Assignment

On
Strategic Management
Course code: 409
Title: Investment Opportunities in Bangladesh a critical
evaluation on Ceramics Industry in Bangladesh

Submitted to:
Tanvir M H Arif
Associate professor
Department of finance and banking
University of chittagong

Submitted by:
Group Alpha
4th year BBA mid-term
Department of finance and banking
University of chittagong

Date of Submission: 7th march, 2015

1

Name of the Members:

Name

Id

Mohammed nurul alam

11303048

Mohammed Abdullah al mamun

11303074

Palash Chandra Roy

11303014

Sumia sultana

11303107

Sabrina Nishi

11303013

Table of Contents
INTRODUCTION................................................................................................................................... 5
OBJECTIVES OF THE STUDY ............................................................................................................. 6
METHODOLOGY .................................................................................................................................. 7
GLOBALIZATION OF CERAMIC INDUSTRY .................................................................................... 8
ANALYSIS AND FINDINGS ............................................................................................................... 10
ABOUT THE COMPANY ................................................................................................................ 10
EXTERNAL ENVIRONMENT ANALYSIS ..................................................................................... 10
PESTLE analysis: .......................................................................................................................... 10
ANALYSIS OF CERAMIC INDUSTRY BY APPLYING PORTERS FIVE FORCES MODEL
...................................................................................................................................................... 13
RESULTS OF INDUSTRY ENVIRONMENT ANALYSIS .......................................................... 16

OPPORTUNITIES:................................................................................................................ 17

THREATS: ............................................................................................................................ 17

INTERNAL ENVIRONMENT ANALYSIS ...................................................................................... 18

THE VALUE CHAIN PROCESS .................................................................................................. 18
STRENGTHS:............................................................................................................................... 22
WEAKNESS: ................................................................................................................................ 24
Conclusion And Recommendations ....................................................................................................... 24
REFERENCES...................................................................................................................................... 25
APPENDICES ...................................................................................................................................... 26

Figure 1:Growth of Ceramic Tableware Export from Bangladesh ............................................................ 8

Figure 2: Manufacturing Process ........................................................................................................... 19
Figure 3: Distribution channel ............................................................................................................... 20
Figure 4: The Five-Force Model of Competition: A Key Analytical Tool ............................................... 26
Figure 5: Ceramic Export Leaders ......................................................................................................... 27
Table 1: Growth of Ceramic Tableware Export from Bangladesh Year .................................................. 27
Table 2: Major Ceramic Manufacturers and their Annual Capacity. ....................................................... 27
Table 3: Total Export and Ceramics Export (USD MM) ........................................................................ 28
Table 4: Summary Results Of Ceramic Industry Environment Analysis ............................................... 28

ABSTRACT

Ceramic industry of Bangladesh is a booming sector and the growth potential of both domestic and local
market indicates it may become one of the big foreign exchange earners for the country. Therefore,
analyzing the industry environment of ceramic sector is of great concern to strategist since defending
against the competitive forces of the marketplace and shaping them in a companys favor are crucial to
strategy formation. To address this issue, this paper analyzes the industry environment (competitive
environment) of ceramic sector of Bangladesh by using Porters five forces model, PESTLE. Beside this
value chain model, strength and weakness has been analyzed to assess the internal environment. The
analysis of five forces indicates that the collective impact of the competitive forces is moderate to weak;
hence, the ceramic industry of Bangladesh is considered to be competitively attractive in the sense that
industry members can reasonably expect to earn decent profits and a nice return on investment.

INTRODUCTION
Demand for ceramic is primarily initiated by the increase in construction activities in the world and rising
demand for new residential houses in buildings. Asian countries (esp. China & India) dominate the global
market for ceramic tiles.
Ceramic industry in Bangladesh is now a potential sector to boom. Growing demand for sanitary ware
and tiles due to huge commercialization has made this sector more attractive. In the near future, ceramic
industry has every potential to become a big foreign exchange earner for the country which is suggested
by its growth potential for both domestic and export market. Bangladesh entry into ceramic export market
is very new as compare to Jute and Tea. But the industry has witnessed a rapid growth since 1991. For its
quality products, this sector has already earned a good name in the global market. Ceramic products have
a $20 billion global market, of which Bangladesh has 17% share.
Ceramic industry of Bangladesh is a booming sector and the growth potential of both domestic and local
market indicates it may become one of the big foreign exchange earners for the country
Hence, we have initiated the report toward the investigation of the opportunities for investment in
Ceramic industry in Bangladesh.

OBJECTIVES OF THE STUDY

The broad objectives of this study are1) To evaluate the present position of Ceramic industry of Bangladesh in world economy.
2) To find out the existing and upcoming local and global problems and potentials of this industry.
3) To recommend some suggestions to be taken for solving the problem along with some initiative
for sustainable growth in local and global market and expanding investment opportunities in
Bangladesh.

METHODOLOGY
1) Information used to prepare this assignment has been collected from secondary sources.
These include:
books,
newspaper articles,
journal articles,
Website publications by Export Promotion Bureau and Bangladesh Bank and online
articles from different news-based websites.
2) Quantitative and Qualitative methods:
In our study, we use those sources which include both quantitative and qualitative information.

GLOBALIZATION OF CERAMIC INDUSTRY

Demand for ceramic is primarily initiated by the increase in construction activities in the world and rising
demand for new residential houses in buildings. Asian countries (esp. China & India) dominate the global
market for ceramic tiles.

Why Bangladesh? Does it offer attractive opportunities for investment?

