AN EMPIRICAL STUDY OF EXPORT MARKETING PRACTICES OF TEXTILE
EXPORTING UNITS IN INDIA
SUMMARY
SUBMITTED TO
MAHARSHI DAYANAND UNIVERSITY, ROHTAK
FOR THE AWARD OF THE DEGREE OF
DOCTOR OF PHILOSOPHY IN
MANAGEMENT
Under the Supervision of Submitted by
DR. ASHUTOSH NIGAM VARSHA RANI Associate Professor Regn. No. 98-DERJH-494 Department of Management Studies, Vaish College of Engineering, Rohtak
INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH
MAHARSHI DAYANAND UNIVERSITY, ROHTAK
2014
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India’s textiles industry is one of the mainstays of the national economy. It is also one
of the largest contributing sectors of India’s exports worldwide. It plays important
role in terms of generating revenue and employment. In the liberalized post-quota
period, India has emerged as a major sourcing destination for buyers from all over the
globe. As a measure of growing interest in the Indian textiles sector, a number of
reputed houses opened their sourcing offices in India. The government has been
continually supporting the textiles exports sector through various policy initiatives to
enable the sector to increase market share in the global textiles markets.
The aim of present study was to evaluate the export marketing performance of textile
exporting units operating in India and develop export marketing framework in the
light of incentives provided by government with special focus on scheme like
technology up-gradation and integrated textile park schemes and prevalent marketing
practices adopted by textile exporter considering export marketing barriers faced
textile exporting units. Indian textile sector is predominantly based on cotton, fiber,
yarn, wool, silk, handlooms, handicrafts and jute. The study was focused mainly on
the industry possessing different profiles to develop an effective and efficient
framework for textile exporters.
1. Organization of the Study
The present work is divided into six chapters.
Introduction, the problem and factor influencing trade of textile export marketing of
the study are included in first chapter.
Second chapter is on the literature concerning several key variables, which have been
found to influence the textile performance, factor influence trade in textile, and textile
export framework.
Third chapter portrays the research methodology, objectives and briefly describes
the research instruments developed, sample items selected, research design and
method of conducting the present study.
Fourth chapter would focused on Textile Export Marketing Framework.
Fifth chapter presents the analysis of the data and the results and the discussion of
the findings.
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Sixth Chapter presents the managerial implications, recommendations and summary
and conclusion drawn.
2. Significance of the Study
The review of the literature identified inherent strength of textile industries on
account of the lower labour costs prevailing in India. Textile industries was
traditionally were highly protected vulnerable in the globalised era. Government of
India has initiated a variety of reforms across a wide spectrum of activities calculated
to user in a more competitiveness and deregulated open economic system in the
country. In spite of having competitive advantages many bottlenecks continue to exist
in export procedural policy frameworks. The study is a deliberate attempt to provide
the significant information to the economists, planners, exporters and policy makers
to develop a conducive environment with a realistic and sound policy, procedural and
infrastructural support system, enabling Indian export units to take advantage of their
core competencies to capture global competitive advantage. Hence the present study
is a step towards probing of the problem and bottlenecks in the export sector and will
suggest the remedial measures to ensure Indian exports shine in the global scenario in
terms of their unique competitiveness. Moreover this would aid in bridging the gap
between policy makers expectations and the export sector demands to enhance
competitiveness. This new dimension will unfold various issues and will make
recommendations on key parameters. Thus the need to conduct this fresh study has
emerged as the economist has a perception that the dismantling of MFA quotas would
throw up immense opportunities for the Indian textile industry. This changed
international scenario requires analyzing the Indian textile industry in terms of its
potential advantages, key success factors, preparing dues to meet the challenges.
3. Objectives of the Study
The study has the following concise objectives:
i. To determine export marketing performance of textile exporting units in India.
ii. To study the factors influencing trade in textile exports from India.
iii. To study the impact of the technology up-gradation scheme and scheme of
integrated textile park on textile exporting units.
iv. To analyze existing export marketing practices adopted by textile exporters.
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v. To design export marketing practices for textile exporting units in the light of
foreign trade policy.
4. Research Methodology
The research methodology followed to discuss the research objectives and procedure
which include the overall research design, sample design, universe and survey
population, data collection, analysis methods and statistical techniques used for data
analysis is discussed as below.
4.1 Research Design
The present study was descriptive cum diagnostic in nature. It was descriptive as the
researcher made an attempt to express the experiences of textile exporters by
examining the different components of export marketing strategies being adopted by
them. It was diagnostic in a sense that export marketing bottlenecks were identified in
the light of foreign trade policy. The focus of the studies was on developing effective
and efficient frame work for textile exporters.
4.2 Sample Design
The sampling design was combination of non-random purposive sampling in case of
senior export marketing managers and random in case of consumers. In all, data was
collected from a sample size of 200 respondents for the purpose of this research study.
Exporters selected were from large, medium and small segments to make the sample
representative.
4.3 Universe and Survey Population
The universe of the study was confined to major textile exporters based in Panipat and
National Capital Region dealing with different sub segments i.e. Cotton, fiber, yarn,
wool, silk, handlooms, handicrafts and jute industry, possessing different profile. The
survey population included senior level export marketing managers or the
owners/exporters dealing with overseas clients.
4.4 Data Collection
Primary sources and secondary sources were used for collecting the data of present
study. A self administered questionnaire was developed for data collection. However,
personal interviews were also conducted of the subjects in the light of the same
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questionnaire. Primary data was collected through structured questionnaire which
included items on demographic information of respondents, export marketing
strategies adopted by the textile exporting units, export marketing barriers, and the
impact of foreign trade policy and trade incentives provided to exporting units. The
secondary data was collected from publications of ministry of textiles, annual reports
of various textile export promotion councils, various articles that appeared in journals
and newspapers. The statistics for the exports were gathered from publications of
Centre for Monitoring Indian Economy (CMIE), National Council for Applied
Economic Research (NCAER), Indian Trade Promotion Organization (ITPO),
Reserve Bank of India (RBI) and Export and Import bank of India (EXIM). The
survey data were also compensated by journal publications like Economic and
Political Weekly, Foreign Trade Review, Yojana, Federation of Indian Exporter
Organization etc.
