Академический Документы
Профессиональный Документы
Культура Документы
Submitted to
Ms. Syeda Shaherbanu Shahbazi Ahmed
Senior Lecturer, BRAC University
Submitted by
MD. Amirul Islam Lisan
Sami Kazi
And the Group
Submission Date
30th July, 2015
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This paper has been prepared in order to present an evaluation of the international business
strategies of Ready-made garments industries. Ready-made garments industries are the greatest
value creation sector for one country. In Bangladesh, RMG (Readymade Garments) sector is
generating a huge amount of money. Today RMG industry is the most contributing sector in the
amount of export that Bangladesh do. In recent years percentage of RMG in total exports rising
from 75% to 80%. In this report we talked about the global RMG industries and the international
policies which they are using to conduct the business. Moreover, we talked about the domestic
market, growth and size, exported or imported raw materials, valuable skills and human resources
and the value chain system. In order to get a clear view we have used Porter`s Diamond theory
model and tried to relate with those factors. In addition we have talked about different segment of
this sector and others necessary things. In conclusion, most of the information of this report was
collected from secondary sources. The sources include data from websites, article, theoretical
knowledge and internet search.
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Analysis of country wise export shows that the USA is the main destination of our export. It
appears from Table that in FY 2008-09, the USA secured the top position in respect of importing
commodities from Bangladesh followed by UK (14.58%), Germany (9.64%) and France (6.62%).
During the period under report, goods worth US$4,052.00 million were exported to the USA,
which was 26.03 percent of the total export of the country. The principal commodities exported to
USA are woven garments, knitwear.
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What is interesting to note here is that denim (jeans) constitute 50 per cent of total output and
quality is up to the mark. With a pair of jeans retailing at wholesale level ranging between Tk50
and Tk100 below that of other wholesale markets in the country, Keraniganj has been propelled in
to a different playing field. With retail pricing ranging at around Tk300 for mediocre quality and
pricing going anywhere up to Tk2,000 for superior finish, we are seeing the emergence of a parallel
RMG sector that caters purely for domestic consumers. Needless to say, the Keraniganj model can
and probably will be replicated successfully in other parts of the country. Yet, domestic apparel
producers are not bereft of problems beyond their control. Infrastructure inadequacies like power
outages hamper production; poor condition of roads and the haphazard manner in which factories
have grown are some of the issues that need to be dealt with to avoid incidences of fire and even
building collapse. The sector needs recognition and access to banking credit to realize its full
potential. These are areas where the government must step in to help facilitate growth of this subsector.
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Bangladeshs recent export performance in the world market for readymade garment has improved
markedly. Constant Market Share Analysis is used in order to determine the competitiveness of Bangladesh
and its competitors, which are the main readymade garment producers, in the USA, UK, CANADA
and others.
Bangladesh is able to export s readymade garment of high and consistent quality at low costs,
under conditions which meet the world standards set by the world. In addition to competitive
advantages, Bangladesh has benefited from growth in the overall size of the world export market
for readymade garment, but has suffered from having only relatively small shares in the important
markets of some member States. Market research on consumers demand and preferences could
further improve Bangladeshs recent export performance of readymade garment.
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Despite many difficulties faced by the RMG industry over the past years, it continued to show
its robust performance and competitive strength. The resilience and bold trend in this MFA
phase-out period partly reflects the imposition of safeguard quotas by US and similar
restrictions by EU administration on China up to 2008, which has been the largest supplier of
textiles and apparel to USA. Other factors like price competitiveness, enhanced GSP facility,
market and product diversification, cheap labor, increased backward integration, high level of
investment, and government support are among the key factors that helped the country to
continue the momentum in export earnings in the apparel sector. Some of these elements are
reviewed below.
Market:
Bangladeshi RMG products are mainly destined to the US and EU. Back in 1996-97, Bangladesh
was the 7th and 5th largest apparel exporter to the USA and European Union respectively. The
industry was successful in exploring the opportunities in markets away from EU and US. In
FY06, a successful turnaround was observed in exports to third countries, which having a
negative growth in FY05 rose three-fold in FY06, which helped to record 23.1 percent overall
export growth in the RMG sector. It is anticipated that the trend of market diversification will
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Export
Share
to USA
Export Share
Combined
Export Share
to
Share of USA
of
& EU (%)
Countries
European
Countries
Other
(%)
2001-2002
42.67
55.43
98.10
1.90
2002-2003
38.02
57.12
95.14
4.86
2003-2004
28.64
65.42
94.06
5.94
2004-2005
30.64
64.24
94.88
5.12
2005-2006
33.67
49.77
83.43
16.57
Product:
The growth pattern of RMG exports can be categorized into two distinct phases. During the initial
phase it was the woven category, which contributed the most. Second phase is the emergence of
knitwear products that powered the recent double digit (year-on-year) growth starting in FY04.
