Furniture Industry

PowerPoint Presentation

Furniture IndustryDiamond Porter ModelGroup Members:Muneeb Fazal 12716Sheikh Rafay 14749Adeel Saleem 12890Fahad Yousuf 12889Niha Jawaid 13803Tauheed Dyer 13596Overview of Furniture Industry The wooden furniture industry represents 95 percent of the total market in PakistanPakistan's share in the world market for furniture is negligible, despite the fact that it has a valuable record of craftsmanship and innovation in this sectorPakistan's exports kept increasing by 10 percent annually until 2007-08. However, the past decade can be considered as an opportunity lost for the nascent industryIn FY08, Pakistan exported furniture worth $12 million, while the amount fell to $9 million in 2009 and further declined to around $8 million in 2010

Factor ConditionsRaw Material Availability In Pakistan, almost 50 percent softwood comes from state forests in NWFP, Northern Areas and AJK, whereas most hardwood is from the plains area of Punjab and Sindh Ninety percent of hardwood comes from farmlands and the remaining 10 percent from irrigated plantations Problems: 1. Sheesham availability is inconsistent2. Currently, Pakistan has the worlds second highest rate of deforestation, with virtually no effective replantation programmes

Quality of Raw MaterialBillions of rupees is wasted on import of wood because local sawmills do not work properly and are not competitive to the world regarding finishing of logs

Logging and sawmill practices not only waste Pakistans natural resources, but they also deteriorate standards of living within the country and produce poor quality wood products at higher pricesHuman resource and skill availability HR present in abundance Skills are traditionally inherited Carpentry is a family trade Problem: no training and education centers available to boost entrepreneurship and craftsmanship in this sectorCapital Availability The capital resources of Pakistans saw-mills would be better utilised in more value-added industries, such as the manufacturing of finished goods that use lumber The artisans requirement are minimal, but there is a lack of working capital for wood working craftsmenAvailability of Infrastructure Poor road connectivity Lack of communication Inconsistent power supply and source High Transport Costs Distribution Chain Problem

Demand ConditionsLocal DemandHousehold FurnitureInstitutional Furniture (schools,hospitals)Contractual Furniture (shops, banks, hotels).Local DemandReasons for increase:Increase in consumer spending (average increase of 26% in last 3 years).New housing and non-residential building starts.About 95% demand is for wooden furniture.80% of the local demand met by Chinioti Furniture (known for its superior quality and beautiful wood carvings).70-80% of it is made of sheesham wood.In Karachi, plywood is used the most in furnitureLocal DemandSeasonal Demand:Nov-Feb : Wedding season, high demand for furniture especially bedroom sets increases for dowry.Summers: Home renovations, visits of relatives from abroad high demand for dinning room furniture.Ramazan and Eid times also have higher demand for furniture.Average Spending:Furniture manufacturers sell Rs. 0.5 million worth of furniture for a single wedding.Even poor spends on average Rs.50,000 on furniture given to their daughters.The prices vary greatly, depending on the area, type of wood and the quality of wood.

International DemandTotal world trade in furniture is estimated to be in the tune of $23.2 billion, of which the share of wooden furniture is 77 percent.Pakistans exports of wooden furniture amounted to $12m in 2008, decreased to $8m in 2010.The most important reason for this decline is the depleting sheesham reserves. Importing such wood costs 4 times more.The major importers of Pakistani furniture are Italy, USA, Canada, Japan, Saudi-Arabia, the UAE, Germany and Spain.Furniture exports are about 0.47% of the total exports of the countryRegional CompetitorsIndia:Pakistans exports of wooden furniture were $8 million in 2010 while Indias were $280 million.This makes Indias share in the export of furniture world market 0.2%.China:Chinas exports of furniture were $9.5 billion in 2010. They were higher than the exports of Germany and Italy combined.

Related and Supporting IndustriesRelated and Supporting IndustriesIndustries in the Furniture and Related Product Manufacturing subsector make furniture and related articles, such as mattresses,window blinds, cabinets, and fixtures.The processes used in the manufacture of furniture include the cutting, bending, molding, laminating, and assembly of such materials as wood, metal, glass and plastic.Design and fashion trends play an important part in the production of furniture.Related and Supporting IndustriesWooden Industry All the softwood in Pakistan comes from forests in the Northern areas.All the hardwood in Pakistan comes from the plain areas of Sindh and Punjab.The solid wood industry in Pakistan is infant and small scale.

Consumption of Wood in PakistanAll the sectors that use wood as a raw material or consume wood are:ConstructionFurnitureMatch productionMining applicationsPlywood manufactureProduction of sports goodConstruction of train, bus and boatsSugar Industry The chipboard is the trash from sugar mills.It is an artificial type of wood which undergoes the process of lamination and then used

Hardware Industry Furniture hardware are those products that are used to support the furniture look, design and durability.Example: (Furniture frames, Furniture Legs, Furniture arms)

Glass Industry With the trends shifting people are now shifting from wooden furniture to glass furniture.Glass furniture is:Easier to maintainSpaciousFireproofWaterproofRich and expensive lookTypes of Glass furniture

Polish IndustryThere are different types of polish in furniture.SpiritChanuttiKaneShishamLaker

Firm Strategy, Structure and RivalryFirm Strategy, Structure and RivalryThe way in which companies set goals, implement strategies and manage its hierarchical structure is important for successInfluenced by management style and culture of the country.No single management style guarantees success. For example, In Italy manufacturing firms are medium sized operating in fragmented industries with a strategy towards meeting the needs of small market niches. In Germany, successful organizations tend to be hierarchical with a highly disciplined management structure. They emphasize on technical content ith strategy of precision in manufacturing.