4.5 Data Analysis and Statistical Tools
The study was designed to evaluate the export marketing performance, examine the
impact of foreign trade policy on textile exporting units, and design export marketing
strategy on different sub components of the textile. The questionnaire was analyzed
on the basis of the 5 point Likert scale. The collected data were analyzed using the
Statistical Package for Social Science (SPSS) Version 17.0. The mean scores were
computed by assigning weights as 5, 4, 3, 2 and 1 (e.g. Strongly Agree, Agree,
Neutral, and Disagree and Strongly disagree). Statistical tests like Crosstabs Chi
square test and ANOVA were applied for analysis of the field data. The analysis and
discussions of results were made for understanding the factors influencing textile
exports in the light of foreign trade policy and for designing of the marketing strategy.
4.6 Hypotheses
After an interdisciplinary theoretical investigation of the subject under research and
an analysis of the extant literature, hypotheses were developed which are as shown
below.
H0 (a): There is no significant difference between small, medium and large textile
exports units in terms of promotional channels used by them.
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H0 (b): There is no significant difference between small, medium and large textile
exports units in terms of distribution channels used by them.
H0 (c): There is no significant difference between small, medium and large textile
exports units in terms of pricing policy used by them.
H0 (d): There is no significant difference between small, medium and large textile
exports units in terms of documentation problems in custom clearance experienced by
them.
H0 (e): There is no significant difference between small, medium and large textile
exports units in terms of strategy adopted for creating the brand in international
market.
H0 (f): There is no significant difference between small, medium, and large exports
units in terms of using primary sources for collecting market information.
H0 (g): There is no significant difference between small, medium, and large exports
units in terms of using secondary sources for collecting market information.
H0 (h): There is no significant difference between small, medium and large textile
exports units in terms of insurance policy used by them.
H0 (i): There was no significant difference between small, medium and large textile
exports units in terms of risk in currency fluctuation.
5. Data Analysis and Findings of Present Study
With regard to the survey conducted, this study entangles over 150 (out of 200)
recorded responses (through questionnaire) from 150 respondents who were
approached by the researcher with a useable response rate of 75 per cent. These 150
respondents were related to 150 textile exporting units in Panipat and National
Capital Region dealing with different sub segments i.e. Cotton, fiber, yarn, wool, silk,
handlooms, handicrafts and jute industry, possessing different profile. These exporters
deal in overseas as well as domestic market and hold the largest market share among
all the textile exporting units operative in the region. Present study has been divided
into sections and sub-sections that exhibit the demographic profile of the respondents;
client-base; type of textile products for export market; export marketing practices;
problems/ issues influencing trade in textile exports; constraints of the technology up-
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gradation scheme and benefits of integrated textile park on textile exporting units; and
evaluation criteria to assess export market potential.
5.1 Demographic Profile
The findings of the study revealed that out of the total sample, female textile exporters
were only 11.33 per cent and the rest 88.67 per cent were male counterparts. This
supports the fact that the gender ratio is skewed in the exporting business of textile
and hence the number of women textile exporters is still very low. Also, it was
observed that most of the respondents were owners of textile exporting units. Majority
of the respondents surveyed were having exporting experience of their textile units
below 15 years and amongst more than 15 years of experience, majority was of
having 16-30 years of experience. None of the sampled textile units was having more
than 50 years of experience.
5.2 Client-base/ Market and Exporting Regions for Textile Products
Across the regions (Europe, Middle east, Asia, Africa and other countries) for
exporting the textile products (silk, cotton, woolen, jute, ready-made garments, man-
made, coir, handy craft or any other), the textile exporting units having client-base
(home or overseas) market. The findings of the revealed that textile units more
attentive towards exporting cotton (54.67 per cent of the units), readymade garments
(32 per cent of the units), man-made (28 per cent of the units), jute (26.67 per cent of
the units), silk (16 per cent of the units), handicraft (15.33 per cent of the units),
woolen (13.33 per cent of the units), coir (12 per cent of the units) than for any other
textile products (49.33 per cent of the units). Analysis of the present study shows that
there is correlation visible between cotton and overseas market – the highest the
export of the cotton, the highest the percentage of textile exporting units operating in
the different regions. Interestingly, textile units under study also have a big chunk of
home market for cotton, whereas 32 per cent (48 out of 150) of the textile units for
readymade garments are operating in home (31.25 per cent) and overseas (68.75 per
cent) market. Contrary, among 26.67 per cent (40 out of 150) of the textile units,
almost half of them exports jute in overseas (52.50 per cent) market. Such results are
very natural – jute industry is more appealing to Indian market, and cotton industry is
more appealing in overseas market than any other country. The study concludes that
Indian textile exports heavily dependent to European and the US markets.
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5.3 Export Sales Turnover
Present study show that in order to categorize the textile units in terms of small,
medium and large scale collected data of their sales turnover for three consecutive
financial years i.e. up to 2011-12. Sales turnover per year in 74 units was less than 50
crore in each financial year and were considered small scale textile units whereas 61
units were with a sales turnover from 50 to 250 crores in each financial year and were
accounted as medium scale textile exporting units. Only 15 were crossing their sales
turnover to 250 crores in each financial year and termed as large scale textile
exporting units for the purpose of the study. So India’s performance in textile in world
market is substantially inferior as compared to other European countries. Reason
being, poor capabilities and resources that inhibited it from moving beyond the level
of other competing developing countries and limited size of the Indian textile
companies due to which they had neither the resources and capabilities to respond to
the global market requirements nor the orientation to strategize with a long run view,
to develop new geographical or product markets and to sustain competitive efforts in
spite of initial market difficulties.
5.4 Marketing Practices of Textile Exporting Units
For the purpose of this objective present study included various items of export
marketing strategy adopted by textile exporters. Analysis of these marketing practices
given below.
