report on rmg industry in bangladesh

RMG Sector In Bangladesh| 1

“Analysis of RMG Industry, Bangladesh”

Independent University, Bangladesh

Submitted to

Dr. Nazmul Amin Majumdar

Faculty of Strategic Management (MBA 550, Section-02)

School of Business

Independent University, Bangladesh

Submitted by

Farabi Ahmed

ID: 121-121-8

Date of Submission: 3rd December, 2014


Letter of Transmittal

3rd

December, 2014.

Dr. Nazmul Amin Majumdar

Strategic Management (Sec-02)

Faculty Member of School of Business,

Independent University Bangladesh.

Subject: A report on Bangladesh Ready Mate Garments Industry Analysis.

Dear Sir,

With due respect, I would like to inform you that I have completed the Strategic Management

report on “Bangladesh Ready Mate Garments Industry Analysis”. It is immense pleasure for me

because I have successfully completed this report by receiving your continues guideline as a

supervisor.

I have endeavored to prepare this report from my level of best to accumulate relevant &

insightful information. If I am included any wrong information in unconsciously so please

forgive me as your student. It is a great experience for me to make this report. I have tried to

make the report comprehensively within the schedule time & limited recourse.

You‟re sincerely

Farabi Ahmed

ID: 121-121-8


Acknowledgement

The ideal way to commence documenting this project would be to extend me profound gratitude

to Almighty Allah and all those great minds that have touched this project in the path of its

success, encouraged me and guided me .This Report has proved to be a wonderful opportunity to

know about a particular industry. It was fortunate for me to do this project under the guidance of

Dr. Nazmul Amin Majumdar. I shall remain indebted to him for his assistance and sustained

encouragement throughout the semester. His practical insight and valuable support from the

beginning was extremely obliging to me. Last but not the least; I would like to thank my

respected teacher for helping me in this assignment without which the project would not have

been accomplished successfully.


Executive Summary

This is strategic management report on Bangladesh garments industry. The main objective

of the report is to know briefly about the readymade garments industry of Bangladesh, to know

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 very much locative in terms

of the external and internal environment analysis but after the RANA PLAZA 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 possesses the ultimate

weapon of cheap labour and thus at times, it has to use it to substitute opportunities from its

competitors.

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 labours go on strike all on a sudden and

creates unrest in the factory.

The RMG industry is the only multi-billion-dollar manufacturing and export industry in

Bangladesh. Whereas the industry contributed only 0.001 per cent to the country‟s total export

earnings in 1976, its share increased to about 75 per cent of those earnings in 2005. Bangladesh

exported garments worth the equivalent of $6.9 billion in 2005, which was about 2.5 per cent of

the global total value ($276 billion) of garment exports. The country‟s RMG industry grew by

more than 15 per cent per annum on average during the last 15 years.


Table of Contents

Subject Page No

Introduction

06

Rational of the Study

06

External Analysis of RMG Sector

1.1 Micro Environment Analysis

1.2 Five Forces Model & Competition

(Comments)

07

08

11

Internal Analysis of RMG Sector

2.1 Core Competence

2.2 SWOT Analysis

2.3 Strategy Analysis

2.4 Key Success Factors for the Industry

(Comments)

15

16

17

19

21

Conclusion

22

Recommendations

22

Reference

25


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. RMG‟s 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 country‟s

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.

External Analysis of RMG sector

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:

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 industry‟s 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 RMG industry, 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

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.

A PEST Analysis can help us to know about the external environment situation of a particular

industry of a country. The below analysis is the PEST analysis for the RMG industry of

Bangladesh.


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 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 2008 - 2009 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:

o Publicly Traded Company 27.5%

o Non-publicly Traded Company 37.5%

o Bank, Insurance & Financial Company 45%

o Mobile Phone Operator Company 45% If any publicly traded company declares more

than 20% dividend, 10% rebate on total tax is allowed.

Social Analysis:

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, 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.

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 Bangladesh‟s export industry would always be the

enthusiasm and the prospect of growth it provides to the stakeholders in terms of success and

prosperity. Bangladesh‟s 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 manufacturer‟s 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 possess more power than themselves. China‟s

lead and India‟s 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.

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. It‟s

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 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

government‟s 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.

Comments

Bangladesh Garments industry is very much locative in terms of the external and internal

environment analysis but after the RANA PLAZA 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 possesses the ultimate weapon of

cheap labor and thus at times, it has to use it to substitute opportunities from its competitors.

Internal Analysis of RMG Sector

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.

2.1 Core 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 in RMG

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.


2.2 SWOT Analysis

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:

o 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.


o 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.

o 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 port‟s 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.


o 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.

Comments

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.

2.3 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

Bangladesh‟s 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. 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.

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.

Comments

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 Bangladesh’s existing strengths.

2.4 Key Success Factors for the Industry:

Labor costs

Prices

Quality

Delivery time

Long business relationship with key buyers

Diversification( horizontal, vertical and other)

Comments

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.


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 PLAZA 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:

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 equipment that‟s 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.

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. They have all the latest equipment to serve their customer.


References

Annual Reports:

1. BGMEA‟s 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

report on rmg industry in bangladesh

Retail

bangladesh garments

rmg sector of bangladesh

analysis of rmg industry

overall industry

particular industry

bangladeshi industry

strategic management

internal environment