Independent University, Bangladesh

Strategic Management
Course Code: MGT490
Section: 01
SUBMITTED TO:
Dr. Imranul Hoque
Independent University,Bangladesh (IUB)
SUBMITTED BY:

NAME ID

Ashifur Rahman Neloy 1910434

Ahmed Zulkarnain Seam 1930260
MD. Mahadi Hasan Nayem 1930739
Minnatun Rifa 2022099
Alfiya Virani 2030324
Abed Uddin 2120952

A Report on an Industry Analysis of Handicraft

Submission Date: 10TH December, 2023
Letter of Transmittal

Date: 10th December, 2023

To,
Dr. Imranul Hoque
Faculty
Independent University, Bangladesh
Dhaka, Bangladesh

Subject: Submission of a report on an industry analysis of handicraft

Dear Sir,
With due respect, it is our pleasure and honor to be your student and have this opportunity to
present a report of an export item in Bangladesh. While preparing the report we have given our
best effort thoroughly on the topic regarding this business, and we believe and hope that our
report will provide a clear conception, and will reflect my hard work as much as possible.
Though we are in the learning phase of my career, it is indeed a challenging and interesting
experience. We are more than willing to answer any questions regarding this topic, and clarify it
fully to your understanding.
Thank you very much for all your support, which helped me significantly in preparing this
report.
Sincerely,
Ashifur Rahman Neloy (1910434)

Ahmed Zulkarnain Seam (1930260)

MD. Mahadi Hasan Nayem (1930739)

Minnatun Rifa (2022099)

Alfiya Virani (2030324)

Abed Uddin (2120952)

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 TABLE OF CONTENTS:

Topic Name Page Number

Summary 4

Introduction 5-6

Industry Size and Growth Trends -- Handicraft 7-9

Maturity of The Industry 9-11

External Factors & their Effect on the Handicraft Industry 11-21

Profit Drivers of the industry 22

Porter’s Five Factors 23-27

Key Challenges Facing the Handicraft Industry 27-31

Waste Creation 31-32

Determinants of the effectiveness and economic viability of 32-34

recycling
Product design and development 34

Disposal practices and recycling technologies 35

Conclusion 36

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 SUMMARY

Handicraft business is related to the gathering of handcrafted products from across the country and selling
them in retail shops or to export in other countries. The goods of handicrafts carry marks of the skill of
the artists. They manufacture a wide range of essential items. Cottage industries are handicrafts as well.
Bangladesh is still in the process of being fully industrialized. Skilled artisans produce a wide range of
essential items. Bangladesh has a good tradition in the manufacturing of handicrafts. Handicrafts and
cottage industries were the most important industries in Bangladesh during the early and middle ages.
Customers' access to handcrafted products has grown easier with the introduction of online shopping and
multiple ecommerce platforms, leading in an increase in sales of handcrafted goods around the world. The
shifts from ethnic to contemporary styles, as well as strong demand from businesses, homes, hospitals, an
d hotels, are all fueling demand for handcrafted goods. Because of the increasing travel and tourist industr
y, local craftsmen and handicraft producers have had a lot of opportunities to manufacture commoditized
products and offer them to visitors who are willing to spend a lot of money on crafts. Handicrafts also util
ize less energy thanmachinemade things, which need the usage of electricity. Because of low capital requi
rements, the handicrafts sector is increasing, especially in emerging countries like India and China.
Handicraft plays an important part in the country's rural economy and cultural legacy, in addition to
contributing to foreign exchange earnings, creating jobs, and providing possibilities to use indigenous
materials. Handicrafts developed by painters and sculptors, as well as craft workers with little or no
artistic training who create their work for others rather than museums or wealthy collectors, represent the
country's cultural history. Despite their origins in the patronage of the wealthy, most handicrafts serve to
the needs of the common people. They gain the dignity of a craft over time. At the cottage level, members
of the craftsmen's family or cooperatives work in the handicraft production unit. The earnings of the
workers (skilled or semiskilled) are paid on a daily basis. The following is a list of some of the most well-
known handicraft manufacturers In Bangladesh, there are over 1000 large-scale handcraft makers, but
only 300 are registered. A huge majority of handicraft producers sell their products on the local market,
with only a handful exporting their products. Handicrafts are a significant source of employment,
particularly in rural areas. According to a research conducted in seven Asian countries in the 1990s, 4
million individuals worked full-time and another 4 million worked part-time in the craft industry.
Handicrafts are regarded non-traditional commodities in the country's export sector, with a significant
potential for expansion. Bangladesh confronts stiff competition in the export of finished goods in the
manufacturing sector as a developing country, yet many developed countries give preference to the
import of handicrafts from Bangladesh.

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 INTRODUCTION

Handicraft industries are those that manufacture items by hand, rather than utilizing machines, to suit the
needs of the people in their community. A handcrafted item’s artisanship is the most important
qualification, mass- produced or machine- made items are not considered handicrafts. Handicraft industry
is one of the most important sources of employment employing a large number of rural, unskilled, and
uneducated individuals. The handicraft industry is a brunch of business that deals with the creation and
sales of handcrafted objects. These goods are often one-of-a-kind works of art, although they may also
contain mass produced handicrafts in rare situations. Handcrafted things can be almost any form of items,
although pottery, woodwork, and needlework are some of the most prevalent. Decorative objects appear
to make up a substantial portion of the handicrafts sector, owing to mass market production’s abundant
supply of things that are considered needs. Clothing, for example is a required item with a large market of
purchasers. Because of the high demand for clothing and the large quantities. Clothing created in factories
with high- tech machinery and assembly lines has substantially lower production cost than individual item
made by home tailors. Handicraft things offered by mass production are frequently unable to complete
with commercial industry’s reduced prices. Handicrafts are made entirely made by hand or with the aid of
instruments.

