Value Chain Analysis

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 Term Paper
On
Akij Biri Factory Limited

Submitted to:
Shawkat Kamal

Assistant Professor

BRAC Business School

BRAC University

Submitted by:

Arafat Mizan (07104081)

Kanij Sharmin (07104082)

Nazdia Sarwar (07104094)

Razia Sultana (07104089)

Sec - 01

Date of Submission: 30th November, 2010

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 Letter of Transmittal

November 30, 2010

Shawkat Kamal
Course Instructor
MGT- 401, Business Strategy

Subject: Submission of Term Paper

Dear Sir,

This is our pleasure to present our “Business Strategy” report entitled “AKIJ BIRI”.

This is a popular brand of “AKIJ Group” which is manufacture handmade bidi. The purpose of
this report was for us to analyze the value chain activities of the company. Here we have
gathered information through the actual interviews from the Assistant Manager of the
organization. We truthfully hope that our study will help to give the idea how a company does
value chain activities in the real world. We are thankful to you for your guidance, suggestions,
and constructive criticisms during the preparation of this report that only impelled us further into
excelling.

We will always be available for any supplementary interpretation or clarification that you may
require. We sincerely hope that this project will live up to your expectation.

Yours Sincerely,

Arafat Mizan

Kanij Sharmin

Razia Sultana

Nazdia Sarwar

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 Acknowledgement

One individual without the help of others can do no work. In every step of this study, many
individuals and institutional experts supported us. It gives us an immense pleasure to
acknowledge them with our gratitude.

We would like to acknowledge our respected Lecturer, Shawkat Kamal, BRAC Business
School, BRAC University. His sincere guidance, untiring cooperation, valuable advice and
endless inspiration enabled us to overcome all the quandaries that cropped up during the
preparation of our report.

This report is on the study of value chain activities of “AKIJ BIRI”. We also take this
opportunity to thank Rashed Rafiuddin, Assistent Manager (Marketing) and Bejoy Kumar
Saha, Senior Officer (Research) of Akij Biri Factory Limited for giving us the necessary
information related to our report. That’s why we again thank them to give us such an
opportunity.

At the end of our acknowledgements we want to give heartiest thanks to our group members
without whom this team effort cannot be successful.

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 Table of Content

Contents Page Number

i) Executive Summary
1.1 Introduction 07

1.2 Objective 07

1.3 Methodology 07

1.4 Limitation 08

2.0 Company Overview 09

3.0 Competitor Analysis 10

4.0 Value Chain Analysis 12

4.1 Primary Activities 12

4.1.1 Chapter 1: Supply Chain Management 14

4.1.2 Chapter 2: Production 16

4.1.3 Chapter 3: Distribution 20

4.1.4 Chapter 4: Sales & Marketing 22

4.1.5 Service 22

4.1.6 Cahpter 5: Labor Management 25

4.2 Chapter 6: Support Activities 27

6.0 Recommendation 28

7.0 Conclusion 28

8.0 Appendix 29

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 Executive Summary

The report is on the value chain process of Akij biri, which is a well known product of Akij
group. We tried to cover every part of value chain analysis of Akij Biri including primary and
support activities. They are leading the bidi market of Bangladesh by their 45% of total market
share. The supply chain management process is ensuring the product availability and maintaining
the quality of the product. Their distribution channel is also very strong all over the country
which is their important competitive advantage than other bidi brands. As this business is labor
oriented we focus on the facilities, working environment for the workers. In the supporting
activities part we discussed about their research and development department, human resource
department and the general administration. After completing the report we suggest some
recommendations and strategies which can be beneficial for Akij Biri.

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1.0 Introduction:

Bidi smoking is a popular habit in Bangladesh, especially in rural areas and among the urban
poor. Bidi is a popular sold item in Bangladesh. It is traditionally offered in public places such as
bazaars or tea-stalls. It is the cheapest substitute for a cigarette and is generally available in filter
less form in Bangladesh. Among several bidi brands Akij Biri is one of the popular brands of
manufacturing bidi in this country. Akij Biri has several products under its name in the market
for the consumers like handmade cigarette and tobacco which are popular to almost everyone
since a long period of time. Akij Biri covers a wide range of market in urban and rural area of the
country.

The value chain process includes strategic decision making situation at different stages. Several
strategies are made and executed to gain sustainable competitive advantage, to gain significant
market share and ultimately to gain profit. Value chain analysis is one key tool to analyze how
efficiently one firm is managing its value adding activities and implementing strategies for
gaining competitive advantage over rivals.

