILLIONPAIRS
SourceEurostat
Production in these countries however, has declinedor stagnated over a 4-yearperiod to 2002.This reflectsmore on the transformation of the industry from aplannedeconomy toanopenmarketone. In recentyears,productionhasbeenincreasing as companies re-organise and comes to terms with the newmarketenvironment.
Themanufacturing plants make leather shoes in themedium quality level, butarehavingdifficultymeetingthepricepointsdemandedbythemarketinEuropeduemainlytoorganisationaldifficulties.Thesehowever,arebeingsolvedbytheirEuropeancounterparts.
COUNTRY
Turkey
Poland
CzechRepublic
Hungary
Slovakia
1998
241
58
15
14
10
2002
215
52
8
14
10
EXPORTS2001
52
31
N/A
N/A
N/A20
Romania has a significant footwearmanufacturing industry supported by Italianinvestment.It isnotfarfromNorthernItaly,thehuboftheshoeindustry.Asit is(currently)outside theEU, itcanmaintaina lowcostbase in termsofwages. ItproducesmediumtomediumlowqualityshoesatcompetitivepricesandobviouslysubcontractsfortheItalians,Italytakes75%ofitsexports.
FOOTWEAREXPORTU.S.$‘000
3 Otherexporters
3.1BrazilBrazilhasalargeshoeindustryandisanaggressiveexporter.Thereareover6,000shoefactoriesproducingalmost650millionpairsperyear.70%oftheshoesmadeareforlocalconsumption.Thebalanceforexport,mostlygoestotheUSA,againabout 70%. UK ranks second with other South American countries taking therest.ExportsareaboutUS$1.5billion.Themainproductexportedishighqualityaffordableladiesshoesofalltypes.
3.2MexicoMexicoisalargeproducerofshoes,mainlyforthedomesticmarket.ForexportsittendstolookNorth/South,especiallyasithastheNAFTAtotradein.However,this is adouble-edged sword.Anyunwanted stock left inUSA is verypromptlyshippedtoMexicoatlowprices,whichdisruptsthelocalmarket.IthasalsobeennoticedthatcheapChineseshoesalsocomeinthiswaysomehow,whichputsanevenbiggerstrainonlocalmanufacturers.MexicoshipsverylittletoEuropewiththeexceptionoftoSpain.Theshoesareaimedatthemiddlemarket.
ExportsaredecliningfromUS$400millionin2000to328millionin2002.Buttheindustryhasaprogrammeofre-generationassistedbystronglocalassociationsandhelpfromtheFederalGovernment(ThepresidentofMexicocomesfromashoemakingarea).
ThecountryissufferingfromlowcostshoesfromChina.TheMexicanGovernmenthas recently (2004) extended its anti dumpingduties for another 4 years.Theserangefrom165%to1,105%dependingonthetypeoffootwear(Nikehoweverisexempt fromthismeasure).Thishasnotcompletelysolvedtheproblem,Mexicois suffering from “Triangulation” i.e. shoes from China entering the USA andthenbeingshippedtoMexicofreeofdutiesduetotheNorthAmericaFreeTradeAgreement(NAFTA).
3.3Tunisia/MoroccoTunisiaisasuccessstoryasfarasshoeexportingisconcerned.AcombinationofindustryfriendlyGovernmentpolicies,aggressivepromotionbyexportpromotion
ROMANIASOURCEITC
World
Italy
Rest
2000
784,974
599,276
185,698
2001
975,599
737,958
237,641
2002
1,157,931
864,612
293,319
21
agencies,atraditionofshoemaking,adevelopedsupportindustryintermsoftrainingschemesandatechnicalcentre,havecreatedaleatherindustryworthUS$770.2million.There are 423 companies in the sector employing over 25,000 people,20,000ofwhichworkinexportorientedfactories(2002figuresfromCEPEX).Itisalsoclosetothemostimportantfootwearmarketintheworld–Europe.Ittakesatruck4-5daysdoortodoortoMilan.
Exportshavetripledin10yearsfromUS$138.7millionin1993to$439.6millionin 2003. Companies that export 100% of their production due to their specialstatusasindividualexportingzonesmanufacture77%ofexports.Shoesanduppersrepresentcloseto84%oftheseexportsinmonetaryterms.
Over90%ofexportsgo toEurope, Italybeing thebiggestmarket (52%),France(30%)andGermany(9%).Obviouslyshoesgoingtothesecountriesareofahighstandard.
Oneoftheproblemscomingtolightaftertenyearsofdevelopment,forcompaniesthatarenot100%foreignowned,isprofitability.MuchoftheworkdoneinTunisiaissubcontract forEuropeanbrands.Thesepartnersdictate the termsofbusiness(becausetheysupplytheorders),andconsequently,theprofitallowedtothelocalproducer.Localcompaniesfindthemselvestrappedinthissystemandfinditalmostcommerciallyimpossibletogetoutofit.Thesystemworkswellinthebeginningbut as local companies gain more experience through technology transfer andmarketingandbecomemoreconfident,therecomesatimetheywouldliketobe“mastersoftheirowndestiny”.
TheonlyrealwayoutofthisdilemmaistostartanewfacilityelsewhereeitherinTunisia(mightbedifficult,conflictofinterests)oranother“userfriendly”country–Jordan.
MoroccoisasomewhatsmallerplayerthanTunisiabutstructuredinaverysimilarway.Thereareabout220smallertomediumsizedcompaniesemploying13,000peopleproducingabout70millionpairsperannum.TheyhavethesamecustomersasTunisia.
4 Conclusion–internationalsupplyTheFarEastisaformidableproducerofcheap,lowqualitysyntheticshoesandhighqualitysportsshoes,dominatedbyChina.Itisdevelopingitsleathershoemakingcapability,theratioof60%syntheticshoeswillswingmoreandmoretoleather.
ItisgeareduptohighvolumesandtendstodealwithlargebuyerswhoareusuallylocatedintheUSA–wheremassmarketingisthenorm.Inotherareas,particularlyEuropethereisatrendtotargetmarketing,creatingniches,requiringfastreactiontimesfromsuppliers.TheFarEastisnotsosuccessfulinthistypeofoperation.Thisprovidesopportunities for smallerflexible, specialised,productionunits that areclosertothemarket.
This goes a longway to explaining the reasons for the success of theTunisian,Moroccan,ItalianandSpanishshoeindustries.ThereisanopportunityforJordantoemulatethem.
Romaniaisemergingasaformidablesupplier,helpedtoalargeextentbyItalianknowhow,bothtechnicalandmarketing.
22
Indiahasagreatpotentialbutnotyetfullyrealised.
C.InternationalImportMarketAnalysis
1 EU(15)marketforimportsForseriousshoemanufacturerswhowishtoenterexportmarketsEuropeprovidesthemostpotential.If“GreaterEurope”istakenintoconsideration,itisthebiggestimportmarket in theworld, it isalsothemostdiversified.Europeimportscheapquality low-end shoes,andalso thehighestqualityavailable,pluseverything inbetween.There are differences inmarket characteristics betweenmember statesanddifferencesindistributionmethods.Somecountriesareeasiertoexporttothanothers.Thesizeofthemarketsinindividualcountriesalsovariesduetopopulationandconsumption trends.There isamoveaway fromthecheapershoes tomorecomfortableleatherfootwear.Fashionplaysabigpartinthemassmarket.ThereisasubstantialtradeamongtheEUpartners,especiallyfromItaly,whoexportstoeveryothercountryintheEU.
Threecountriesarenotpartof themonetaryunion,UK,DenmarkandSweden.WiththeJordanianDinarpeggedtotheUSdollarthisshouldmakeexportstothesecountriescompetitive,especially to theUK(DenmarkandSwedenarerelativelysmallmarkets).
Thebiggestconsumersof footwear in theEUareGermanyandUK followedbyItaly,FranceandSpain.Germanyinparticular,andItalytosomeextent,havehaddepressed economic climates and are showing limited growth potential. UK isprobablythemostbuoyantmarketintheEUatpresent.
Consumptionfiguresareasfollows:
EU(15)FOOTWEARCONSUMPTIONU.S.$‘000
SourceCBISurvey
Theleading6countriesrepresent87%ofthetotalconsumptionofthe15states.
Thedifference inconsumption inmember states ismore related toclimaticandculturaldifferencesratherthanmarketforces.
AsfarasimportsofshoesmadeinJordanareconcernedthebiggestcompetitorswouldbe:
COUNTRY
Germany
UK
Italy
France
Spain
Benelux
Others
2000
11,026
7,693
8,457
7,934
5,183
3,553
6,355
2001
11,021
8,147
8,639
8,037
5,485
3,702
6,526
2002
10,763
8,595
8,293
8,198
5,777
3,693
6,676
CONSUMP-TIONPERCAPITA
132
143
146
139
144
142
129
ESTIMATEDANNUALGROWTH%
2003–2007
1.5
3.0
-1.0
2.2
1.8
1.0
1.5
23
ItalySpainPortugalTunisiaMorocco
IndiaCentral&EasternEuropeanCountries(CEEC)
TheFarEastisstillafactorincertainEUcountries(Vietnamwithitsleatherindustrydevelopment).Itsproductmixtendstobemorein“white”shoes,itisnotpossibletocompetewiththemdirectly.Nichemarketingisthekeytomarketentryintheso-called“brown”shoemarket.
IMPORTSTOEU(15)FROMCOUNTRIES
Itcanbeseenfromtheabove,importsfromintraEuropecountriesaredeclining,while imports fromNorthAfricaand Indiaare increasing.TheCEECaremakinginroadswithRomania(notyetamemberofEU)makingthebiggestpenetration.OftheexportingcountriesthereforeTunisia,IndiaRomaniawouldbethemajordirectcompetitors.
1.1UKTheUKmarketissomewhatuniqueinEuropeinthatitimportsfootwearfromtheverylowend(allsynthetic),toexpensive(allleather)designerbrands.Themarketsegmentsrangefromverylowtoveryhighpricepoints.AccordingtotheBritishFootwearAssociation,UKimported338millionpairsin2003.
About240millionpairsweresoldthroughretailchains,withlessthan10%soldthroughindependentretailers.Theseretailchainscanbeof20-30shopsupto300–450shopsspecialisinginfootwear.Otherretailersincludedepartmentstoresthattraditionally sold only clothing, now they are starting to sell the total ensembleincluding shoes.Other outlets, non-specialist, are supermarkets,mail order andmarketstalls.
Women’sshoesaccountforabout50%ofthemarket,men’s34%andthebalance16%children’sinmonetaryterms.Inpairagetermswomenbuy49%men26%andthechildren’smarketis25%.Importsofleatherfootwearaccountforalmost60%
COUNTRY
Italy
Spain
Portugal
Tunisia
Morocco
India
CEEC(exclRom.)
Romania
1999 20012000‘000prs
244
103
81
11
12
29
92
45
‘000US$
3,291
1,145
1,357
263
161
428
1,422
661
‘000prs
240
93
76
14
13
30
98
53
‘000US$
3,215
1,108
1,336
320
175
481
1,543
862
‘000prs
201
92
76
16
15
33
110
63
‘000US$
3,323
1,166
1,390
355
199
585
1,793
1,155
24
oftheUKmarket.
