Strategic Management Report

Bangladesh RMG Industry Analysis
1

Introduction:

The Ready-Made Garments (RMG) industry contributes to the Bangladesh economy in a
distinctive manner. The last 20 years witnessed unparalleled growth in this sector, which is also
the largest exporting industry in Bangladesh. It has attained a high profile in terms of foreign
exchange earnings, exports, industrialization and contribution to GDP within short span of time.
The industry plays a significant role in terms of employment generation. Nearly two million
workers are directly and more than ten million inhabitants are indirectly associated with the
industry. In addition to its economic contribution, the expansion of RMG industry has caused
noticeable changes by bringing more than 1.12 million women into the workforce. Hence it is
quite apparent that this sector has played a massive role in the economic development of the
country. RMGs contribution in terms of GDP is highly remarkable; it has reached 13 percent of
GDP which was only about 3 percent in 1991. It also plays a pivotal role to promote the
development of other key sectors of the economy like banking, insurance, shipping, hotel,
tourism, road transportation, railway container services, etc. One of the key advantages of the
RMG industry is its cheap labor force, which provides a competitive edge over its competitors.
The sector has created employment opportunities for about two million people of which 70
percent are women who mostly come from rural areas. Thus the industry helps in the countrys
social development, women empowerment and poverty alleviation. Currently RMG earns the
lion's share of foreign exchange earnings.

Rational of the Study:
The objectives of the enterprise analysis are the following.
To know briefly about the readymade garments industry of Bangladesh.
To identify the external factors which influences the readymade garments industry of
Bangladesh.
To identify the porter's five forces to know whether the industry is locative for the new
investor or not.
To identify the internal factors that influences the readymade garments.
To find out the market growth of readymade garments industry of Bangladesh.
To know the strategy that the industry is following to compete.
To identify the SWOT of readymade garments industry of Bangladesh.


2

Table- 1.1: Table showing the growth of members of BGMEA
Year No. Of members of BGMEA Year to year
% of Growth
Cumulative
Growth
1983-1984 134 100
1986-1987 629 469
1989-1990 759 121
1992-1993 1537 203
1993-1994 1839 120
1994-1995 2182 119
1995-1996 2353 107
1996-1997 2503 106
1997-1998 2726 109
1998-1999 2963 109 146.30
1999-2000 3200 108
2000-2001 3496 109
2001-2002 3618 103
2002-2003 3760 103
2003-2004 3957 105 105.60
2004-2005 4107 103
2005-2006 4220 103
2006-2007 4637 110 105.33
Source: BGMEA Annual Report, 2006- 2007
1.0 External Analysis

A business does not operate in a vacuum. It has to act and react to what happens outside
the factory and office walls. These factors that happen outside the business are known as
external factors or influences. These will affect the main internal functions of the business and
possibly the objectives of the business and its strategies. The central components of external
analysis are:

3

Industry structure: Industry is a group of organizations producing a product(s) or
providing a service(s) which is (are) close substitutes. The industry environment has a more
direct effect on the individual organization.
Strategic group mapping: The concept of strategic group mapping is a competitor
grouping using similar strategies that differ from other industry groups within an industry.
Competitor analysis: Though a business does not want competition from other
businesses, inevitably most will face a degree of competition. The factor that affects most
business is the degree of competition how fiercely other businesses compete with the products
that another business makes.
Critical success factors: An industrys key factors are those things that most affect
industry members ability to prosper in the marketplace. There are three questions to help in
identifying CSFs.
Macro environment/ General environment
There are six major macro environment factors also known as six sigma: cultural,
demographic, economic, natural, political, and technological. The Socio-cultural environment
includes institutions and other forces that affect the basic values, behaviors, and preferences of
the society-all of which have an effect on consumer marketing decisions. The demographic
environment includes the study of human populations in terms of size, density, location, age, sex,
race, occupation, and other statistical information. The economic environment consists of all
factors-such as salary levels, credit trends, and pricing patterns- that affect consumer spending
habits and purchasing power. The Global environment involves political events, global markets,
overseas financial markets, wars, political regimes, trade blocs, trade boycotts, changing cultural
patterns. The political environment includes all laws, government agencies, and lobbying groups
that influence or restrict individuals or organizations in the society. The technological
environment consists of those forces that affect the technology and which can create new
products, new markets, and new marketing opportunities.
1.1 Macro Environment Analysis of readymade garments industry of Bangladesh
In Bangladesh readymade garments industry have large market size. The Ready-Made
Garments (RMG) industry occupies a unique position in the Bangladesh economy. It is the
largest exporting industry in Bangladesh, which experienced phenomenal growth during the last
25 years. By taking advantage of an insulated market under the provision of Multi Fiber
Agreement (MFA) of GATT, it attained a high profile in terms of foreign exchange earnings,
exports, industrialization and contribution to GDP within a short span of time. The industry plays
a key role in employment generation and in the provision of income to the poor. Nearly four
million workers are directly and more than twelve million inhabitants are indirectly associated

