COMPETITIVE ANALYSIS ON GARMENT INDUSTRY IN CAMBODIA

UNDER FREE TRADE ENVIRONMENT

MR. YIN YANNO

A Thesis Submitted in Partial Fulfillment of the Requirements

For the Degree of Master of Business Administration
Department of International Business
Graduate School
University of the Thai Chamber of Commerce
2007

COMPETITIVE ANALYSIS ON GARMENT INDUSTRYIN CAMBODIA

UNDER FREE TRADE ENVIRONMENT

YIN YANNO

A Thesis Submitted in Partial Fulfillment of the Requirements

For the Degree of Master of Business Administration
Department of International Business
Graduate School
University of the Thai Chamber of Commerce
2007
Copyright by University of the Thai Chamber of Commerce

iv
Thesis Title
Name
Degree
Major Field
Thesis Advisor
Graduation Year

: The Competitive Analysis on Garment Industry in Cambodia

under Free Trade Environment
: Yin Yanno
: Master of Business Administration
: International Business
: Dr.Thasana Boonkwan
: 2006

ABSTRACT
The objectives of this study on Competitive analysis of Garment Industry in
Cambodia under Free Trade Environment were to: (1) Identify the factors affecting
competitiveness of garment industry in Cambodia, (2) Investigate the competitiveness of
garment product business, (3). Provide both garment management and government as
policy-makers the best alternative strategies to improve the competitiveness of garment
industry in the future garment competitive edge.
Following the light of Balanced Scorecard concept initiated by Kaplan and
Norton, Diamond theories and Five Force Model established by Michael E. Porter and
together with macro environment Analysis of Pearce and Robinson, quantitative analysis
was employed to examine both primary and secondary data. Primary data consisted of
questionnaires distributed to 196 that constituted population and to two agency officers
in Ministry of Commerce.
This research revealed some important findings. Some factors such as
economic growth from macron environment, investment climate from national

v
environment, as well as economic of scale, capital requirement, product are identical
among competitor, full of information from industry environment were considered
imperative affecting to competitiveness. Garment firms analysis showed that garments
competitiveness was quite poor relative to their competitor in the industry. Meanwhile,
SWOT analysis displayed that all garment industry were wresting with several
weakness, however, there were facing some opportunities from the environments.
The findings from this study showed that most of negative impact was dealing
with government agencies. Strongly recommend the Cambodian government to create
Special Economic Zones and Free Trade Zones to solve institutional issues and
corruption problems. The plan for SEZs is achieved high economic growth through
export promotion. In addition, the government should think carefully about the benefits
and cost of tax incentives. Human resource, infrastructure, information system, shorten
lead-time and business operation should be requested to government to improve. The
government should set up specific garment developing goal by focusing on addressing
of competitiveness of garment industry and developing supporting policy and action to
address of weakness and harness key opportunity. Importantly, the government should
improve through these negative or endogenous factors by using all relevant policy just
like motive economic reforms, trade reform, administrative reform, legal and judicial
reform, and banking and exchange rate reforms. Through this image, the government
should implement quickly, specially, Cambodia corruption law has not yet adopted by
National assembly.

vi

:
:
:
: .
: 2006

(1)

(2)

(3)

Kaplan
Norton Diamond Five Force Model Michael
E. Porter Pearce Robinson
196
2

vii
SWOT

(Special Economic Zones; SEZ)
(Free Trade Zones)

viii

ACKNOWLEDGEMENTS
Throughout the course of research leading to the completion of this thesis, I
have gratitude to many people, who have provided me with tremendous help and
support in one way or another, which I think I cannot possibly acknowledge in full
measures.
First and foremost, I would like to express my sincere thanks to Dr.Thasana
Boonkwan, my advisor, for his invaluable thoughts, insightful suggestions and useful
guidance throughout the thesis works. Sincere appreciations were also to the committee
members for their propositions, valuable comments, and constructive suggestions which
were of substantial value to this study.
I wish to express my special gratitude to Dr. Somchai Harnhirun for his kindly
comments and useful advice during the implementation process of this study. His point
of view, provoking comments, time and above all patience refined my thoughts, made
me see the light at the end of the tunnel and more confident to develop the study.
I would like to faithfully acknowledge professors of Global MBA Program at
University of the Thai Chamber of Commerce (UTCC) for their insightful lectures in
different subjects that provide me knowledge and technique to develop a good
research.
I am also immensely grateful to Thailand International Development Cooperation
Agency (TICA), Ministry of Foreign Affairs, Royal Thai Government, especially the Thai
people for granting me the scholarship and enabling me to pursue my Master of

ix
Business Administration in International Business in University of the Thai Chamber of
Commerce (UTCC). I would like to express my gratitude for their sharing and
enthusiasms during two memorable years in Thailand.
I would like to express gratitude and special thanks to my Senior Minister and
Minister of Commerce, Excellency Cham Prasidh and my secretary of State, Excellency
Sok Siphana, J.D. who have appointed me to attend this master scholarship.
Special thanks are extended to Deputy Director General, Mr. Sok Sopheak, and
my Director Mr. Seang Thai for their kind assistances and some financial support during
my study.
My sincere thanks are extended to my entire friends for their meaningful
discussion, hospitality and friendshipe, especially Miss. Chandee Kayubrungrueng for
her very useful contribution in doing SPSS.
Finally, I am profoundly grateful to my parents my sisters and my brothers, who
have been always with me in every situation. They have been an inexhaustible source
of encouragement and sharing. Their tender love and understanding are invaluable. To
my much-loved wife, Tep Ravy, and my adored kids Yin Sovansokvatei and Yin
Thanith, for their patience, loves and yearning during two years hard waiting.
The research of this thesis is dedicated to my respected and beloved grandma,
Yei Heung, Yai Loeung and my older brother Yin Phina, for their immeasurable love,
cares and supports during my life when they were alive.

TABLE OF CONTENTS
ENGLISH ABSTRACT. ...................................................................................................... iv
THAI ABSTRACT ............................................................................................................... vi
ACKNOWLEGEMENT.......................................................................................................viii
LIST OF TABLES..............................................................................................................xiv
LIST OF FIGURES...........................................................................................................xvii
Chapter
1. Introduction

1.1 Background...........................................................................................................1
1.2 Statement of the Problems...................................................................................2
1.3 Objectives of the Study ........................................................................................3
1.4 Scope of the Study ..............................................................................................4
1.5 Research the Question.........................................................................................4
1.6 Operation Definitions ...........................................................................................4
1.7 Expected Benefits of the Study............................................................................5
1.8 Organization of the Study ....................................................................................5
2. Literature Review ............................................................................................................6
2.1 Theories of Competitiveness Assessment ..........................................................6
2.2 The Factor Affecting the Competitiveness of Garment Industry .......................8
2.2.1 Macro Environment .............................................................................8
2.2.2 National Environment ........................................................................10

xi

TABLE OF CONTENTS (CONTINUED)

2.2.3 Industry Environment .......................................................................16
2.3 The Factor Affecting the Competitiveness of Garment Industry .....................23
2.3.1 Financial Measure ...........................................................................26
2.3.2 Customer Measure ..........................................................................27
2.3.3 Internal Business Measure ...............................................................29
2.3.4 Learning and Growth Measure ........................................................29
2.4 Srategy Analysis .............................................................................................30
2.5 Overview of Garment Industry in the World and Cambodia ...........................32
2.5.1 Overview of Garment Industry in Cambodia .................................37
2.5.2 The Status of Garment Industry in Cambodia ................................48
2.5.3 Structure of Industry in Cambodia ..................................................50
3. Research Methodology ................................................................................................53
3.1 Hypotheses ..........................................................................................53
3.2 Conceptual Framework .......................................................................57
3.3 Research Design ..................................................................................59
3.4 Population, Sampling, Design and Measurement of Questionnaires .60
3.5 Data Analysis Method ..........................................................................63
4. Data Analysis and Result..............................................................................................69
4.1 Response Rate and General Business Profile .................................................70

xii

TABLE OF CONTENTS (CONTINUED)

4.2 Analyse the Performance of Garment Industry in Cambodia .........................77
4.2.1 Macro Environment ............................................................................77
4.2.2 National Environment ........................................................................80
4.2.3 Industry Environment .........................................................................87
4.3 Firm Competitive Analysis .................................................................................67
4.3.1 Financial Measue Factor....................................................................67
4.3.2 Customer Measure Factor ..............................................................100
4.3.3 Internal Business Mesure Factor.....................................................102
4.3.4 Learning and Growth Measurement Factor.....................................104
4.3.4 Learning and Growth Measurement Factor.....................................104
4.4 Testing Hypotheses ..........................................................................................108
4.5 Strategy Analysis .............................................................................................128
5. Conclusion, Discussion, and Recommendation .......................................................130
5.1 Conclusion .......................................................................................................130
5.2 Discussion ......................................................................................................136
5.3 Recommendation..............................................................................................143
BIBLIOGRAPHY..............................................................................................................151

xiii

TABLE OF CONTENTS (CONTINUED)

APPENDICES

156

A : Letter for Questionnaire Survey ..........................................................157

B : Questionnaires.....................................................................................158
C : List of Garment Industry in Cambodia................................................176
BIOGRAPHY

180

xiv

LIST OF TABLES
Table

Page

2.1

Measuring strategic financial themes

27

2.2

Global Foreign Trade in garments-top export countries

34

2.3

Cambodia's Garment Exports - 1995-2003, Values and Quantities

41

2.4

Benchmarking of Export Trade

42

2.5

Benchmarking of Marketing and Logistics

48

3.1

The criteria to measure level of variable according to

the separate of seven levels

63

3.2

Important rank calculation

66

3.3

Favorable rank calculation

66

4.1

General Business Profile

71

4.2

Importance Score of Macro Environment Factors

77

4.3

Favorability Score of Macro Environment Factors

79

4.4

The Importance Score of National Environment Factors

81

4.5

The Favorability Score of National Environment Factors

83

4.6

Private sector perception on infrastructure quality

85

4.7

Number of document and time required to export

86

4.8

The Importance Score of Threat of New Entry Factors

86

4.9

The Favorability Score of Threat of New Entry Factors

89

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LIST OF TABLES (CONTINUED)

Table

Page

4.10 Important Score for Intensity of Rivalry among Competitor

90

4.11 Favorability Score of Intensity of Rivalry among Existing

92

4.12 The Importance Score of Power of Buyer Factors

93

4.13 The Favorability Score of Power of Buyer Factors

94

4.14 The Importance Score of Power of Supplier Factors

95

4.15 The Favorability Score of Power of Supplier Factors

97

4.16 The Importance Score of Financial Measure Factors

98

4.17 The Favorability Score of Financial Measure Factors

100

4.18 The Importance Score of Customer Measure Factors

101

4.19 The Favorability Score of Customer Measure Factors

102

4.20 The Importance Score of Internal Business Measurement Factors

103

4.21 The Favorability Score of Internal Business Measurement Factors

104

4.22 The Importance Score of Learning and Growth Measurement Factors

105

4.23 The Favorability Score of Learning and Growth Measurement Factors

107

4.24 Economic Growth * Macro Environment Cross Tabulation

108

4.25 Infrastructure * National Environnent Cross Tabulation

110

4.26 Economic of Scale * Threat of New Entrant Cross Tabulation

111

4.27 Number of Competitor * Intensity of Rivalry among Existing Competitor

112

xvi

LIST OF TABLES (CONTINUED)

Table

Page

4.28 The buyer has ability to postpone to purchase garment product * Power
of Buyer Cross Tabulation

114

4.29 The suppliers product is an important product to your company * Power of

Supplier Cross Tabulation

116

4.30 Economic Growth * Macro Environment Cross Tabulation

118

4.31 Infrastructure * National Environnent Cross Tabulation

120

4.32 Economies of Scale * Threat of New Entrant Cross Tabulation

121

4.33 Number of Competitors * Intensity of Rivalry Among Existing Competitor

Cross Tabulation

123

4.34 The buyer has ability to postpone to purchase product * Power of the buyer
Cross Tabulation

125

4.35 The buyers have full information * Power of Buyer Cross Tabulation

127

4.36 SWOT Analysis of the Cambodian Garment Industry

129

xvii

LIST OF FIGURES
Figure

Page

2.1 Competitive of nations Porters Diamond Theory (1990)

11

2.2 Element of Industry Structure: Five Forces Model

17

2.3 The Balanced Scorecard translating Strategy into Action

25

2.4 Formulations, Implementation, and Control of Competitive Strategy

31

2.5 Top General Constraints to Private Enterprise Operation and Growth

43

2.6 Percent of Sales Value Paid Informally to Public Officials

44

2.7 Time and Cost to Start a Business

45

2.8 Cost to Start a Business (%) of income per capita

45

2.9 Cambodia garment industry investment approvals

50

3.1 The conceptual Framework, Formulated base on literature review

58

4.1 The type of firms size

72

4.2 Register capital

73

4.3 Number of years that the company establish

73

4.4 Percentage of sale through marketing officer

74

4.5 The main export market

75

4.6 Percentage of garment Industry growth in year 2006

75

4.7 Number of sales return through out 2006

76

CHAPTER 1
INTRODUCTION
1.1 Background
The industries sector has been the main engine of economic growth in
Cambodia. The textile and garment sub-sector has displayed a remarkable dynamism.
Cambodias garment industry has undergone dramatic growth in its export during the
last five years, following the United States granting Most Favored Nation (MFN) status
in 1996 and introducing the General System of Preferences (GSP) in 1997.
By 2004, Cambodia was one of the major exporters of garment products, with
an export volume of 36 percent of the countrys GDP. Accounting to the IMF, GDP in
20005 increased fromm2.3 percent to 6 percent. This fast growth is a result of the
increase in garment industry export, even after the quota phased out.
Elimination of global textile and apparel trade quotas on January 1, 2005, has
brought about a dramatic shift in the world market for textiles and apparel products.
Cambodia garment industry remains virtually 90-100% foreign owned, with most of the
decision takers largely based in East Asia from where production orders are received
together with fabric and accessory supplies and delivery instructions. These foreign
owners make decisions about operations in Cambodia based on global business
developments and most have similar operations in other countries, such as China.

2
The industry is almost 100% dependent on imported yarns (for knitwear),
finished woven and circular knitted fabrics (for woven and knitted cut and sew
garments), all accessories, and almost all packaging and presentation materials. The
domestic material content is limited to some cardboard cartons and poly bags.
The domestic value added content of the Cambodian garment industry amounts
to 20% of garment exports.

1.2 Statement of Problems

The key date for the garment industry worldwide is 1 January 2005, when
quotas finally phased out. The ending of the quota system is likely to intensify the
following major industry trends: Cost competitiveness will continue to be a key factor as
garments prices expected to continue to fall after couple of years.
The buyers require faster deliveries to meet increasing levels of consumer
demand and ever decreasing product cycle times. This will place greater and greater
emphasis on countries with more complete supply chains that are able to meet these
increasing demands.
It is noticeable that many garment supply countries have been making strategic
investments in recent years to ensure that their supply chains are complete. Buyers
want business to be as straightforward and uncomplicated as possible. They will have a
greater choice after the ending of quotas, and they will buy from preferred suppliers
who offer consistent quality, reliable delivery dates, competitive prices and productivity

3
levels at international standards. The number of countries in the garment industry
expected to fall, and buyers will have greater value-added service requirements.
Most of the foreign investors have more freedom in where to place offshore
investments after the ending of the quota system. They prefer host countries that
enable successful operations with the least problems In general; the global garment
market has been demanding higher levels of (a) personal service, (b) quality
consistency, (c) delivery lead times, (d) product innovation, (e) price competitiveness, (f)
reliability, and (g) country image (including compliance with corporate codes of conduct).
The overall impact of the new global market environment on Cambodias
garment exporters, and in particular the increasing competitiveness in the global textile
and clothing (T&C) industry, is expected to be a reduction in exports, re-trenched
workers without alternative job opportunities, and a downturn in the national economy.
Urgent action needed now to prevent this from happening.

1.3 Objectives of the Study

1. Identify factors affecting competitiveness of garment industry in Cambodia
2. Investigate the competitiveness of Cambodias garment industries, and build
up competitive strategy in export garment products.
3. Provide both garment management and government as policy-makers the
best alternative strategies to improve the competitiveness of garment industry in the
future garment competitive edge.

4
1.4 Scope of the Study
This study is intended to study the factors affecting the competitiveness of
garment industry in Cambodia based on the list from Ministry of Commerce are
operation in Phnom Penh city and others provinces near by city.
1.5 Research the Question
1. How is the competitiveness of garment industry managed in Cambodia?
2. What are the relevant factors should consider as competitiveness in
Cambodias garment industry.
3. How does the garment firm do to improving their competitiveness on
garment industry in global market?
1.6 Operation Definitions
1. Competitiveness is the relative standing of the organization against its
competitors.
2. Competitive factor it refers to some related aspects affecting the firm in
achieving their relative competitiveness against the competitors. In this study, those
factors are classified into macro, national and industry environment.
3. Industry environment factors are factors that come from inside industry that
shape external opportunities and threats toward the firm.
4. Competitive indicators are a couple of measures used in assessing the
competitive position of certain company among its competitors;
5. Determinant factors mean the factors influencing decisively on printing
industry competitiveness.

5
6. Demand conditions about demand for the medicine in the domestic market
7. Related and supporting industries that have effects on performance of the
industry such as input, supporting activities, etc.
1.7 Expected Benefits of Study
1. Giving the understanding for the present situation of Cambodias garment
export industry and its position in the world market,
2. Identify how effectively the competitiveness of garment industries in
Cambodia
3. Recommending a new competitiveness method to the garment firms can use
to improve their competitiveness in Cambodia.
1.8 Organization of the Study
This thesis is structured in five chapters. The first chapter describes about the
background and problems statement, objective, scope of this study, Research the
question, operation definition, expected benefits of study and organization of the study.
The second chapter represent reviews the underpinning and underlying the theories
from the relevant literature including overviews of Cambodian garment industry and the
role of garment industry. The third chapter focuses on the explanation of the research
methodology content of conceptual framework, hypothesis, and the research
methodology. The fourth chapter targeted the result of analysis. The conclusion,
discussion and recommendation are in chapter 5.

CHAPTER 2
LITERATURE REVIEW
This chapter intended to review basic theories and concept as basis for
developing the research conceptual framework. In this chapter, the comprises of 5
sections such as:
Section 1 : The theories of competitiveness assessment.
Section 2 : The factor affecting the competitiveness of garment sector,
Section 3 : Firm competitiveness assessment.
Section 4: Strategy Analysis,
Section 5 : Overview of garment industry in the world and Cambodia

2.1 The Theories of Competitiveness Assessment

The global garment industry has raised some concerns about global competition
when quota phase out by January 2005 in performing the standard on garment industry
such as a) Cost competitiveness will continue to be a key factor as garments prices are
expected to continue to fall after couple years. b) The buyers require faster deliveries to
meet increasing levels of consumer demand and ever decreasing product cycle times.
c) The buyers want business to be as straightforward and uncomplicated as possible.
They will have a greater choice after the ending of quotas, and they will buy from
preferred suppliers who offer consistent quality, reliable delivery dates, competitive

7
prices and productivity levels at international standards. The number of countries in the
garment industry can expected to fall, and buyers will have greater value-added service
requirements.
McCulloh (1998) in his book stated that one of various definitions in macro or
nation level taken by U.S presidential Commission on Industrial Competitiveness which
defined competitiveness as the degree to which an economy, under a free market
regime. It could produce goods and services and that survive the test of international
markets, while at the same time maintaining and expanding the real income level of its
citizen.
Defining competitiveness in macro level by basing on productivity and real
income level has been more acceptable than the other one that base on trade
performance ( Markusen, 1992 and Ezeala-Harrison, 1995). This is because increasing
import or decreasing export not necessarily loss competitiveness. Some industries will
be exporter while others will be domestic oriented, then, increasing import may be used
for productive investment may lead to a balance trade deficit but may constitute an
investment for raising future productivity.
Markusen (1992) said defined competitiveness as the ability of the firm/industry
to achieve and maintain a level of productivity that is equal to or higher than level
accomplished by competitors. In addition, in term of cost of competitiveness defined as
the ability of firm/industry to produce and market product at equal or lower unit costs
relative to that of competitors. Some authors tend to prefer using productivity as a
parameter of competitiveness. They use Total Factor Productivity (TFP) that indicates

8
the combined productivities of all factors of production and institutions as well as
infrastructure at work within the country. Cost parameter can be misleading just
because there is different price of production factors among competitors in different
countries.

2.2 The Factor Affecting the Competitiveness of Garment Industry

The shape of competitive strategy, each firm has to deem any key factors
affecting to its competitive. Pearce and Robinson (1997) classified those factors into
three abroad levels; macro/remote environment, industry environment, and
firm/operating environment. Thompson and Strickland (2003) also categorized into the
same pattern. Two first major factors constitute source of opportunities and threats for
the company, meanwhile firm factors are the source of strengths and weaknesses of
the company. Two later levels of competitiveness sources are described separately
next.
The term of competitive advantage was written by Michael E. Porter in his book
of Competitive Advantage of Nation (1985) and statistical research on the
microeconomic foundations of economic development "The Microeconomic Foundations
of Economic Development" (in The Global Competitiveness Report 1998, Geneva,
Switzerland: creating sustaining superior performance 1985.
Michael E. Porter also extended his microeconomic based on theory of
competitiveness in a variety of ways. He is exploring the shifting role of various
microeconomic influences as a nation's economy becomes more advanced, and the

9
relationship between macroeconomic conditions and microeconomic conditions in
development.

