swot bangla
TRANSCRIPT
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EXPORT MERCHANDISING
SWOT ANALYSIS OF APPAREL EXPORT BUSINESS FOR
BANGLADESH WITH RESPECT TO INDIA
Submitted By:
Govindasamy.A
Kimjoujam Leivon
Kristy N. Shangpliang
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Malavika Pemmaya
Rosemary Jacob K.
INTRODUCTION:
Bangladesh has emerged as a new destination for apparel exports. Bangladesh has registered a
40 percent hike in its apparel exports in the last six months, with its increased exports to India
and new markets wrested from global leader China. With many importers switching from
China, Bangladesh has new destinations such as Japan, South Africa, Canada, Australia, New
Zealand and some Latin American countries.
The total exports were USD 12.19 billion against the USD 10.27 billion target. The annual
export target has been set at USD 18.5 billion for fiscal 2010-11.The sector, however, is
plagued by poor wages and working conditions that have frequently provoked workers to take
to the streets. With manufacturers exerting pressures on the government for more concessions, awage increase that the government oversaw last year is yet to be fully enforced. The exports are
set to rise in coming months, as manufacturers have already bagged bigger orders than before.
The government data shows Bangladesh exported knitwear worth USD 5.07 billion during the
July-January period of the current fiscal year, registering 43.22 percent growth compared with
the same period a year ago. In the seven-month period, the country exported woven garments
worth USD 4.38 billion, a 39.09 percent rise.
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The higher prices of raw materials, such as cotton and yarn, are also increasing the export
earnings, as the buyers are paying more to help the makers cope with the costly imports.
Bangladesh needs to import most of the raw materials for its garment industry.
According to the data available, India's readymade garment exports moved up to $11.16 billion
in April-March 20110-11, registering a growth of 4.23% when compared to April-March 2009-
10. It is also observed that four months of May, June, July and November showed actual decline
over corresponding months in the year 2009-10. The overall annual growth of 4.23% is
anything, but cheerful.
India always has an advantage over Bangladesh in terms of raw materials, infrastructure,
quality, and technology. But India lost in terms of labour wages, lead time, semi skilled
labourers and import duties.
BANGLADESH
Bangladesh has been witnessing tremendous industrial growth across its industrial sector; textile
and apparel have especially dragged the focus of government bodies and private investors. Vast
availability of lowest manpower, one of the most competitive energy costs and a proven track
record in apparel production and exports have positioned Bangladesh as a regional apparel
industry development hub in the Asian continent. In context of fast increase in labour wages
and raw material prices in other major regional counterparts, such as China, India, Thailand etc,
Bangladesh is well poised to remain most preferred destination for international apparel majors
for sourcing world class fabric and finished clothes.
Bangladesh apparel industry has grown manifold in the last decade. The countrys recognition
as low cost-high quality apparel production base resulted in apparel production boom. Both
small- and large-sized firms are booking huge orders from the US and EU buyers andexpanding their production capacities. The study revealed that factors including new plant
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setups, capacity expansion in existing ones, technological up-gradation coupled with
government favourable policies will enable apparel production to grow at an unmatched CAGR
of 14.3% during FY 2011-FY 2014.
On demand fronts, the growth has been slow but steady. Drastic improvement in income level
encouraged the countrys middle-class population to opt for good quality apparels. The impact
of improving buying power is quite visible on domestic market as consumers are now buying
branded apparels and spending a considerable part of their disposable income on textile and
clothing.
READY MADE GARMENTS IN BANGLADESH:
Ready Made Garment (RMG) is the leading industry in Bangladesh. It is basically a labour-
intensive industry and it needs limited financial investment and relatively simple technology
compared to other high technical industries. The success story of Garment Industry in
Bangladesh is the story as to how the readymade garments starting in the late seventies as an
insignificant non-traditional item of export. In 1998-99 this sector has earned 4019.98 million
US$ through exporting which is 75.67% of the total export (Redwan, 1995).
STRENGTH
The tremendous success of Readymade Garment (RMG) exports from Bangladesh over last two
decades has surpassed the most optimistic expectations. At present Bangladesh ranks fourth in
the ladder of international garment exporters, accumulating US$13.2bn in export revenues in
the period July 2010 to March 2011, according to official figures. This accounts for about 80%
of Bangladesh's total exports, with 5m people employed across the country.
