Nova Leathers Report + TOC

7/31/2019 Nova Leathers Report + TOC

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Strategic Marketing Planning

Internal and External Analysis of

Presented by:

Amna Abdulla (3431),

Fatima Hanif (3544),

Mohammad Ali Jamot (3738).

Presented to:

Mr. Azhar Aqil

Date of submission:

10th December 2007


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TABLE OF CONTENTS

LETTER OF ACKNOWLEDGEMENT ..................................................3INTRODUCTION ................................................................................... 4MANUFACTURING UNITS ................................................................... 6EXTERNAL ANALYSIS ......................................................................... 8

Customer Analysis ...............................................................................................................8Customer As Active Partner ................................................................................................9

COMPETITOR ANALYSIS .................................................................11Local Competition: ...........................................................................................................11Foreign Competition: .........................................................................................................12Other Exporters .................................................................................................................13Global Competition ............................................................................................................13

MARKET ANALYSIS ........................................................................... 15

Market Growth ...................................................................................................................15Product Life Cycle .............................................................................................................15Market Profitability ............................................................................................................16Key Success Factors ...........................................................................................................16Raw Materials .....................................................................................................................17Novas Raw Materials .........................................................................................................17Demand Conditions ............................................................................................................18Exhibitions and Trade Fairs ...............................................................................................18

ENVIRONMENTAL ANALYSIS ..........................................................20Technology .........................................................................................................................20Government ........................................................................................................................20

Research & Development ..................................................................................................20Social Compliance ..............................................................................................................22

INTERNAL ANALYSIS ........................................................................ 23PERFORMANCE ANALYSIS .........................................................................................23

Production Capacity .......................................................................................................23Customer Satisfaction ....................................................................................................23Product Quality .............................................................................................................24Managing Workforce Diversity: ....................................................................................25Employee Training and Productivity .............................................................................26Responding to Labor Shortage .....................................................................................27Machinery .......................................................................................................................27

DETERMINANTS OF STRATEGIC OPTIONS ..................................29Past Strategies .....................................................................................................................29Future Strategies .................................................................................................................29Strategic Problems ..............................................................................................................29

SWOT ANALYSIS ............................................................................... 30RECOMMENDATIONS ....................................................................... 32

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LETTER OF ACKNOWLEDGEMENT

Dear Reader

This course has helped us expand our understanding of Strategic BusinessPlanning, in general, and has taught us how an effective business strategy isset, in particular. Through this report we have attempted on our part toexplore the various dimensions of Nova Leathers internal and externalenvironments.

We thoroughly value the time and effort spent on compiling this report intoits final form. For this we are grateful to you, Mr. Azhar Aqil, for mentoring

and inspiring us to give in our best!

We have worked with full dedication and conscientiousness to bring thisreport into its final form, with the hope that it makes informative andinsightful reading!

Sincerely,

Amna Abdulla (3431),Fatima Hanif (3544),Mohammad Ali Jamot (3738).

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INTRODUCTION

The leather industry is the second largest industry in Pakistan aftertextile, contributing more than 7% to its export earnings. It constitutesmore than 5% of the manufacturing GDP of Pakistan.

With over 17 years of experience under its belt, Nova leathers areproud to be one of the largest garment and accessoriesmanufacturers in Pakistan and today hold the first position in leatherexporters in Pakistan. Their strengths include having a tannery toensure a smooth supply of raw material, the presence of a dedicatedworkforce and state of the art machinery. Nova has been growingever since its inception and has embossed its name on foreign

markets.

Corporate Profile

Nova leathers were established in 1986 and have grown by leapsand bounds.

Initially starting out as a tannery manufacturing all types ofgarment leathers, Nova set up its first stitching unit in 1998manufacturing quality leather apparel.

From humble beginnings of 25,000 pieces a month, Nova nowproduces an annual quantity of approximately 800,000 pieces. In view of continuous expansion, Nova has increased its human

resources with qualified people at all levels and the currentfigure of Novas personnel lies somewhere around 2000.

Its array of state of the art machinery includes 1400 stitching aswell as embroidery and embossing machines.