2.2.1. Macro Environment

All companies operate in a Macro environment shaped by influences
emanating from the economy at large, population demographics, societal value and
lifestyles, government legislation and regulation, technological factors, and, closer to
home, the industry and competitive arena in which the company operates. Strictly
speaking, a companys macro environment includes all relevant factors and influences
outside the companys boundaries, by relevant, we mean important enough to have a
bearing on the decisions the company ultimately makes about its direction, objectives,
strategy, and business model.
Macro or remote environment encompasses all aspects that originate beyond,
and usually irrespective of, and single firms operating situation such as economic,
social, political, technological, and ecological factor (Pearce and Robinson, 1997). This
is in line with what Thompson and Strickland (2003) have categorized; the economy in
large, legislation and regulation, population demographics, social value and lifestyle, as
well as technology.
Economy factors concern the nature the direction of economy in which a firm
operates. It include such issue as availability of credit, the level of disposable income,
interest rate, inflation rate, and the propensity of people to spend. Social factors involve
the belief, value, attitudes, opinions, and lifestyle in the firm environment as developed

10
from cultural, religious, educational, and ethnic condition. Then, political factors define
the legal and regulatory parameters for example: anti-trust law, tax program, minimum
wage legislation, pollution and pricing policies and so on. In associated with
technological factor, a firm must aware of it to avoid obsolescence and promote
innovation. Finally, ecological factors consist of specific concern regarding global
warming, loss of habitat, and biodiversity, and air, water, land pollution as well (Pearce
and Robinson, 1997).
2.2.2 National Environment
Referring to particularly industry in a country compared to the same industry in
other nations, Michel E. Porter proposed so-called national competitive advantage. Why
does nation achieve international success in a particular industry or why does particular
industry/firm in certain country more competitive and more sustainable than the same
industry in different country? According to Michael E. Porter (1990) the nations
competitiveness are influenced by two factors, they are factors that come from the
nation where the industry/firm exist so-called national competitive advantage and ability
of industry or firm to process the nation environment through competitive strategy.
Johansson (2003) used different terms of factors; these are country-specific advantage
(CSAs) and firm specific advantage (FSAs).
National completive advantage or country specific advantages is attribute of
nation that shape the environment in which local firms compete that promote or impede
the creation of competitive advantage. Porte classified those factors into four broad

11
attributes: factor conditions, demand conditions, related and supporting industries, firms
strategy, structure, and rivalry,
So-called Porters Diamond Theory as illustrate following figure:
FIRM STRATEGY,
STRUCTURE AND
RIVALRY

Chance

FACTOR
CONDITIONS

DEMAND
CONDITIONS

RELATED AND
SUPPORTING
INDUSTRIES

Government

Figure 2.1 Porters Diamond Theory

Source: Adapted from Michael E. Porter (1990)

Nation is most likely to succeed in industry or industry segments where the

nation diamond is the most favorable. However, it is not to say that all a nations firm
will achieve competitive advantages in industry because not all have equal skill and
resources nor do they exploit the national environment equally well. Porter also added
that the diamond is mutually reinforcing system. The effect of one determinant is
contingent on the state of others.
There are two additional variables, according to Michael E. Porter, can influence
the national system in important ways, and are necessary to complete the theory. There

12
are chance and government. Chance events are development outside the control of
firms such as pure invention, breakthroughs in basic technologies, wars, external
political developments and major shift in foreign market demand. They create
discontinuities that can unfreeze or reshape industry structure and provide opportunity
for one nations firm to supplant anothers. The final element necessary to complete the
theory is government. The government, at all levels, can improve or detract from the
national advantage. This role has seen the most clearly by examining how policies
influence each of determinants. Moreover, the influence will be more noticeable when
the firm is state-own enterprises (SOE). The government intervention is not only
indirectly but also directly to the company. Regarding this matter, will elaborated
separately later on. Now each determinant in diamond theory will reviewed in more
detail.
Factor Condition: this determinant represent the nations position in factor of
production, input necessary to compete in any industries, such as labor, arable land,
natural resources, capital, and infrastructure. All classical theories in trade such as
Adam Smiths absolute advantage, Comparative advantage of David Recardo, as well
as Hechesher-Ohlin theorem rest on factor production (Appleyard & Field, 2001).
Porter grouped the factors into two categories, basic and advantaged factors.
Basic factors include national resource into two categories, basic and advance factors.
The basic factors include natural resources, climate, location, unskilled and
semiskilled labor, and debt capital. Meanwhile, advanced factors include modern digital
data communication infrastructure, highly educated personnel.

13
Demand Condition: this determinant represents home demand conditions for
the industrys products or services. According to Porter there are three significant broad
attributes of home demand: the composition of home demand, the size and pattern of
growth of home demand, and the mechanism by which nations domestic preference
are transmitted to foreign market.
The composition of home demand shapes how firms perceive, interpret, and
respond to buyer needs (Cooper, 1986). There are three characteristics of the
composition of home demand particularly significant to achieve the national competitive
advantage: segment structure of demand, sophisticated and demanding buyers, and
anticipatory buyer needs (Porter, 1990).
The size of the home market has been prominent in discussion of national
competitiveness (Scott and Lodge, 1985). Rapid domestic growth leads a nations firms
to adopt new technologies faster (Schmookler, 1966). Provided it anticipates buyer
needs in other nations, early local demand for a products or service in a nation helps
local firms to move sooner than foreign rivals to become established in an industry
(Vernon, 1966). In addition, in early saturation in their home market force nations firm
to continue innovating and upgrading to introduce new feature, improve product
performance. Saturation escalates local rivalry, forcing cost cutting and shakeout of the
weakest firms (Porter, 1990).
Porter described the characteristic of home demand is internationalization of
domestic demand. Porter argued that it could happen through at least two ways. Firstly,
if the nations buyer is mobile or multinational companies who travel extensively to other

14
nations, it can highlight the opportunity of establishing an overseas presence to a
nations firm and may well provide the conviction to pursue such a presence b lowering
the perceived risk. Secondly, a similar set of arguments applies if homebuyers are
multinationals with subsidiaries or operation in many countries.
Related and supporting industries: the third broad determinant of national
advantage in an industry is the presence in the nation of supplier industries or related
industries that are internationally competitive (Hirschman, 1958). Competitive advantage
in some supplier industries confers potential advantages on nations firm in many other
industries because they produce inputs that widely used and important to innovation or
to internationalization.
The competitiveness as Porter explained that could be reaped in some ways:
efficient, early, rapid, and sometimes preferential access to the most cost-effective
inputs, ongoing coordination, and through the process of innovation and upgrading. The
presence in a nation of competitive industries that related often leads to new
competitive industries.
This enables to provide opportunities for information flow and technical
interchange, share activities and sometimes forge formal alliances. International success
in one industry can also pull through demand for complementary product or service
(Porter, 1990).
Porter described the characteristic of home demand is internationalization of
domestic demand. Porter argued that it can happen through at lest two ways. Firstly, if

15
the nations buyers are mobile or multinational companies who travel extensively to
other nations, it can highlight the opportunity of establishing an overseas presence to a
nations firm and may well provide the conviction to pursue such a presence by lowering
the perceived risk. Secondly, a similar set of arguments applies if homebuyers are
multinationals with subsidiaries or operation in many countries.
Firm Strategy, Structure, and Rivalry: nations will tend to succeed in
industries where the management practices and modes of organization favored by the
national environment are well suited to the industries sources of competitive advantage.
The attitudes toward authority, norms of interpersonal interaction, attitude workers, and
social norm also have impact in a firm competitive advantage. The Important national
differences in management practices and approaches occur in such area as the
training, background, and orientation of the leaders, group versus hierarchical style, the
strength of individual initiative, the attitude toward international activities, and the
relationship between labor and management (Chandler, 1986).
Domestic rivalry, like any rivalry, creates pressure on firms to improve and
innovate. Local rival push each other to lower cost, improve quality and service, and
create new product and service. While firms may not preserve advantages for long
periods, active pressure from rivals stimulate innovation as much from fear or failing
behind as the inducement of getting ahead (Arrow 1962, Scherer 1980, Thomas 1989).
Vigorous local competition not only sharpens advantages at home but also pressures
domestic firms to sell abroad in order to grow. Particularly when there are economies

16
of scale, local competitors force each other to look outward in the pursuit of greater
efficiency and higher profitability. The presence of domestic rivals nullifies the type of
advantage that come simply from being in the nation, such as factor cost, access to or
preference in the home market, a local supplier base, and cost of importing that must
be borne by foreign firms (Porter, 1990). Johansson (2003) added one particular
country specific advantage (that can be disadvantage) is so-called country-of-origineffect. The effect refers to the impact on customers of the made-in label, or, more
generally, a branded product or service is perceived to be from. Products or services
from countries with a positive image tend to be favorably evaluated; white the products
from less positively perceived countries tend to be downgraded.
2.2.3. Industry Environments
Although the relevant environment is very broad as illustrated above, the key
aspect of firms competitive advantage is the industry in which it competes. Industry
structure had a strong influence in determining the competitive rule of the game as well
as the strategies potentially available to the firm. Thompson and Strickland (2003)
defined industry as a group of firms whose products have so many of the same
attributes that they compete for the same buyers.
Industries differ widely in their economic characteristics, competitive situations,
and future profit prospects. Knowledge of competitive factors within its positioning in its
industry, clarifies the area where strategic changes may yield the greatest payoff, and
highlight the areas where industry trends promise to hold the greatest significance as
either opportunities or threat (Porter, 1980).

17
Michael E. Porter (1980) has convincingly demonstrated that the state of
industry competition is composite of five competitive forces. These factors are
substitution, bargaining power of buyer, bargaining power of supplier, and rivalry
among existing competitors, jointly determine the intensity of industry competition and
profitability, and the strongest force of forces are governing and become crucial from
the point of view of strategy formulation:

Figure 2.2 Elements of Industry Structure Five Forces Model

Source: Adapted from Michael E. Porter (1979), Competition and Strategy: How Competitive Forces
Sharp Strategy.

18
Threat of Entry: a several factors determine whether the threat of new
companies entering the market place poses significant competitive pressure. One factor
relates to the size of the pool of likely entry candidates and the resources at their
command. As a rule, the bigger pool of entry candidates, the stronger the threat of
potential entry. This is especially true when some of the likely entry candidates have
ample resources and the potential to become formidable contenders for market
leadership.
New entrants to an industry bring new capacity, the desire to gain market share,
and substantial resources. Price can be bid down or incumbents cost inflated as a
result, reducing profitability. Porter argued the threat of entry into the industry depends
on the barriers to entry are present, couple with the reaction from existing competitors
that the entrant can expect. If barriers are high and/or the newcomer can expect sharp
retaliation from entrenched competitors, the treat of entry is low.
As Porter said, there are six major sources of barriers of barriers to entry:
- Economics of scale: It refers to declines in unit cost of a product (or operation
of function that goes into producing a product) as the absolute value per period
increases. Economics of scale deter entry by forcing the entrant to come in at large
scale and risk strong reaction from existing firms or come in at small scale and accept a
cost disadvantage, both undesirable options.
- Product differentiation: It means that established firms have brand identification
and customer loyalties, which stem from past advertising, customer service, product

19
differences, or simply being first into the industry. It creates a barrier to entry by forcing
entrants to spend heavily to overcome existing customer loyalties.
- Capital requirement: The need to invest large financial resources in order to
compete creates a barrier to entry, particularly in the capital is required for risky or
unrecoverable up-front advertising or research and development.
- Switching cost: It is one time costs facing the buyer of switching from one
suppliers to another supplier. It includes employee training cost, cost of new ancillary
equipment, and so forth.
- Access to distribution channels: to the extent that established firm has already
served logical distribution channels for the product, the new firm must persuade the
channel to accept its product through price breaks, cooperative advertising allowances,
and the like, which reduce the profits.
- Government regulation and policy Government: can limit or even foreclose
entry into industries with a control of instance: limits access to raw materials, air and
water pollution from entrenched firms safety.
Following things can single sharp retaliation from entrenched firms that deter the
new entrants: a history of vigorous retaliation, great commitment of established firm,
highly illiquid assets employed in it, or slow industry growth (Porter, 1980).

20
Intensity of Rivalry among Existing Competitors
Rivalry occurs because one or more competitors either feels the pressure or
sees the opportunity to improve position. Intense rivalry is the result of a number of
interacting structural factors (Porter, 1980).
- Numerous or equally balanced competitors: When firms are numerous, the
likelihood of mavericks is great and some firms may habitually believe they can move
without being noticed. Even when there are relatively few firms, if there relatively
balanced in term if size and perceived resources, it creates instability because they may
be prone to fight each other and have resources for sustained and vigorous retaliation.
- Slow industry growth: It turns competition into a market share game for firms
seeking expansion.
- High fixed or storage cost: It create strong pressure for all firms to fill capacity
which often lead to rapidly escalating price cutting when excess capacity is present
shade.
- Lack of differentiation or switching cost: Where the product or service is
perceived as a commodity or near commodity, choice by buyer is largely based on price
and service, and pressure for intense price and service result insulation.
- Capacity augmented in large increments: Capacity addition can be chronically
disruptive to the industry supply/demand balance, particularly where there is a risk of
bunching capacity additions.

21
- Diverse competitors: Diverse in strategies, origins, personalities, and
relationship to their parent can cause a difficult and different treatment to overcome
them.
- High strategic stakes Rivalry in an industry becomes even more volatile if a
number of firms have high stakes in achieving success there.
- High exit barriers the following reasons can make a company keep competing
in an industry although they may be earning low or even negative return on investment:
specialized assets, fixed cost of exit, strategic relationship, emotional barriers, as well
as government restrictions.

Pressure form Substitute Products

Porter defined a substitute product as other products that can perform the same
function as the product of industry. Based on Porters argument substitute products that
deserve the most attention are those that: (1) are subject to trends improving their
price-performance trade off with the industry products, or (2) are produced by industries
earning high profits. Some other indicators are also important such as growth rate,
market inroads, and expand capacity of substitute product (A. Mondrowitz, 1998).

Bargaining Power of Buyers

Buyer competes with the industry by forcing down prices, bargaining for higher
quality or more services, and playing competitors against each other, all at expense of

22
industry profitability. According to Porter, a buyer group is powerful if the following
circumstances hold true:
- It is concentrated or purchase large volume relative to seller sales;
- The products it purchases from the industry represent a significant fraction of
the buyers cost or purchases;
- The products it purchases from the industry are standard or undifferentiated;
- It faces few switching costs;
- It earns low profits;
- Buyer poses a credible threat of backward integration;
- The industrys product is unimportant to the quality of the buyers products;
- The buyer has quantity and quality of full information.

Bargaining Power of Suppliers

Supplier can exert bargaining power over participant in an industry by
threatening to raise price or reduce the quality of purchased goods. A supplier group is
powerful if the following apply (Porter, 1980).
- There are few suppliers for a specific input for your company.
- It is not obliged to contend with other substitute products for sale to the
industry.
- The industry is not an important customer of the supplier group.
- The supplier product is an important input to the buyers business.

23
- The suppliers groups products are differentiated or in building up switching
costs.
- Some suppliers threaten to integrate forward.
- Needed products are in short supply.

2.3 The Factor Affecting the Competitiveness of Garment Industry

As mentioned earlier, the last of three abroad competitive sources is firm or
operating level. From this level, the company can identify the strengths and the
weaknesses relative to its competitor in order to be tailor appropriate strategy. There
are a several methods for assessing companys competitiveness. One of them is
Balanced-Scorecard method.
In the last decade, there has been a growing criticism of traditional management
control as too narrowly focused on financial measures. For most of the twentieth
century, traditional management control systems have existed in an environment of
mature products and stable technologies (Hally, 1994) Sophisticated technologies and
production processes have led to new demand on company system of measurement
and management control. Financial measures showed the effect of decision already
taken but failed to provide adequate guidance for long-term strategic management
(Olve, Roy & Wetter, 1999).
The following some other criticism over traditional system:
1. Information given by traditional system can lead to action inconsistent with
strategic objective (Goldenberg & Hoffecker, 1994);

24
2. The measures used send misleading signal about the efficiency and
profitability of the business (Peters, 1987);
3. Financial measures alone do not provide a rue and fair view of how a
business is developing (Johnson & Kaplan, 1987);
4. The system has been tending to favor short-term investment decision that
encourages manipulation of financial measures (Smith, 1992).
Many began to realize that to be competitive a company needed more complete
reporting on the various aspects of its business. In 1992, Robert Kaplan and David
Norton published firstly the Balanced Scorecard (BSC) model as an alternative of
outcome measure and performance driver. By the thousands, companies embraced the
idea, a balanced scorecard became the hakmark of a well-run company, and a
completely new consulting specialty sprang up to help companies create one for them.
Kathy Ho and Mckay (2001) defined balanced scorecard as a strategic
measurement and management system that translate an organizations mission and
strategy into a balanced set of integrated performance measures. Regarding BSC as a
communication tool of the multiple, linked objective and some others else argued as a
substitute for a budget (Olve,Roy & Wetter, 1999).

25
To succeed
financially, how
should we appear to
our shareholder?
FINANCIAL
PERSPECTIVE

Objective
Measure
Target
Initiative

To achieve our vision,

how should we appear to
our customer?
CUSTOMER
PERSPECTIVE

To satisfy our shareholder

and our customers what
business process must
we excel at?
INTERNAL BUSINESS
PERSPECTIVE

VISION &
STRATEGY

Objective

Objective

Measure

Measure

Target

Target

Initiative

To achiee our vision

how will we sustain
our ability to change
and improve?

Initiative

LEARNING & GROWTH

PERSPECTIVE

Objective
Measure
Target
Initiative

Figure 2.3 The Balanced Scorecard translating Strategy into Action

Source: Kaplan, Robert S and David P. Norton. (1997). Balanced Scorecard:
Translating Strategy into Action.

However, all agreed that BSC provides a framework for strategic management
by transforming a companys strategic goals into an integrated collection of objectives
and the performance of indicators that organized by Kaplan and Norton into four

26
perspectives: financial, customer, internal business process, and learning and growth.
The name reflected the balance provided between short-term objective,
yesterday-today-tomorrow dimension, between lagging outcome measure) and leading
indicator (Performance driver), and between internal and external performance
perspective Kaplan&Norton, 1996).

2.3.1 Financial Measures

This measure indicates whether the companys strategy, implementation, and
execution are contributing to bottom line improvement. This is lagging measure because
it shows measurable economic consequences of action already taken in the past.
The financial objectives can differ considerably at each stage of a businesss
lifecycle. Business strategy theory suggest several different strategies that business unit
can follow, ranging from aggressive market share growth down to consolidation, exit,
and liquidation (Hofer and Schendel, 1978, MacMilan, 1982). However, for simplification
purposes, Norton and Kaplan identify just three stages; growths, sustain, and harvest.
Each of those strategies, based on Kaplan and Norton study, has three financial themes
that are revenue and growth mix, cost reduction or productivity improvement, and asset
utilization.
Olve, Roy & Wetter (1999) has already added some keys specific measures
such as revenue per total assets, profit per total assets, value added per employee,
revenue per employee. Additionally he added profit margin, ROI, ROA, and so on.

27
Table 2.1 Measuring strategic financial themes

Growth -

Sustain -

Business
Unit Strategy

Harvest -

Strategic Themes
Cost Reduction /
Revenue and
Productivity
Growth Mix
Improvement
- Revenue per
Sales growth
employee
% revenue from new
product and
customer
- Cost versus
Share of targeted
competitors
customers and
- Cost reduction rate
account
- Indirect expense (%
% revenues from
of sales)
new application
customers and
product line
profitability
- Unit cost
Customer and
(per unit of output,
product line
per transaction)
profitability
Percentage
unprofitable
customers

Assets
Utilization
- Investment
(% of sales)
- R&D (% of
sales)
- Working capital
ratios
- ROCE by key
asset categories
- Asset utilization
rate

- Payback
throughput

Sources: adapted from Kaplan, Robert S., and David P. Norton (1996)
The Balanced Scorecard: Translating Strategy into Action

2.3.2 Customer Measures

Kaplan and Norton describe this perspective as the ways in which value is to be
created for customers, how customer demand for this value is to be satisfied, and why
the customers will be willing to pay for it. In this perspective, managers identify the
customer and market segment in which the business will compete and the measures of

28
the business units performances in these targeted segments. One could say that this
part of the process is the heart of the scorecard. If the company fails to deliver the right
product and service for cost-effectively satisfying customers need in both the short and
long run, revenue will not generated, and the business will wither and die (Olve, Roy &
Wetter, 1999). According to Kaplan and Norton, the core measurement of this
perspective includes measures of market share, customer retention, customer
acquisition, customer satisfaction, and customer profitability.
Market share measure reflects the proportion of business in given market (in
term of customers dollar spent, or unit volume sold) that a business unit sells. Then,
customer acquisition measures, in absolute or relative terms, the rate at which a
business unit attracts or wins new customers or business. Meanwhile, customer
retention measures tracks, in absolute or relative terms, the rate at which a business
unit retains or maintains ongoing relationship with its customers. Customer satisfaction
measures assess the satisfaction level of customers along specific performance criteria
within the value proposition, and finally, customer profitability measures the net profit of
a customer, or a segment, after allowing for the unique expenses required to support
that customer (Kaplan & Norton, 1996)
Olve Roy & Wetter (1999) provided several other measures such as number of
complaints, marketing expense, and brand-image index.

29
2.3.3 Internal Business Process Measures
In this perspective, the executives identify the critical internal processes in which
the organization must excel to satisfy the shareholders and customers. It should focus
on the internal processes that will give the greatest impact to the customer satisfaction
and achieving the organizations financial objectives. Kaplan & Norton identify three
principal business process in preparing this perspective; innovation, operations, and
post-sale service. There are many kinds of measures can use for example. Productivity,
capacity utilization, delivery time, administrative expense/total revenue, on-time delivery,
lead-time, etc (Olve, Ray & Wetter, 1999).

2.3.4 Learning and Growth Measures

This perspective enables the organization to ensure its capacity for long-term
renewal, a perquisite for survival in the long run. In this perspective, the company
should consider not only what it must do to maintain and develop the knowledge
required for understanding and satisfying customers wants and needs, but also how it
can sustain necessary efficiency and productivity of the processes, which presently
create value for the customers.

