EXECUTIVE SUMMARY The upholstered furniture and beds market is estimated to be worth around 400 billion dollar. Both markets grew substantially during the boom period of the late 1980's and suffered significant decline during the prolonged recession of the early 1990's. Imports and exports have become increasingly significant, with imports having grown to around 17 percent of the UK market. Imports are sourced mainly from within the EC including Italy, Belgium, Luxembourg, Sweden and France. Exports are estimated to be worth 9 percent of UK production of upholstered furniture. Action furniture continues to grow as consumers seek more benefits and features from their products. There are a growing proportion of older consumers and these products are also becoming more acceptable to younger age groups. Classic styling is still very popular, although modern designs are becoming more accepted. However, traditional finishes such as leather and show wood are gaining share although both are now offered in more modern designs and colors to appeal to the younger generation. Cane and rattan is beginning to move up market after experiencing some problems in terms of quality. Major suppliers of these industries are basically EU based like Germany, Sweden, etc. In terms of distribution, multiples command the largest share at 54 percent having continued EU nations in recent years, while furniture independents and specialists are also key outlets. Furniture Industry In Bangladesh Page 1
Transcript
EXECUTIVE SUMMARY
The upholstered furniture and beds market is estimated to be worth around 400 billion dollar.
Both markets grew substantially during the boom period of the late 1980's and suffered
significant decline during the prolonged recession of the early 1990's.
Imports and exports have become increasingly significant, with imports having grown to
around 17 percent of the UK market. Imports are sourced mainly from within the EC
including Italy, Belgium, Luxembourg, Sweden and France. Exports are estimated to be
worth 9 percent of UK production of upholstered furniture. Action furniture continues to
grow as consumers seek more benefits and features from their products. There are a growing
proportion of older consumers and these products are also becoming more acceptable to
younger age groups.
Classic styling is still very popular, although modern designs are becoming more accepted.
However, traditional finishes such as leather and show wood are gaining share although both
are now offered in more modern designs and colors to appeal to the younger generation. Cane
and rattan is beginning to move up market after experiencing some problems in terms of
quality.
Major suppliers of these industries are basically EU based like Germany, Sweden, etc. In
terms of distribution, multiples command the largest share at 54 percent having continued EU
nations in recent years, while furniture independents and specialists are also key outlets.
In terms of Bangladesh some renowned brand company starts to dominate accounting for
over increasing percent of the market, although non brand owners are growing their share due
to a combination of labor intensive country. In terms of distribution, furniture
independents/specialists dominate with 35 percent, followed by multiples, department/variety
stores, mail order and others.
This comprehensive report represents a detailed assessment of the market, reviewing major
trends, key factors influencing developments and future prospects for the sector. Analysis is
both quantitative and qualitative, based on our substantial experience of the building and
home improvement markets.
Furniture Industry In Bangladesh Page 1
Furniture industry in Bangladesh
1.1. Origin of the report
This study and the resulting report was conducted and submitted as a partial requirement for
the International Business (ITB 301) course .
1.2 Objective
The objective of this report is to address the performance of Bangladesh in international
trading through a thrust sector name “Furniture industry”. This is a study to identify the major
trade partners and competitors of Bangladesh in this sector in the terms of foreign trade. It
also analyzes the trade potentiality of Bangladesh in different sectors with various trade
partners and ultimately impact of trade in economic development of Bangladesh and to
scrutinize the overall problems and opportunities from trade.
1.3. Scopes and methodology Restrictions
Since it’s not possible to conduct analysis on the large number data, some specified tables
and articles have been chosen for analysis. but we have faced several issue as obstacles.
Secondary research was conducted to identify present situation or position of
Bangladesh in international trade.
The main limitation of the study is the unavailability of all information. At the
beginning stage of the study, the major problem was found out the relevant
information. Sometimes after getting the information, it was found that data was not
completed.
Another significant limitation was time constrain. It was difficult to perform all the
analysis about international trade within a shorter period of time.
Collection of data was more or less time consuming.
Lake of in-depth understanding of certain terms and concepts prevented us from going
into details.