The acquisition of a digitized pattern cutting grading machine(investronica), allows customers to send patterns via email,saving them time and eliminating the possibility if ill fitting

garments. In 2002, the accessory division was started, producing leather

hand bags and gloves. Initially starting out with the aim ofutilizing garment wastage, this division quickly outgrew theresource and is now doing exceptionally well.

With the acquisition of a new tannery two years ago, Nova grewin size as well as exports

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The exports figures for Nova in particular have grown about 30-40% in the previous 2 years.

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MANUFACTURING UNITS

Tannery:

To ensure a steady supply of raw material for its units, Nova has itsown tannery producing leather for the garments and accessories unit,and for exporting to customers in Far East and Europe.

With skilled technicians at the helm Nova is able to produce over 120different qualities of leather as per the demands of the client. Thequalities of leather differ and the range of colors is also constantlyincreasing.

Covered area: 90,000 sq ftHuman resource: 150 workers.Production capacity: 12 million sq ft per annum

Nova is also proud to be one of the first tanneries in Pakistan toinstall an in-house tannery effluent treatment plant for theprimary treatment of discharging water. This makes thegarments made from its leather environment friendly.

Garments:

Standing proud as the largest leather apparel stitching unit in thecountry, Novas garments unit produces a wide range of products thatincludes jackets, trousers, skirts, long coats etc. constant upgrades ofmachinery are made to enhance efficiency and quality.

Covered area: 100,000 sq ftHuman resource: 1250 workersMachinery: 500 stitching machines

Button-hole Embroidery embossing machine Digitized pattern grading and cutting machine (Investronica).

Accessories:

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Since its establishment in 2002, the accessories unit has grown byleaps and bounds. Utilizing both garment leather and vegetabletanned accessories leather, their range of products includes ladieshand bags, mens briefcases, wallets, gloves, scarves etc.

Covered area: 35000 sq ftSub-division: Hand bags

GlovesHuman resources: 250 workersMachinery: 65 stitching machines

Embossing

Strip cutting

Clicking press

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EXTERNAL ANALYSIS

Customer Analysis

Nova Leathers is essentially in the business of exporting its goods allover the world. Although the company has few local outlets, its mainfocus is on the global market. Its customers include big brand namessuch as Zaras, H&M, and Esprit.

Nova Leathers does not interact directly with its customers. It doesbusiness with exporting middlemen, which are generally referred to

as agents. These agents in turn deal directly with the clients andserve as an intermediary which bridges the gap between thecompany and the customer.

Many a times Nova Leather also produces directly for big brandnames. These companies, for example Zara, approach Nova directlyand provide them with designs and quality specifications. Nova thusexports to these brands directly, and the brands sell to customersfurther.

Whether Nova deals with the agents or the branded companiesdirectly, the clients mostly provide the specifications for the product inall aspects. This includes color, patterns, cuts, quality, and designs.Designs can also be copied off from previously designed products forbigger customers; however, they cannot be supplied in the sameseason in which the original design was launched.

Creating an end-consumer profile for Nova is not possible since theymanufacture products for business customers and not end-

consumers or individuals. Nova Leathers has divided its globalcustomers into the following logical units based on the region, size oforder, and the product quality which is also their customer profile:

CODENAME REGION/QLT/QTY BRANDS

Alpha Scandinavia Big Bock, Mustang, Street One

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Bravo Spain, FranceQuaterfil, Alcampo, Promode,Camare, Mango

CharlieGermany, U.S.A,Turkey Espirit, H&M, C&A, Bugati, FrontLine

Sigma Big quantities Zara, Bershka

The Alpha unit handles orders from Scandinavian countries whereasBravo covers most of Spain. Charlie employs the best and mostskilled workers and this unit fulfills small and specialized orders.Sigma handles the biggest orders for brands such as Zara, andBershka. This department has its own capacity setup as well asbackup machines. However, at times when the orders placed are innumbers beyond the companys production capacity, Nova outsources certain quantities so as to ensure order completion. Nova out

sources its production to a parent company in Lahore.