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Wood, bamboo, straw, bead, stone, seashell, coconut shell, brass, copper, leather, jute, cane, grass, natural
fibers, natural dyes, and other environmentally acceptable raw materials are used.

Since their first exports in 1973, such products manufactured totally by hand or with only a few
rudimentary tools have grown to a $34 million international market. In 1973, Bangladesh's handicrafts
industry was hardly able to generate Tk 3 crore in foreign exchange. Since then, the sector has been
gradually expanding. Bangladesh handicraft products are gaining popularity as global citizens become
more concerned about environmental degradation. They are comparatively less expensive, handmade, and
environmentally friendly. In the worldwide market, Bangladesh exports jute products, hogla products,
bamboo products, cane products, water hyacinth products, rugs, seagrass baskets, Thypha, Kaisa, pottery,
weaving, muslin, and jamdani. During the pandemic, some unique goods, such as baskets made of hogla
leaves, cane and jute, terracotta, and Shotoronji, significantly increased handcraft export profits and
cottage businesses. Approximately 72 Bangladeshi businesses are now exporting their handcrafted goods
to more than 60 countries, including the United States, Canada, England, Russia, Germany, Italy, France,
Spain, Finland, Turkey, Japan, Denmark, South Africa, and Greece. The largest exporters of handicrafts
made in Bangladesh include Karupannya Rangpur Ltd, Classical Handmade Products BD, BD Creation,
San Trade, Dhaka Handicrafts Ltd, and Taurus Limited. According to the Bangladesh Handicrafts
Manufacturers and Exporters Association, often known as Banglacraft, Karupannya Rangpur Ltd alone
exported handicrafts worth $25 million in FY 2020-21. Many specific crafts have been practiced for
centuries, while others are modern inventions or popularizations of crafts that were originally practiced in
a limited geographic area. Handicraft has its roots in rural crafts, the material-goods necessities of ancient
civilizations and many specific crafts have been practiced for centuries, while others are modern
inventions or popularizations of crafts that were originally practiced in a limited geographic area. The
goal of this report is to determine how our handicraft export compares to that of other countries and how
it affects our economy.

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 INDUSTRY SIZE AND GROWTH TRENDS

The handicraft industry saw a notable increase in exports during the pandemic, despite other
industries seeing negative growth. This achievement has been attributed to efforts to preserve the
unique local qualities of the products.

The Bangladesh Handicraft Manufacturers and Exporters Association (Banglacraft) reports that
ninety-two organizations export goods valued at $20 million annually to other nations. The group
represents up to 485 producers and exporters of handicrafts. Large retailers like Walmart are
now focusing on Bangladeshi handicrafts. As other industries struggle amid the COVID-19
pandemic Handicraft exports have grown by roughly 60%. (Handicraft Business Thrives in
Pandemic, n.d.)

Between 2020 and 2026, the Bangladeshi handicrafts market is expected to expand at a
compound annual growth rate (CAGR) of 5.7%. Some of the main reasons propelling the
expansion of the Bangladeshi handicrafts market include the rising demand for traditional crafts
and goods, shifting lifestyle preferences, and the market's strong growth potential in urban
regions. (Bangladesh Handicrafts Market (2020 - 2026) | Trends, Outlook & Forecast, n.d.)

Aside from this, the manufacturing and sale of handcrafted goods in Bangladesh are now
supported by government initiatives and supportive programs that aim to increase employment
prospects in rural areas. Also, yearly growth is brought by low production costs, low-interest
financing availability, raw resource availability, and untapped markets.

Furthermore, during the coming years, it is anticipated that stronger marketing initiatives by
regional artists would drive further sales development. (Bangladesh Handicrafts Market (2020 -
2026) | Trends, Outlook & Forecast, n.d.) Additionally, a greater emphasis on environmental
sustainability has prompted consumers to switch to eco-friendly products, such as jute bags,
which increase demand for handicrafts from Bangladesh.

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Following Market size is forecasted to increase overtime a period of
massive growth during
the pandemic, the country's export earnings from the handicrafts sector experienced a drastic
decline in recent months.

However, according to EPB statistics, however, Bangladesh's export earnings from this sector
saw a sharp increase in the three fiscal years from 2020 to 2022, reaching $20.52 million, $33.97
million, and $42.83 million, respectively. (Uddin & Elahi, 2023)

When it comes to the strength of Bangladeshi handicrafts, it should be noted that the nation
exports primarily two types of handicrafts: home furnishings and a wide variety of bamboo,
fiber, jute, cane, and plastic baskets. The home furnishings that are shipped from Bangladesh
include pillow covers, jute bags, executive bags, laptop bags, shaving kit bags, and nakshi
kantha, he mentioned. In addition, Bangladesh manufactures and exports traditional handicrafts
like jute, tant, muslin, jamdani, bamboo, and pottery, as well as shitalpati. Bangladesh primarily
exports handicrafts to nations in North America, Europe, and the Middle East. Cane is the most
valuable raw material for handicrafts, and we must preserve it.

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In response to a question regarding the size of the local market, the president of the BHMEA said
that it was valued between Tk. 10,000 and 12,000 crores and that 60–70 lakh people were
employed in this sector either directly or indirectly.

Industry insiders claim that the country's low competitiveness and fierce competition from other
countries, whose exports were restricted during the pandemic, are the main causes of the recent
decline. (Uddin & Elahi, 2023)

"We're asking the government to boost the industry's competitiveness via various means, such as
increasing financial incentives," stated Mr. Haider, president of Banglacraft, also known as the
Bangladesh Handicraft Manufacturers and Exporters Association. (Uddin & Elahi, 2023)

While Bangladeshi handicraft exports have not yet gained much traction, it is true that the
industry has enormous growth potential. This is strongly supported by studies and surveys
carried out by the Fair Trade Forum (ECOTA), BANGLACRAFT (an association of handicraft
producers and exporters), and the EPB. Based on these findings, it seems that gifts, housewares,
home décor, seasonal goods, toys, and personal accessories are the primary markets for our
handcrafted goods.

