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RMG Sector In Bangladesh| 1
“Analysis of RMG Industry, Bangladesh”
Independent University, Bangladesh
Submitted to
Dr. Naz...
RMG Sector In Bangladesh| 2
Letter of Transmittal
3rd
December, 2014.
Dr. Nazmul Amin Majumdar
Strategic Management (Sec-0...
RMG Sector In Bangladesh| 3
Acknowledgement
The ideal way to commence documenting this project would be to extend me profo...
RMG Sector In Bangladesh| 4
Executive Summary
This is strategic management report on Bangladesh garments industry. The mai...
RMG Sector In Bangladesh| 5
Table of Contents
Subject Page No
Introduction 06
Rational of the Study 06
External Analysis o...
RMG Sector In Bangladesh| 6
Introduction
The Ready-Made Garments (RMG) industry contributes to the Bangladesh economy in a...
RMG Sector In Bangladesh| 7
To identify the internal factors that influences the readymade garments.
To find out the marke...
RMG Sector In Bangladesh| 8
study of human populations in terms of size, density, location, age, sex, race, occupation,
an...
RMG Sector In Bangladesh| 9
Political analysis:
Among various features of our political situation, most noticeable and imp...
RMG Sector In Bangladesh| 10
billion. The economy has grown at the rate of 6-7% p.a. over the past few years. More than ha...
RMG Sector In Bangladesh| 11
management. So, business organizations can thereby have an inclusive financial, commercial an...
RMG Sector In Bangladesh| 12
investment friendly atmosphere for the brand names to outsource their production process in
B...
RMG Sector In Bangladesh| 13
firms initiative to step into the supply chain. Bangladesh gives the suppliers a large scale
...
RMG Sector In Bangladesh| 14
Moreover, new entrants would have to gain an advantage against Bangladesh whose growth ratio
...
RMG Sector In Bangladesh| 15
substituted to either China or India. Also, the substitute cost is not that high for buyers t...
RMG Sector In Bangladesh| 16
organization operates in either a positive or negative way. Once again it is an internal even...
RMG Sector In Bangladesh| 17
2.2 SWOT Analysis
The usefulness of SWOT analysis is not limited to profit-seeking organizati...
RMG Sector In Bangladesh| 18
o Weakness
 We do not have enough raw material of our own, as a result we have to import
raw...
RMG Sector In Bangladesh| 19
o Threats
 China is a most likely the biggest threat for Bangladesh as this country has
rela...
RMG Sector In Bangladesh| 20
Vigorous marketing and promotional drives would be needed to break into markets for other
RMG...
RMG Sector In Bangladesh| 21
finally removed in the Industrial Policy 2005, the Bangladesh RMG sector may have missed out
...
RMG Sector In Bangladesh| 22
Conclusion
Till now 80% of our respondents enjoy the duty- free market access and 20% of the ...
RMG Sector In Bangladesh| 23
Since, our RMG sector is facing huge competition in the world market as because of abolition ...
RMG Sector In Bangladesh| 24
has been spent on training of staff with skills that are transferable across the industry. Be...
RMG Sector In Bangladesh| 25
References
Annual Reports:
1. BGMEA‟s Annual Report, 2006-2007
2. Ministry of Commerce Bangla...
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Report on RMG Industry in Bangladesh.

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Analysis on RMG Industry in Bangladesh.

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Report on RMG Industry in Bangladesh.

  1. 1. RMG Sector In Bangladesh| 1 “Analysis of RMG Industry, Bangladesh” Independent University, Bangladesh Submitted to Dr. Nazmul Amin Majumdar Faculty of Strategic Management (MBA 550, Section-02) School of Business Independent University, Bangladesh Submitted by Farabi Ahmed ID: 121-121-8 Date of Submission: 3rd December, 2014
  2. 2. RMG Sector In Bangladesh| 2 Letter of Transmittal 3rd December, 2014. Dr. Nazmul Amin Majumdar Strategic Management (Sec-02) Faculty Member of School of Business, Independent University Bangladesh. Subject: A report on Bangladesh Ready Mate Garments Industry Analysis. Dear Sir, With due respect, I would like to inform you that I have completed the Strategic Management report on “Bangladesh Ready Mate Garments Industry Analysis”. It is immense pleasure for me because I have successfully completed this report by receiving your continues guideline as a supervisor. I have endeavored to prepare this report from my level of best to accumulate relevant & insightful information. If I am included any wrong information in unconsciously so please forgive me as your student. It is a great experience for me to make this report. I have tried to make the report comprehensively within the schedule time & limited recourse. You‟re sincerely Farabi Ahmed ID: 121-121-8
  3. 3. RMG Sector In Bangladesh| 3 Acknowledgement The ideal way to commence documenting this project would be to extend me profound gratitude to Almighty Allah and all those great minds that have touched this project in the path of its success, encouraged me and guided me .This Report has proved to be a wonderful opportunity to know about a particular industry. It was fortunate for me to do this project under the guidance of Dr. Nazmul Amin Majumdar. I shall remain indebted to him for his assistance and sustained encouragement throughout the semester. His practical insight and valuable support from the beginning was extremely obliging to me. Last but not the least; I would like to thank my respected teacher for helping me in this assignment without which the project would not have been accomplished successfully.