5.4.1 Promotional Channels for Overseas Markets
All the respondents were asked to indicate the type of promotional channels being
used in their organizations and how much importance is attached by them to various
channels for promotion of the textile products in overseas market. Present study found
that most widely used promotional channels in all type of textile units are export
promotion cells/councils, international trade fairs, and through internet, and TV
commercials in foreign media, sponsoring international events/games are least
approved by all textile units. Based on the ranks given by the respondents from small,
medium and large scale textile exporting units international trade fairs and export
promotion councils for small and medium size textile units whereas internet
websites/social media and international trade fairs for large size units, are the first and
second choice for promotion of textile products in overseas markets. TV commercials
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in foreign media is least approved by small and large scale textile exporting units and
sponsoring international events/games is not considered by medium size units for the
promotion of their products in overseas markets. So it can be established that small
and medium industries give first preference to international trade fair and large
industries give first preference to internet for their promotional activities. One way
ANOVA result show that there was significant difference between small, medium,
and large textile units with regards to the variables ‘outdoor ads like at international
airports’, ‘sponsoring international events/games’, and ‘through internet (websites,
social media) (F=5.946; p=.003, F=7.100; p=.001, and F=3.016; p=.052). There is no
significant difference between small, medium, and large textile units for variables
‘export promotion cells/councils’, ‘International trade fairs’, ‘one to one meeting with
overseas customers’, ‘catalogues’, ‘through agents/buying houses’, ‘TV commercials
in foreign media’ and ‘international newspapers/magazines’.
5.4.2 Distribution Channels for Overseas Markets
All the respondents were asked to indicate the type of distribution channels being
used in their organizations for distribute the product in overseas market. Present study
found that most widely used distribution channel in all type of textile units are selling
directly to overseas customers followed by agents or buying agencies, and
manufacturing setup in any overseas market, franchise mode, company owned
showroom, overseas distribution networks are least preferred distribution channels for
the type of product they sell in overseas market. However, based on the three
categories of textile units, it has been observed that small and large industries give
first preference to agents/buying agencies but medium type of industries give their
first preference to directly selling products to overseas customer. One way ANOVA
result show that there was significant difference between small, medium, and large
textile units with regards to variables ‘company owned Showroom’, ‘franchise mode’,
‘manufacturing setup in any overseas market’, and ‘liaisoning network’. There is no
significant difference between small, medium, and large textile units for variables
‘directly to overseas customers’, ‘through agents or buying agencies’ and ‘through
overseas distribution network’.
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5.4.3 Pricing policy to Determine Price of the Textile Products
The Indian textile exporters use different types of pricing policy for determining the
price of their products in international market such as Keep out pricing , Skimming
pricing, Penetration pricing, Psychological pricing, Price lining, One price versus
variable price policy, Discrimination pricing, Competition oriented pricing, Cost
oriented pricing. When the researcher asked the respondents to select appropriate
pricing policies adopted by the textile exporting units for determining pricing of their
products. Present study found that most of the respondents preferred discrimination
pricing policy (95), and competition oriented pricing policy (10) were the least
preferred among all the policies as considered under the study by the respondents.
Present study found that all the pricing policy variables in small, medium, and large
units are same, so it can be said that there is no significant difference between small,
medium and large units in term of pricing policy used by them. One way ANOVA
result show that there was significant difference between small, medium and large
textile units for all variables except competition oriented pricing policy.
5.4.4 Strategies for Creating Brand in International Market
When the researcher asked the respondents about strategies adopted for creating brand
in international market such as multi product brand strategy, single brand product
strategy, mixed brand strategy, private brand strategy, and manufacturer’s brand.
Present study found that mixed brand strategy was the first choice of all the textile
exporters followed by single brand product strategy and multi product brand strategy.
The respondents also opted for private brand strategy and manufacturer’s brand as a
strategy to face the competition in the international market environment. The findings
of the study also revealed that all branding variables in small, medium, and large
textile units are same, so it can be said that there is no significant difference between
small, medium and large units in terms of strategy adopted for creating the brand in
international market. This is proved using Chi-square test on the respondents views
about the brand strategies used by them. Chi-square result show that there was
significant difference between small, medium and large textile units for all variables
except private brand strategy, and manufacturer’s brand.
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5.4.5 Primary Sources used for Collecting Market Information
When the researcher asked the respondents about primary sources used for collecting
market information such as telephone interview, personal interview with individuals
or group, mail survey, electronic survey and personal survey. Present study found that
electronic survey, followed by personal survey and mail survey method as the top
three measures adopted by all the three categories of textile exporting units. Personal
interview with individuals and telephone interview are the other methods taken into
consideration by the small, medium and large size textile units. The findings of the
study also revealed that all primary sources variable in small, medium, and large
textile exporting units are same, so it can be assumed that there is no significant
difference between small, medium and large units in terms of using primary sources
for collecting their market information. However, before reaching to conclusion it was
checked statistically using One-way ANOVA.
5.4.6 Secondary Sources used for Collecting Market Information
When the researcher asked the respondents about express their agreement or
disagreement on type of secondary source used for collecting the market information
in textile export, such as: Personal files/internal documents, Public libraries, On-line
databases, Government records/publication, Trade associations, Press and media
directories, Academic journals and newspaper. Present study found that on-line
databases, followed by personal files/ internal documents and press and media
directories were the top three methods adopted by all the three categories of textile
exporting units. Academic journals and newspapers, public libraries, Government
records/publications and trade associations were the other techniques taken into
consideration by the small, medium and large size textile units. The findings of the
study also revealed that all secondary sources variable in small, medium, and large
textile exporting units are same, so it can be assumed that there is no significant
difference between small, medium and large units in terms of using secondary sources
for collecting their market information. However, before reaching to conclusion it was
checked statistically using One-way ANOVA. One-way ANOVA result show that
there was significant difference between small, medium and large textile units with
regards to the variables ‘personal files/internal documents’, ‘On-line databases’ and
‘press and media directories’. There was no significant difference between small,
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medium, and large textile units for variables public libraries, Government
records/publication, Trade associations, Academic journals and newspaper.
5.4.7 Insurance Policy adopted by Organization in Textile Exports
When the researcher asked the respondents about insurance policies opted by their
exporting units such as open policy, special declaration policy, duty insurance policy
and seller’s contingency policy, it was found that open policy was the first choice of
all the textile exporters followed by duty insurance policy and special declaration
policy. The respondents also opted for seller’s contingency policy as an insurance
policy for their textile products. Present study also found that all insurance policies
opted in small, medium, and large textile units are given same preference, so it can be
said that there was no significant difference between small, medium and large units in
terms of insurance policies opted by them. Chi square test was applied to know
whether the type of insurance policies differ significantly in various types of units.