Bangladesh is one of the worlds most important countries in ceramic production and consumption. As
one of the worlds most populated country, ceramic industry of Bangladesh faces huge domestic demand,
which indeed push forward the rapid development of BD ceramic industry so as to make BD important
country in production and consumption of ceramic tiles in the world. Statistics show that the consumption
in the Asian pacific countries exceeds 10% in the recent year. (ceramic asia) Besides, the market in AsiaPacific is projected to witness a CAGR of more than 15.0%, in terms of value, in the next five years.
(Global Ceramic Matrix Composites Market 2019 Forecasts and Research Report)
Along with its domestic demand, BD has a huge opportunity to export its product since it has improved
its production system and quality of its product by importing machines, efficient labor force and the use
of natural gas in the production system. Interestingly the use of natural gas in the production has made the
ceramic tiles brighter and shiny. BD has earned a lot of foreign currency by exporting ceramic goods to
more than 45 countries. The largest export destinations are the United States, the middle-east, Italy, Spain,
France, New Zealand, the Netherlands, Australia and Sweden. (The Financial Express, 15 June 2014)
Year

Amount in US$

2012-13 (July-March)

27,779,246.64

2011-12

33,748,128.72

2010-11

37,579,260.27

2009-10

30,775,334.51

2008-09

31,167,227.14

Figure 1:Growth of Ceramic Tableware Export from Bangladesh

Source: Bangladesh Export Promotion Bureau

Besides, in the first nine months of the 2013-14 fiscal years, Bangladesh exported about US$36 million
worth of goods and this is only after meeting 80% of the domestic demand. (The independent, 15 June
2014)
Bangladesh ceramic industry has earned its huge potential considering the per capita consumption while
providing employment for more than 600,000 people. In ceramic industry, Bangladesh not only owns
dozens of big players, but also has some small and medium enterprises. With importing globally
advanced technology and equipment from China and Italy, BD ceramic industry has made tremendous
development in terms of production efficiency, quality, R&D and designing. This development has earned
reputation and strong position for BD in the world ceramic market.

The ceramics industry sector has already attracted foreign investment. The investments have mainly been
from China and the Middle East states. Some of the major joint venture partners are RAK Ceramics, Fu
Wang and China-Bangla of which the largest is RAK of the UAE, and who have about 80% of the
domestic sanitary ware market.

ANALYSIS AND FINDINGS

To make the assessment we took RAK a ceramics as our case sample.
ABOUT THE COMPANY
RAK Ceramics is an international consumer Ceramics Company based in the Persian
Gulf sheikhdom of Ras Al Khaimah, a member of the UAE. It was established in 1991 under the
management of Sheikh Saud Bin Saqr Al Qasimi, who succeeded his father Sheikh Saqr Bin Mohammed
Al Qasimi as the Ruler of Ras Al Khaimah in 2010, and the Swiss-Lebanese engineer Khater Massaad.
RAK Ceramics is listed on the Abu Dhabi Securities Exchange. Over a period of twenty years the
company developed into the worlds largest ceramics manufacturer with a global annual production
output of 117 million square meters of ceramic and porcelain tiles, 4.5 million pieces of bathware and 20
million pieces of tableware. The main factory complex in the UAE is located in the Arabian desert about
an hour by car from Dubai International Airport. The products are made from local sand, clay
and feldspar, as well as imported specialist materials, mostly using equipment made by the
Italian Sacmi company.
EXTERNAL ENVIRONMENT ANALYSIS
PESTLE analysis:
Our objectives of finding opportunities and threads of Textile Industry of Bangladesh can be achieved by
external analysis. PESTLE analysis is a framework to examine the external environment of an industry.
So we can perform external analysis through PESTLE.
Here PESTLE stands forP=Political Factors
E=Economic Factors
S=Social Factors
T=Technological Factors
L=Legal Factors
E=Environmental Factors

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Political environment
Political factors play a significant role in the manufacturing and distribution of ceramics products thus in
the overall ceramic industry. The Government tax policy and political climate has a contributory impact
on ceramic industry in Bangladesh.
The industry faces high import duty on certain ceramic raw materials from 7.5 percent to15 percent.
(Iftekhar Omer)
Since GSP system has recently suspended by the US Government, ceramic product manufacturers have
proposed Bangladesh government to cut duty on imported raw materials and increase import duty on
finish ceramic products to support them to survive and remain competitive in the global market.
The government has assured ceramic manufactures to take effective measures to boost local ceramic
industry and thereby it seems government policies and regulations are supportive in ceramic industry.
In spite of suffering financial crisis due to political instability, the industry is significantly contributing to
the countrys overall development.

Economic environment
The economy of Bangladesh is growing at a positive trend despite some of unfavorable events. Although
economic factors are not in control of the ceramic industry but the countrys economic growth rate,
market factors such as inflation and interest rate, total savings and investment are supportive enough for
the rapid growth of the ceramic industry.
According to the Export Promotion Bureau ceramic exports moved up by 26 per cent in 2014 financial
year. The sector brought in US$47.5 million in FY'14, compared with $37.7 million a year ago.
Moreover, more than 40 thousands of workers are directly involved in ceramic industry. As the
construction industry including residences, shopping malls and others is growing so fast, the ceramic tiles
business is becoming one of the booming and prospective sectors with a staggering annual growth rate of
20 percent (Nusrat Jahan 2010). Therefore, economic environment is favorable for the expansion of this
industry.