This perspective involves with identifying the

infrastructure that the organization must build and create long-term growth and
improvement.
Based on their experience in practice, Kaplan and Norton argued there are
three principal categories for learning and growth perspective; employee capabilities,
information system capabilities, and motivation, empowerment, and alignment. From

30
those categories can be draw some measure such as employee satisfaction, employee
retention, employee productivity, R & D expense, investment research, investment in
training, investment in development new product/market, etc (Olve, Roy & Wetter,
1999).

2.4 Strategy Analysis

One of the familiar methods in analyzing firm strategy is SWOT analysis. SWOT
is an acronym for the internal Strengths and Weaknesses of a firm and the environment
Opportunities and Threats facing the firm. It is grounded in the basic principle that
strategy-making efforts must aim at producing a good fit between a company resources
capability (as reflected by its balance of resource strengths and weaknesses) and its
external situation (as reflected by opportunities and threats emerged from macro
environment, as will industry environment) (Thompson & Strickland, 2003).
Strength is something a company is good at doing or a characteristic that gives
it enhanced competitiveness relative to its competitors. Meanwhile weakness is
something a company lacks or does poorly (in comparison to others) or a condition that
puts it at a disadvantage. The sources of weaknesses are, basically, the same as
those of strengths (Thompson and Strickland, 2003). They may exist with regard to
financial resources, image, and market leadership (Pearce and Robinson, 1997).
Thompson and Strickland added such thing as skill or important expertise, physical
assets, alliances and so on.

31
As illustrated above, it is useful to utilize the BSC concept to identify a firms
strengths and weaknesses that cover four linked-different perspectives: financial,
customer, internal business, and internal growth perspective compared to its
competitors.
The opportunity is defined Pearce and Robinson as major favorable situation in
a firms environment. On the other hand, threat is a major unfavorable situation in a
firms environment. As discussed earlier, firm environment commonly includes macro
environment (political, economic, societal, etc), nation environment (factor, demand,
domestic rivalry, government, etc) as well as industry environment (supplier, buyer,
substitute, etc).

Figure 2.4 Formulations, Implementation, and Control of Competitive Strategy

Source: Adapted from Pearce and Robinson (1997)

32
SWOT analysis can use to aid strategic analysis as illustrated in Figure 2.4 and
SWOT matrix in table 2.2. Key external opportunities and threats systematically
compared with internal strength and weaknesses in a structured approach. The
objective is identification of one of four distinct patterns in the match between a firms
internal and external situation.

2.5 Overview of Garment Industry in the World and Cambodia

The global textile and garment industry has expanded continuously to meet the
demands of a growing world population with increases in standards of living worldwide
and diversification of end-use applications. In 1950, for example, the consumption of
fiber by the worlds textile mills was 7 million tons and that increased to almost 55
million tons in 2003. It is interesting to note that polyester, first discovered by The
Calico Printers Association in Manchester, UK in the early 1950s, now represents about
65% of total fiber consumption, i.e. about 36 million tons. The principle end-use
applications for textiles fifty years ago were in the manufacture of garments (about 84%)
and home textiles, e.g. bed linen, furnishings, towels, etc., (about 12%) whilst other end
uses represented some 4%. Today, one of the key growth areas for textiles is in
industrial textiles, e.g. fabric substrates for the production of shoes, airbags for cars,
buses, etc., and in technical textiles, e.g. geo-textiles, agro-textiles, and construction
textiles.
The Multi-Fiber Arrangement (MFA) was introduced by the major, high cost
textile and garment industries in the late 1960searly 1970s as a means of protecting

33
their declining textile industries by restricting imports from the then established textile
and garment exporting countries, e.g. China, Egypt, Hong Kong, India, Republic of
Korea, Pakistan, Taiwan, Thailand, Turkey, etc. The quantitative restrictions, known as
quotas, were introduced through bilateral negotiations or, if discussions failed to reach
agreement, restrictions were imposed unilaterally.
The objective of the quotas was to enable the textile and garment industry
capacities in the higher cost countries to be reduced at a controlled rate. This reduction
has taken place over the last 30 years. One of the apparently incidental results of the
MFA has been the transfer to, and growth of textile and garment industries in, many
countries that previously had no significant textile or garment manufacturing traditions
and, therefore had no restrictions on their exports. These countries include Bangladesh,
Indonesia, Malaysia and Sri Lanka. Cambodia is one of the later entrants to the global
export market with garment export sales first recorded in the middle 1990s.
Cambodian garment production, while critical to the economy of Cambodia,
remains relatively small in global terms with about 0.3% of garment production
worldwide and 0.7% of global foreign trade, by value, based on WTO data. In 1995, the
Uruguay Round of negotiations was concluded and the stage set to enable all world
trade to return to the General Agreement on Tariffs and Trade (GATT). This involved
replacing the Multi-Fiber Agreement (MFA) with the WTO Agreement on Textiles and
Clothing (ATC). The ATC is based on a non-extendable 10-year transitional program for
the removal of all quotas by 1 January 2005.

34
The critical aspects of the ATC were that the higher cost countries importers
had a further 10 years in which to make the needed commercial, industrial and social
adjustments in reducing their production capacities and that the exporting countries had
the same 10 years in which to prepare their business strategies to be competitive in the
new market situation.
Table 2.2 Global garment foreign trade in garment top export country
(Actual project, US$ Billions)

The global textile and garment industry has expanded continuously to meet the
demands of a growing world population with increases in standards of living worldwide
and diversification of end-use applications. In 1950, for example, the consumption of

35
fiber by the worlds textile mills was 7 million tons and that increased to almost 55
million tons in 2003. It is interesting to note that polyester, first discovered by The
Calico Printers Association in Manchester, UK in the early 1950s, now represents about
65% of total fiber consumption, i.e. about 36 million tons. The principle end-use
applications for textiles fifty years ago were in the manufacture of garments (about 84%)
and home textiles, e.g. bed linen, furnishings, towels, etc., (about 12%) whilst other end
uses represented some 4%. Today, one of the key growth areas for textiles is in
industrial textiles, e.g. fabric substrates for the production of shoes, airbags for cars,
buses, etc., and in technical textiles, e.g. geo-textiles, agro-textiles, and construction
textiles. The Multi-Fiber Arrangement (MFA) was introduced by the major, high cost
textile and garment industries in the late 1960searly 1970s as a means of protecting
their declining textile industries by restricting imports from the then established textile
and garment exporting countries, e.g. China, Egypt, Hong Kong, India, Republic of
Korea, Pakistan, Taiwan, Thailand, Turkey, etc. The quantitative restrictions, known as
quotas, were introduced through bilateral negotiations or, if discussions failed to reach
agreement, restrictions were imposed unilaterally. The objective of the quotas was to
enable the textile and garment industry capacities in the higher cost countries to be
reduced at a controlled rate. This reduction has taken place over the last 30 years. One
of the apparently incidental results of the MFA has been the transfer to, and growth of
textile and garment industries in, many countries that previously had no significant
textile or garment manufacturing traditions and, therefore had no restrictions on their
exports. These countries include Bangladesh, Indonesia, Malaysia and Sri Lanka.

36
Cambodia is one of the later entrants to the global export market with garment export
sales first recorded in the middle 1990s. Cambodian garment production, while critical to
the economy of Cambodia, remains relatively small in global terms with about 0.3% of
garment production worldwide and 0.7% of global foreign trade, by value, based on
WTO data. In 1995, the Uruguay Round of negotiations concluded and the stage set to
enable all world trade to return to the General Agreement on Tariffs and Trade (GATT).
This involved replacing the Multi-Fiber Agreement (MFA) with the WTO Agreement on
Textiles and Clothing (ATC). The ATC is based on a non-extendable 10-year
transitional program for the removal of all quotas by 2005.

The WTO Agreement on Textiles and Clothing

The completion of the Uruguay Round of negotiations resulted in an agreement
to integrate trade in textiles and clothing into the GATT/WTO. In 1995, the Multi-Fiber
Agreement (MFA) was replaced by the WTO Agreement on Textiles and Clothing
(ATC). The ATC is based on a non-extendable 10- year transitional program for the
removal of all quotas by 1 January 2005. Liberalization has proceeded along two paths.
One concerns integrating textile and clothing trade into the WTO framework and the
other is related to the application of accelerating growth factors for MFA quotas. The
ATC binds only for WTO Members and is a subject to the same set of rules and a
single system of resolving disputes, which is applicable to all WTO Agreements. The
ATC calls for a gradual phase out of the quota restrictions carried over from the MFA
regime. Products covered by the ATC have been integrated in three stages and the

37
percentage of products that must be brought under GATT rules are specified for each
step. If any of these products come under quotas, then the quotas must be removed at
the same time. In these three stages, the quota growth rates increase progressively
from their base levels by increasing annual growth rates at each stage. Products
brought under GATT rules at each stage were required to cover the four main types of
textiles and clothing: tops and yarns; fabrics; made-up textile products; and clothing.
(Source: Adapted from UNIDO 2003)

2.5.1. Overview of Garment Industry in Cambodia

After two decades of turmoil, the Cambodian government cooperates
with the firms to develop and rebuild with international assistance in the 1980s in
order to provide basic needs for the home market. Mid of 1990s, while Cambodia
restored peace and the government had converted from a centrally planned to a
market economy, (Cambodias garment industry should rely on FDI improve export
development). This sector is now the mainstay of Cambodian manufacturing and
thus it is a single most important export item.
The robust growth in the garment sector is mainly the result of Normalized
Trade Relationship (NTR) agreements, first signed with the European Union (EU)
in 1996 and then with the United States the following year. Following the
agreements, Cambodia received grant with the trade statuses of MFN and included
in their GSP. From1990 until 1999, the Cambodia garment exports grew from
virtually from 0 to 50 percent of the country's total exports, with about 90 percent of

38
garment shipments to the United States. In 1999, Cambodia's remarkable
performance prompted the United States to introduce quotas on 12 categories of
Cambodian garment exports, but fortunately, this measure has not significantly
affected the expansion of the industry.
The quota stipulates that each year there would be an automatic 6 percent
relaxation of the quotas, effective from January 2000. In year 2000, USA has linked
the relaxation of import quotas to working conditions in order to encourage the
Cambodian government to improve labor conditions in the garment industry by
suggesting an additional 14 percent relaxation of the quotas on top of the
automatic 6 percent, if Cambodia complied substantially with internationally
recognized labor standards. By 2001, the Cambodian garment industry reached a
landmark achievement of exports totaling $1 billion. The growth trend continued as
Cambodia benefited with both an increased quota and with growth in non-quota
products. By 2004, Cambodia became one of major exporters of garment products,
ranking number 16 in the American market. Exports accounted for 36 percent of
the country's GDP that year. The Business Climate on garment industry in Cambodia
both the public and private sectors have long recognized the significant challenges
faced by the business sector in Cambodia (Report by Dr. Hing Thoraxy, CICP director,
Foreign Direct Investment: Opportunities and Challenges for Cambodia, Laos and
Vietnam, Hanoi, August 16-17, 2002). He identified some key issues facing the
business community such as 1).Weaknesses of system; 2). Costs of and access to
finance;3) Inadequate market information on consumer trends; 4) Shortages of skilled

39
labor;5) Inadequate infrastructure that restricts access to markets and raw materials; 6)
the quality of the port facilities; 7) the high cost of essential utilities and services, i.e.
electricity, water supply, and telecommunication services; and 8). Land issues for
agriculture investment projects.
In order to provide a more systematic evaluation of the Cambodian investment
climate and to provide policy advice based on both an assessment of the business
climate in Cambodia and that of major competitors, the World Bank carried out
Cambodia productivity and investment climate survey (PICS) in 2003. The PICS
analyzed in World Bank in 2004 represents by far the most comprehensive evaluation
of the investment climate in Cambodia to date. Given the opportunity of private-led
growth* and the challenges of improving the business environment, the government
has begun to design and implement a broad reform strategy anchored in its successful
bid to join the WTO.
As H. E. Sr. Minister Cham Prasidh (Senior Minister and Minister of Commerce
of the Kingdom of Cambodia) described in a recent speech on the Protocol of
Accession. His Excellency requires the Government to undertake 98 separate legal and
policy reforms on an accelerated schedule, improvements in the regulator framework for
foreign direct investment and taxation, and a framework for open consultations with the
private sector on investment climate issues. However, WTO only sets the stage for
competition. An efficient, low-cost investment climate is needed in order for domestic
firms to be able to take advantage of market access opportunities.

40
Exports and Markets: Cambodias export performance is shown in Table 2.3
Garment exports rose from about US$26 million in 1995 to over US$1,600 million in
2003. This amounted to almost 80% of total Cambodian exports, and Cambodias
garment exports represented 0.74% of the world total by value. In 2003, exports to the
US broke through the billion-dollar barrier for the first time at US$1.1 billion, of which
63% were items under quota. However, the US market share of total garment exports
from Cambodia has fallen steadily from a peak of 81% in 1998 to below 70% in 2003.
This was due largely to the provision of preferential access to the EU in the late
1990s and early 2000s and is reflected in the increasing share of exports to the EU
qualifying for GSP privileges in the last three years. Exports to the EU topped US$407
million in 2003, and following the extension of Canadas GSP scheme to cover textiles
and apparel in January 2003, exports to other markets jumped in 2003 to over US$75
million.

41
Table 2.3 Cambodia's Garment Exports - 1995-2003, Values and Quantities
1995

1996

1997

1998

1999

2000

2001

2002

2003

433.3

524.5

501.4

626.5

710.7

Values (US$ mn)

US
Quota
Non-Quota
Total

82.8

226.8

327.2

327.1

410.4

0.5

1.6

109.9

291.8

516.1

751.3

828.6

953.5

1121.1

83.9%

69.8%

60.5%

65.7%

63.4%

1.8%

2.0%

48.4%

81.2%

78.2%

76.2%

71.7%

71.3%

69.8%

143.0

186.4

239.0

2002

2003

Share of Quota (%)

US Share of Total (%)
EU
GSP
1995

1996

1997

1998

1999

2000

2001

166.1

169.2

168.4

25.7

74.8

112.4

63.1

136.7

220.8

309.1

355.7

407.4

46.3%

52.4%

58.7%

96.0%

93.2%

49.5%

17.6%

20.7%

22.4%

26.8%

26.6%

25.3%

Values (US$ mn)

MFN
Total
Share of Quota (%)
US Share of Total (%)
Other Markets

0.6

3.9

4.8

4.5

7.3

14.3

17.9

28.1

78.7

Total Garment Exports

26.7

80.3

227.1

359.4

660.1

986.4

1155.6

1337.2

1607.1

Total Merchandise Exports

865.0

717.0

839.0

795.0

1124.0

1394.0

1564.0

1742.0

2056.0

Garment Share of Exports (%)

3.1%

11.2%

27.1%

45.2%

58.7%

70.8%

73.9%

76.8%

78.2%

Quota

118.0

115.2

156.7

136.9

138.9

None-Quota

30.0

91.3

110.2

172.3

201.6

148.1

206.5

266.9

309.2

340.5

GSP

38.5

49.3

67.2

MFN

42.8

41.0

40.4

Quantities(pcs mn)
US

Total

1.3

8.8

62.2

124.7

EU

Total

9.0

2.0

34.3

20.7

34.7

58.3

81.3

90.2

107.6

Other Markets

0.7

2.0

15.2

1.1

3.2

4.4

4.5

7.4

18.2

Source: Export data of Cambodia's Garment Exports (1995-2003), Values and Quantities was
obtained from GSP Department, Cambodian Ministry of Commerce.

Export Trade: China is by far the largest garment exporter, based partly on
imported finished fabrics and partly on increasing self-sufficiency, through domestic and
foreign textile investments. India is second largest of the countries in garment orders,

42
based mostly on domestic textile production and limited foreign investments.
Bangladesh garment exports to the third highest in these countries and have reached a
level of about US$5 billion, building on recent domestic investment in textile production
and backward linkages. Indonesia is the fourth largest garment exporter, after having
been third largest for some years. Indonesia has invested heavily in Man-Made Fiber
production, as well as in textile production, so self-sufficiency in materials supply is also
increasing.
Table 2.4 Benchmarking of Export Trade
Factor

Exports 1990 US$ mn

Exports 2000 US$ mn

Exports 2002 US$ mn

Cambodia

Bangladesh

China

India

Indonesia

Sri

Viet

Lanka

Nam

Pakistan

643

9.669

2.530

1.646

1.014

638

300

985

4.171

36.071

6.178

4.734

2.144

2.812

900

1.339

4.131

41.302

5.600

3.945

2.228

2.326

1.000

0.59

8.9

2.3

1.5

0.94

0.6

0.3

0.5

2.1

18.3

3.1

2.4

1.1

1.4

0.5

0.7

2.1

20.6

2.8

1.1

1.2

0.5

Share global trade

(%)
Share global trade
(%)
Share global trade
(%)

Source: WTO and Cambodian statistics

Sri Lanka is fifth largest exporter of garments, based largely on foreign

investments and imported fabrics but with a high degree of self-sufficiency in knitted
fabrics sector. Pakistan has focused more on home furnishing textiles that are more
suited to local cottons and garment exports (US$2.2 billion) are ahead of Cambodia

43
(US$1.5 billion). Pakistans garment industry is based almost entirely on domestic
investment.
Overall Evaluation of Constraints Overall The survey found that the top
priorities of private companies in Cambodia involved governance, the rule of law, and
corruption. Figure 2.5 shows that corruption was ranked as the number one constraint
for business, with security as number two, and anti-competitive or informal practices as
number three.

Figure 2.5 Cambodia: Top General Constraints to Private Enterprise

Operation and Growth
Source: World Bank, 2004, Data for the year 2000.

Governance and Corruption: In generally, in order to conduct business and the

average level of such payments amounted to between 5% and 6% of total sales. This
places Cambodia significantly higher than Bangladesh at around 50% of Cambodia
levels one of the countrys main competitors in the garment industry. In addition,

44
companies operating in Cambodia viewed the integrity of the bureaucracy as very weak,
reinforcing the widely held view that dramatic reforms in all areas of public sector
governance are required to improve the business environment. The impacts have been
resulted in weak governance and high levels of corruption. For example in a number of
indicators such as the Governance Matters Indicators produced by the World Bank,
the Corruption Perception Index produced by Transparency International the Investment
Climate indicators reproduced in World Development Indicators; and the Country Policy
and Institutional Assessment (CPIA) ratings done by the World Bank. Cambodias
government, civil society, and public alike recognize weak governance and high levels
of corruption as major impediments to lasting growth and poverty reduction.

Figure 2.6 Percent of Sales Value Paid Informally to Public Officials

Source: The World Bank, PICS for each respective country.

Business Operations: two key measures of the ease of doing business

concern the time taken to start up a business and the cost of starting up a business.

45
Cambodia was scores considerably higher (in terms of time & money) than major
competitors in South East Asia, especially in terms of costs.

Figure 2.7 Time and Cost to Start a Business

Source: World Bank 2004

Figure 2.8 Cost to Start a Business (% of income per capita)

Source: The World Bank 2004

46
Trade Facilitation and Regulatory Streamlining (Cambodian Government
commitment)
In the trade facilitation area, the Government committed to the Twelve-Point
Plan leading to a streamlined, Electronic Single Window was pilot by December 2005.
The overall development objective is to Increase the private sector's contribution
to poverty reduction through growth, export diversification and improved service
delivery. These reforms support Cambodia's pro-poor trade strategy by reducing the
cost, time and transparency of export and import transactions and clearance
processes. Improvements m trade facilitation practices are strongly correlated with
increases in trade and GDP. In the short run, this would also have the effect of
making the garment sector more competitive in a post-quota environment, and
in the long-term contributes to diversification.
Cost and time required to clear import and export shipments is reduced, as
measured by
A reduction in the number of steps required to clear imports from 45 to
less than 10 by December 2005;
Reduction in the percentage of export shipments that arc physically
inspected or scanned to less than 40% by June 2005 and to the ASEAN average by
June 2006;
A 35% reduction in the time required to clear export shipments by June 2006.
The corruption in trade facilitation processes improves in a follow-up ICS
in 2006.

47
Trade Facilitation: The World Bank clearly identifies the negative aspects of
trade facilitation high costs of corruption and long delays for clearance procedures
as a critical issue affecting productivity and competitiveness in Cambodia, with each
step in the exporting process characterized by delays, formal costs and informal
payments. In addition to the time taken, companies particularly object to the arbitrary
nature of the procedures that are seen as unclear and often superfluous. Again, it is
found that Cambodia scores lower even than Bangladesh in terms of the longest time
taken to clear customs. In the garment industry, for example, it takes up to 19 days in
Cambodia to clear customs, while in Bangladesh it takes only 14 days.

Marketing and Logistics: Cambodia is disadvantaged relative to the other

countries as shown in Table 8. Each of the other countries has domestic access to at
least some, if not most, of the materials required in the manufacture of garments. This
allows for better performance, in terms of on time delivery and rapid repeat orders.