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The overall impact of the readymade garment export industry is certainly one of the most
significant social end economic developments in contemporary Bangladesh. The remarkable
achievement of RMG sector is now exposed to each and every country. Despite these
impressive achievements and the probable challenges in the near future, if properly managed,
the prospects for further expansion and growth for this sector remain bright. There are some
major threats still exits in this sector but Bangladesh has the ability to overcome these threats.
Readymade Garment (RMG) industry holds a key position in the economy of Bangladesh in
terms of foreign exchange earning, employment generation and poverty alleviation. Right now
RMG sector is the highest foreign currency earner in Bangladesh. Apart from contributing to
huge foreign exchange earnings, RMG industry has become the largest source of employment
generation. Around 2 million people are presently involved of whom 90% are distressed women
in the RMG industry of Bangladesh. In addition a rough estimate shows that the sector through
linkage effects is currently generating about US$ 2 billion worth of domestic economic
activities.
Bangladesh enjoys duty-free access of its apparel products to the European Union, Canada,
Australia and some Asian countries, including Japan, Korea and China.
WEAKNESS
It is the largest manufacturing sector contributing about 5% to the GDP. But this RMG sector is
now facing some challenges especially after 2004. Bangladesh is still at its infancy in terms of
quantity production in the readymade garments industry. The country still faces problems for
the production of quality goods. Standard is also not satisfactory. The quality of the readymade
garments of Korea, Hong Kong, Taiwan and other countries is far superior to that of
Bangladesh.
In RMG sector, value-addition is 30% only because a RMG unit has to import 70% of the total
value of the product. The low value added represented that the backward linkage industries such
as fabrics and accessories, which directly feed into the garment sector, have not satisfactorily
developed. The weakest point of the Bangladeshi apparel industry is that it is still at the mercy
of the exterior suppliers of its main raw materials namely the fabrics. Right now Bangladesh hasa very limited capacity to produce fabrics required by the RMG factories. Her competitors
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India, Pakistan, Thailand, Malaysia and other countries have their textile mills that can produce
quality fabrics for the respective apparel industries.
OPPORTUNITIES
This sector will remain in intense competition in the context; it is very necessary to find out
opportunities and challenges of RMG industry of Bangladesh in order to face firm competition
in the free market environment.
Japan is one of the potential markets for exports from Bangladesh. Quality and fashion
conscious Japan is importing readymade garments from Bangladesh at an increasing rate even
though this increase is very negligible. An extremely large program has to be taken to increase
the exports. There exists supportive policy environment in the RMG sector of Bangladesh.
The package of textile sector incentive has been aimed at primarily to boost up the exporters.
Government has extended some major incentives and facilities for the local and foreign
investors to help increase investment in the country for all industrial sectors including textiles
and clothing.
Quality and standard of RMG products can be improved by practicing Total Quality
Management, preparing and following a quality manual for the products, training Quality
Control and Quality assurance Personnel etc.
Indian Government announced the duty-free access to 46 apparel items from Bangladesh;
exporters from that country have reported orders for readymade garment worth an estimated
$90 million from India.
The country has registered a 40 per cent hike in its apparel exports in the last six months, with
increased exports to India and new markets wrested from global leader China. With many
importers switching from China, Bangladesh has new destinations such as Japan, South Africa,
Canada, Australia, New Zealand and some Latin American countries, government officials and
exporters said.
THREATS
According to the Ministry of Textiles, the local fabric manufacturers currently supply less than
19% of total woven fabric requirement. About 70% of the total fabric requirement of the knit
sector is domestically produced as reported by the BTMA. Textile policy 1995 envisages
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established of 246 spinning mills with 25000 spindles each, 481 weaving mills each with
capacity to produce 17 million meters of fabrics, 481 dyeing-printing-finishing units each with
same capacity for yarn and woven fabric by the year 2005. Thus it is a challenge for RMG
sector in Bangladesh to get right quantity of fabrics. The recent US Trade and Development Act
2000 provide duty free and quota free access to the US market from 48 countries of Sub-
Saharan African (SSA) from October 1, 2000 to September 13, 2008.Though after 2004 quota
system will be benefited for access duty free to USA till 2008. As USA is the single largest
importer of Bangladesh RMG, Bangladesh will lose competitive position relative to those 72
countries.