Social environment
Demand for ceramic tablewares has also increased significantly in Bangladesh among middle income
groups. This increased demand can be attributed to the fact that people have turned away from the
traditional practice of presenting jewellery at wedding ceremonies and have resorted to the next best
option, ceramic tableware.
Therefore, societal values, attitudes, cultural factors, and lifestyles are supportive for the development and
growth of ceramic industry.

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Technological:
Trends in technology can affect numerous industry factors including the product or service and how it is
produced and delivers. As new technologies are innovated, the companies in BD are able to increase their
productivity and reduce their delivery time and by this way increase their profit margin more than
existing.
The companies in general use the raw material of Bangladesh, with importing the high- level glaze and
technology from China, India, Malaysia and Italy. And those machines adopt the whole set of the raw
material facility of China & India. Major firms also import the molding facility from Italy. Furthermore,
they also import press and in case of ceramic machines made in Italy deliver best services available.
Legal:
The law of our country offers very attractive opportunities to invest in this growing sector. In our country
ceramic industries enjoyed GSP facilities for a long time. But unfortunately, we have lost this facility.
Although the govt. of our country is trying to get this facility back, it also has given some incentives to
ceramic industry to help run their business as before and save them from sufferings due to loss of this
facility.
In a budget proposal for the 2014-15 fiscal to the National Board of Revenue, the association demanded
the government to reduce the raw material import duty to from existing 5%-25% on different raw
materials of ceramic industry.
Currently, 5% import duty is applicable on basic raw materials, 25% on cover coat, bond and silk screen,
10% on milk talc, magnesium sulphate and calcium carbonate, alumina liner, filter cloth and other raw
materials.
The present investment in the countrys ceramic industry is roughly Tk5000 crore and total annual
capacity of ceramic tableware manufacturing companies is 22.2 crore pieces, tiles 687 lakh square meter
and sanitary ware 1.14 lakh metric tonnes.

Environmental:
Every business should always consider environmental management to be an internal and fundamental part
of business strategy. The company must be committed to making sure that comply with all the latest
ministry of environment legislative and BSTI standards that affect the activities of ceramic industry. It
should be companys principle aim to continuously improve their approach to the prevention of pollution
and to achieve the highest possible environmental standard in all aspects of their company practice.
Company has established a waste water treatment plant to make a difference to the environment.
BD offers a very handy and helpful environment for businesses including ceramic industry. In our
country, construction activities are growing with high living standard. Furthermore, it is also easy to
export to other countries.

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ANALYSIS OF CERAMIC INDUSTRY BY APPLYING PORTERS FIVE FORCES MODEL

If a company wants to identify its major opportunities and threats that prevail in the industry environment,
it becomes necessary to analyze the competitive forces of the companys industry sector (Hills and Jones
1998).
Michael. E. Porter of the Harvard School of Business Administration has developed competitive forces
model that effectively facilitates industry analysis. According to Michael Porters Five Forces Model, if
the company can overcome its threats it becomes easier to sustain in the market within which it operates.
This model holds that the state of competition in an industry is a composite of competitive forces
operating in five areas of overall market (Porter 1980, Thompson et al. 2007):

Rivalry among competing sellers in the industry;

Competitive pressures associated with threat of new entrants into the market;

Competitive pressures coming from the sellers of substitute products;

Competitive pressures stemming from supplier bargaining power; and

Competitive pressures stemming from buyer bargaining power.

According to Porter the stronger each of these forces is, the more limited is the ability of established
companies to raise prices and earn greater return. Within Porters framework, a strong competitive force
can be regarded as a threat since it depresses profits. A weak competitive force can be viewed as an
opportunity, for it allows a company to earn greater profits (Hills and Jones 1998).
Competitive Rivalry within the industry
Although Bangladesh ceramics industry experiences severe competition from foreign countries like like
Sri Lanka, China and Thailand, the domestic marketplace is not strong competitive enough.(Nusrat Jahan
2010).
Bangladesh being the low cost labor force economy, developed countries is continuously placing more
orders for the production of quality ceramic wares. As a result the demand both in terms of domestically
and internationally for Bangladeshi ceramic products is growing increasingly. Addressing this strong
growth, the numbers of competitors, roughly of equal size and competitive capability, are increasing in
this industry day by day (Khandaker and Alamgir 2006, Khan).
According to Bangladesh Ceramic Ware Manufacturers Association (BCWMA), there are approximately
50 ceramic manufacturers including 14ceramic tableware, 20 tiles and 16 sanitary firms are operating in
this industry producing tableware, sanitary ware and tiles. Six of them are fairly large and they share more
than 90% of the total capacity and they produce over 40,000 tonnes of ceramic products a year.
At present Shinepukur Ceramics is leading all the ceramic manufacturers both in terms of production
capacity and total revenue. It has about 62% market share in the export market and is only second to
Monno Ceramics in the domestic market. The total production capacity exceeds 25 million assorted
pieces per year, which is over 6,000 tonnes of ceramic ware (Golam Mohammad Forkan).

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Monno Ceramics Company with the capacity of producing 5,500 tonnes of ceramic products currently
manufactures and exports very high quality porcelain tableware and bone china units and Standard
Ceramics Ltd has the third largest capacity with 4000 tonnes of ceramics products. Bengal Fine Ceramics
Ltd. is the first company in the country to make soft porcelain, which was branded as 'stoneware'
(Khandakar Safwan Saad). FARR Ceramics Ltd started operation in 2007 and within a span of two and a
half years the company has grabbed more than 10% share in the ceramics export market. Moreover, it is
the first Bangladeshi company to enter the export market of Argentina after shoring up its foothold in
Europe (Rahman 2009c, 2009f, Bhuiyan 2009, Star Business Report 2009).
The competing local manufacturers are also active in making fresh moves to improve their market
standing and business performance. For instance, X Ceramics produces ceramic tiles for both interior and
exterior usage. Besides, X ceramics is also increasing its production capacity to manufacture 20% more
output than their nearest competitors to gain 25% of the market share (Nusrat Jahan 2010).
However, increment in the number of new plants, capacity development, product development and market
expansion by ceramic ware manufacturers of Bangladesh are still low compared to the robust growth in
demand both in export and local market. As there still exit ample growth opportunities in this industry,
the rivalry among the existing companies are still weak, thus making this sector more attractive for the
potential entrants (Nusrat Jahan, 2010).

