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Final report on

Strategic analysis of Readymade Garments industry of

Bangladesh

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Term Paper on

Strategic analysis of Readymade

Garments industry of Bangladesh

Prepared For:

DR .Nazmul A. Mojumder

Lecturer

School of Business

Independent University,Bangladesh

Prepared By:

Monoarul Islam Jawad ID: 1321684

Date: 16, JULY 2014

Independent University, Bangladesh

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Executive Summary

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. 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.

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. Appropriate training

to the workers focusing on awareness of safety and what is to be done during the time of

emergency will be effective in improving employee morale. Government of Bangladesh,

Ministry of commerce, Ministry of textile, Export Promotion Bureau, BGMEA, Institute of

Fashion Technology and other concerned authorities should work strengthening the RMG

industry of Bangladesh

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Table of Contents Introduction .......................................................................................................................................5

Bangladesh's Ready-Made Garments Industry ......................................................................................6

PEST Analysis of Bangladesh Business environment ..............................................................................8

PEST ANALYSIS FOR RMG INDUSTRY OF BANGLADESH ..........................................................................9

PORTERS FIVE FORCES ANALYSIS FOR RMG INDUSTRY .................................................................... 12

A SWOT Analysis on Readymade Garment Industry in Bangladesh ....................................................... 18

SWOT ANALYSIS OF RMG INDUSTRY IN BRIEF: ................................................................................ 22

Concluding remarks and recommendations:....................................................................................... 28

References ....................................................................................................................................... 29

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Introduction

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 labor 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.

According to this report, Bangladesh Apparel Industry Analysis, Bangladesh apparel industry

has grown manifold in the last decade. The country's 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 and expanding their production capacities. The

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study revealed that factors including new plant setups, capacity expansion in existing ones,

technological up-gradation coupled with government favorable policies will enable apparel

production to grow at an unmatched CAGR of 14.3% during FY 2011-FY 2014.

But Bangladesh’s RMG industry requires better and improved RMG competitive business

analysis with a mixture of competitive analysis of Bangladesh. This paper reveals the

competitive and business analysis of RMG industry of Bangladesh along with the competitive

forces of Bangladesh’s own.

Bangladesh's Ready-Made Garments Industry

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 a 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

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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.

.INDUSTRY ANALYSIS

The Readymade Garment (RMG) industry of Bangladesh marked the leadership of private

enterprise and the country’s successful transition to a major export-oriented economy. The key

products of this industry are Knit and Woven Shirts and Blouses, Trousers, Skirts, Shorts,

Jackets, Sweaters, Sportswear and many more casual and fashion apparels. RMG industry has

enjoyed an impressive rise from less than 50 factories in 1983 to over 3600 in 2006.

Garments sector’s continual success can be attributed to the following:

Quotas under Multi-Fiber Arrangement (MFA) in the North American market

Preferential market access to European markets

The country has a small textile industry, but the volume and quality of its output are unable to

fully meet the demand of the garments industry. Most of Bangladesh’s garments exports are

made from imported textiles. RMG exports have grown rapidly after extensive trade and other

economic reforms were undertaken in the early 1990s. Exports increased by 16.5 percent per

year during the past one and half decade. Knitwear sector has performed particularly well over

time. The sector’s share in total RMG exports has grown from about 17 percent in 1995 to

almost 40 percent in 2003. In context of Bangladesh’s total export, RMG’s contribution is

approximately 76%. Excepting 2002, the industry has developed rapidly with significant positive

growth. Over the years, it has experienced around 18% growth rate

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PEST Analysis of Bangladesh Business environment

The PEST analysis is a useful tool for understanding market growth or decline, and as such the

position, potential and direction for a business. A PEST analysis is a business measurement tool.

PEST is an acronym for Political, Economic, Social and Technological factors, which are used

to assess the market for a business or organizational unit.

Here PEST Analysis is done for evaluating the business environment of Bangladesh focusing

complexities and potentiality-

Figure: Pest analysis for Bangladesh Business Environment

PEST

of BD Business Environment

Technological

Economic

Political

Social

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PEST ANALYSIS FOR RMG INDUSTRY OF BANGLADESH

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.

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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.

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

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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 ter m 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.

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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.

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Figure: Porter’s Five forces analysis for Bangladesh’s Ready Made Garments Industry

Competitive rivallry within

the industry for getting the large

buyer's orders

Threat of new country with low

cost labor coming into RMG

production

Bargaining Power of the

customers from the countries

without GSP or qouta facilities

Threat of the ris eof synthetic products, jute or banana fiber

clothes

bargaining power of the

Knit and cotton

supplier countries like

china and India

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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.

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C. Bargaining Power of Customers

Bangladeshi manufactures realize that the buyer posses 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.

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 don’t 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 a

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.

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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.

On the other hand, 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.

