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Page 1: Bus 301 Term Paper

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Prepared for

Mrs. Syeda Rownak AfzaLecturer

BRAC Business School

Course: BUS 301; Section 1BRAC University

Prepared By

Rubaiya Afreen HuqID: 05204013

A.S.M Moshiur RahmanID: 05204014

Noor Ahmed NaveedID: 06104003

Rahib Maruf IftekharID: 06104053

Date of Submission: 29th November, 2008

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Table of Contents

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Acknowledgement

We would like to start by thanking our course instructor, Ms. Syeda Rownak

Afza for giving us this opportunity to work on such an interesting topic. 

While working on this report we actually had to explore and learn how

companies really export their products, which is affected by various internal

and external factors.  We had learnt all these facts in theory and when we

started working on this paper, we discovered the practicality of the topic. 

We would like to thank her for her excellent guidance through valuable

lectures, personal advice and support. 

 Sometimes we got confused on how to proceed with report but the

innovative ideas contributed by all group members helped overcome these

problems.  We would also like to drop a word of thanks to each other, among

our group, for our well managed coordination and division of work. Through

group cooperation and hard work were able to prepare this project report.

We are also very thankful to Subrata Kumar Chakraborty, Deputy Manger,

Export of Otobi Ltd. for helping us with all the necessary information that

could not have otherwise been obtained.

Finally and above all, we would all like to thank God, the Almighty for giving

us great strength and patience to work together to prepare this report on

“International Operations Otobi Limited”.

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Executive Summary

The report, “International Operation of Otobi Limited’ has been prepared for

the course International Business. The report takes an in-depth look into how

Otobi Limited is conducting their business outside the borders of Bangladesh.

With the “Number One” tag in the furniture industry in Bangladesh, Otobi

Limited’s venture outside the border has not yet proved fruitful. The

unnerving strives for quality, have allowed competitors to stake a claim in

their market share, both locally and in the international arena. Recent

modifications were made in their market strategy and their customary

product line to address the ever evolving international market. The report

further includes our recommendations which would help Otobi Limited retain

its market share in the international arena.

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30th November, 2008

Ms. Syeda Rownak AfzaCourse InstructorCourse: Organisational Behaviour (MGT 201)BRAC University66 Mohakhali, C/ADhaka, 1212

Subject: Report submission on “International Operations Otobi Limited ”.

Dear Ms. Afza,

Please accept the accompanying report entitled as “International Operations Otobi Limited”.

The report is a complete study which has been conducted to understand how Otobi Ltd. is doing conducting business outside Bangladesh’s borders and they can expand their business. The report was assigned to us as a term paper which is a part of our course curriculum. The purpose of this report is to understand how companies export their products, what factors influence their choice of markets and their performance in those markets, and how organisations deal with those factors.

Hard work was required to gather information through an interview with Subrata Kumar Chakraborty, Deputy Manager, Export Otobi Ltd. We must thank you ma’am for your patient guidance and suggestions that have made it possible for us to complete this report.

For any clarification required, we are there to provide you with an explanation. We hope that you will enjoy going through our report.

Thank You

Yours Sincerely,

______________________ ________________________

Rahib Maruf Iftekhar Rubaiya Afreen Huq

______________________ ________________________

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Noor Ahmed Naveed A.S.M Moshiur Rahman

Introduction

International Business is a term used to collectively describe the topics

relating to the operations of firms with interest in multiple countries. Such

firms are called multinational corporations. Such firms’ areas of study include

topics which differ from their countries such as political, economy, language,

living standards, etc.

International business by its nature is a primary determinant of international

trade. One of the results on the increasing success of international business

is ventures is globalization. In today’s fast moving world, the next step

towards expansion is going ‘global’.

Expansion outside the borders, facilitate companies to find new market for

their product. It helps them to expand to market where there is demand for

their product, or to achieve economies of scale. In other cases many other

companies may expand internationally due to adverse economic conditions,

or cultural shock. Companies in today’s world cannot afford to stay at one

place for too long. If they do so, they risk being over-run by competitors.

Otobi Limited, like many others see the international market as a bottomless

pit of opportunities. Expansion in other territories would help Otobi Limited

diminish the advantage their competitors hold over them and also help them

to gain a competitive edge over their competitors. Although they are yet to

set an example of themselves in the international arena, one can only

predict that it is just a matter of time.