48
Table 2.5 Benchmarking of Marketing and Logistics
Competitive
Factors

Cambodia

Bangladesh

China

India

Indonesia

Pakistan

Sri
Lanka

Viet
Nam

Market
orientation-local

On time delivery

3 to 4

3 to 4

3 to 4

Fast repeat orders

4 to 5

3 to 4

4 to 5

4 to 5

Local yarn
supplies

1 to 2

1 to 2

Local fabric
supplies

3 to 4

1 to 2

3 to 4

2 to 3

Local accessories

4 to 5

3 to 4

3 to 4

4 to 5

Note: 1= excellent; 2= good; 3= average; 4= less than average and 5=weak or poor

Sources: Market research of Ministry of Commerce of Cambodia

2.5.2 The Status of Garment Industry in Cambodia

The Cambodian garment industry has developed extremely rapidly within the
last 10 years, from a minor presence in 1995, to become the major manufacturing
activity in the country by the late 1990s and early 21st century. In 2003, the garment
industry is estimated value added of almost US$500 million accounted for around 12%
of national GDP. The garment industry has an estimated 320,000 employees of which
85-90% is female and in the age group 18-25 years. This accounts for around 65% of
total manufacturing sector employment. The number of companies, for example, if the
high season requirement were for a 100% workforce, then the low season requirement
is only 60% of that number. The work patterns during the low season are met by
arranging for some workers to return to their villages for an extended stay, at retainer
wages, by releasing contracted workers at the end of their contracted periods, or by

49
letting permanent employees leave the companies. In addition, there are many indirect
jobs associated with the garment industry perhaps as many as 150,000 related jobs.
The garment industry is estimated to have 286 companies in early 2006, located mostly
in Phnom Penh and its suburbs with a few in Sihanoukville, near to the main port, and
in Kompong Cham province. Fifty-six companies are reported to have closed down
since the mid- 1990s, so the total number of companies entering the garment industry
has been 242. In addition, there are estimated to be a large number of small cottage
industry sub-contracting companies that provide extra sewing capacities during peak
demand periods. The industry is virtually 100% foreign owned, with most of the decision
takers based in East Asia from where production orders are received, together with the
fabric, accessory supplies, and delivery instructions. The foreign owners usually have
similar stitching units in other Asian countries and decide in which of their units to have
garment orders made-up according to quota availability, product quality, manufacturing
costs, and delivery lead-time. The attractiveness of Cambodia for foreign direct
investment in the mid-1990s was due to the competitive wage cost, no restrictive quotas
into major global markets and GSP access to the EU market, with the added advantage
that quota premiums that had to be paid in most competing countries were not paid in
Cambodia. Consequently, Cambodia had cost competitive advantages over many other
countries.
As a result, the EU was the main market in the early years. Subsequently, even
when some quotas were applied, preferential access to the US market was offered and
exports to the US increased significantly. The garment industry is dependent almost

50
completely on imported yarns (for knitwear); finished woven and circular knitted fabrics
(for woven and knitted cut and sew garments); all accessories and almost all packing
and presentation materials. The domestic material content is limited to some cardboard
cartons and poly bags. As a result, the total average domestic added value content in
2003 was about US$ 442 million, i.e. the difference between the value of exports and
imports. Expressed as a percentage of exports, this domestic value added content
amounted to 28.6%. The garment industry is considered one of the most compliant in
terms of labor practices and Cambodia has been awarded incremental increases in
quota allocations by the US government (an additional 14% in 2004 of a possible
increase of 18%).
2.5.3. Structure of Industry in Cambodia
Between 1996 and 2003, a total of US$656 million in fixed asset investment and
the government (figure 2.9) approved US$445 million in garment sector registered
capital.

Figure 2.9 Cambodia garment industry investment approvals

Source: Cambodian Investment Board (CIB) reported in CDRI Vol. 8, Issue 2.

51
Role of Foreign Investment/Local Investment: It is usual for foreign investors
to join with local investors in setting up joint-venture companies, where the opportunities
are (a) to use locally available material resources, (b) to sell into a strong domestic
market or (c) to export the product into identified target markets. In the case of
Cambodia, there are no domestic investors with which to form joint- ventures and only
the third option is available. Most Cambodian-based garment companies (woven and
knitted cut and sew as well as knitwear companies) are 100% foreign owned. This is an
almost a unique situation in global terms. These foreign investors often have similar
units in other garment assembly countries, e.g. Bangladesh, China, Indonesia, Pakistan,
Sri Lanka and Viet Nam, and make all strategic business and sales decisions.
Fabric/materials are distributed from their central headquarters to the units that produce
the garment orders. The decision as to in which of their manufacturing locations make
up garment orders is based on the manufacturing skills and costs of each of the units,
the lead times available and especially the availability of quotas and preferential market
access. After 1 January 2005, the question of quotas no longer apply and production
location decisions are increasingly based on product quality, lead times, reliability in
meeting delivery dates, productivity and cost competitiveness. Cambodias cost
advantage disappears when quotas end and quota premiums are no longer paid in
several competing countries. Delivery lead times is necessarily longer than in countries
with domestic textile production; shipments of incoming materials can, and often are,
subject to delays in shipment or at the port and so garment exporters may not be so
reliable as units in countries that manufacture textiles. Costs are also higher at a time

52
when buyers are looking for faster deliveries for smaller orders at lower prices. The
buyers in other countries have indicated that major US and other buyers will focus on
buying more from countries with integrated textile value chains. Possibly the value chain
can extend back to fiber growing or production, but this is not an essential criteria.
Garment companies in such countries are more likely to offer a superior service at
lower costs than companies in Cambodia where all materials have to be imported
indirectly (via Singapore), processed and exported indirectly (via Singapore). In this
context, where will the interests of the dominant foreign investors in the Cambodian
garment industry lie? Will this be with their global business or to their manufacturing unit
in Cambodia?
The decision is not a difficult one; their global business is likely to be their
choice. This is unfortunate because with few domestic investors to support the
Cambodian garment industry, and most Cambodian based companies having no
significant investment in the country, Cambodia is expected to lose a significant amount
of garment business. If the garment companies in Cambodia had been joint ventures, it
could be expected that the local partners at least would an interest in consolidating the
position of the garment industry by ensuring the prompt supply of the needed finished
fabrics and other input materials. This could achieve with backward linkages into textile
production or strengthening commercial ties for supply capacities. Foreign investors do
not see the same need or make the same commitments, as would domestic investors.

53

CHAPTER 3
RESEARCH METHODOLOGY
The purpose of this chapter is to present the methodology of collecting and
interpreting data. This chapter is divided into 5 sections:
Section 1: Hypotheses
Section 2: Conceptual framework
Section 3: Research Methodology
Section 4: Research Design
Section 5: Data collection & data analysis method

3.1 Hypotheses
Based on the theories discussed in chapter 2 and the objectives of the study,
this research including following hypotheses:
H1: The effect on macro environment based on performance of garment industry
H0: The economic growth has no significant effect on Macro environment based on
performance of garment industry in Cambodia.
Ha: The economic growth has a significant effect on macro environment based
performance of garment industry in Cambodia

54
H2: The effect on National Environment based on performance of garment
industry
H0: Infrastructure has no significant effect on efficiency on national environment
based performance of garment industry in Cambodia.
Ha: Infrastructure has a significant effect efficiency on national environment based
performance of garment industry in Cambodia

H3: The effect on Threat of new entrant based on performance of garment

industry
H0: Economic of scale has no significant effect on threat of new entrant based
performance of garment industry in Cambodia.
Ha: Economic of scale has a significant effect on based threat of new entrant based
on performance of garment industry in Cambodia.

H4: the effect on Intensity of Rivalry among Existing Competitor based on

performance
H0: The number of competitor has no significant effect on intensity of rivalry among
competitor-based performance of garment industry in Cambodia.
Ha: The number of competitor has a significant effect based on intensity of rivalry
among competitor of garment industry in Cambodia.

55
H5: The effect on power of buyer based on performance of garment industry
H0: The buyer has the ability to postpone purchasing the garment product have no
significant effect on the power of buyer-based performance of garment industry
in Cambodia.
Ha: The buyer has the ability to postpone purchasing the garment products have a
significant effect based on the power of buyer-based performance of garment
industry in Cambodia.

H6: The effect on power of suppliers based on performance of garment firms

H0: The suppliers product is important products to garment firms have no significant
effect on the power of supplier-based performance of garment industry in
Cambodia.
Ha: The suppliers product is an important product to garment factory have a
significant effect based on the power of supplier based the performance of
garment industry in Cambodia.

H7: The effect on macro environment based on performance of garment industry

H0: The economic growth has no significant effect on macro environment based on
performance of garment industry in Cambodia.
Ha: The economic growth has a significant effect on macro environment based base
performance of garment industry in Cambodia.

56
H8:

The effect on national environment based on performance of garment

industry

H0:

Infrastructure has no significant effect on national environment based

performance of garment industry in Cambodia.

Ha:

Infrastructure has a significant effect on macro environment basing

performance of garment industry in Cambodia.

H9:

The effect on threat of new entrant based on performance e of garment

industry

H0:

Economic of scale has no significant effect on threat of new entrant basing

performance of garment industry in Cambodia.

Ha:

Economic of scale has a significant effect on the threat of new entrant basing
performance of garment industry in Cambodia.

H10: The effect on intensity of rivalry among exiting competitor based on

performance
H0:

The number of competitor has no significant effect on intensity of rivalry

among exiting competitor basing of garment industry in Cambodia.

Ha:

The number of competitor has a significant effect on intensity of rivalry among

exiting competitor basing of garment industry in Cambodia.

57
H11: The effect on the power of the buyers based on performance of garment
industry
H0:

The buyer has ability to postpone the garment products have no significant
effect on power of buyer basing performance of garment industry in Cambodia.

Ha:

The buyer has ability to postpone the garment products have a significant
effect basing performance of garment industry in Cambodia.

H12: The effect on powers of supplier based on performance of garment

industry
H0:

The suppliers product is an important product for garment industry has no

significant effect on power of supplier basing performance of garment industry
in Cambodia.

Ha:

The suppliers product is an important product to the garment industry has a

significant effect on power of supplier basing performance of garment industry
in Cambodia.

3.2 Conceptual Framework

The study was conducted by basing on the following conceptual framework
adapted from a couple of theories discussed earlier. The variables were defined then
the interactions among variable are established to clarify the research logical
framework.

58
Two Porters theories related to competitiveness, these were National
Competitive Advantage and Five Force Model, were employed to identify the factors
affecting the competitiveness. Those factors represent existing opportunities and threats
of the firm.
For formulation of the competitive strategy, SWOT analysis will be use to utilize.
The conceptual framework of this study is s illustrated as below.

Competitive Indicator

Competitive Indicator

Macro Environment

Financial Measure
Customer Measure

National Environment

Industry Environment

Internal Business
Measure
Learning & Growth

SWOT Analysis
The Competitiveness on Garment Industries
in Cambodia Under Free Trade environment

Figure 3.1 The conceptual Framework, Formulated base on literature review

59
3.3 Research Design
Source of data
The study used two main sources of data: secondary and primary data
1. Primary data
This source includes two types: the questionnaires additional sources from
firms and government agencies, NGOs, such as WB, ADB, and IFC.
Questionnaires were developed and launched with population of 196
garment industries in Cambodia (the sample size was calculated in next page). The
researchers collected the primary data through interviews are employed with one
executive manager who is responsible for marketing activity in garment factory in
Cambodia. The results from this stage will be used to check the variables and content
validity of the developed questionnaire and market surveys.

2. Secondary data
The data of garment industry are operating in Cambodia based on public
databases just like, annual reports of garment industry from GSP Department, Foreign
trade Department, Ministry of Commerce, GMAC, custom Department and some NGOS
such as WB, ADB, IFC and CDRI.

60
3.4 Population, Sampling, Design and Measurement of Questionnaire
Population
There are 196 garment industries in Cambodia, but some factories have closed
without inform to the Ministry of Commerce. So the questionnaires were conducted
based on report from Ministry of Commerce and Garment Manufacturing Association of
Cambodia.
Significantly, the selection of the companies would be done by discussion with
GMAC office.
For assessing the firms competitiveness, the benchmarking firms standards for
each predetermined measures are needed. For this case, some key players in the
industry will be picked up, and then its average of each predetermined measures from
all firms.

Sampling and Sample Size

The sampling to conduct questionnaire is the garment industries in Cambodia.
Based on the list of the Ministry of Commerce (2004) there are 196 garment industries
in Cambodia are operating business with non-state owner enterprises.
A random sample of garment factories selected from 196 garment-exporting
companies. Yamane (1973) recommended the formula for random sample as below:

61
n

N
1 + Ne

Where, n is sample N is population e2 is probability of error.

n

196
= 131.54
1 + 196 (0.05) 2

132

With N= 196, e=5% (05 percent confidence). Hence, the sample size for
conducting questionnaire should be 132 garment companies.

Questionnaires Design
The questionnaires were designed to meet the objectives of the study and
predefined conceptual framework. The researchers judged to be desirable for both
respondents and the researchers (Zigmund, 2000). The questionnaires were developed
through the following process:
1. Specify information were sought base on the objectives of the study, the
competitive model and major related researches mentioned in chapter 2.
2. Determine type of questionnaire
3. Determined content of individual question
4. Determined wording of each question
5. Determined sequence of questionnaire
6. Draft questionnaires based above garment factory

62
7. Pretest draft questionnaire with foreign friends and revise
8. Submitted the draft questionnaire to the advisor
9. Advisor check, correct and get approval on the questionnaire
10. The questionnaires are translated into Cambodian language
11. Pilot testing to make sure the respondent understands and interprets the
question in the same way.
Questionnaire Measurement
In this part, the respondents were requested to answer the series of the
questions concerning to the factors affect the competitiveness of the firms. Firstly, the
respondents were asked to rate each factors with the importance or significance level
toward the firm by writing the number from 1 to 7. (1 for not important at all to 7 very
important). This was used to determine the weight the importance of each proposed
point toward the firm. Secondly, the respondents were asked to consider the IMPACT
of the each item over the respondents firms by giving (X) sign within the determined
range (-3) for very unfavorable, (0) for no impact and (3) for very favorable).
Each question consisted of many activities that mentioned above based on
literature review, especially competitive model to capture the construct of interest. The
higher score is the better activities will be done. The percentage of scales will be used
to measure activities in a way such that mean scores could be calculated to show how
the garment companies in Cambodia can manage or solve all activities in competitive
intention. The researcher defines the criteria to measure level of variable according to

63
the separate of seven levels as follows:
Table 3.1 the criteria to measure the variable in 7 levels
Most favorable

Most unfavorable

-3

-2

-1

Not
effective

Slightly
ineffective

Moderately
effective

Average

Favorable

Very
favorable

Most
favorable

Source: Likerts scale

3.5 Data Analysis Method

The researcher analyzes data from questionnaire data by using SPSS statistic
to compute for the results. The outputs of the program have been presented in chapter
4 and 5. The result of survey will be presented as follows:
1. Descriptive statistics to describe general business profile such as Registered
Capital, type of the company, number of year that the company establishment, percentage
sales through joining marketing official, main export market, percentage of customer growth in 2006,
Number of Sales Return Through Out 2006 Toward Total Sale by mean, frequency distribution

and percentage.
2. Statistics including mean, frequency, percentage, standard deviation, are
employed to analyze the garment firms performance and respondents opinion about
the effect to environment forces.
3. SWOT analysis case, the opportunity and threats that existed in the
environment and also strengths and weakness that the industry had, needed to be
scored, weighted, and summed up together. As illustrated previously, for identifying the

64
opportunities, and threats encountered by each of garment industry in Cambodia, the
research classified the sources into 3 environments; macro, national, as well as industry
environment.
Each environment will be detailed into several parameters. Specifically for
industry environment, it was broken down into 5-force model simplified into 4 forces;
threat of new entrants, intensify of rivalry among existing competitors and substitute
products, bargaining power of buyer, and bargaining power of supplier as well. Each
force, then, was specified into some items.
Some experts, including Porter, have argued that those environments have
different extent of effect toward the firm. Industry environment is believed to have more
powerful impacts toward the company than two others, and in the meantime national
environment has greater influence than macro environment. For this reason, those three
environments were judged as weight proportionately with their importance.
Subsequently, to determine each weight for each parameter within particular
environment of forces (sub-environment) the mean of 7-scale importance column of the
questionnaire filled out by respondents were used as the basis. Next, each weight stem
from earlier calculation was multiplied with -3 to 3 favorability score rated by each
respondent for each particular parameter to bring about weighted rating. The numbers
from all of multiplications were figured up to produce total weighted opportunity-threats
rating. Positive values represent opportunities had by the company, vice versa negative
sign revealed threats faced by the firm.

65
Afterward, the similar procedure was employed to find out the total weighted
strength-weaknesses rating. Like described in prior sub chapter, four parameters from
finance measure, as well as four parameters from learning and growth measures were
used to assess he strengths and weaknesses of each garment industry. Since each
parameter was considered equally crucial so that total weight 100 was allocated
according to mean of 7-scale importance score given by respondent for each measure.
For rating the strengths weaknesses relative to the industry, some steps needed
to follow. First, using descriptive table could identify analysis the maximum, minimum as
well as the average for each measure. To be able to rate by using - 3 to 3
competitiveness scale, interval for both upper and lower average needed to be
determined. It could be calculated by dividing the difference between the average value
with the maximum and the minimum value accordingly.
For instance, interval below average (-3 to 0 score) was determined by
deducting industry average value with minimum number, and then divide it with 3.
Secondly, once intervals were determined, the relative competitiveness (strength or
weaknesses) of each garment firms relate the industry could be assigned by matching
each parameter value with the predetermined interval. Similar to weighted opportunitythreat rating, then each parameter weight had to be multiplied with competitiveness
score to bring about weighted competitiveness score. The sums up of all weighted
measure were total weighted strength-weakness rating. Positive scores represented
strengths, while the negative rates signified weaknesses.

66
1

Range = Maximum- Minimum = 7 - 1 = 6

Important level

Range
Level

6
= 0.86
7

Table 3.2 Important rank calculation

Range of
mean score
1.00-1.86
1.87-2.72
2.73-3.57
3.58-4.42
4.43-5.27
5.28-6.12
6.13-7.00

No

Level of importance

1
2
3
4
5
6
7

Not important
Important level
Below important
Average
Above important
Upper important
Most important

Interval calculation
Interval

High Low
Level

Table 3.3 favorable rank calculation

Range of
Mean score
(-3.00) - (-2.14)
(-2.13) - (-1.28)
(-1.27) - (-0.42)
(-0.41) - (0.44)
(0.45) - (1.30)
(1.31) - (2.16)
(2.17) - (3.00)

No
1
2
3
4
5
6
7

Satisfaction level
Most unfavorable
Unfavorable
Below average
Average
Above average
Favorable
Most favorable

67
Validity and Reliability
Validity can defined the ability of an instrument to measure what it is supposed.
A data-collecting instrument is considered valid if it is free from both systematic and
random error. In our research, a direct contact was made with the respondents in
connection with the measure (personal interviews). Thus, all researchers were able to
safely determining that the measuring results give an indication of what our research
intended to examine. Relatively high contemporaneous validity is possible. We carefully
designed the questionnaire, which was then reviewed, commented upon, modified, and
finally approved by the supervisors from the school and company who have experience
within the research area. In this way, we can ensure the face validity of our research.
Construct validity is establishing that correct theoretical constructs are being linked to
the problems and the results of study. When we compare the findings with existing
theories the marketing strategies based on Jansson (1994) are relevant to our research
problem and analysis of the results of our study. Content validity is high, since a lot of
information gathered to cover as many dimensions as possible.
Personal interview is a very flexible way to gather information. The respondents
felt free to express their opinions. It is necessary to point out that our secondary data
that collected from reliable sources and then compared to the primary data. In other
words, we tried our best to reach a high validity in our research.

68
Reliability
Reliability is concerned with the consistency and accuracy of the results. It
refers to the extent to which the measurement process is free from random errors. It is
a prerequisite for validity. An investigation with good reliability that get the impact by
whom it is conducting it or by the surrounding circumstance. To some extent, if
research is reliable, this means that the same results was obtained if the research were
carried out again under the same circumstances. To increase the reliability of an
investigation, the measurement process has to be performed as identically as possible
every time to avoid random errors. Techniques to measure reliability are internal
consistency, test-retest and alternative forms. The collection of primary data from the
survey was compared to secondary data from various sources in order to check the
reliability.

69

CHAPTER 4
DATA ANALYSIS AND RESULT

In this chapter, we will discuss the result of analysis of primary research from all
the questionnaires and secondary data, based on the conceptual framework mentioned
in chapter 3 to prove the research objectives.
In this chapter, the results of the data analyses are presented in three sections:
Section 1 : Response Rate and General Business Profile
Section 2 : Analyzing the performance of garment industry in Cambodia
Section 3 : Firm competitive measure
Section 4 : Hypothesis Testing and Interpretation
Section 5 : Strategic Analysis
The questionnaires were conducted at the end of the years 2006 and early of
year 2007, a peak time of every garment industries so the response rate expected to be
lower than normal. Timing of conducting questionnaire is about one month from 25
December 2006 to 24 January 2007.
The difficulties of low responses rate if conducted by mail and fax. The
researchers tried to ask colleagues and friends to distribute and collect all the
questionnaires directly to all garment companies. The researchers also made
appointment first by calls or letters and collected the questionnaires directly from all

70
garment companies by mail and fax. Other tools conducted the surveys: mail, email,
interview by phone and fax.

Data in this part have been organized into different types according to the
distinctive characteristics of the variables under consideration. The data are presented
in term of number and percentage of respondents as below.

4.1 Response Rate and General Business Profile

Response Rate
After 132 questionnaires were delivered. Consequently, the researcher got
back only 112 qualified filled questionnaires, leading to a response rate of 84.85 %
percent (112/132).

General Business Profile

The purpose of this section is to analyze and interpret data from questionnaire
in order to prove the research objectives.
Data in this part have been organized into different types according to the
distinctive characteristics of the variables under consideration. The data are presented
in term of number and percentage of respondents as shown in table 4.1.

71
Totally, seven factors are related to general business profiles of garment
industry in Cambodia as shown in table below. Those factors are type of company,
registered capital, years of company establishment, percentage sale through join
marketing officer, main export market, percentage of customer growth in year 2006, and
number of sale return through out 2006 toward out total sale.

Table 4.1 General Business Profile

Detail
Type of Company
- Private Enterprise
- Joint Venture
- Others
Registered Capital
- Less than 100 Million Riles
- More than 100 Million Riles
Year of the Company establishment
- Less than 10 years
- More than 10 years
- Others
Percentage Sales through Join Marketing officer
- Lower 25%
- Between 25-50%
- Between 50-75%
- More than 75%
The Main Export Market
- USA
- EU
- Canada
- Other

Frequency

Percent

4
108
0

3.57
96.43
0.00

4
108

3.57
96.43

59
53
0

52.68
47.32
0.00

100
12
0
0

89.29
10.71
0.00
0.00

93
19
0
0

83.04
16.96
0.00
0.00

72
Detail
Percentage of garment industry Grow in Year 2006
- Lower 25%
- Between 25-50%
- Between 50-100%
- More than 100%
Number of Sales Return Through Out 2006 Toward Total Sale
- Lower 5%
- Between 5-10%
- Between 10-15%
- More than 15%

Frequency

Percent

108
4
0
0

96.43
3.57
0.00
0.00

31
81
0
0

27.68
72.32
0.00
0.00

Type of Garment industry

4%

96%

Private Enterprise

Joint Venture

Figure 4.1 The type of the company size

Type of the company : shows that there were 96.43 % of joint venture on large
firms and only 3.57 % for enterprise. If we look through the garment structure, there
are now around 200 garment firms operating in Cambodia, of which about 90% are
foreign-owned.