Each of these units has a fixed amount of agents to handle. Thedivision of agents per unit is elaborated below:

Alpha: 3-4 major agents. Alluna is its biggest agent in terms of

quantityBravo: 4 agents. Including Indigo, and a French companyCharlie: 3 agents. Includes the Brand FrontLineSigma: Handles one agent which is responsible for 50% of theexports of Nova. The Indi-tech brand which is a parent brand forcompanies like Berksha and Zara

Customer As Active Partner

Nova Leather works closely with its customers treating them as theirown partners. Although there is an agent handling the interactions,Nova makes sure it succumbs to its customers every whim andcollaborating with them from beginning to end. Even before thecustomer places an order, they visit the factory to make sure thecompany is complying with the international laws and regulations.

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After the customers approval, active dialogue is carried out to ensureboth parties understand the contract terms.

Since Nova exports its products all over the globe, it deals with adiverse range of customer requirements. Some highly sophisticated,some requiring basic work. Novas break up of its customers indifferent groups according to regions and size simplifies the processas well as keeps its customers happy and satisfied.

Novas offer to 100% customize any material or design gives itscustomers an immense number of options. Customers may send intheir own designs or choose one from Novas previous collections andmake the changes they want to make.

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COMPETITOR ANALYSIS

Local Competition:

Nova Leathers entered the local market with the opening of K.O.S.Saround 5 years back. It faced heavy competition from Hub Leathersand Jafferjees.

K.O.S.S essentially offered garments made from leather not used inexport production. Leather was heavily wasted either because ofunapproved quality or because of the pieces left behind from the cut

outs used for other things. Nova also ventured into an accessory lineby the name of Limited Edition for which a special designer had beenbrought in. Currently Limited Edition outlets are situated at,

1. Karachi : ForumZamzamaPark Towers

2. Lahore

Plans to open outlets in Islamabad and Multan are underway.

nova leathers local selling VS Export

Local

2%

Export

98%

Local

Export

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Proportionate Local Market Share

Jafferjees

48%

Foreign

goods

7%

Hub

leathers

39%

Nova

Leathers2%

Othersl

6%

Foreign Competition:

Pakistan holds 1.5% share in the total world leather exports. In 2001the country had a boost in the international market because of thefoot and mouth disease affecting various European Countries. As aresult Pakistan was the next best country to import leather productsfrom and sales rose. However, in 2002-03 the demand steadilydecreased; the reasons being economicrecessions in buyer

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countries e.g. in USA; Other factors include the IraqWarwhich cut offtrade routes for a while thus reducing contracts.

Other Exporters

Nova Leathers stands at number 1 in the Pakistani export market. Avery close Number.2 is a leather manufacturer in Sialkot. As far aslocal leather exporters are concerned, competitor organizations areshutting down due to black trade as well as tough competition facedby them from the major leather manufacturing units in Pakistan.

Its main current competitors are listed below:

1) Leather Field Sialkot2) Skin Craft (shut down)3) NBZ (shut down)4) Focus Sister company

Global Competition

On the global front, Nova Leathers falls on number 4 in ranking. Thecompeting countries are few but the competition faced is tough. Thisis because the industry competes on a quality basis and not price.Major competition is faced by India and China which have a greatadvantage in terms of cheap labour.

Pakistans quality of leather is about 10% better than India. HoweverChinas quality is just as good as Pakistans and they have acompetitive advantage as well because of their cheap prices. China

generally has a cost advantage due to the fact that in addition tocheap labour they even have cheap leather. Moreover, they even sellpig leather which is cheaper. Indiagains a competitive advantageover us because they produce their own chemicals whereas thePakistani Chemical Industry has not been developed and thereforeimports more than 90% of its chemicals. Thus this increases the costof production

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Since there is a lot of idle production capacity in leather garmentsfactories in Turkey and because of cheaper raw material, the Turkishsuppliers are offering very competitive prices to the buyers in Europeand USA. In the past, Turkey used to be expensive than Pakistan byabout 15-20 per cent in prices, but now the Turkish manufacturersare offering the same or even cheaper prices than the manufacturesfrom Pakistan.