Chi-square result show that there was significant difference between small, medium
and large textile units for all variables except open insurance policies.
5.4.8 Competitive Advantages over other Exporters
When the researcher asked the respondents about competitive edge over others,
present study found that Indian exporters were having a number of competitive
advantages. It was observed that good product quality, followed by always on-time
delivery are the top indicators to take competitive advantage as expressed by the
respondents, and close (or old) association with your customer, well established brand
name in overseas market were not found significant predictors of getting competitive
advantage in textile exports. On the basis of the ranking given by the respondents
belonging to the small, medium and large size textile units. The study could not reveal
any significant difference in considering the factors under study for getting
competitive advantage in export business among the three categories of textile units.
Good product quality, always on-time delivery, lowest cost of production, wide range
of products manufacturing capability and fast product development capability were
the top most five factors considered by small and medium size units whereas always
on-time delivery, followed by good product quality, wide range of products
manufacturing capability, lowest cost of production, and fast product development
capability were the factors given top five ranks by the respondents belonging to large
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scale textile units for taking competitive advantage. Surprisingly, well established
brand name in overseas market was the least considered factor leading to competitive
advantage by all the textile exporting units over the rivals.
5.5 Marketing Barriers in Textile Exports
The aim of the present study identifies export marketing barriers face by textile
exporters. For the purpose of this objective present study included various items of
export marketing barriers. Analysis of these marketing barriers given below.
5.5.1 Infrastructure Problems in Exporting Textile Products
When the researcher asked the respondents about infrastructure problems in textile
exports in overseas market. Present study found that cost of electricity (Rank score
455), followed by un-availability of good quality fabric/ raw material (Rank score
683) as the biggest infrastructure problems. Telecommunication network and IT
(Rank score 1319) was given the tenth rank as infrastructure problem in textile
exports by the respondents. Movement of goods to sea ports and airports, inland
container depots, air cargo complexes (Rank score 1325) and augmentation of
transport facilities especially for decongestion (Rank score 1343) were also
highlighted as the infrastructure related issues in textile export business. Further, the
infrastructure problems were analyzed on the basis of the ranking given by the
respondents belonging to the small, medium and large size textile units. The study
found significant differences in experiencing infrastructure problems among the three
categories of textile units. Cost of power was ranked as the first and foremost problem
in textile industry by all the respondents from these three types of exporting units.
Product development capability was the second largest infrastructure problem for
small and large size textile units whereas un-availability of good quality fabric/raw
material was the second largest problem for medium size textile units. Outdated
garmenting technology was the third largest infrastructure problems by medium and
large size units whereas un-availability of good quality fabric/raw material was the
third largest problem for small size textile units. Augmentation of transport facilities
especially for decongestion was considered at eleventh positioned infrastructure
problem by all the textile exporters. Movement of goods to sea ports and airports,
inland container depots, air cargo complexes etc. by small size, Telecommunication
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network and IT by medium size and Red-tapism by the large size textile exporting
units were indicated as the least significant issue among the infrastructure problems.
5.5.2 Trade Barriers for Textile Exports
The textile exporters also face various type of trade barrier in exporting their products
to overseas countries. It was observed from the survey that regulation and standards
(Rank score 380), followed by environmental requirements (Rank score 430) were the
chief trade barriers for textile units. Other trade barriers were testing and certification
(Rank score 524), corruption and theft (Rank score 549), quality, label and packing
(Rank score 593), and transport cost (Rank score 674). Further, the trade barriers were
also analyzed on the basis of ranking given by the respondents belonging to the small,
medium and large size textile units, the present study found significant differences in
facing the trade barriers among the three categories of textile units. Regulations and
standards and environmental requirements of the countries where the textile products
are to be exported, are first and second big barrier for all type of textile units.
Transport cost is the least significant barrier for small and medium size textile units,
whereas testing and certification was the least significant barrier for large textile units.
5.5.3 Tariff and Non-Tariff Barriers for Textile Export
Indian textile exporters face various types of tariff and non-tariff barriers. These are
import quota, licensing, exchange and other financial controls, prohibitions,
discriminatory bilateral agreement, advance deposit requirement, antidumping duties,
subsidies and other aids, government procurement policies, and competition. Present
study found licensing (Rank score 421) and import quota (Rank score 470) as two big
tariff and non-tariff barriers in textile exports. Whereas advance deposit requirement
(Rank score 1109) and prohibitions (Rank score 1036) were least significant barriers
as indicated by the respondents in textile export. Further, these barriers were analyzed
on the basis of the ranking given by the respondents belonging to the small, medium
and large size textile units. Overall, the present study indicated that licensing is the
biggest barrier for small and medium type of textile units, whereas import quota is the
largest barrier for large type of textile units.
5.5.4 Problems in Cross Border Transactions for Textile Export
The textile exporters face various types of problems related to cross border
transactions in textile exports. The findings of the study revealed that currency
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convertibility (Rank score 485), followed by Political instability (Rank score 680) and
unfavorable attitude towards the foreign buyers (Rank score 789) were the three big
hurdles in cross border transactions faced by the exporters. However, professional
service (Rank score 1699), memorandum of understanding and treaties with the
destination countries (Rank score 1599) and local management and partner (Rank
score 1594) were the three cross border transaction problems least bothered by these
sampled exporters. Based on the analysis, the researcher establishes that political
stability and currency convertibility are the top most problem related to cross border
transaction for all type of textile units, whereas economic growth is largest problem in
cross border transaction for small and large units, and attitude towards the foreign
buyers is biggest problem for medium textile units. Local management and partner
was the least significant problem in cross border transaction for small and medium
textile units, whereas Memorandum of understanding and treaties with the destination
countries was the least viewed problem by large textile units. The problem related to
professional service was least significant problem for all type of textile units.
5.5.5 Commercial Risk for International Transaction in Textile Export
Indian textile exporters also face various types of commercial risks in textile exports.
