This presentation provides an in depth look into the Knitwear industry of Bangladesh, and relate the concepts and theories of managerial economics with the findings regarding both the overall industry and some of its major players.

1. A STUDY ON THE KNITWEAR
INDUSTRY OF BANGLADESH:
USING THE APPLICATION OF
ECONOMIC CONCEPTS, TOOLS AND
TECHNIQUES

2. PREPARED BY
GROUP NO - 09
Mohammand Abul Rahat Chowdhury (ZR-44, 52D)
Ahmmed Imtiaj (ZR-45, 52D)
Snehashish Kumar Das (ZR-46, 52D)
Md. Masud-ul Haq (ZR-47, 52D)

3. BROAD OBJECTIVE
To have an in depth look into the
Knitwear industry of Bangladesh, and
relate the concepts and theories of
managerial economics with the
findings regarding both the overall
industry and some of its major
players.

4. SPECIFIC OBJECTIVES
1) Contribution of the Knitwear Sector
2) Analyze Demand and Supply
3) Study the price and income elasticity
4) Comparative Advantage
5) Factors of production and cost structure for the
firms
6) Pricing Strategies
7) Market structure of the industry
8) Problems faced and Recommendations
CONTRIBUTION
OF KNITWEAR

5. METHODOLOGY
Exploratory approach in the
beginning
1. The factors affecting demand
and supply
2. The factors of production
3. The effects of government
policies
4. Market and firm structure
Followed by a more
descriptive approach
1. Pricing strategies used
2. Major costs of the firms
3. Elasticity of Demand and
Supply

6. DATA SOURCES
Primary Data
 Personal interview
 Phone interview
 Questionnaire
Secondary Data
Internal Sources
Company websites, profiles and publications
External Sources
1. Export Promotion Bureau
2. BKMEA and BGMEA
3. OEC
4. World Bank Database

7. FIRMS
AsroTex
Beximco Textiles
Viyellatax
Fakir Knitwears
BUYING HOUSES
Asro Fashion Ltd.
Fibre2Fashion (bd) Ltd.
Vertex Group Bangladesh

8. INDUSTRY OVERVIEW
 Export(2014-15): USD 12.43
billion
 Share in overall export: 40%
 CAGR: 17% (last 12 years)
 Knitwear exported to 151
countries
 RMG employs 4 million
 Knitwear employs 1.6
million jobs
0
5000
10000
15000
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
MILLIONUSDOLLARS
Knitwear Export
0
2
4
6
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
12-13
13-14
14-15
EMPLOYMENT IN MILLION WORKERS

9. INDUSTRY OVERVIEW
 EU-28 countries are the
major market
 Total Export to EU in 2014-
15: USD 8.7 billion, which
is 70% of total Knitwear
export
 Branching into emerging
markets such as Australia
and Japan
Canada
Spain
UK
USA
RMG export (in Million USD ) Knit export (in Million USD)
0
200
400
600
800
Turkey Australia Japan Brazil Russia China
RMG(mn USD) Knitwear(mn USD)

10. DEMAND AND SUPPLY ANALYSIS
Quantity exported in million dozens
1993-94: 15.3 million dozens
2014-15: 815 million dozens
Fiscal Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Export (Million
dozen)
120.13 165.02 199.54 241.6 290.92 292.7 441.03 441.23 490.57 512.23 815
Export (Million
USD)
2819.47 3816.98 4553.6 5532.52 6429 6483.29 9482.06 9486.39 10475.9 12049.8 12426.8
Number of RMG Factories
1993-94: 1839
2014-15: 4296

11. FACTORS AFFECTING DEMAND AND SUPPLY
PRICE
Bangladeshi Knitwear
products are sold at a
lower price compared
to the competitor’s
products
3.64
2.1
5.46
7.36
2.74
8
7.52
4.15
7.01
5.53
3.1
6.93
5.02
2.99
6.39
7.64
2.71
6.79
6.06
2.68
6.53
POLO T-SHIRT T-SHIRT PULLOVER
Bangladesh China Indonesia India
Cambodia Sri Lanka Vietnam

12. FACTORS AFFECTING DEMAND AND SUPPLY
SUBSTITUTES
There is a trend of
buyers shifting their
orders from China to
Bangladesh and other
countries

13. NEW MARKETS
Demand is increasing
and exporters move
to newer emerging
markets
FACTORS AFFECTING DEMAND AND SUPPLY
Year 2002 2011 2015
No. of Markets for
Knitwear Export
86 145 151
No. of Markets for
Woven Wear Export
94 126 144
No. of Markets for RMG
Export
97 159 170

14. FACTORS AFFECTING DEMAND AND SUPPLY
LOW PRODUCTION COST
Low prices of factors of
production such as Cotton,
Labor and Electricity reduce
cost
SEASONALITY
Survey showed that
highest demands were
recorded in Summer,
followed by Winter