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Woven
Knitwear
2002-03
4.28
13.34
2003-04
8.59
29.88
2004-05
1.70
31.26
2005-06
13.50
35.38
In the globalize economy and ever-changing fashion world, product diversification is the key to
continuous business success. Starting with a few items, the entrepreneurs of the RMG sector have
also been able to diversify the product base ranging from ordinary shirts, T-shirts, trousers,
shorts, pajamas, ladies and childrens wear to sophisticated high value items like quality suits,
branded jeans, jackets, sweaters, embroidered wear etc. It is clear that value addition accrues
mostly in the designer items, and the sooner local entrepreneurs can catch on to this trend the
brighter be the RMG future.
Shirt
Jackets
T-Shirt
Trousers
Sweater
2001-02
871.22
412.34
546.28
636.61
517.83
2002-03
1019.88
464.51
642.62
643.66
578.38
2003-04
1116.57
364.78
1062.11
1334.85
616.31
2004-05
1053.34
430.28
1349.71
1667.72
893.12
2005-06
1056.87
408.97
1781.51
2165.25
1042.61
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Source: Authors calculation based on Bangladesh Economic Review, Bangladesh bank, Export
promotion Bureau
From the statistics view we can easily see that the export condition of India to Bangladesh is grew
from time being to 2001-2013. In very previous years probably early as 1995 Bangladesh is
imported very low amount from other country but in present time it would be increased. The main
reason behind it is the demand of the customers desired goods. The customers demands are going
to increase day to day and to satisfy their wants Bangladesh need to import raw materials. In 20012002 Bangladesh imported 500 us dollars and in 2012-2013 it increased by 3500 us dollars. And
it import very large in petroleum products goods and very low in food grains products
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Import payment has increased in the first seven months of this current fiscal year because of the
the import payments of capital machineries, petroleum, industrial raw materials and consumer
goods. LCs opening of Capital machineries was USD 2118.64 million with a growth rate of 54.27
percent in the period of July-January of FY 2013-14 whereas it was USD 1373.37 million with
growth rate of only 12.50 percent in the same period of the previous fiscal year. LCs opening of
imported goods decreased in FY 2012-13 because of the high rate of interest on banks landing
and shortage of gas and electricity. The import of capital machinery increased in the recent months
of this current fiscal year despite having an unfriendly business environment in the country amid
political unrest. The import of rice increased gradually in the recent months due mainly to lower
prices of the essential commodity in the international market and increase in price of rice in the
local market in the last few months.
From the table we can understand the import condition of Bangladesh over a year.The percentage
of import is changed by months ina year in it also go ups and downs over a year.
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After observing the statistics table we can easily recognize that the production of goods in RMG
is quit increased since 1993 to 2013. It is really a positive side for the RMG industry as well as for
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Source: Authors calculation based on Bangladesh Economic Review, Bangladesh bank, Export
promotion Bureau, 2014
The figure: 4 show the country wise export rate of RMG sector. The highest percentage of export
is done with USA and the very low with India and Turkey. So the economy of Bangladesh is
depends on the export of RMG with developed nation USA and it based on the production capacity
of the industry.
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The figure is the production level of RMG industry in Bangladesh where the export and import
growth rate is increased like this percentage. Its a basic information for Bangladesh is that our
economy as well as growth rate is highly depends on RMG export sector. In every year our country
exports a large percentage of goods in foreign countries and attains large number of foreign money.
On the other hand by day to day our countries import level is also going to increase as the demand
of customer is increased. To satisfy the customers need RMG sector need to import raw materials
such as button, cotton, fabrics, zipper, color, machineries etc. from other countries. The import is
mainly go run with the neighboring country India and USA, Canada, Japan, Russia, Thailand.