MATURITY OF THE INDUSTRY

Sales of handcrafted goods have increased globally as a result of customers having easier access
to a wider variety of handcrafted products thanks to the development of internet shopping and
multiple e-commerce platforms.

The transition from ethnic to contemporary styles, along with strong demand from businesses,
homes, hospitals, and hotels, are other factors driving the market for handcrafted goods. Because
of the booming travel and tourism industry, local artisans and handicraft producers have had
many opportunities to create commoditized products and sell them to tourists who are willing to
spend a lot of money on crafts. Also, handicrafts use less energy than manufactured goods,
which require electricity.

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Due to low capital investments, the handicrafts market is expanding, particularly in developing
nations like the UK, USA, Italy, India, and China. The worldwide handicraft market is
anticipated to expand in the near future because the handicrafts sector is also a major source of
substantial exports and potential foreign exchange.

In the 1970s, the industry has passed the introduction stage between years 1970 to 1976, growth
stage in 1977 to 1985 and maturity stage 1985 to 2000. Bangladeshi handicrafts were first
offered for sale after 1970. And when the product gained traction in the market in the 1980s,
that's when it started to grow.

Bangladeshi handicraft products saw a slow growth in the 1990s; this was the product's
maturation period. Due to the product's subpar quality and outdated design, sales fell after 2000.
Furthermore, new rivals entered the market with well-made, creatively designed products.
Bangladesh's handicraft industry consequently saw a downturn. (Textile Handicrafts and Its
Prospect in Bangladesh, 2010) as shown by the diagram below:

Handicraft industry declining in 2000s

However, the industry survived

and again reached its growth stage and achieved higher maturity rate due to rise of demand of
handicrafts during the pandemic, as indicated in the diagram below:

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Maturity of the Industry in 2021-2022

The diagram shows that the maturity of the industry was during the year 2021-23 and
significantly declined in the years 2022 – 2023 (July to May). (Uddin & Elahi, 2023)

However, the research states that it is expanding overtime and is forecasted to increase their
exports, resulting in the growth of the industry.

EXTERNAL FACTORS & THEIR EFFECT ON THE HANDICRAFT INDUSTRY

The handicraft industry, like any other industry, is influenced by a variety of external factors that
can have both positive and negative effects. The study focuses on the development of handicrafts
in Iran, exploring its economic, social, and cultural implications. Despite its historical
significance, the handicraft industry faces challenges such as recession and inadequate export
performance. The research aims to identify environmental factors affecting handicraft production
in Iran, using a descriptive-analytic methodology. Theoretical literature defines cultural and
creative industries, emphasizing their role in sustainable development. Handicraft, characterized
by manual production and local materials, holds economic, social, and cultural consequences.
The study uses the PEST matrix to analyze external economic factors such as inflation,
unemployment, and interest rates, highlighting their impact on private sector investment and the
handicraft industry. Challenges include limited resources and dispersed production units,
requiring effective strategies for improvement.

For example: Aarong, stands as a social enterprise department store chain in Bangladesh,
focusing on Bengali ethnic clothing and handicrafts. Its meaning 'Village Fair' in Bengali, owned

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by the nonprofit organization BRAC, Aarong engages numerous rural artisans nationwide.
Presently, it runs twenty-one stores across nine major Bangladeshi cities.

Here are some key external factors and their potential impact on the handicraft industry:

Technological Factors:

Craftsmen emphasize that "technology tools don't serve as creative instruments" for them;
instead, their craft is defined by an aesthetic vision rather than being limited by technological
constraints. Despite their appreciation for "creative integrity" and a preference for "hands-on"
experiences, they acknowledge that technology plays a role in helping them "envision and
realize" their ideas. Their core belief is that the essence of their craft lies in aesthetic vision, not
in being confined by technological aspects.

Craftsmen consistently emphasize that technology is a minor aspect of their craft and can be
separated from it at any time. They argue that combining technology with traditional skills
strengthens, rather than weakens, the embodied relationships they have with their work. This
hybrid approach has the potential to expand craft practices and introduce new ways of thinking

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and doing. Crafters and artists see technology as a solution to challenging problems that might
otherwise limit their creative potential. The integration of technology into craft creation requires
a significant investment of time for practicing and applying these technological tools. In specific
cases, such as digital fabrication, qualified professionals may be needed to handle data revision
and machinery operation, raising concerns about authorship. Despite these challenges,
technology plays a crucial role in managing change and opening up new directions for the work
processes and careers of craft practitioners.

Examples:

Society tends to prioritize convenience over improvement, falling into the "ease trap." While
technology offers convenience, it may not necessarily lead to better outcomes. For instance, AI
might make us less intelligent. Cars, despite being convenient, come with significant downsides.
Too much ease can lead to boredom, and ready-meals lack the fulfillment of cooking with fresh
ingredients. Technology, intended to enhance capability, often makes us dependent and poses
health challenges. Pursuing meaningful goals, though requiring effort, leads to more fulfilling
outcomes than mere convenience.

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In summary, technology is acknowledged as a valuable tool in the craft world, aiding artisans in
realizing their creative visions, managing change, and exploring new avenues in their careers.
The careful integration of technology with traditional skills can result in innovative, high-quality
craft products with lasting value in the global market.

The following are some examples of areas where technology could be useful:

 Digital Technology Integration: In the manufacturing process, digital technology is

harnessed to craft shapes that would be impractical or unattainable by manual means.
 Subtractive Manufacturing: This involves cutting or subtracting material from the
original Computer-Controlled Machines (CC), achieving precision and intricacy.
 Additive Manufacturing: The process involves building objects layer by layer using
Computer-Aided Design and Computer-Aided Manufacturing (CAD/CAM) software.
This intricate method is particularly useful for creating objects defined by physical
complexity.
 3D Printing: After the digital design, the object is printed using a 3D printer. This allows
for replication in different materials or casting, enhancing flexibility and creativity in the
production process.