  4. 4. RMG Sector In Bangladesh| 4 Executive Summary This is strategic management report on Bangladesh garments industry. The main objective of the report is to know briefly about the readymade garments industry of Bangladesh, to know the external environment of the industry which are mainly influence the overall industry and the internal environment in which it is discussed that what a company need in order to compete their business in RMG sector of Bangladesh. By conducting Macro environment analysis, Porter's Five Forces analysis I found that, Bangladesh Garments industry is very much locative in terms of the external and internal environment analysis but after the RANA PLAZA incident everyone thought that the industry is going to suffer and also thought that the other countries like China and India will take the benefits, due to the lower production cost, Bangladesh plays a major role in substituting the Chinese and Indian manufacturers. This opportunity has to be nurtured by the Bangladeshi industry to ensure its growth and profitability. Bangladesh possesses the ultimate weapon of cheap labour and thus at times, it has to use it to substitute opportunities from its competitors. A close examination of the SWOT analysis reveals that the sample companies as well as the RMG sector has threat from the Socio-economic sector , competitor sector , supplier sector, ecological sector and customer sector. The sample companies have strength in the production and operation sector, corporate resource and personnel sector. Since the sample companies are private limited companies and do not provide balance sheet data we could not diagnose about the financial health of the sample companies. However, our sample companies have shown satisfactory performance due to distinctive competitive advantage in the personnel sector. But there is also threat from the personnel sector because labours go on strike all on a sudden and creates unrest in the factory. The RMG industry is the only multi-billion-dollar manufacturing and export industry in Bangladesh. Whereas the industry contributed only 0.001 per cent to the country‟s total export earnings in 1976, its share increased to about 75 per cent of those earnings in 2005. Bangladesh exported garments worth the equivalent of $6.9 billion in 2005, which was about 2.5 per cent of the global total value ($276 billion) of garment exports. The country‟s RMG industry grew by more than 15 per cent per annum on average during the last 15 years.
  5. 5. RMG Sector In Bangladesh| 5 Table of Contents Subject Page No Introduction 06 Rational of the Study 06 External Analysis of RMG Sector 1.1 Micro Environment Analysis 1.2 Five Forces Model & Competition (Comments) 07 08 11 Internal Analysis of RMG Sector 2.1 Core Competence 2.2 SWOT Analysis 2.3 Strategy Analysis 2.4 Key Success Factors for the Industry (Comments) 15 16 17 19 21 Conclusion 22 Recommendations 22 Reference 25
  6. 6. RMG Sector In Bangladesh| 6 Introduction The Ready-Made Garments (RMG) industry contributes to the Bangladesh economy in a distinctive manner. The last 20 years witnessed unparalleled growth in this sector, which is also the largest exporting industry in Bangladesh. It has attained a high profile in terms of foreign exchange earnings, exports, industrialization and contribution to GDP within short span of time. The industry plays a significant role in terms of employment generation. Nearly two million workers are directly and more than ten million inhabitants are indirectly associated with the industry. In addition to its economic contribution, the expansion of RMG industry has caused noticeable changes by bringing more than 1.12 million women into the workforce. Hence it is quite apparent that this sector has played a massive role in the economic development of the country. RMG‟s contribution in terms of GDP is highly remarkable; it has reached 13 percent of GDP, which was only about 3 percent in 1991. It also plays a pivotal role to promote the development of other key sectors of the economy like banking, insurance, shipping, hotel, tourism, road transportation, railway container services, etc. One of the key advantages of the RMG industry is its cheap labor force, which provides a competitive edge over its competitors. The sector has created employment opportunities for about two million people of which 70 percent are women who mostly come from rural areas. Thus the industry helps in the country‟s social development, women empowerment and poverty alleviation. Currently RMG earns the lion's share of foreign exchange earnings. Rational of the Study The objectives of the enterprise analysis are the following. To know briefly about the readymade garments industry of Bangladesh. To identify the external factors which influences the readymade garments industry of Bangladesh? To identify the porter's five forces to know whether the industry is locative for the new investor or not.
