Dholaikhaal

1 | P a g e

1.0 INTRODUCTION

1.1 BACKGROUND

Dholaikhal is situated on the bank of the river Buriganga in the old part of Dhaka city. Bounded

by sites such as Lalbagh Fort, Ahsan Manjil, etc, the area is of much significance historically. The

place was named after a canal (“khal” in Bengali) that was excavated at around 1610 A.D. by

the first Mughal Subedar of Dhaka, Islam Khan. Many aristocratic families of the Nawabs and

rich merchants used to live in these parts back in those days (Bhattacharja, 2009).

In the more recent times, however, the name Dholaikhal rings a different sort of bell. It is

considered as a “mini motor industrial zone” with as much as 4,000 to 5,000 shops situated

here, providing the livelihood of almost 40,000 people. It is widely believed to be the main

service centre for worn out vehicles and the best place to buy old motor parts. From nuts and

bolts to heavy engines, from chassis to bearings, wheel drums, springs any small or big parts of

motor vehicles are available at Dholaikhal (Alam, 2013). A map of Dholaikhal is provided in the

appendix section of the report (Appendix 1).

This market for second hand car parts was first established in the 1960s, that too never

formally. The industry that grew up in there was based on the need and skills of the traders and

workers. In most countries across the world, the type of work that the workers at Dholaikhal do

would require a minimum diploma certificate in Mechanical Engineering. But most of the

“engineers” here do not know any alphabets other than the numbers written on a slide caliper

or a screw gauge. They know how things work, a craftsmanship handed down from their

forefathers (Gazi, 2014).

2 | P a g e

1.2 OBJECTIVES OF THE REPORT

The objectives of the report are as follows:

To portray the existing scenario of individual businesses of the local merchants in

Dholaikhal (a business at the base of the pyramid): their strengths, weaknesses,

opportunities, threats, challenges, etc.

To give an idea about the mini-motor industry as a whole, using the individual

entrepreneurs as samples with the help of different theoretical frameworks (SMEC

framework, Triple Triangle framework and GIM framework).

To share some observations that were noted which would shed more light on the

behavior of the industry as a whole.

To deduce the opportunities as a potential investor and as a potential entrepreneur

interested to get involved in the existing business or in some business development

service related to the mini motor industry of Dholaikhal.

1.3 SCOPES AND LIMITATIONS

The scope of the report is limited to the following points:

A majority of the entrepreneurs of the motor shops in Dholaikhal were uncooperative

in the interviewing process. They were secretive regarding some of the business

practices that they follow.

Shortage of time and a limitation on the number of team-members disallowed us from

interviewing more entrepreneurs.

The scope of the report is limited to only the mini motor industry of Dholaikhal. All the

other businesses in that area have not been taken into account.

3 | P a g e

1.4 METHODOLOGY OF DATA COLLECTION

1. Primary sources of data: Interviews were carried out with entrepreneurs from

Dholaikhal area from the mini motor industry. Each member of the group administered

three interviews. The questionnaire of the interview was supplied by our course

instructor. Alongside this, the observations made by the team members while carrying

out the interview have been used as valid primary sources of data.

2. Secondary sources of data: Different articles and websites have been cited in the

report, which were used to pick relevant information. Secondary sources were widely

used in the process of etching out the “Background” and “Industry Overview” sections

of the report.

4 | P a g e

2.0 INDUSTRY OVERVIEW

2.1 DIVERSITY OF INDUSTRY

As specified in the preceding section of the report, the entire “mini motor industry” of

Dholaikhal comprises of approximately 4,000 to 5,000 shops which provide employment to

around 40,000 people (Alam, 2013). Most of these people are educated only with technical

skills and many of them do not have any idea about reading and writing save signing their

names. This being said, these technical workers in Dholaikhal are mostly self-taught or taught

by mentors. These mentors are usually owners of the firm in which the workers work. They help

the workers improve their skills from an early age and guide them towards the goal of opening

a new shop in the area and becoming entrepreneurs themselves.