The European buyers prefer to buy from Turkey because there is nocustoms duty for imports from Turkey into Europe whereas Europeanimporters have to pay customs duty on import from Pakistan. In caseof equal prices, the European buyers would still prefer Turkeybecause of close proximity and their better taste of fashion and

design than the Pakistani producers.

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MARKET ANALYSIS

Market Growth

Novas Growth rate of 20% annually has been constant in spite oflocal exporters moving out and them getting more business. Novasrevenue and profits have been stable over the years because ofcertain external effects. The prices of leather, labor, and utilities areall on the rise and the only reason this is survived by Nova is due tothe increase in demand.

Product Life Cycle

On a product life cycle, Nova is in its growth phase while LeatherFields is in the maturity phase. There are no new entrants in themarket as the barriers to entry are extremely high.

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Market Profitability

Nova Leathers current turnover is of Rs.2.8 billion.

There is no set profit for the company as they are continuouslyinvolved in the process of expansion and as the prices of leathercrust and wet leather keep increasing. They are currently at a breakeven point. The increase in quantity of finished leather demanded,due to the shut down of various leather exporters is the only reasonfor the sustainability of Nova in the leather industry.

Key Success Factors

Novas key success factors are as under:

1. Top of the line leather quality

Product

DevlpmtStage

Introduction DeclineMaturityGrowth

Nova

LeatherField

Sales

Sales andProfits ($)

Time

Profits

Losses Investment ($)

0

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2. Several grades of quality, some of which cannot be matched byany tannery globally

3. Some of the worlds most leading brands import Novas products4. Prompt delivery5. Perfect customer correspondence

Raw Materials

Throughout the leather industry animal skins, which are the basis ofthe leather industry, are obtained from the provinces of the Punjaband Sindh. Limited quantities of imported hides are also used. Theseason of peak activity begins around Eid-ul-Azha and extends for

between two to three months.

Livestock growth in the country is between 1 to 2%. There is shortageof hides and skin, which leads to an import of 30% of the hides andskin. The imports are mainly made from Saudi Arabia, Iran,

Afghanistan, and other Muslim countries in the region. The export oflive animals to Saudi Arabia and other countries met with a lot ofprotest from the tanners as such exports made the shortage of thehides and skin more acute. After a lot of lobbying, the exports of liveanimals have reduced but these have not completely stopped.

The import of hides and skin is not always due to shortage. It issometimes required because of the kind of finished product that thelocal exporter has to make. Different hides and skin in differentcountries have varied texture, strength, and quality. The requirementof the product would determine as to what kind of hides and skin is tobe used.

Novas Raw Materials

Nova imports leather in various forms and then further processes it inits tanneries. Wet blue and crust leather is imported mainly by Nova.Nova also imports items such as buttons and buckles from China.

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Most of Novas leather imports are from Muslim countries. Theseinclude the likes of South Africa, Iran and Sudan. The reason forimporting from Muslim countries is that the method of slaughter issuch that allows all the blood to gush out of the veins and thus leavefewer marks on the skin making the skin of high class quality.

Nova prefers to import raw leather rather than get a local supply dueto a low threshold for credit. The suppliers can not invest the amountneeded. When raw material is supplied it is done in millions of squarefeet, and they need up to 20-30 containers of raw leather. This alsomeans it is a Rs. 50 to 70 million investments which is too steep forlocal suppliers.

Demand Conditions

Having a sophisticated buyer means that these buyers demand thebest quality products. In order to meet such stringent demands of thebuyers, the firms are compelled to provide them with the best. Thesebuyers may be individual consumers, industrial buyers, ordistributors. When they pressurize firms for high-quality products thatshould meet the standards of the global market, firms have no choicebut to rise to the challenge or face the danger of being driven out ofthe market. Therefore, it is not the size of the demand that matters;what matters most is the quality of the demand in order for a firm tobe globally competitive.

Nova caters to a pure global market with a minimal local marketshare. Therefore in order to compete in the global market, they haveto continuously strive to provide its customers with the highest qualityproducts, comply with international standards, and maintainsuccessful customer relations. All these factors contribute to

maintaining and increasing Novas current and future demand.