Distributors,wholesalers and agents introduce shoes to themarket.There is nomajorbuyinggroup,whichmeanstherearemanycustomerstosellto.Therearealsomany popular brand names on themarket, either as supplied footwear orbrandedshops.
Themainsuppliersforleatherfootwearin2001in‘000pairswereasfollows:
Thissectorimported130,852millionpairsintotalfortheperiod.
1.2BeneluxThetraditionoftradedominatesthefootwearsectorhere,HollandandBelgiumarebigre-exportersofimportedshoes.TheysupplytherestofEU(15)plustheCEECaswellastheirlocalmarket.Themarketsegmenttendstobemediumormediumlowendandthetradersdemandkeenprices.However,ifthemerchandisingiscorrect,goodbusinessrelationshipscandevelop.TheattractionofBeneluxismoreforthere-exportingratherthanjustthelocalmarket.
Themainsuppliersforleatherfootwearin2001in‘000pairswereasfollows:
Thissectorimported80,960millionpairsintotalfortheperiod.
1.3GermanyTheretailmarketinGermanyhasbeendepressedforsometimeduetoprevailingeconomicconditionsinthecountry.Theredoesnotseemtobeanygreatchangeintheseconditionsfortheforeseeablefuture.
Twolargebuyinggroups(GarantandANWR)controlover25%ofthepurchasesinthecountryanddominatethemarket.Theyhavebetweenthem3,500members,theDiechmanngroupisthebiggestretailchainoperatingwith1,113shops.
Thereare fewother largegroupswhoarealsoplayers.Thismakes itdifficult forexporterstosellintothemarketbecauseofthelimitednumberofcustomers.Also,Germanyhasahighqualitythreshold,withrigidspecifications,makinglifedifficultforoverseasmanufacturers.
COUNTRY
Italy
Portugal
India
FarEast
‘000PAIRS
24,303
16,333
3,787
31,845
COUNTRY
Italy
Portugal
Spain
Germany
India
FarEast
‘000PAIRS
6,053
4,948
276
184
122
18,828
25
Themainsuppliersforleatherfootwearin2001in‘000pairswereasfollows:
Thissectorimported148,522millionpairsintotalfortheperiod.
1.4FranceThe Frenchmarket has a very similar structure toUKwith the largedivergenceofmarketsegments.Ithasaretailsector,whichisverysimilaraswell.Thereareabout6,700shoeretailshopsinFrance,whichincludes42chains.ThebigchainsareVivarte(formallyAndre)with143shopsandLaHalleauxChaussureswith495shops.
Themainsuppliersforleatherfootwearin2001in‘000pairswereasfollows:
Thissectorimported95,850millionpairsintotalfortheperiod.
1.5Spain/PortugalSpain has about 16,000 retailers supplying shoes. Independent specialisedretailerssellabout55%andmultiplechainsabout7%ofthemarket.Therestisindepartmentstores,mailorderandclothingshops.DevelopmentsinthedistributionoffootwearinSpainhavelaggedbehindotherEuropeancountries.
Portugalissimilarbutsmaller.
The main suppliers for leather footwear to Spain in 2001 were Benelux, ItalyPortugalandtheFarEast.Importswere13,959millionpairsintotalfortheperiod.
1.6ItalyAlthoughamajorproducerofshoesandisexportoriented,theItalianshoemarketfor imports isgrowing. Importswere196millionpairs in2000andestimatedat294millionpairsin2003.80%oftheseshoescomefromoutsidetheEU.In2002,Romaniawas thebiggest supplier in value terms (28%) as the shoes it sells arenearlyall leather.Themajorityof supplies fromRomaniaare subcontractswithItalian manufacturers or distributors, so little marketing is done by Romanian
COUNTRY
Italy
Portugal
Spain
Austria
India
FarEast
‘000PAIRS
34,03
14,325
10,660
439
351
15,371
COUNTRY
Italy
Portugal
Spain
Netherlands
FarEast
‘000PAIRS
22,340
15,779
12,756
8,922
6,488
26
producers.China is thebiggest supplier inpairage terms (27.4%),mostlysports,textileandplasticshoes.
Leatherfootwearisthebiggestmarketsegmentatabout70%oftotalconsumption.Distribution in Italy is somewhat fragmented with no major chains unlike UK,Germany and France.There are many independents and of course departmentstores. Shoppingmalls have not yet developed in amajorway. Because of thisfragmentationthereare,intheory,manycustomerstogoat.Thesecustomerstendtobeservedbywholesalers,importagents,anddistributors.
Themainsuppliersforleatherfootwearin2001in‘000pairswereasfollows:
Thissectorimported84,748millionpairsintotalfortheperiod.
2 Conclusions–EUmarketforimportsTheEUmarketislargeanddiversified,itisalsoverycompetitive,withallaspiringexportingcountriestryingtopenetrateit.Themarketisfullandoccupied,theonlywaytoenterthemarketisbyconquestmarketingi.e.beatingoutacompetitor.
TheEUisnotproactivewhenlookingfornewsuppliers,itisuptothemtopresenttheirofferingtothebuyersforconsideration.Forbuyerstotakenoteacompetitiveadvantagemustbeestablishedandavaluepropositionmade.
ThecurrentintraEuropesuppliers,Italy,SpainandBeneluxarewellestablishedandareatleadingedgeofthemarketintermsofproductdevelopment.Theyoperatein the medium to high end of the market.The extra Europe suppliers,Tunisia,India,Romaniahavegovernmentalsupport,havestrongdomesticmanufacturingindustries,arewellsupportedbycomponentsuppliersandothers.Consequently,theyareverycompetitive,theyoperateatthemediumtomediumlowendofthemarket.
OperatingintheEuropeanmarkethasotheradvantages.Inevitably,companiesareexposedtothelatestfashions,technologyandmarkettrends;thisisabighelpwhenexportingtootherlessdevelopedmarkets.
TheFarEastisafactor,italwaysis,itdominatesthewhiteshoemarketsupplyinEurope.FarEastcountriescompeteamong themselves for thismarket,Europeansuppliershavemoreor lessabandoned it.However, as thismarket isbecomingsaturated, Far East suppliers are turningmore andmore to “brown shoes” fromleatherandposeathreatforthefuture.
3 USAmarketforimportsUSAhas the biggest individualmarket in theworld for shoes. Like amagnet itattractsalmostall shoemanufacturers.However, the realitiesofoperating in the
COUNTRY
Romania
CEEC
Vietnam
China
Others
‘000PAIRS
32,876
9,544
6,020
976
35,332
27
Americanmarketareharsh–itisverycompetitive,verybig,andveryunforgivingifmistakesaremade.
ThemajorityofconsumergoodssoldintheUSA,themassmarket,aresoldthroughlargechainsofshops,withthousandsofstoresperchain.Footwearisnoexceptionto this fact, this type of operation needs like sized suppliers to feed the largevolumesinvolved.ThisiswhymainstreamUSAlookstotheFarEastforitssupplierswhoarecompatibleinsize.However,thereareotherchannelsofdistributionthatinAmerican termsare relatively small,but for smallandmediumsizeexportersofferopportunities.
ImportsoffootwearintotheUSAareasfollows:
FOOTWEARIMPORTSTOUSAUS.$‘000
Sportsshoes,predominantlywhiteshoes,takeupthemajorityoftheretailmarket.AccordingtotheNationalSportingGoodsAssociationover$14,400millionworthofshoesweresoldeachyearforthepast3years.TheactualproductionofshoesintheUSAisabout75millionpairsperyear(manyofthemindustrialfootwear)versusimportsof1.9billionpairs(2002figures).
Althoughthemarketishugeandcanbeintimidatingforsmallandmediumsizedmanufacturers,itstillhasitssegments.Therearestillopportunitiesforgoodqualityleatheruppered shoes, correctlypriced, likewise safety footwear. Fully injectionmouldedsafetywellingtonbootsisanotherarea.
Forsmallandmediumsizedshoemanufacturersthishasimplicationswhichmeandevelopingstrategiestoenterthemarket.
JordanhastheFTAandQIZagreementswithUSA.TheFTAallowsconventionalleatherandsafetyshoes toenterUSAat0%duty.Forothercountries thedutiesrangefrom8.5%to20%.TheQIZallowsfullymouldedindustrialfootweartobeimportedfreeofduty.OutsidetheQIZitwouldbesubjectto22.5%fromJordanand37.5%fromothercountries (TheFTAandQIZsystemshavecertainrules toallowthistohappenbutthesearemanageable.Theobjectiveistoencouragetradebetweenthetwocountries).
For Jordanianmanufacturers, itwould seem tomake sense to aim at these twosegmentswhichofferacompetitiveadvantage.
Recently (August 2004) the NSRA (the National Shoe Retailers Association of
USASOURCEITC
WORLD
China
OtherFarEast
Italy
Brazil
Mexico
Spain
UK
Rest
2000
15,662,620
9,741,866
1,603,698
1,317,198
1,205,938
356,225
341,779
203,214
2,078,182
2001
16,009,439
10,283,988
1,549,544
1,311,242
1,202,939
315,290
286,042
156,039
904,355
2002
16,159,259
10,763,137
1,548,637
1,229,370
1,134,595
283,188
281,269
109,105
809,958
28
America) launched their buying alliance. The NSRA represents independentretailerswhogenerallyoperatesmallchainsofshopsthatarefamilyowned.Thebuyingallianceislookingtopurchaseforitsmembers,privatebrandsthatarenotavailableinothershopsinUSA.Theyaimtobuydirectfromproducersandimportdirectly to their member’s stores, in this way they cut out themiddleman.Themanufacturerandtheshopsshouldsharethissaving.Theshopsarehopingforupto70%margins.Althoughnewandasyetuntried,itcouldturnouttobeanexcellentwayforasmallproducertoentertheUSAmarket.
ThealliancewillbeshowingattheWSA(WorldShoeAssociation)shoeshowinLasVegastwiceperyear.Contactshouldbemadewiththem.
Industrialfootwearistechnicalinnatureandneedstobecarefullydeveloped,witha37.5%dutyadvantage itwould seemanother segment tobe investigated.ThecompaniescurrentlymakingthisproductforthelocalandregionalmarketshouldconsidertheUSAmarketthroughtheQIZ.ThepossibilityofmakingunderlicenceinJordanshouldalsobeborneinmind.
3.1TypesofshoeswithmarketpotentialThereisnoreasonthatshoesaimedattheEUmarketcannotalsobesoldinUSA.Thereforetoavoidduplication,thesesametypesofshoeslistedundertheEuropeanmarketwouldbesuitablefortheUSA.
3.2Conclusions–USAmarketforimportsTherearenogreatsecretsorspecialtechniquesaboutoperatingintheUSAmarket.Tobesuccessful,thefollowingshouldberemembered:
Producersanddistributorsshouldbeofcompatiblesize.Theproductmustbeofconsistentlygoodquality.Pricingmustbekeen.Excellentservicemustbegiven.