The broad cluster of “mini motor industry” is subdivided into smaller clusters, each addressing a

specific ancillary service related to motor cars. For an instance, there are specialized areas

where only bearings (a circular metallic part that restrains relative motion and reduces friction

between moving parts of a car) are sold (known locally as the “Bearing Market”), areas where

only engine deconstruction parts are sold, areas where car body parts and chassis are sold,

areas where the electrical parts are sold, etc. These are examples of different segments that are

targeted by the existing enterprises. It goes without mentioning that there exist many bigger

entrepreneurs who target multiple segments of these types.

Beside shops selling different motor parts, Dholaikhal contains huge warehouses. Most of these

warehouses are located as one goes away from the main road, where different parts are stored

and made.

In the sector of competition, the local entrepreneurs of Dholaikhal have their own set of

competitors. To begin with, every other entrepreneur in that area acts as competitor in terms

5 | P a g e

of customers, suppliers and skilled employees. Moreover, the existing entrepreneurs tag

foreign countries from which auto parts are imported as a generic competitor. A vast majority

of the existing motor parts are imported from countries such as China, Japan, Taiwan, India, etc,

which affect the potential market of the business (South-South Trade Promotion Programme,

2002).

2.2 GENERIC SUPPLY CHAIN

For the mini motor industry as a whole, the business occurs in a few general steps, as confirmed

during our interview:

Foreign companies supplying

worn out vehicles and its parts

Local suppliers of

worn out motor

vehicles

Local importers of

worn out vehicles and

its parts

Entrepreneurs of Dholaikhal to

disassemble parts and vehicles

to smaller parts

Usable parts sold to

different customers

Non-usable parts scrapped

as metals to be reassembled

into new parts

Customers: Servicing centers,

wholesaling entrepreneurs and end

users of motor parts

6 | P a g e

2.3 INDUSTRIAL SWOT ANALYSIS

The cumulative strengths, weaknesses, opportunities and threats posed and faced by the

entrepreneurs at Dholaikhal are etched out below.

• The cost of operation is comparatively lower, mainly due to availability of cheap labour.

• The whole "mini motor industry" in Dholaikhal is the only industry in Dhaka engaged in such practices. It does not have any competitive industry in the surrounding areas, other than the one in Nobabpur.

• The cheap labour that is available is very skilled in the technical field.

• Localization of the industry has turned into a strength for the business.

S

• Very insignificant availability of technology when compared globally.

• No centre for vocational training in the nearby areas. All the workers are trained by the individual entrepreneurs.

• There is no united association or chamber present.

• Finance to start the business is not readily available.

• Negative perception held by many towards the industry as a whole.

W

• Huge potential if import barriers are placed to reduce foreign competition.

• Huge potential if new technology are introduced to the industry through government or private ventures.

O

• Threat of cheap imports of motor parts from abroad (especially China and Japan).

• Threat of economic and political uncertainty .

• Threat of increasing competitiors within the industry.

T

7 | P a g e

3.0 SAMPLE FINDINGS

3.1 SMEC FRAMEWORK

Owners: Most of the owner’s themselves feel that the profit they gain from doing the business

is definitely important because they do the business for the money, but it is not something they

stress on. They care about profit but do not strive for a very high profit margin, partly because

the business they are in doesn’t allow for a high profit margin with a huge chunk going to the

suppliers and less return from the customers. The other reason is because there is not much

room for development that will bring in a higher profit margin. So the average rate of this factor

at ‘3’, i.e. it is important but not crucial.

Customers: They seem to be the controlling facet of the industry. Most of the entrepreneurs

feel that in an environment that holds about 5000 different shops, attracting and retaining the

customers is the only way of sustainable profit. As mentioned above, the goal of the

entrepreneurs at Dholaikhal is not a high profit margin but a sustainable profit margin, and

customers are the way to do that. So the average rating of the importance of customers is ‘4’

i.e. very important.