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My Findings in External Analysis:

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. 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

INTERNAL ANALYSIS

Core competencies:

Ready-made Garments (RMGs) industry is one of the Bangladesh’s success stories. Like

many developing countries Bangladesh was encouraged in the late seventies into the

garments industry. The RMGs in Bangladesh is characterized by small and medium sized

privately owned enterprise. The industry has attained phenomenal growth over the past

fifteen years as the sector has been earning millions of dollars by exporting garments. In

the context of export oriented industry, the garment industry has expanded very fast.

Therefore, the present study is initiated exploring core competencies of ready-made

garments in Bangladesh.

A core competence is a basis for competitive advantage because it represents specialised

expertise that rivals do not have and can’t readily match (Thompson & Strickland, 1992). It is

opined by Hamel & Prahalad (1990) that, there are three tests to identify core competencies of a

business. First, a core competence provides potential access to a wide variety of markets, second,

a core competence should have a significant contribution to the perceived customer benefits of

the end product; and finally, a core competence should be difficult for competitors to imitate.

Successful business strategies usually aim at building the company’s competence in one or more

core activities crucial to strategic success and then using core competence as a basis for winning

a competitive edge over rivals (Thompson & Strickland, 1992).

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Bangladesh, one of the Least Developed Countries (LDCs), had only a handful of garment

factories about fifteen year ago (Hyvarinen, 1995). Till the end of 1983, there were only

forty seven garment manufacturing units. In that early 1980s, international buyers from

South Korea and Hongkong were looking for a new potential supply source like

Bangladesh due to quota restrictions on traditional suppliers (Chowdhury, 1997). Since

then it has been growing on an average rate of 66.50% over the last 15 years (Chowdhury,

1997). The RMG industries of Bangladesh are characterized by small and medium sized

enterprises in terms of their capital requirements, machine space required, man hour

utilised etc (Chowdhury,1997). Low level of value addition in the RMGs industries create

problems and opportunities. But virtually the RMGs of Bangladesh business has no core

competence, which can neither help the business to increase customer perceive value nor

help to have an access to a wide variety of market. It is realized that the phenomenal

growth was possible due to the quota privilege under the Multi Fiber Arrangement (MFA)

into the North- American Market, which will be phased out in the year 2005, and the

Generalised Systems of Preference (GSP) for the EU market. So, after the phasing out of

MFA, Bangladesh will have to look for sustained competitive advantage with which can

outperform it.

A SWOT Analysis on Readymade Garment Industry

in Bangladesh

RMG is the leading industry in Bangladesh. It is basically a labor-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).

The tremendous success of Readymade Garment (RMG) exports from Bangladesh over last two

decades has surpassed the most optimistic expectations. At present Bangladesh is the 6th largest

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exporter to USA and in 1997 Bangladesh becomes 18th largest exporter in the world. Now

Bangladesh ranks first export of T-shirts to Europe (BGMEA, 1997-98)

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

(Bhattacharya, 2000)

RMG industry is the most important sector for the economy of Bangladesh. It accounts for 75.14%

in 2000-2001 of the country’s total export earnings (BGMEA Newsletter, 2001) About 1.5 million

workers of whom 90% are distressed women are engaged in about 3200 garment factories as on

June 2000(BGMEA, 1997-98).

It is 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. We still have problems in our country 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 ours.

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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 has a

very limited capacity to produce fabrics required by the RMG factories. Her competitors India,

Pakistan, Thailand, Malaysia and other countries have their textiles mills that can produce quality

fabrics for the respective apparel industries.

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

Still there are some threats existing in our RMG sector. 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 established of 246 spinning mills with 25000

spindles each, 481 weaning 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

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USA is the single largest importer of Bangladesh RMG, Bangladesh will lose competitive position

relative to those 72 countries.

A lot of research works should be done cordially how to face challenges of the coming changes in

the world business for the continued existence of this sector. From the above discussion we have

found some weaknesses and threats of RMG sector. Bangladesh can overcome its weaknesses if it

formulates and implements some strategies like cost reduction strategy, product diversification

strategy, market diversification strategy. The findings show that the workers needed significantly

shorter time to produce a shirt of a given specification than the time presented in another study

completed by Khan and Chowdhury in 1986.

This means that labor productivity in RMG factories has improved during the last 9 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 9 years but productivity has increased more than

wages have. 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.

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. Appropriate training to

the workers focusing on awareness of safety and what is to be done during the time of emergency

will be effective in improving employee morale. Government of Bangladesh, Ministry of

commerce, Ministry of textile, Export Promotion Bureau, BGMEA, Institute of Fashion

Technology and other concerned authorities should work strengthening the RMG industry of

Bangladesh.

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SWOT ANALYSIS OF RMG INDUSTRY IN BRIEF:

Strength

Low labor cost.

Energy at comparatively lower price.

Easily accessible infrastructure like sea road, railroad, river and air communication.

Wide ranges port facilities.

Accessibility of fundamental infrastructure, which is about 3 decade old, mainly

established by the Korean, Taiwanese and Hong Kong Chinese industrialists.

FDI is legally permitted.