73
Registered Capital

4%

96%

Less than $US 1M

More than $US 1 M

Figure 4.2 registered capital

Registered Capital: most of the firms registered in large amount. As shown in
table 4.1 there are only 3.57 % registered with amount less than 100 million Riels
(23,809 United States Dollars) and most of the firms registered with capital more than
100 million (96.43%).
The establishment of garment industry

47%
53%

Less than 10 Years

More than 10 Years

Figure 4.3 The establishment of the garment industry

74
Year of company establishment: as shown in table 4.1, there are 59 garment
firms opened less than ten years during Cambodia got quotas and GSP from United
State and EU. There are 53 garment firms were established more than 10 years.

Percentage of sales through marketing

officer

11%

89%

Lower 25%

25%-50%

Figure 4.4 percentage sales through marketing officer

Percentage Sales through Join marketing officer: in table 4.1 shows that the
marketing strategy is in weak position. Before quota phase out, most of the garment
firms did not focus on marketing strategy. All firms enjoyed with quota. The government
and GMAC play the important role in lobbying and making agreement with USA and
EU, so most of the firms have not been controlled properly on garment sectors.

75
The main garment export market

EU Market
17%

USA Market
83%

Figure 4.5 Main export market

The main export market: the majority of garment companies export to United
States (83.04) but there is only 16.96 % of garment firms export to EU. If we look to
the statistic from ADB, there is around 80 % of Cambodia garment export United
States.
Garment industry growth in 2006

4%

96%

Lower than 25%

25%-50%

Figure 4.6 The percentage of garment industry growth in year 2006

76
The growth of garment industry in Year 2006: as shown in table 4.1, garment
industries growth, most of the respondents did not know well about new industry
growth. So they just estimate by counting from the previous year. The garment
industries grew less than 25% in years 2006.
Sales return through out 2006

28%

72%

Lower 5%

5-10%

Figure 4.7 Number of sales return through out 2006

Number of sales return through out 2006 toward total sale: as shows in table
4.1 in sales return, it presented that there are 72.32 % of sales return through out 2006
caused more National and public holiday in Cambodia. Garment firms complained to the
relevant government agencies related to issuance of C/O. There are only 27.68 % from
respondents argued that their sales were return through out 2006 about 5%.

77
4.2. Analyze the Performance of Garment Industry in Cambodia
4.2.1 Macro Environment
As depicted in table 4.2, the findings from the questionnaires were indicated that
there are several factors related to Macro environment factor that contributing to
achievement of the competitiveness of garment industries in Cambodia. As the top
ranks of those factors were dominated by factors conditions such as economic growth,
government legislation and regulation and technical change with mean 6.07, 5.86 and
5.57 were scored fairly by respondents respectively.
Table 4.2 The Importance Score of Macro Environment Factors
n= 112
1.
2.
3.
4.
5.
6.

Macro Environment Factors

Economic grow
Interest rate
Inflation rate
Technological change
Environment issues
Government legislation and
regulation

Min
2
2
2
4
2
5

Max
7
3
5
7
5
7

Mean
6.07
2.37
3.39
5.57
3.74
5.86

Std. Dev.
1.374
0.484
0.853
1.063
1.038
0.826

With regard to the favorability score of each prearranged factors towards the
competitiveness of garment sectors in Cambodia, as shows in table 4.3, the
respondents deemed economic growth was scored very high by the highest mean of

78
favorability with mean 1.96 (favorable) followed by technological change with mean 0.87
as average favorable.
Cambodia's garment industry represents less than 1% of the global industry,
but it is of great importance to the country because it employs 230,000 workers,
represents more than 80% of the country's total exports and 12.4% of GDP.
Real GDP grew well in 1995 and 1996 but declined in 1997 and 1998. It has
picked up again to grow strongly. GDP increased by 6.3% in 2001 and 5.5% in 2002
and is expected to grow by 6% in 2003 (RGC, 2003). The country is undergoing a
gradual shift from the agricultural economy of the 1980s towards one emphasizing
textiles, tourism and services. Agriculture remains the dominant sector, contributing
28.4% to GDP in 2001 and employing 80% of the working population. Nevertheless,
other sectors, for example manufacturing, tourism and services, are growing steadily.
Technological factor was judged as moderate favorability score for the
responded. In this context, the respondents had mix up, technology applied in
Cambodia is at the lowest level in sewing and inspection sections. A few attachments
are applied to the machines that could aid workers to operate more effectively, both in
volume and quality terms. This is characteristic of countries where labor costs are very
competitive as management considers it cheaper to employ people than to invest in
machines or specific machine attachments. A few garment firms in Cambodia work with
CAD systems and laying/cutting machines to minimize waste, but this type of
technology is not widespread.

79
Grbler states that there are no textbooks on technology and global change,
and technology's treatment in global change models is rather poor.
Technology relates to all major drives to global change such as population
growth, economic development, and all source use. Technology is also central in
monitoring environmental impacts and implementing response strategies. So at least,
the technological changes should be judged as favorability score for garment firms.
As predicted, the government legislation and regulation was deemed as positive
factor for garment industries. All respondents were believed that government legislation
and regulation and environment issues were scored with most unfavorable score. The
garment companies with mean of -2.33 and environment issues with mean -1.56.
Table 4.3 The Favorability Score of Macro Environment Factors
n=112
1.
2.
3.
4.
5.
6.

Macro Environment Factors

Economic growth
Interest rate
Inflation rate
Technological changes
Environment issues
Government legislation and
regulation

Min
1
-1
-1
-1
-2
-3

Max
3
2
2
3
1
-1

Mean
1.96
0.33
0.54
0.87
-1.56
-2.33

Std. Dev.
0.770
0.649
1.039
0.915
0.641
0.810

80
4.2.2 National Environment
As depicted in table 4.4, the findings from the questionnaires indicated that
there were several national environment factors keep contributing to achieve the
competitiveness of garment industries in Cambodia in garment and textile business.
The top ranks of these factors were dominated by factors conditions such as
infrastructure by mean of 5.68 (Upper important), Corruption, collusion, nepotism with
mean 3.84 (Average), investment climate with mean 2.72 (not important), Political/
security stabilities (2.52), skilled labor (1.85), and government subsidy (1.82).

81
Table 4.4 The Importance Score of National Environment Factors
n=112
National Environment Factors
1. Investment climate
2. Industry location
3. Production
4. Skilled labor
5. Arable land for material plantation
6. Natural resources
7. Debt and capital
8. Infrastructure
9. High educated labor
10. Network and alliance among local
producer
11. Country and brand image as garment
producers
12. Impact domestic rivalry over lowering
cost, improving quality, creating new
product
13. Government subsidy
14. Political/ security stabilities
15. Bureaucracy
16. Corruption, collusion, nepotism
17. GMAC relation
18. ILO intervention

Min
0
0
0
0
0
0
0
0
0
0

Max
7
7
2
7
5
0
7
7
6
5

Mean
2.72
0.40
0.05
1.85
0.36
0.00
0.88
5.68
0.89
0.74

Std. Dev.
3.094
1.345
0.324
2.826
1.293
0.000
1.714
2.045
1.646
1.374

1.31

2.018

1.44

2.213

0
0
0
0
0
0

7
6
4
7
5
7

1.82
2.52
1.53
3.84
0.83
1.49

2.243
2.122
1.542
2.388
1.445
1.836

Surprisingly, in term of favorable score as mentioned in table 4.5, only few

factors were judged as favorable for respondents such as, the Cambodia investment
climate can benefit them in doing garment business with the mean of 1.48 (favorability)

82
followed by network alliance between local garment producers by the mean 0.80 (above
average) is the next position. In this context, the government of Cambodia corporate
with ILO tries to lobby or negotiated in Free Trade Agreement on garment and textile
products with United States or EU to keep supporting Cambodia by using quotas or
MFN.
The Royal Government of Cambodia has given the opportunity of private-led
growth and the challenges of improving the business environment and the
government has begun to design and implement a broad reform strategy anchored in
its successful bid to join the WTO. As H.E. Sr. Minister Cham Prasidh described in a
recent speech, the Protocol of Accession requires the Government to undertake 98
separate legal and policy reforms on an accelerated schedule, improvements in the
regulator)' framework for foreign direct investment and taxation, and a framework for
open consultations with the private sector on investment climate issues. However, WTO
only sets the stage for competition. An efficient, low-cost investment climate is needed
in order for domestic firms to be able to take advantage of market access opportunities
(Conference on seizing on the global opportunity).
An efficient investment climate, as has been proven throughout the world, will
lead to increasing levels of formalization and employment growth. This will broaden
the tax base for the government, which will in aim strengthen institutions required to
support a continually more competitive economy.

83
Table 4.5 The Favorability Score of National Environment Factors
National Environment Factors
1. Investment climate
2. Industry location
3. Production
4. Skilled labor
5. Arable land for material plantation
6. Natural resources
7. Dept and capital
8. Infrastructure
9. High educated labor
10. Network and alliance among local
producer
11. Country and brand image as
garment producers
12. Impact domestic rivalry over
lowering cost, improving quality,
creating new product
13. Government subsidy
14. Political/ security stabilities
15. Bureaucracy
16. Corruption, collusion, nepotism
17. GMAC relation
18. ILO intervention

Min
0
-1
-1
-3
-3
-2
-2
-3
-2
-1

Max
3
2
0
0
0
0
1
-1
1
3

Mean
1.48
-0.30
-0.07
-2.05
-0.49
-0.66
-0.44
-2.59
-0.25
0.80

Std. Dev.
1.004
0.919
0.259
0.879
0.783
0.778
0.733
0.679
0.678
0.957

-2

0.14

0.758

-2

-0.52

0.805

-3
-3
-3
-3
-2
-1

-1
0
-1
-1
1
3

-2.17
-1.97
-2.12
-2.58
-0.02
0.72

0.642
0.811
0.761
0.595
0.930
1.261

Most respondents above investment climate (1.48) and follow by network

alliance among local garment firms with mean 0.80 scored most favorable factors
(favorability score) and the next position for national environment is ILO intervention
with mean 0.72 (favorable score).

84
As predicted, there were some factors believed that as an unfavorable aspects
concerned by respondents. These aspects were infrastructure (-2.59 most unfavorable),
corruption, collusion, nepotism (- 2.58 most unfavorable), government subsidy (-2.17
most unfavorable), bureaucracy (-2.12 unfavorable), skilled labor (-2.05 most
unfavorable), Political/ security stabilities (- 1.97 unfavorable).
It is widely understood that the global garment competitiveness must focus on
goods and services to be successful strategy in global competition, but Cambodia is
labor-intensive industry, so the garment firms have focused on good service to compete
in globalization on garment industries. Cambodia poorly positioned in terms of
infrastructure compared to the other countries. Both Cambodia and Bangladesh face
constraints in that they do not have a deep sea port so all imports and exports need to
be trans-shipped through a third country, especially Singapore.
In addition, Cambodia's infrastructure is viewed as one of the poorest in the
region. Both transportation and energy costs significantly increase production costs. The
number of shipping companies is still limited, which prevents competition and keeps
prices high. Moreover, Cambodia is also naturally disadvantaged because of it relative
distance to the important US markets. The shipping time from Cambodia to the US
takes longer than from China, Hong Kong and Taiwan.

85
Table 4.6 Private sector perception on infrastructure quality
General
Railroads
infrastructure
Bangladesh
2.7
2.6
Cambodia
2.4
1.5
China
3.2
3.6
India
2.9
4.2
Indonesia
3.3
3.1
Vietnam
2.6
2.3
Country

Port
facility
2.6
2.7
3.6
3.1
3.3
2.8

Power
supply
2.3
2.6
3.7
3.3
3.6
3.5

Postal
system
2.7
2.7
5.0
4.9
4.1
5.3

Telecom
2.5
4.7
5.5
6.3
4.4
5.8

Source: World Economic Forum, Executive Opinion Survey 2005-2006

Note: 1: is worse, 7 is the best

Furthermore, as being garments producers, there are some issues associated

with government activities such as bureaucracy, corruption, collusions, and nepotism. All
respondents argued that the top priorities of private companies in Cambodia involved
governance the rule of law, and corruption. Corruption in Cambodia was the main major
shows that corruption was ranked as the number one constraint for business.
As reported from World Bank, there are around 82% of companies reported that
they needed to pay bribes in order to conduct business, and the average level of such
payments amounted to between 5% and 6% of total sales. This places Cambodia
significantly higher than Bangladesh at around 50% of Cambodia levels one of the
countrys main competitors in the garment industry. In addition, companies operating in
Cambodia viewed the integrity of the bureaucracy as very weak, reinforcing the widely
held view that dramatic reforms in all areas of public sector governance are required to
improve the business environment.

86
As complained, all the garment firms have been requiring in applying C/O at
several places at the Ministry of Commerce, and Ministry of Industry, Mine and Power.
It take long time for getting C/O and have many national holiday caused long delay in
issuing of C/O or export license.
The above table shows the private sectors perception of infrastructure in
selected Asian countries. Cambodias infrastructure is rated low and only comparable to
Bangladesh, while lagging behind other competitor countries such as China, Indonesia
and Vietnam. Railroads, port facilities, power supplies and the postal system are just
some of the areas which are considered underdeveloped and require substantial
investment.
Table 4.7 Number of document and time required to export
Country
Bangladesh
Cambodia
China
India
Indonesia
Vietnam

Document

Signature

Time (days)

7
8
6
10
7
6

15
10
7
22
3
12

35
43
20
36
25
35

Source: World Bank, doing business 2006

All garment firms were dialed with intricate and bureaucracy system from
government agencies that lower responsiveness toward market condition and vulnerable
to corruption, collusion, and nepotism. These could bring about high cost and nonvalued activities to the garment firms.

87
The government subsidy policy was expected to be positive factor in facilitate
garment firms in order to compete with global garment, but in fact, this factor was
judged as negative factor for garment sectors with mean -2.17 (Most unfavorable
score).
4.2.3 Industry Environment
Threat of New Entry
Concerning threat of entry, some factors were deemed critical as entry barriers
for newcomers. As shown table 4.8, the garment respondents scored the most
important factor is economies of scale with mean very high 6.13 follow by Government
policy by mean 6.06 (Upper important).
Some factors were judged as the next positions are government incentive with
mean 4.31, industry growth (4.00 and tariff and international restriction with mean 3.56.
Cambodia economic of scale achievement plays an important role in garment sectors
was vital for being able to produce the products at very competitive cost of production.
In addition to the economic of scale, the government policy was also accepted as true
for another key entry barrier

88
Table 4.8 The Importance Score of Threat of New Entry Factors
n = 112
Threat of New Entry Factors
1. Economies of scale
2. Tariff and international
restriction
3. Capital requirement
4. Government incentive
5. Industry growth
6. Government policy

Min
4
2

Max
7
5

Mean
6.13
3.08

Std. Dev.
0.969
1.194

2
2
2
4

5
7
6
7

3.56
4.31
4.00
6.06

0.792
1.605
1.611
0.852

According to the favorability of each entry barrier, the major of respondents

argued that the economic of scale as the favorability factor one with score 1.36 follow
by capital requirement 1.00 (average). To enter the industry, the new candidate meets
some issues in producing the product with competitive cost, because some of the
transferring of quotas from one factory to another factory. All new comers are required
to have huge amount of money to invest in this sector. They have to pay good money
at CDC for applying investment certificate with intricate system. The new applicants
have to spend more money such as rent for factory, office, buy machineries, office
equipment and Office supply. So definitely they need a huge amount of money to invest
on this field. Additionally, the cost of land and house in Cambodia are higher if compare
to the neighboring countries.
On the other hand, relating to negative factors that involved with government
agencies. Those sectors are government policy, government incentive, tariff and
restrictions, and industry growth with mean as (-2.31) most unfavorable, -2.04

89
unfavorable, and 0-96. Cambodian government is not yet ready for setting forth enough
strict regulation and other requirement in doing business on garment sector.
The government allows new industries use black money moving over the
country caused affecting to high inflation. New comers have ability to be own for
hundred percent. In couple years ago, government is careless to control all investors to
use their incentive. Some firms, they register the company at CDC but they use
government incentive and they sell to other firms easily. When they finish their
incentive, they would close factory and transfer their money to their home countries
easily. New applicants they invest in Cambodia because of quotas, GSP or WTO
membership benefits (tariff, MFN) only. When quotas phase-out, they move to the other
countries, just like, Vietnam and China.
Table 4.9 The Favorability Score of Threat of New Entry Factors
Threat of New Entry Factors
1. Economies of scale
2. Tariff and international
restriction
3. Capital requirement
4. Government incentive
5. Industry growth
6. Government policy

Min
0
-3

Max
3
-1

Mean
1.36
-2.04

0
-3
-3
-3

3
-1
0
0

1.00
-2.31
-0.96
-2.31

n = 112
Std. Dev.
0.837
0.758
0.671
0.736
0.670
0.771

90
Intensity of Rivalry among competitor
Asked for the importance of factors associated with intensity rivalry among
existing competitors, most of respondents identified that the crucial factor for intensity
rivalry among competitors are existing barriers with mean of 6.27 and follow by number
of competitors by mean 5.32 (upper important), industry/market growth 4.78 (important),
and divers competitor with mean 4.29 (average). Meanwhile, business size of
competitor and product differentiation, switching cost and pressure from substitute
product was scored at 3.68, 2.15, and 1.52.
Table 4.10 the Importance Score of Intensity of Rivalry among Existing
Competitor Factors
n=112
Intensity of Rivalry Among
Existing Competitor Factors
1. Number of competitors
2. Business size of Competitors
3. Industry / market growth
4. Product differentiation and
switching cost
5. Diverse competitor
6. Exist barriers
7. Pressure from substitute
product

Min

Max

Mean

Std. Dev.

3
0
2
1

7
7
7
4

5.32
3.68
4.78
2.15

0.988
1.514
1.511
0.785

1
2
1

7
7
5

4.29
6.27
1.52

1.852
1.057
0.920

Nonetheless, generally speaking the rivalry intensity among existing competitors

and substitute products was obviously unfavorable for the respondents. None of factors

91
were considered providing advantageous influence toward garment business in
Cambodia.
Those are existing barriers (-2.40.Most unfavorable), industry or market growth
(-2.02Unfavorable), diverse competitor with mean -1.83, number of competitor with
mean business size of competitor with mean -1.09. And the next factors followed by
pressure from substitute product (-0.90) and product differentiation and switching cost (0.25).
All garment producers have right to use tariff and international restriction
equally. The government never uses tariff and trade restrictions (antidumping rules,
local content requirements, quotas, etc) to raise entry barriers for foreign firms and
protect domestic producers from outside competition. The government agencies could
not limit even bar entry by requiring licenses and permits. The regulated industries like
cable TV, telecommunications, electronic and gas utilities, radio and government did not
control television broadcasting and railroads properly.

92
Table 4.11 The Favorability Score of Intensity of Rivalry among Existing
Competitor Factors
Intensity of Rivalry Among
Existing Competitor Factors
1.Number of competitors
2. Business size of competitors
3. Industry / market growth
4. Product differentiation and
switching cost
5. Diverse competitor
6. Exist barriers
7. Pressure from substitute
product

Min

Max

Mean

Std. Dev.

-3
-3
-3
-3

1
1
0
1

-1.50
-1.09
-2.02
-0.25

1.031
0.906
0.502
0.915

-3
-3
-2

-1
-1
0

-1.83
-2.40
-0.90

0.879
0.677
0.910

Bargaining Power of Buyer

By using statement questionnaires form, the respondents were asked some
factors with respect to bargaining power of buyers. As displayed in table 4.12, it is the
fact that most of respondents argued that the quality and quantitative information are
available toward their products were the most significant aspects in assessing the
bargaining power of buyer with mean considerably high 6.41 (most important). Normally
all information about price, quota, product name, label are kept by Ministry of
Commerce and GMAC. The Ministry of Commerce and GMAC play the important role in
advertising, promoting and assisting garment product by using Ministry of Commerce
website, export Department website and GMAC website.

93
The next position is the buyers have the right to postpone or cancel purchase of
garment products with the mean by 5.48 (upper important).
The company sells product to limited number of buyer by mean of 4.77
(important), the buyers have a chance to do backward integration by mean 3.64, and
the products are identical among competitors with mean 3.42, switching cost spent by
the buyer is low (2.42), and the buyer gain low profit (1.65). According to the lead-time
and poor productivity, buyers canceled most of products.
Table 4.12 The Importance Score of Power of Buyer Factors
n = 112
1.
2.
3.
4.
5.
6.
7.