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Objective:

The objective of the study is as follows:

- To enrich knowledge about the exporting methods of Otobi Ltd.

- To know the International and global market for furniture and home décor products

- To know what are the internal and external factors that affect international business of a company

- Find out ways to exploit the factors that present opportunities and overcome the ones that pose threats

Methodology:

Two sources had been used to collect the required information, which are as

follows:

Primary Source: An interview was conducted on the Subrata Kumar

Chakraborty, Deputy Manager, Export Otobi Ltd.  

Secondary Source: Basic theoretical information was collected from

the course text book and by searching through the internet.

Scope of the Report:

- To study international business methods, and internal and external factors

that could affect them.

- Practical experience was gained by working in a group for collecting

information and compiling it into a report.  An insight on international

business was received and experience gained by all while working in a

group for a simple institutional project.

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- Knowledge gathered about how internal and external factors of a company

affect its business, thus teaching us methods to deal with these factors

later in life.

Company Introduction

Background of Otobi Ltd.

Otobi Limited started its journey sometime back in the year 1975. The

entrepreneur of this business was Mr. Nitun Kundu who conceived the

idea of Bangladeshi made furniture. He was a Bangladeshi artist, sculptor

and finally entrepreneur.

Nitun Kundu was known to be the pioneer for integrating metal and wood

designs in furniture for which Otobi Ltd. gained its popularity in the

market. Kundu’s artistic skills were highly reflected in those furniture

pieces making them “a world apart”. They had a kind of simplicity which

distinctly marked Otobi’s character. Today Otobi Ltd. is one of the biggest

furniture manufacturers in Bangladesh and it has traveled a long way

since its commencement.

Initially the company manufactured mainly chairs and steel tables, in the

office furniture section. Since the year 2000, Otobi Ltd. started the

manufacture of a variety of furniture like beds, cabinets, conference

desks, book shelves, etc all using melamine laminated boards and

medium density fibre boards. From then Otobi Ltd. has been operating at

a new level, and providing products to the international market mainly in

South East Asia. In 2008 Otobi decided to break out of their tedious

furniture line to focus on a wider range of products. The introduction of

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candles, cushions and table lamp, which complements the furniture, has

been a huge success in the market. Their products are backed by

warranty along with after sales services which contribute to their goodwill.

Bengali people always prefer wood to melamine boards, but Bangladesh

is short on this crucial resource, which is why the furniture manufacturers

are all turning to this substitute for production. Nowadays furniture is

more about design and quality, rather than “type of raw material used”,

and in this market, Otobi Ltd. still dominates in Bangladesh.

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Overview of the Bangladesh Market

Before we take any further look into the Otobi’s international business,

let us take a look in to the national market. Domestically Otobi Ltd. has

been the leading company for many years. None of its competitors has

been able to possess any major threat to their market position. The

products’ quality and outlook, which is their major asset for their rise to

the top, has been the major problem for their competitors to replicate.

Obstacles Faced in Bangladesh

In the home market of Bangladesh Otobi Ltd. faces a few minor

challenges. Even though these challenges are minor, they need a lot of

tending; otherwise these can pose a great amount of threat to the

company. The obstacles faced are:

ـ There is a certain degree of uncertain competition in the

Bangladeshi market. This is because no competitor is actually

equivalent to Otobi in terms of size and product line, but there are

certain seasonal and occasional set backs due to these

competitors.

ـ Imported products available at shops such as Koncept Furniture,

Studio 45 and many other furnishers pose a threat to Otobi’s

market share. This is because Otobi Ltd. is trying to compete in

terms of quality and design with imported furniture. Therefore

when customers prefer imported goods than to Otobi’s local

products, this posses a threat to the company.

ـ Price competition is a major setback for the company. Otobi Ltd.

has many small and medium competitors in various parts of the

country especially in Dhaka. Panthapath is a prominent location

to get melamine laminated board furniture which also uses the

concept of Otobi to blend metal & wood designs. These products

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are less durable, but a lot cheaper than Otobi’s products. They

also don’t provide any warranty. Still there is a large group of the

population willing to sacrifice quality for price and make

purchases from such places.