Exhibitions and Trade Fairs

At times Nova participates in global exhibitions and trade fairs. This isnot done for promotional marketing as much as it is carried out for

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clearing remnant stock piles, from excess productions, and left oversample pieces.

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Two government based Research and Development institutes areNational Institute of Leather Technology (NILT) and Pakistan Councilof Scientific and Industrial Research(PCSIR). PCSIR carries outresearch in various fields like pharmaceutical, glass, ceramics, food,as well as leather. The two institutes have achieved no real resultsand may be considered to be namesake based on theirachievements so far.

However, the two most important associations in this industry are:

Pakistan Tanners Association (PTA):

The PTA is an association that controls and organizes all thefunctions of most of the tanners existing in the country. It is an

influential group that helps make various strategic decisions on theamount of finished leather and tanned leather that needs to beexported and imported. Plus, who should the customers be, thequality and pricing determinants of the tanned leather, whichmanufacturing process needs to be utilized when and how etc.

Pakistan Leather Garment Manufacturing & Export Association(PLGMEA):

This association controls the manufacturing and sale of garments thatare produced locally. It undertakes market surveys in order toproduce for a foreign market since leather garments are demandedon an extremely small scale locally. Its functions are similar to that ofPTA except that they relate to Garments and not finished leather.

No firm invests individually in R&D. PLGMEA is responsible forconducting all R&D efforts in Pakistan. For example, PLGMEArecently brought in a new machine and placed it at a central locationwhere all manufacturers were allowed to come and utilize the

machine at a minimum rate. Skilled technicians have also beenbrought in for training the local workers.

PLGMEA also imported a waste purifier which was set up in Korangi.This machine takes the leather wastes and processes it to transformit into un-harmful form which is wasted in an environmental friendlymanner into the water.

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Social Compliance

The company adheres to a strict code of conduct which involves thefollowing:

1) Environmental compliance2) Non discrimination3) Child labor4) Harassment and abuse5) Freedom of association

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INTERNAL ANALYSIS

PERFORMANCE ANALYSIS

Production Capacity

Novas total capacity is an average of 80,000 garments a month. Thishas doubled in the last 4 years. During seasonal highs the capacitycan exceed 150,000 garments per month.

Nova gets business almost all year round, except for about 2-3months of the year which are usually quite unproductive for them.This year, there have been no slow months for Nova. Nova has acapacity of producing 80,000 units without outsourcing. In Nov 2007they had a preset target of producing 125,000 units of garments andthey exceeded their targets and actually produced 133,000 units. Thenumber of garments produced per department is as follows:

DEPARTMENTNO: OFUNITS*

Alpha 31,000

Bravo 28,000

Charlie 13,915

Sigma42,000 +17,000

* Figures are approximations

Customer Satisfaction

Every customer appreciates on time response and delivery. Companyperformance is analyzed and monitored at all levels. The top levelmanagement of Nova personally takes care of their clients needsand queries. The clients are treated as guests in case a foreign

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delegation arrives. Special treatment is given to them in the form ofdinners, entertainment and free stay.

Timely response is given so much importance throughout theorganization that all the e-mails coming in and being sent out aremonitored by the General Manager. It is Novas policy to make sureeach and every query is being answered and all e-mails should bereplied within 24 hours irrespective of the fact if it is a regular client ornot.

Due to the time difference between Pakistan and various parts of theworld, a problem arises where the customer needs to get in touchwith the managers and cant because of the time difference.Managers have then been given Black Berrys to ensure they are

available for their customers at all hours of the day and night. Clientsmay contact them at any given time of the day.

In order to optimize customer satisfaction Nova keeps a record of allits clients for the previous ten years. This data is analyzed and trendsand patterns are deduced. This data can then be useful to identifykey clients and their buying and preference patterns.

A general mind set that works against Pakistani companies globally isthat we have shabby customer service and after sales service. Novamakes sure that this is not reinforced at their company. Nova ensuresprompt service, delivery times and customer care.