Owners

Value chain actors

Society

Customers

Employees

8 | P a g e

Employees: An overwhelming number of people cited this to be the most important factor for

their business. There are 2 main reasons behind this:

1. Many people have their son or other close relatives as employees, so when the family is

involved in the business they inherently become a crucial and very important part of the

business.

2. There are approximately 5000 shops selling motor parts in Dholaikhal and there is no actual

training place where workers are trained, there is no vocational training institute from which

one might learn to work. There is only one way someone can learn the engineering skills

required to be an employee at any of these shops, and that one way is- experience. So when on

shop owner trains his employee, the employee becomes a prized possession and becomes

crucial to the running of the business, since it is by that employees hand that all the work will

be done. Moreover, the customers don’t remember the owners; they remember the person

who did their work for them- the employees. So the employees become the contact point each

point has with their customer. Since even the customers are dependent on the employees, the

average rating for the employees is at ‘5’- crucial to the business.

Suppliers: The average rating for the importance of suppliers in Dholaikhal was as low as ‘1’.

There are 2 main reasons behind this: 1. There are many suppliers in the area so there isn’t

much competition for that. 2. The suppliers only care about money so there is nothing that has

to be done to keep them at hand. These 2 reasons combined is the issue behind why suppliers

are not important to the Dholaikhal motor industry.

Environment and Society: Even though most of the businesses in Dholaikhal don’t really care

about the environment issues, they do however feel a strong sense of society. They feel that by

employing young men, they are reducing unemployment and giving them skills with which they

can earn a living. This is something they pride themselves on, because in about 5000 shops,

about 40,000 people have found work. So the average rating for environment and society was

actually a ‘3’, showing that most owners consider this to be as important as profit itself.

9 | P a g e

3.2 TRIPLE TRIANGLE FRAMEWORK

The Triple Triangle Framework has been used to explain the components, which need to be

focused upon in order to attain sustainable competitiveness in the second hand parts industry

in Dholaikhal. The components are divided into 3 tiers namely, Firm Level, Industry Level and

Macro Level based on which the competitiveness in this industry would be analyzed.

1. Enterprise Level Factors:

Culture: The work culture will deal with the work practices in the industry. Most shops do not

hire many workers due to the cost incurred in paying the workers. In the shops that can afford

to hire workers, the workers are put to work in hot and humid conditions in the pavements and

adjacent roads. As for payment, the workers get around BDT 3,000 a month. Due to poor sales

in the past few years, these workers barely get any festival or annual bonuses. They also have

fixed work hours since most of the shops open up at 10 a.m. and have to close down by 9 p.m.

because of the government regulations on shop hours.

Capacity: The major problem for the shops in Dholaikhal that can afford workers is that they

don’t get skilled manpower trained. In most countries across the world, the work people at

10 | P a g e

Dholaikhal do would require a minimum diploma certificate. But here, some workers cannot

even read but recognize the numbers written on a screw gauge. They know how things work, a

craftsmanship handed down from seniors. There is no planned education to get these workers

employed in something of a larger scale where their craftsmanship can be nurtured.

Capital: Generalizing the access to finance in this sector has proved to be difficult. Most

entrepreneurs want to receive microcredit facilities, which do not exist at present. However,

majority of the entrepreneurs complain that access to finance is very limited and bank loans are

hard to obtain. Since most of these people are worker-turned-owners and lack credit

worthiness, the risk of giving a loan and the interest rate charged by banks is too high.

Entrepreneurs often seek informal sources of finance like lending from known persons because

they perceive the banking process as too complicated.

2. Industry Level Factors:

Competitors: Since most of the stores are regionally concentrated within Dholaikhal and they

have almost exactly the same products, competition is quite high. In fact, according to most

entrepreneurs, the competition in this industry is highly unfair and unethical, because of the

plummeting sales in the recent years. Many entrepreneurs complained that their counterparts

are predatory with each other’s customers. If one shop offers parts at BDT 1000, an adjacent

shop will offer BDT 900 and lure the customer away. Also the problems with these small

enterprises are that they lack customer service quality and sales people with good

communication skills for which they lag behind in repeat purchase. Other than these, Chinese

products act as a very big generic competitor to the whole industry.