  7. 7. RMG Sector In Bangladesh| 7 To identify the internal factors that influences the readymade garments. To find out the market growth of readymade garments industry of Bangladesh. To know the strategy that the industry is following to compete. To identify the SWOT of readymade garments industry of Bangladesh. External Analysis of RMG sector A business does not operate in a vacuum. It has to act and react to what happens outside the factory and office walls. These factors that happen outside the business are known as external factors or influences. These will affect the main internal functions of the business and possibly the objectives of the business and its strategies. The central components of external analysis are:  Industry structure: Industry is a group of organizations producing a product(s) or providing a service(s) which is (are) close substitutes. The industry environment has a more direct effect on the individual organization.  Strategic group mapping: The concept of strategic group mapping is a competitor grouping using similar strategies that differ from other industry groups within an industry.  Competitor analysis: Though a business does not want competition from other businesses, inevitably most will face a degree of competition. The factor that affects most business is the degree of competition – how fiercely other businesses compete with the products that another business makes.  Critical success factors: An industry‟s key factors are those things that most affect industry members ability to prosper in the marketplace. There are three questions to help in identifying CSFs.  Macro environment/ General environment: There are six major macro environment factors also known as six sigma; cultural, demographic, economic, natural, political, and technological. The Socio-cultural environment includes institutions and other forces that affect the basic values, behaviors, and preferences of the society-all of which have an effect on consumer marketing decisions. The demographic environment includes the
  8. 8. RMG Sector In Bangladesh| 8 study of human populations in terms of size, density, location, age, sex, race, occupation, and other statistical information. The economic environment consists of all factors-such as salary levels, credit trends, and pricing patterns- that affect consumer spending habits and purchasing power. The Global environment involves political events, global markets, overseas financial markets, wars, political regimes, trade blocs, trade boycotts, changing cultural patterns. The political environment includes all laws, government agencies, and lobbying groups that influence or restrict individuals or organizations in the society. The technological environment consists of those forces that affect the technology and which can create new products, new markets, and new marketing opportunities. 1.1 Macro Environment Analysis of RMG industry, Bangladesh In Bangladesh readymade garments industry have large market size. The Ready-Made Garments (RMG) industry occupies a unique position in the Bangladesh economy. It is the largest exporting industry in Bangladesh, which experienced phenomenal growth during the last 25 years. By taking advantage of an insulated market under the provision of Multi Fiber Agreement (MFA) of GATT, it attained a high profile in terms of foreign exchange earnings, exports, industrialization and contribution to GDP within a short span of time. The industry plays a key role in employment generation and in the provision of income to the poor. Nearly four million workers are directly and more than twelve million inhabitants are indirectly associated with the industry. Over the past twenty five years, the number of manufacturing units has grown from 180 to over 4000. The sector has also played a significant role in the socio-economic development of the country. A PEST Analysis can help us to know about the external environment situation of a particular industry of a country. The below analysis is the PEST analysis for the RMG industry of Bangladesh.
  9. 9. RMG Sector In Bangladesh| 9 Political analysis: Among various features of our political situation, most noticeable and important conditions may be identified as follows:  Absence of democratic political culture  Absence the rule of law  Absence of strong civil society  Absence of strong political leadership  Confrontational politics  Corruption and terrorism  Negativity/Double standard despite of many drawbacks, our government has taken some positive initiatives in favor of foreign investors. There are no distinctions between foreign and domestic private investors regarding investment incentives or export and import policies. Incentives for investors include - 100% ownership in most sectors, tax holidays, reduced import duties on capital machinery and spares, 100% duty-free imports and tax exemptions.  Government policies for Foreign Investments: The stated policy of the government of Bangladesh (BDG) is to pursue foreign investment actively, and it has enacted a number of policies to this end. There are no distinctions between foreign and domestic private investors regarding investment incentives or export and import policies. Incentives for investors include: 100% ownership in most sectors; tax holidays; reduced import duties on capital machinery and spares; duty-free imports for 100% exporters; and tax exemptions. Economic analysis: The economy of Bangladesh RMG environment constituted by that of a developing country. Its per capita income in 2010 was est. US$1,500 (adjusted by purchasing power parity) significantly lower than India, Pakistan, both which are also lower than the world average of $10,497.According to the gradation by the International Monetary Fund, Bangladesh ranked as the 48th largest economy in the world in 2010, with a gross domestic product of US$224.889