15. ELASTICITY
Fiscal Year
Price
Elasticity of
Demand
2005-06 -25.77
2006-07 -15.61
2007-08 60.22
2008-09 -5.83
2009-10 2.66
2010-11 -17.24
2011-12 INF
2012-13 -16.44
2013-14 0.43
2014-15 -1.68
 Price elasticity of demand tends
to be large
 Income elasticity of demand
varies between inelastic and
elastic for the EU-28 countries
 Demand is affected more by
global economic events
compared to changes in price
and income
Year
Income
Elasticity of
Demand
2006 17.6
2007 1.11
2008 2.24
2009 -0.83
2010 -323.38
2011 4.16
2012 -0.17
2013 4.49
2014 0.76

16. COMPARATIVE
ADVANTAGE
 Revealed Comparative
Advantage (RCA) was calculated
for both the US market and the
entire world.
 Bangladesh has a significant RCA
over two its major competitors
China and Vietnam.
 Cambodia has RCA similar to
Bangladesh in the Knitwear
Industry.
23.67
3.15
1.89
22.85
23.28
3.02
1.89
22.32
21.83
2.77
1.7
20.86
0 5 10 15 20 25 30
Cambodia
Vietnam
China
Bangladesh
RCA 2013 RCA 2012 RCA 2011
US MARKET

17. 86.89
11.58
6.94
83.89
83.56
10.84
6.78
80.14
80.37
10.21
6.27
76.81
0 20 40 60 80 100
Cambodia
Vietnam
China
Bangladesh
RCA 2013 RCA 2012 RCA 2011
 The products for which RCA is
highest :
 Men’s Shirts
 T-shirts, Singlets and Vests
 Jerseys, Pullovers and Cardigans
 High RCA has mixed
repercussions
 Highly favorable conditions for the
Knitwear industry
 An extreme dependence of overall
export on the industry
COMPARATIVE
ADVANTAGE
WORLD

18. FACTORS OF PRODUCTION
LABOR
Cheap source of labor
available
Laborers in the industry
are mostly female
Industry employs 1.6
million people
0.25
0.6
0.4
1
0.35 0.4
0
0.2
0.4
0.6
0.8
1
1.2
Labor rate (USD)

19. FACTORS OF PRODUCTION
CAPACITY
Number of factories
has grown almost
every year
Number has slightly
fallen in the last two
years
0
1000
2000
3000
4000
5000
6000
7000
NUMBER OF GARMENT FACTORIES

20. FACTORS OF PRODUCTION
RAW MATERIALS
Backward Linkage in the
industry
Supplies 90% of its own knit
fabric requirement
Contribution of Knitwear
Sector to GDP is 7%, Backward
Linkage provides 2%
MACHINERY
 Firms surveyed placed heavy
importance on maintaining the
best possible machinery
 Machinery mostly bought from
Taiwan and Japan
 Bought through long-term
dealers

21. PRICING STRATEGIES
• Firms sell products at a price that covers their production cost and a
certain margin.
ABSORPTION
PRICING
• Knitwear products are sold at a lower price in emerging
markets.
• Average price of Knit products in South Africa is 75% of their
European price.
PENETRATION
PRICING
• Different prices in different markets.
• Price of Knit products in US market lower than EU
markets.
PRICE
DISCRIMINATION

22. BUYER SIDE MARKET
STRUCTURE
 The market on the buyer side is
dominated by the EU-28
countries, which account for
70% of the overall Knit exports
of Bangladesh
 Market share within the EU:
Germany 30%, UK 16%, France
11% and Spain 10%
 USA accounts for only 10% of
Bangladesh’s Knit product
exports.
EU-28
70%
USA
10%
Canada
4%
Australia
2%
Japan
2%
Turkey
1%
Russia
1%
Others
10%

23. BUYER SIDE MARKET
STRUCTURE
 In recent years, Knitwear
exporters are branching out to
emerging markets.
 Average growth rate in 10
emerging countries over the
last 4 years is 58%, whereas for
top 10 EU countries the rate is
23%.
 Knitwear exported to 151
countries in 2014, up from 86
countries in 2002.
253.35
132.82
22.38
288.24
99.29
57.96
97.7 73.12
Japan Russia S. Africa Australia China S. Korea Brazil Mexico
Emerging Market Export (Million $)
129.8
61.63
38.43
7.25
42.47
4.38
23.31
21.29
0 20 40 60 80 100 120 140
Emerging
EU
Growth Comparison
Growth 13-14(%) Growth 12-13(%)

24. MARKET STRUCTURE: SUPPLIERS
 Currently 1865 Knitwear firms operating in Bangladesh according to
BKMEA.
 Attracted by the low labor cost, strong backward linkage and
industry competitiveness.
 Success and Growth of the industry is a testament to the
entrepreneurial spirit of the people.