Bargaining Power of Buyer Factors

Your company sells product to limited
number of buyer but in large size
Your products are identical among
competitors
Switching cost spent by your buyer
is low
Your buyer gain low profit
Your buyers have a chance to do
backward integration
Your buyers have ability to postpone
purchase your products
Your buyers have full information

Min
1

Max
7

Mean
4.77

Std. Dev.
1.495

3.42

1.505

2.42

1.001

1
0

4
7

1.65
3.64

0.824
1.935

5.48

1.013

6.41

0.896

In general, the impact of buyer of bargaining power over the competitiveness of

Cambodias garment industry was mix up. It is shown in table 4.13 was scored by
respondents. The garment products are identical among the competitors was

94
considered as the most favorable mean for them with the mean 1.88 (Favorable) and
the next position follow by the buyers have full information with mean 0.99 (above
average). The buyers have a chance to do backward integration (0.54), the company
sells product to limited number of buyer but in large size (0.50), the buyers have ability
to postpone purchase your products (0.45), and switching cost is low (0.32).
Table 4.13 The Favorability Score of Power of Buyer Factors
n = 112
Bargaining Power of Buyer Factors
1. Your company sells product to limited
number of buyer but in large size
2. Your product are identical among the
competitors
3. Switching cost spent by your buyer is
low
4. Your buyer gain low profit
5. Your buyers have a chance to do
backward integration
6. Your buyers have ability to postpone
purchase your products
7. Your buyers have full information

Min
0

Max
2

Mean
0.50

Std. Dev.
0.569

1.88

1.002

-1

0.32

0.661

-3
-1

1
2

-0.72
0.54

0.961
0.746

-1

0.45

0.938

-3

0.99

1.227

Bargaining power of suppliers

Lastly, on the question of the importance of factors connected with suppliers
bargaining power, the result shows that most of responses placed the significance of
suppliers products are in short supply over respondents business in first position with

95
mean 5.36 (upper important). There are some factors followed by rely on suppliers
products with the mean of 5.02 (important).
The next position is few suppliers for a specific input for garment companies
with mean 4.05 (important). The supplier groups products are differentiated or build
switching costs with mean 402, the factory is dominated by limited number of supplier
that sell in large amount (3.93), the company is not important customer for supplier
(2.82) and the last is the supplier threaten the company to integrate forward (2.80).
Table 4.14 The Importance Score of Power of Supplier Factors
n = 112
1.

2.
3.
4.
5.
6.
7.

Bargaining Power of Supplier Factors

Your factory is dominated by limited
number of supplier that sell in large
amount
There are few supplier for a specific input
for your company
The suppliers product is an important
product to your company
Needed products are in short supply
The supplier groups products are
differentiated or build switching costs
Your company is not important customer
for supplier
Your supplier threaten your company to
integrate forward

Min
1

Max
7

Mean
3.93

Std. Dev.
2.396

4.05

1.659

5.02

0.300

3
1

6
7

5.36
4.02

0.967
1.986

2.82

1.254

2.80

2.731

96
By in large, the bargaining power of suppliers over the respondents was weak. It
could be witnessed from the positive mean for almost all factors suppliers bargaining
power factors raised. It is not hard to understand with this finding. The industry is
almost 100% dependent on imported yarns (for knitwear), finished woven and circular
knitted fabrics (for woven and knitted cut and sew garments), all accessories, and
almost all packaging and presentation materials. The domestic material content is
limited to some cardboard cartons and poly bags.
The domestic value added content of the Cambodian garment industry amounts
to 28.6% of garment exports. The garment industry buys materials, yarn, and all
accessories from outside country by doing contract. So the suppliers have no strong
bargaining power toward garment industries. Recently, Bangladesh government
encourages the garment factories to consume local material and not all material and
yarn are allowed to import.
The supplier groups products are differentiated or build switching cost was
judged as the most unfavorable factors for respondents by the mean of -2.14 (most
unfavorable). The supplier threaten the company to integrate forward with mean 2.03(most unfavorable), factory is dominated by limited number of supplier that sell in
large amount (-1.49), There are few supplier for a specific input for these companies
(-1.48).

97
Table 4.15 The Favorability Score of Power of Supplier Factors
n = 112
Bargaining Power of Supplier Factors
1. Your factory is dominated by limited number of
supplier that sell in large amount
2. There are few suppliers for a specific input for
your company
3. The suppliers product is an important product
to your company
4. Needed products are in short supply
5. The supplier groups products are differentiated
or build switching costs
6. Your company is not important customer for
supplier
7. Your supplier threaten your company to
integrate forward

Min
-3

Max Mean Std. Dev.

0 -1.49
0.644

-3

-1.48

0.890

-2

0.29

0.990

-2
-3

0
-1

-1.42
-2.14

0.624
0.500

-3

-0.58

1.386

-3

-1

-2.03

0.716

Surprisingly almost all factors were scored in negative way. The suppliers have
no right to be threatening to integrate backward. It performs very low in term of supply
factor.

4.3 Firm Competitive Analysis

4.3.1 Financial Measure Factor
The most important factor was availability of capital investment with mean 6.29
(Most important) follow by total sales by the mean 6.11 (upper important). The most of
respondents deemed that the value of government incentive benefits them in doing

98
garment business in Cambodia. Garment factories will get incentive for 5 years after
registering the company at CDC. They can import more items to Cambodia without
paying taxes or with very low taxes. Another factors were regarded as the most
significant for respondents is availability of long term investment with the mean 4.32
(important factor) and the next position are customer and product line profitability, cost
of working capital, cost of long term investment, percentage of unprofitable customer
with the following rate 3.73, 3.63, 2.52, and 1.34 (not important) respectively.
Table 4.16 The Importance Score of Financial Measure Factors
n = 112
Financial Measure Factors
1. Total sales
2. Cost of working capital
3. Customer and product line
Profitability
4. Profit from operation
5. Availability of long term
investment
6. Cost of long term investment
7. Capital investment

Min
3
1
1

Max
7
7
7

Mean
6.11
3.63
3.73

Std. Dev.
0.904
1.302
0.986

0
1

4
5

1.34
4.32

0.926
1.364

1
2

5
7

2.52
6.29

1.200
1.297

The favorability of each factor as displayed in table 4.18, the majority of

respondents argued that the value of government incentive as the most favorable factor
with high score 1.63 (favorable). The next factors are total sales with mean 0.49 (above
average), cost of working capital 0.15 (average), Availability of long term investment by

99
mean (0.07), Cost of long term investment by mean -0.21, % of unprofitable customer
with mean -0.36, Customer and product line Profitability by mean -0.46 (below average).
In the above table shows that the majority of the respondents argued that the
value of capital investment benefit them in doing garment business under investment
climate. The incentive that the firms get from the government can support them in
running business, such as (1) a corporate tax rate of 9 per cent except the tax rate on
the exploration and exploitation of natural resources, timber, oil, mines, gold, and
precious stones which shall be set in separate laws, (2). a corporate tax exemption of
up to 8 years depending on the characteristics of the project and the priority of the
government which shall be mentioned in a Sub- Decree. Corporate tax exemption shall
take effect beginning from the year the project derives its first profit. A 5-years loss
carried forward shall be allowed. In the event the profits are being reinvested in the
country, such profits shall be exempted from all corporate taxes, (3). Non taxation on
the distribution of dividends or profits or proceeds of investments, whether they will be
transferred abroad or distributed in the country, (4) 100 per cent import duties
exemption on construction materials, means of production, equipment, intermediate
goods, raw materials and spare parts (source: Cambodian Investment Law).

100
Table 4.17 The Favorability Score of Financial Measure Factors
n =112
Financial Measure Factors
1. Total sales
2. Cost of working capital
3. Customer and product line
Profitability
4. Profit from operation
5. Availability of long term
investment
6. Cost of long term investment
7. Capital investment

Min
0
-2
-1

Max
3
1
1

Mean
0.49
0.15
-0.46

Std. Dev.
0.644
0.750
0.709

-3
-2

1
2

-0.36
0.07

1.089
1.152

-3
0

1
3

-0.21
1.63

0.969
0.783

4.3.2 Customer Measure Factor

Asked for the importance of factors associated with customer measurements,
most of respondents identified the customer satisfaction as the most critical factors with
mean 6.50 (Most important) and follow by market share by mean 5.60 (upper
important), Customer profitability by mean 5.33 (important), customer retention (4.14)
and the last is customer acquisition with 3.35 (below important).
Throughout the global Internet marketplace, customer satisfaction surveys often
regard as the most accurate barometers to predict the success of a company. Because
they directly ask about the critical success factors of a business, if done effectively,
customer satisfaction surveys can deliver powerful incisive information and provide ways
to gain a competitive edge.

101
By implementing, the customer satisfaction surveys powered by garment confirm
it into a customer relationship management, the enterprises are able to gather measure
and analyze valuable information with more accuracy, consistency and in less time than
using traditional telephone or paper surveys.
Obviously, GMAC plays the important role to link between garment firms with
customers, such as, feedback, comment, relationship, what customer want and need,
and trade network.

Table 4.18 The Importance Score of Customer Measure Factors

n = 112
Customer Measure Factors
1. Market share
2. Customer retention
3. Customer acquisition
4. Customer satisfaction
5. Customer profitability

Min
3
3
3
3
2

Max
7
6
6
7
7

Mean
5.60
4.14
3.35
6.50
5.33

Std. Dev.
1.127
0.535
0.756
0.930
1.052

Most of the factors were considered as the most important for respondents such
as customer satisfaction with mean 6.50, followed by market share (5.60), and customer
profitability by mean 5.33. Even if, Cambodia gain only 1% from the global market on
garment industry but it is the most beneficial for Cambodia to develop economic. It
account for 80% of total national export.

102
Table 4.19 The Favorability Score of Customer Measure Factors
n = 112
Customer Measure Factors
1. Market share
2. Customer retention
3. Customer acquisition
4. Customer satisfaction
5. Customer profitability

Min
-2
-3
-3
-3
-3

Max
2
1
1
3
3

Mean
-0.32
-0.76
-0.09
-0.53
-0.23

Std. Dev.
1.246
0.998
0.717
1.382
1.513

Nonetheless, in the customer measure factor were obviously unfavorable for all
the garment respondents. Absolutely, none of factor was considered giving
advantageous influence toward Cambodias garment firms. In term of customer
retention, was considered as the least beneficial factor with mean quite low -0.76
(Above average). In this context there are some factors that affect to the customer
retention such as poor brand awareness, brand loyalty, brand switching, lead-time,
delay time, poor performance, poor productivity, and bureaucratic in import and export
procedure. In addition, customer satisfaction also was scored so low that cause effect to
customer retention.
4.3.3 Internal Business Measure Factor
Table 4.20 shows respondents opinion on internal business factor in garment
industry in Cambodia. In this case, the respondents were asked to rate their internal
measurement in their garment firms.
The mean of the opinion score for each variable indicates the effective level of
internal business that the firms have known lead time was the most effective factors for

103
internal business management with mean by 5.76 (upper important) and the next
position was followed by number of production by having mean 5.38 (upper important).
Meanwhile, some factors were ranked in the next position as the capability utilization,
productivity, and Import & export procedure with the mean 4.34, 4.31, 4.21, respectively.
Table 4.20 The Importance Score of Internal Business Measurement Factors
n=112

1.
2.
3.
4.
5.

Internal Business
Measurement Factors
Number of production
Capability utilization
Worker motivation & Productivity
Lead time
Import & export procedure

Min

Max

Mean

Std. Dev.

2
3
2
3
2

7
7
7
7
7

5.38
4.34
4.31
5.76
4.21

1.639
1.249
1.178
1.239
1.233

The most unfavorable factors was ranked very low was lead time with mean of 1.21 (unfavorable) and motivation & productivity by mean (-.33). Another negative
impact, were ranked at the next position was import and export procedure by mean 0.25. Basically, the unofficial payment relating to import and export procedures, the
respondents were raised their concerns that the bureaucracy associated with importing
raw materials and exporting the finished products often results in significant time
wasting and unacceptable delays. The amount of time that senior management needs
to spend on government-related matters represents a serious misallocation of
resources.

104
The major structural problem ranked as very high concerning the issue of lead
times. These concerns were especially serious for knitwear and circular knit cut and
sews cut. In a comparative sense, garment lead times from Cambodia remain lengthy,
with other major competitor countries able to offer reduced delivery times. The lead-time
issue relates largely to the almost complete absence of backward linkages.
Table 4.21 The Favorability Score of Internal Business Measurement Factors
n =112

1.
2.
3.
4.
5.

Internal Business
Measurement Factors
Number of production
Capability utilization
Worker motivation & Productivity
Lead time
Import & export procedure

Min

Max

Mean

Std. Dev.

-3
-3
-3
-3
-3

2
3
0
0
1

-0.13
0.52
-0.33
-1.21
-0.25

1.507
1.401
0.702
1.052
1.061

4.3.4 Learning and Growth Measurement Factor

The Last but not least, measures for evaluating garment firms in Cambodias
competitiveness learning and growth was found in table 4.22, most of respondents
scored to factors differently. But the factor was scored highly is human resource
development with men 6.34 (most important) and the employee productivity was the
next position by mean 6.27 (most important). The next positions were employee
motivation 4.76, employee motivation (4.76), and market research 2.95, employee
retention with mean (2.73). Obviously, the garment firms believed that human resource
is the most an important activity and it plays the important role in competition on

105
garment industry in Cambodia. The Human resource development (HRD is key factors
for Cambodias efforts to sustain the textile and clothing industries in long run for
respondents.
In term of productivity for employee reach the industry are too low but similar to
Bangladesh, and Pakistan. Due to the skills development, culture/communication gaps
between workers and expatriate production supervisors and other management, low
motivation of workers, the large production (Chinese and Vietnamese style) halls in
many companies, low levels of technology, lack of engineered work places, and high
number of national and personal holidays.

Table 4.22 The Importance Score of Learning and Growth Measurement Factors
n = 112

1.
2.
3.
4.
5.
6.
7.

Learning and Growth

Measurement Factors
Employee productivity
Employee retention
Employee motivation
Market research
Investment training
Investment development
Human resource development

Min

Max

Mean

Std. Dev.

4
1
2
0
1
1
3

7
5
7
6
6
4
7

6.27
2.73
4.76
2.95
2.66
2.15
6.34

0.794
1.633
0.932
1.457
1.182
0.988
0.935

In general, the net impact of learning and growth measure was mix. It was
summary of their respondents at table 4.23, the employee motivation was judged
beneficial for the respondents by mean 0.10. It makes sense that the training methods

106
and low levels of skill development; cultural and communication gaps level of
technologies used; level of worker motivation; the work environment, large sized
operations appear to have more problems in motivating workers and achieving
productivity levels. The firms have to work hard in motivating the garment workers to
improve productivity and good performance in companies. Most of factors were judged
as the most unfavorable point for respondents, just like, Human resource development
with mean (-2.35), Employee productivity with mean (-1.26), Investment training (1.09).
HRD in Cambodia is still poor if we compare to neighboring countries. According to the
reported from CDRI, the garment workers were paid US$ 38 US$ 38 (about one month
wage) just obtain the job at in garment industry only. This is an important management
practice with regard to the issue of skills upgrading, since, if it is necessary in any case
to buy a job, the benefit to a job seeker of developing greater skills is clearly lower
than if jobs are allocated to applicants with greater skills. Obviously, the garment firms
do not have specialist human resource managers. This is a major concern when
increasing productivity in garment factories becomes important and calls for the injection
of improved human resource management practices into the garment companies.

107
Table 4.23 The Favorability Score of Learning and Growth Measurement Factors
n = 112

1.
2.
3.
4.
5.
6.
7.

Learning and Growth

Measurement Factors
Employee productivity
Employee retention
Employee motivation
Market research
Investment training
Investment development
Human resource development

Min

Max

Mean

Std. Dev.

-3
-2
-1
-3
-3
-3
-3

1
1
1
3
0
1
0

-1.26
-0.80
0.10
-0.04
-1.09
-0.70
-2.35

1.558
0.708
0.671
1.404
0.991
0.868
0.779

In short, the primary data analysis earlier reveals that predetermined factors of
four of environments were generally considered affecting to garment products business
competitiveness. However, some factors in each environment were judged as the critical
aspects in the garment factories. The factors included economic growth, government
legislation & regulation, technical issues in macro environment, infrastructure,
corruption, collusion, nepotism, investment climate, political/security stabilities, skilled
labor and government subsidy in national environment. Regarding industry environment
considered as the most influential one, some factors in each 4 factors were regarded
highly important.

108
4.4 Testing Hypotheses
H1: The effect on macro environment based on performance of garment industry
H0: The economic growth has no significant effect on Macro environment based on
performance of garment industry in Cambodia.
Ha: The economic growth has a significant effect on macro environment based
performance of garment industry in Cambodia
Table 4.24 Economic Growth * Macro Environment Cross Tabulation
Important
Level

Private Enterprise
Frequency Percent
Level 1
0
0.00
Level 2
0
0.00
Level 3
0
0.00
Level 4
0
0.00
Level 5
0
0.00
Level 6
4
100.00
Level 7
0
0.00
Total
4
100.00
Chi-square = 10.839, P-Value = 0.028*

Type of Company
Joint Venture
Total
Frequency Percent Frequency Percent
0
0.00
0
0.00
7
6.48
7
6.25
0
0.00
0
0.00
8
7.41
8
7.14
7
6.48
7
6.25
27
25.00
31
27.68
59
54.63
59
52.68
108
100.00
112
100.00

As show in table 4.24 there are 112 respondents from private enterprise and
joint venture were asked to rate for macro economic environment. There are 4
respondents have their own business as private garment industry rated economic
growth in level 6 with 100%. Anyways, 108 respondents are joint venture companies
were regarded the economic growth in different level. There are 7 respondents rated

109
the economic growth in macro environment in level 2, and respondents judged
economic growth as the important in level 4 with 7.41%. On the other hand, there re
respondents from joint venture regarded the economic growth as the fourth level in
macro environment. The 27 respondents from joint venture considered the economic
growth as the important level 4. Remarkably, there are 54.63% from the joint venture
regarded the economic growth as the most important level (level 7) for garment
producers in macro environment. Based on Chi-square = 10.839, P-Value = 0.028*
There are relationships significantly between the type business of the company and
economic growth at 90% confident.
There are no relationship significantly between the experience in the
international market and domestic consumption at 90% confident.

H2: The effect on National Environment based on performance of garment

industry
H0: Infrastructure has no significant effect on efficiency on national environment
based performance of garment industry in Cambodia.
Ha: Infrastructure has a significant effect efficiency on national environment based
performance of garment industry in Cambodia

110
Table 4.25 Infrastructure * National Environment Cross Tabulation
Important
Level
Level 1
Level 2
Level 3
Level 4
Level 5
Level 6
Level 7
Total

Type of Company
Private Enterprise
Joint Venture
Total
Frequency Percent Frequency Percent Frequency Percent
4
100.00
7
6.48
11
9.82
0
0.00
0
0.00
0
0.00
0
0.00
3
2.78
3
2.68
0
0.00
0
0.00
0
0.00
0
0.00
7
6.48
7
6.25
0
0.00
45
41.67
45
40.18
0
0.00
46
42.59
46
41.07
4
100.00
108
100.00
112
100.00

Chi-square = 38.088, P-Value = 0.000*

In table 4.25 shown that there are only 4 respondents from private enterprises
regarded the infrastructure is the less important factor for garment producers in level 1.
There are 108 respondents from joint venture enterprise scored the infrastructure in
different ways. There are only seven respondents considered the infrastructure is the
less important factor in national environment. There are around 88% of respondents
judged the infrastructure is the important level in different ways just like 7 (6.48%)
respondents regarded infrastructure as the important in level 5, 45 respondents
(41.67%) in level 6 and 42 respondents (42.59%) regarded infrastructure in 7th level.
Based on Chi-square = 38.088, P-Value = 0.000* so most of respondents from joint
venture enterprises considered the infrastructure in macro environment as the most
important level for competition on garment industry (level 6 & 7) so here are
relationships significantly between the type business of the company and infrastructure
in macro environment at 84.26% confidence.

111
H3: The effect on Threat of new entrant based on performance of garment
industry
H0: The economic of scale has no significant effect on threat of new entrant based
performance of garment industry in Cambodia.
Ha: The economic of scale has a significant effect on threat of new entrant based on
performance of garment industry in Cambodia.
Table 4.26 Economic of Scale * Threat of New Entrant Cross Tabulation
Important
Level

Private Enterprise
Frequency Percent
Level 1
0
0.00
Level 2
0
0.00
Level 3
0
0.00
Level 4
0
0.00
Level 5
0
0.00
Level 6
0
0.00
Level 7
4
100.00
Total
4
100.00
Chi-square = 4.786, P-Value = 0.188.

Type of Company
Joint Venture
Total
Frequency Percent Frequency Percent
0
0.00
0
0.00
0
0.00
0
0.00
0
0.00
0
0.00
8
7.41
8
7.14
22
20.37
22
19.64
30
27.78
30
26.79
48
44.44
52
46.43
108
100.00
112
100.00

In table 4.26, there are 4 respondents which is 100% from private enterprises
regarded the economic of scale the most important factor in macro environment (level
7). Conversely, economic scale was scored in different levels by joint venture. There
were 8 respondents judged the economic growth as important factor in level 4. In level
5, there were 22 respondents (20.37) regarded the economic of scale as the important
factor in level 5. There are 30 respondents in which 27.78% considered economic of

112
scale as important factor in level 4. Notably, there are 48 respondents (44.44%) judged
the economic of scale as the most important factor for threat of new entrant.
Based on Chi-square = 4.786, P-Value = 0.188, There are no relationships
significantly between the type business of the company and economic of scale in threat
of new entrant.
H4: The effect on Intensity of Rivalry among Existing Competitor based on
performance
H0: The number of competitor has no significant effect on intensity of rivalry among
competitor-based performance of garment industry in Cambodia.
Ha: The number of competitor has a significant effect on intensity of rivalry among
competitor based on performance of garment industry in Cambodia
Table 4.27 Number of Competitor * Intensity of Rivalry among Existing Competitor
Cross Tabulation
Type of Company
Private Enterprise
Joint Venture
Total
Frequency Percent Frequency Percent Frequency Percent
Level 1
0
0.00
0
0.00
0
0.00
Level 2
0
0.00
0
0.00
0
0.00
Level 3
4
100.00
0
0.00
4
3.57
Level 4
0
0.00
10
9.26
10
8.93
Level 5
0
0.00
64
59.26
64
57.14
Level 6
0
0.00
14
12.96
14
12.50
Level 7
0
0.00
20
18.52
20
17.86
Total
4
100.00
108
100.00
112
100.00
Chi-square =112.000, P-Value = 0.000*
Important
Level

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In table 4.28 shows that there are 4 respondents (100%) from private
enterprises was asked to rate the number of competitor. The number of competitor was
regarded as the important factors in level 3 only. But the number of competitor was
scored in different type such as 9.26% in level 4, 59.26% in level 5, 12.96% in level 6
and 18.52% in level 7. So most of respondents from joint venture company considered
the economic of scale was the most factor in competition on garment industry in
Cambodia.
Based on Chi-square =112.000, P-Value = 0.000* there are relationships
significantly between the type business of the company and the number of competitors
in Intensity of Rivalry Among Existing Competitors.