  10. 10. RMG Sector In Bangladesh| 10 billion. The economy has grown at the rate of 6-7% p.a. over the past few years. More than half of the GDP belongs to the service sector; nearly half of Bangladeshis are employed in the agriculture sector, with RMG, fish, vegetables, leather and leather goods, ceramics, rice as other important produce. The inflation rate in Bangladesh was last reported at 10.2 percent in May of 2011. The Deposit interest rate (%) in Bangladesh was reported at 9.65 in 2008, according to the World Bank. Bangladesh is considered as a developing economy because of the GDP growth above 5% during the last few years. Microcredit has been a major driver of economic development in Bangladesh. Bangladesh Corporate Tax Rates The standard rate of corporate tax in Bangladesh is 27.5% in 2008 - 2009 tax years. This is the standard corporate tax rate applicable to publicly traded companies in Bangladesh, a list including tax rates for other corporations are as follows: o Publicly Traded Company 27.5% o Non-publicly Traded Company 37.5% o Bank, Insurance & Financial Company 45% o Mobile Phone Operator Company 45% If any publicly traded company declares more than 20% dividend, 10% rebate on total tax is allowed. Social Analysis: Companies are facing the challenges of adapting effectively to the changing environment in the context of globalization and in particular in the export sector in Bangladesh. Although Consumer Rights Movement, enforcement of government regulations and a structured view regarding the economic importance of Social responsibility are not yet so widespread in the corporate world in Bangladesh, companies have gradually attaching more importance to Social responsibility in the local market as well. They are increasingly aware that Social responsibility can be of direct economic value. Companies can contribute to social and environmental objectives, through integrating Social responsibility as a strategic investment into their core business strategy, management instruments and operations. This is an investment, not a cost, much like quality
  11. 11. RMG Sector In Bangladesh| 11 management. So, business organizations can thereby have an inclusive financial, commercial and social approach, leading to a long term strategy minimizing risks linked to uncertainty. Technological The need for faster technological development is increasingly felt in Bangladesh. Development plans of Bangladesh have emphasized science and technological research to develop technologies through adoption of imported technology as well as development of indigenous technologies. As the country is heavily dependent on imported technologies, proper planning is required for its effective transfer through acquisition, assimilation and adoption. A National Science and Technology Policy has been formulated and adopted by the Government. It has laid down the directions for S and T activities and research, institutional and manpower development. Dissemination and documentation facilities. The National Council for Science and Technology (NCST) determines S and T policies, reviews the activities of different institutions and provides direction towards S and T research and activities. 1.2 Five Forces Model of competition PORTERS FIVE FORCES ANALYSIS FOR RMG INDUSTRY A. Competitive Rivalry between Existing Players Bangladesh is the 6th largest apparel and textile supplier in the US & EU market. It is shaping itself as a potential market player by providing the most quality with the cheapest price possible. Whilst the market is controlled by the bigger players like China and India, the role of Bangladesh is still important. Among the very few suppliers, Bangladesh imports most of its raw materials, but utilizes other factors of production to produce in a cheaper manner. It offers
  12. 12. RMG Sector In Bangladesh| 12 investment friendly atmosphere for the brand names to outsource their production process in Bangladesh. Bangladesh is putting up a show against other competitors like China and India. by providing available cheap labor. It has been facing tremendous growth even after the alleviation of the quota from the US market. This is due close customer relationship and quality production. Bangladesh has this advantage against its rivals. Bangladesh is one of those countries who cannot fulfill its quota provided by the larger markets. As a result of that, many foreign companies are merging in to use Bangladesh as a hub to prepare their product by outsourcing in Bangladesh and then gaining entrance to markets which were previously unavailable to them. Bangladesh is taking advantage of this and inviting investors, and foreign companies to place orders to attain this facility. It should focus on placing more orders instead of making its export rates efficient and strong. B. Bargaining Power of Suppliers: Bangladesh has always been enjoying the upper hand in ordering its inputs from its suppliers. Bangladesh has very few input or raw materials of its own. Most of them are imported. Although this leads to a problem in reducing the opportunity to initiate backward linkage, and thus increasing the supplier power, Bangladesh still manages to acquire the inputs at world price from its suppliers. But the most importing aspect of Bangladesh‟s export industry would always be the enthusiasm and the prospect of growth it provides to the stakeholders in terms of success and prosperity. Bangladesh‟s domestic suppliers‟ power is increasing in a slow but steady manner as more and more local companies are stepping up to the task. They are creating an integrated system of supply channel management by which the manufacturer‟s work load is reduced. Companies are more prone to order through local suppliers who themselves apply to the task of importing raw materials and components necessary for the production process. And the favorable attitude of the government is also helping this growth. The back to back LC process was approved by the government to facilitate the growth of the industry. Bangladesh has a good reputation in terms of timely payment to the suppliers. This reputation is helping create a longer term relationship with the suppliers (foreign) and is also giving the local