This report contains the current value chain activities performed by the specific company named
“Akij Biri” states the analysis findings from different aspects.

1.1 Objectives: The objectives are as follows:

 To gather some practical knowlegde about the manufacturing process

 To be familiar with the elements of the product
 To know the value chain process
 Analysis on competitors

1.2 Methodology: We have divided our source into primary and secondary sources but we did
not use any secondary sources from their website.

We have made this report on the basis of interviews taken with Rashed Rafiuddin, Assistant
Manager (Marketing) and Bejoy Saha, Senior Officer( Research) at the head office of Akij
Group in Akij Chamber, Motijheel Dhaka.

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We have visited their office two times. We had a chat over phone with Rashed Rafiuddin and he
gave us an appointment on 4th Novebmer, at 3 p.m. Our four members went to their office. We
asked him several question about value chain process. He talked with us for 2 hours and gave us
necessary infomation about value chain activities.

On 11th November, 2010 we again visited their office as we needed some pictures and more
information regarding their distribution channel. There Mr. Rafiuddin introduced us with Senior
Officer Bejoy Kumar Saha. After introduction period had ended they provided some documents
and pictures.

On 26th November, at 11:30 pm we started for Rangpur by bus to visit the factory of Akij Biri.
We reached there at 5:30 am and went to our relative’s house for refreshment. After that at 11:00
am we started to visit Bengal Biri in Haragas as we did not get the permission to visit the Akij
Biri factory. We went there by microbus. After visiting the Bengal Biri we decided to take a
chance to visit Akij Biri factory which is in Mithapukur. Initially we got the permission to enter
into the factory but did not get the permission to take any pictures or videos. After visiting the
Akij Biri factory we came back at Rangpur city and stayed a night there. Next morning we
started our journey towards Dhaka at 8:00 am and reached at 3:00 pm. The visit help us to make
our report on the basis of real scenario.

1.3 Limitation:

 As we did not get the permission to take any pictures or video of the production process
so we use the Bengal Biri’s production process video as the process is same.
 The company maintained secrecy to provide information so in the report there can be
some lackings.

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2.0 Company Overview

History of Akij Group:

History of Akij Group stretches back to later part in 1940. Akij Group is one of largest and
fastest growing companies in Bangladesh. It is a family oriented business. The founder of “Akij
Group” Late Sheikh Akijuddin, first started his business with jute trading. Later on beside this
they started bidi business. It is now one of the most successful companies in terms of
proffesionalism and management excellences the main business objectives are to provide quality
products, fair and competitive price total customer satisfaction.Now it has number of companies
under one umbrella like cigarettes, handmade cigarettes, printing & packaging, textiles, hard
board, pharmaceutical, leather processing, footwear, cement, food & beverage and real-estate
business are in operation, catering jobs for more than 100,000 people in various categories.

Akij Biri Factory Limited: Those who smoke bidis “Akij Biri” is a very familiar brand to them.
Akij went into manufacturing handmade bidi in 1948. They established “Akij Biri Factory Ltd”
in 1980. Now Akij Biri has eight bidi making factories in all over the country. It is the leading
bidi manufacturing company in Bangladesh. Among the several units of Akij Group Akij Biri is
one of the vital sectors of the group. The product is distributed under strong distribution system.
For that reason, the company has a large number of satisfied and loyal customers with strong
brand image. This sector gave a real boost to the revenue earning of the group as well as making
a substantial contribution to government exchequer.

Product Line

On 10/10/2010 Akij Biri extended their product line by introducing Akij King. Previuosly there
were not any filtered bidis being produced but in this case, Akij Biri has introduced their new
product known as Akij King which contains filter in bidis. Filter helps to reduce the harmfulness
of biri.

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What is Bidi?

Bidi is a small roll of dried TOBACCO leaf. Bidi is the cheapest substitute of cigarette and is
generally available in filter less form in Bangladesh. It is a crude form of smoking, smaller than a
cigarette in size, home-made, and consists of about 0.5 g of raw, dried and crushed tobacco
flakes, hand-rolled in a dried leaf of or white paper.

At past bidi was wrapped in a leaf and that bidi was called “Patar Bidi”. The leaf by which bidi
was wrapped into is called “Tendu leaf”. After Mujib government importing tendu leaf was
banned. After that Akij Biri started to make paper made bidi.