Bargaining Power of Buyers

Individual consumers of ceramic products in this industry have much bargaining power in negotiating
price concession or other favorable terms with seller, hence, the individual buyers mostly pay the sellers
posted price. However, it is relatively easy for buyers to switch to comparatively low-priced imported
ceramic goods; keeping this in mind, the local manufacturers are aiming for competitive pricing to attract
and retain customers (Nusrat Jahan 2010).
Bangladesh has got a huge opportunity in ceramic tableware market because of increasing demand from
the developed countries where the production cost of ceramic tableware has increased significantly due to
an enormous rise in labor cost.
At present, Bangladesh is exporting ceramic products to about 50 countries including, the USA, the EU
and Canada, tiles to India, Nepal and Bhutan, and sanitary wares to the Middle East, specially the UAE.
(Source: The Financial Express, 17 July, 2014)
The bargaining power of these international buyers is reasonably strong enough to negotiate for price
concession and favorable terms since they can always switch to low-priced suppliers of ceramic wares
from China, Sri Lanka, Thailand and Malaysia. But due to increased production cost, these countries are
also failing to offer competitive prices and losing their share in the international market. Thus, more
international buyers are moving towards Bangladesh as it has cost competitiveness in terms of gas supply,
cheap labor cost, skilled labor and also has competitive advantage of possessing bone china technology
(Khan 2009).
As the number of buyers, both in local and international market, is growing, the bargaining power of
buyers is weakening.

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Bargaining Power of Suppliers

About 95% of raw materials for making quality and exportable ceramic products in Bangladesh are
imported from abroad. The materials are imported mainly from China, Japan, Germany, New Zealand,
South Korea and India. The prime raw materials of ceramic products are white clay and sand
(Banglapedia.search.com). The raw materials account for 35-40 percent of the total production cost of the
ceramic products.
Since in Bangladesh, there is a shortage of raw materials, equipment and machineries for ceramic
industry, it gives the supplier more leverage in bargaining the price (Nusrat Jahan 2010). But the supplier
base of ceramic sector is moderately large enough to weaken the supplier power. However, some of the
suppliers like India are also showing interest to integrate into the ceramic industry of Bangladesh and
perhaps could become a powerful rival (Chowdhury 2004, Islam 2010, Khan 2009).
Threat of New Entrants
Traditionally, Ceramic manufacturing in Bangladesh is a gas-based, labor intensive and skills-oriented
business. Skilled labor force and plentiful natural gas is our great resource in ceramic industry and the
industry is using the most advanced Bone China technology and the availability of labor is relatively easy
compared with the developed nations (Board of Investment, Bangladesh). Being the low-cost labor
economy and the expanded production of ceramic tiles and sanitary ware positioned Bangladesh as a
significant exporter while meeting the domestic market demand.
Bangladesh Ceramic-ware Manufacturers Association (BCMA) sources say the present investment in the
countrys ceramic industry is roughly Tk.8.00 billion and total annual capacity of ceramic tableware
manufacturing companies is 22.2 crore pieces, tiles 687 lakh square meter and sanitary ware 1.14 lakh
metric tones. In 2013-14 internal markets for ceramics products is worth of three thousands and fifty lakh
crore.
In first nine months of the current fiscal year(2013-2014), export earnings from ceramics products stood
over US$36m, an almost 30% rise, comparing to previous year, according to the Export Promotion
Bureau. After a consistent growth in last 15 years, this sector is now in a good position to achieve the
target of $100 million export earnings (Daily Ittefaq, 2009; Hossain, 2009; Export Promotion Bureau and
Bangladesh Bank).
Ceramic exports moved up by 26 per cent in 2014 financial year as it showed resilience even after the
suspension of Generalized System of Preferences by the US government, industry executives said. The
sector brought in US$47.5 million in FY'14, compared with $37.7 million a year ago (Export Promotion
Bureau).
As it indicates that the local and foreign demand of ceramic products is increasing (due to growing
construction industry including residences, shopping malls) resulting in widening the gap between
demand and supply, the new entrants can easily expect to earn attractive profit by capturing the untapped
demand (Rahman 2009d, 2009e).
Therefore, many business companies like X ceramics, Peragon Ceramic Industries Ltd, Akij Group and
Dulal Brothers Ltd have entered in this sector within few times.
This indicates that the competitive threat of new entry is not strong enough to place significant
competitive pressure on the existing manufacturers as the government regulations are supportive for new
15

entrants. However, the number of new entrants and their capacity development is low compared to the
growth in domestic and export demands (Nusrat Jahan 2010).

