BALA Footwear Cost Analysis
BALA Footwear Cost Analysis
BALA Footwear Cost Analysis
Project Report on
Submitted to
Hassan Abbas (L3f08bcom2312) Muhammad Saad (L3f09bcom2599) Hafiz Islam Aslam (L3f08bcom2325) Adil Naeem (L3f08bcom2314) Osama Imran (l3f08bcom2366)
Section no.
B-5 (F)
Faculty of Commerce
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ACKNOWLEDGEMENTS
We are thankful to Almighty Allah for the countless blessings and infinite mercy, which enabled us to complete this report work. We wish to extend our sincere appreciation to our course instructor Ms. Fareena Noor, under whose guidance and help, this report was completed. We are thankful to her for her extremely valuable advises. Our thanks also due to all the persons involved in our project report, without whom it would be possible.
Hassan Abbas Hafiz Islam Aslam Muhammad Saad Adil Naeem Osama Imran
EXECUTIVE SUMMARY
The purpose of this report is to fully understand the working of Bala Footwears. Bala Footwears started its business in 1985 in Lahore, Pakistan. We have analyzed the whole firms procedure and understood the work environment of the firm. In this report, weve incorporated all the businesses and products of Bala Footwears. Apart from that detailed cost of the product such as variable cost, fixed cost and profit calculations are provided in the report, economic problems face by the production department, causes of failure of the product and suggestions to increase the demand of the product are also included. The study indicates that there is potential for higher growth of the industry and it can become a source of exports earnings. The study suggests that in the rapidly changing environment and in the face of increasing cost of doing business in Pakistan, there is a need to strengthen the competitiveness of the footwear industry in Pakistan.
TABLE OF CONTENTS
Introduction of Company
Bala Footwear is one of Pakistans most quality conscious and progressive footwear companies. Located in Lahore, it maintains a fine combination of comfort, style and workmanship and is embarking upon appreciable growth plans for the future.
History:
Bala Footwear Co. was established in 1985 under the name of Bala Hawaii Chappal. Under this brand name, companys main products are indoor slippers (including house slippers, hotel slippers) and outdoor slippers (including clogs, flip flops and nude slippers) with the annual production capacity of 1,300,000 pairs. With sincere services and high quality products, it has built long term business relationship with many customers all over the Pakistan. After several years of business, in 2005 a new division of Bala Footwear Co. was named established Bala Eva. Equipped modern facilities, company is now able to produce all sorts of EVA sandals and slippers, featuring high quality, novel style with competitive price. Company always pays much attention to quality and quality control. Its footwear products enjoy a good reputation for high quality due to have own raw material manufacturing unit to maintain the quality. With the success of companys products and support from customers all over the Pakistan, now it has started to produce polyurethane slippers and sandals by using the new technology called Direct on Upper under the Division formed in 2009 named Bala PU. Equipped with a group of excellent production technicians, advanced equipment, it has great ability and capacity in designing and developing new products. In addition, it continually develops products and production process such as importing advanced machinery from Taiwan, China and improving the quality of polyurethane.
Haji M. Afzal
Haji M. Iqbal
Shahid Iqbal
Mehmood Ahmed
Javed Iqbal
Maqsood Ahmed
Labor Dep.
Stock Dep.
Purchase Dep.
Sales Dept
Accounts Dep.
Production Dept
Finance Dep.
Product Range:
Bala Footwear stepped into the footwear industry in 1985. It started off with the
manufacturing of Hawaii slippers and subsequently diversified into manufacturing following: 1. PU Shoes, 2. EVA Close Shoes, 3. PVC Shoes. 4. Hawaii slippers.
Under the strict vigilance and support of the CEO of company Haji Muhammad Aslam, it has carved a niche in the field of footwear items such as casuals PU Slippers and PVC Shoes. Company was set with an objective of setting a modern plant for the purpose of manufacturing Hawaii Chappals. The company is also recognized as one of the quality EVA footwear manufacturers and suppliers from Pakistan.
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Economic Problems
PU Raw Material:
In production, polyurethane resin (PU) is very important without it production is not possible. One of the biggest issues is the availability of PU resin. In summers due to increase in the demand of PU resin, chances of shortage of it increase. When we talk about the PU resin, price variation also matters because half of the cost of production per unit depending on it.
Artificial Leather:
Artificial leather also matters in the production process. Now-a-days in Pakistan prices of leather has also gone up. The PU resin is also the main production material for making leather, so, both raw materials are increasing the production cost of PU Slippers, damaging the prices of PU Slippers and the demand.
Production Analysis
The production of the PU slipper is based upon the demand of the various articles. The company has more than 70 articles of PU slipper for both ladies and gents and cant make over production of any specific article because its per unit cost is very high. The Company is producing mainly on order bases by the retailers and wholesalers the different markets of Pakistan. The company is also producing separate quota for exporting purposes. According to the company representatives, over production of an article without specific demand may leads to blockade of money. In the production planning, one thing is very important i.e. the current trends, designs and styles, because ignoring these issues or making out-dated styles can result loss to the organization. The production capacity of this firm for the PU slipper for 10 hours shift is 3000 pairs. And it can produce the 75000 pairs per month.
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Cost Analysis
Variable Cost per Unit:
Items Polyurethane Material Cutting Charges Printing Charges Embossing Charges Upper Leather Inner Leather Upper-Man Wage Bottom-Man Wage Production labor Wage Packing Trimming Wage Electricity Charges Packing Material Transportation Cost Other Misc.exp Buckle Variable Cost per Unit Rs. 70 4 4 3 25 15 7 3 10 6 5 7 2 5 9 175
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Profit Calculations
The price selling charged by the company is as follows: Price of PU slipper/unit = Rs. 195
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Market Structure
The company is facing perfect competition because of the following conditions: Number and size of sellers: The size distribution of firms is also an important characteristic of market structure. In footwear industry there are many sellers, however few are larger like Bata and Service etc. and rest are medium and small scale.
Number and size of buyers: Market can also be characterized by the number and size distribution of buyers. In the market, there are many small buyers of PU slipper; all buyers are likely to pay about the same price.
Product Differentiation: Product differentiation refers to the degree that the output of one firm differs from that of the other firms in a market. Whereas the market selected product are undifferentiated and decisions to buy are made strictly on the basis of prices.
Entry/ Exit: Entry barriers are high however exit barriers are low. High investments and capital is required to enter this industry .On the other hand technical knowledge, expertise and availability of skilled work force makes entry barriers high. National and international level competitors are competing at the same platform with minor variations.
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Bibliography
Managerial Economics [Book] / auth. Petersen Lewis, Jain. - [s.l.] : Prentice Hall, 2008. - Vol. fourth edition.
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