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7. International market of furniture industry
Furniture industry has changed over the years. It no longer restricts itself to a production of a
chair or a table or a bed but today it includes manufacturing of a range of furniture and home
furnishings and designed interiors which spell class and elegance. There is a boom time for
furniture industry. Every country sports a string of furniture showrooms of all kinds and
sizes. Changing lifestyle, disposable incomes, economy growth, increasing migration to
urban areas have all contributed to the demand for furniture and in turn the growth of the
furniture industry as whole.
7.1 Characteristics of the furniture industry Furniture manufacturing worldwide forms a regionally centralized competition pattern
under the clustering effect.
The furniture industry is both an organized and a non-organized sector.
Utilization of skilled and unskilled workers.
Utilization of handcrafted tools, machines and CAD/CAM for manufacturing and
designing.
Source of employment for rural workers.
Employment is spread across many sectors showing the diverse nature of the industry
and a broad product range.
Consumer expectations and purchasing behaviors have marked regional variations.
Global Furniture ProductionThe furniture sector as a whole is a one of the most basic industry, if the industrialized
countries are considered. The furniture sector generally represents between 2 to 4% of the
total production value of the manufacturing industries. The global furniture industry has
shown a growth rate of 8% in 2005.The industry was valued at around US$76 billion from
US$70 billion in the year 2004. As far as gaining the top spot as the world's largest furniture
exporting country.
China is giving a run for its money to Italy. In 2004 Italy was able to narrowly beat China.
Italy's exports were US$10.5 billion compared to China's US$10.3 billion. Others that made
it to the list as top five furniture exporting countries were Germany, Poland and Canada.
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While the top five importing nations of 2004 were the US, Germany, UK, France and Japan
the solitary Asian nation.
Chart: 03
EUNAFT
AASIA
Other Eu
rope
latin Ameri
caAfri
ca
Others0
100002000030000400005000060000700008000090000
10000095421
5706451445
9020 5163 1825 3550
Global Furniture Production(in million Dollars)
Series1
Source: furniture manufacturers The following factors guide the demand for furniture:-
Elasticity in terms of the disposable income of the household Generally the
estimated elasticity changes from country to country. But the average elasticity has
been found to be 1.5 that effectively means, if the income increases by 1, the demand
for furniture is going to rise by 1.5 and vice versa.
Economic scenario - This translates into consumers' confidence in the economy of
the nation, growth of the Gross National product, the purchasing power and also
factors like level of unemployment.
Infrastructural considerations - Like level of investments in housing etc.
The evolution of the borrowing terms - If the interest rate is hiked the consequences
are higher costs for borrowing for purchasing furniture and housing, and vice versa if
the interest rate falls
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Demographic variables - Such as the evolution of marriages, household formations,
births taking place and the composition of age class.
Distribution of wealth - It is quite evident that demand for furniture would be s
higher in countries where wealth is more evenly distributed than in countries where
wealth has a tendency to be concentrated.
IKEA is a Swedish furniture company one of the most renowned Furniture brand in this
world. The IKEA Group is one of the world's leading home furnishing companies, with
procurement in some fifty countries and retailing in presently twenty-two countries. The
IKEA Group is faced everyday with cultural differences and diverse economic and social
conditions. The International Federation of Building and Wood Workers (IFBWW) is an
international trade union organization organizing building, wood and forestry workers
worldwide.
"The IKEA Way on Purchasing Home Furnishing Products". A contract based on "The IKEA
Way on Purchasing Home Furnishing Products" has been introduced world-wide and is being
implemented in relation to all suppliers of IKEA products. IKEA has established a
compliance organization with the task to support and monitor the compliance work. Both
IKEA and IFBWW appreciate the value of a continued co-operation and henceforth see it
beneficial to have a joint group that will meet twice per year, one meeting being organized by
IKEA and the other by IFBWW.
IKEA BECOMES CHEAP IN CHINA
IKEA successfully built the global consistent image of cheap furniture. Now, it successfully
brings the same image to Shanghai, China. IKEA furniture is really cheap for local residents.
The recent IKEA's on sale campaign is astonishing. A set of flower picture that was sold at
19 RMB now only costs 1 RMB. Hey. IKEA is on sale, as more as 95% off! I believe IKEA
intentionally put this product as the first article in the store people can see - so creating an
atmosphere of big on sale....