29
SECTIONII:ANALYSISOFJORDANFOOTWEARSECTOR
1 MethodologyIn order to get a proper picture of the shoe manufacturing industry in Jordan,a seriesof visitsweremade to the larger enterprises inAmman.This comprised13 companies (1 company declined a visit) ranging from shoe manufacturers,componentmanufacturersandrawmaterialsuppliers.Theoriginalaimofthevisitswastodoabenchmarkingexerciseoneachcompanytocompareitwithindustrynorms.Abenchmarkingformwasdesigned.Intheevent,theparlousstateoftheindustry rendered the form redundant. Much of the information therefore wasempirical in nature, obtained from entrepreneurs themselves throughdiscussionandinterviewandbyobjectiveexperience.Theowners/managersofthecompanieswereforthrightintheirviews.Whereinformationcouldbeverified,itwasacceptedasfact,whereitcouldnotbeverified,itwasacceptedasopiniononly.Afterinitialhesitation, (the visit coming from “government”), entrepreneurs welcomed thevisits,recognisingthatthemainobjectivewastohelptheindustryoutofitspresentdifficulties.
AsurveywasalsoconductedoftheretailshopsinAmmantoseethevariousmarketsegmentsthattheindustryserved.
In order to complete the study, information was obtained from official sources(Department of Statistics, EJADA, The Competitiveness Team at the Ministry ofPlanning,plusotherrecognisedshoeinformationcentres).
2 ManufacturingFromanassessmentofthesevisits,itisclearthatthestateofshoemanufacturinginJordanisinaverybadway.
With the exception of JordanTanning Company and possiblyAl-Manara ShoesCompany(whobothhavenichemarketsintheservicesegment)thereisnoshoefactory in operation. All have been reduced to mere workshops, making, bytraditionalhandmethods,between20and120pairsofshoesperday,mostlyfromsyntheticmaterials.EvenaCompany,whichisknownasoneofthebestmanagedshoeenterprisesintheworld,hasreduceditsoperationtoonlyimporting,havingpreviouslymade 1,500,000 pairs of shoes per year in Jordan 50% of the shoeenterprisesvisitedarealsoimportingshoesforresellinordertocreateanincome.Thisisanobviousconflictofinterests.
Becauseof themassive impact ofChinese (synthetic shoes) and to some extentSyrian (leather) footwear imports, local manufacturers now have a very limitedmarket for their products. It is worth noting, Syrian shoe manufacturers areprotecteddomesticallyagainstimports.Companieshavealsosufferedfromcapitalerosion.Management andowners are completely demoralised, thinking only ofsurvivalratherthanplanningforthefuture.
Thedomesticmarkethasbeenmoreorlesslosttolocalmanufacturers.Theonly
33
peopledoingwellareshoerepairers!Themassmarket,retailpricesbetweenJD5.00toJD15.00,hasbeentakenoverbyimportsfromChina.Theseshoesare90-95%synthetici.e.withPUorPVCuppersandliningsandsolesofPVC,thermoplasticrubber,resinrubberorPU.Theseshoesarenotleather,theydonotbreath,(unlikeleather),theyaresimilartoputtingaplasticbagonyourfoot,whichcanproducefoothealthproblems,especiallyduringthehotseason.Theyareuncomfortabletowear,butpeoplestillbuythemforthemselvesandevenfortheirchildren!
Local shoe manufacturers who are still active, are trying desperately hard tocompetewiththeChineseimports.However,theycontinuetoreplicatetheChineseproductintermsofcheapmaterials,lastshapes,heelheights,colours.TheyhaveseentheChineseshoesintheshopsandthereforebelievethisiswhatconsumerswant.TheyarefightingtheChineseheadtohead.Thisisnotagoodstrategyandclearlylacksvision.Theyneedtofindothernicheproductsiftheyaretosurvive,butnichemarketinghastobedoneearlyoninthecycle.Manymanufacturersnowfindit is too late, theyrealise thisstrategy isnotworkingandsuccumbtobeingimportersthemselves.
Onlyonecompanyvisitedchanged itsproduction fromChinese type imports tosafetyshoesinordertosurvive,thiswasmainlyduetocorrectstrategicthinking.
FOBpricesforthetypesofshoesinquestionhavebeenquotedatbetweenUS$1.40and$4.00.Someofthepricesquoted,comparedtothecostofmakingtheshoe look far too low,which gives rise to the suspicion of dumping.However,this is difficult to prove. It also seems that smuggling is an issue. Even officialspokespersons for theChinese industrysay theaverageex factoryprice is$2.50perpairin2003.ItisalsosuspectedthattheChineseindustryhashiddensubsidiesandexportincentives(13-14%)whichareineffecttheprofitofthefactoriesratherthanapercentageof the trueproductioncost, (importers themselvesmentionedthis).Thesefactsmakemanufacturersevenlesswillingtoproduceandturnsthemintoreluctantimporters.
Faced with this structure, it is extremely difficult for local manufacturers tocompete.Theyhaveduties,upto30%,theyhavetopayforrawmaterialimports.Themainrawmaterial,leather,isonlyavailablefrom1localtannerywhoismoregeared to service footwear than fashion.Manycritical rawmaterialsneeded forshoemanufacturinginJordanhavetobeimportedanddutypaid.Governmenthasrecentlyannouncedthatimportedindustrialinputswillbereducedtozerorateofduty.However,thesituationonthisisstillunclear.
A trialcostingwasdone (seeannexes)ona ladiesdressshoesimilar toChineseimportsbutusinglocallyavailablesyntheticmaterials.ThisshowedarawmaterialcostofUS$4.15,addonlabour,$2.96,givingaproductioncostof$7.11.Thisisprobablyabout$4.11to$4.61morethantheFOBpriceoftheequivalentChineseshoe.
Say the Chinese shoe is $3.00 FOB, $3.50 CIF, duty, clearing and forwarding,local transportation etc, would be 35% = $4.73 into warehouse cost, still lessthanproductioncost(withoutoverheadsandprofit)of$7.11forthelocallymadeequivalent.
Reduce the local raw material costs by 30% (duty, handling charges, localwholesalersprofitetc)givesarawmaterialcostof$2.90addlabourof$2.96=
34
productioncostof$5.86.
This isstill$1.13morethantheChineseCIFprice.Thisscenariostillmakes itextremelydifficultforthelocalmanufacturertofighttheimportsandre-establishthelocalmanufacturingbase,evenifitwouldgivetheconsumersabetterqualityproduct.
Nodoubtwithafactorymakingupwardsof450pairsperday,everyday,efficienciesinmanufacturingwouldbeachievedandcostswoulddecreasetogettoacceptednorms.Thiscostsavingwouldallowtheshoestobemarketedatsensibleprices.
Howevereveniflocalmanufacturershadamarketandaccesstodutyfreeinputstheystillhavesomemajorobstaclestoovercomeiftheyaretosurvive.Thesearetechnicalinnature.
Shoeengineeringhastobeimproved.Gradingofpatternsshouldbedonebymechanicalorcomputerisedmeans,itisnotpossibletomakeexcellentqualityshoesgradingpatternsbyhand.This is timeconsuming, inaccurateandmostimportantly wastes material, (leather, the most expensive commodity in theshoe).
Lasts,solesandheelsmustbeinthecorrectcombination.Theshoemusttreadcorrectly,otherwiseitwillbeuncomfortableinwear.Noforeignbuyerwouldbuyashoethatdoesnottreadcorrectly.
Cuttingofleathermustbedoneproperlyaccordingtothelinesofstretchandpositionofthepartontheleatherhidetopreservetheintegrityandqualityoftheshoe.Wastehastobecontrolled.
Thereneedstoaninvestmentinthestitchingofuppers.Mostmachinesusedaresimpleflatbed,veryfewpostbedsewingmachineswereinevidence.Postbedmachinesgivetheflexibilityandefficiencyinproducingdesignsthatthemarketwants.
Workshopmanagementisatbestrudimentary.Therewaslittlecontrolovertheproductionprocesses.Shoesweretreatedlikepotatoesduetolackofequipmentfor transportingsemi-processedgoodsthroughthefactory.Tobeefficientandreducecosts,aproperlabourloadingofoperatorsisrequired,linkedtoincentivepayment.
Propercostingsystemsare required.Most factoriesestimatecosts rather thancalculatethemgivinginflatedfiguresleadingtotoohighprices.Costingcanbedonemanuallybytheparallelogramsystemorbetterstillbycomputer.
Companies need to decide their market niches and build a range of shoesaccordingly,thengooutandsolicitordersforthem.Thisshouldbedoneatleasttwiceperyear.
Companies should practice proactive, sound marketing techniques. Thereneedstobeproductdifferential,(not“metoo”shoes),keycustomervalues,acompetitiveadvantage(s),brandnamesthatarepromotedtotheconsumeretc.Itispossiblethatpartofthereasontheimportshavebeensuccessful,intheshorttermatleast,isthefactthatthelookoftheshoeorfashioniswhatthemarket
35
36
wants.Successfulshoemanufacturersmakewhattheycansellratherthansellwhattheycanmake.
The above are manageable situations which can be solved by technologytransferand training.Thestructureof themarket,however, requiresGovernmentintervention.
3 LocalmarketThesurveyoftheretailshops,fromshoppingmallstothedowntownarea,revealsthatthemarketissaturatedwithlowquality,thoughcheap,Chinesemadefootwear.Theyareallvery similar in stylingandpricing inalmostall shops, there is littleproductdifferentiation.Theyarenotvalue formoney. However, the shoes lookgood,arefashionable,intermsoflastshapesandheelheights.Thisisthereasontheysell,iftheydidnotlookgoodnomatterwhattheprice,consumerswouldnotbuy.Addtothisanattractivepriceandyouhaveawinningretailcombination.
Thereseemstobetoomanyshoeschasingtoofewcustomers.Hopefully,thefactthatthistypeofChineseshoethatlastsfrom3daysto3monthsbeforeitbreaks,andhastobereplaced,willhaveaneffectonthemarketandincreasethedemandforbetterqualityfootwear,albeitathigherretailprices(Bettertobuy3pairsperyearfor45JDthan5pairsfor50JD).Thelackofimplementationofconsumerprotectionlawsdoesnothelpthesituation.However,itseemsthatconsumershavenotyetreactedtothisfact,butsoonerorlaterthequalityproblembecomesafactorandsalesinevitablydecline(Onelocalmanufacturergivesanunconditionalguaranteefor6monthsonitsshoes).
Inothercountriesthisinfluxofcheap,inferior,Chinesefootweardisruptsthelocalmarketforaperiodof3to5yearsbeforeconsumersbecomedisillusionedwiththeproductsandrejectthem.Chinesefootwear,initially,gainsanentryintoamarketnotreallyonprice,(althoughthisisafactor)butbecausetheylookgoodandarefashionable (Possibly in the past local manufacturers were not supplying whatconsumerswanted).
Thefirstimportersmakegoodprofits(buylow,sellhigh),thenothersrealisethisand also start to import. Competition between importers becomes fierce, retailpricesandmarginsfall,themarketcannotabsorballtheshoesinstock,eventuallythereisafalloutandthemarketshouldreturntosomenormality.