H5: The effect on power of buyer based on performance of garment industry

H0: The buyer has the ability to postpone purchasing the garment product have
no significant effect on the power of buyer-based on performance of garment
industry in Cambodia.
Ha: The buyer has the ability to postpone purchasing the garment products have a
significant effect on the power of buyer based on performance of garment
industry in Cambodia.

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Table 4.28 The buyer has ability to postpone to purchase garment product * Power of
Buyer Cross Tabulation
Important
Level

Private Enterprise
Frequency Percent
Level 1
0
0.00
Level 2
0
0.00
Level 3
0
0.00
Level 4
0
0.00
Level 5
4
100.00
Level 6
0
0.00
Level 7
0
0.00
Total
4
100.00
Chi-square = 53.926, P-Value = 0.000*

Type of Company
Joint Venture
Total
Frequency Percent Frequency Percent
0
0.00
0
0.00
0
0.00
0
0.00
12
11.11
12
10.71
7
6.48
7
6.25
4
3.70
8
7.14
85
78.71
85
75.90
0
0.00
0
0.00
108
100.00
112
100.00

Table 4.29 shows that there are 4 respondents (100%) from private enterprise
were asked to score the buyer have ability to postpone or cancel the purchase of the
garment products from the respondents. Anyways, in joint venture, this factor was
judged as the important in different level just like. There are 12 respondents (11.11%)
considered this factor as the importance in level 3, 7 respondents considered it as the
importance in level 4, there are 4 respondents in which 3.70% judged this factor in level
5 and notably there are 85 respondents (78.71%) regarded the buyer has ability to
postpone or cancel the purchase from garment products.
Most of respondents from joint venture believe that the Cambodian garment
industry have faced the problems in competition the global garment industries. So
definitely, the buyers have ability to postpone purchasing the garment products from the

115
buyer unless. The producers set up competition strategy in performing the standard on
garment industry such as a) Vocational training on garment skills, b) improve skill labor
and reducing unskilled labor, c) human resource development, d) the buyers require
faster deliveries to meet increasing levels of consumer demand and ever decreasing
product cycle times. c). reduce transportation cost. The factors are the key strategies in
maintaining or protecting the buyer to postpone or cancel garment products from
respondents.
Based on Chi-square = 53.926, P-Value = 0.000* there are relationships
significantly between the type business of the company and the buyers have the ability
to postpone or cancel the purchase products from respondents.

H6: The effect on power of suppliers based on performance of garment firms

H0: The suppliers product is important products to garment firms have no significant
effect on the power of supplier based on performance of garment industry in
Cambodia.
Ha: The suppliers product is an important product to garment factory have a
significant effect on the power of supplier based on the performance of garment
industry in Cambodia.

116
Table 4.29 The suppliers product is an important product to your company * Power of
Supplier Cross Tabulation
Important
Level

Private Enterprise
Frequency Percent
Level 1
0
0.00
Level 2
0
0.00
Level 3
0
0.00
Level 4
0
0.00
Level 5
4
100.00
Level 6
0
0.00
Level 7
0
0.00
Total
4
100.00
Chi-square = 0.407, P-Value = 0.816

Type of Company
Joint Venture
Total
Frequency Percent Frequency Percent
0
0.00
0
0.00
0
0.00
0
0.00
0
0.00
0
0.00
4
3.70
4
3.57
98
90.74
102
91.07
6
5.56
6
5.36
0
0.00
0
0.00
108
100.00
112
100.00

In table 4.30 shows that in private enterprises, there are 4 respondents in which
100% considered the suppliers product is an important product to the respondents in
level 5. But in joint venture, there are 4 respondents regarded the suppliers product is
an important product to garment firms account for 3.70%. Conversely, most of
respondents in joint venture considered the suppliers products as the important just in
level 5 only for the firm producers and just only 6 respondents in which 5.56% judged
the suppliers products as the important factor for garment companies in level 6 only.
Totally most of respondent from both private enterprises and joint venture considered
the suppliers products as the important factor just only in level 5 only. Meaningful, even
if, global garment sectors are in the global concern since the quotas phase-out by early

117
2005, but the suppliers still have no ability to threat the garment firm in term of prices,
quality, services.
Based on Chi-square = 0.407, P-Value = 0.816 there are no relationships
significantly between the type of the company and the suppliers product from
respondents. Obviously, all raw materials such as yarn, accessories and machineries
have been imported from ASEAN countries and China, but the price of raw material are
not concerned to the demand of global garment firms. Some countries such as Sri
Lanka, Bangladesh and China, their government encourage and subsidy to the raw
material growers by offering land, seeds, and fertilizers. All import raw materials are
reduced to import by government. In last couple year ago, the Ministry of Commerce in
Cambodia cooperated with garment factors to encourage the cotton growers. The cotton
growers association controls the price of cotton based on the price of the contract. So
the price of yarn raise up and go down base on international market or neighboring
countries such as Vietnam, Laos and Thailand.

H7: The effect on macro environment based on performance of garment industry

H0: The economic growth has no significant effect on macro environment based on
performance of garment industry in Cambodia.
Ha: The economic growth has a significant effect on macro environment based on
performance of garment industry in Cambodia.

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Table 4.30 Economic Growth * Macro Environment Cross Tabulation
Number of Year that the Company Established
Less than 10 years
More than 10 years
Total
Frequency Percent Frequency Percent Frequency Percent
Level 1
0
0.00
0
0.00
0
0.00
Level 2
7
7.00
0
0.00
7
6.25
Level 3
0
0.00
0
0.00
0
0.00
Level 4
8
8.00
0
0.00
8
7.14
Level 5
3
3.00
4
33.33
7
6.25
Level 6
27
27.00
4
33.33
31
27.68
Level 7
55
55.00
4
33.33
59
52.68
Total
100
100.00
12
100.00
112
100.00
Chi-square = 18.683, P-Value = 0.001*
Important
Level

In table 4.31 shows that the respondents from private enterprise to rate on
economic growth. There are 7 respondents that established the company less than 10
years, considered that the economic growth as the important factor for garment
producer (level 2).
The economic growth was regarded as the fourth level of important factor by 8
respondents whom established the garment company less those 10 years. There are
only 3 respondents that operated their garment business less than 10 years judged the
economic growth as the important factors for garment industry in competition in global
industries in level 5. Surprisingly, most of respondents those started their garment
business less than 10 years considered the economic growth as the most important
factor in level 6 (27 respondents) and level 7 (55 respondents).

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Notably, the garment firms those are operating their garment business more
than 10 years have judged the infrastructure as the important factors in three different
level such as 4 respondents that have experience in doing business more than 10 years
have regarded the infrastructure as the important factors in level 5. The infrastructure
also be regarded as the important level in level 6 by 4 (33.33%) respondents that have
their business more than 10 years in garment sector. Moreover, there are 4 (33.33%)
respondents from 10 years experiences in doing garment business have considered the
infrastructure as the important factor in level 7. Based on Chi-square = 18.683, P-Value
= 0.001*, there are relationship between the number of the company that the company
establish and the economic growth in macro environment.

H8: The effect on national environment based on performance of garment

industry
H0: Infrastructure has no significant effect on national environment based on
performance of garment industry in Cambodia.
Ha: Infrastructure has a significant effect on macro environment basing performance
of garment industry in Cambodia.

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Table 4.31 Infrastructure * National Environment Cross Tabulation
Number of Year that the Company Established
Less than 10 years
More than 10 years
Total
Frequency Percent Frequency Percent Frequency Percent
Level 1
11
11.00
0
0.00
11
9.82
Level 2
0
0.00
0
0.00
0
0.00
Level 3
3
3.00
0
0.00
3
2.68
Level 4
0
0.00
0
0.00
0
0.00
Level 5
7
7.00
0
0.00
7
6.25
Level 6
41
41.00
4
33.33
45
40.18
Level 7
38
38.00
8
66.67
46
41.07
Total
100
100.00
12
100.00
112
100.00
Chi-square = 4.821, P-Value = 0.306
Important
Level

Table 4.32 shows that there are 11 respondents, established their business less
than 10 years, considered that the infrastructure as less important factor for them
(level 1). There are 3 respondents that ran their business less than 10 years judged the
infrastructure as important factor for them in level 3 only. 7 respondents that do their
business less than 10 years considered that the infrastructure as the important factor in
level 5, there are 41 respondents in level 6 and 38 respondents in level 7. Obviously
the infrastructure was considered as less important factors for garment producers. As
mentioned early, Cambodian infrastructure factors are very poor in performance in
garment industry. There are only 4 respondents that has their business less that 10
years regarded that the infrastructure as the important factor in level 5 and 8
respondent (66.67%) considered that the infrastructure as the important level 7 for
garment firms. So based on Chi-square = 4.821, P-Value = 0.306 there are no

121
relationships significantly between the number of the company that establish the
company and the infrastructure in macro environment.

H9: The effect on threat of new entrant based on performance e of garment

industry
H0: The economic of scale has no significant effect on threat of new entrant basing
performance of garment industry in Cambodia.
Ha: The economic of scale has a significant effect on the threat of new entrant
basing performance of garment industry in Cambodia.
Table 4.32 Economies of Scale * Threat of New Entrant Cross Tabulation
Number of Year that the Company Established
Less than 10 years
More than 10 years
Total
Frequency Percent Frequency Percent Frequency Percent
Level 1
0
0.00
0
0.00
0
0.00
Level 2
0
0.00
0
0.00
0
0.00
Level 3
0
0.00
0
0.00
0
0.00
Level 4
8
8.00
0
0.00
8
7.14
Level 5
14
14.00
8
66.67
22
19.64
Level 6
30
30.00
0
0.00
30
26.79
Level 7
48
48.00
4
33.33
52
46.43
Total
100
100.00
12
100.00
112
100.00
Chi-square = 20.186, P-Value = 0.000*
Important
Level

In table 4.33 ( 8%) shows the 8 respondents that has their business less than
10 years considered economic of scare as the important factor in level 4 for them and

122
14 respondent (14%) judged that the economic of scale as the important factor in level
5. There are 30 respondents (30%) ran their business less than 10 years, regarded that
the economic of scale as the important factor in level 6 for them and 48% that has their
business less than 10 years judged the economic of scale as the important level in level
7. Remarkably, there are only 2 levels of economic of scale were advantageous for
garment firms. There are 8 respondents that have their business since less than 10
years have considered that the economic of scale as the important factor for them in
doing business and only 4 garment respondents those have their garment business
more than 10 years considered that the economic of scale as the most important factor
for trade barrier for new entrants. Based on Chi-square = 20.186, P-Value = 0.000*
there are relationship between the number of the company that the company establish
and the economic growth in macro environment.

H10: The effect on intensity of rivalry among exiting competitor based on

performance
H0:

The number of competitor has no significant effect on intensity of rivalry

among exiting competitor basing on performance of garment industry in
Cambodia.

Ha:

The number of competitor has a significant effect on intensity of rivalry among

exiting competitor basing of garment industry in Cambodia.

123
Table 4.33 Number of Competitors * Intensity of Rivalry Among Existing
Competitor Cross Tabulation
Number of Year that the Company Established
Less than 10 years
More than 10 years
Total
Frequency Percent Frequency Percent Frequency Percent
Level 1
0
0.00
0
0.00
0
0.00
Level 2
0
0.00
0
0.00
0
0.00
Level 3
4
4.00
0
0.00
4
3.57
Level 4
10
10.00
0
0.00
10
8.93
Level 5
56
56.00
8
66.67
64
57.14
Level 6
10
10.00
4
33.33
14
12.50
Level 7
20
20.00
0
0.00
20
17.86
Total
100
100.00
12
100.00
112
100.00
Chi-square = 8.960, P-Value = 0.062
Important
Level

Table 4.34 shows that the number of competitors was rated in different level
such as 4 respondents operated business less than 10 years were asked to score the
number of competitors factors. They considered that the number of competitor was
regarded as the 3rd important level. In level 4, there are 10 respondents that their
business was run less 10 year considered that number of competitors as the
importance in level 4 in which 10%. Mostly, there are 56% (56 respondents) that ran
their business less than 10 years considered that the number of competitor as the
important factor in level 5. There are 10 respondents those ran their business less than
10 years considered that the number of competitor as the upper important level (level 6)
for garment competition in threat of new entrant. But there are 20 respondents in which
20% of respondents that have their business less than 10 years were asked to rate on

124
the number of competitor. They judged that the number of competitors as the most
important factor for them (level7). There are only two level of number of competitor
were regarded by garment respondents that have operated their business more than 10
years. There are 8 respondents considered the number of competitor as the important
factor for garment firms in level 5 and 4 respondents regarded the number of competitor
as the important factor in level 6.

H11: The effect on the power of the buyers based on performance of garment
industry
H0:

The buyer has ability to postpone purchasing the garment products have
no significant effect on power of buyer based on performance of garment
industry in Cambodia.

Ha:

The buyer has ability to postpone purchasing the garment products have
a significant effect basing on performance of garment industry in Cambodia.

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Table 4.34 The buyer has ability to postpone to purchase product * Power of
Buyer Cross Tabulation
Number of Year that the Company Established
Less than 10 years
More than 10 years
Total
Frequency Percent Frequency Percent Frequency Percent
Level 1
0
0.00
0
0.00
0
0.00
Level 2
0
0.00
0
0.00
0
0.00
Level 3
12
12.00
0
0.00
12
10.71
Level 4
7
7.00
0
0.00
7
6.25
Level 5
4
4.00
4
33.33
8
7.14
Level 6
77
77.00
8
66.67
85
75.90
Level 7
0
0.00
0
0.00
0
0.00
Total
100
100.00
12
100.00
112
100.00
Chi-square = 15.337, P-Value = 0.002*
Important
Level

In table 4.35 shows that there are 12 respondents who have their business as
the garment producers less than 10 years, considered that the buyers have ability to
postpone or cancel to purchase the garment products as the import factor in level 3.
There are 7 respondents from their business less than 10 years have considered the
buyer have ability to postpone to purchase the garment products as the important factor
in level 4, less than 10 years business operation of 4 respondents judged the buyer
have ability to postpone or cancel to purchase the garment products from them in level 5.
Remarkably most of respondents that their business less than 10 years
regarded buyers have ability to postpone purchasing the garment product as important
factors (level 6). Surprisingly, the respondents from their business more than 10 years

126
considered the buyer have ability to postpone purchasing the garment product as the
important factor in (level 5).
In addition, 8 respondents (66.67%) that they operated their business more than
10 years regarded the buyers have ability to postpone to purchase the garment
products as advantageous for garment firms in competition.
Base on Chi-square = 15.337, P-Value = 0.002* there are relationship between
the number of the company that the company establish and the buyers have ability to
postpone to purchase the garment products.

H12: The effect on powers of supplier based on performance of garment

industry
H0:

The suppliers product is an important product for garment industry has

no significant effect on power of supplier basing on the performance of
garment industry in Cambodia.

Ha:

The suppliers product is an important product to garment industry has a

significant effect on power of supplier basing on the performance of garment
industry in Cambodia.

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Table 4.35 The buyers have full information * Power of Buyer Cross Tabulation
Number of Year that the Company Established
Less than 10 years
More than 10 years
Total
Frequency Percent Frequency Percent Frequency Percent
Level 1
0
0.00
0
0.00
0
0.00
Level 2
0
0.00
0
0.00
0
0.00
Level 3
0
0.00
0
0.00
0
0.00
Level 4
0
0.00
0
0.00
0
0.00
Level 5
23
23.00
8
66.67
31
27.68
Level 6
4
4.00
0
0.00
4
3.57
Level 7
73
73.00
4
33.33
77
68.75
Total
100
100.00
12
100.00
112
100.00
Chi-square = 10.313, P-Value = 0.006*
Important
Level

Table 4.36 shows that the buyers have full information were considered as the
important factors in different levels. There are 23 respondents (23%) that their garment
business has been run less than 10 years has considered the buyers have full of
information as the important factor in level 5. Moreover, there are 4 respondents are
also have been running garment business less than 10 years judged that the buyer
have full information about garment product as important level (level 6). Most of
respondents around 73 respondents (73%) whose garment business have been run
less than 10 years regarded the buyer have full information about garment products as
the most important level (level 7) for the garment firms in competition in global garment.
If look at the respondents whose have run their business more than 10 years,
considered the buyer have full information about garment product as the important
factor (level 5) and there are only 4 respondents that have business almost more than
10 years regarded the buyers have full information about garment sectors as the most
important level (level 7).

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4.5 Strategy Analysis
SWOT Analysis
To be able to provide recommendation related to strategy that garment industry
in Cambodia should do practice in the near future, it is definitely important to begin with
mapping the recently company position in the competition. For doing so, this research
proposed using SWOT analysis as examining tool. How to come up with the weight and
score for each parameter of strength, weakness, opportunity, as well as threat is
already explained in chapter 3 under section data analysis. As described at the same
section, once the weight and the score were determined, the weighted rate for each
particular parameter could be calculated. Eventually by summing up those entire
weighted rates, the total weighted for opportunity-treat and strength-weakness of each
garment firms could be obtained.
In table 4.37, it shows that it draws together the analysis in strengths,
weaknesses, opportunities and threats (SWOT) framework. The basic elements
identified in the SWOT table are outlined in this study. However, drawing together the
key constraints supports the view of the whole of garment industry in order to be a key
success factor for competition with the global garment industry under free trade
environment.

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Table 4.36 SWOT Analysis of the Cambodian Garment Industry

Strengths
Total sale
Capital investment
Cost of working capital
Capital utilization
Financial measure

Opportunities
Economic growth
Technical change
Investment climate
Network alliance among producers
ILO intervention
Bargaining power of suppliers
Threat of new entrants

Weaknesses
Lead-time
Human resource development
Employee productivity
Customer retention
Customer satisfaction
Investment training
HRD
Customer measure
Internal business measure
Threats
Environment issues
Government legislation
Skill labor
Land for material
Debt and capital
Infrastructure
Impact of domestic
Government subsidy
Political/security stability
Bargaining power of buyers Bureaucracy
Corruption
Intensity of rivalry among existing
competitors & substitutes products
Learning and growth

130

CHAPTER 5
CONCLUSION, DISCUSSION, AND RECOMMENDATION
The chapter comprises five sections. Section 1 presents the conclusion of the
research, particularly answering the research objectives. Section 2 discusses the
research findings in relation with previous research. Section 3 is recommendations to
related parties, and then section 4 elaborates the limitations of the study. Lastly, section
5 provides some suggestions to future studies.
5.1. Conclusions
Answering the first objective of the research, that is to identify factors affecting
competitiveness of garment industry in Cambodia. Some conclusions have been found
as follows:
1. Regarding macro environment, economic growth has been judged as the
most important factors followed by government legislation issues, technological
changes, environment issues, inflation rate issue that occupied the second, third, fourth
and the fifth position correspondently. Meanwhile, interest rate was regarded as the last
least important. Nevertheless, economic growth was considered as the most favorable
and the last three factors, technological issues, inflation rate and interest rate were still
deemed benefit (average) them.