The 80% of production of RMG industry is going to export and rest is used in Bangladesh. In every
year Bangladesh will import 20 to 30% raw materials from some developed country and the main
portion of raw materials is come from the root areas of the locality.
The generation of RMG area is relies on upon the improvement of making items and guarantees
to make great quality item. In RMG Bangladesh is as of now all that much created and deliver
great quality item so they can get the need. The creation limit is likewise expanded by presenting
great sorts of hardware. The pieces of clothing work are likewise take preparing in fundamental of
create more item and also some of the time work need to travel to another country for go to
preparing venture of how to deliver more quality item. The RMG business is a constructive sign
for the unemployment part of individuals by offers them a potential work. The lower class
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Cotton Industry: Cotton considered the first stage of backward linkage sub-sector which
is the main source for producing yarn. Bangladeshi garment industry is fully dependent on
imported cotton to fulfill the huge shortfall of yarn souring. Though Bangladesh needs to
support cotton production but due to scarce land in Bangladesh, to build cotton industry in
Bangladesh may not be recommended. Bangladesh garment market is still categorized as a
source of low to medium quality garment in the international market. So it may be necessary
to sticks with low to medium range cottons. With the lower-price cotton markets, Bangladeshi
is disadvantageous compared to Indian textile mills who buy cotton from Indian growers 25%
to 30% cheaper than Bangladesh import the same cotton from India or international market.
The government needs to take some initiatives such as imposing no tariffs or quota on cotton
import so that importers can get cotton cheaper and keep the cotton price down in the local
market.
Spinning Industry: The textiles and clothing sector is segmented into the Textiles Sector
(locally known as Primary Textiles Sector or PTS) and the export-oriented clothing (or RMG)
sector. The textiles sector spans everything from the conversion of raw cotton to yarn through
spinning yarn to weaving gray fabrics as well as finishing, dyeing and printing of gray fabrics.
The textiles sector (PTS) is the backbone of the clothing industry because it provides the
backward linkage for both the knit and woven sectors. The textile mills produce the inputs
needed by the RMG industry, so there are substantial cost savings. The domestically produced
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Knitwear Industry: The next stage is weaving and knitting where yarn are converted to
fabrics. Fabric is main raw material for making garments and accounts for 75 percent of the
garments cost. Both hand loom and power loom are suitable for domestic market but a large
demand of quality fabrics cannot be met by hand loom production. But in case of power loom,
they may be increase the production capacity to satisfy part of the RMG sector demand with
the large investment. In the long run Bangladesh weaving mills need a high volume of yarn
production to fulfill the demand for domestic and export markets. The export-oriented
Knitwear industry is the top-leading exporting sector in Bangladesh in terms of export. Its
contribution in creating employment opportunities for female workers without high
educational background in the formal sector is exceptional! The industry has a great
contribution in poverty reduction by providing entry-level workers with a great scale of
employment opportunities and earnings higher than the national poverty line. Such a dynamic
development of the industry entails great diversity in efficiency, even in comparison with the
garment industry of other developing countries. The Knitwear industry of Bangladesh has
global competitiveness in terms of product quality & price through industrial upgrading in
terms of usage of latest machineries and vertical integration and industrial agglomeration.
Starting with a few Knitwear items, the entrepreneurs of the RMG sector have also been able
to diversify the product base ranging from ordinary shirts, T-shirts, trousers, shorts, pajamas,
ladies and childrens wear to sophisticated high value items like quality suits, branded jeans,
jackets, sweaters, embroidered wear etc. It is clear that value addition accrues mostly in the
designer items, and the sooner local entrepreneurs can catch on to this trend the brighter be the
RMG future.
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Woven Garments Industry: Garments are made from various types of fabrics (Ahmed,
2002; Islam, 2001). Woven garments are made from the type of fabric that is crafted through
weaving (Wikipedia, the free encyclopedia, 2005). The various kinds of fibers are the most
basic raw material of any types of garments. Then, in case of natural fibers, they (fibers) are
straightened through a process called carding (Ahmed, 2000). After that, the fibers go through
a further processing called combing through which short strands are taken out. They are then
called silver and processed to give a twisted shape called roving, which is put on spinning
frame to be spun around bobbin or cone. Such spun fibers take the name of yarns. The yarns
are then packed and marketed. The main markets of Bangladesh woven products of Bangladesh
are the European Union countries and the United States. Historically, these two markets have
counted for over 90% of the entire woven export of the country. In the EU, the bigger markets
are the U.K., Germany, Sweden, Italy, and the Netherlands. In the North American region,
besides the US, Canada is a substantial market where woven garments export of BD is
gradually increasing. Among the new markets, Japan and Turkey seem to be big potentials,
where a greater share of woven export is going every year. The following table compiled upon
the data from Export Promotion Bureau of Bangladesh shows the markets of Bangladeshi
woven products and the value of export and the share of total woven garments export in each.