Somemanufacturers,evenimporters,claimthereareupto5millionpairsofshoesinwarehouseswaitingtobeputonthemarket.Therewasnowaytoverifytheseclaimsbutevidenceinalltheretailshopswherethereisheavydiscountinggoingon,maypointtostockeliminationratherthantraditionalsummersales.Iftherearelargeinventories,thishastheeffectofstagnationinthemarket.Retailershavenoopentobuybecauseofcapitaltiedupinstock.Inthiscase,manufacturerswiththebestproductintheworldcouldnotsell.
The statistics on imports of shoes into Jordan are confusing.TheDOS has onesetoffigures, the ITC,whichpublishesfigures fromtheUNComtradeStatistics,obtainedfromreportingcountries(inthiscaseChina)hasanother.Thefiguresareasfollows:
37
IMPORTSOFSHOESINJORDAN(US$)
Thereisahugediscrepancyinthefigures.Anaverageof3millionpairsperyearunaccounted for (and this is takinganaveragepriceof$3.00perpair,which isprobablyhigherthanthetrueaverage).Thislendscredencetotheclaimsthattherearemillionsofpairssittinginwarehouseswaitingtobemarketed.
Duringthisperiod,thelocalshoemanufacturingindustryhasaverydifficulttimeand is in danger of going into terminal decline. If nothing is done, it is almostimpossibleforittorecover.Theindustryisaneasycreatorofjobs,bothintanningandmanufacturing.Acomponentandrawmaterialsupplyindustryalsodependsonit.
A further irritant in themarket is the selling of imported second hand or usedfootwear.Thiscommodityisimportedbythekiloandissubjecttoadutyrateof30%underthe640590classification.Ithasbeenknownforthecategorytobechangedto “charitable status”which is zero rate.The shoes are of poor quality, no twopeoplehavethesamefeet.Itisthereforeguaranteedthatpreviouslywornfootwearwillbeuncomfortabletowear.Furthermore,theseshoescanprovetobeahealthhazardastheiroriginsareunknownandtheyarecertainlynotsterilised.Theydonotseemtobeamajorfactorinthelocalmarketatpresentdue,inthemain,tothelowpricesofregularimportedshoesandlackofconsumerawareness.However,iftheChineseshoeimportsweretobecurbed,thereisadangerthatthisitemcouldtaketheirplace,whichwouldbeevenworsescenarioforlocalmanufacturers.Theyreallyhavenoplaceinadevelopingmarketandshouldbebanned.
3.1MarketsizeAneffortwasmadetotryanddeterminetherealsizeofthelocalmarketforshoes.Intheeventthisturnedouttobemoredifficultthananticipatedduetoconflictinginformation,andthelackofstatisticsinpairageterms.Industrialists’opinionswerethat themarketrangedfrom8millionto20millionpairs.Whenaskedto justifythesefigurestheyprevaricatedleadingtotheconclusiontheydidnotreallyhaveanyconcreteinformationastothesizeofthemarket.
However,usingstatisticsfromDOS,industrysources,andexperience,thefollowingextrapolationwasdone:
YEAR
DOS,allshoes
ITC,CHINAonly
Difference
Diff.Inpairs@$3.00perpair
2000
11,940,261
20,044,000
8,103,739
3,980,087
2001
11,169,963
19,894,000
8,724,037
2,908,012
2002
14,650,480
20,240,000
5,589,520
1,863,173
ESTIMATIONOFTHEFOOTWEARMARKETINJORDANThefollowingisanestimationofthesizeofthefootwearmarketinJordan.Itassumesthateveryshoethatismanufacturedorimported(minusexports)issoldinthecountryduringtheyearinquestion.Ittakesnoaccountofchangeininventory.
TOTALPOPULATIONAgeGroup0-1415-1920-6565+TOTALINCOMEEARNERS(I.E)EmployedMaleFemaleTOTALInfomal(33.3%employed)TOTALINCOMEEARNERSFOOTWEARMARKET(JD)ImportsLocalExportsTOTALPURCHASEPERCAPITA(JD)PURCHASEPERI.E(JD)
1998
1,764,383603,9802,206,668180,7194,755,750
1,372,966217,7751,590,741529,7172,120,458
6,547,55413,865,00010,603,7089,808,846
2.064.63
1999
1,817,900622,3002,273,600186,2004,900,000
1,414,610224,3811,638,991545,7842,184,775
7,564,21014,364,0004,084,46317,843,747
3.648.17
2000
1,869,469639,9532,338,096191,4825,039,000
1,454,739230,7461,685,485561,2672,246,752
8,528,75820,486,0004,467,41824,547,340
4.8710.93
2001
1,922,522658,1142,404,448196,9165,182,000
1,496,023237,2941,733,317577,1952,310,512
7,978,54516,666,0002,654,52021,990,025
4.249.52
2002
1,987,076680,2122,485,184203,5285,356,000
1,538,569246,5991,785,168594,4612,379,629
10,464,62915,942,0001,962,24624,444,383
4.5610.27
Theabovegivesan indicationofmarketactivity infinancial terms.However,abetter indicationof the sizeof themarketisthenumberofpairsconsumedi.e.boughtduringthecourseof1year.Therearenoavailablestatisticsonthenumberofpairsofshoesmade,importedorexported.Thefollowingisanattempttodeterminethemarketsizeintermsofpairageconsumed.
MARKETBREAKDOWN
EST.PAIRSPERCAPITA
ESTPAIRSPERCAPITA,I.E
5.00JD6-10JD10.00+JD
ESTPRS3,103,6013,338,6883,889,487
0.650.700.820.721.461.571.831.62
ESTCIFUS$3.005.008.00
ESTPRS5,645,9116,073,5697,075,554
1.151.241.441.282.582.783.242.87
ESTCIFJD2.143.575.71
ESTPRS7,766,9848,355,3069,733,720
1.541.661.931.713.463.724.333.84
ESTMARKETSHARE%(A)256510
ESTPRS6,957,8287,484,8598,719,672
1.341.681.681.573.013.243.773.34
ESTMARKETSHARE%(B)35605
ESTPRS7,734,4088,320,2629,692,894
1.441.551.811.603.253.504.073.61
IIIIII
AI+AII+AIIIBI+BII+BIIICI+CII+CIII
AVERAGE
AVERAGE
RETAILSELLINGPRICEUpto
(A)(B)(C)
(A)(B)(C)
AVERAGECONSUMPTIONOVERTHE6YEARPERIODISESTIMATEDAS:
Percapita1.40pairsperyearPerI.E.3.11pairsperyear*estimate
TOTALSHOEMARKETACCORDINGTOTHEABOVEDATAIS:7,437,153TO9,320,369PAIRSPERYEAR.OR8,378,761PAIRSAVERAGE
38
2003
2,033,080695,9602,542,720208,2405,480,000
1,585,079249,8881,834,967611,0442,446,011
12,899,50212,275,340*1,669,92623,504,916
4.299.61
ESTMARKETSHARE%(C)65305
ESTPRS7,437,1538,000,4909,320,369
1.361.461.701.513.043.273.813.37
The official statistics of household expenditure on footwear in 2002 shows apurchaseofJD1.36–9.02perannum.AtanaveragesellingpriceofJD7.00,thiswouldgiveapercapitaof0.20to1.30pairsperyear.
If thesefiguresareanywherenearcorrect then, thequestionremainshowmanymodernshoemanufacturingplantscanthemarketsupport?
Importsarenevergoingtogoaway,theyaretheretoagreaterorlesserextentinanymarket.Governmentinterventionand/ormarketforcescancontrolthesizeoftheimportmarket.Wehaveseentheresultofsocalledmarketforces–thedelugeofimportsfromChina.
Ifimportswerepeggedat4millionpairs(50%ofthemarket)thiswouldleave4million pairs available for localmanufacture.At 260working days per yearthis represents a local production of about 15,000 pairs per day.This level ofproductioncouldsupport12to18modernSME’smakingbetween800and1,200pairs per day each. At this level of production, shoe factories become viableenterprises.Theywoulddirectlycreate1,500 to2,000direct labour jobs,withmanymorebeingaddedinsupportingindustries.
Thisalsoassumesthatnotasinglepairoflocallymadeshoesisexported,whichis unrealistic. Exports are a bit of an unknown quantity.Nevertheless, it is safeto assume some exporting will take place either regionally or internationally,especiallywhentheQIZsystemandFTAwithEuropearetakenintoconsideration.Thiswouldcreateanevenbiggermanufacturingbasethanindicatedabove.
Itshouldbenoted,forthistohappen,somesortofmarketregulationisnecessaryintheshorttermtoallowthelocalmanufacturingbasetoregroup.
4 BenchmarkingofindustryAsdiscussed,thelocalmanufacturershaveretreatedfrommechanisedproduction.Of the visits made, 7 companies were more or less equipped with the basicmachinery (lying idle) required for this type of manufacture. This represents aconsiderable investmenton thepartof theowners (Amodern lastingplant fromItalywouldcostintheregionofUS$325,000).
Itwasnotpossiblethereforetodoanactualbenchmarkforeachindividualcompany.However,ifandwhen,theindustryhasthecorrectenvironmenttorebuild,itmustaspiretointernationalnormsinordertosurviveintheworldmarket.Itmustalsopresentamodern,viablefacetopotentialbuyersandinvestors.Seriousbuyerstendtovisittheirsuppliersandseetheirfacilities.Theywanttoseeaclean,tidy,wellorganisedmanufacturingoperation(notoffices)thatgivesthemconfidence.
ThefollowingbenchmarksweredevelopedforthefootwearindustrybytheleatherunitofUNIDO,Vienna.Theyaredesignedtoevaluateacompany’scompetitivenessintheglobalmarket.Managementshouldusethesetoassesswhethertheywillbeabletomeetthechallengesofthemarket,inotherwordsaretheyasgoodasorbetterthantheirglobalcompetitors.Cantheybeatothersuppliersofthesametypesoffootwear?
The study lists themost important areas (controls,management, processes) andaspects of footwear manufacturing, provides benchmarks and indicates goodmanufacturing practices. It is understood that the quoted quantitative criteria
39
are fairly general (i.e. they characterise productionof everyday leather shoesorstreet shoes) ormay be applicable only to specific segments of an entire rangeof footwear. Further, theseparameters arebasedon thecurrent achieved resultsandwillcertainlychangeastechnologydevelops,consumerneedschangeand/orexternal conditions of industrial operations change.Therefore, it is obvious thatbenchmarks andGMP (GoodManufacturing Practice) are not static.They needto be periodically reviewed, updated and supplemented according to actualeconomic,market,technicalandsocialconditions.
Company(Business)Management
Very large shoemakingcompanies,havegraduallydeclined in thepast40years(Notwithstanding the situation inChina). In the 1950-60’s, factories operated inmulti-story buildings, today most factories are single story rectangular shapedbuildings.Theuseofpremisesofinadequateand/orinappropriatelayoutcanadd15%tothetotalemploymentbill.
Production:Cutting
Despite relativelyhigh investmentcosts, theuseofcomputercontrolled leather-cutting machines in the production of samples and small orders can have asurprisinglyshortpaybackperiod.