Moderately open Economy, particularly in the Export Promotion Zones.

GSP under EBA (Everything But Arms) for Least Developed Country applicable

(Duty free to EU).

Improved GSP advantages under Regional Cumulative.

Looking forward to Duty Free Excess to US, talks are on, and appear to be on

hopeful track.

Investment assured under Foreign Private Investment (Promotion and Protection)

Act, 1980 which secures all foreign investments in Bangladesh.

OPIC's (Overseas Private Investment Corporation, USA) insurance and finance

agendas operable.

Bangladesh is a member of Multilateral Investment Guarantee Agency(MIGA)

under which protection and safety measures are available.

Adjudication service of the International Center for the Settlement of Investment

Dispute (ICSID) offered.

Excellent Tele-communications network

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Weakness of currency against dollar/euro and the condition will persist to help

exporters.

Bank interest@ 7% for financing exports.

Convenience of duty free custom bonded w/house.

Weakness

Long lead-time

Lack of marketing tactics.

The country is deficient in creativity.

Absence of easily on-hand middle management.

A small number of manufacturing methods.

Low acquiescence: there is an international pressure group to compel the local

producers and the government to implement social acquiescence. The US GSP may

be cancelled and purchasing from US& EU may decrease significantly

The machinery required to assess add on a garment or increase competence are

missing in most industries.

Lack of training organizations for industrial workers, supervisors and managers.

Autocratic approach of nearly all the investors.

Fewer process units for textiles and garments.

Sluggish backward or forward blending procedure.

Incompetent ports, entry/exit complicated and loading/unloading takes much time.

Speed money culture.

Time-consuming custom clearance.

Unreliable dependability regarding Delivery/QA/Product knowledge.

Communication gap created by incomplete knowledge of English.

Subject to natural calamities.

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Opportunity

EU is willing to establish industry in a big way as an option to china particularly for

knits, including sweaters.

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.

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.

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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

CORPORATE LEVEL STRATEGY Ready made garment industry is moving very fast, new competitors are emerging in the market

frequently; growth rate is decreasing year after year. To cope with changes Rahim Textile Mills Ltd. must tailor its strategy so that the company can become profitable and competitive to

surrounding rivalry establishing a distinctive competence. 1.Strategies for entering the market

More and more companies are finding themselves in industry situations characterized by rapid technological change short product cycles because of entry of important and fast-evolving

customer requirements and expectations –all occurring at once. Due to the entrance of new competitors the market for Rahim Textile Mills Ltd. is shrinking. To compete with these fast moving changes, this company has to be technologically sound, product innovative to attract the

change-demanding customer and product diversification. 2. Strategies for coping with rapid changes

It is very important to understand the key driving forces of an industry to decide upon the strategy of any company inside the industry. By searching the internet, reviewing related literatures, implementing key informant technique, and by organizing focused group discussion

the following key forces have been identified. A. Growing use of internet technology and applications

B. Increasing globalization C .Changes in the buyers’ requirements D. Changes in cost and efficiency

E. Changes in global regulations in the textiles and apparels industry In Bangladesh internet technology and web applications play a vital role in establishing

collaboration between importers and buyers abroad. Exporters communicate with Importers though internet where buyers put their proposal and ask for bidding. Prospective sellers bid

through the internet and the lowest bidder is rewarded with sales contract This is how internet technology acts as a bridge in connecting business people across different parts of the world. In domestic market there is no such seller who uses websites as a part of their supply chain.

Although the ready made garment sector is not so much speedy changing, it has to be proactive about the market demand and thereby make itself prepared for the market demand. Other option

is the company can react with the change. Rahim Textile Mills Ltd. is considering the latter approach. It is reacting with the changes. When the other companies are fighting to reduce lead time and improve delivery time, this company also trying to walk in the same way. The company

is trying to incorporate new technology for its production process.

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Concluding remarks and recommendations:

In my concluding remarks I must say that the SWOT of Bangladesh itself works as a

complementary profile for the SWOT of the readymade garments industry of Bangladesh. After

the strategic, business and competitive analysis of the Readymade Garments industry of

Bangladesh, we must confess that the Competitive strategic factor for Bangladesh, the human

capital or cheap labor, is itself the competitive advantage of the RMG industry. So, the labor cost

and human resource is the main part of formulating the business and competitive analysis RMG

industry of Bangladesh.

In recommendation, we must say that-

RMG manufacturers should look for other strategic factors other that the human capital

of lower cost.

Opportunities of RMG industry must be converted to strength with the support of the

government.

Manufacturers should look for other strategy like value chain competitiveness rather that

only price competitiveness.

Rather than trying to do everything equally all at once, it helps to have a sense of priority.

Putting the prioritized elements together in a mutually supportive and logical package creates a

strategy. The desirable outcome of a SWOT should be a strategic plan to address the challenges.

Thus, by identifying the key issues and establishing their relation with each other, a degree of

clarity is possible that helps to make one clear about priorities and the time a policy will take to

bring the outcomes.

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