Such as government regulation, country financial risk, currency interest rate volatility,
political and social disturbances, spread of epidemics like world flu etc. Product
quality and safety problem was the other commercial risk in international transaction
in textile exports. It was observed that government regulations (Rank score 387),
followed by country financial risk (Rank score 491) and political and social
disturbances (Rank score 528) were the three major commercial risks as indicated by
the exporters under study, whereas currency interest rate volatility (Rank score 550),
product quality and safety problem (Rank score 798), activist attack on global brand
(Rank score 913), natural disasters (Rank score 965), terrorist attacks (Rank score
975) and spread of epidemics like world flu (Rank score 1143) etc. were other
commercial risks in textile exports in their respective order. Government regulation
was found largest commercial risk for small and medium size units, whereas Political
and social disturbances for large textile units as a major commercial risk.
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5.5.6 Documentation Problems Experienced in Custom Clearance
The textile exporters faced various types of documentation problems while exporting
in overseas countries. Present study found that issuance of commercial invoice (26.9
per cent) and issuance of photo copy of income tax registration certificate (32.8 per
cent) as the major documentation problems in textile exports. The other
documentation problems were issuance of copy of export license (15.5 per cent),
issuance of packing list (13.9 per cent), issuance of foreign exchange declaration
forms (11.9 per cent). Based on the ranks given to these problems by the respondents
from small, medium and large scale textile exporting units, issuance of commercial
invoice for small and large size units was the first and for medium size units the
second problem encountered in their custom clearance process. Whereas issuance of
copy of export license was ranked first by medium size and second rank was given to
the problem by the small size textile units. Issuance of photo copy of income tax
registration certificate was realized as documentation problem at second rank by the
large size units under study which was at third position as experienced by the small
and medium size textile exporting units. The present study establishes that issuance of
commercial invoice was the biggest documentation problem for small and large
textile units whereas issuance of copy of export license for medium textile units.
Issuance of custom declaration forms was the least considered documentation
problem for medium and large textile units whereas issuance of certificate of origin
for small textile units.
5.6 Trade Incentives Provided by Indian Government
Government of India is determined to establish India as global sourcing destination
for textile and clothing industry. In this regard various steps are taken by government
of India and state government to promote textile exports from India. The government
of India has been continually supporting the textiles exports sector through various
policy initiatives to enable the sector to increase market share in the global textiles
markets. Government is also implementing various schemes in the foreign trade
policy 2009-14 for development of the textile industry in India. Government of India
has also introduced several exports promotional measures in the union budget 2012 -
13 for promote textile exports from India.
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5.6.1 Export Finance Schemes Availed/Offered by the Government of India
When the respondents were asked to indicate various types of export finance schemes
offered by the Government of India to textile exporters which they preferred. Present
study was found that on line credit to exporters (56.67 per cent respondents), finance
scheme for export of goods for exhibition and sale (54.67 per cent respondents), and
advance against retention money (42 per cent respondents) were the three top most
schemes rated by the textile exporters). Interest rate subvention scheme (38.67 per
cent respondents), advance against export bills purchased, discounted, or negotiated
(29.33 per cent respondents), rediscounting of export bills abroad scheme (23.33 per
cent respondents), export credit guarantee corporation maturity export factoring
scheme (20.67 per cent respondents), advance against for duty drawback receivable
from government (16.67 per cent respondents), International export factoring scheme
(6.67 per cent respondents), advance against undrawn balances on export bills (4.67
per cent respondents), gold card scheme (2.67 per cent respondents) and factoring/
forfeiting scheme for conversion of credit sale into cash sale (1.33 per cent
respondents) were the other schemes considered by the respondents for getting export
finance assistance in their export business .
5.6.2 Market Access Initiative Schemes Availed/Offered by the Government of
India
Market Access Initiative Schemes included Focus Market Scheme, Focus Product
Scheme, Market Linked Focus Product Scheme for textile products, and Vishesh
Krishi and Gramudyog Yojana (VKGUY) etc. Survey revealed that 84 per cent
respondents agree with Focus Market Scheme (FMS), 42 per cent with Market Linked
Focus Product Scheme (MLFPS), 29.33 per cent with Special Focus Market Scheme
(SFMS), 26.77 per cent with Vishesh Krishi and Gramudyog Yojana (VKGUY), and
25.33 per cent with Focus Product Scheme (FPS) .
5.6.3 Schemes Availed/Offered by the Government of India for boosting the
product
The respondents were asked to express their agreement or disagreement on getting
assistance from the Government of India in boosting the product. Majority of the
respondents (82.7 per cent) accepted that they have availed the Government assistance
for boosting the product and only 26 respondents (17.3 per cent) were not getting the
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Government assistance for boosting the product. Further, to those who availed the
Government assistance, a list of various schemes offered by the Government of India,
such as Export promotion capital goods scheme, Duty drawback scheme, Duty free
replenishment certificate scheme, Duty entitlement passbook scheme, Annual advance
license scheme, Generalized System of Preferences (GSP) scheme, Development of
Mega Cluster (DMS) scheme, and Textile Worker’s Rehabilitation Fund (TWRF)
scheme was presented and asked to mark only those, availed by the exporters .The
respondents indicated Export Promotion Capital Goods (EPCG) Scheme (95.16 per
cent) and Duty Drawback Scheme (73.39 per cent) as the most important schemes
provide by the Indian Government. Other important scheme offered from Government
of India to textile exporters are Development of Mega Cluster (DMS) Scheme (43.55
per cent respondents), Generalized System of Preferences (GSP) Scheme (39.52 per
cent respondents), Annual advance license scheme (28.33 per cent respondents),
Duty entitlement passbook scheme (14.52 per cent respondents), and Textile
Worker’s Rehabilitation Fund (TWRF) scheme (10.48 per cent respondents), and
Duty free replenishment certificate scheme (5.65 per cent respondents). Based on the
findings of present study, it can be concluded that EPCG was one of the most
successful comprehensive schemes which facilitate the import of new and second
hand machines.
5.7 TUFS Scheme and Constraints Associated with TUFS Scheme
When asked the researcher to the respondents about availing the technology up-
gradation fund scheme for the modernization and up-gradation of their textile units.