Shoecomponent-prefabricationofunitsoles,insoles,stiffeners,heelshasbecomeabusinessinitselfandareproducedbyspecialistmanufacturers.
Benchmark
Minimumcompanysize–production
Optimalcompanysize–no.ofemployees
Optimalcompanysize–production
Locationfrommajormarketbytrucktransporttime
Unit
Pairs/day
People
Pairs/day
Day
Value
450-1000
~600
5,000–8,000
<3
GoodManufacturingPractice
Unutilisedpremisesandequipmentreduceefficiency
Marketingisthekeyfunction:productdevelopmentshouldbecontrolledbymarketing
Onlydesignandshoemakingskillsarespecifictoshoemakingtechnology.Specialistsshouldbeemployedinotherarease.g.unitsolesmaking,purchasing,accounts,marketing.
Trainingoflabourandmanagementisessential
Benchmark
Diecutting(formakingcuttingdies)
Cutterproductivity
Genuineleatherbeamcutting
Manualsoftleathercutting
Unit
Pairs/style
Stroke/8hr
Pairs/8hr
Value
<2,000
200–220
80–100
GoodManufacturingPractice
Workplaceorganisation:1,500Lxevenartificiallighting,properdielabelling&storagesystem,organisedcutpieceremoval&storagewastecollectionateachmachine/workspace
40
Production:MaterialUtilisation
Production:Closing(Stitching)
Shoeuppersare themostvariablepartsofashoe.Their labourcontentdependsonthenumberofcomponents,complexityofconstruction,contours,decorationsetc.Itisnotpossibletosetbenchmarksforactualproduction.Ifmorethan10%ofclosingroomworkersareidle(moving,waiting,inspecting,thinking,talking,etc),thentheremustbesomeproblemsthatmustbesolved.
Production:ShoeAssembling
* pairsperworkerperhour
Benchmark
Useofleathermeasuringmachine
Patternmeasurement,materialcosting&cuttercontrolsystem
Usableleatherarea
Useofcuttingoptimisationsystem
Unit
%
%
%
%
Value
+2
+5–15
75–92
5–7
GoodManufacturingPractice
Incentivestobepaidtocuttersformaterialeconomy
Benchmark Unit Value GoodManufacturingPractice
Performancecanbeincreasedby30–70%through:Better®ulartraining(skilldevelopment)Workplaceorganisation&motionstudiesBetterworkmeasurementUseofoptimalworkingconditions(lightingspaceetc.)Betteroperatorcontrol
Performancecanbeincreasedby30%through:Quickstop&variablespeedmotorsNeedlestop&positioningdevicesThreadcuttersProgrammefacilitiesEvensmallercompaniescanjustifyautomated,computercontrolledsewingmachines
Benchmark
Productivity
Conventionallymechanised
Highlyautomated
Bestknowntoday
Finishing:numberofoperatorsinrelationtothoseinassembling
Unit
*Pair/w/hr
%
Value
16
26-28
32
<50
GoodManufacturingPractice
Principlesforhighproductivity:
Wellbalanceproductionline
Combinationofoperations
Noshoesshouldbetouchedifnophysicalchangesaremade
41
Ifacriticalmassofproduction(minimum400pairs/8hourshift)isnotensured,thelastingmachinesaretooexpensive,thenhandlastingshouldbeused.Equipment,productionlinebalancingandincentivesdefineproductivity.
Production:Overheads
Production:QualityAssurance
ProductDevelopment
Purchasing
Benchmark
Materialcontent(incosts)
Sandals
Standardshoes
Boots
Markdownbyendofseason
Unit
%
%
%
%
Value
~45
~50
~60
<2
GoodManufacturingPractice
Negotiatewithsuppliers
Donotdependonasinglesupplier
Payaccurately(poorpaymentmayadd12%)
Usesuppliersofmatchingsize(toyourself)
Usealeatherassessmentsystem
Measureandcheckqualityofsupplies
Benchmark
Defectrate:
Rejects+customerreturns
Unit
%
Value
<3
GoodManufacturingPractice
Solebondtests
ISO9000
Finalinspection
Benchmark
Designsandpatternengineeringfromidea/sketchtogradedpatterns
Manual
CAD
Unit
Day/style
Value
~1
~2
GoodManufacturingPractice
Efficiencycriteria:
Productivity
Punctuality&speed
Accuracy
Benchmark
Shareofindirectworkersinnormalshoeproduction
Productionsupervision
Supervisiononly
Supervisewithsupportstaff
Unit
%
Worker
Value
<15
~25
~40
GoodManufacturingPractice
Openplanoffice:
Easiercommunication
Higherefficiency&discipline
Eliminates“halfjobs”
42
Marketing
Thenumberof shoemanufacturersand the supply to theworldmarketexceedstheactualdemand.Companies,whodonothavemarketingandsellingpolicies/strategies, leave a high rate of profit to traders.Manufacturers should be awarewhere theymakeprofit.Typeofproduct,customer,market,distributionchanneletc. A brand is not created only by advertising, good reputation (image) is animportant factor in getting business and also staying in business.The followingfactors, in order of priority, definemarket competitiveness and success in shoemanufacturing:
Specialityproduct Compliance with order specification (delivering what was ordered bycustomers)Deliveringontime,reliabilityandconsistencyofsupply Service,acceptingsmallandrepeatorders Priceandpaymentterms
FinanceandAssetUtilisation
Benchmark
Margins(ofprofitonsellingprice)
Wholesalers
Retailers
Agents
Bonusesoffered
Quickrepeatorders
Specialseller(e.g.mailorder)
Brandadvertisementcosts
Unit
%
%
%
%
Value
~30
45-60
~7
~10
10-25
3.5-4.0
GoodManufacturingPractice
Companyreputation:
Quality,consistency,reliability
Health&safety(atwork),environmentalprotection,labourpolicy
Brandedfootwear:
Goodproductispre-requisite
Longtermstrategy
Benchmark
Turnofcapital:ShoemanufacturerShoeretailerReturnonsales:BasicshoemakingBrandedNiche/specialWorkingcapital:BasicmaterialsWorkinprogress
Finishedgoods:Directsupplytoretailers
Wholesale
Capacityutilisation:LadiesMenandchildren
Unit
times/year
%%%
w.dayw.day
w.dayw.day
%%
Value
>2.52.5–3.5
6–88–1212–16
<304–10
<10<60
~87~92
GoodManufacturingPractice
Mediumandlargescaleoperationsbestcombineprivateandbankcapital
Smallercompanies–shareholdersfunds
Loansshouldbetakenonlyforhighlyprofitablegrowthopportunities
Alternativestonormalbankfinancingshouldbeexplored(supplierscredit,governmentschemes,internationalfunds)
Ifproductionneedstobeincreasedthenaproperinvestmentdecisiontobemaderatherthanaddingmorelabour
Theproductionlevelshouldbemaintainedevenlythroughtheyear.
43
Profitmadeonfootwearproductionisessentialtokeepthecompanyinbusiness.Generally,itisnoteasytoborrowfundsfortheshoeindustry.Loansusuallyhavehighborrowingcosts.Profitabilityoflessthan5%createshigh-riskconditionsandmakesthecompanyquitevulnerable.
TheaboveguidelinesshouldbeusedbyJordanianshoemanufacturingcompanieswhentheyaregoingthroughare-organisationprocess.Benchmarkingisausefultool,measuringperformanceisnecessaryinordertobecomegloballycompetitive.No improvementwillbeachievedwithout thedeterminationofmanagement tofindouthowthingscanbedonebetter.
Thosewhothinktheyare“different”andthatbenchmarkingandgoodmanagementpracticesdonotapplytothem,willlikelydisappearfromthemarket.
5 SWOTanalysisTheresultsoftheanalysisareasfollows:
SWOTANALYSIS
STRENGTHS
QIZagreementwithUSA
FTAwithEU(andUSA)
ProximitytotheEUmarket,11daysdoortodoor.
0%dutyratesonnecessaryimportedrawmaterials(inprocess)
Smallerflexiblefactories
Labourisavailable
Wageratesarerelativelylow
ProximitytoItalyforrawmaterialsandstyling
Efficientinfrastructureandcommunications
WEAKNESSES
Lowmarketingskills
LackofexperienceinInternational(asopposedtoregional)markets
Nolocalmarket
Nosectorassociation
Poorfactorymanagement
Shoemachineinventorypoorandold
NoCADsystemsinplace
Poorpatternengineering
Lackofexperiencedshopfloormanagement
Poorsourcingofrawmaterials
Nolocalleather
Lackofworkingcapital
Poorcommunicationskills
OPPORTUNITIES
MarketingofsafetyshoestoUSA
MarketingofleathershoestoEU
Canre-organisefactoriestoahigherleveloftechnology
Exportpromotionschemesavailable
Reclaimlocalmarket
Upgradeworkingconditions(jobsecurity,benefits,incentives)
THREATS
Importstakeoverthelocalmarket
Managementcannotcopewiththecommercialproblemsthatwillappear
Labourdoesnotreachinternationalstandardsofproductivity
Smugglingofshoes
Notrainedlabourtointernationalstandards
44
6 ConclusionsonJordanFootwearSector
6.1HumanResourcesIn any industry or business, the levels of skill available with which to operatepredicateitssuccess (or failure).Themostsophisticatedtechnologyormarketingtechniques are useless, unless they are understood and implemented properly.This particularly applies when entering international markets (Nike are superbmarketersandexcellenttechnicians,Microsoftaresuperbtechniciansandexcellentmarketers).
ThelevelofskillavailableintheshoeindustryinJordanneedstobeaugmented.
Fromtheevidence,theredoesnotseemtobeenoughskilled(uptointernationalstandards)machineoperatorsavailable.ThiscanbecorrectedbytheVTCsystemthroughmovingthecoursesavailableupalevel.Thecriticaloperationsofclicking(cuttingupleather),closing(stitchingpartstogether)andtosomeextentlastingbymachineneedtobeaddressed.
Any operator cannot work efficiently, unless he has good organisation in theworkshop. It was difficult to judge the plants, simply because they were notworkingundernormalconditions.However,fromexperienceitcouldbeseenthatworkshopmanagementwaspoor.Theflowofwork,thebalancingofoperations,material handling, cost control, the control of parts, is rudimentary at best.Thisreflectsalackofknowledgeandortrainingonthepartofworkshopsupervisors.Inshoemaking,thecontrolofthetwocriticalareasofcostofmaterialsandwagescanleadtosuccessorfailure(Theindustryisnotcapitalintensive).
Apartfromhavingskilledoperatorsandknowledgeableworkshopsupervisors,themost importantareaofall isSeniorManagement.The leadmustcome from thetop.Theownersandmanagersoftheindustryneedmoreexposuretointernationalbusinessdealings.Theymustunderstandinternationalmarketing,theymustmoveaway from being producers to marketers. All Management in the industry hashadadifficult timeof lateandhas losta lotofconfidence in the future.This isunderstandablegiventhesituationinthelocalretailmarket.Whateverthereasonsfortheinfluxofimportedshoes,managementhasnotbeenabletocopewiththem.Theyhavelostabattle,hopefullynotthewar.