4

with the industry. Over the past twenty five years, the number of manufacturing units has grown
from 180 to over 4000. The sector has also played a significant role in the socio-economic
development of the country.
Political analysis:

Among various features of our political situation, most noticeable and important
conditions may be identified as follows

Absence of democratic political culture
Absence the rule of law
Absence of strong civil society
Absence of strong political leadership
Confrontational politics
Corruption and terrorism

Negativity/Double standard despite of many drawbacks, our government has taken
some positive initiatives in favor of foreign investors. There are no distinctions between foreign
and domestic private investors regarding investment incentives or export and import policies.
Incentives for investors include - 100% ownership in most sectors, tax holidays, reduced import
duties on capital machinery and spares, 100% duty-free imports and tax exemptions.

Government policies for Foreign Investments:

The stated policy of the government of Bangladesh (BDG) is to pursue foreign
investment actively, and it has enacted a number of policies to this end. There are no distinctions
between foreign and domestic private investors regarding investment incentives or export and
import policies. Incentives for investors include: 100% ownership in most sectors; tax holidays;
reduced import duties on capital machinery and spares; duty-free imports for 100% exporters;
and tax exemptions.

Economic analysis:

The economy of Bangladesh RMG environment constituted by that of a developing
country. Its per capita income in 2010 was est. US$1,500 (adjusted by purchasing power parity)
significantly lower than India, Pakistan, both which are also lower than the world average
of $10,497.According to the gradation by the International Monetary Fund, Bangladesh ranked
as the 48th largest economy in the world in 2010, with a gross domestic product of
US$224.889 billion. The economy has grown at the rate of 6-7% p.a. over the past few years.
More than half of the GDP belongs to the service sector; nearly half of Bangladeshis are

5

employed in the agriculture sector, with RMG, fish, vegetables, leather and leather goods,
ceramics, rice as other important produce. The inflation rate in Bangladesh was last reported at
10.2 percent in May of 2011. The Deposit interest rate (%) in Bangladesh was reported at 9.65 in
2008, according to the World Bank. Bangladesh is considered as a developing economy because
of the GDP growth above 5% during the last few years. Microcredit has been a major driver of
economic development in Bangladesh.

Bangladesh Corporate Tax Rates:

The standard rate of corporate tax in Bangladesh is 27.5% in 2012 - 2014 tax years. This
is the standard corporate tax rate applicable to publicly traded companies in Bangladesh, a list
including tax rates for other corporations are as follows:
Publicly Traded Company 27.5%.
Non-publicly Traded Company 27.5%.
Bank, Insurance & Financial Company 45%.
Mobile Phone Operator Company 37.5% in 2011.
If any publicly traded company declares more than 20% dividend, 10% rebate on total tax
is allowed.