Threat of Substitute Products

The ceramic industry in Bangladesh is in aggressive competition with low-priced sanitary ware, tiles and
table wares, mostly imported from China. Besides, this sector is also facing strong competitive pressure
from firms in other industries offering substitute products (Nusrat Jahan 2010).
In Bangladesh, the crockery companies like Bangladesh Melamine, Sharif Melamine, RFL, BRB, and
GAZI are growing rapidly with the production of low-priced, attractive and convenient substitutes of
ceramic tableware such as melamine wares, aluminum wares, steel kitchen wares, glass wares and plastic
wares and substitutes of tiles include bamboo flooring, ply board, marble stones wooden flooring and
other artificial stones for both interior and exterior usage. The local large manufacturers of these
substitute products are also expanding their existing capacities with concentration on new product lines to
attract more customers (Islam 2010).
In recent years, large scale manufacturers have entered the crockery market, with their brands competing
strongly with both local ceramics products and foreign products of their same kind. Hence, the
availability and low cost of substitutes is exerting moderately competitive pressure on the existing
companies of ceramic industry. (Nusrat Jahan 2010).
RESULTS OF INDUSTRY ENVIRONMENT ANALYSIS
The industry environment of ceramic sector is weak to moderate competitive and offers ample growth
opportunities for both its incumbents and new entrants. Details of this analysis has been enamurated in
TABLE 4.

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From the analysis of Porters five forces model and a thorough analysis of PESTLE model reveal the
following Opportunities and Threats in the ceramic industry of Bangladesh.

OPPORTUNITIES:
Opportunities are the favorable external environmental factors that help the firm to take advantages so
that the operation of the firm becomes more profitable. The available opportunities of the ceramic
industry of Bangladesh are:
1. The rapid increasing in the construction and housing sectors creates a major source of ceramics
products demand.
2. As the living standard of people increasing day by day, this creates a positive opportunity for the
growth of ceramic industry.
3. The development of Hotel and tourism industry also demands for ceramic and tiles products.
4. Since Bangladesh is growing rapidly towards urbanization, there exists a vast opportunity for the
growth of ceramics industry
5. In Bangladesh, ceramic industry is labor intensive. As being the low cost labor force economy,
Bangladesh is continuously getting more orders from developed countries.

THREATS:
As oppose to opportunities, threats are unfavorable external environmental factors that endanger the
profitability of the business firm. The major threats prevailing in the Bangladesh ceramic industry are:
1. There is a shortage of raw materials for producing ceramic products. Most of the raw materials
are imported from china.
2. Lack of continuous supply of electricity and natural gas poses a major threat.
3. Technology barrier in ceramic industry is significant as modern ceramic industry is going towards
technological based.

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INTERNAL ENVIRONMENT ANALYSIS

THE VALUE CHAIN PROCESS
RAK ceramics value chain includes analysis of inbound logistics, operations, outbound logistics, sales
and marketing, customer service and supporting activates like: procurement, technological development,
R&D program, general administration and human resource management.
RAK ceramics is fully backward and forward integrated. The value chain process of RAK ceramics is
described below in details.
Inbound logistics:
The basic raw material of ceramic is different types of clay. For best quality floor covering, RAK select
the best quality clay which includes: Indonesian Clay, Malaysian Clay, Indian Clay, China Clay,
Bangladeshi Clay, Czech Republican Clay. For glazing or coloring RAK use several raw materials. This
material arrives from Italy and Spain. The materials are: Color Pigment, Cerfrit, Adhesive and Chemicals
for stabilizing color.
Suppliers of raw materials: The main raw materials supplier of RAK is Global Business Association
(GBA). The GBA is a sister concern of RAK ceramics. Cerfrit which is a company from Spain supplies
cerfrit for using in colors. On the other hand Color pigment is supplied by GBA which is collected
from Italy.
Shipment of Raw materials: GBA sends the raw materials by ship to Chittagong port and sometimes to
naryanganj from Chittagong port. Spare parts for their machineries are collected from SACMI,which is
a giant of manufacturing machines and completing plants and its an Italian company, by air.
Supplier of packing Raw materials: The packets used to pack the final products are supplied by KEA
printing and packaging company. This is a subsidiary company of RAK ceramics and is situated right in
front of RAKs manufacturing plant in Sreepur, Gazipur. Hence, collecting cartons from there is easy
now.
Inventory management: Store department and accounts department mainly involved in inventory
management job. Accounts department is in charge of Raw materials inventory whereas Store department
is in charge of the management of finished goods.
Operations:
Manufacturing Process: Using SACMI, the most advance technology which comes from Italy used in
the ceramics production, RAK is producing tiles and sanitary ware. RAKs production plant is fully
automated and computer operated that helps to reduce the chance of error. SACMIs machineries is a
sensor based in which it is assigned the specific tasks to be performed with minimum error.

Here below, the whole production process is summarized. So, lets see HOW DO THEY DO IT!

18

Step1: In lab a
"master sample is
created to maintain
the standard of
quality tiles.

Step2: The lab

gives the
composition list
instructing
percentage of 'clay'
to be used to the
"Quality Assurance
Department"

Step3: Body
preparation sector
calculates the
weight of different
clay which will be
used to make the
tiles.