The labour productivity in RMG factories has improved during the last 11 years. The
experiences of Japan, Hong Kong, South Korea and other suppliers of RMG confirm this type
of relationship between productivity and wages. Unlike in the public sector of Bangladesh, in
RMG sub sector, wages have increased during the last 11 years but productivity has increased
more than wages have.
The growth and development of Bangladesh Ready Made Garment is highly satisfactory as it is
found in number of factories, share in total foreign exchange earnings and value added to the
economy. The major problems of RMG are low net exporting, low value addition, low quality
and standard, low productivity, elimination of quota and GSP, intense competition, scarcity of
backward linkage industries etc. to comply with the set standards by the importing countries and
global RMG marketers, Bangladesh need to improve its working condition.
Bangladesh has to improve their infrastructure
Irregular gas and electricity supply, pitiable rail and road communication systems, political
instability, and high bank interest as the stumbling blocks to the sectors further growth
Bangladesh is having competition with China, Vietnam, Cambodia and Sri Lanka.
The EU being the Bangladeshs biggest single market (take over half of Bangladesh exports) is
a great concern. The impact is not less in China, India and ASEAN countries also
About 50-60 percent of Bangladeshi garment goods are exported to EU, where a lot of
companies are going through economic crisis. So, due to this the garment exports are little low.
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SWOT ANALYSIS OF INDIAN APPAREL & TEXTILE INDUSTRY
The Indian Textile industry adds 14% to the industrial production and 8% to the GDP of India.
It provides employment to 38 million people and thus, is the second largest employment
provider after agriculture. The Indian Apparel & Textile Industry is one of the largest sources of
foreign exchange flow into the country with the apparel exports accounting for almost 21% of
the total exports of the country. Indian apparel industry contributes 45 % of Textile exports. A
systematic SWOT analysis of the textile and apparel industry indicates the following:-
STRENGTH
Raw material base
India has high self sufficiency for raw material particularly natural fibres. Indias cotton
crop is the third largest in the world. Indian textile Industry produces and handles all
types of fibres.
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Strong entrepreneurial skills have always been the backbone of the Indian Apparel and
textile Industry.
Flexibility
The small size of manufacturing which is predominant in the apparel industry allows for
greater flexibility to service smaller and specialized orders.
Rich Heritage
The cultural diversity and rich heritage of the country offers good inspiration base for
designers.
Domestic market
Natural demand drivers including rising income levels, increasing urbanisation and
growth of the purchasing population drive domestic demand.
WEAKNESS
More dependence on cotton
Due to over specialization in cotton, the bulk of the international market is missed out,
synthetic products in India are expensive and fabric required for items like swimsuit,
sky-wear and industrial apparel is relatively unavailable.
Less attention on man power training
Poor quality standards
Distance of the potential market
Lower average consumption in domestic market
Lack of professionalism and integration of supply chain
Dependence on quota system
Very low investment on R&D
Limited exploitation of economies of scale
Higher production costs on account of power and capital costs
Lower labour productivity
Infrastructure bottlenecks causing delays
Under developed supply chain management and 3PL logistics service providers
Outdated and Inflexible labour laws
Fluctuation in the currency exchange rate
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Lack of capacity and value addition.
OPPORTUNITIES
Growing Industry
World textile trade would continue to grow at a rate of 3-4% Market access through
bilateral negotiation
The trade is growing between regional trade blocs due to bilateral agreements between
participating countries.
Integration of Information technology
Supply Chain Management and Information Technology has a crucial role in apparel
manufacturing. Availability of EDI (Electronic Data Interchange), makes
communication fast, easy, transparent and reduces duplication.
Opportunity in High Value Items
India has the opportunity to increase its UVRs (Unit Value Realization) through
moving up the value chain by producing value added products and by producing more
and more technologically superior products.
India now focusing more on Non EU and US markets like Japan, Latin Americas and
African Countries.
India has the huge opportunity in High quality and luxury products.
Government Initiatives
The Government of India has promoted a number of export promotion policies for the
Textile sector in the Union Budget 2011-12 and the Foreign Trade Policy 2009-14. This
also includes the various incentives under Focus Market Scheme and Focus Product
Scheme; broad basing the coverage of Market Linked Focus Product Scheme for textile
products and extension of Market Linked Focus Product Scheme etc. to increase the
Indian shares in the global trade of textiles and clothing.