Customers: Most of the customers of the business live around different parts of Old Dhaka.

According to the entrepreneurs, the demand dynamics of the customers vary according to

seasons and political conditions of the country as a whole. For example, during rainy seasons,

the customers generally visit the shops less than other times. The customers include both

retailers and wholesellers and also direct consumers of the motor parts.

Collaborators: The collaborators mainly include the suppliers and distributors of the industrial

11 | P a g e

and motor parts. For the motor parts cluster, the supply chain starts at foreign companies

supplying worn out vehicles or local suppliers for worn out vehicles. The local importers buy the

vehicles from foreign companies and sell them at Dholaikhal. Entrepreneurs at Dholaikhal buy

both local and foreign cars and disassemble and clean the parts for sale. For the bearing parts

cluster, the supply chain starts at the shipyards in Chittagong. Many of the entrepreneurs have

moved backwards in the supply chain, investing shops in Chittagong, which supply these parts.

3. Wider Environmental Factors:

Globalization and International Forces: Globalization helps create dialogues between people in

different countries, companies and governments. Drilling down to more specifics, there are

numerous upsides and downsides of globalization for suppliers. Perhaps the most obvious is the

access globalization affords suppliers and retailers in terms of sourcing options. For example,

globalization allowed suppliers to import parts from Japan, which is one of the main reasons

why the industrial and motor parts industry in Dholaikhal evolved. However, globalization is

one of the instrumental reasons for the downturn of the industry in Dholaikhal. An adjacent

industry in Nobabpur has flourished due to cheap imports from China, which has taken a large

toll on the shops in Dholaikhal.

Technology: Enterprises in Dholaikhal does not have good access to technology all over. Some

of the works such as day to day trading does not require much technological helps. However,

other jobs such as manufacture and repairing of parts can be done more efficiently if the

technological aspects are improved. Moreover, if the workers are trained using technologies

that countries such as Japan and China use (through government financed training programs),

their level of skill will improve drastically.

State and Society: There are no regulatory bodies to govern the activities of Dholaikhal. Most

of the small and medium firms do not want to get involved in these associations since they

believe that this would not make their position any better. Rather they believe these bodies will

create obstacles in their business activities. As for externalities generated, most of the shops do

not have adequate spaces inside and have picked up the pavements road to work on.

12 | P a g e

3.3 GIM FRAMEWORK

Policy Advocacy: There is no existing policy advocacy for the Dholaikhal motor industry; this is

mainly because there is no united association of the industry that can advocate the policy. Also

since most of the participants in the industry are uneducated they can’t take it upon

themselves to advocate either. Thus, an absence of the united front is why policy advocacy is

absent.

Knowledge: There is also literally no initiative for knowledge creation or scientific research and

this is why even after having a large labor force this industry is lagging behind, because there is

literally no development of this factor of production. This can be mitigated by policy advocacy

and vocational skill training initiative from the government or private sectors.

Networking and Collaboration: There is definitely networking that people in this business do,

they collaborate with the suppliers of the spare parts, the importers of the foreign parts and

even the big company customers. So collaboration is a big part of the business; however the

collaboration is done at an individual firm level, rather than a collective industry level, again

due to a lack of an association.

Policy Advocacy

Knowledge

Business development

services

Networking and

collaboration

13 | P a g e

Business Development Services: As of now, there are no BDS for this industry, mainly because

there is no order in the industry, and also because the people running the industry the

entrepreneurs do not want any external help because of a very low level of trust. And for this

low level of trust the firms place on external sources, any future prospect of a BDS seems dark,

moreover with no association of the firms it will be very hard for any BDS to have a differential

effect on the industry as a whole. This is because it will be impossible to cause a change by

changing one firm out of 5000 and reaching out to all 5000 at a time is quite impossible with

the absence of an association.

14 | P a g e

4.0 MAJOR DISCOVERIES

This section includes the major discoveries that were made by our group as a whole and have

appealed us to a great extent. Some of the discoveries have already been included in the

preceding sections, but their significance forces us to mention them in a different section as

take-aways.