The main woven products of Bangladesh are shirts, trousers, and jackets, mostly made from
cotton. Though the products are not categorized by the Export Promotion Bureau according
to whether they are woven shirts or non-woven shirts, the following table compiled from data
of EPB still testifies that these are the three main woven products of Bangladesh. These three
products, the majority of which are woven, constitute over 40% of the total apparel export of
Bangladesh.
Dyeing and Finishing Industries: This is the final stage where the fabric either can be
used for domestic market or RMG sector for export purposes. Dyeing and finishing units in
Bangladesh are currently able to process all of the locally produced grey. According to
Bangladesh Textile Mills Association (BTMA, 2001). Bangladesh knitting, knit dyeing and
finishing sub-sector had 282 firms (99 merchandized dyeing and finishing, 183 semimerchandized dyeing and finishing) with annual fabric production capacity (fabric) of 680
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Accessories: Only for accessories, Bangladeshi garment industry is in quite good position.
About 80% of those known as accessories (zippers, buttons, threads, stiffeners, inter-linings,
packaging materials, etc.) are available locally and meet the requirements of the international
buyers. A considerable amount of backward linkage has already been established in this export
support sector and it maintains its excellent position.
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Policy Initiatives
Fire and Building Safety in Bangladesh RMG Industry
Despite the epic growth of our RMG industry, and its bright prospects, challenges are still there.
One of the biggest challenges currently faced by our RMG industry is to ensure workplace safety
and better working conditions for the millions of garment workers.
Two major accidents, the Tazreen fire and the Rana Plaza collapse, have brought the issue of
workplace safety to the fore and led all stakeholders to act accordingly. Following the unfortunate
incidents, various platforms such as the Bangladesh Accord on Fire and Building Safety, the
Alliance for Bangladesh Worker Safety and National Plan of Action have been formed to improve
building and fire safety of Bangladeshs garment industry.
All members of the BGMEA and BKMEA are working all-out to carry out the corrective action
plans suggested by the Accord, Alliance and National Plan of Action after inspections, even
investing huge amount of money.
Moreover, the factories which were set up in an unplanned way and housed in risky buildings have
started relocating to safer buildings. Besides, a project has been taken to set up a well-planned
garment industrial park beside the Dhaka-Chittagong Highway where the structurally weak
garment factories will be able to relocate.
However, ensuring workplace safety at all garment factories is a gigantic task and will take time
to accomplish. But we believe the government of Bangladesh, BGMEA and BKMEA, with the
support of global brands and international development partners, will be able to ensure the safety
of the RMG industry and maintain the momentum of socio-economic development in the country.
The National Tripartite Plan of Action on Fire Safety and Structural Integrity (NAP), signed in
July 2013 after Rana Plaza, updated a previous fire safety plan signed after Tazreen. The plan
Stipulates a series of commitments for the government of Bangladesh to meet by certain deadlines.
For example, the government has upgraded its labor inspection department to a full directorate
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To help Bangladesh with inspections and safety improvements in factories, in October 2013 the
International Labor Organization (ILO) launched a $24 million, three-and-a-half year initiative
called Improving Working Conditions in the Ready-Made Garment Sector (RMGP). The
program will assist with inspections of approximately half of Bangladeshs garment factories by
helping to stand up 30 structural assessment teams. The program will also work to improve the
governments inspection mechanisms, build occupational health and safety awareness in factories,
and provide compensation and skills training for victims of the Tazreen and Rana
Plaza accidents.
Apparel brands launched two major worker safety initiatives after Rana Plaza. Over 100
companies, mostly European but joined by a few American firms such as PVH (parent company
of Calvin Klein, Tommy Hilfiger and Izod), American Eagle, and Abercrombie & Fitch, signed
on to an initiative called the Accord on Fire and Building Safety in Bangladesh (the Accord).