Social

Companies are facing the challenges of adapting effectively to the changing environment
in the context of globalization and in particular in the export sector in Bangladesh. Although
Consumer Rights Movement, enforcement of government regulations and a structured view
regarding the economic importance of Social responsibility are not yet so widespread in the
corporate world in Bangladesh, companies have gradually attaching more importance to Social
responsibility in the local market as well. They are increasingly aware that Social responsibility
can be of direct economic value. Companies can contribute to social and environmental
objectives, through integrating Social responsibility as a strategic investment into their
core business strategy, management instruments and operations. This is an investment, not a
cost, much like quality management. So, business organizations can thereby have an inclusive
financial, commercial and social approach, leading to a long term strategy minimizing risks
linked to uncertainty.

Technological

The need for faster technological development is increasingly felt in Bangladesh.
Development plans of Bangladesh have emphasized science and technological research to
develop technologies through adoption of imported technology as well as development
of indigenous technologies. As the country is heavily dependent on imported technologies,

6

proper planning is required for its effective transfer through acquisition, assimilation and
adoption. A National Science and Technology Policy has been formulated and adopted by the
Government. It has laid down the directions for S and T activities and research, institutional and
manpower development. Dissemination and documentation facilities. The National Council for
Science and Technology (NCST) determines S and T policies, reviews the activities of different
institutions and provides direction towards S and T research and activities

1.2 Five Forces Model of competition

PORTERS FIVE FORCES ANALYSIS FOR RMG INDUSTRY

A. Competitive Rivalry between Existing Players

Bangladesh is the 6th largest apparel and textile supplier in the US & EU market. It is
shaping itself as a potential market player by providing the most quality with the cheapest price
possible.

Whilst the market is controlled by the bigger players like China and India, the role
of Bangladesh is still important. Among the very few suppliers, Bangladesh imports most of its
raw materials, but utilizes other factors of production to produce in a cheaper manner. It offers
investment friendly atmosphere for the brand names to outsource their production process in
Bangladesh.

Bangladesh is putting up a show against other competitors like China and India.
by providing available cheap labor. It has been facing tremendous growth even after the
alleviation of the quota from the US market. This is due close customer relationship and quality
production. Bangladesh has this advantage against its rivals.

Bangladesh is one of those countries who cannot fulfill its quota provided by the
larger markets. As a result of that, many foreign companies are merging in to use Bangladesh as
a hub to prepare their product by outsourcing in Bangladesh and then gaining entrance to
markets which were previously unavailable to them. Bangladesh is taking advantage of this and
inviting investors, and foreign companies to place orders to attain this facility. It should focus on
placing more orders instead of making its export rates efficient and strong.


7

B. Bargaining Power of Suppliers:

Bangladesh has always been enjoying the upper hand in ordering its inputs from its
suppliers. Bangladesh has very few input or raw materials of its own. Most of them are imported.
Although this leads to a problem in reducing the opportunity to initiate backward linkage, and
thus increasing the supplier power, Bangladesh still manages to acquire the inputs at world price
from its suppliers. But the most importing aspect of Bangladeshs export industry would always
be the enthusiasm and the prospect of growth it provides to the stakeholders in terms of success
and prosperity. Bangladeshs domestic suppliers power is increasing in a slow but steady
manner as more and more local companies are stepping up to the task. They are creating an
integrated system of supply channel management by which the manufacturers work load is
reduced. Companies are more prone to order through local suppliers who themselves apply to the
task of importing raw materials and components necessary for the production process. And the
favorable attitude of the government is also helping this growth. The back to back LC process
was approved by the government to facilitate the growth of the industry.

Bangladesh has a good reputation in terms of timely payment to the suppliers. This
reputation is helping create a longer term relationship with the suppliers (foreign) and is also
giving the local firms initiative to step into the supply chain. Bangladesh gives the suppliers a
large scale advantage as the industry is quite concentrated in area basis.

A good global reputation is helping Bangladesh match the price with international
quoting with the suppliers both foreign and local ones. Suppliers although having a sort of
upper hand over Bangladesh, also regard Bangladesh as a reliable source of repayment. This
reputation has been helping Bangladesh to ensure prompt supply of raw goods.