Present study found that 57.3 per cent exporters admitted that TUFS has served the
purpose of modernization in their organizations. However, 42.7 per cent respondents
were not of the view that TUFS served the purpose. All the respondents were asked to
rate the constraints such as: information on TUFS, processing of case by the
Government, availability of funds from financial institution, documentation
requirements, interest grant/subsidies from Government, and processing of case from
financial institutions in the successful implementation or failure of TUFS. The study
observed that complexities in interest grant/subsidies from Government (32.1 per
cent), followed by documentation requirements (28.4 per cent) and availability of
funds from financial institution (15.2 per cent) were the three main constraints where
maximum exporters strongly agree to and the Government must consider improving
18
the situation. Many of the respondents agreed to that obtaining information on TUFS
(3.28 per cent) and processing of case from financial institutions (00 per cent) is still a
difficult task. Surprisingly, many respondents were also found neutral in perceiving
the constraints of the scheme. Based on the ranks obtained from the mean scores as
given by the respondents from small, medium and large scale textile exporting units,
complexities in interest grant/subsidies from Government was found the main
constraint in successful implementation of TUFS as viewed by all the exporters.
Further, the six constraints as presented in the study were used to test whether
statistically the views of respondents belonging to small, medium and large size
textile units are significantly different or not. ANOVA result show that no significant
main effects for the three categories of textile units (F = 0.239 and F=1.483) for the
variables ‘documentation requirements’ and ‘interest grant/subsidies from
Government’. With regards to the variables ‘information on TUFS’, ‘processing of
case by the Government’, ‘availability of funds from financial institution’, and
‘processing of case from financial institution’, statistically significant main effects
were found for the three categories of textile units. The above results indicate that
differences among small, medium and large scale units were detected for some of the
constraints as recognized in the success or failure of TUFS.
5.8 ITP Scheme and Benefits of the Integrated Textile Parks (ITP) Scheme
When asked the respondents about availing the Integrated Textile Parks (ITP) scheme
for the growth of their textile units. Present study found that only 38 per cent
exporters admitted that they opted for the ITP scheme whereas, 62 per cent
respondents were not of the view that ITP serves the purpose of growth in their
organizations. Further, all the respondents were asked to rate the benefits such as:
identification and procurement of suitable land, exemption of stamp duty etc. for the
units located in the ITP, flexible and conducive labour environment for the units
located in the ITP, power, water and other utilities to the ITP, financial support from
different financial institution, assistance in project formulation and implementation for
the growth of textile industry. Study observed that power, water and other utilities to
the ITP (15.1 per cent), followed by tax exemptions (10.9 per cent) were the two main
benefits where maximum exporters strongly agree to for the growth of textile
industry. Identification and procurement of suitable land (3.6 per cent), exemption of
19
stamp duty (9.62 per cent) and flexible and conducive labour environment (5.56 per
cent) for the units located in the ITP were the other benefits as viewed by many of the
respondents. Surprisingly, many respondents were also found neutral in perceiving the
benefits of the scheme. Further, the ten benefits of ITP scheme as presented in the
study were used to test whether statistically the views of respondents belonging to
small, medium and large size textile units are significantly different or not. ANOVA
result show that significant main effects for the three categories of textile units for the
variables ‘identification and procurement of suitable land’, ‘buildings for common
facilities’, ‘financial support from different financial institution’, and ‘Assistance in
project formulation and implementation’. With regards to the other variables,
statistically no significant main effects were found for the three categories of textile
units. The above results indicate that differences among small, medium and large
scale units were detected for some of the benefits as recognized for the growth of
textile industry.
5.9 Evaluation Criteria to Assess Potential of Export Market
Indian exporter were also asked to assess different types of criteria for evaluating the
potential of export market such as market selection criteria, market potential, shipping
cost and time, potential competition, service requirement, and product fit. The finding
of the study revealed that market potential (Rank score 338), market access (Rank
score 431), were the major criteria for evaluating the textile export market. Market
selection (Rank score 530), potential competition (Rank score 645), shipping cost and
time (Rank score 694), and service requirement (Rank score 753) are the other criteria
used by these exporters. Surprisingly, product fit (Rank score 809) was given the last
rank (seventh) as evaluation criteria for assessing the market potential in textile
exports. Further, the evaluation criteria were analyzed on the basis of the ranking
given by the respondents belonging to the small, medium and large size textile units.
Present study found that there were differences in using the market potential
evaluation criteria among the three categories of textile units. Market potential and
market access were assumed the first and second evaluation criteria by the small and
medium size units whereas large size textile units considered market access firstly,
followed by the market potential. However, market selection criteria were ranked at
third position by all the respondents from these three types of exporting units.
Potential competition and shipping cost and time were recognized at fourth and fifth
20
position by small and medium size units whereas shipping cost and time, followed by
potential competition were on these positions as rated by the large size textile units.
Again, service requirement and product fit were the last evaluation criteria (i.e. at
sixth and seventh position) of all the respondents from these three types of exporting
units.
6. Conclusions
Present study concludes that in the post MFA phase era, Indian textile firms are
becoming competitive in the changed business environment. It has evoked diverse
reaction from different textile exporters. While majority of exporters were happy with
the development, other is getting cautious. Some are branching out while others are
concentrating on niche products. However, a majority of the exporters perceive that it
will be positive outlook to India, as well as to their organizations.
Present study also concludes that Indian textile exports heavily dependent to
European and the US markets. Sector-wise analysis of the export performance of
Indian textile sector revealed that cotton is the most important fiber from India in
overseas market. So to achieve these priorities with appropriate technology is a must.
India has an inherent advantage in this sector because of abundant availability of raw
material, long tradition of craftsmanship and design and presence across the entire
value chain. The export competitiveness of this sector is very significantly affected by
the cost and reliability of power supply, logistic and transaction costs. Indian textile
Industry some inherent advantages like excellent resource base, availability of cheap
labor, presence in the value chain which is making textile exports globally
competitive in comparison to other countries. Indian government is promotional in
boosting textile exports from country through various export promotion schemes like
Scheme of Integrated textile scheme, Technology Up-gradation Fund, Export
Promotion Capital Goods (EPCG) scheme, Duty draw back scheme and Export
Oriented Units (EOUs)/SEZs Scheme yet there have been certain constraint in
implementation issues that had restricted the ability of Indian textile industry to
harness its potential globally. The study outlines the view of textile export units in
terms of difficulty faced by them that restricts their ability to compete globally.
21
6.1 Infrastructure
The most prominent problem existing for Indian textile export industry is of
infrastructure mainly due to scarcity and cost of electricity, distance from sea port,
unavailability of frequent freight trains, congestion at the port or procedural hassles at
different levels, there is definitely lack of coordination and commitment from
government department who provide vital support services to promote the export
from country. There is definite need to provide single window for all logistic
problems. Although private participation is initiated in this direction but results are
awaited and can only hope for better future prospects.