25. EFFECTS OF RULES AND REGULATIONS
0
5000
10000
15000
04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15
EXPORT VALUE (MILLION USD)
Knitwear Woven
 Plagued by accidents due to
lack of compliance
 Over 1700 casualties in the last
10 years
 Bangladesh lost its GSP
benefits in the US in 2013
 Woven exports have overtaken
Knit exports following revised
EU RoO

26. CONCERNS FOR THE INDUSTRY
 Poor Infrastructure
 Political Instability
 Lack of Compliance
 Raw Material
 Uneducated and Unskilled
Workforce
 Rising Wages

27. RECOMMENDATIONS
 Build up a skilled workforce
 Develop Infrastructure
 Ensure proper compliance
 More focus on emerging markets
 Diversify overall exports

28. VISION FOR THE FUTURE
 Knitwear exports are projected
to grow to 21 billion USD by
2020, and 32 billion USD by
2050
 Compliance, market research,
infrastructure growth, trade
agreements, use of MIS are all
required

29. THANK YOU

30. SUPPLEMENTARY
SLIDES

31. COST STRUCTURE
 Raw Material costs
dominate the overall
annual cost
 Other costs include
financial expenses
such as interest
payments,
depreciation,
overhead etc.
66%3%
6%
7%
4%
12%2%
Raw Materials
Processing
Depreciation
Manufacturing Overhead
Administrative Expenses
Financial Expenses
Tax Expenses

32. COST STRUCTURE
 International cotton prices
have an impact of the
overall cost for the firms
 Cost affected by other
such as labor cost,
electricity cost etc.
126.55
229.67
165.52
114.1
84.4 92.62
70.34 71.7
0
50
100
150
200
250
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-13
Oct-13
Feb-14
Jun-14
Oct-14
Feb-15
Jun-15
Price(inUSCents)
0.07
0.095
0.11
0.17
0.08
0
0.05
0.1
0.15
0.2
Bangladesh India China Thailand Pakistan
CostperKWH(Inusd)

33. SWOT ANALYSIS
LOW LABOR COST
BACKWARD LINKAGE
LOW PRICE
STRONG LOCAL SUPPLY CHAIN
INDUSTRY EXPERIENCE
LOW PRODUCTIVITY
POLITICAL INSTABILITY
INFRASTRUCTURE
PORT MANAGEMENT
LACK OF MARKET INTELLIGENCE
STRENGTHS WEAKNESSES

34. SWOT ANALYSIS
EMERGING MARKETS
COMPARATIVE ADVANTAGE
DIVERSIFICATION
RMG INTEGRATION
DECOUPLING
LACK OF COMPLIANCE
LOSS OF GSP
REGIONALISM
COMPETITORS
RULES AND REGULATIONS
OPPORTUNITIES THREATS

35. FIRM INFRASTRUCTURE
1) FINANCIAL POLICY: PUBLIC AND PRIAVE LISTINGS 2) REGULATORY COMPLIANCE: CORPORATE STRUCTURES
3) COMMUNITY AFFAIRS: CORPORATE SOCIAL RESPONSIBITY PROGRAMS
HUMAN RESOURCE MANAGEMENT
1) HUMAN RESOURCE PRACTICES NOT WELL DEVELOPED 2) MORE HANDS-ON APPROACH IS USED
3) LIMITED USE OF MANAGEMENT INFORMATOPN SERVICES
TECHNOLOGICAL DEVELOPMENT
1) FIRMS RELY ON MACHINE AND PROCESS INNOVATIONS FROM ABROAD 2) LIMITED ATTEMPT OF OWN INNOVATION
INBOUND LOGISTICS
RAW MATERIALS AVAIABLE
FROM DIFFERENT SOURCES
CHEAP SOURCE OF LABOR
AVAILABLE THROUGH WORD
OF MOUTH
MACHINERIES BOUGHT
FROM TAIWAN AND JAPAN
THROUGH DEALERS
ORDERS RECEIVED FROM
FINAL BUYERS OR
CONTRACTORS, DEPEDNING
ON FIRM SIZE
OPERATIONS
PRODUCT DESIGN
PRE-PRODUCTION
KNITTING
DYEING
FABRIC FINISHING
PATTERN AND CUTTING
PRINTING
EMBROIDERY
STITCHING
FINISHING
PACKING
PROCUREMENT
RAW MATERIALS MOSTLY PROCURED FROM LOCAL AND INTERNATIONAL MARKETS, AS WELL PROVIDED BY BUYERS AND CONTRACTORS FOR
SMALL FIRMS
OUTBOUND LOGISTICS
WAREHOUSING:
FINISHED GOODS THAT ARE
READY FOR SHIPPING ARE
STORED IN WAREHOUSES
ORDER FULFILLMENT AND
TRANSPORTATION:
EXTORTION AND TRAFFIC JAM
CAUSE LOSSES TO THE
KNITWEAR PRODUCING
FIRMS DURING
TRANSPORTATION
MARKETING AND SALES
DIRECT COMMUNICATION:
THE MAJOR SOURCE OF
MARKETING ACTIVITIES FOR
THE FIRMS
E-MAIL AND WEBSITES:
FIRMS MAINTAIN WEBSITES
FOR POTENTIAL BUYERS
BTMA ADVERTISEMENT:
FIRMS OFTEN ADVERTISE
THROUGH THE FAIRS
ORGANIZED BY BTMA AND
IN THE BTMA DIRECTORY
POST SALE SERVICES
MOST FIRMS MAINTAIN
GOOD RELATIONS WITH
THEIR BUYERS, WHICH ARE
SOMETIMES PART OF THE
SAME COMPANY