Report on RMG Industry in Bangladesh.

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

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

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.

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.

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

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.

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

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.

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

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

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

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

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.

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

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

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.

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.

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.

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.

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

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.

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;

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

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.

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

Report on RMG Industry in Bangladesh.

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Report on RMG Industry in Bangladesh.

Similar to Report on RMG Industry in Bangladesh. (20)

More from Farabi Ahmed

More from Farabi Ahmed (10)

Report on RMG Industry in Bangladesh.