Firm Strategy, Structure and RivalryRivalry in the home base is also important as it creates pressure to innovate.Domestic competition is more direct and impacts earlier than foreign competitors towards innovation and efficiency. Only through high domestic competition we can hope to compete successfully at the global level.Firm Strategy, Structure and RivalryPakistans Furniture industry can be divided in two main types; cottages and small-scale industry.Most units are not mechanized and use out-dated toolsManual labor is employed for the production of furniture.There are about 700 registered units in the country, operating on a single shift/300 days per annum basis. Firm Strategy, Structure and RivalryThreats to Furniture Industry:Not mechanized, Outdated toolsHigh cost of the furniture businessThe prices of all raw materials used in making furniture which include chipboard, timber, foam, polish chemical materials, color paints and hard ware have increased. Timber production on the other hand has gone down drastically because of unchecked deforestation.

Firm Strategy, Structure and Rivalry Imported chipboard is used for bedroom sets. About 60% raw material is imported from China. Mostly imported item are chipboard, hardware items and glass. More than 80 % of the furniture demand in the country is met by Chinioti furniture. This industry, combined with the handicraft industry, is employing about 50,000 people.

Chance OccurrencesChance OccurrencesChance event are occurrences that have little to do with circumstances in a nation and are often largely outside the power of firms (and often the government) to influence.Examples:Acts of pure inventionDiscontinuities in input costs such as oil shocksShifts in world financial marketsSurges of regional demand in the worldPolitical decisions by foreign governmentWars

Chance OccurrencesChance events often take shape in the form of technological discontinuities.A technological discontinuity is represented in a new technology or in the re-packaging of a set of existing technologies that results in quickly obsoleting a product or service.Chance events are important because they create discontinuities that allow shifts in competitive position and provide opportunities to other nations to supplant.They can nullify the advantages of previously established competitors

Exports of Pakistan (SBP)Imports of Pakistan (SBP)

Chance OccurrencesExamples of Chance The advent of microelectronics was enormously important in neutralizing American and German dominance in numerous relevant industries. It gave Japanese industries a competitive position.A surge in demand for ships gave Korea the opportunity to enter the shipbuilding industry against JapanThe apparel industry developed in Singapore after western nations placed quotas on apparel imports from Hong Kong and japan.Chance OccurrencesThe surge in demand for more traditional-stylish furniture has impacted the designs of furniture in Pakistan.This impact has caused a significant change in the offerings of most companies within the industry which now boast a mixture of several cultures.Craftsmanship has changed in our country.This chance-shift has affected our exports and imports for wood and furniture.Most notable example would be of Interwood.

GovernmentImportant OrganizationsPakistan Furniture Council (PFC): Organizes trade expos, and works and sets aims for trade exports. Export target of $5 billion for the next five yearsTraining to the existing workforceRemove hurdles at the lowest level by educating and providing training to furniture entrepreneurs on global standards, especially in solid wood handmade furniture, which is in high demand,Aims to ensure industry friendly legislation to support both vendors and clients by managing tax regime All Pakistan Furniture Exporters Association (APFEA): Trade organizationlong the same lines, and facilitates manufacturers. Timber MafiaThe direct link between Pakistans timber mafia and the countrys deforestation is thatthe government regularly took bribes from the timber mafia in exchange for permits to fell treesThe outcome is that forests have beenruthlessly exploited by law enforcement agencies, politicians and bureaucrats for their own vested interestsFurniture grade Sheesham trees take more than 50 years to grow. But the timber mafia in the country ends up cutting Sheesham prematurely for use in low value-added structural or even for use as firewood.Current ScenarioCorruption Chinese furniture has also hit the local industry by 70 percent and the sales of locally manufactured household furniture have gone down by 30 percentEffect of Timber MafiaForeign firms do not trust Pakistani companies because the latter often fail to meet quality standardsExports of furniture have gone down since 2007 due to political and economic turmoil coupled with load shedding.Environmental Effects The affects on the environment have their own adverse affects. The depleting forest to land ratio in this country is triggering raging floods, hotter summers, colder winters and a weather that cannot be predicted for the coming years making our farmers, our mainstream industry, at a huge risk.

RecommendationsGovernment should immediately introduce and implement a reforestation plan that is focused on replanting A minimum of ten trees should be planted for every tree cut, and a heavy penalty should be placed on cutting these trees prior to their maturity period, which is approximately fifty to sixty yearsAllocating idle industrial zones and premises to the furniture industry will also help in boosting its exportsRecommendations Export fairs should be arrange to attract the international buyersEasy access of credit, tax holidays on expansion, frequent road shows and visits to international exhibitions, along with assistance from government officials for marketing furniture in Europe are some of the initiatives that can benefit the industry.