Economic Factors:

The handicraft sector plays a vital role in the economy, offering employment to artisans in rural
areas and contributing significantly to foreign exchange. Despite challenges like lack of
organization, education, and exposure to technology, the sector has seen a 3% annual growth
rate. In Bangladesh, handicrafts, a labor-intensive and cottage-based industry, serve as a crucial
income source for both regular and off-season workers in rural communities. The Arts and Crafts
movement emphasizes the fulfillment derived from creative handicrafts. In terms of pension

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history, rulers and governments have provided pensions for centuries, but formal pension
policies began developing in the late 1800s. The postwar period witnessed the expansion of
public pension schemes globally, ensuring financial support for retirees.

Despite these limits, the sector has experienced a 3 percent annual growth rate. During the 10th
Five Year Plan, some of the most promising areas in the crafts industry were:

 Exports of high-value-added crafts products increased.

 As a result of economic liberalization, consumer tastes shifted quickly.
 Increase consumer awareness while focusing on quality and product diversification.

Handicraft industries in Bangladesh are becoming more active in PVN as a means of improving
the country's economy. Handicraft becomes a key source of income for both regular and off-
season employees in rural communities as a labor-intensive, cottage-based, rural, and small-
ownership centered industry.

In terms of economic development, handicrafts are quite significant. Even with little capital
input, they give plenty of job opportunities and have become a popular source of foreign
revenue. Bangladesh is one of the world's largest producers and suppliers of handicrafts. For a
long time, Bangladesh has been a major manufacturer and supplier of handcraft products. This
art and industry were a possible economic benefit for the country before to the emergence of
industrialization.

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Example: ABC Corporation, a producer of calculators and electronic goods, engaged in mass
production and inventory management. Anticipating an approaching economic downturn, they
opted to increase their stock levels to cut expenses associated with frequent production cycles.
Shortly after, the recession was officially declared, leading to a substantial surge in inflation.
Unfortunately, the management overlooked the escalating expenses linked to rent, labor, and
logistics. Consequently, they had to pivot and promote additional products alongside calculators
to navigate through the challenging economic phase.

Political factors:

The handicraft industry in Bangladesh is a rich tapestry of traditional craftsmanship,

encompassing various handmade products like weaving, pottery, and ornament crafting. Rooted
in cultural and historical values, handicrafts have evolved with time, incorporating modern tools
and machinery for efficiency. As a vital export item, Bangladesh's handicrafts find a market in
approximately 50 countries, making a substantial contribution to the national economy.

Bangladesh is a developing country, and the present government is striving relentlessly to attain
rapid economic development in the country. Many programs implemented so far have been
carried out successfully. Despite a lack of resources faced by the government, development
programs in the key sectors have continued. At the same time, considering the importance of the
private sector, an all-out support is being provided to initiatives taken in the handicraft sector. As
a result, a new kind of dynamism is under way in both the public and private sectors. In this
backdrop, it is essential to examine various aspects of industrialization and its impacts on overall
economic activities. Given the present environment of global competition, the private sector is
playing an important role in the handicraft industrialization of the country. Therefore, the
Government in the Ministry of Industries has taken the role of a facilitator. Faced with the
challenges of the free-market economy and globalization, the government has accepted private
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ownership and management of industrial enterprises as one of the major guiding forces in
achieving economic growth. Besides this, the government has also brought about many
constructive and timely reforms in the running of businesses, and liberalized trade so that private
entrepreneurs can seize opportunities of establishing and running industrial enterprises profitably
and freely. To reduce poverty and generate employment opportunities, more efforts are needed to
establish handicraft -based industries as well as to raise production. This will ensure the
protection and fair price of handicraft products and employment of a huge number of
unemployed people. In order to create further employment opportunities beyond the handicraft
sector, initiatives should be taken to set up small, medium and large industries across the
country. If these types of industries are set up in a planned way, then unemployment rates will
decline, and poverty alleviation will be accelerated. With these objectives in mind, the Industrial
Policy has been radically reshaped.

To' further strengthen the country's industrialization process, the present" government has
identified the Small and Medium Enterprises (SMEs) as a priority sector and as the driving force
for the handicraft industry.

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Example:

 Tax Policy: The tax policies set by the government can significantly impact businesses.
High or low tax rates, tax incentives, and changes in tax regulations can affect the
financial health of organizations.
 Environmental Regulations: Government regulations related to the environment, such
as emission standards or waste disposal requirements, can impact how a business
operates. Compliance with these regulations is crucial for sustainability.
 Trade Restrictions and Reform: Policies related to international trade, tariffs, and trade
agreements can affect businesses engaged in global markets. Changes in trade restrictions
or reforms may create opportunities or challenges.
 Tariffs: Tariffs imposed on imports and exports can influence the cost of goods and
impact international trade. Businesses involved in global supply chains need to be aware
of tariff changes.
 Political Stability: The stability of the political environment in a country or region is
vital for business operations. Political instability, unrest, or frequent changes in
leadership can lead to uncertainties and risks.

Environmental Factors in Handicraft Development:

The use of natural materials and eco-friendly processes in crafting has become a trend in
Bangladesh, reducing carbon emissions and making handmade products more environmentally
friendly. Unlike large factories facing challenges with environmental regulations, handicraft
artisans find these regulations advantageous, giving them a competitive edge. The global focus
on sustainable development recognizes handicrafts as vital to cultural industries.