C. Bargaining Power of Customers:

Bangladeshi manufactures realize that the buyer posses more power than themselves.
Chinas lead and Indias march to the top keep the Bangladeshi manufacturers/ suppliers on their
toes. Bangladesh is providing a large space of choice to the provider in terms of quality and cost.
It is offering the lowest possible production price and also work that is best in quality. Due to
high switching opportunities for the customers, Bangladesh has to perform or allow the
customers to win in many cases. Bangladesh plans to use cost-effectiveness to present itself as
the best option to the buyers.

The important factor here is that many of the companies in Bangladesh are either
franchises or subsidiaries. Along with them the local companies are giving Bangladesh a look of
the best outsourcing place of the lot. Many of the reputed companies, brands are outsourcing
their products in Bangladesh as they get the most quality in the cheapest price possible.

8

C. Bargaining Power of Customers

Bangladeshi manufactures realize that the buyer posses more power than themselves.
Chinas lead and Indias march to the top keep the Bangladeshi manufacturers/ suppliers on their
toes. Bangladesh is providing a large space of choice to the provider in terms of quality and cost.
It is offering the lowest possible production price and also work that is best in quality. Due to
high switching opportunities for the customers, Bangladesh has to perform or allow the
customers to win in many cases. Bangladesh plans to use cost-effectiveness to present itself as
the best option to the buyers. The important factor here is that many of the companies in
Bangladesh are either franchises or subsidiaries. Along with them the local companies are giving
Bangladesh a look of the best outsourcing place of the lot. Many of the reputed companies,
brands are outsourcing their products in Bangladesh as they get the most quality in the cheapest
price possible.

Buyers are also interested in the growth aspect of the Bangladeshi suppliers. Bangladesh
is growing as a major player in the textile and apparel industry globally and due to the quota
system it is quite an important player in the field. Bangladesh still has its quota left in the EU
market where countries like China dont have the entry. So, many countries are planning to use
Bangladesh as a hub and buy the service to export under its label. That gives Bangladesh a
comparative advantage against the buyers of its services. And due to immense quality assurance,
Bangladesh is continuing to be the best choice for many buyers in the industry

D. Threat of New Entrants

Bangladesh has yet to reach economies of scale in terms of production. Thus it
allows potential entrants to pose a threat to its growth. But again, if we just analyze the growth
of textile and RMG sector, this threat might seem negligible. Textile in Bangladesh is in growing
stage. Its growing in a rapid pace and is posing itself as an entrant to the more established
players. Thus the threat of new entrants is quite minimal to its concern.

Moreover, new entrants would have to gain an advantage against Bangladesh whose
growth ratio is almost 20% per year even after the MFA. A newer entrant would thus cause
fewer troubles to Bangladesh. The greatest advantage that Bangladesh has right now is its cheap
labor. Cheap labor would continue to be available until the living standards go up. Till that
happens, labors will have low rates in terms wages and keep Bangladesh safe from any sort of
new entrants.

One factor has to be kept in mind that, due to the unstable political scenario in recent
years, investors and foreign firms are reluctant in investing in Bangladesh. Using this

9

opportunity, countries like Sri Lanka and other small Latin American countries can steal away
potential buyers from Bangladesh.

Moreover, new entrants would have to gain an advantage against Bangladesh whose
growth ratio is almost 20% per year even after the MFA. A newer entrant would thus cause
fewer troubles to Bangladesh. The greatest advantage that Bangladesh has right now is its cheap
labor. Cheap labor would continue to be available until the living standards go up. Till that
happens, labors will have low rates in terms wages and keep Bangladesh safe from any sort of
new entrants. One factor has to be kept in mind that, due to the unstable political scenario in
recent years, investors and foreign firms are reluctant in investing in Bangladesh. Using this
opportunity, countries like Sri Lanka and other small Latin American countries can steal away
potential buyers from Bangladesh.

E. Threat of Substitutes

Bangladesh, in terms of substitutes, plays both the roles of an affected and an opportunist.
China and India are growing their customer base at a higher pace than Bangladesh. This is due to
poor country branding, and less power to influence customers. Due to these reasons, customers
sometimes prefer China or India to Bangladesh.