  13. 13. RMG Sector In Bangladesh| 13 firms initiative to step into the supply chain. Bangladesh gives the suppliers a large scale advantage as the industry is quite concentrated in area basis. A good global reputation is helping Bangladesh match the price with international quoting with the suppliers both foreign and local ones. Suppliers although having a sort of upper hand over Bangladesh, also regard Bangladesh as a reliable source of repayment. This reputation has been helping Bangladesh to ensure prompt supply of raw goods. C. Bargaining Power of Customers: Bangladeshi manufactures realize that the buyer possess more power than themselves. China‟s lead and India‟s march to the top keep the Bangladeshi manufacturers/ suppliers on their toes. Bangladesh is providing a large space of choice to the provider in terms of quality and cost. It is offering the lowest possible production price and also work that is best in quality. Due to high switching opportunities for the customers, Bangladesh has to perform or allow the customers to win in many cases. Bangladesh plans to use cost-effectiveness to present itself as the best option to the buyers. The important factor here is that many of the companies in Bangladesh are either franchises or subsidiaries. Along with them the local companies are giving Bangladesh a look of the best outsourcing place of the lot. Many of the reputed companies, brands are outsourcing their products in Bangladesh as they get the most quality in the cheapest price possible. D. Threat of New Entrants Bangladesh has yet to reach economies of scale in terms of production. Thus it allows potential entrants to pose a threat to its growth. But again, if we just analyze the growth of textile and RMG sector, this threat might seem negligible. Textile in Bangladesh is in growing stage. It‟s growing in a rapid pace and is posing itself as an entrant to the more established players. Thus the threat of new entrants is quite minimal to its concern.
  14. 14. RMG Sector In Bangladesh| 14 Moreover, new entrants would have to gain an advantage against Bangladesh whose growth ratio is almost 20% per year even after the MFA. A newer entrant would thus cause fewer troubles to Bangladesh. The greatest advantage that Bangladesh has right now is its cheap labor. Cheap labor would continue to be available until the living standards go up. Till that happens, labors will have low rates in terms wages and keep Bangladesh safe from any sort of new entrants. One factor has to be kept in mind that, due to the unstable political scenario in recent years, investors and foreign firms are reluctant in investing in Bangladesh. Using this opportunity, countries like Sri Lanka and other small Latin American countries can steal away potential buyers from Bangladesh. Moreover, new entrants would have to gain an advantage against Bangladesh whose growth ratio is almost 20% per year even after the MFA. A newer entrant would thus cause fewer troubles to Bangladesh. The greatest advantage that Bangladesh has right now is its cheap labor. Cheap labor would continue to be available until the living standards go up. Till that happens, labors will have low rates in terms wages and keep Bangladesh safe from any sort of new entrants. One factor has to be kept in mind that, due to the unstable political scenario in recent years, investors and foreign firms are reluctant in investing in Bangladesh. Using this opportunity, countries like Sri Lanka and other small Latin American countries can steal away potential buyers from Bangladesh. E. Threat of Substitutes Bangladesh, in terms of substitutes, plays both the roles of an affected and an opportunist. China and India are growing their customer base at a higher pace than Bangladesh. This is due to poor country branding, and less power to influence customers. Due to these reasons, customers sometimes prefer China or India to Bangladesh. More to add, Bangladeshi products are being substituted due to lack of supplier power and government‟s reputation. Many firms, buyers, investors are now hesitating to invest in Bangladesh due to unstable political scenario. Thus the opportunity for Bangladesh is being
  15. 15. RMG Sector In Bangladesh| 15 substituted to either China or India. Also, the substitute cost is not that high for buyers to switch to a Chinese producer or even to a Sri Lankan producer. Comments Bangladesh Garments industry is very much locative in terms of the external and internal environment analysis but after the RANA PLAZA incident everyone thought that the industry is going to suffer and also thought that the other countries like China and India will take the benefits, due to the lower production cost, Bangladesh plays a major role in substituting the Chinese and Indian manufacturers. This opportunity has to be nurtured by the Bangladeshi industry to ensure its growth and profitability. Bangladesh possesses the ultimate weapon of cheap labor and thus at times, it has to use it to substitute opportunities from its competitors. Internal Analysis of RMG Sector Internal driving forces are those types of things, events, situations, that occur within an organization and affect it in either a positive or negative way. Typically, the internal forces are things that occur within the organization and are by-and-large under the control of the organization. Example, does the organization have up to date technology that has the capacity to hold power programs that can help the organization. Or, are they working with an old antiquated legacy system that is slow, crashes frequently, etc. This effects the organizations day-to-day operations. It's something that in internal and under the control of the organization. Even the culture of the organization effects the way it operates. In other words, are the employees happy, do they come into work energized, or do they come to work dragging themselves in because it's Monday and doing cartwheels out the door because it's Friday. These effects the way the