Assumingthataviablelocalmarketcanbecreatedfortheindustrytouseasabaseforfutureexports,Managementmustbeuptothechallengeahead.MechanismsneedtobeavailableforManagementtogaintheknowledgenecessarytooperateinInternationalmarketsand,perhapsmoreimportantly,theconfidencewithwhichtodoit.
Thereisstrengthinnumbers,ownersandentrepreneurshavetocometogetherandshareknowledgeandexperiences.Therehastobeaforumforthis,anassociationis required.The industry inmany successful exporting countries operates as anintegratedunit.Inotherwords,eachmemberofthesupplychainworksinharmonywiththeotherstocreatea“team”withthecommongoaltogetexportorders.Thisinturn,willbenefitallmembersoftheteam.Itworksonan“OlympicRing”system.The principlemembers of the team are tanners, component suppliers, the shoefactory,marketingunit,banks,accountants.
45
6.2TechnologylevelsIncertainplants,thelastingmachineryavailablewasgood.Thisisthe“glamour”endof the shoemanufacturingprocess.However, to feed thesemachines,goodqualityuppersarerequired.Thismeanspropershoeengineering,todaycomputersusing CAD systems does this best. None are in use in the industry, clicking isavailablebymachine.However, theareaofclosingneedsalotof improvement,sewingmachinesareoldandof restricted types (mostlyflatbed).Today, sewingmachines are more reliable. They have many automatic features available toimproveproductivity,whichcanpaybackinashortperiodoftimeevenforasmallcompany.
Withtwoexceptions,thecompanieswereoperatinginmultifloorbuildings.Thisisinefficient.Factoriesshouldbesinglefloorbuildingsforeaseofcontrolandcostreduction.
6.3ThelocalmarketTherehastobeare-alignmentof thelocalmarket forcompanies tosurviveandgrow.Noinvestmentwilltakeplaceinmanufacturingunlessthisisso,allexportersneedabasefromwhichtooperate.Thisisusuallythelocalmarket,mechanismsarenecessaryforthistohappen.
6.4OptionsforExportMarketPenetrationTheindustryhasanexcellentstartingpointintheexportprocessthroughtheFTA,withEUandUSA,andtheQIZwithUSA.Thiseffectively,atpresent,allows,undercertainconditionstheexportoffootweartothesemarketsat0%duty.
Themechanismformarketpenetrationrevolvesaroundtwomethodsviz:
DirectsellingSubcontracting
Bothhaveadvantagesanddisadvantages.Directsellingallowscompaniestocontrolthewholeoperation, theycandecidewhichmarkets to sell in to,and theycancreatetheirownbrands.Thereisthepotentialforhigherprofits.Thedisadvantagesaremoreinternationalcompetition,continuedproductdevelopment.Marketentrytakesalongertime.
Subcontracting,inotherwordsformingpartnershipsand/orjointventureswiththirdparties,allowsforeasiermarketaccess.Inthesepartnershipsinmanycases,thelocalmanufactureisthejuniormember.However,itallowsforthetransferoftechnology,anditcreatescrediblesalesinthelocalmarket.Thereisalsoa“comfortzone”withthesystem.Themaindisadvantageisthat,theseniorpartnereffectivelycontrolsprofitlevels.Thelocalcompanyisusuallylockedintoanagreementandhasnointernationalmarketingexposure.However,thissystemworkswellinmanycountries,particularlythosethatarepotentialcompetitorsof theJordanindustry,Tunisia and Romania.None the less, there comes a timewhen companies feelstronger and feel they canmanage on their own.At this point, it is difficult tobecomeindependent.
A step along the way for exporting under this system, is to become the locallicenseeforaninternationalbrand,thisusuallyinvolvesanupfrontlicensefeeand
46
/orapercentageofsales.Intheagreementthereshouldbeaclausethatstates,atapointinthefuture,thattheprinciplewillpurchaseshoesforexport.
Whichmethodtouseforinternationalmarketingisreallyuptothecompaniestodecideforthemselves.
6.5TypesofShoesforExportThisisacriticaldecisionforcompaniestomake.Theprincipleistohavesomethingdifferentoratleastinrelativelyshortsupply.ThereisnotmuchpointinfollowingtheTunisian,RomanianorItalianmainstreamfootwear,making“metoo”shoes.Shoesthatareabitmoredifficulttomakeorslightlyunusualhavemorechanceofsuccess.
Itemsinthiscategoryareasfollows: Industrial footwear,bootsandshoeswith leatheruppersand twocomponentsoles.SolesofPU/vulcanisedrubberortwocomponentPU,injectionmouldedon.Withandwithoutsteeltoecaps,steelinsoleandmetatarsalguard. FullymouldedPVCand/orTRwellingtonboots,withorwithoutthecomponentsabove.HandsewnuppersontoPUsolesknownasClarkstypeorSt.Crispin. SidewallstitchedshoesMcKaystitchedgenuinemoccasins Caterpillartypeconstruction StitchoutsGoodyearwelted
IndustrialandmouldedfootwearlendsitselfwelltotheUSmarketunderQIZrules.These shoes attract a 37.5% duty from other countries.Men’s goodyearweltedshoesalsohaveahighdemandinUSA,currentsuppliersareUKandMexico.
TheothertypesaresuitableforbothmarketsEUandUSA.
6.6TargetCountriesNormally, exporters should startwith 1 target country and a secondarymarket.InthecaseofJordantotheEUthisisacceptablebutbecauseoftheQIZ/FTAtheUSAshouldalsobeincluded.AsfarasEuropeisconcerned,thequestioniswhichmarkettotarget.Someareeasiertopenetratethanothers.
Dependingonthemarketentrymethodchosen, therearedifferentcriteria tobeassessedtotryandmakeanobjectivedecisiononwhichcountriestotarget.
Therefore,amethodwasdevisedtotryandmakethis judgementpossible.Alistof attributeswas drawn up according to the entrymethod.Thesewere given aweightingintheirorderofimportance,eachattributewasthenassessedbycountrywithascoreoutof10.Atotalpointsscorewasthereforeobtained,thecountrywiththehighestscorewasjudgedtobetheoptimumtargetmarket
47
TARGETMARKETS–DIRECTSELLING
Fromtheabove,itcanbeseenthatthebestmarketfordirectsellingisUKfollowedbyBenelux,thenFranceandGermanybothfairlyequal.
TARGETMARKETS–SUBCONTRACTING
*Thehigherthescorethelessoneroustheagreement
From the above, it can be seen that the bestmarket for sub contracting is ItalyfollowedbyGermany.FranceandUKarebothfairlyequal.
AcceptanceofImports
SizeofMarket
Importfriendly-Rules,regulations,distributionchannels
Marketdynamics–Expanding,contracting,same
Pricepoints
Qualitylevels–thehigherthelevelthemoredifficult
Communications
AvailabilityofAgents
TOTAL
RELATIVEPOSITON
Weight-ingKEYATTRIBUTE
2.0
1.6
1.5
1.4
1.2
1.0
0.8
0.5
10.0
GERMANY
5
10
5
6
8
5
6
6Score
Points
10.0
16.0
7.5
8.4
9.6
5.0
4.8
3.0
64.3
3
UK
9
9
8
9
6
8
7
6
Score
Points
18.0
14.4
12.0
11.8
7.2
8.0
5.6
3.0
80.0
1
ITALY
6
8
6
4
7
6
5
6
Score
Points
12.0
12.8
9.0
5.6
8.4
6.0
4.0
3.0
60.8
6
FRANCE
6
7
6
7
7
6
5
6
Score
Points
12.0
11.2
9.0
9.8
8.4
6.0
4.0
3.0
63.4
4
SPAIN
6
6
6
6
7
7
5
6
Score
Points12.0
9.6
9.0
8.4
8.4
7.0
4.0
3.0
61.4
5
BENELUX
8
5
8
5
5
8
7
6
Score
Points
16.0
8.0
12.0
7.0
6.0
8.0
5.6
3.0
73.6
2
WeightingKEYATTRIBUTE GERMANY
Score
Points
UK
Score
Points
ITALY
Score
Points
FRANCE
Score
Points
SPAIN
Score
Points
BENELUX
Score
Points
StructureofAgreements*
Willingnesstosubcontract
Technologysupport
Financialsupport
Availabilityofbrands(Quality)
Willingnesstoallowlocalsales
TOTAL
RELATIVEPOSITION
2.5
2.0
1.8
1.5
1.2
1.0
7
6
8
8
5
6
17.5
12.0
14.4
12.0
6.0
6.0
67.9
2
6
6
8
7
4
7
15.0
12.0
14.4
10.5
4.8
7.0
63.7
4
6
8
8
6
8
7
15.0
16.0
14.4
9.0
9.6
7.0
71.0
1
6
7
7
6
6
6
15.0
14.0
12.6
9.0
7.2
6.0
63.8
3
5
7
6
5
5
7
12.5
14.0
10.8
7.5
6.0
7.0
57.8
5
5
5
5
5
4
6
12.5
10.0
9
7.5
4.8
6.0
49.8
6
48
SECTIONIII:RECOMMENDATIONS
1 StrategyforJordanianshoemanufacturingindustry1.1 Create a viable domesticmarket for shoemanufacturing companies by the
reductionofimportsespeciallyfromChina.Allimportsshouldbelimitedtoa50%shareofthelocalmarketintermsofpairs.
1.2 Createaviablelocalmanufacturingenvironmenttoallowtherehabilitationofexistingfactoriesandencouragetheformationofnewproducerseitherlocal,jointventureorFDI, (TheMinister forTradeandCommerce from IndonesiavisitedJordanrecentlytoexploreJVpossibilities.WiththeexodusoffootwearfactoriesfromIndonesia,Jordancouldbecomeabeneficiary).
1.3 Implement industry specific knowledge transfer courses to strengthen themanagement skills of seniormanagers, especially in the areas ofmarketingandfactoryworkshopmanagement.
1.4 EstablishregionallinkagesbetweenVTCandcounterpartsinTunisiaandEgypt,withaviewtoprovidingmoderntraininginskilledshoemachineoperation,shoetechnologyanddesign.
1.5 Attract investment in the tanning sector to establish2–3new tanneries inJordantosupportlocalshoemanufacturing.
1.6 Establish linkages with Assomac (Italian Association for Shoe MachineryManufacturers), and the leather unit of UNIDO for technology transfer toestablishbestmanufacturingpracticesappropriatetothelocalindustry.
1.7 In the next 4 years target 2 EU (15) markets through FTA and selectedmarket segments in USA throughQIZ for export promotion and/or inwardinvestment.
1.8 Haveinplace in5years time10–16viable Jordanianshoemanufacturingcompaniescapableofexportingglobally.
1.9 Concentrateandfocusexistingexportpromotionschemes,specificallytoassisttheexportprocessforfootwear.
51
2 ActionplanforJordanianshoemanufacturingindustry
2.1 Forthedomesticmarket
2.1.1 Togive localmanufacturersachance to rebuildby investingfurthercapital, theyneedthelocalmarketforsupportandtoreducerisk.Importedfootwearshouldbelegislateddownwardstoalevelof50%ofthetotaldomesticmarket.