6.2 Supply Chain Management (SCM)
The Indian textile industry has one of the longest and most complex supply chains in
the world, with as many as fifteen intermediaries between the farmer and the final
consumer. Each contributes not only to lengthening of lead times, but also adding to
costs. By the time cotton reaches from farmer to the spinning unit, its cost inflates
many folds. By the time it reaches to the final consumer in overseas market, its costs
increased substantially. This creates hindrance factor to penetrate global market. The
industries would need to develop this SCM perspective and rationalize costs at every
stage in the entire supply chain, and not only within their firms, or between
themselves and their vendors and suppliers.
6.3 Cost of Raw Material
Indian cotton prices have been lower than international cotton prices of comparable
varieties due to ban on imports and control on exports of cotton. Indian prices
reported to be lower than their international counterpart. This gave a cost advantage to
Indian textile exporters. Major issue with the textile exporters include uncertain
demand from clients, product life cycles are short and competitive intensity is high.
6.4 Low Labor Cost
India textile sector enjoys favorably across the developing countries in terms of low
labour costs and skilled workforce. Quite often high wages are paid to skilled laborers
as remuneration for the high levels of skill and productivity which, in turn are
important factors of export competitiveness. It is identified that export oriented
garment unit pay higher wages to their labour than the domestic market oriented units.
22
This difference in wage rates is attributed to the unique and Indispensable skills of
designers, pattern makers and craftsmen, as well as to better-trained cutters and tailors
employed by exporting firms.
6.5 Labor Laws Relates Issues Affecting Textile Exports
Strict labor laws in India make it virtually impossible for companies to shed labor. It
also introduces unfair discrimination against large companies who are forced to
comply with the labor laws relating to minimum wages, social security, contractual
obligations, nature of terminations, internal transfers/job rotation, right to leaves and
regulations regarding working hours etc., while the smaller ones (like powerloom)
manage to evade compliance with such regulations. This introduces a competitive
edge to powerloom compared to organized mills, and has led to decline of mills and
proliferation of powerloom in India, with all its attendant adverse implications for
competitiveness of the textile and clothing sector chain.
6.6 Government Policy Framework for Textile Sector
Many researchers have recognized that the origin of a substantial number of exporting
problems is rooted in the external environment. The nature of these problems tend to
vary widely: distinctive foreign consumer preferences, unfamiliar business protocols
and practices, the imposition of tariff barriers and regulatory import controls by
overseas governments, fierce competition, exchange rate fluctuations and limited hard
currency for international trade. Government of India is focusing toward textile export
products to make them globally competitive. Some of the government policies that
have a bearing on global competitiveness of the Indian textile sector are briefly
outlined below.
6.6.1 Excise Duty
The excise duties applicable to the textile industry are the Basic Excise Duty (BED),
Additional Excise Duty (AED) at the rate of fifteen per cent applicable on cotton
yarn and on all man-made/ blended yarn and fibre and AED in lieu of sales tax
applicable on power processed fabric. However, the duty structure is biased since duty
incidence falls disproportionately on different segments of the Indian textile and
clothing sectors. However, Government of India is looking to reform the excise duties
in textile sector in the current Union Budget.
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6.6.2 Technology Up-gradation Fund
Owing to the impact of globalization, Indian textile exports have been forced to
compete with global players in terms of quality and pricing of products. While
abundant human resources have helped the industries to survive to a certain extent,
Indian textile manufacturers are realizing that product quality and economies of scale
can be reaped only with sophisticated manufacturing facilities. The TUF scheme has
helped overcome technological obsolescence in the textile industry by infusing capital
for modernization of the infrastructure and machinery, which in turn enhances local
sourcing options for foreign apparel retailers. Under the TUF scheme, manufacturing
units are eligible for long and medium term loan from IDBI, SIDBI and IFCI, at
interest rates that are 5 per cent lower than the normal lending rates of banks. The
utilization of funds under this scheme has been disappointing. However, the one
positive observation is that processing sector-which is the least modernized in the
entire value chain- is also among the largest recipients of the loans. In textile exports
special preference for the small scale industries prevents units for making significant
investments and expanding their businesses and during recession the large textile
exporting firms were not willing to expand capacity. However exporters availing the
scheme issues in documentation and getting necessary documentation for the same.
6.6.3 Scheme for Integrated Textiles Parks
Though the Indian textile industry has its inherent advantages, infrastructure
bottleneck is one of the prime areas of concern. To provide the industry with world-
class infrastructure facilities for setting up their textile units, the Scheme for
Integrated Textile Park (SITP) was availed by small and medium firm to locate their
units in textile parks of international standards and project tit as potential growth
centers. Taking into consideration the response to the scheme and the opportunities
for the growth of textile industry in the quota free regime but documentation, red
tapism, rentals and stringent non flexible norms for the units located in the parks are
acting as bottleneck to generate its truly potential.
7. Suggestions
Even after the implementation of various textile policies in India, textile sector is
facing increased competition from the multinational companies and survival of the
24
fittest has been the buzz-word against the backdrop and in the light of the present
study, the following strategies are recommended for the promotion of the textile
sector in India for achieving the export targets for each of the product groups as
outlined below.
7.1 Government Level Initiatives
A substantial increase in production capacities is required to avail economies of scale.