Step4: Raw
materials are given
input in BOX
FREEDER by the
help of wheel
loader.

step8: From SLIP

TANK, slip is moved
to SPRAY
DRYER, which forms
the slip into powder
or granule.

step7: From BALL

MILL the present
form of clay which
is also called slip is
stored into "SLIP
TANK"

Step 6: In BALL
MILL the raw
materials are mixed
with water to
create slip, this
procedure is called
"milling.

step5: From BOX

FREEDER by the use
of conveyr belt, raw
materials are
passed to BALL
MILL.

step9: This
powder will be
passed into
PRESSING
MACHINE through
SILO where the
powder is given five
bar pressing to
convert the powder
or granule in to raw
tiles.

step10: In PREFIRING the raw tiles

are taken through
200 degree
Celsius, to reduce
the moisture of the
raw tiles.

step11: The raw

tiles will now go
through the DISC
Glazing BOOTH
machine, where it
will be covered by
the first coat of
Coloring or Glazing.

step12: After the

DISC Glazing
BOOTH process the
tiles will go through
the PRINTING
MACHINE and
there it will get the
necessary designs
on top.

step16: after
checking by master
CPU 0% error and
3% error are
categorized as Class
A and B
respectively.

step15: After
passing tiles from
B&T KILN LOADING
MACHINE every tile
have to pass
through Master
CPU and it also
checks the level of
tolerance for error

step14: B&T KILN

LOADING MACHINE
is basically a firing
machine which
gives huge heat on
the tiles to increase
the hardness and
reliability.

step13: From the

PRINTING
MACHINE the tiles
are loaded into
LOADING CAR by a
conveyer belt,and
then the LOADING
CARs take the tiles
to B&T KILN
LOADING
MACHINE.

step17: Tiles are

packed by
PACKAGING
MACHINE attached
with sensors. For
Class A tiles white
box and for Class B
brown boxes are
used.

step18: After
packaging, the
finished goods are
stored in
warehouse.

Figure 2: Manufacturing Process

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Outbound logistics:
Distribution channel:
The four level distribution channel followed by RAK is given as follows:

RAK

manufacturer

Dealer

Sub Dealer

Consumer

Figure 3: Distribution channel

They use dealers to distribute their products as they do not maintain own distribution channel. Currently
RAK has 32 dealers all over Bangladesh. They directly control their dealers through 4 state managers in
six divisions. Dealers are allowed to appoint sub dealers to sell RAKs product but RAK does not control
them.
Sales and Marketing: RAK ceramics uses sales force for industry buyers and dealers reference for
normal customers. The company mainly produces for commercial demand. However, if a company places
order for industrial tiles they fulfill their demand. RAK ceramic doesnt use any direct selling in
marketing, if a customer place order from RAK head office where they have a showroom, then instead of
selling directly to them RAK provides reference of nearby dealers to their location for providing
convenient support.
Customer Service: RAK ceramics doesnt have a specialized service center for customers because it isnt
required in that extend. But they provide full support to the customers by providing information and
details of tiles before purchasing to avoid deceptive selling.
Supporting Activities:
The support activities of value chain analysis includes

Procurement
Technology development
Human Resource Management &
Infrastructure

Procurement: Purchase managers visit to Indonesia, Malaysia, India, China and Czech Republic to
monitor Class A and B raw material (clay) and check quality report and sent it to laboratory more
researching on clay about the quality. An active team of ceramist is dedicated to find more cost effective
solution for gaining competitive advantage over competitors. Due RAKs huge investment and dedication
on R&D, enables them to compete with competitors and gain competitive advantage
RAK key raw materials include(a) body materials comprising various types of clays, sands and minerals and
(b) glaze materials comprising additives, bonding agents and finishes.
20

RAK Ceramics follows a global sourcing and vendor development policy under which supply sources are
identified, supplier capabilities are assessed and competitive supply terms are negotiated through
competitive bidding for key supplies. RAK has built up a database of over 2,500 suppliers that provide
industry specific supplies.
The major raw materials of RAK Ceramics (Bangladesh) Limited are imported from overseas, mainly
India, China, UAE, UK, Singapore, Thailand, few other European countries etc. Suppliers are evaluated
periodically on supply reliability, quality and prices with new suppliers being added after they meet the
required quality and reliability benchmarks through supplier appraisals and track record.
Key suppliers: SACMI Imola, Gruppo B&T, Cerfrit, Hindalco, FERRO Local supplies from Clay Local
sand/ lime stone/ silica sand from various suppliers in Shepur, Sylhet.
Technology Development: RAK makes a huge investment on R&D. RAK is the only ceramic company in
Bangladesh to spend 150 crore in R&D. RAK use SACMI manufacturing machines and complete plants
for the Ceramics making which is the best technology for making ceramics. RAK uses Effluent Treatment
Plant (ETP) to reduce environmental hazard. RAK ceramics factory have computer controlled guided
vehicles which transfers semi-finished good from station to station, all of the machines are controlled by
laser sensors, skilled technician to operate sophisticated operations. Furthermore, RAK has built a
motivated team to make continuous innovation on design and laboratory to focus on designing new tiles
and sanitary wares. RAK Ceramics also has the latest machinery housed in the sanitary ware plants like a
high-pressure casting mould bench. A robot-spraying machine is used to give each piece of sanitary ware
a perfectly even finishing. They have latest technology in both tiles ware and sanitary ware.
Human Resource Management: Since its creation in 1991, RAK Ceramics in the UAE has relied on
European machinery and Asian migrant workers. At present, around 8,000 employees work for the
company in the UAE.
Infrastructure: The success behind the continuous innovative product range being launched by RAK
Ceramics is its unparalleled production facilities extending over an area of 1,500,000 square meters. On
this vast area of land are 10 state-of-the-art tiles factories along with 2 sanitary ware plants, raw material
warehouses, CNC workstations, showrooms, office buildings, showrooms, research & development
laboratories, and silkscreen & digital printing facility. The plants at Ras Al Khaimah are equipped with
some of the longest kilns in the world. The largest press in the ceramic industry - the PH 7200 (tons) is
housed at& produces Gres Porcellanato slabs of large format up to 125 x 185 cm - the largest size in the
industry. The plants are also equipped with other sophisticated equipment such as a water jet cutting
machines used to create various designs & patterns, rotomatrix color decoration machines that give tiles
natural perfect prints, and diamond cutting machine used in the production of special items like vanity
and kitchen tops. With the introduction of its Nanopix digital printing technology, RAK Ceramics latest
tile designs have floored its customers in over 160 countries where RAK Ceramics distributes its products
range.