4.1 SOUR RELATIONSHIP WITH THE GOVERNMENT

Some of the entrepreneurs that were interviewed in the research process came up with the

point that the government hinders their activities more than they provide help.

A lot of the entrepreneurs have voiced in that they want a training centre where their workers

will be trained so that they do not have to individually train them, which undoubtedly is the

reason for a major part of their expenses. If such a training centre were established, that would

mean that they would have a steady flow of trained workers, which seems to be hard to get

these days. Moreover, they want the government to facilitate them by putting up some trade

barriers that would discourage Chinese imported automobile parts that act as competitors to

this industry.

Instead of this fruitful relationship with the government, the entrepreneurs feel that the

government is hindering their business. The entrepreneurs, as observed by our team mates, live

in fear of government officials. Some of the owner even sent us away from their shop thinking

that we have come on behalf of the government with some redundant paperwork for them

that might take away their day. Some of the government rules and regulations were tagged as

unnecessary bureaucratic burdens aimed towards getting briberies.

Having said this, it does not mean that the intervention from the government is without any

basis. A very negative perception is associated with this area when it comes to tax-evasion and

fraudulent activities.

15 | P a g e

4.2 MENTORING COMMUNITY

The whole community of Dholaikhal is based on the principle of mentoring. As mentioned

countless times above, there are no existing training institutes to provide the workers with the

skill necessary to do these kinds of work. This means that all the work that a worker learns to

do is learnt from the owners of the enterprise where s/he works.

One notable thing worth mentioning here is that most of the workers (as well as many

entrepreneurs) who work here did not even pass the 8th grade. Yet, they are successful in the

field of business that they have taken up. A reason for this is the good level of mentoring that

was provided to them by the neighboring enterprises. Some of the businesses were inherited

from the entrepreneurs’ families for which their skills and involvement in this field is beyond

comparison. One of the entrepreneurs specifically mentioned, during our interview, that a lot

of the owners train the employees in a selfless manner so that when these employees grow

older and more skilled, they can look after the whole industry by opening a business of their

own. This will expand the whole industry and all these would be done without any sort of

external assistance.

A consequence of this mentoring community is seen in the work culture of the industry. All the

entrepreneurs and workers are very cooperative with each other in this respect, which give

them a comparative advantage.

4.3 HIGH SELF EFFICACY OF THE ENTREPRENEURS

Most of the owners in the area have a very high self efficacy. An experience of a team member

of ours verifies this fact to some extent. As reported by him, one of the entrepreneurs claimed

that had the technological situation in Bangladesh been as good as that in Japan or China, the

level of skill owned by the workers in this locality would make them (the enterprises in

Dholaikhal) much more skilled and efficient than those in the countries mentioned previously.

Furthermore, he claimed that they would be able to capture the global market as much as our

RMG sector has succeeded in doing in the global apparel sector.

16 | P a g e

The extent of reliability of this factor is not the main reason why this point was included in the

“Major Discovery” section of the report. It was incorporated because this high self efficacy of

the entrepreneurs shows a fighting spirit whereby the locales are challenging the global

powerhouses. For every other Bangladeshi to have faith in them, they must have faith in

themselves first.

4.4 INCREASED COMPETITION IN RECENT YEARS

In the modern days, the competition present in the motor parts industry has significantly

increased. One of the main aspects that almost every interviewee mentioned was the

availability of Chinese automobile parts that are widespread in the market. This has been

tagged as the main competitor of the whole cluster in general.

From the perspective of the entrepreneurs, the competition in this particular case is

unparalleled since the Chinese are way ahead in the field of technology. They desperately want

the government to intervene by setting up trade barriers to reduce the flow of goods from

China.

Other recent competitors include different localized clusters of automobile parts at different

parts of Dhaka like Bangla Motor, Tejgaon, Paltan, Nobabpur, etc.

17 | P a g e

5.0 RECOMMENDATIONS

During our visit to the Dholaikhal automobile parts industry, we didn’t see businesses being run

in orthodox business fashion. But what we saw was that it worked for the businesses there.