  16. 16. RMG Sector In Bangladesh| 16 organization operates in either a positive or negative way. Once again it is an internal event and under the control of the organization. 2.1 Core competencies A core competence is the result of a specific unique set of skills or production techniques that deliver value to the customer. Such competences empower an organization to access a wide variety of markets. Executives should estimate the future challenges and opportunities of the business in order to stay on top of the game in varying situations. Core competencies are developed through the process of continuous improvements over the period of time. To succeed in an emerging global market it is more important and required to build core competencies rather than integration. It is important to identify core competencies because it is difficult to retain those competencies in a price war and cost cutting environment. Management must realize that stakeholders to core competences are an asset which can be utilized to integrate and build the competencies. Competence building is an outcome of strategic architecture which must be enforced by top management in order to exploit its full capacity. Core competencies in RMG The Ready-Made Garments (RMG) industry occupies a unique position in the Bangladesh economy. It is the largest exporting industry in Bangladesh, which experienced phenomenal growth during the last 25 years. By taking advantage of an insulated market under the provision of Multi Fiber Agreement (MFA) of GATT, it attained a high profile in terms of foreign exchange earnings, exports, industrialization and contribution to GDP within a short span of time. The industry plays a key role in employment generation and in the provision of income to the poor. Nearly four million workers are directly and more than twelve million inhabitants are indirectly associated with the industry. Over the past twenty five years, the number of manufacturing units has grown from 180 to over 4000. The sector has also played a significant role in the socio-economic development of the country.
  17. 17. RMG Sector In Bangladesh| 17 2.2 SWOT Analysis The usefulness of SWOT analysis is not limited to profit-seeking organizations. SWOT analysis may be used in any decision-making situation when a desired end-state (objective) has been defined. Examples include: non-profit organizations, governmental units, and individuals. SWOT analysis may also be used in pre-crisis planning and preventive crisis management. SWOT analysis may also be used in creating a recommendation during a viability study/survey. SWOT ANALYSIS OF RMG INDUSTRY IN BRIEF: o Strength  Low labor cost.  Energy at comparatively lower price.  Our sample companies in Bangladesh have already created a good impression in world market. So, the only thing to do is to improve the quality of the production according to international standard.  In the production and operation sector, the main advantage of sample companies is low labor cost compared to that of other countries in the world. This is the only competitive advantage of our sample companies. Average wage per hour is the minimum in our country in comparison to that of other countries in the world.  In the Research and Development and Engineering sector, BIFT (Bangladesh Institute of Fashion & Technology) is a new dimension in the garment sector of Bangladesh. Through this Institute sample companies can attract foreign customers. Because quality of fashion designing will come out from this Institute and our sample companies will also be benefitted from the technological development created by BIFT.
  18. 18. RMG Sector In Bangladesh| 18 o Weakness  We do not have enough raw material of our own, as a result we have to import raw material from outside the country.  Our Government policies are not structured enough.  The market is not diversified enough.  Instability in law and order situation: The law and order situation is not suitable in our country. For this reason the sample companies are in problem. The labors of the sample companies create unrest. Sometimes they create unrest in the factory and even physically assault the people of management. In addition to this, the political parties frequently become involved in political agitation. Consequently, the sample companies have to suffer. o Opportunity:  Bangladesh is included in the Least Developed Countries with which US is committed to enhance export trade.  If skilled technicians are available to instruct, prearranged garment is an option because labor and energy cost are inexpensive.  Foundation garments for Ladies for the FDI promise is significant because both, the technicians and highly developed machinery are essential for better competence and output  Japan to be observed, as conventionally they purchase handloom textiles, home furniture and garments. This section can be encouraged and expanded with continued progress in quality.  Chittagong port is going to be handed over to the foreign operator ,which will make the port‟s service much faster, it will also reduce lead-time as well as total cost will be decreased.77  Bangladesh is going to gain its political stability, which will make foreign trade much smoother and will foreign buyers will be more convinced.
  19. 19. RMG Sector In Bangladesh| 19 o Threats  China is a most likely the biggest threat for Bangladesh as this country has relatively high labor productivity and applies more capital-intensive modern technology and it has less lead-time because of its relative advantages in getting locally available raw materials like fabrics, various RMG accessories.  China has also relatively better infrastructural facilities like energy supply, transportation and communication system.  Some African and Caribbean countries have enjoyed zero-tariff facility under AOA act (Agreement on Agriculture) that helps them to be more competitive relative to Bangladesh. Comments A close examination of the SWOT analysis reveals that the sample companies as well as the RMG sector has threat from the Socio-economic sector , competitor sector , supplier sector, ecological sector and customer sector. The sample companies have strength in the production and operation sector, corporate resource and personnel sector. Since the sample companies are private limited companies and do not provide balance sheet data we could not diagnose about the financial health of the sample companies. However, our sample companies have shown satisfactory performance due to distinctive competitive advantage in the personnel sector. But there is also threat from the personnel sector because labors go on strike all on a sudden and creates unrest in the factory. 2.3 Strategy Analysis Product and market diversification: One of the major limitations to apparel export growth is the lack of diversification in products and markets – not least, as noted below – the giant market of neighboring India. A small range of products (shirts, trousers, T-shirts, sweaters, jackets) makes up 60 percent of RMG export.