Product Quality

The process of leather production is simple as illustrated as follows:

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There is a Quality control department which is set up at each unit.

This ensures that quality is maintained at every step of the productionprocess. Quality control is carried out at the stages of:

o Selection of leather,

o Cutting

o Sewing and

o Finally at the shipment stage where the head of quality

conducts a random check.

Moreover, Nova checks its leather for chromo chemicals, which areagainst the international standards and laws and may prove harmfulto human life.

Incase of large orders beyond the companys production capacity, thejob requires out sourcing. The company then has to make sure thatvery high and intensive quality controls are implemented. This isbecause if the outsourced company makes errors in productionsNovas reputation is at stake. To ensure the quality is standardizedvery high checks and controls are kept on the process ofmanufacturing the finished products.

Managing Workforce Diversity:

Nova currently has more than 1,800 employees from differentlocalities of Karachi. Diversification is mainly on the basis of religionand gender. The majority of the workers are Muslims whereas the

Raw blue leather

Wet blue leather

Crust leather

Dyed leather

Finished leather

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rest are Christens. The organizational culture is such that itencourages them to work hand in hand in an organized manner.Nova treats its workers and employees equally and with greatrespect. For example in the Muslims holy month of Ramadan everybody is offered Iftar regardless of their beliefs.

On the other hand Nova has also recently started to hire women onthe assembly lines in order to discourage discrimination between thetwo genders. Moreover Nova understands its employees needsaccording to the society and culture we live in and therefore womenare allowed to work for shorter hours.

Employee Training and Productivity

Approximately 80% of the employed individuals in a typical leatherfirm in Pakistan can be categorized as skilled labor. For recruitmentpurposes, the general custom is to employ people from other firms.This is practiced for approximately 90% of the cases. Apprenticeship-based training is prevalent rather than relying on formal traininginstitutes. The workers, after learning how to perform tasks, undergoa test to ensure they are capable of the work they are set out to do.

Nova employs about 1700-2000 workers which include the workers inthe tanneries, wage workers and regular employees. Nova follows ano child labor policy and all employees are 18+ years.

The pay structure for the labor at Nova is one two levels1) per piece pay this means that the labor is paid for the final

number of approved pieces of output they produce2) Per job This pay structure indicates that a fixed salary will be

paid to the labor on the completion of a complete approved job

on time.

Nova as a company implements both pay structures depending onthe type of job.

Wage rates:

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PerMonth Rs.4600

Per Day Rs.177

Per

Hour Rs.22.11

Novas have always provided its customers with the best qualityproducts along with maintaining the interest of their employees. Forexample extra benefits and bonuses are given to the employees fortheir hard work and dedication towards their job. Furthermore, extracare is taken of the handicapped employees who are given additionalbreaks so that they dont get overworked.

Responding to Labor Shortage

Labor in Pakistan is very unreliable. If they ask for a three day leavethey might show up after a week. This problem puts the topmanagement in a dilemma regarding order completion in a timelymanner. Therefore, in order to over come this problem the companyusually employs temporary workers or asks the existing staff to workfor longer hours for which they are then compensated.

Thus Nova always makes sure that right amount of labor is availableat the location to produce high quality products within the time limit.

Machinery

The use of local machinery in the leather units in Pakistan is very low,up to a maximum of approximately 20% of the machinery beinglocally produced. The main local machinery used is a drum, where

finished leather is dried. These machine manufacturers are locatedmainly in Lahore. The use of foreign machinery represents theopportunities present for the leather industry in Pakistan to invest inbetter machinery and also the difference in the state of high qualitymechanization in Pakistan and its competing countries.

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Nova Leathers carries out the majority of its work on a machine calledInvestronica, which makes patterns on the leather according to thedesign specifications fed into the machine. It creates cut outs ofstencil nature and also grades sizes automatically e.g. from mediumto a large.