More to add, Bangladeshi products are being substituted due to lack of supplier power
and governments reputation. Many firms, buyers, investors are now hesitating to invest in
Bangladesh due to unstable political scenario. Thus the opportunity for Bangladesh is being
substituted to either China or India. Also, the substitute cost is not that high for buyers to switch
to a Chinese producer or even to a Sri Lankan producer.

1.3 Comment:
Bangladesh Garments industry is very much locative in terms of the external and internal
environment analysis but after the Rana plza incident everyone thought that the industry is going
to suffer and also thought that the other countries like China and India will take the benefits, due
to the lower production cost, Bangladesh plays a major role in substituting the Chinese and
Indian manufacturers. This opportunity has to be nurtured by the Bangladeshi industry to ensure
its growth and profitability. Bangladesh posses the ultimate weapon of cheap labor and thus at
times, it has to use it to substitute opportunities from its competitors.


10

2.0 Internal Analysis
Internal driving forces are those types of things, events, situations, that occur within an
organization and affect it in either a positive or negative way. Typically, the internal forces are
things that occur within the organization and are by-and-large under the control of the
organization. Example, does the organization have up to date technology that has the capacity to
hold power programs that can help the organization. Or, are they working with an old antiquated
legacy system that is slow, crashes frequently, etc. This effects the organizations day-to-day
operations. It's something that in internal and under the control of the organization. Even the
culture of the organization effects the way it operates. In other words, are the employees happy,
do they come into work energized, or do they come to work dragging themselves in because it's
Monday and doing cartwheels out the door because it's Friday. These effects the way the
organization operates in either a positive or negative way. Once again it is an internal event and
under the control of the organization.
2.1Core competencies
A core competence is the result of a specific unique set of skills or production
techniques that deliver value to the customer. Such competences empower an organization to
access a wide variety of markets. Executives should estimate the future challenges and
opportunities of the business in order to stay on top of the game in varying situations.
Core competencies are developed through the process of continuous improvements over
the period of time. To succeed in an emerging global market it is more important and required to
build core competencies rather than integration. It is important to identify core competencies
because it is difficult to retain those competencies in a price war and cost cutting environment.
Management must realize that stakeholders to core competences are an asset which can be
utilized to integrate and build the competencies. Competence building is an outcome of strategic
architecture which must be enforced by top management in order to exploit its full capacity.
Core competencies
The Ready-Made Garments (RMG) industry occupies a unique position in the
Bangladesh economy. It is the largest exporting industry in Bangladesh, which experienced
phenomenal growth during the last 25 years. By taking advantage of an insulated market under
the provision of Multi Fiber Agreement (MFA) of GATT, it attained a high profile in terms of
foreign exchange earnings, exports, industrialization and contribution to GDP within a short span
of time. The industry plays a key role in employment generation and in the provision of income
to the poor. Nearly four million workers are directly and more than twelve million inhabitants are
indirectly associated with the industry. Over the past twenty five years, the number of
manufacturing units has grown from 180 to over 4000. The sector has also played a significant
role in the socio-economic development of the country.

11

2.2 SWOT Analysis
SWOT analysis (alternately SLOT analysis) is a strategic planning method used to
evaluate the Strengths, Weaknesses/Limitations, Opportunities, and Threats involved in a project
or in a business venture. It involves specifying the objective of the business venture or project
and identifying the internal and external factors that are favorable and unfavorable to achieve
that objective.
A SWOT analysis must start with defining a desired end state or objective. A SWOT
analysis may be incorporated into the strategic planning model.
The usefulness of SWOT analysis is not limited to profit-seeking organizations. SWOT
analysis may be used in any decision-making situation when a desired end-state (objective) has
been defined. Examples include: non-profit organizations, governmental units, and individuals.
SWOT analysis may also be used in pre-crisis planning and preventive crisis management.
SWOT analysis may also be used in creating a recommendation during a viability study/survey.