I. Welfare Schemes: The Government has offered health insurance coverage and
life insurance coverage to 161.10 million weavers and ancillary workers under
the Handloom Weavers' Comprehensive Welfare Scheme, while 733,000
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artisans were provided health coverage under the Rajiv Gandhi Shilpi Swasthya
Bima Yojna.
II. Skill Development: As per the 12th FYP, the Integrated Skill Development
Scheme aims to train over 2,675,000 people within the next 5 years (this would
cover over 270,000 people during the first two years and the rest during the
remaining three years). This scheme would cover all sub sectors of the textile
sector such as Textiles and Apparel
III. Textiles Parks: The Indian Government has given approval to 21 new Textiles
Parks to be set up and this would be executed over a period of 36 months
IV. More Educational Institutes and Center of Excellence for Textiles
THREATS
There has been an increase in seasons per year which has resulted in shortening of the
fashion cycle.
India will have to open its protected domestic market for foreign players thus domestic
market will suffer.
EU has granted the status of Generalized Systems of Preferences to Sri Lanka, while
Bangladesh has got the Least Developed Country status from EU. Pakistan, meanwhile,
has got a zero duty tariff level from both EU and US. The non-tariff barriers, such as
anti-dumping and countervailing duties, quota restrictions, and packaging, labelling,
testing and quarantine requirements are affecting Indian exporters.
Poor Energy supplies ( almost 6 hrs per day electric cut in many states )
Increase in Petrol Prices, Real Estate cost, Wages
Lack of Semi-Skilled and Skilled labourers
High competition from Countries like China, Bangladesh, Pakistan, Srilanka, Vietnam
etc.
Dyeing problem in Tirupur.
Fluctuations of Currency in the world market.
COMPARISON
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PARTICULARS/COU
NTRYINDIA BANGLADESH
COST OF 1LAKH
SQ.FT FACTORY$ 800000 $ 500000
LABOUR WAGES Rs.8,000/month Rs.5,000/month
LEAD TIME90 days for Knit and
120 days for Woven
60 days for Knit and
90 days for Woven
PRODUCTIVITY 60 % Efficiency 90-95% Efficiency
WORKING TIME 8-8.5 Hours 12 Hours
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DUTY FOR EU &
OTHER COUNTRIES9.6 % Free Import
APPRAEL EXPORTS
(2010)$10 billion $13 billion
EXPORT GROWTH
(2005-2010)5.2 % 14.2 %
CONCLUSION
Many retailers and brands are looking at Bangladesh as huge opportunity for sourcing garments
and they are slowly shifting from India, China and other countries.
If duty concessions, labour and other costs are taken into account, garments produced in
Bangladesh is almost 20 per cent cheaper this apart, the aggressive monetary tightening policies
of the Reserve Bank of India (RBI) in the recent months has also made cost of capital expensive
and further added to the woes of Indian textile makers.
Textile companies are facing cut-throat competition. Profit margin is very low and 15-20 per
cent cost difference is a big thing. So people are getting attracted to Bangladesh.
China is not able to stand the competition and is losing its share of exports in US and European
markets to Bangladesh.
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Textiles are perhaps the most labour intensive industry. In Bangladesh labour is not only cheap
but also easily available when you compare it with India and China. Besides labour cost and
duty advantage, raw materials and real estate costs are also cheaper in Bangladesh.
Recently, Indian garment makers have invested about $79 million in 35 factories in Bangladesh,
according to Bangladeshs Board of Investment, which compiles the data.
This clearly shows the Shift of Apparel business towards Bangladesh.
BIBILOGRAPHY:
Mr.Vijaya Prabhakaran , Merchandiser ,Shahi Exports ,Bangalore Mr.Anton, Merchandiser, Must Garments, Bangladesh.
http://www.fibre2fashion.com
http://www.cci.in/pdf/surveys_reports/indian-textile-industry.pdf
http://www.usitc.gov/publications/332/PUB3401.pdf
http://www.apparelresources.com
http://www.livemint.com/2011/10/02234501/Indian-garment-makers-head-
to.html
http://www.indiantextilejournal.com/articles/FAdetails.asp?id=1546
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http://www.thehindubusinessline.com/industry-and-
economy/economy/article2592173.ece?homepage=true&ref=wl_home
http://texmin.nic.in/
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