The growth of the handicraft sector is closely linked to tourism, showcasing local traditions and
becoming a symbol of destinations visited by tourists. To foster this industry, it's crucial to
understand and address both internal and external environmental factors. Compliance with these

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factors is essential for business survival, while governments can support the industry through
effective laws and regulations.

Analyzing political, economic, social, technological, and other factors using descriptive-
analytical methods reveals that the quality and market relevance of handicrafts determine their
success in domestic and international markets. Factors such as the nature of the handicraft,
skilled labor, investment, technology, infrastructure, and production site distribution are key
considerations. Improving the business environment, adopting new technologies, and
encouraging private sector investment can enhance the competitiveness and development of the
handicraft industry on a global scale.

Example:

Handicrafts, such as handwoven organic cotton textiles, exemplify environmentally friendly

practices. Crafted with sustainable materials like organic cotton, these items demonstrate a
commitment to reducing the environmental impact compared to conventional production
methods. Handicrafts also contribute to waste reduction through precise craftsmanship,
minimizing scraps. The use of manual labor and traditional techniques enhances energy
efficiency by avoiding reliance on energy-intensive machinery. Moreover, the support for local
economies and the creation of durable products contribute to a sustainable lifestyle. Handicrafts,

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with their focus on sustainability, showcase the potential for a more eco-conscious and
environmentally friendly approach to production and consumption.

Competitive Factors:

In marketing, competitor analysis involves evaluating the strengths and weaknesses of current
and potential competitors to gain a strategic perspective on opportunities and risks. This analysis
aids in the development, implementation, monitoring, and adjustment of effective marketing
strategies. Competitor profiling consolidates essential information into a comprehensive
framework. Bangladeshi handicraft employs its unique version of competitive analysis, aligning
products to showcase both strengths and areas for improvement. Each industry brings a
distinctive approach to competitor assessment, and user experience design has specific criteria
for evaluating competitors. Bangladeshi handicraft stands out with a competitive advantage
across various sectors, showcasing superiority over rivals. Only a few countries, including
Bangladesh, can attain such a competitive edge. Major export destinations for indigenous
handicrafts include the United States, Europe, South America, Africa, and China, with the U.S.
and Europe contributing over 60% to the country's total handicraft exports. Business
competitiveness is a dynamic concept linked to a company's capacity to maintain and increase its
market share. This concept is closely tied to competitive advantage, which can take the form of
lower costs or product differentiation compared to competitors. In the case of Bangladeshi
handicraft, its competitive advantage positions it strongly in the global market, making it a
significant player in the industry.

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Example:

Better competitiveness in the handicrafts sector can translate into more consolidated and
profitable businesses, interested in growing and in exploring different ways to achieve this. In the
medium to long term, competitiveness is determined by a combination of processes which, if
managed properly, will improve the profit and growth of artisanal businesses:

 Human Resources Management: Craft businesses rely heavily on skilled workers for
quality products. The proper management of human resources is vital, given the small
size of many craft firms.
 ICT Application: The use of technology is a key driver of competitiveness. Applying
technology to production processes fosters innovation, improves productivity, and aids in
organizational and commercial advancements.
 Innovation: Quality and innovation go hand in hand. Achieving product and service
quality certifications enhances consumer loyalty and reflects a commitment to continuous
improvement.
 Internationalization: While direct sales are common, exploring foreign markets through
specialized portals and websites can broaden the reach of artisanal businesses.
 Financing: The financial health of a business influences growth possibilities. The
strategic use of external financing and its distribution play a role in shaping the business's
trajectory.
 Business and Institutional Cooperation: Collaboration with other entities becomes
essential for small craft businesses. It offers advantages like access to information,
technology, and markets, as well as sharing risks and resources.

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 PROFIT DRIVERS OF THE INDUSTRY

Profit drivers are essential factors, both internal and external, that significantly impact the
revenue and overall profitability of an industry. In the handicraft sector, several key profit drivers
influence the financial success of businesses:

 Brand Loyalty: Loyal customers are more likely to choose their favorite handicraft
brands, allowing companies to charge higher prices. Building and maintaining a strong
brand can positively impact revenue and profit margins.
 Sales Volume and Pricing: The number of sales and the pricing strategy are significant
profit drivers. If a company can maintain costs while selling a higher volume at a
premium price, it directly contributes to increased profits.
 Unique Offerings: Handicrafts often have unique and artisanal qualities. Offering
distinctive products that stand out in the market can attract a premium price, contributing
to higher profit margins.
 Market Demand: Understanding and responding to market demand is crucial. Meeting
consumer preferences and anticipating trends can lead to increased sales and revenue,
positively impacting overall profitability.
 Operational Efficiency: Efficient production processes, supply chain management, and
cost control contribute to maintaining or reducing expenses. Operational efficiency
directly affects the bottom line by optimizing resource utilization.

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 PORTER’S FIVE FORCES

Industry giants such as Aarong, Deshi-Dosh and Kay-Kraft use Porter’s five forces to determine
whether or not new products and services have the potential of a profitable venture. This theory
can be used to understand where the power lies and also identify the areas of strength, avoid
mistakes and improve upon the weakness.

Threat of new entrants: High

Bangladesh is one of the important suppliers of Handicraft to the world market. There is a huge
number of artisans who are working at a very low wage. This is why new entrants can easily
enter into the industry and lower the profitability.

 Economies of scale
Bangladeshi handicraft industry faces high threat of new entrants because of the low production
cost which results in low profitability as the willingness to pay and the price of the product
decreases. For the Handicraft industry the initial manufacturing cost is low, so low capital is
required to produce the handicraft products. So based on economies of scale new entrants don’t
have to face a large risk by entering on a large scale as they do not have to bear a significant cost.

 Access to channels of distribution and relationship

There are times when the Handicrafts’ customers look for creativity and new innovative ideas.
So, the retailers are not reluctant to carry a new manufacturer’s product and new entrant can
easily create a distribution channel. The internet has also been allowing new businesses to start
their own distribution.