SWOT ANALYSIS OF RMG INDUSTRY IN BRIEF:
Strength

Low labor cost.
Energy at comparatively lower price.
Our sample companies in Bangladesh have already created a good impression in world
market. So, the only thing to do is to improve the quality of the production according to
international standard.
In the production and operation sector, the main advantage of sample companies is low
labor cost compared to that of other countries in the world. This is the only competitive
advantage of our sample companies. Average wage per hour is the minimum in our
country in comparison to that of other countries in the world.
In the Research and Development and Engineering sector, BIFT (Bangladesh Institute of
Fashion & Technology) is a new dimension in the garment sector of Bangladesh.
Through this Institute sample companies can attract foreign customers. Because quality
of fashion designing will come out from this Institute and our sample companies will also
be benefitted from the technological development created by BIFT.


12

Weakness
We do not have enough raw material of our own, as a result we have to import raw
material from outside the country.
Our Government policies are not structured enough.
The market is not diversified enough.
Instability in law and order situation: The law and order situation is not suitable in our
country. For this reason the sample companies are in problem. The labors of the sample
companies create unrest. Sometimes they create unrest in the factory and even physically
assault the people of management. In addition to this, the political parties frequently
become involved in political agitation. Consequently, the sample companies have to
suffer.

Opportunity:
Bangladesh is included in the Least Developed Countries with which US is committed to
enhance export trade.
If skilled technicians are available to instruct, prearranged garment is an option because
labor and energy cost are inexpensive.
Foundation garments for Ladies for the FDI promise is significant because both, the
technicians and highly developed machinery are essential for better competence and
output
Japan to be observed, as conventionally they purchase handloom textiles, home furniture
and garments. This section can be encouraged and expanded with continued progress in
quality.
Chittagong port is going to be handed over to the foreign operator ,which will make the
ports service much faster, it will also reduce lead-time as well as total cost will be
decreased.77
Bangladesh is going to gain its political stability, which will make foreign trade much
smoother and will foreign buyers will be more convinced.

Threats

China is a most likely the biggest threat for Bangladesh as this country has relatively high
labor productivity and applies more capital-intensive modern technology and it has less
lead-time because of its relative advantages in getting locally available raw materials like
fabrics, various RMG accessories.
China has also relatively better infrastructural facilities like energy supply, transportation
and communication system.
Some African and Caribbean countries have enjoyed zero-tariff facility under AOA act
(Agreement On Agriculture) that helps them to be more competitive relative to
Bangladesh

13

2.3 Comment:
A close examination of the SWOT analysis reveals that the sample companies as well as
the RMG sector has threat from the Socio-economic sector , competitor sector , supplier sector,
ecological sector and customer sector. The sample companies have strength in the production
and operation sector, corporate resource and personnel sector. Since the sample companies are
private limited companies and do not provide balance sheet data we could not diagnose about the
financial health of the sample companies. However, our sample companies have shown
satisfactory performance due to distinctive competitive advantage in the personnel sector. But
there is also threat from the personnel sector because labors go on strike all on a sudden and
creates unrest in the factory.
2.4 Strategy Analysis:

Product and market diversification:

One of the major limitations to apparel export growth is the lack of diversification in
products and markets not least, as noted below the giant market of neighboring India. A
small range of products (shirts, trousers, T-shirts, sweaters, jackets) makes up 60 percent of
RMG export. Vigorous marketing and promotional drives would be needed to break into markets
for other RMG products that Bangladeshi producers can produce competitively. Since R&D and
market research to expand the product mix and public support in this area will be critical, a
comprehensive research center built on public-private partnership should be established. Its role
would be to gather and disseminate information effectively to local manufacturers on the latest
developments in products and markets, including information on fabric developments, blends,
colors, patterns, latest fashion trends and design forecasting, as well as providing customer
service to foreign buyers purchasing from Bangladesh.

Image building and brand development:

Image building and branding can achieve a high level of value addition and enhance
Bangladeshs reputation as a quality supplier of apparel. As branding is an expensive
investment, incentives and opportunities should be provided to exporters, such as through a
Brand Fund and by encouraging foreign collaboration to launch collective brand names through
corporate marketing companies. Investments in skills, design and advertising will be essential for
the Made in Bangladesh label to make its mark in the global marketplace. For this, an active
promotion campaign will be required by the industry, government, and Export Promotion
Bureau. Local and international exhibitions should be held with aggressive efforts to attract
foreign buyers. Bangladesh embassies abroad should appoint dynamic business-oriented
commercial officers whose main job will be to promote export products through direct contact
with potential buyers.