Over 20 American retailers, including Wal-Mart, Gap, Target and JC Penny, declined to join the
Accord but formed a similar initiative called the Alliance for Bangladesh Worker Safety.
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Value Chain
The overall management of all the operations in a firm is included in its value chain. A firm having
a proper value chain can work efficiently to produce the desired product and distribute it to the end
users in specified time. The value chain of RMG industry of Bangladesh has been discussed as
follows. This value chain comprises a series of value formation activities including production,
marketing and sales, materials management, research and development, human resources,
information systems and firm infrastructure.
Here, we divide all the activities into two parts as primary activities and support activities.
Primary Activities:
It includes the research and development, production, marketing and sales and customer service.
Production:
Production includes all planning, implementation of plans as part of marketing management
functions. Starting from the introduction of new product into the market till the management of
the existing portfolio to achieve the marketing objectives is included here. Production of drugs
and other products include detailed preparation of Marketing Plan, designing and development
of promotional materials and management of regulatory affairs with Drugs Administration. All
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Customer Service:
The management of RMG industries in Bangladesh has a competent team of professionals who
operates with a progressive attitude to provide effective solutions to satisfy the customers needs,
through its products and services of uncompromising quality.
Support activities: It includes the activities related to information system, company infrastructure
logistics and human resource.
Information System:
The main functions here are connected to computer and other related accessories which supports
all the users. Maintenance of server and ensuring of smooth LAN operation are key factors here
as most of the RMG firms are very much updated in technological sectors. Providing latest
technical and software support to all the sectors of the firm is done by the information systems.
RMG firms like A.G. Industries and A.J. Industries are using hi-tech information system to
maintain a proper communication with all the participants of its supply chain.
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Development and maintenance of centralized databases are done by the information systems and
the firm thus can make active managerial decisions and keep their work flow proper.
Human Resource:
Human Resources team develops and outfits strategic advantages consistent with their Values
and business imperatives to both attract potential candidates and retain current employees. In
doing so, the team enhances employee performance, promotes personal development and
organizational effectiveness.
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Training
Time:
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Demand Conditions
Domestic Demand: Demand of Bangladeshi RMGs in other countries are pretty high, but in
domestic market, it is too weak. If the industry need to grow then both domestic market and
international market is equally important. Some companies thinks that the international market in
future will be difficult to access and then if they want to grow, they need to expand in the domestic
market. But this is going to be tough too because most of the population has a little excess
disposable income to spend on clothing.
Demand in USA and EU Countries: The biggest market of the RMG goods of Bangladesh is
USA and EU countries. Bangladeshi RMG experience a sharp increase in export of goods in USA
in 1990s and started to increase since 2004. In the time period 1996-2005, Bangladesh has faced
both quantitative and qualitative changes in exporting to EU countries. In this time, export earning
has increased from 1.2 billion euros to 3.7 billion euros. Major shares of export earnings are
coming from exporting to European Union.
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Recommendation
Bangladesh economy at present is more globally integrated than at any time in the past. The
MFA phase-out will lead to more efficient global realignments of the Garments and Clothing
industry. The phase out was expected to have negative impact on the economy of Bangladesh.
Recent data reveals that Bangladesh absorbed the shock successfully and indeed RMG exports
grew significantly both in FY06 and (especially) in FY07. Due to a number of steps taken by
the industry, Bangladesh still remains competitive in RMG exports even in this post phase-out
period.
Our Garments Industries can improve their position in the world map by reducing the overall
problems. Such as management labor conflict, proper management policy, efficiency of the
manager, maintainable time schedule for the product, proper strategic plan etc.
Government also have some responsibility to improve the situation by providing- proper policy
to protect the garments industries, solve the license problem, quickly loading facility in the port,
providing proper environment for the work, keep the industry free from all kind of political
problem and the biasness. Credit must be provided when the industry fall in need.
To be an upper position holder in the world Garments Sector there is no way except follow the
above recommendations. We hope by maintaining proper management and policy strategies our
country will take the apex position in future.
Conclusion
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. To
remain competitive in the post-MFA phase, Bangladesh needs to remove all the structural
impediments in the transportation facilities, telecommunication network, and power supply,
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