Competition in Bangladesh

Navana Furnitures: It is the brand of the furniture unit of AFTAB

Automobile Ltd, founded in 2002. Since then it has been regarded as the

leading competitor for Otobi Ltd.’s market share. However it has never

been able to match Otobi’s product quality and variety. Although it may

seem that Navana Furniture does not possess a direct threat to Otobi’s

market share, the company must remain vigilant to outwit Navana in all

ways possible.

Aarong and Local Private Brands: The recent inclusion of wider range

of home decor has seen their ‘competition base’ increase significantly.

The likes of Aarong provide stiff competition in Otobi’s bid to increase

their customer base. Their home decor products such as candles, cushion,

table lamps, etc have already created a position in the people’s mind,

thus making it hard for Otobi to capture their potential market.

Local Traders: Traders who occupy the streets of Panthopath, Science

Laboratory, Hatirpool and other key areas around Dhaka city are

providing uneven competition for Otobi Ltd. They are price competitive,

but they compromise on quality. Consumers, who have budget

constraints, are easily attracted to such products and this is eating away

Otobi’s potential market share.

Foreign Threat: Furniture from China and Malaysia, and also Europe are

regarded as major threat for Otobi Ltd. Both the countries have abundant

factor endowments for being able to produce furniture at competitive

prices. European furniture is preferred very much by the upper crust of

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the society for its elegance and quality. This is the reason why imported

furniture has been able to penetrate markets in Bangladesh.

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Background of Export

How, When & Why Export?

In mid 2003, between July and August Otobi Limited started its export

journey to India. During that time, the company attended an industrial

fair at Kolkata, India. Through this fair, Otobi Ltd. made contacts with a

lot of Indian customers who were very interested in the Bangladeshi

furniture products. The main idea of the company to attend the industrial

fair was to expand their market globally. Otobi Ltd. has been operating in

Bangladesh for the past 33 years, and in 2003 it saw the opportunity to

go global, which is why the company took the initiative to attend an

international industrial fair.

Selecting Export Markets

Otobi Ltd. did not begin “searching” for their market, because they were

focused on exporting to India and it was a part of their plan. The

company is currently exporting to the eastern provinces of India such as

West Bengal, Shillong, Tripura, and Assam. Otobi Ltd. provides dealership

to Indian retailers in those provinces and through them the company is

making sales in India. Initially, the company was not in a position to

“choose” dealers because they had to accept any offer that came their

way, but 5 years into the export business Otobi Ltd. now chooses carefully

whom it’ll give the dealership contract in India to.

Otobi does not have a specific target from a income level perspective. It

chooses to market to all furniture and home décor customers. This makes

it a difficult for them as their goods a premium priced and best suited to

higher income level customers.

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Intermediaries and Transport Used

The intermediaries used for selling the products into the Indian market

are the Indian dealers themselves. As for sending the goods to India,

Otobi Ltd. uses special trucks which have been hired for the purpose of

exporting the company’s furniture. They are like “containers” in ships,

and are very protective and sealed for ensuring the quality of Otobi’s

products. Regionally within Bangladesh, local trucks are used to transport

goods to regional outlets, and within Dhaka city Otobi Ltd. has its own

pick up van to distribute products from warehouse to showroom.

C&F Agents, Insurance Company & Banks

Otobi Ltd. exports its products to India through the land ports of

Bangladesh which goes to include Benapol, Burimari, Akhaora and

Shewla. At each land port, there are clearing and forwarding agents from

both the Bangladeshi side and the Indian side. These agents check

whether all the necessary documents have been fulfilled by the exporter

& importer on both borders. The particular C&F agent used by Otobi Ltd.

has not been disclosed for the purpose of this report for which it cannot

be mentioned. Since Otobi Ltd. is the exporter, the company is not

required to prepare arrange for any insurance. It is the importer of the

furniture who arranges for the insurance of imported goods. This is also

another reason why Otobi Ltd. could not provide this particular

information for this report.

All export transactions carried out by Otobi Ltd. as an exporter is handled

by AB (Arab-Bangladesh) Bank Ltd. Importers usually send their TT

(telephonic transfers) or LC (letters of credit) from their Indian banks to

AB Bank Ltd. to process for Otobi. The company usually prefers receiving

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TT compared to LC because it is a more direct form of payment, and

requires much lesser time to process and receive the fund.