Figure: Patar Bidi

3.0 Competitor Analysis:

Bidi is a large industry in Bangladesh. There are many brands who are manufacturing bidis like
Aziz Biri, Abul Biri, Bengal Biri, Momotaz Biri, Raja Biri etc. At present, Akij Biri is not
considering any bidi brands as their competitors. As Akij Biri is the market leader and they have
the 45% share of the market on the basis of market survey, revenue board, internal report,
random sampling etc. So it means that the other bidi brands are not that position to compete with
them. They are mainly considering cigarette brands as their competitors. Their dominant regions
are Tangail, Mymensingh, and Kushtia including other district of the southern part of
Bangladesh.

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As Akij Biri does not consider any other bidi brands as their competitors but we think they have
many competitors. But the distribution channel of other bidi brands is not so strong like Akij
Biri. So Akij is leading the bidi market.

Figure: Different brands of bidis in Bangladesh

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A company’s value chain is consists of two broad categories of activities. These are:

• Primary activities
• Support activities
Our selected company Akij Biri is a manufacturing company and also perform value chain activities to
ensure the best quality for the product. The value chain activities that is maintaining by Akij Biri is shown
in the below by a diagram.

4.1 Primary Activities:

Figure: Primary activities of Akij Biri

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4.1.1 Supply Chain Management:

To be succesful, a company needs an effective supply chain management. The whole function of
Akij Biri is rely on supply chain management system. Firstly, Akij collects raw materials from
different suppliers for their bidi production. Their main market from where they collect tobacco
is Rangpur. After collecting the tobacco they usually preserve it for 6 months to 1 year. But in
the meanwhile the storage place of tobacco has to be changed at 1 week interval. This is because
storing the tobacco in one place for long causes to lit up fire due to the heat build up inside the
stack of stored tobacco. It is not possible to use new fresh tobacco for making bidi because the
more day’s tobaccos are persevered; the taste of tobacco will be better and can make good
quality bidis. When the market demand is high, than the tobacco will be preserved for six
months. Akij do not have any specific suppliers from where they accumulate raw materials. They
choose suppliers according to the market demand, availability of raw materials, quality of the
tobacco and low price etc. Akij Biri always tries to produce better qualityproduct and also ensure
the standard of the product. The objective behind the management efforts are:

• Ensuring the product availability

• Maintain the quality of the product

Raw materials: Tobacco, jaggery, small amount of chemical

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4.1.2 Production: The production process of Akij Biri is purely labor based. Almost every steps
of production is done by human hands. They use three different machines for drying, cutting,
crashing and mixing and rest of the process is done by manually. The basic steps in
manufacturing of Akij Biri are generally as follows-

• Sun cure
• Washing
• Re dry
• Crashing
• Mixing of different ingredients
• Making paper tube
• Packaging
Sun cure: After collecting the tobacco from the farmers, the tobacco is dried in sun. It is the
natural process of drying tobacco. When the farmers collect the tobacco, the tobacco is full of
dirt. The purpose of drying tobaccos in sun light is to ensure that raw tobaccos become dust free.
Labors carry those tobaccos and spread it in the clean space. This process is called sun cure.

Washing: After sun cure, they wash the tobacco in water so that tobaccos get divest of dust.

Re dry: When the tobacco are cleaned tobaccos than again re dried under the sun. The objective
behind this step is to make sure that the tobaccos contain possibly least percentage of moisture.
The process of re dry is the same process of sun cure.

Crashing: In crashing part the tobaccos are cut into small pieces which are done by a machine.

Mixing: When the tobaccos are into pieces it is mix with some ingredients. Such as: jaggery and
a very small percent of chemicals. This process is called blending. They add jaggery and
chemicals to give a taste of sweetness.

Paper Tube: After adding together different ingredients the mixture is ready to put into the
paper tube. They purchase the paper from different suppliers. Workers make the paper tube by
hand and use a belt to wrap it around the bundle of 1000 tubes. They spread the tobacco over the
tubes and jerk the whole set of bundle. They jerk the bundle for 2-3 times and when the tubes are
filled with tobacco, they close the end of the tube. Then it is send to the factories. In the appendix

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the Figure 1 shows the manufacturing process of Akij Biri. In the following diagram shows each
steps of the labor in the production process:

Tobacco Tobacco Crashing and Putting the

drying cutting into mixing mixture into
pieces paper tube

Closing the Putting 25 bidi Closing the Wrapping the

end of the sticks in a packet with plastic with
tube plastic packet heat paper

Tied up the
packet with a
ribbon

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 Picture: The process of making bidi

Packaging: The last part of the production is packaging. The packet is color printed paper. They
purchase the paper from diferrent suppliers according to the level of cost. They collect the ribbon
from treasury of the Bangladesh government which they are used to tied up the packet. In each
packet there are 25 sticks. Total 20 packets makes one outer. For distribution, one carton
contains 500 outers (10,000 sticks).