During these value chain activities RAK becomes most prominent in the industry satisfying consumers.
The company has four folded margin between 2001 and 2006. Revenue from ceramic products increased
by 3.9 per cent and accounting for 84.9 per cent of the total revenue. The new focus follows the private
equity firm Samena Capitals acquisition of a 30.5 per cent of the company from Ras Al
Khaimah(RAK)s ruling family in 2014. Besides the profit rose by 22% in 2013.

21

STRENGTHS:

1. Financial Resources:
Equity - accounted investees of BDT 62748110.
Loan to associates (short term) of BDT 28701662.
Loan to associates (long term) of BDT 39740582.
Cash and cash equivalents of BDT 1491937675.
Advance income tax of BDT 2049203419.
Trade and other receivables of BDT 569321814 and so on.
2. Physical Resources:
Property, plant and equipment of BDT 2594796721.
Inventories of BDT 1803388526.
Work-in-progress of BDT 50533256 and etc.
3. Human Resources:
Trained store associates.
A team consisting of 1106 members.
4. Intangible Resources:
Intangible assets of BDT 101282953.
5. Structural-cultural Resources:
Customer satisfaction.
Team work.
Integrity.
Aiming for excellence.
Thinking green responsive.
These are the resources of RAK Ceramics (Bangladesh) Ltd which in turn will help us to explore the
ability, competence, core competencies and distinctive competencies of the firm.
ABILITY:
follows;
i.
ii.
iii.
iv.
v.
vi.

Ability of a firm refers to the usual things a firm does. In relation to RAK these are as
RAK try to generate a like to like growth.
It tries to improve in cost reduction at each of its business units.
It deepens its presence in the mind of its customer by introducing several new tile
products across various popular sizes and infinity range of sanitary ware products.
RAK tries to provide improved customer service.
It tries to increase market share every year.
It announces dividends to reflect its financial soundness.

22

 CAPABILITY/COMPETENCE: Its the level of ability which is actively consistently well and that
too at an acceptable cost. In case of RAK these are;
i.
Strong understanding of the business.
ii.
Active product range.
iii.
Deep customer connection.
iv.
Robust operations management.
v.
A motivated staff.
According to RAK Chairman Abdallah Massaad, the result is that despite a challenging business
environment, RAK was able to grow their turnover by 7.17 percent to BDT 4,908.17 million reflecting
the strong affinity for their products among their customers, leading to both growths in tiles and sanitary
ware volumes as well as realizations during 2012. Moreover, strong company-wide initiatives to control
costs, reduce wastages and maximize efficiencies led to a healthy operating profit margin of 18.55 percent
and net profit of BDT 608.12 million in the year of 2012.
CORE AND DISTINCTIVE COMPETENCIES: These are the valuable company resources that
reflect company or firms comparative internal activities. These are the genuine strengths of the
company. In relation to RAK there are five core strengths of it.
i.
First of the five core strengths is high quality production asset paired with unrivalled
knowledge of ceramics which resulted in a higher-than-industry margin profit of 18.55%
in the year of 2012.
ii.
Second one is dominant market share.
iii.
Third one is RAKs world-class display centers engaged with their customers in several
ways, facilitated by their trained store associates, who are informed of product range,
benefits and costs, and by this means, enable customers to make the most informed
purchase. It increased sales as high as 83 percent for tiles and full capacity utilization of
sanitary ware.
iv.
Fourth one is optimized raw material resource cost say robust ability to manage gas (fuel)
cost. Evidently it had a 15% decline in fuel cost in the year of 2012.
v.
At last but not the least the fifth strength of RAK is one of the biggest shareholder-centric
strengths is it is a zero debt company with no long-term debt on their standalone books,
which helps protect fortunes from a high interest rate environment.

23

WEAKNESS:
Through examining various available information of RAK ceramic firm's including their annual report we
have identified the following weaknesses that the company is currently encountering:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

They have less control over sub dealers

The brand quality is yet to adjust to the emerging economies.
They have more price fluctuation and lack of access to key distribution channels relative to others
The cost of importing raw materials are generally high
Capacity development and product development are low compared to meet the demand both in export
and local market.
Lack of skilled labor forces for producing quality and sustainable products
Technology barrier compared to other ceramic firms in the industry is significant.
Low productivity, as a result of a poor raw materials quality and low automation in some production
phases (especially in sanitary ware).
Lack of efficient supply chain integration for collecting non natural raw materials.
The level of customer relationship is limited in terms of constancy, packaging, respect of international
quality targets, lack of culture for services, etc.
Deep dependency on the local and neighboring markets.

Conclusion And Recommendations

Analyzing the external and internal Environment of Ceramics industries in Bangladesh we have reached
in a conclusion that this sector is allured with great prospects with its resources and opportunities. In
Bangladesh it is one of the most prospective industries. However, Governments good willingness to
incentivize to boom this sector is in great demand.