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7.8 FEAR OF CHEAP IMPORTS (From China)The Indonesian Furniture Producers Association has welcomed the government's reaction to
its request for consideration to be given to delaying the full implementation of the FTA with
China amid fears that hundreds of thousands of Indonesian workers in the wood processing
sector could lose their jobs. According to the Association, cheap furniture imports from
China could overwhelm local manufacturers. They quote an example where a computer table
made locally from particleboard sells for about US$65 while an imported Chinese made table
of similar material could sell for about US$45. The Association added that the FTA between
ASEAN and China could result in huge job losses at major Indonesian furniture
manufacturers.
Table: 05
Source: China Furniture Market Report, 2006-200
Chinese Furniture market (at a glance)
FURNITURE EXPORTS IN 2009The furniture sector saw a big drop in exports for the second consecutive year. Brazilian
furniture exports ended 2009 with a fall of 28.5% compared to the previous year. The sector's
foreign sales totaled US$ 706.9 million. US imports of Brazilian furniture declined 41% in
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2009, dropping to a value of only US$ 95 million in 2009. Nevertheless, the US continues to
be the main importer of Brazilian furniture, accounting for 13% of the total exports of the
sector. Argentina follows in second place with an 11% share of the total Brazilian furniture
sector exports, but sales were down 37% in 2009 to US$ 75.7 million. In third place was the
UK which accounted for a 10% share of furniture exports from Brazil. This business was
worth around US$ 72 million in 2009, representing 1.2% drop compared to 2008. Cuba was
the country with the highest growth in purchasing Brazilian furniture, despite having only a
minor share of Brazil’s exports at only 2% of total export sales. Exports to Cuba increased
some 60% in the period, and the Southern state of Rio Grande do Sul was the main exporter. Furniture industry in Bangladesh
Furniture industry of Bangladesh has proved to be one of the most promising sectors with a
high export potential. The industry has its members spread all over the country with key
players located in Dhaka with an overall number of 80,000-100,000 people. There are about
10,000 furniture manufacturing enterprises all over the country and the market size is Taka 4
billion with a growth rate of 15-20%. The country earned Taka 261 million from exporting
modern wooden furniture during the first quarter of the financial year of 2007-2008. The
Bangladeshi economy is developing at a fast pace and the government has declared the
furniture industry as a ‘Thrust Sector’. This is where Bangladesh Furniture plays a key role in
the Furniture Market evolving as the biggest Furniture Exporter of Bangladesh. Our Team
has carried out extensive research and studies on furniture and its market and the potential of
the market here in Bangladesh. Many of its projects have turned out successful and many are
progressing well.
Bangladesh Furniture Industries Owners Association (BFIOA) is playing a crucial role to
develop this sector from the very small, local level to the International market. To doing this
in a active and flourishing way they are The Furniture industry of Bangladesh has proved to
be one of the most promising sectors with a high export potential. The industry has its
members spread all over the country with key players located in Dhaka with an overall
number of 80,000-100,000 people. By exploring new opportunities Export promotion Bureau
(EPB) of Bangladesh is also assisting this sector for the development as well as global growth
and to introduce this sector as a major foreign earning source
3. Factor Endowments
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3.1 Land: required a good amount of land but still less to other massive industry like RMG
3.2 Labor: Cheap labor market3.3 Capital: Less capital required 3.4 Raw materials: highly available. And sub products are
Wood, ply wood or laminated board for the main surface.
Industrial glue adhesives, screw pins for jointing several parts of furniture.
Color coating, polishing and other decorative work.
3.5 Technology: Human oriented rather than machine oriented Local producer and exporter
In all, there are 5,000 registered furniture houses in the country, according to the Bangladesh
Furniture Association. Almost 90 per cent of them are categorized as non-brand operators.
Although these non-brand operators hold almost half of the market their share is diminishing
day by day, thanks to aggressive marketing campaign by the branded companies as they
boom up the market competiton.‘Local consumers are feeling comfortable with the brand
items’ Otobi chief executive officer Sabbir Hasan Nasir told New Age.