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4.1.3 Distribution: Akij Biri has its own strong distribution channel. The product is available
throughout the country with the help of an organized distribution channel. The product is
manufactured at 8 different factories throughout the Bangladesh. The factories are in Rangpur,
Jessore, Bagerhat, two in Pabna, two in Lalmonirhat and Ishurdi.

Sales Centre: The finished product is then delivered to the sales centers of Akij Biri. Akij Biri
has in total of 12 sales centres in Bangladesh. These are in Dhaka, Mymensingh, Brahmanbaria,
Sylhet, Comilla, Chittagong, Faridpur, Rajshahi, Rangpur, Bogra, Khulna and Jessore. The
products are delivered by using their own transport such as tracks.

Distribution Point: The Company has divided the whole area of the country into 200 territories
and each of them having a single distribution point. The products are thus thereafter transported
to these distribution points. In this case also they use their own transport to deliver the goods.

Retail Outlet: At this stage the products are then distributed to 700,000 retail outlets throughout
Bangladesh from these distribution points. To deliver the goods to the outlets the company
planned 7,000 different routes so that each route is planned to deliver at 100 retail outlets. There
is a sales person for each of these 7,000 routes. There are 500 zone in-charges to monitor the
distribution process in the routes. So that for 14 routes there is one zone in-charge. In this stage
the transport is not provided by the company. The type of transport is depended on the route and
the distribution points are responsible to arrange for the transports to deliver the products to the
retail outlets. In the appendix Figure 2 shows the whole distribution procedure.

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4.1.4 Sales and Marketing:

As Akij Biri is only for a certain group of customers, right marketing efforts are needed to
capture profit.

• The target market of Akij Biri is low socioeconomic group. They mainly target aged
between 18-60 years, from both urban and rural areas.

• In our country it is banned to advertise any kind of tobacco product. There are some
rules and regulation which protest to show any tobacco advertising in television,
newspaper or any outlets. Due to government restriction Akij Biri cannot use any kind of
media to promote their product. Only the retailer can place an 8.5/5.5 printed
advertisement in their store, but they cannot convince the customer to purchase.

4.1.5 Services: No after sales services are provided by the company.

The reason behind continuing bidi business of Akij group:

As Akij Biri is a big company and many people are working in this company so always they
have to think about their workers. Many people are working with Akij Biri. At earlier period it
was a very small business. But now the business has expanded a lot and they also add many
different industries in their business. They earn a lot of profit from different industries of their
business. The profit that comes from Akij Biri is 10%. They can easily close down this business
and can invest the money in other sectors. But the only reason they still continue this business is
due to the affection for the poor people. Every bidi factory of Akij group is situated in
underprivileged rural areas. Almost all the poor people who are living in the surrounding villages
of these factories have to depend only on the bidi factories for their living. If Akij group close
down this bidi business almost all the people of those areas will have to starve and go through
many other suffering. Although Akij biri factory is producing one of the most harmful products
for human life but at the same time they are also providing jobs for a large poor population of
Bangladesh. For this reason they still continue this business.

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Although they said that they are earning a small amount of profit from Akij Biri which is 10%
but we think the percentage is higher and they are earning a huge amount of profit from Akij
Biri. As we have visited one of their factories we have seen that the condition of the factory is
very developed. They also maintain fair wages of their workers which other bidi brands are not
maintaining. They also introduce a new bidi with filter which is Akij King. We think without
huge amount of profit it is not possible to maintain all these things and lead the market.

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Labor Management:

All Akij Biri factories are situated in very rural area. Most of the people of that area are directly
or indirectly related to the production of bidi. Management of Akij Biri is very concerned about
their worker. Child labor is strictly prohibited in those factories but sometimes the children
voluntarily help their mother or father during their leisure time. According to the payment
scheme imposed by the Bangladesh government the company pays their workers at least TK105
per day. The payment can also vary up to TK150 to TK180 depending on the productivity of the
workers. Besides this they also give various facilities to their worker such as:

• Working environment: Usually tobacco factory is harmful for both the workers and the
environment. But Akij Biri is highly concerned with the associated harmful effects of
their tobacco production. Each of the factories is built over a large area. Inside the factory
there is enough working space for the workers so that they can work comfortably. The
management of Akij Biri planted a large number of trees inside the factory area. They
also dug ponds within the factory area to increase the natural beauty inside the factory.
These ponds also help them to collect water if there are any fire incidents.