 Product differentiation

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Bangladeshi Handicraft industry has a narrow product range. Therefore, new interns that come
from other countries can easily enter the handicraft industry and compete with the Bangladesh
industry.

Bangladesh Handicraft industry faces high threat of new entrants because of the low production
cost which results in low profitability. The market has more products so the willingness to pay
decreases and the companies are forced to lower the price.

Bargaining power of buyers: Very High

The bargaining power of buyers is very high in this industry. Usually, buyers purchase in large
volume with a lower cost. Because of numerous suppliers the buyers are not price sensitive,
therefore they have higher bargaining power.

 Size and concentration of buyers

The industry provides employment to over 3 million artisans including a large number of women
and people belonging to the rural area of the society. The buyers are smaller in number
comparing to the suppliers. So, for the suppliers losing one of the buyers results in a greater cost.
Thus, the Bargaining power of buyers is high.

 Undifferentiated products
As mentioned before, the product range for this industry is narrow. There are many categories
but the products are not unique even if the suppliers vary, which is the reason why the buyers are
able to bargain more.

 Lower switching costs

The costs to make the products are very low. Suppliers mostly being from rural areas cannot take
the risk to increase the prices. So, they mostly have uniform price range for every product. So,
the switching cost is also low.

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As the buyers’ bargaining power is very high it also increases the profitability by increasing the
selling price.

Bargaining power of suppliers: Low

The bargaining power of suppliers in this industry is very low. Since there are a large number of
suppliers of each essential input and the products don’t have a lot of uniqueness in them, the cost
of switching from one supplier to another is low. Moreover, retailers such as Aarong dictate the
price.

 High dependency on the industry

The artisans are employed in the handicraft production unit at the cottage level. They are paid in
a daily basis. The local suppliers mostly experience shortage of capital. As they produce the raw
materials, they are highly dependent on the industry. So, they are very price sensitive and have
low bargaining power

 High substitutes for supplier products

Abundance of easily available skilled workforce gives the buyers the advantage of easily getting
substitute products. So, the suppliers do not change the price range as they can easily be
replaced.

 Suppliers offer undifferentiated products

Due to the lack of innovation and new design of the handicraft industry in Bangladesh, the
bargaining power of the suppliers is low. So, they can create undifferentiated products and
buyers move to alternative suppliers as substitute cost is low.

Due to the bargaining power of the suppliers being very low, the probability of the industry
increases as the cost for the products is low.

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Rivalry among existing firms: Low

 Concentration
In the handicraft industry, the market is dominated by leading companies such as Aarong.
Aarong takes the market share lead by a landslide and none of the other competitors are even
close. Then there are a few other prominent companies like Hatey Bunan, Prokritee, etc. but their
promotional strategy is very weak and it becomes difficult for them to compete with the leading
companies. So, all in all the rivalry is low.

 Product Differentiation:
Most of the products from the existing brands are very similar to each other. If we
see the product of Aarong, Prokritee and Corr the jute works, it’s very difficult to
find products from different categories. This is why in Bangladesh; handicraft
products are highly priced and the companies are competing on the price.
Customers don't usually buy handicraft items on a regular basis. So, the existing
farms do not promote their handicraft products aggressively and thus, there is not
much rivalry in a huge scale.
As rivalry in the existing firms is low the probability is high. Because the prices
are high but the cost is low.

Threat of substitution: High

The threat of substitution of Bangladeshi handicraft industry is high because of substitutions

from other countries such as India, China, Malaysia and Vietnam who produce similar kinds of
handicraft products. Lack of innovation and new designs or increasing price can easily lead the
existing customers to switch to manufacturers overseas. India also has low labor cost and low
production cost so the products are priced competitively for the global market and can be placed
as alternative handicraft products replacing Bangladeshi handicraft products.

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So, if the price of the products keeps increasing the customer’s willingness to pay will decrease
along with the probability of purchase.

KEY CHALLENGES FACING THE HANDICRAFT INDUSTRY

The transition to a circular model in industries will require a significant shift in knowledge,
awareness, and engagement among market participants. The 3R principles should be applied
throughout the entire cycle of production, consumption, and resource return. Challenges include
reducing material and energy intensity, reducing toxic substances, enhancing recycling,
maximizing renewable resource use, extending product durability, and increasing service
intensity. The industry must also address waste prevention throughout the product life cycle and
minimize landfill waste. The success of this transition depends on adopting a new approach to
product design, production, and consumption. Effective waste management will significantly
influence all 3Rs by reducing virgin raw materials, reusing waste, and recycling them. However,
this depends on the initial phase of product design and development. The main challenges,
barriers, and risks related to closing the loop in the industry and transitioning to the circular
model are detailed.

 Narrow item range:

Thin item goes and an absence of new and imaginative plans reasonable for send out business
sectors have both been distinguished as significant road obstructions to Bangladeshi
craftsmanship trade development.

 Unseemly Framework and Correspondence Offices:

The industry lacks adequate communication and infrastructure facilities. Our nation's
appropriation and correspondence courses are both lacking. Deals are canceled when messages
from other countries arrive late or are promptly answered. Thus, individuals seldom show
adequate interest in buying Bangladeshi painstaking work and are believed to move their craving
to another country.

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 Lack of ability to Create in Enormous Volume:

One more trouble for the crafted works industry is the absence of ability to create gigantic
amounts. Since banks are reluctant to loan to the crafted works industry. Capital is therefore
scarce. At last, because of an absence of money, they can't produce in immense amounts.

 Refreshed data:

Entrepreneurs in the handicrafts industry must keep up with the changing interests and
preferences of customers. Notwithstanding, an absence of state-of-the-art information on moving
preferences and inclinations among worldwide clients much of as far as possible market
admittance to possibly beneficial items.