Products of Export

Furniture:

Otobi Ltd. initially exported very basic

furniture to the Indian market that

consisted mainly of chairs and tables. Once

they were established in the market they

introduced bedroom set, dining room set,

and general office furniture. All the

products were of economy range because Indians want “good quality

products at economical prices”. Therefore in order to capture the fancy of

the Indian market Otobi Ltd. exports cheap, but good quality and modern

designed furniture.

Now they are exporting a wide range of multi-

purpose furniture all within the economic price

range such as a cabinet that serves as a tv stand,

a CD rack, a stand for decoratives etc, all of which

were to cater to more specific Indian demands.

Their newer product lines such as office

furniture, hospital furniture etc are in high

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demand in the corporate market. Their furniture line has evolved over the

years since they commenced their business in India.

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Home Decor:

As of 2008, Otobi expanded their product line to include other interior

decorations. They first introduced these new products in Bangladesh to

observe customer’s reactions. They started with

cushions to complement their home furniture.

These were quickly accepted by the Bangladesh

market and perceived as stylish and trendy. Due

to the similarities between the Bangladeshi and

Indian culture Otobi decide to export it to India.

The cushions captured the market quite quickly.

To build on the success of the cushions they decided to

make more products that could complement their

existing product line. They thus started on lamps and

candles. They started test marketing these in the

first quarter of 2008 in Bangladesh. Although they

did not create the same buzz as the cushions, they

have nonetheless been deemed a success. Otobi

have now started exporting the lamps and candles

to India, but on a small scale.

However, Otobi’s focus on “good quality products at economical prices”

was not enough for the Indian market. Conducting further business in

India revealed that the Indian people were not particularly attracted to

Otobi’s products (challenges faced have been included in the report).

Thus Otobi altered their product line of home decor so as to capture the

illusive Indian market.

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Obstacles Faced in India

The Indian market is very hard to penetrate and government rules and

regulations are known not to be too flexible to allow outsiders to enter.

The obstacles are:

ـ A very ethnocentric market which does not accept foreign made

products. Indians are very patriotic when it comes to the

purchase of locally made products which is why Otobi products

are not entirely accepted by the Indians.

ـ Otobi’s largest contender in India is Godrej. The company

produces furniture and provides the same product line like that of

Otobi. India has its own stock of raw materials, and does not

require importing, which is why Godrej is able to offer its furniture

at competitive prices. Whereas Otobi imports many of its raw

materials from Malaysia, the cost of production is slightly higher

for Otobi Ltd.

ـ Another major problem with the Indian customers is that they are

very biased in believing that the products of Otobi Ltd. are not

actually Bangladeshi made. The customers are very critical and

are reluctant to believe that Bangladesh is capable of making

such high quality furniture.

ـ Moreover, the Indian customers are highly price & design

sensitive. They also desire having furniture that has a multi-

purpose function.

Competition in India

Local Producers: Indian people multipurpose furniture which are

economical and also allows a variety of choice. Indians are very

conservative in making any investment decision therefore they are very

precise about everything they purchase. As mentioned earlier, in India,

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Otobi’s main competitor is Godrej in terms of providing the “right kind of

furniture” to its people.

Foreign Competition: Otobi also faces stiff competition in India form

other companies that are from China, Japan, Taiwan, etc. These are

basically the same foes that it competes against in Bangladesh. They

answer the Indian market’s need through their low priced and multi-

purpose products.

Competitive Advantage of Competitors: The competitive advantage of Otobi’s

competitors home and abroad includes:

ـ Cheaper Furniture

ـ A Variety of Designs which are Attractive

ـ Multi Purpose Furniture

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SWOT ANALYSIS

Strengths:

It is quite ironic how certain competitive advantages of Otobi Ltd’s

competitors are also its own competitive advantage. They include:

ـ High Quality Furniture using Melamine Boards, and Chairs

ـ Product Durability

ـ Product Warranty

ـ Many Attractive Designs which is quite unconventional for

Melamine Board Furniture

ـ The Goodwill of Otobi Ltd.

Otobi Ltd’s precision for quality is termed as their major asset. The

unhindered need to provide its customers with the best product doubled

with features and variation, they are still the leading company in the

industry in Bangladesh. Using their goodwill, they have been able to gain

local customers, who live abroad thus gaining a competitive edge over its

rivals.