• Grocery shop: Akij Biri set up their own grocery shops inside their each factory. From
these grocery shops the workers can buy their daily necessary commodities at a very low
price compared to the general market.

• Education facilities: They give financial support to those workers who have school
going children at their home. Most of the workers cannot afford their children’s
educational expenses hence this is an appreciable support provided by the company.

• Medical facilities: They also give medical facility to their workers. The facility includes
bearing all the expenses of the worker’s health care and medicines if they cannot afford.
The company is also bound to take the responsibilities for any major casualties occurred
due to an accident within the factory.

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4.2 Support Activities:

There are different departments which provide support to the value chain activities such as
Research and Development, HR department.

Research and Development (R&D): The main task of R&D department is divided in two types.
One is market research and another is product development. In market research they analyze the
demand of the product, competitor’s product etc. In product development they analyze their
product. In this case they cannot improve their product because any change in product
development will create cost. So price will be high. But if price will high consumers will switch
to substitute products. But recently they are thinking to change their packaging because same
packaging style is continued from the beginning of their business. On the other hand, it will risky
to change their packaging style. They are also worried about how their consumers will react.

Human Resource Department: Since Akij Biri is a labor intensive company it means that they
are much concern about human resource. There are numerous people who are working under
Akij Biri and these human resources are managed by Human Resource Department. The main
function of human resource department is to recruit people, supervise workers, work for
wellbeing of the employee and to think about the safety and happiness of the workers. They have
one supervisor to control 20 workers.

General Administration: On the top of the organization they have chairman. Beneath chairman
they have a managing director. There are two directors who are working under the managing
director. Akij Biri has several departments such as marketing department, audit department,
account department, transport department, finance department, purchase department etc. In each
department they have an individual head of the department. In the following there is a diagram
which shows the hierarchy of the organization.

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 Chairman

Managing Director

Director

Head of the Department

5. SWOT Matrix: After completing the value chain analysis, we found several strength,
opportunity, strength and threat of Akij Biri. By analyzing these, we have come up with some
strategies which can be beneficial for Akij Biri. In Figure 3 in the appendix we have discussed
this in details.

6. Recommendation:

• They should follow backward integration to produce the packet by their own. This will
minimize the risk of dependency on others.

• They should reduce the amount of nicotine in their product.

• They can give incentives such as Eid bonus, Pooja bonus etc. to their workers.

7. Conclusion: Through the appropriate value chain activities, both primary and supporting, the
company is leading in the bidi industry. Although they claim that they are not earning huge profit
from bidi industry but we think they earn a big amount of profit. At the same time it helps a huge
number of unemployed poor people in rural areas to earn their living. With a well structured
distribution channel the company is ensuring the availability of the product to the consumers of
all areas of the country.

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8. Appendix:

Sun Cure Washing Re Dry

Tobacco is mixed Tobaccos are cut

with different into small pieces
ingredients

Making Mixing Crashing

Paper Tube

Fill with mixture and close the

end of the tube and send to
distribution centre

Packaging Distribution

Figure 1: Manufacturing Process of Akij Biri

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 Factory Raw materials
send to the 8
factories

They send the

finished goods to
sales centre by their

Sales They have 12

sales centres
Centre

There are 200

Distribution
distribution Point
points in

Retail All together they

have seven lakh
small retail outlets
Outlets

Figure 2: Distribution process of Akij Biri

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 Strength Weakness
S1:Product quality W1: No product development
S2: Production is extremely cost effective W2: Cannot reach to higher and middle level of
S3: Low price income customers
S4: Product availability W3: Packaging
S5: Huge number of loyal customers W4 Hazard product
W5: Following strict procedures

Opportunity
O1: Vast number of potential customer
Threat
T1: Government tax
T2: Decreasing cultivation land day by day
T3: Cigarette
T4: Crisis of raw materials
T5: Restrictions on promotional activities
T6: Social and religious pressure

Figure 3: SWOT Matrix

SWOT Matrix
(S3, O1): Fix the price to attract potential customer

(S5, W1): Justify no product development with low price

(W5, T6): Validate strict procedure to reduce social pressure

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