 Shortage of innovation:

Non-presentation of powerful innovation is viewed as a lack of critical for the area's solid
extension on the grounds that large volumes of assembling are out of reach without cutting edge
innovation. The absence of innovation keeps on being the essential obstruction to the business'
quick extension.

 Environmental Sustainability Concerns:

With the increasing global focus on sustainable and eco-friendly products, the lack of adherence
to environmentally friendly production practices and materials might limit market access for
Bangladeshi handicrafts.

 Intellectual Property Rights (IPR) Issues:

Protecting traditional designs and craftsmanship from piracy and unauthorized duplication is a
significant challenge, especially in the absence of robust intellectual property laws or
enforcement mechanisms.

 Skill Development and Training:

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Limited access to skill development programs and training opportunities for craftsmen inhibits
the enhancement of their techniques and expertise, impacting the quality and competitiveness of
their products.

 Supply Chain Challenges:

Inefficient supply chain management, including difficulties in sourcing raw materials and lack of
streamlined logistics, can lead to production delays and increased costs, affecting the overall
competitiveness of Bangladeshi handicrafts.

 Limited Market Diversification:

Dependence on a few key export markets leaves Bangladeshi handicrafts vulnerable to market
fluctuations, geopolitical tensions, or economic downturns in those specific regions.

 Documentation and Compliance:

Challenges in meeting stringent documentation and compliance requirements for international

trade, including certifications, standards, and export regulations, pose barriers for exporters and
limit market access.

 Access to Technology and Innovation:

Limited access to technological advancements and innovation hubs hampers the industry's
ability to modernize production methods, diversify product offerings, and improve efficiency.

 . Fragmented Industry Structure:

Lack of cohesive industry associations or collaborative platforms often leads to fragmentation

within the sector, hindering collective efforts for market development, research, and lobbying for
policy support.

 Cultural Perceptions and Trends:

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 Changing consumer preferences and cultural perceptions of handmade goods versus mass-
produced items may impact the demand for traditional handicrafts, requiring continuous
adaptation and marketing strategies.

 Inadequate Government Support and Policies:

Insufficient government incentives, subsidies, or policies specifically tailored to support the

handicrafts industry hinder its growth potential and global competitiveness.

 Currency Fluctuations and Economic Stability:

Vulnerability to currency fluctuations and economic instability can affect export

competitiveness, pricing strategies, and overall market presence of Bangladeshi handicrafts in
the global market.

 Falsely robotized item creation in created nations:

Falsely computerized item creation by contenders, for example, Chinese weaving machine
items, which rival our hand join.

 Better goods produced in other nations:

Contending nations like India, Pakistan, China, South Africa, and others produce excellent
things.

 Exchange terms:

Contending nations in some cases have preferable exchange conditions over the US.

 Advertising and correspondence bunch:

Bangladeshi handiworks are in every case generally welcomed on the overall market, as per the
showcasing and correspondence office. Because of advertising and correspondence holes, there
are a few cutoff points. Bangladeshi crafted works are as yet unexceptional with regards to
homegrown and global reach.

 Monetary imperatives:

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Because of an absence of admittance to institutional funding, painstaking work in Bangladesh
depends on wasteful supporting administrations from casual sources.

 Business venture abilities:

An apprehension about facing challenges, an absence of vision, and the ability to plan and carry
out are factors that smother the development of craftsmanship in Bangladesh.

 Quality confirmation:

The public authority has neglected to lay out a public quality strategy, reasonable help
instruments, or a public quality certificate authority. Subsequently, Bangladeshi crafted works
have attempted to keep up with the nature of their items and administrations on both the
homegrown and global business sectors.

 Contest from less expensive unfamiliar products:

Crafted works in Bangladesh are likewise compromised by savage contest from less expensive
global things from China, Taiwan, Korea, India, and Thailand.

WASTE CREATION

The current linear model of production and consumption (fast fashion) leads to enormous
quantities of waste, because clothes are discarded after being worn for a relatively short time.
There is also the issue of overproduction; only 30% of the clothing produced today is sold at the
recommended retail price, another 30% goes in the sales and 40% remains unsold or even fails to
reach the shops.
Waste can be generally divided as per its source into three main types:
 Post-industrial waste
 Pre-consumer waste
 Post-consumer waste
Post-industrial waste – a side-effect of clothing manufacture. Only 20% of clothing waste is
collected globally for reuse or recycling. The remaining 80% is landfilled or incinerated,

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 which results in a great loss of energy and raw materials. Therefore, let us try to identify the
main causes of this situation.
Pre-consumer waste – inferior quality garments at the manufacturing site or a retailer’s
distribution center, unsold merchandise at the retail store.
Post-consumer waste – generated by consumers themselves: worn out, damaged or
unwanted clothing.
The key challenge in handling the three types of waste is to reduce their amounts and to
minimize waste that is now being incinerated or landfilled. Most of the countries managed to
reduce their waste levels from 2004. The problem that wastes poses today lies not only in the
number of its streams, but also how it is treated. The typical end-of-life options for handicraft
products are the following:
 reuse (repair, resale)
 recycling (high value recycling, up-cycling, down-cycling)
 incineration (without energy recovery, with thermal energy generation), and
 landfill disposal

DETERMINANTS OF THE EFFECTIVENESS AND ECONOMIC VIABILITY OF

RECYCLING

The effectiveness and economic viability of recycling within the handicraft sector in Bangladesh
can be influenced by several determinants:

Raw Material Availability: The availability of suitable raw materials for recycling directly
impacts its viability. For instance, the availability of discarded textiles or materials like jute,
paper, or wood in abundance can make recycling economically feasible.

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 Technological Advancements: Efficient recycling technologies and processes can
significantly impact the economic viability of recycling. Improved machinery or innovative
methods for recycling various materials can lower production costs and increase efficiency.