14

FDI or Joint ventures:

Bangladesh has been a reluctant recipient of FDI, at least in the RMG sector, limiting it,
until recently, to EPZ only while the domestic sector was kept off limits for foreign equity or
partnerships. Less than 15 percent of Bangladesh garment firms have foreign equity. This policy
has had one positive impact growth of indigenous entrepreneurs who are now much more
prepared to face the post-MFA challenge on their own. Although the restrictions on FDI were
finally removed in the Industrial Policy 2005, the Bangladesh RMG sector may have missed out
on certain benefits that accrue from the presence of FDI in a sector. Our survey of RMG firms
showed those with foreign equity to have productivity levels on average 20 percent higher than
those without. In addition, the survey showed positive and significant productivity spillovers.
For every 10 percent increase in the productivity level of FDI in the industry, productivity of
domestic firms increases by 1.4 percent.

2.5 Comment:
Although Bangladesh has a limited number of joint venture RMG industries, even these
can be very effective in bringing in managerial and marketing expertise. Continuous efforts
should be made by the Export Promotion Bureau and Board of Investment to ensure that the
investment climate of the future favors more FDI or joint ventures. The positive spillover effects
of FDI can make a substantial addition to Bangladeshs existing strengths.

2.6 Key Success Factors for the Industry:

Labor costs
Prices
Quality
Delivery time
Long business relationship with key buyers
Diversification( horizontal, vertical and other)

2.7 Comment:
Energy Cost New textile mills in Bangladesh are cost competitive compared to
imports from Korean and Indian spinning mills. Given the choice, domestic weavers and
spinners prefer to use locally produced yarn as prices are slightly lower and since there
is no involvement of shipping costs and delivery is more reliable.


15

Conclusion:
Till now 80% of our respondents enjoy the duty- free market access and 20% of the
respondent group enjoys GSP facilities only if local fabrics are used. 60% of the respondent
group collects order through the buying house (local buying agent) and the rest gets offer directly
through the head office situated abroad. They have no problem in collecting orders due to better
quality and low price. The respondent group believes that they have been able to cope up in
accordance with the changes in the attitude of buyers and customers. The main thing of the
report is to identify the external environment of the industry which are mainly influence the
overall industry and the internal environment in which it is discussed that what a company need
in order to compete their business in RMG sector of Bangladesh. By conducting Macro
environment analysis, Porter's Five Forces analysis I found that, Bangladesh Garments industry
is peaty much locative in terms of the external and internal environment analysis, but after the
Rana plza incident everyone thought that the industry is going to suffer and also thought that the
other countries like China and India will take the benefits, due to the lower production cost,
Bangladesh plays a major role in substituting the Chinese and Indian manufacturers. So our
government should take some initiatives to control Rana Plaza type situation so that this industry
can grow and can contribute more in our country.
Recommendations

Moreover, some steps will be taken to shorten the "lead time for export of readymade
garments by means of development of port management, simplification of goods unloading,
resolving the electricity problem and similar activities. Furthermore, assistance will be given to
improve the work environment in the readymade garments factories, to reduce risks of accident
and to fulfill the compliance requirements at the factory level. Besides, an integrated and
reasonable compliance regulation will be prepared with the help of all stakeholders;
Since, our RMG sector is facing huge competition in the world market as because of
abolition of quota system we have to go very carefully to capture the world-wide market. As a
result, we have to take some necessary steps which will be taken to send marketing missions
abroad, to organize single country textiles and readymade garments fairs, to organize and
participate in international trade fairs at home and abroad so as to expand and integrate the
markets for readymade garments.
At the end we can say that our RMG sector is doing well what is more than our
expectation. And if this flow goes on this way then we will be successful and our RMG sector
will be a great threat for other competitors in the world market. Based on the above data analysis
and findings we suggest the following strategies that RMG should follow:


16

Improve labor productivity and managerial efficiency
The labor productivity should be increased and it can be possible if the labors are
provided with a significantly decent wages and other facilities such as free medicine, bonus, and
transportation cost, they will be more motivated and their motivation will lead them to become
more productive.
Better working environment
Working environment of garments in Bangladesh is very poor. The owners should give
more attention to improve the working condition of the garments. There should be proper
ventilation system, clean sanitation, significant number of fire extinguishers, emergency exit to
ensure the safety and security of the workers.
Improving the R&D
Bangladesh garment sector does not have advanced technology and equipments thats
why they should invest more in research and development. Besides, they may buy high-tech
machines or adopt lease strategy so that they can export higher quality products.
Upgrading of Skills and Technical Expertise
Although there is an apparent abundance of labor in Bangladesh, there is insufficient
level of skill when it comes to the use of many high-speed machines used in the industry. Far too
little has been spent on training of staff with skills that are transferable across the industry. Better
skilled staff will increase the productivity of the company as well as increase in GDP. This factor
of investment in its workforce is often neglected by enterprises, which have been hampered by
short term planning.
Integration
Due to the lack of development networks among the players involved in the Bangladesh
industry and their respective markets, there is little integration within the garment industry. It is
also necessary to develop direct links with retailers in the US and EU.
Diversifying Product Range
Bangladesh has always relied on a small, medium to semi-high quality product. These
were the main categories covered by the MFA. The development of high quality products will
require an investment in technology, training and quality control.
Elimination of child labor.
The Bangladeshi industries employ many children and the garment sector is not different
from them. It is a matter of industrial reputation that will go down if they recruit child labors.

17

Recruiting child labor may also bring negative impression on the brand image of the company to
its customers.
Improvement of Quality
Quality is one of the important factors that make the customer loyal to the product. The
respondent group believes that the quality of the product is a factor that affects the sales. They
also believe that the volume of their business depends on the quality, design and the commitment
as the fashion and style changes too often. Therefore, the companies have to respond according
to their customers test.


18

References:
Annual Reports:
1. BGMEAs Annual Report, 2006-2007
2. Ministry of Commerce Bangladesh Export Policy, 2006- 2009, p. 5.
3. Ministry of Finance Bangladesh Economic Review, 2003, p. 74.
Web sites:

1. Asian market data, analysis and forecasts from Business Monitor International,
the trusted source for business information and intelligence on global emerging
markets; September 29, 2008
http://findarticles.com/p/articles/mi_qa5508/is_200106/ai_n21474192/

2. BGMEA lobbying for backward linkage industry; Retrieved September 29, 2008
http://findarticles.com/p/articles/mi_qa5508/is_200106/ai_n21474192/

3. Crabbe, The Textile and Garment Industry Sector of Bangladesh.
Retrieved May 14, 2008 from
http://www.cleanclothes.org/publications/unst9.htm

4. Green, Duncan Fashion Victims: Together we can clean up the Clothes Trade:
Web site. Retrieved May 14, 2008 from
http://www.cleanclothes.org/publications/fashvictim.htm

5. The Daily Star: BGMEA hopes to push garment export to $18b in next 3 years
Published On: 2007-10-26, and News (2003) Prospective RMG in trouble
Retrieved June 9 & 12, 2008 from
http://www.thedailystar.net/story.php?nid=8916

6. The homepage of Bangladesh Garments Manufacturer and Exporter Association:
Future of RMG. Retrieved March 15, 2007
http://bgmea.com.bd/news.htm


19

7. WTO Textiles- Back in the mainstream Information paper from the World Trade
Organization (WTO); Retrieved April 26, 2008 from
http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm4_e.htm

8. Web site: W. M. K. Trochim, (2006), Deduction & Induction: Deductive and
Inductive Thinking; Retrieved May 15, 2009 from
http://www.socialresearchmethods.net/kb/dedind.php

Strategic Management Report

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Strategic Management Report

Uploaded by

Copyright:

Available Formats

Bangladesh RMG Industry Analysis

You might also like