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DETERMINANTS OF STRATEGIC OPTIONS

Past Strategies

Novas organizational structure is dynamic and has been changingsignificantly over the past 17 years. Over the past few years theproduction quantities have increased by 40%. In the initial years therewas slow growth for Nova. They started with one manufacturing unitas tanneries and as customers increased Nova vertically integratedits business and ventured into garments and accessories. Graduallythe teams of merchandisers increased and so did the number of

people in each team. The regions also expanded and then finally thenumber of units expanded to where they stand to date. The units

Alpha, Bravo, Charlie, and Sigma were started 1.5 years ago as aresult of all this activity to make the production processes moremanageable.\

Future Strategies

In order to approach new clients Nova Leathers go to them directly.Their future strategy is to analyze their past sales trends and get ridof unprofitable clients and retain more profitable ones. They are notlooking into further expansion at this point in time.

Strategic Problems

1. A major problem that Nova faces are customer claims. Claims arewhen clients find reasons legitimate or illegitimate to get a 5% claim

on the delivered goods.

2. Another problem faced by Nova is the wages for the labor. There isa limited supply of labor and thus other factories may take theworkers for higher wages and then Nova has to yet again increasetheir rates to get them back. Here the theory of sticky wages andwage spirals come into effect.

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SWOT ANALYSIS

Strengths:

Nova owns its own tanneries where they produce their ownleather. This serves as an advantage because; if the prices offinished leather increase or decrease in the market Novaremains unaffected by this market situation.

Tremendous experience on their side as the factory has beenestablished for 17 years.

Big brand name clients such as Zara, H&M, and Espirit. Good customer relations. Nova has, over time, come to be known as a trusted name in

leather manufacturing. Leather market and demand is constant and there has never

been a decline in the demand for leather.

#1 in leather export Supplier of processed leather to China. Cheaper and better quality leather then China and India. Acquisition of Investronica a pattern making machine. It

creates cut outs of stencil nature and can grade sizesautomatically. E.g. medium to a large.

Follows all international standards: No child labor

Environmental friendly

ISO certified plant

Resource reutilization (generators produce gas withno toxic fumes, the heat produced though isrecycled to heat the boilers etc.)

Opportunities:

The Chinese government is decreasing its subsides placed onthe leather industry and thus their production of leather goodswill become more expensive and the price will increase makingthe global market more approachable for us as the prices willbe more competitive. This serves as an opportunity as

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compared to Chinas previously cheaper prices and Pakistansmore expensive products.

Around 20 to 24 leather factories closed down in the past fewyears giving Nova a wider clientele

Threats:

Main global competitors are China and India due tocheaper/free electricity and cheap labor.

Bangladesh is a minor competitor. Leather field in Sialkot is a close #2 and was #1 till a few years

ago. Turkey is a major threat to Pakistan, since their designs and

quality are of a superior quality. Moreover, the ease of

importing items from Turkey for Europe gives turkey acompetitive edge over Pakistan.

Weaknesses:

In the current market situation where labor and other prices arehigh, meeting global prices is difficult for Nova. As previouslymentioned before Nova has the highest qualities in the worldand this does not come without a price. The finished leather

prices are high and additional prices to make these intogarments makes it higher and thus other global competitors winin the price war. Nova is unable to meet these prices and at thesame time maintain the same high quality it is proud of.

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RECOMMENDATIONS

Remedy for protecting itself from foreign competition is to improvequality by using technology and by giving better customer service.To date Nova has not met a single dissatisfied customer so itsability to compete is tremendous, however little bit support from thegovernment will also give an edge.

Research & Development should be undertaken to see how thetanned leather can be developed even further at cheaper prices.

If all finished leather converted into leather garments Pak will earn

30% more foreign exchange & greater employment. Thereforeefforts to make this into a reality should be made.

Invite foreign designers to give local designers of garments training;As a result local designers will become familiar with differentdesigns not just local ones.

Send local designers abroad so that they could study foreigndesigns and production processes.

Should try and cater to the higher segment of the markets abroad.Nova has great potential because their qualities of products are farbetter than the neighboring countries. As a result they should startmarketing to a higher segment of the market by enhancing theirvalue addition.

Potential for entering the footwear industry.

Have a continuous training program. So that workers who leavedont leave the firm in a desperate state for talent & skill.

Documents

Nova Leathers Report + TOC