2.1.2 This means instigating a Safeguard Mechanism with China.Theirshareofimportsofsyntheticshoesshouldbereducedto40%ofthetotalmarket.Theremaining10%ofimportswouldbe from other countries. These shoes should be of a moreupmarketnature.
2.1.2 Toensuretheabovemarketmix,tariffsshouldbeleviedonaperpairbasisandapercentageoftheCIFpricesimilartotheUSAregulations.UsingHTS6402(syntheticshoesandsandals)asanexamplethiswouldmeanatariffstructureasfollows:
valuenotover$3.00perpair 84%
valueover$3.00butnotover$6.50,$1.58perpair+66%
valueover$6.50butnotover$12.00,$1.58perpair+35%
valueover$12.00perpair 35%
ThesefiguresmayhavetobeamendedfortheJordanianmodel.ItisworthnotingPolandleviedanantidumpingtaxonChineseshoesin1999.ImportsofChinesefootweardeclinedfrom79.8millionpairsin1998to2.2millionpairsin2000.
2.1.3 All shoes made in Jordan or imported should have the EU“pictogram”attachedtoatleasthalfapair.Thistellsconsumerswhattheshoeismadeofi.e.theuppermaterial,liningmaterial,andsolingmaterial(ItismandatoryintheEU).
2.1.4 All shoes sold in Jordan should also have a label clearlyshowingthecountryoforigin.Thisisaimedprimarilytotryandstop“triangulation”i.e.shoesbeingmadeinonecountryandshippedtoasecondforimportintothethirdtoevadeduties.
2.1.5 Revive (if they exist) consumer protection laws so thatcustomersaresureofgoodsof“merchantablequality”andarenotexploitedbyunscrupulousretailers.
2.1.6 The Jordan InstituteofStandards&Metrology shouldhaveawatchingbriefoverthequalityofshoesthatenterthecountry.
2.1.7 Haveanoutrightbanonsecondhandorusedshoes.Theseareahealthrisk.
2.1.8 Statistics should be collected in pairs as well as monetaryvalue.
ACTIONBY:
MOITCUSTOMS
MOITCUSTOMS
MOITCUSTOMS
JISM
JISM
JISMCONSUMERPROTECTIONSOCIETY
JISM
JISM
DOS
52
ACTIONBY:
EJADACHAMBEROFINDUSTRYCOMPANIES
MOIT
MOIT
EJADACOMPANIES
EJADAUNIDOSATRA
COMPANIES
EJADA EJEP JIB
JUMPCOMPANIES
COMPANIES
JIB
COMPANIES
2.2 Fordomesticmanufacturing
2.2.1 The Industrymust formanassociation to further its interests.(Thishasbeentriedinthepastwithmixedresults.Howeverwith thesupportandguidanceofGovernmentandtheChamberofIndustryitshouldbemadetowork).
2.2.2 Reduction to zero rate of all raw materials required to beimportedforshoemanufacture(Thisisinprocess).
2.2.3 Reductiontozerorateforindustrialleathersewingmachines.Thesearecriticalmachinesinshoemanufacture.
2.2.4 The industry must develop leather shoe making rather thansynthetics or full plastic (with the exception of industrialfootwear).
2.2.5 Industrialists must gain the knowledge of how to managea shoe production unit efficiently, especially in the areasof costing, workshop management, pattern engineering byCADandmechanically.CoursesshouldbeorganisedthroughSATRAand/orUNIDO.
2.2.6 WiththehelpoftheAssociationformabuyinggroupinordertoimportnecessarybasicmaterials,insoleboard,toepuffandcountersheets,rubbersolingsheets,grinderiesetc.
2.2.7 EstablishlinkageswithASSOMAC(ItalianAssociationofShoeMachineryManufacturers)withaviewtogroupvisitstoLineaPelle (shoe component and design fair) and SIMAC, (shoemachinery fair).Theobjective is to be aware of the latest instylingandtechnology.
2.2.8 Companies must take it upon themselves to upgrade theirmachinery inventories (particularly in closing) depending onthetypeofshoetheydecidetomake.Theyhaveanopportunitynowto“leapfrog”technologies.TheyshouldinvestigateCADsystemsandautomaticmachines.
2.2.9 Companies to consider importing leather uppers from India(or others) to kick-start the rehabilitation process.These arepermissibleunderFTAandtheQIZsystems.
2.2.10Governmenttoactivelyencourageoutsideinvestment(orlocal)intwo(orthree)newtanneriesinJordan.Thesecanbefinishingtanneriestostartwith(processingwetblueleather)tominimiseriskand investment.Thiswouldbepreferable thanhaving toimportleather.Thefinishedleathercanalsobeanexportitem.Itwillalsoallowfastreactiontimestocustomersrequests.
2.2.11 Companies should achieve productivity gains to become aplayer in the internationalmarket. Examples of internationalproductivityinpairsperoperatorperdayinshoefactoriesis:
France 18.5
53
Spain 18.0
Italy 13.0
UK 13.0
Germany 9.0
Within1yearshouldtargetthelevelof15pairsperdayperoperatorandstrivefor20pairsperdayperoperator.
2.2.12Where necessary and this will be a judgement on anindividualbasis,companiesmustensuredesigninputsthatareup todate.This canbedonebyestablishing linkageswithinternational(particularlyItalian)designstudios.
2.2.13Companies, with the assistance to the Association, theChamber of Industry and relevant Ministry, should seekoutlicensingagreementswithestablishedbrands.Thiswillenablethemtomakeforthelocalmarketandexportinthefuture.TheFTAwithEUandQIZwithUSAwillbeabigadvantage in this regard. It is better to approach “lesserknown”brandsthanthemajors,somesuggestions:
Geox (Italy) men’s comfort dress shoes. CurrentlyimportedintoJordan
Stonefly(Italy)Men’scomfort/dressshoes
Clarks (UKmen’s, ladies andchildren, amajorBrand,but susceptible to licensing), currently imported intoJordan
Hush Puppies (USA) men’s and ladies comfort streetshoes
Hotters/Padders(bothUK)ladiescomfortStreetshoes,solesPUinjectionmouldedon(ThistechnologyexistsinJordan).
Initial approaches should be made through ANCI(Italian National Association of Shoe Manufacturers),ASSOMAC, and BFA (British Footwear Association).(HushPuppies-direct).
1.2.14Oneof thebiggestadvantages to the footwear industry inJordan,throughtheQIZisthemanufactureofsafetyshoesfor export to theUSA.Thesecurrentlyattract37.5%dutyfromallothercountries(withtheexceptionofshoesmadeinMexicoandCanada).Localinvestorsandmanufacturersshould investigate this exceptional opportunity. TheadvantagesoftheQIZshouldbedisseminatedmorewidelythroughtheindustry(ThroughanAssociation)
ACTIONBY:
COMPANIES
JIBEJADAJEDCOCHAMBERCOMPANIES
ASSOCIATIONCOMPANIES
54
ACTIONBY:
JEDCOEJADA
JEDCOEJADACOMPANIES
ditto
COMPANIES
COMPANIES
COMPANIES
JEDCOEJADA
COMPANIES
JEDCOEJADA
JUSBP
JUSBP
2.3 MarketingtoEU
2.3.1 Financial help should be given to a select group of shoecompanies, on a cost-sharing basis, to become exportdevelopmentpathfinders.
2.3.2 Group visits should be made to European shoe shows asobservers viz. GDS, Dusseldorf, Expo Riva Schu (Italy).Thisshould be combined with window shopping trips to Milan,Frankfurt,Paris,Amsterdam,London.Thisshouldbedoneoveroneyeari.e.twotimes,Spring/summerandAutumn/winter.
2.3.3 GroupvisitLineaPelle(Italy)2times(accordingtotheseasons)togetrangebuildinginformation.
2.3.4 Buildshoerangesbasedonthemarketresearchandtypesofshoes.
2.3.5 Testmarketshoesonthelocalmarket
2.3.6 Decidewhichcountries tomarket into.ThesuggestionisUKandBenelux(Holland).
2.3.7 Contactpotentiallicensingpartners(Seeabove)
2.3.8 Searchforagentsintherelevantcountrieswhererepresentationisrequired.
2.3.9 HaveathreeyearprogrammetoshowasaJordanGroupattheGDStwotimesperyear(Thiswillneedfinancialassistance).
2.4 MarketingtoUSA
IndustrialFootwear
2.4.1 UtilisingtheQIZsystemandFTA,offersamajoropportunityforJordanshoemanufacturersinthesafetyfootwearmarket.Fullyinjectionmouldedfootwearattractsa37.5%dutyfortherestoftheworld(exceptCanadaandMexico),0%fromJordan.Leatherupper shoeswith injectionmoulded soleshaveaMFN rateof8.5%and20% fromother countries.FromJordanundertheFTAthisis0%
The shoes are highly technical in nature, so makingunder licence would be the way forward for Jordanianmanufacturers.
2.4.2 Twocompaniesarecurrentlymakingsafety footwearwithleather uppers in Jordan. They should be encouraged toconsider having licence agreements with US companiesafter they have upgraded their manufacturing facilities.Nobody is making fully injection moulded boots. Thisprocess calls for a large capital investment in terms ofmachineryandmoulds.Amarketneeds tobesecured forthisfirst,consequentlythisprocesslendsitself toFDIora
55
wellconnectedlocalinvestor.
2.4.3 ThefollowingcompaniesmakesafetyshoesintheUSAWeinbrennerShoeCoLehighSafetyShoeCoAltamaFootwear(military&service)H.H.Brown
ThefollowingdistributesafetyfootwearNautilusSafetyFootwearWolverine(previouslyweremanufacturers,alsomarketCaterpillarBoots,whicharesoldinJordan)
2.4.4 TheinterestedcompaniesshouldreviewtheproductrangeonofferfromUSAmarketleaders(thiscanbedoneontheinternet).
2.4.5 Re-engineer and/or re-design current footwear range tothese standards and features. Get certification under ISO(forEurope)andASTM(forUSA).
2.4.6 Establishthecorrectsellingprice,thencostshoestoensuretheycanbemadeatthisprice.(Ifthepriceistoolowthencosts have to be cut, not prices increased. If this is notpossiblethentheprojectshouldbeabandoned).
TraveltoamajorUSandattendamajorsafetyindustryshowtoascertainmarketinginformation,especiallythepossibilityofexportingtoUSfromJordan.
2.4.8 Approach USA manufacturers for possible licensingagreementsforJordanandtheregionalmarkets.
2.4.7 HaveanagreementinprinciplewithlicensorthatfootwearcaneventuallybeexportedtoUSA.
[Safety shoes can also be marketed in Europe. It is acompetitivemarket and less inclined to imports.Also thedistributionmethodsaredifferentfromthoseoutlinedaboveforconventionalshoes].
ConventionalShoes
2.4.8 The shoe line can be the same as for Europe. Check thedollar price applicable to theUSmarket.Aim at smallerretail chains.Arrange a group visit toWSA shoe show inLasVegas as observers to get marketing information andpossiblerepresentation.AttheshowcontacttheNSRA.