Based on what was observed during our visit to the Dholaikhal automobile parts industry and

the key findings, we would like to make the following recommendations:

Proper training for the mechanics working on the engines of automobiles. This will

enable these entrepreneurs to be more efficient in selling the parts and also avail the

parts in better condition.

More engagement with the associations which are present within the industry. This will

cause a cumulative rise in their bargaining power and will aid the whole industry in

making united decisions.

Better working conditions for all the workers there. This means proper disposal for all

the hazardous material that cannot be used. They can ask help from the government in

this regard.

Proper advertisement can lead to more customers. This will help the dip in business that

they are experiencing currently.

Cheap imports from China should be carefully maintained as it is causing problems for

the local industry

18 | P a g e

So What?

We have learned about different business models during our course but this visit and its many

findings have opened our eyes to the difference between theory and real life business.

Something that struck many of us during the completion of the questionnaires and also during

the visit is that something that we were already informed of. It is the fact that the best role the

government can play in businesses is no role. All the owners of businesses informed that the

government was making life very hard for them by making sanctions that were hindrances to

the business. An example of this could be the fact that the government is not providing visas to

Dubai where many entrepreneurs go to see and buy different body parts and finally import

them. So this fact has made a real impact on everyone about real businesses.

This trip to Dholaikhal has also opened our eyes as to how a cluster of shops selling almost

identical parts can work in perfect competition and keep a good working environment amongst

its employees. Also, this was a great opportunity for us to visit the much talked about

Dholaikhal and find out how it works.

All of the findings, observations, answers will also change the way we look at businesses. This

visit has given us a unique perspective, insight and knowledge about this industry which will

definitely help us if we ourselves are to become entrepreneurs in this industry.

19 | P a g e

6.0 CONCLUSION

The Dholaikhal motor parts industry is facing crucial problems at present owing to both internal

and external factors. There was a time when this place was the leader of this industry in Dhaka.

But the scenario has changed a lot over the years.

The whole business was analyzed from 3 major frameworks. These frameworks revealed

different insights to this report. SMEC framework has helped gather knowledge about the

perceptions of the business owners on the different entities that build up the whole business.

According to them, after profit-making, satisfying the customers is the most important thing

that they look forward to.

The Triple Triangle framework has enabled us to understand the whole condition of Dholaikhal

from three different angles. From the enterprise level analysis it can be said that the business is

lacking capital and skilled manpower. The industry analysis revealed that competition is fierce

at present and the customer base is not increasing that much. So business owners are even

considering unethical practices to make more profit. Environment analysis showed that Chinese

products have made the lives of the Dholaikhal entrepreneurs very difficult. Also there is no

suitable government policy that is helping their cause.

GIM framework has helped us understand the need for a strong regulatory association for this

place. Collaboration among the entrepreneurs is not that great because of the absence of a

chamber/association. Also it is difficult to maintain business development services in such an

industry.

Aside from these analyses, we have observed some important aspects of Dholaikhal motor

parts industry. These are mainly the bitter relationship with the government and their policies.

This condition needs to be improved. It can be concluded that the government should step up

to help these 4000 entrepreneurs because a major portion of the lower class people of Dhaka

city depends on the success of Dholaikhal.

20 | P a g e

APPENDIX

Appendix 1: The location of Dholaikhal in the map of Dhaka city is marked by a black circle

21 | P a g e

REFERENCES

Alam, S. (2013, November 21). Dholaikhal industrial zone in Bangladesh. Retrieved from

Demotix: http://www.demotix.com/news/3295097/dholaikhal-industrial-zone-

bangladesh#media-3294666

Bhattacharja, H. (2009). Dholaikhal. Retrieved from Banglapedia:

http://www.bpedia.org/D_0199.php

Gazi, R. (2014, January 17). Dholai Khal "engineers". The Daily Star.

South-South Trade Promotion Programme. (2002). Supply and demand survey on automotive

components. International Trade Centre.