Weakness:

Weaknesses refer to the internal limitation of a company. Despite all its

strength there are no shortages of weakness for Otobi Ltd. They are as

follows:

ـ Country of origin

ـ Price.

ـ Lack of information for foreign customers.

ـ Time management.

Otobi’s main disadvantage is its image its country of origin carries.

Bangladesh is not perceived to producer quality products, which is why Otobi

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finds it difficult to position itself based on its quality, which unfortunately

happens to be its biggest asset in Bangladesh.

Otobi’s uncompromising focus on quality has made their products too

expensive for the target market. Combined with the lack of information -

such as no website, infrequent advertisement, etc - makes attracting new

customers very difficult. At the same time, their poor customer service adds

to their woes.

Opportunities:

Over the years Otobi has achieved significant success in the market, and the

products are being widely accepted. This presents the opportunity to expand

their product line.

It has also been seen that Otobi has been generating some buzz in the

international market. Private importers from Denmark and England are

creating a market for Otobi’s product through their own businesses. This

gives Otobi the opportunity to expand to these countries and perhaps many

others.

Threats:

Threats for Otobi are no different from other companies conducting business

in this industry. They face threats from new competitors who can provide its

target market with low price products. China and Malaysian exporters have

already taken a huge market share from Otobi. Their cost effective manner

of producing the products have penetrated the market.

With Otobi’s new wooden product line it might so happen that the

government may impose restrictions upon such furniture, due to its adverse

effect on the economy.

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Future Plan

Domestically Otobi Ltd. intends to introduce wood furniture product line.

They have established a factory dedicated to producing such products.

Some of the wooden furniture is already available retail outlets around

Dhaka city, but a full commercial launch in expected in the 2009 Dhaka

International Trade Fair (DITF).

Internationally Otobi’s main aim is to spread its business all over India

within the up coming years. Already it has established a showroom in

Kolkata, which it will use as a stepping stone to gain access to others

parts of India. Once they have captured India, they intend to divert their

attention to others markets in Asia. Countries such as Nepal, Indonesia

and Bhutan are being seen as potential targets. Extensive surveys are

being conducted to get in depth information regarding markets in South

Africa, which will be platform for multinational status.

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Recommendations

First and foremost Otobi should be more selective about their

target market as it will allow them to position themselves

better, especially when they export. It could consider

expanding to other home décor products. This may include

chandeliers, lights, etc.

It should also consider offering more variety in its existing product line. Some more innovative

designs could easily attract a lot of attention and quickly boost their long term sales while also

strengthening their image. Some possible examples are given below:

Titan Table

Transforming sofa set Lizard Chair

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Kube Table

Ying Yang Table

Oval Table

Folding wall chair

aero

ball chair

Tri layer table

Plateau coffee table

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Apollo chairs

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Many of the above are also multi functional, an attribute which is in

high demand in many foreign markets.

Finally, Otobi’s market potential in other foreign countries is limitless and we

recommend that they exploit it to the fullest

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Conclusion

Since its inception Otobi has been very successful in the market, both in

the furniture, and in the home décor industry. Despite many

shortcomings, the company has done well for itself, and has great

potential as a global furniture and home décor company. There is

however still a lot of room for improvement in its present condition.

Bibliography

1. Cateora, Phillip. R and Graham, John. L, “International Marketing”, 12th Edition

2. Internet Websites:

ـ http://en.wikipedia.org/wiki/Nitun_Kundu#Furniture_Pioneer

ـ http://www.evistatech.com.au/otobi1/home.asp

ـ http://www.probenewsmagazine.com/index.php?index=2&contentId=4239

ـ http://mocoloco.com

ـ http://weburbanist.com/

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Support from the Bangladeshi Government

There is no particular assistance that Otobi Ltd. receives from the

Bangladeshi Government. The benefit that the company reaps is due to

the different trade agreements for SAARC countries such as SAFTA (South

Asian Free Trade Agreement) and SAPTA (South Asian Preferential Trade

Agreement). This allows the exporter (Otobi Ltd.) to enjoy certain VAT

exemptions and the importer (Indian Dealers) to benefit from tax rebates.

Other than that, there is no help from the government of Bangladesh that

Otobi Ltd. is capable of acquiring benefit.

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