2.4.9 Inparallelrun“advertorials”inFootwearNewsmagazine.
2.4.10Return to the show as an exhibiting group. Continue the
ACTIONBY:
COMPANIES
COMPANIESJISM
COMPANIES
JEDCOJUSBPCOMPANIES
JEDCOJUSBPCOMPANIES
JEDCOJUSBPCOMPANIES
JEDCO
JEDCO
56
ACTIONBY:
EJADAVTC
EJADAVTC
EJADAVTC
EJADAVTCUNIDO
EJADAVTCUNIDOSATRA
shoeshowprogrammefor3years.
2.5 Training
2.5.1 There is a need to upgrade themarketing skills of seniormanagersandownersinmarketingtechniques.Thecriticalareasaresegmentationpositioningtargetingpromotiondistribution
Coursesforseniormanagementshouldbeorganised.
2.5.2 Trainingshouldalsobeconductedinshoefactoryworkshopmanagement:workflowloadingofoperators(balancingaproductionline)
2.5.3 Trainingincostingtechniques:materialallowanceslabourrates
2.5.4 Traininginpatternengineering:patternmakinggradingbymachineandCAD
2.5.5 Training of operators. This should be upgraded from thecurrent machine control level to full speed operation.(Modernsewingmachinesoperateat~2,300stitchesperminute).
57
AnnexCHINAFOOTWEAREXPORTU.S.$‘000
ChinaSourceITC
World
USA
Europe
Regional
Rest
2000
9,850,226
4,886,500
1,059,104
1,831,606
2,073,016
2001
10,095,769
5,044,340
1,068,367
1,793,782
2,189,280
2002
11,090,084
5,055,068
1,230,180
2,053,272
2,751,564
INDONESIAFOOTWEAREXPORTU.S.$‘000
IndonesiaSourceITC
World
USA
UK
Germany
France
Italy
Spain
BelgiumLux/Netherlands
EastAsia
Rest
2000
1,672,110
692,340
151,571
80,175
64,705
49,412
27,864
185,689
126,621
293,733
2001
1,505,580
611,881
124,597
79,314
60,547
40,608
25,415
179,789
155,756
227,673
2002
1,148,052
475,494
103,002
68,764
39,583
26,350
16,942
123,912
140,707
153,298
VIETNAMFOOTWEAREXPORTSU.S.$‘000
Vietnam
SourceITC
World
UK
Germany
BelgiumLux/
Netherlands
France
USA
Italy
Spain
Sweden
Asia
Rest
2000
1,471,667
219,972
210,605
288,417
140,270
87,393
86,503
39,162
22,501
148,780
228,064
2001
1,630,193
256,854
214,070
318,607
168,154
114,889
102,677
45,100
21,990
114,891
272,961
2002
1,900,000
-
-
-
-
-
-
-
-
-
-
2003
2,200,000
-
-
-
-
-
-
-
-
-
-
2004
(projection)
2,500,000
-
-
-
-
-
-
-
-
-
-
58
INDIAFOOTWEAREXPORTU.S.$‘000
IndiaSourceITC
World
UK
Germany
USA
Italy
France
Spain
BelgiumLux/Netherlands
Portugal
EastAsia
MiddleEast
Rest
2000
651,382
159,614
100,684
113,387
77,532
30,722
11,619
20,698
20,038
12,170
19,525
85,393
2001
662,511
159,101
116,601
89,487
97,388
32,429
12,830
27,708
17,319
9,671
22,531
77,446
2002
622,590
145,199
105,155
89,457
78,779
36,579
20,019
24,413
16,756
8,087
23,044
75,102
MALAYSIAFOOTWEAREXPORTU.S.$‘000
MalaysiaSourceITC
World
Italy
Germany
France
Turkey
Belgium/Netherlands
UK
Greece
Spain
EastAsia
Rest
2000
92,966
9,808
1,790
3,892
179
4,022
2,239
904
498
42,183
27,451
2001
85,918
5,008
3,782
4,432
355
2,410
3,458
1,644
1,201
37,278
26,350
2002
90,475
5,827
4,463
3,908
3,893
3,631
3,278
3,148
2,788
34,805
24,734
THAILANDFOOTWEAREXPORTU.S.$‘000
ThailandSourceITC
WorldUSAUKBelgiumLux/NetherlandsDenmarkFranceItalySpainEastAsiaMiddleEastRest
2000
832,951330,90692,76979,64233,37926,11318,03810,17757,53746,793137,597
2001
839,255308,121101,832108,10236,35825,23112,26010,89559,11948,768128,569
2002
-----------
59
PHILIPINESFOOTWEAREXPORTU.S.$‘000
PhilippinesSourceITC
WorldBelgiumLux/NetherlandsUKMexicoUSAGermanySpainFranceSwitzerlandItalyEastAsiaRest
2000
76,45412,3353,81566417,3387,4708482,9994852,19915,36312,938
2001
72,95318,8766,6194,26114,2933,4352,0782,1744908858,48011,362
2002
35,54713,2435,1073,0141,3721,2945955685665336,2572,998
ITALYFOOTWEAREXPORTU.S.$‘000
COUNTRY
ItalySourceITCUSAGermanyFranceUKRomaniaSwitzerlandRussianFedBelgiumLux/NetherlandsEastAsiaMiddleEastRest
2000
7,153,3041,249,5241,196,238723,024561,651266,051297,589210,714448,109354,205257,5071,588,692
2001
7,570,2541,250,1761,235,723740,243543,814343,216362,675254,969479,703390,311273,5271,695,897
2002
7,587,7291,136,5931,089,391849,374600,816413,421315,049271,838476,754378,824277,2281,778,441
SPAINFOOTWEAREXPORTU.S.$‘000
SpainSourceITC
WorldFranceUSAUKGermanyPortugalItalyBelgiumLux/NetherlandsGreeceMexicoEastAsiaMiddleEastRest
2000
1,885,249344,340319,736211,736287,174106,78177,767121,53435,07016,30050,48763,392250,932
2001
1,985,784385,271273,171235,776263,596127,97186,423131,77635,10926,29854,49268,881297,020
2002
2,124,644415,436272,473272,262266,113144,936111,984133,62146,19142,43955,41868,092295,679
60
PORTUGALFOOTWEAREXPORTU.S.$‘000
PortugalSourceITC
World
Germany
France
UK
BelgiumLux/Netherlands
USA
Denmark
Spain
Sweden
Norway
EastAsia
Rest
2000
1,479,109
414,620
277,868
301,772
151,613
43,553
76,818
47,220
40,390
18,660
10,440
96,155
2001
1,515,059
429,701
313,437
288,431
171,382
55,526
51,853
45,032
35,808
17,730
6,603
99,556
2002
1,497,448
405,723
320,351
280,941
164,421
60,356
52,514
49,068
35,740
16,072
7,493
104,769
FRANCEFOOTWEAREXPORTU.S.$‘000
FranceSourceITC
World
Germany
BelgiumLux/Netherlands
USA
UK
Italy
Spain
Switzerland
Portugal
EastAsia
MiddleEast
Rest
2000
944,220
133,200
145,485
99,949
63,582
61,098
58,563
48,823
26,079
56,536
79,527
171,378
2001
956,120
123,077
148,204
94,662
62,939
63,373
56,194
47,024
30,168
58,094
88,763
183,622
2002
1,070,762
133,575
170,095
105,111
80,244
76,251
63,075
48,862
31,108
70,388
100,292
191,761
BENELUXFOOTWEAREXPORTU.S.$‘000
BeneluxSourceITC
World
France
UK
Italy
Spain
Germany
MiddleEast
Rest
2000
2,141,108
313,384
292,120
195,407
116,498
114,984
151,600
805,515
2001
2,545,470
380,372
356,507
210,092
143,487
136,099
219,280
1,199,633
2002
2,620,026
457,053
374,654
216,905
167,094
162,519
199,900
1,041,901
61
TUNISIAFOOTWEAREXPORTSUS$‘000
TunisiaSourceITC
World
Italy
France
Germany
Rest
2000
265,279
125,766
91,139
31,724
16,650
2001
328,319
170,645
106,896
28,694
22,084
2002
343,555
180,198
101,541
30,382
31,434
MOROCCOFOOTWEAREXPORTSUS$‘000
MoroccoSourceITC
World
France
Spain
Germany
Italy
Rest
2000
148,692
85,758
9,724
14,224
24,929
14,057
2001
163,417
94,967
23,310
15,102
23,715
6,323
2002
178,639
117,119
21,025
17,509
16,081
6,905
62
Name
Customer
Item
Upper1
Upper2
Upper3
Lining1
Lining2
Sock
Foam
Eyelets
Thread
Binding
Trims
Elastic
Toepuff
Counter
Insole
Shank
Shankboard
Sole
Heel
Lace
Label
Box
Carton
Grinderies
TOTALRAWMATERIAL
Chinatype
ChineseimportedPVC
ChineseimportedPVC
Chineseimportedfabricbased
Local
Allowance
Allowance
Solventactivated
Solventactivated
Chinesecellulousboard2mm
Importedsteel
GenuineleathergradeI
Chineseresinrubber2.00mm
Imported90mm
localprinted
Local
Allowance
SHOECOSTING
Last
ShoeType
Description
N/A
ladieshighheelcloseddressshoe
Patternno. N/A
Allowance
0.23
0.18
0.05
0.005
0.008
0.042
0.05
1
0.03
0.06
1
2
1
18
U.O.M.
Ft2
m2
Ft2
m2
m2
m2
m2
m2
m2
pair
m2
m2
pair
piece
piece
piece
Date:08/21/2004
Currency
Price
2.50
1.60
1.50
1.00
1.25
1.65
2.20
0.05
5.25
3.90
0.50
0.02
0.50
0.50
JD
Cost
0.00
0.58
0.00
0.00
0.29
0.08
0.01
0.00
0.05
0.00
0.10
0.00
0.01
0.07
0.11
0.05
0.16
0.23
0.50
0.00
0.04
0.50
0.03
0.15
2.94
63
$
0.40
0.40
0.70
0.60
2.10
2.52
0.76
8.32
1.66
9.98
12.03
10.00
Prsperday
1
1
1
1
20
0.83
JD
0.40
0.40
0.70
0.60
120%ofdirectlabour
Rawmaterials+directlabour+directoverheadsx10%
totheUS$,totalcosts=
No.ops
1
1
1
1
LABOUR
Bottompreparation
Upperpreparation
Closing
Makingfinishing
TOTALDIRECTLABOUR
DIRECTOVERHEADS
INDIRECTOVERHEADS
TOTALMANUFACTURINGCOST
PROFITMARKUP%
TOTALCOSTS
REMARKS
RecommendedsellingpriceJDFOB.
NotethesellingpricesforrawmaterialswereobtainedfromalocalwholesalerinAmman
Thelabourcostswerequotedbymanufacturers.Thesearethepricestheypaytooutworkers
OverheadsarebasedonaformulaforawesterntypefactoryandareprobablyoverstatedinJordanianterms.
64