  20. 20. RMG Sector In Bangladesh| 20 Vigorous marketing and promotional drives would be needed to break into markets for other RMG products that Bangladeshi producers can produce competitively. Since R&D and market research to expand the product mix and public support in this area will be critical, a comprehensive research center built on public-private partnership should be established. Its role would be to gather and disseminate information effectively to local manufacturers on the latest developments in products and markets, including information on fabric developments, blends, colors, patterns, latest fashion trends and design forecasting, as well as providing customer service to foreign buyers purchasing from Bangladesh. Image building and brand development: Image building and branding can achieve a high level of value addition and enhance Bangladesh‟s reputation as a quality supplier of apparel. As branding is an expensive investment, incentives and opportunities should be provided to exporters, such as through a „Brand Fund‟ and by encouraging foreign collaboration to launch collective brand names through corporate marketing companies. Investments in skills, design and advertising will be essential for the “Made in Bangladesh” label to make its mark in the global marketplace. For this, an active promotion campaign will be required by the industry, government, and Export Promotion Bureau. Local and international exhibitions should be held with aggressive efforts to attract foreign buyers. Bangladesh embassies abroad should appoint dynamic business-oriented commercial officers whose main job will be to promote export products through direct contact with potential buyers. Including information on fabric developments, blends, colors, patterns, latest fashion trends and design forecasting, as well as providing customer service to foreign buyers purchasing from Bangladesh. FDI or Joint ventures: Bangladesh has been a reluctant recipient of FDI, at least in the RMG sector, limiting it, until recently, to EPZ only while the domestic sector was kept off limits for foreign equity or partnerships. Less than 15 percent of Bangladesh garment firms have foreign equity. This policy has had one positive impact – growth of indigenous entrepreneurs who are now much more prepared to face the post-MFA challenge on their own. Although the restrictions on FDI were
  21. 21. RMG Sector In Bangladesh| 21 finally removed in the Industrial Policy 2005, the Bangladesh RMG sector may have missed out on certain benefits that accrue from the presence of FDI in a sector. Our survey of RMG firms showed those with foreign equity to have productivity levels on average 20 percent higher than those without. In addition, the survey showed positive and significant productivity spillovers. For every 10 percent increase in the productivity level of FDI in the industry, productivity of domestic firms increases by 1.4 percent. Comments Although Bangladesh has a limited number of joint venture RMG industries, even these can be very effective in bringing in managerial and marketing expertise. Continuous efforts should be made by the Export Promotion Bureau and Board of Investment to ensure that the investment climate of the future favors more FDI or joint ventures. The positive spillover effects of FDI can make a substantial addition to Bangladesh’s existing strengths. 2.4 Key Success Factors for the Industry: Labor costs Prices Quality Delivery time Long business relationship with key buyers Diversification( horizontal, vertical and other) Comments Energy Cost New textile mills in Bangladesh are cost competitive compared to imports from Korean and Indian spinning mills. Given the choice, domestic weavers and spinners prefer to use locally produced yarn as prices are slightly lower and since there is no involvement of shipping costs and delivery is more reliable.