1. Market Demand and Trends: The demand for recycled handicraft products both
domestically and internationally is crucial. Understanding market trends and consumer
preferences for eco-friendly or recycled goods can determine the success of recycled
handicrafts.

2. Cost-Benefit Analysis: Conducting a thorough cost-benefit analysis is essential. Factors

such as initial investment, operational costs, labor, and potential revenue from selling
recycled products should be considered to ascertain economic viability.

3. Skill Enhancement and Training: Providing training to artisans in new recycling

techniques and innovative designs can improve the effectiveness of recycling. Enhanced
skills can lead to better-quality products, attracting more buyers and improving economic
viability.

4. Infrastructure and Access to Resources: Availability of proper infrastructure for

collecting, sorting, and processing recyclable materials is crucial. Moreover, easy access to
these materials without excessive transportation costs can influence economic viability.

5. Environmental Awareness and Sustainability: Growing global awareness about

environmental conservation and sustainable practices creates a demand for recycled products.
Aligning with eco-friendly initiatives can positively impact the marketability and
effectiveness of recycled handicrafts.

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6. Collaboration and Networking: Collaborations with NGOs, industry partners, or
international organizations can provide opportunities for knowledge sharing, access to
markets, and resources, boosting the effectiveness and economic viability of recycling in the
handicraft sector.

PRODUCT DESIGN AND DEVELOPMENT

In the circular economy, product performance (determined by its durability, recyclability and
reparability) will be defined as early as the design stage. Decisions being made then will
influence all the subsequent phases of a garment’s life-cycle (from the specification of raw
materials and the selection of dyes, solvents, finishing processes, garment construction,
accessories, and labelling methods to the disposal of the garment by the consumer), thus
determining the range of end-of-life options In trying to achieve this, they will have to
solve a sort of problem although many fibers and fiber blends present in finished products
cannot be effectively separated for recycling unless complex processes are applied, they
cannot be given up because they give fabric qualities appreciated by consumers, such
as softness, breathability, ease of care, comfort, appearance, drape, handle, color
fastness, functionality and so on. A case in point is the blend of cotton and polyester. It is
inexpensive for clothing manufacturers and offers consumers the desirable performance and care
features (breathability and softness of cotton is enhanced by polyester properties such as color
stability and resistance to abrasion and repeated washings), but recycling it is a challenging task.
This inevitably implies that the circular economy will need new design philosophies and
interdisciplinary teams capable of coming up with circular, resource-efficient solutions
acceptable for customers.

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 DISPOSAL PRACTICES AND RECYCLING TECHNOLOGIES

Another crucial and challenging stage in the development of a circular system is finding an
answer to the question about how waste should be collected and sorted. For the process to be
successful, recovery and reprocessing infrastructure is necessary, as well as effective
communication across the supply chain. As it seems, closing the loop in every industry is
hindered by three main types of barriers-

• Consumer disposal practices – behaviors and education

• Producer disposal practices and possibilities – infrastructure and processes for waste collection
and sorting

• recycling technologies – operable in practice

A lack of up-scaled efficiency in collecting and sorting waste is also a problem. Due to this, low-
quality materials and blends dominate in the recycling market and puts a strain on the
commercially viable recycling technologies for low-grade industries and blends. As a result, only
15 to around 20% of all industries including handicraft industry (depending on the region) go to
recycling, while the rest of it is landfilled or incinerated. The rate for reused or recycled clothing
is only 18%, which is even worse.

The mainstream recycling technologies and structural solutions that could eliminate
barriers to the introduction of a global closed loop in the industry are still few. To cope with this
problem, the industry, research institutions, academia and NGOs have intensified their efforts
aimed to develop effective solutions through research projects and programs, and to introduce
new business models and technologies.

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 CONCLUSION

In conclusion, Bangladesh has a rich cultural heritage, and handicrafts play a significant role in
preserving and showcasing this heritage. Traditional crafts such as pottery, weaving, and
embroidery have been passed down through generations. The handicraft sector contributes to the
country's economy by providing employment opportunities, especially in rural areas where many
artisans are engaged in various craft activities. Some of the notable traditional crafts in
Bangladesh include Nakshi Kantha Jamdani and Muslin textiles, pottery, jute products, and
more. These crafts often carry cultural significance and have a unique aesthetic appeal. The
government of Bangladesh has taken initiatives to promote and support the handicraft sector.
This includes organizing fairs, providing training to artisans, and facilitating market access.
Some Bangladeshi handicrafts have gained recognition in the international market. However,
there is still room for improvement in terms of marketing strategies, quality control, and meeting
global standard The handicraft sector often empowers women in rural areas, as many craft
activities are traditionally carried out by women. This can contribute to women's economic
independence and social well-being. There is an increasing focus on sustainability and
environmentally friendly practices in the handicraft sector. Artisans are exploring ways to
incorporate eco-friendly materials and processes into their crafts. The handicraft sector in
Bangladesh is an integral part of the country's cultural identity and has the potential for economic
development. However, addressing challenges such as market access, modernization, and quality
control is crucial for ensuring the sustainability and growth of this sector. Ongoing government
support and international recognition can further enhance the prospects of Bangladeshi
handicrafts on the global stage.

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 REFERENCES

Handicrafts -Banglapedia
Handicrafts boom in pandemic - The Business Post(businesspostbd.com)
Handicraft -Wikipedia
Prospect of handicrafts in Bangladesh - The Business Post(businesspostbd.com)
Handicraft Industry in Bangladesh(slideshare.net)
Textile Handicrafts and its Prospect in Bangladesh(textiletoday.com.bd)
Comparative advantage -Wikipedia
Handicrafts inBangladesh
https://www.6wresearch.com/industry-report/bangladesh-handicrafts-market-2020-2026
https://www.tbsnews.net/economy/trade/handicraft-business-thrives-pandemic-206929

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