Hundred per cent depreciation may be allowed on capital expenditure on textile
machinery for income tax purpose so as to encourage fresh investment. Rising input
costs are a factor affecting exports of garments worldwide. Since India has the
advantage of having its own source of raw material, this advantage needs to be
leveraged so as to gain a competitive edge over other countries. The exports of cotton
and cotton yarn need to be regulated in a manner which protects the domestic
industries from the major fluctuations in raw material prices. A huge potential exists
for increasing exports by undertaking capacity building in this sector. The high
custom tariffs in the importing countries is an important limiting factor in expanding
our exports. Efforts are required to negotiate with these countries to reduce the tariff
structure. Dispense with the requirement of maintaining the average export
performance under the EPCG scheme. Exempt capital goods supplied indigenously
under the EPCG scheme from Terminal Excise Duty (TED). One of important
problem faced by textile sector is that of finance. In order to overcome the problem,
specialized bank branches for textile industries are to be opened by the banks to
facilitate operation of large number of textile loan/credit account. Specialized
branches have to be set up in clusters having concentration of textiles. In this
connection Government of India has to establish the modernization program
assistance of soft loan schemes. Most of the entrepreneurs are not aware of the
incentives; assistance and subsidies provided to the various networking banking sector
units by the Central and State Government. The government should give wide
publicity to ensure better awareness. There is also a need to encourage large-scale
production, particularly in manmade and garment sectors. Disbursement of credit,
supply of cheaper raw materials, supply of electricity at reasonable rates, promoting
better capacity utilization, flexible labor laws, easy entry exit norms for the firms are
some of the basic policy measures which would help the Indian textile industry
become more cost effective. Further, it would be prudent to focus on selected states
25
having comparative advantage in a specific industry. Such measures could help
convert the post MFA challenges into an opportunity rather than a threat.
Infrastructure plays a very important role in export of textile industry. The
government should give top priority for creating basic infrastructural facilities like
road, power, transport and communication to the backward areas of our country. The
problem of shortage of power is wide spread throughout the country and the textile
units are hit hard by this. The government should take care of this and assure
uninterrupted power supply as provided to the large scale units. State government
should ensure uninterrupted supply of electricity to these textile parks. For this state
government may invite private players for power generation and distribution. This
will ensure continuous supply to industry and government can concentrate on
domestic and agriculture sector. Also, power theft is very high in industry. State
government can shed off this segment and give it to private players. There are various
power generation companies in India who can do this job and sometimes the tariff is
even lesser than government tariffs due to better management practices. Almost all
units in textile sector carry on production with outdated and obsolete technology.
Another major problem, facing the industry is the procurement of raw materials. Open
market purchase by the textile units leads to high cost of production and competitive
inefficiency. Allocation of raw materials to textile industries should be based on
capacity utilization. In a competitive environment the share of labor input is higher in
most of the product groups followed by capital, therefore the results emphasize the
importance of skilled labor component for the industry. Foreign direct investment
should be allowed through automatic route in textile sector. This is must for up
liftment for the textile industry. Although inviting FDI in textile sector would not be
an easy task. Indian infrastructure is too poor to build confidence in overseas
investors. International certification or textile industry is going to be compulsion in
times to come. In order to export textile products to Europe and US, it is likely to be
must to have certain international certification. Ministry of textile must encourage
textile units’ or rather whole textile industry to obtain this international certification.
This will build confidence in overseas buyers on compliance of various sensitive
issues. Ministry of textile should constitute an agency of international repute to
provide complete package on consultancy, audit and certifications. There must be a
series of awareness programs among textile exporter on various hedging tools and
techniques to cover transaction risks and ensure safeguard from exchange rate
26
fluctuation. Banks could be major participant in this program. This will help exporters
enter into long term agreements and provide price stability which is must in
international trade. Governments do not solely impose these procedural requirements.
Also independent organizations such as banks, shipping organizations and insurance
companies, have their own procedures. As the intense competition in the international
textile product market grows each year, the high quality advantage and brand
advantage of textile exports will be a major element in marketing strategy. Under
TUFS scheme spinning sector has played dominant role in modernization process.
International certification recognized globally is required the industry create
confidence and trust among foreign clients. In order to export textile products to
Europe and US, it is likely to be must to have certain international certification.
Ministry of textile must encourage exporting to obtain these international
certification. This will build confidence in overseas buyers on compliance of various
sensitive issues. Ministry of textile should constitute an agency of international repute
to provide complete package on consultancy, audit and certifications.
7.2 Firm Level Initiatives
Small and medium textile exporting firms need to focus on quality of products to
survive in global market. For the firms selling in the mature market where product
differentiation is small, the cost reduction will be acting as important differentiator.
Small and Medium enterprises need to focus on quality to act as important
differentiator. Large exporting firms can focus on subcontracting to make them more
competitive and will act in terms of cost reduction , quality and availability. Firms can
explore the opportunity to customized the textile product as per client required and
accordingly the localization of products should be done by exporting firms. Marketing
knowledge should be developed as it is dependent on the relevance and depth of
marketing information available to the firm. Textile firms that use relevant, accurate
and timely information are in a better position to respond to export problems.
Information about exporting and more specifically market information was mentioned
as the most serious problem of manufacturing firms in developing countries. Getting
concrete information on prospective foreign markets is essential before exporting can
occur. The study identified several other marketing barriers that can inhibit exporting,
for instance, pricing of the product in the international market. Textile exporters rely
on international competitive prices as a benchmark and do not ask for premiums for
27
exchange and extra ordinary risks so premium can be charged by the firms to compete
globally and earn foreign earnings. Deficient advertising and promotion programs are
also mentioned as other factors that constrain export activities which needs to be
explored. There is significant cultural distance between Indian and western countries
so to be successful in a foreign market textile exporters should choose a lower control
entry mode when country risk is high. The textile firms exporting in overseas market
need to focus on cultural distance, making it a less salient challenge. Indian textile
exporters needs innovative in product and production techniques. This is the greyest
area of Indian textile industry. They need to be more innovative and start designing
new product mix right from the yarn stage. They must learn the chemistry of colors
combinations, adopt designs from nature, understands themes of designs which are
hot topics these days for designers. International designers do not speak the language
of designs; but of themes and follow the nature. Then they must respond at the speed
of electricity so that customers feel attended and must get your attention. Then third is
the quality consciousness. Manufacturers must consider the retail price at which this
garment will be sold to ultimate consumer and not the price at which they are selling
it to retailer. There is huge difference in the retail price and buying price. Most of
times the price of garment at which garment is sold to retailer are mere forty per cent
or less than the retail price at which it is sold to consumer. The consumer must get
value for money it must be delivered through delivering optimum quality standards.
Lack of information about export procedures has been mentioned as an export barrier
in many studies. A firm that wishes to enter the export market or intends to increase
its export activity will have to acquire the knowledge and skill to deal with
administrative procedures. Exporting requires knowledge about export procedures.
One of the most cited obstacles with regard to exporting concerns the time and
paperwork required to comply with foreign and domestic market regulations.
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