Harvard Case - Chiban Leather: Designing The Next Chapter
"Chiban Leather: Designing The Next Chapter" Harvard business case study is written by Nicole R.D. Haggerty, Jennifer Dobrowolski, Jasmyn Dossa, Michelina Aguanno, Jessica Orchin. It deals with the challenges in the field of Strategy. The case study is 6 page(s) long and it was first published on : Dec 16, 2020
At Fern Fort University, we recommend Chiban Leather pursue a multi-pronged growth strategy focusing on digital transformation, strategic partnerships, and sustainable manufacturing practices. This approach will leverage their existing strengths in craftsmanship and heritage while adapting to the evolving market demands and consumer preferences.
2. Background
Chiban Leather is a family-owned business in Bangladesh, known for its high-quality leather goods. The company faces challenges in maintaining profitability due to increased competition, rising raw material costs, and evolving consumer preferences. The case study focuses on the decision facing the third generation of the family, who must decide how to steer Chiban Leather into the future.
The main protagonists are:
- Shahriar Chiban: The current CEO, driven by a desire to preserve the family legacy and adapt to the changing market.
- Anika Chiban: Shahriar's sister, who brings a modern perspective and emphasizes the importance of digital marketing and sustainability.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong brand reputation: Chiban Leather is known for its quality and craftsmanship.
- Experienced workforce: The company has a skilled workforce with a long history of leatherworking.
- Vertical integration: Chiban Leather controls most of its production process, providing cost advantages and quality control.
- Strong family values: The Chiban family is committed to ethical practices and social responsibility.
Weaknesses:
- Limited marketing and distribution channels: The company relies heavily on traditional methods, lacking a strong online presence.
- Lack of data analytics: Limited data collection and analysis hinders strategic decision-making.
- Limited product innovation: Chiban Leather's product line is relatively traditional, lacking modern designs and functionalities.
- Dependence on local market: The company's reliance on the domestic market exposes it to economic fluctuations.
Opportunities:
- Growing global demand for luxury leather goods: The global market for premium leather products is expanding.
- E-commerce growth: Online platforms offer new opportunities for reaching wider audiences.
- Sustainable manufacturing trends: Consumers are increasingly interested in ethical and eco-friendly products.
- Partnerships with international brands: Collaborating with established brands can provide access to new markets and resources.
Threats:
- Increased competition: The leather goods market is becoming increasingly competitive, especially from emerging markets.
- Fluctuating raw material prices: Leather prices are volatile, impacting profitability.
- Economic instability: Global economic uncertainties can impact consumer spending.
- Environmental regulations: Stricter environmental regulations may increase production costs.
Porter's Five Forces:
- Threat of new entrants: High due to the relatively low barriers to entry in the leather goods market.
- Bargaining power of buyers: Moderate, as consumers have a wide range of choices and can easily switch brands.
- Bargaining power of suppliers: High, as leather prices are volatile and suppliers have strong bargaining power.
- Threat of substitutes: Moderate, as alternative materials like synthetic leather are becoming more common.
- Competitive rivalry: High, as the market is fragmented and dominated by numerous players.
Value Chain Analysis:
- Inbound logistics: Chiban Leather has strong control over its supply chain, sourcing leather directly from local tanneries.
- Operations: The company's vertical integration allows for efficient production and quality control.
- Outbound logistics: The company relies heavily on traditional distribution channels, limiting its reach.
- Marketing and sales: Chiban Leather's marketing efforts are limited, primarily relying on word-of-mouth and local retailers.
- Service: The company provides excellent customer service, but lacks a formal customer relationship management system.
Business Model Innovation:
Chiban Leather needs to adapt its business model to embrace digital transformation, sustainability, and global expansion. This includes:
- Developing an e-commerce platform: Creating an online store will expand reach and access a wider customer base.
- Investing in data analytics: Collecting and analyzing data on customer preferences, trends, and market dynamics will inform strategic decisions.
- Developing new product lines: Introducing innovative designs and incorporating sustainable materials will attract a wider customer base.
- Exploring strategic partnerships: Collaborating with international brands, retailers, and designers will provide access to new markets and resources.
4. Recommendations
1. Digital Transformation:
- Develop a robust e-commerce platform: Invest in a user-friendly website and mobile app to offer a seamless online shopping experience.
- Implement data analytics tools: Track customer behavior, market trends, and competitor activity to optimize marketing strategies and product development.
- Leverage social media: Develop a strong social media presence to engage with customers, promote products, and build brand awareness.
- Invest in digital marketing campaigns: Utilize targeted online advertising, content marketing, and influencer partnerships to reach a wider audience.
2. Strategic Partnerships:
- Partner with international brands: Collaborate with established brands to co-create products, access their distribution channels, and leverage their brand recognition.
- Explore strategic alliances with retailers: Partner with online and brick-and-mortar retailers to expand distribution reach and increase brand visibility.
- Collaborate with designers and artisans: Partner with talented individuals to develop innovative product lines and tap into new design trends.