24

REFERENCES
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Financial Express.
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http://www.boi.gov.bd/key-sectors/ceramics.
3. Daily Ittefaq .2009 November 7. Ceramic Wares Export Potential.
4. Chowdhury, T. A. ed. 2004. Budget proposal for 2004-05 Fiscal, Ceramic Industry for
Minimum Duty Slab on Raw Materials.
5. Export Promotion Bureau. Retrieved from http://www.epb.gov.bd/
6. The Financial Express.2007 June 27. Some Budgetary Measures to Hit Ceramic Industry.
7. Hossain, S. 2009, August 3. Ceramic Ware Exporters Aim Sturdy Business. Daily New Age.
Dhaka.
8. Hill, C.W. and G. R. Jones. 1998. Strategic Management: An Integrated Approach. 4th ed.
Boston: Houghton Mifflin Company.
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New York: The Free Press.
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Advantage.15th ed. Boston: McGraw-Hill/Irwin.
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Star.
12. Iftekhar Omer 2012, GSP Suspension Affects Ceramics Industry Growth Retrieved from
businessoutlookbd.com
13. Khan, K. 2005. September 17. Ceramic Industry Seek Policy Support. The Daily Star.
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Star.
15. Rahman, S. 2009a, January 29. Recession Creeps into Ceramic Tableware. The Daily Star.
16. Rahman, S. 2009b, March 5. Six Firms Eye Tiles Market. The Daily Star.
17. Rahman, S. 2009c, July 7. Local Ceramics Maker Rides out Global Recession. The Daily Star.
18. Rahman, S. 2009d, August 31. Ceramics Brace for High Demand. The Daily Star.
19. Rahman, S. 2009e, November 7. Tiles Market Heats up. The Daily Star.
20. Nusrat Jahan, 2010: Ceramic Industry of Bangladesh: A Perspective from Porters Five Forces
Model
21. "Ceramic industries seek duty cut on raw materials import". Dhaka Tribune. Retrieved 15
January 2015.
22. "Ceramic industry witnesses over 200pc growth in five years". The Financial Express. Retrieved
15 January 2015.
23. Khandakar Safwan Saad (November 7, 2010) Shinepukur Ceramics Limited-BRAC EPL.
24. Nusrat Jahan (2010),Ceramic Industry of Bangladesh: A Perspective from Porter's Five Forces
Model, Volume -V, Issue - 02, July -December, Journalof Business and Technology (Dhaka).
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Express
26. RAK Ceramic (Bangladesh) Ltd : Annual Report 2012

25

27. Md. Mahbudur Rahman, Fariha Bahar Chowdhury, Priyanka Paul and Md. Monirul Islam (2014)
: Report on Performance Analysis of Ceramic Industry in Bangladesh.
28. Global Ceramic Matrix Composites Market 2019 Forecasts and Research Report; retrieved from
http://www.prnewswire.com/news-releases/; 15 January, 2015.
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June 2014.
31. "China-Bangla Ceramic dealers to visit China". The Independent. Retrieved 15 June 2014.
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June 2014

APPENDICES

Figure 4: The Five-Force Model of Competition: A Key Analytical Tool

Source: Thompson et al. (2007)

26

10%

Shinepukur

10%

Monno
18%
62%

FARR
Others

Exports

Figure 5: Ceramic Export Leaders

Table 1: Growth of Ceramic Tableware Export from Bangladesh Year

Year
Amount in US$
2012-13 (July-March)
27,779,246.64
2011-12
33,748,128.72
2010-11
37,579,260.27
2009-10
30,775,334.51
2008-09
31,167,227.14
Source: Bangladesh Export Promotion Bureau

Table 2: Major Ceramic Manufacturers and their Annual Capacity.

Name
Shinepukur Ceramics
Monno Ceramics
Standard Ceramics
Bengal Fine Ceramics
Peoples Ceramics
FARR Ceramics

Annual Capacity(Tonnes)
6300
5500
4000
3300
3000
2500

27

Table 3: Total Export and Ceramics Export (USD MM)

Total Export
Ceramics Export
% of Total Export:

12177.86
29.95
0.25%

14110.8
38.33
0.31%

15565.19
31.7
0.26%

16204.65
30.78
0.25%

Table 4: SUMMARY RESULTS OF CERAMIC INDUSTRY ENVIRONMENT ANALYSIS

Parameter Competitive Rivalry within the industry

Primary investment
Market growth: Export
Market growth: Domestic
Probability of competing rivals making fresh moves
Existing product diversity / differentiation
Possibility of production capacity development by competitors

Condition
High
High
High
Medium
Medium
Medium

Effect
Rivalry
Rivalry
Rivalry
Rivalry
Rivalry
Rivalry

Bargaining Power of Buyers

Number of potential customers
Number of actual customers
Imposed cost for switching to an alternative product
Probability of potential customers using another
companys product
Companys financial dependency on selling to customers

High
Medium
Low

Buyer Power
Buyer Power
Buyer Power

High
High

Buyer Power
Buyer Power

Medium
Medium
Medium
Medium

Supplier Power
Supplier Power
Supplier Power
Supplier Power

Bargaining Power of Suppliers

Number of key suppliers
Suppliers ability to bargain for prices and favorable terms
Switching cost from one supplier to another
Suppliers power on product quality

Threat of Substitutes
Switching cost of end users
Availability of substitutes
Attractiveness of substitutes price

Low
High
Medium

Threat of substitutes
Threat of substitutes
Threat of substitutes

Threat of New Entrants

Pool of new entrants
New entrants immediate access to suppliers
Probability that new entrants would earn attractive profits
Primary Investment
Source: (Nusrat Jahan, 2010).
28

Medium
Medium
High
High

Threat of New Entry

Threat of New Entry
Threat of New Entry
Threat of New Entry