  22. 22. RMG Sector In Bangladesh| 22 Conclusion Till now 80% of our respondents enjoy the duty- free market access and 20% of the respondent group enjoys GSP facilities only if local fabrics are used. 60% of the respondent group collects order through the buying house (local buying agent) and the rest gets offer directly through the head office situated abroad. They have no problem in collecting orders due to better quality and low price. The respondent group believes that they have been able to cope up in accordance with the changes in the attitude of buyers and customers. The main thing of the report is to identify the external environment of the industry which are mainly influence the overall industry and the internal environment in which it is discussed that what a company need in order to compete their business in RMG sector of Bangladesh. By conducting Macro environment analysis, Porter's Five Forces analysis I found that, Bangladesh Garments industry is peaty much locative in terms of the external and internal environment analysis, but after the RANA PLAZA incident everyone thought that the industry is going to suffer and also thought that the other countries like China and India will take the benefits, due to the lower production cost, Bangladesh plays a major role in substituting the Chinese and Indian manufacturers. So our government should take some initiatives to control RANA PLAZA type situation so that this industry can grow and can contribute more in our country. Recommendations Moreover, some steps will be taken to shorten the "lead time” for export of readymade garments by means of development of port management, simplification of goods unloading, resolving the electricity problem and similar activities. Furthermore, assistance will be given to improve the work environment in the readymade garments factories, to reduce risks of accident and to fulfill the compliance requirements at the factory level. Besides, an integrated and reasonable compliance regulation will be prepared with the help of all stakeholders;
  23. 23. RMG Sector In Bangladesh| 23 Since, our RMG sector is facing huge competition in the world market as because of abolition of quota system we have to go very carefully to capture the world-wide market. As a result, we have to take some necessary steps which will be taken to send marketing missions abroad, to organize single country textiles and readymade garments fairs, to organize and participate in international trade fairs at home and abroad so as to expand and integrate the markets for readymade garments. At the end we can say that our RMG sector is doing well what is more than our expectation. And if this flow goes on this way then we will be successful and our RMG sector will be a great threat for other competitors in the world market. Based on the above data analysis and findings we suggest the following strategies that RMG should follow: Improve labor productivity and managerial efficiency The labor productivity should be increased and it can be possible if the labors are provided with a significantly decent wages and other facilities such as free medicine, bonus, and transportation cost, they will be more motivated and their motivation will lead them to become more productive. Better working environment Working environment of garments in Bangladesh is very poor. The owners should give more attention to improve the working condition of the garments. There should be proper ventilation system, clean sanitation, significant number of fire extinguishers, emergency exit to ensure the safety and security of the workers. Improving the R&D Bangladesh garment sector does not have advanced technology and equipment that‟s why they should invest more in research and development. Besides, they may buy high-tech machines or adopt lease strategy so that they can export higher quality products. Upgrading of Skills and Technical Expertise Although there is an apparent abundance of labor in Bangladesh, there is insufficient level of skill when it comes to the use of many high-speed machines used in the industry. Far too little
  24. 24. RMG Sector In Bangladesh| 24 has been spent on training of staff with skills that are transferable across the industry. Better skilled staff will increase the productivity of the company as well as increase in GDP. This factor of investment in its workforce is often neglected by enterprises, which have been hampered by short term planning. Integration Due to the lack of development networks among the players involved in the Bangladesh industry and their respective markets, there is little integration within the garment industry. It is also necessary to develop direct links with retailers in the US and EU. Diversifying Product Range Bangladesh has always relied on a small, medium to semi-high quality product. These were the main categories covered by the MFA. The development of high quality products will require an investment in technology, training and quality control. Elimination of child-labor The Bangladeshi industries employ many children and the garment sector is not different from them. It is a matter of industrial reputation that will go down if they recruit child labors. Recruiting child labor may also bring negative impression on the brand image of the company to its customers. Improvement of Quality Quality is one of the important factors that make the customer loyal to the product. The respondent group believes that the quality of the product is a factor that affects the sales. They also believe that the volume of their business depends on the quality, design and the commitment as the fashion and style changes too often. Therefore, the companies have to respond according to their customers‟ test. They have all the latest equipment to serve their customer.
  25. 25. RMG Sector In Bangladesh| 25 References Annual Reports: 1. BGMEA‟s Annual Report, 2006-2007 2. Ministry of Commerce Bangladesh Export Policy, 2006- 2009, p. 5. 3. Ministry of Finance Bangladesh Economic Review, 2003, p. 74. Web sites: 1. Asian market data, analysis and forecasts from Business Monitor International, the trusted source for business information and intelligence on global emerging markets; September 29, 2008 http://findarticles.com/p/articles/mi_qa5508/is_200106/ai_n21474192/ 2. BGMEA lobbying for backward linkage industry; Retrieved September 29, 2008 http://findarticles.com/p/articles/mi_qa5508/is_200106/ai_n21474192/ 3. Crabbe, The Textile and Garment Industry Sector of Bangladesh. Retrieved May 14, 2008 from http://www.cleanclothes.org/publications/unst9.htm 4. Green, Duncan Fashion Victims: Together we can clean up the Clothes Trade: Web site. Retrieved May 14, 2008 from http://www.cleanclothes.org/publications/fashvictim.htm 5. The Daily Star: BGMEA hopes to push garment export to $18b in next 3 years Published On: 2007-10-26, and News (2003) “Prospective RMG in trouble “Retrieved June 9 & 12, 2008 from http://www.thedailystar.net/story.php?nid=8916 6. The homepage of Bangladesh Garments Manufacturer and Exporter Association: Future of RMG. Retrieved March 15, 2007 http://bgmea.com.bd/news.htm

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