3. Sustainable Manufacturing Practices:
- Implement eco-friendly production processes: Adopt sustainable practices such as using recycled materials, reducing waste, and minimizing water and energy consumption.
- Obtain certifications for sustainable practices: Seek certifications like Leather Working Group (LWG) to demonstrate commitment to environmental responsibility and attract environmentally conscious consumers.
- Promote transparency and traceability: Provide information about the origin of leather, manufacturing processes, and environmental impact to build trust with consumers.
4. Organizational Culture:
- Foster a culture of innovation: Encourage employees to share ideas, experiment with new designs, and embrace digital tools.
- Embrace continuous learning: Invest in training programs to equip employees with the skills needed to adapt to the changing market landscape.
- Promote collaboration and communication: Encourage cross-functional collaboration and open communication to facilitate innovation and decision-making.
5. Corporate Governance:
- Implement a strong corporate governance framework: Establish clear policies and procedures for ethical business practices, risk management, and financial transparency.
- Develop a long-term strategic plan: Define clear goals, objectives, and strategies for sustainable growth and profitability.
- Ensure family succession planning: Develop a plan for the smooth transition of leadership to ensure the continuity of the business.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Chiban Leather's strengths, weaknesses, opportunities, and threats. They align with the company's core competencies in craftsmanship and heritage while addressing the evolving market demands and consumer preferences.
The recommendations are designed to:
- Enhance competitive advantage: By adopting digital transformation, strategic partnerships, and sustainable manufacturing practices, Chiban Leather can differentiate itself from competitors and attract a wider customer base.
- Increase profitability: By expanding distribution channels, leveraging data analytics, and optimizing production processes, the company can improve efficiency and reduce costs.
- Foster sustainable growth: By embracing ethical and environmentally responsible practices, Chiban Leather can build a sustainable business model that benefits both the company and society.
6. Conclusion
Chiban Leather has a strong foundation built on years of craftsmanship and family values. By embracing digital transformation, strategic partnerships, and sustainable manufacturing practices, the company can navigate the changing market landscape and secure a successful future. This approach will allow Chiban Leather to leverage its existing strengths, adapt to evolving consumer preferences, and achieve sustainable growth in the global leather goods market.
7. Discussion
Alternatives:
- Maintaining the status quo: This option would likely lead to a decline in profitability as the company struggles to keep up with competitors.
- Focusing solely on domestic market: This strategy would limit growth potential and expose the company to economic fluctuations in Bangladesh.
- Merging with a larger company: While this could provide access to resources and expertise, it could also compromise the company's independence and family values.
Risks and Key Assumptions:
- Digital transformation: The success of this strategy depends on the company's ability to adapt to new technologies and develop a strong online presence.
- Strategic partnerships: Finding the right partners and managing the relationships effectively is crucial for success.
- Sustainable manufacturing: Implementing sustainable practices can be costly and requires ongoing commitment.
Options Grid:
| Option | Advantages | Disadvantages | Risks |
|---|---|---|---|
| Digital Transformation | Increased reach, improved customer engagement, data-driven decision-making | Requires significant investment, potential for technical challenges | Failure to adapt to digital trends, cybersecurity risks |
| Strategic Partnerships | Access to new markets, resources, and expertise | Potential for conflicts of interest, dependence on partners | Partner instability, loss of control over brand identity |
| Sustainable Manufacturing | Enhanced brand image, reduced environmental impact | Higher initial costs, potential for regulatory challenges | Consumer skepticism, difficulty in sourcing sustainable materials |
8. Next Steps
- Develop a detailed digital transformation strategy: Identify specific goals, timelines, and resources required for implementing e-commerce, data analytics, and social media initiatives.
- Identify potential strategic partners: Research and evaluate potential partners based on their market reach, brand reputation, and alignment with Chiban Leather's values.
- Implement sustainable manufacturing practices: Develop a roadmap for adopting eco-friendly production processes, obtaining certifications, and promoting transparency.
- Establish a dedicated team for innovation and digital transformation: Recruit and train employees with the necessary skills to drive the company's digital transformation.
- Monitor progress and adapt the strategy as needed: Regularly review the progress of the implementation plan and make adjustments based on market feedback and performance data.
By taking these steps, Chiban Leather can successfully navigate the challenges and opportunities of the global leather goods market and ensure a prosperous future for the family business.
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Case Description
In May 2019, Chiban Leather, a socially conscious leather manufacturing firm based in Addis Ababa, Ethiopia, was undergoing an expansion and the company's chief executive officer was contemplating its strategic future. She wanted to take advantage of opportunities in the Ethiopian leather industry and expand her client base to include 10 primary wholesalers. She was proud of the social impact the company had achieved so far, and she hoped to be able to focus more on this by expanding the company's production process. She was also considering other options, including developing Chiban Leather as a retail brand, focusing on trade shows, and pursuing alternative exposure through diversified products and subscription boxes. She wondered if this was the right time to establish the brand and sell directly to clients. She also had to consider whether this option would align with her current goals and strategy.
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