131
2. For the national environment, the top rank factors importance was
dominated by factor condition such as Infrastructure and Corruption and collusion
nepotism with very high score. Investment climate, Political/ security stabilities, Skilled
labor, Government subsidy, Bureaucracy , ILO intervention, Impact domestic rivalry,
Country and brand image as garment producers , were commonly judged as the last
least critical factors for national environment. With regard to the favorability, the
Cambodian garment industry has achieved great success over a short of time. The
garment industry has become the engine driving the national economy (accounting for
around 12% of GDP), is making the greatest national contribution to poverty reduction
by creating some 230,000 direct jobs (65% of manufacturing employment). It generates
the largest share of the countrys foreign currency earnings (80% of total exports in
2003). The most favorable of national environment were followed by availability of
investment climate with more favorability and next position were followed by network
and alliance among local producer, ILO intervention moderate factors were judged by
the majority of garment firms as moderate factors for national environment. The last
factors were Infrastructure, corruption, government subsidy, political stability, the
respondents regarded bureaucracy as unfavorable factors. Obviously, Cambodias
infrastructure is not strong at all. Compared to relatively well-prepared FDI law, a weak
infrastructure is a serious barrier to attracting more FDI and further developing the
Cambodian textile and clothing industry. In the reality, Political stability in Cambodia
does not fully extinguish foreign investors' concerns about expropriation. Foreign
investors are still afraid that opaque practices and the processes of implementing

132
the system can generate indirect costs for them and provide room for bureaucrats'
arbitrariness.
3. With respect to threat of entry as a part of industry environment, economic
of scale was regards as the most important factors and government policy was deemed
as the next position in upper important factor. The government incentive and industry
growth were judged as the moderate crucial, and for the favorability, the economic of
scale and capital requirement were regarded as the favorability and above favorable
factor. On the other hand, government policy, government cooperation, tariff and
international restriction, and industry growth were judged as the most unfavorable
factors from the garment industry in Cambodia.
4. All prearranged factor in competition among existing competitors and
substitute products were considered as important parameters, however, exist barriers,
the number of competitors were ranked the two first decisive aspects for the
respondents. The industry / market growth, diverse competitors were ranked as the
important factors only. Conversely, all predetermined factors were assessed as an
unfavorable factor by the majority of garment firm in Cambodia, especially business size
of competitors, product differentiation and switching cost, pressure from substitute
product were ranked as the three last least important. With regard to the favorability
there were not favorable for intensity of rivalry among existing competitors. Conversely,
all factors were judged as the most disadvantageous factors.
5. In this part, most of respondents argued that all information were available
toward their products was the most significant aspect in assessing the bargaining power

133
of the buyers, followed in the next ranked was the ability of the buyer in postponing the
purchase of the products. In term of favorability factors, most of the respondents
thought that products are identical among the competitors was judged as advantageous
for them and the second factors was their products are identical with competitors
product with above favorable. On the other hand, the buyer gain low profit was the
most detrimental factors.
6. Most respondents place the significance of needed products in short supply
product over respondents business in the first position, followed by respondents rely on
suppliers and the importance of respondents in the next rank. Largely, bargaining power
of suppliers over the garment respondents was weak. However, garment firm import
totally 80% of raw material but the bargaining power of supplier still is weak. The most
unfavorable factor was supplier groups products are differentiated or build switching
costs.
Concerning the second data objective of the research about the investigation
toward Cambodias garment industry competitiveness within the industry, this study
provides some important findings as follows:
1. Generally, the competitiveness of the garment industry in Cambodia from
financial perspective can be evaluated as critical factors for respondents. These factors
were judged as most important factors just like, capital investment as the most crucial
one and total revenues was the next position. Concerning favorability, the capital
investment was judged advantageous for them and of working capital and availability of

134
long term; investment was regards as disadvantageous factor.
2. With regard to the competitiveness of garment factories from customer
perspective evaluated by all respondents were customer satisfaction were ranked in the
first position, and the second position followed by market share, the third position was
customer profitability in upper position. On the other hand, the customer retention was
scored as the moderate factor and the customer acquisition was judged as not
important for respondents. Largely, customer measure factor over the respondents was
weak.
3. Surprisingly in term of internal business measure, all factors were scored at
least in moderate. The two factors were thought as the more important factors followed
by lead-time present in the first rank and the second rank is production. In addition
there three factors were regarded as moderate score are capital utilization, worker
motivation & production and import and export procedure respectively. The most of
respondents argued that most favorable factor is capital utilization in rank of above
average. Conversely, some factors were judged as disadvantageous for respondents
were production, import and export procedure, worker motivation & productivity and the
last position is lead time as advantageous for garment firms.
4. With regard to the learning and growth, the findings revealed that there were
two factors as the most important factors for the respondents such as human resource
development present as the first rank and employee productivity was ranked the second
position. With regard to most favorability, there was employee productivity present as
moderate factor and followed by market research, investment development, employee

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retention, investment training, employee productivity and human resource was regarded
by majority of firms as disadvantageous factors.
Meanwhile, SWOT analysis exposed that all garment industries in Cambodia
were having positive factors for all opportunity-threat. It can be interpreted that they all
were facing a handful opportunities from the environment. However, further garment
business in Cambodia image shows that opportunities were dominated by macro and
national environment. For the time being, industry environment believed as the most
influential and critical factor causes disadvantageous for garment factories. Probably it
will not be able to settle the problem or give the strong competitive edge for the
garment producers. Conversely, SWOT analysis also presented the fact that all garment
producers were suffering from serious and various weaknesses that need to be
addressed or settled. It was made clear by negative score for total strength-weakness
were scoring. Despite each garment firm had different score for both opportunity-threat
and strength-weakness rating, so those garment firms occupied the same quadrant of
the SWOT structure.
Given insight from the SWOT analysis, the strategy that the management and
the government should employ in which way that is able to bring the firms position to
the quadrant that provides positive factors for both opportunity-threat and strengthweakness scoring. Another word, the both government and firms should strive in
mending the internal weakness while creating better and more opportunity for the firms.
Lead-time is the most negative factors that can effect to customer satisfaction and

136
customers retention. In term of govern involvement with threat of new entrant, there are
some factors that make the new entrant be stronger in competition with Cambodia
garment firms. Obviously, the root was explained in detail in chapter 4.

5.2 Discussion
This study found many interesting about the competitiveness of garment industry
in Cambodia. This investigation was conducted by questionnaire. The strength of this
study can be considered in not only primary data but also secondary data. In this part
the results and findings from the study will discuss as following
Macro Environment
The result of the study actually comes from the primary data. According to the
result in previous chapter, shown that there were several sectors were judged as the
important factor for respondents such as economic growth, government legislation and
technological changes. In term of economic growth, the world market for garment
products continues to grow by 5% but, that while competition in the US market after the
end of the quota system will be strong, with the implementation of sound economic and
legal reforms Cambodia garment producers will remain competitive and maintain their
market share in the world market. Notably, Cambodia garment export has been
increased steadily $USD 0.90 in year 2000, $USD 1.30 Billion in 2002, $USD 1.76
Billion in 2005 and expected to be increased in $USD 2.60 in 2010.

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The respondents judged that government involvement was considered awarding
negative impact to the firms. In table 4.3, shows that the government legislation and
regulation in garment sector was in the negative impact with mean very low. The
government agencies plays the important role in cooperation, facilitation, supports
garment firm in enhancing garment export. Conversely, the government performs in
negative aspect such as intricate law, import and export procedure, official and unofficial
payment for appliance Certificate of Origin or export license. Therefore, the government
involvement at least should be in the positive way perspective.
National Environment
Surprisingly, in term of favorable factor as display in national environment, there
are some factors were regards as advantageous such as investment climate. With
regard to investment climate, the government strives to have bilateral talk with USA or
EU in order to gain benefits from the WTO. Recently Cambodia received GSP and
quota from WTO member just like, USA, EU, China, and Korea. Obviously, the
investment climate was regarded as good environment for garment business. ILO
intervention was judged as benefits for in the third position factor of respondents of
remediation activities introduce six modules for improvement in seven garment factories
and observe the impact on productivity and product output. Additionally, it plays a vital
role in monitoring adherence to core labor standards in the garment sector in order to
promote compliance with and effective enforcement of Cambodias Labor Code, as well
as internationally recognized core labor standards. It was estimated that adherence to

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ILO labor standards have improved considerably in Cambodia in recent years. One
estimate suggests that this results a possible annual increase of 18% in the export of
garments to the U.S. On the other hand, some factors were judged ass unfavorable
factors such as government agencies with negative aspect. These factors are
infrastructure, government subsidy, bureaucracy, political/security stability. Since 1993,
Cambodia has initiated fundamental reforms in many crucial areas and significant
progress has been made in promoting economic recovery, and reducing inflation to low
levels. However, much remains to be done to rebuild a society and economy shattered
by almost three decades of civil strife and to address the countrys areas of
vulnerability. Sustained development, and the alleviation of pervasive poverty, will
critically hinge upon continued implementation of broad based actions aimed at
strengthening governance, deepening fiscal and bank restructuring, and establishing a
sound legal framework.
Industry Environment
1. Threat of new entry: there were 2 factors were considered as the more
significant factors for garment producer such as economic of scale and government
policy. But in fact economic of scale was judged as the first position advantageous and
the second position was capital requirement was scored the next position in above
average. In term of government sectors were judged as negative point by most of
respondents. The government agencies should play an important role in private sectors
by setting high barriers for new entrance.

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2. Intensity of Rivalry among existing competitor factor: Most of respondents
considered the exist trade barriers was regarded as the most crucial factors in the first
rank and followed by number of competitors and the third is industry/growth for the next
position. On the other hand, all factors from intensity of rivalry among existing
competitor were judged as disadvantageous for the respondents. With regard to the
garment industry, grow notably because the new comers can be strong in doing
business. Existing barriers was considered in negative aspect. The government not yet
set up the high barriers for new applicant such as export tax, tariff, and regulation.
3. Inter of power of buyer: There are full information, only one factor was
considered as the most significant one for the respondents. Buyers have ability to
postpone purchase your products, company sells product to limited number of buyer but
in large were regarded as the most important factor for garment producers. There are
several factors were deemed as advantageous for respondents such as product are
identical among the competitor, the buyer have full information, and the buyer have a
chance to do backward integration. These factors were rated above average.
4. Power of suppliers: in this context, almost all factors were considered as
negative favorability points for respondent. The power of suppliers was regarded as
weak position. The power of suppliers has no ability to threat integrate backward in
negative way. The suppliers products are differentiation or building up the switching
cost is in negative perspective.

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Financial Measure
1. Financial Measure: The most of respondents were deemed that there were
only 2 chapter were considered as the most important factors for the respondents
followed by capital investment was ranked in the first position and total sale was judged
as significant factor for them. On the other hand, in term of favorability, there were three
factors were regarded as advantageous for them. These factors were capital investment
was ranked in the first position, total sales revenue in the second position (above
average) and the last position is customer and product line profitability with in the same
rank with total sales revenue.
2. Customer Measure: there are five sectors were scored as the important for
respondents but except customers acquisition was judged as not important for
producers. The most important were customers satisfaction with the first rank and
followed by market share in the second position and customer profitability. Nonetheless,
all factors were considered as negative effect to the firms. Market share and customers
satisfaction were considered the most unfavorable for respondents. In the reality, the
customer measure is the most important factors in playing important role in retaining
and measuring the customers want and needs. With regard to the customers
retention, consider as the most negative factor. The customer retention measures
tracks, in absolute or relative terms, the rate at which a business unit retains or
maintains ongoing relationship with its customers. In this perspective, managers identify
the customers and market segment in which the business will compete and the
measures of the business units performances in these targeted segments. So all

141
factors related to customers measure, should be take into account in order to measure
and retain the mechanism of the customers.
3. Surprising noticing all factors were considered as important factors for
respondents at least in average rank. Nevertheless, lead-time was judged as the most
important one for them. One the other hand, in term of favorability, most of factors were
regarded as disadvantageous for firms producers except capability utilization was
considered benefit them in above average rank. The major of the structural problem
was ranked as very high concerning the issue of lead times. In a comparative sense,
garment lead times from Cambodia remain lengthy, with other major competitor
countries able to offer reduced delivery times. The lead-time issue relates largely to the
almost complete absence of backward linkages. With regard to the Cambodia
production, regarded as poor condition. The both government and firms should create
a system that has production costs comparable to its neighbors. This involves not
only keeping wages at a competitive level, but also providing institutional settings to
suit international businesses. As far as the wage level is concerned, labor costs in
Cambodia are relatively more competitive than in other competing countries.
4. Learning and Growth: the last but not least, there were only 3 factors
were considered as the most important score for respondents such as human
resource was scored in the first rank in most important, followed by employee
productivity present the second position and the last position was employee
motivation was in the last position. Additionally, employee motivation was deemed
as moderate factor for respondent. In spite of impressive economic growth in recent

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years, Cambodia has one of the lowest human development performances in the
region. Cambodia human resource is ranked in the second lowest in Southeast Asia.
Cambodia is a plentiful supply of female labor available for garment production. The
level of education is generally quite low and operator skills are limited. Most companies
in all of the countries prefer to train employees in-house by placing new recruits
alongside experienced workers rather than by using in-house training facilities for
formal training. Additionally, the management training is a general problem and
vocational training schools (VTS), especially in the public sector, are not well supported
by the garment industry as the curricula rarely matches the needs of the industry.
Suitable training of teachers in the VTS should be a priority, so that they can work
within companies and train employees in the necessary skills to achieve the needed
standards of quality and work speed. Such employee training will create confidence
which, combined with in individual bonus payment schemes, will bring about motivation.
With regard to productivity levels, serious need of improvement in several countries, as
matches the needs of the industry. Suitable training of teachers in the VTS should be a
priority, so that they can work within companies and train employees in the necessary
skills to achieve the needed standards of quality and work speed. Such employee
training will create confidence which, combined with individual bonus payment schemes,
will bring about motivation. Significantly, Human resource management includes many
activities that affect by traditional and nepotism way such selecting garment worker
base on their relationship, nepotism and corruption to the top managers. Some factors
of garment industry were lack of vocational training. Most of the workers and staffs work

143
for garment factory without training on garment skill. Most of them are uneducated
people.
5.3 Recommendation
With regard to the result of SWOT analysis in previous chapter, the following
recommendations are believed necessary to be done in order to move out the garment
industry in Cambodia from current with weak position to better position in where the
garment firms are creating more opportunities and hold more strength.
Recommendations should present to management as daily decision-maker and to the
government policy makers. The garment quota expired since last couple of years back,
however, the global market environment is in a transitional stage and these changes will
create new challenges for the garment industry. The quota premium cost competitive
advantage will disappear and, although Cambodia will continue to enjoy some
preferential market access, suppliers offering lower costs through higher productivity
levels, human resource development, skilled labor, good infrastructure and shorter lead
times which under good investment climate will gain the advantage.
For creating more abundant and sustainable opportunity, the management
and the government not only concentrate on macro environment and national
environment but also concentrate on industry environment by strengthening tie with
the customers, among the existing competitors, as well as with the suppliers.

144
1. Recommendations to the management
1) For creating more abundant and sustainable opportunities, the
management must concentrate on industry environment by strengthening tie
between the industries with the buyers, among the existing competitors.
2) The garment firms should set up specific new development strategy for
garment competition when quota system was expired since couple years ago. It means
that garment strategy before quota ended and strategy after quota end are not the
same. So the firms should set up the strategy to follow the post-quota period.
Cambodian Garment Industry Development Strategy (Development Strategy) should
focus on addressing the competitiveness of the industry and on developing policies and
actions to address key weaknesses and to harness key opportunities. Strategy must
recognize with macro and national environment that have proposed policy measures
and actions and should focus on all aspects of the garment industry cluster.
3) The firms should request to the government to cooperate in building
up workers management skills in production development, distribution channel,
training adequate human resource to carry out product design and development
process, and, not least important, expanding to highly-demanded from domestic
market.
4) The firms strategies should include quality improvement, efficiency
increasing, response to customers, production cost reduction, product development to
meet with market requirements, human resource development, and production
technology improvement.

145
2. Recommendations to the government sectors
Institutional creation
An important element of the Development Strategy will involve bringing key
stakeholders into the development and implementation of actions and policies to
enhance the competitiveness of the garment sector. In this process, a number of
important aspects will need to be considered (in the short to medium term):
1. Special Economic Zones and Free Trade Zones, the Cambodian
government has been considering establishing one or more special promotion zones
geared to attracting domestic and foreign investment. Industrial zones are to be
developed in Phnom Penh, Sihanoukville, Koh Kong, Poipet, and Pailin, which would
include export processing and free-trade-zone. In order to solve institutional issues and
corruption problems, the plan for SEZs is achieve high economic growth through export
promotion. Since LDCs such as Cambodia lack of sufficient funs to finance their
investments, the country should attract foreign investors. Through this important image,
first strongly recommend to the government policy makers coordinate the failure, which
raises a significant time lag between the planning and implementing the significant
policies. Second, the government should think carefully about the benefits and cost of
tax incentives. Tax incentive for many Asian countries, including Cambodia, are not
significantly effective. Furthermore, incentives are costly as they are a loss of
government incentive.
2. The government should develop the high level of comprehensive policy
reform and a donor coordination mechanism to (a) oversee implementation of the

146
elements of the Action Plan, (b) coordinate and plan allocation of donor interest and
resources to the garment industry, and (c) develop an action oriented public-private
sector dialogue.
3. The government should set up specific goal by focusing on addressing of
competitiveness of garment industry and developing policies.
4. With the huge amount of raw material import such as cotton, yarn and
some accessories materials, the Royal Government of Cambodia should cooperate
with firm to promote local cotton and raw material growers by financing or subsidy to
the growers. Some of garment factories singed sub-contract with the cotton growers
by providing loan and offering cotton seeds free to the growers in couple year ago.
Some countries such as Bangladesh, Cambodia and Sri Lanka possess have no
indigenous textile fibers, the other countries have an abundance of cotton, or man-made
fibers (MMF), or both. Nevertheless, China and Pakistan have to import MMF in order
to have the specific material needed for particular garment products and to achieve the
necessary price levels. Pakistan imports cotton in order to have the correct lint cotton
quality and staple length, whilst Indonesia has only a limited cotton crop and, therefore,
needs to import cotton. Bangladesh is totally dependent on cotton imports.
5. Recommend that the government take an active part in promoting
export development and assistance in marketing, information technology, and the
acquisition of know-how. Expanding textile and clothing exports requires sustained
efforts on both the macroeconomic and microeconomic levels. We recommend
establishing a trade information agency that would gather and distribute information

147
and knowledge on the preferences of the final consumers in developed
economies, production network, buyers, and the like.
6. This would also be designed to provide information about the
Cambodian textile and clothing industry. Providing systematic knowledge and
information to foreign investors as well as to potential local entrepreneurs
contributes to realizing investment opportunities in Cambodia.
Infrastructure:
Cambodia is poor positioned in terms of infrastructure compared to the other
countries. Definitely, the production costs and shipment cost of goods severely affected
by an insufficient and unreliable power supply and expensive electricity costs.
- Current transportation infrastructure consists of road, railways, inland water
transport, and air transport. These factors affect to overall cost just like shipment cost,
lead-time, and power supplies and so on. Through the inadequate infrastructure,
recommend to the government to look for some part of technical assistance for donor
countries to supporting or subsidy on garment firms such as electricity cost, water cost.
As mentioned by GMAC official, the government planed to buy electricity from Vietnam,
but now this plan has not been process because of bureaucratic government
involvement. Importantly the government should eliminate corruption and drastically
reducing the administrative complexity of doing business in Cambodia. In the reality,
there is corruption throughout the world and especially elsewhere in Asia. Cambodia
simply cannot afford the luxury of corruption. And if the Cambodian government were

148
to make a serious effort to combat it many foreign investors would start turning away
from China, Vietnam, and Thailand and start setting up shop here.
- Government involvement (Corruption, political issues, bureaucracy, bribes)
According to the World Bank report recently suggested that the policy uncertainly,
corruption, bribes as a percentage of sales, and crime are the major constraints to
doing business in Cambodia. Obviously, the override priorities in Cambodia are
decrease policy uncertain and corruption. Importantly, the government should improve
through these negative or endogenous factors by using all relevant policy just like
motive economic reforms, trade reform, administrative reform, legal and judicial reform,
and banking and exchange rate reforms. These are important factors for the firms.
Through this image, the government should implement quickly. Specially, Cambodia
corruption law has not yet adopted by National assembly. These factors are important
for firms and people but the government has tried to delay in adopting this law because
they can continue to do corruption.
Human resource
It is a key for Cambodia's efforts to sustain the textile and clothing industry in
the long run The Cambodian garment industry is working on human resource
development to improve productivity. There is an abundance of labor in Cambodia.
However, there are insufficient skills 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. By increasing, the salary for better skilled

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staff will lead to happier staff and more productive staff, which in turn will lead to an
increase in production.
Suggestions for Further Studies
This study contains a lot of the fact and findings for garment competitiveness
in Cambodia while the global garment has faced with quota phase-out. So further
studies will be implemented in the near future as following:
First, it is necessary to augment and enlarge the number of respondents to
other stakeholders within the industry such as both owner and regulator. It is
undisputedly vital to present far-reaching, integral, and comprehensive views about
the topic.
Second, the whole of garment picture should be excavated by employing
deep analysis to all industry players. It is needed to assess the firms
competitiveness relative to the industry.
Third, the relationship among the garment producers that are involved in the
research should be examined by employing more various statistical tools to acquire
more profound understanding from different perspectives. From this analysis, more
precise recommendations and suggestions will be able to be awarded.

150
Limitations of the study
Despite presenting better understanding about the garment industry in
Cambodia and providing some insightful information as well as useful findings, this
research is subject to some limitation as mention follows:
1. Limited scope of respondents that included garment industry and some
officers need to be expanded to private enterprises and other stakeholders in the
industry such as suppliers, buyers, government as policy maker and so forth to gain
much deeper and broad perspective especially concerning the factors affecting
competitiveness.
2. To measure the garment industry in Cambodias competitiveness relating
to the industry, it requires real industry standard as tool of comparison. Because of
limited time and information available publicly, this study use only some big
companies as benchmarks and assumed the average of all prearranged companies
as industry average.
3. Relationship among all factors involved in the research, its will be
examined by employing more various statistical tools to acquire more profound
understanding from different perspectives. From this analysis, more precise
recommendations and suggestions will be able to be awarded.

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APPENDICES

157

Appendix A
LETTER FOR QUESTIONNAIRE SURVEY

To whom it may concern:

As a MBA ( Masters of Business Administration) student in International
Business Program at The University of the Thai Chamber of Commerce, Bangkok,
Thailand, I am conducting a study topic entitle Competitive analysis of Garment
Industry in Cambodia under free trade environment.
I would appreciate your willingness to take part in this study, as the information
made available would be critical to the successful completion of my thesis.
Please take time in answering the questionnaires. If there are any queries,
kindly contact the undersigned at email address: yannowto@yahoo.com.
Finally, I would like to extend my sincere gratitude for your valuable time and
kind cooperation.
I look forward to receiving any recommends from you for being useful of
academic purpose.

Yours sincerely,
Yin Yanno
MBA in International Business
The University of the Thai Chamber of Commerce
Bangkok, Thailand

158

APPENDIX B
QUESTIONNAIRES
COMPETITIVE ANALYSIS OF GARMENT INDUSTRY OF CAMBODIA
UNDER FREE TRADE ENVIRONMENT

Thank you very much for spending your time and effort to fill this form. Your
support will help give valuable information in completing my thesis entitle Competitive
analysis of garment industry in Cambodia under free trade environment. All of these
following questions are only related to Garment industry in Cambodia. All of your
information is intended for academic purpose only.
Part I General Business Profile
1. Please Indicate symbol 9 into the { } which regarding your business.
Companys name
Position
2. Type of your company (Can answer more than 1)
{ }Private enterprise

{ }Joint venture

{ }others

(Please specify)
3. Registered capital
{ } Less than 100 Million Riels { }More than 100 Million Riels
4. Number of year that the company established
{ } Less than 10 years

{ }More than 10 years

{ }Other

159
5. Percentage Sales through Join marketing officer
{ } < 25%

{ }25-50%

{ }50-75%

} { > 75%.........

6. The main export market

{ } USA

{ }EU

{ }CANADA

{ }Other

Percentage of garment industry grow in year 2006

{ } < 25%

{ }25-50%

{ }50-100

{ }>100

7. Number of sales return through out 2006 toward total sale

{ } <5%

{ }5-10%

{ }10-15%

{ } >15%

160
Part II
In this part, you will be asked to answer series of questions concerning on some
factors affecting the competitiveness of your company where you work for. There are
two kinds of question for each point. First, please indicate the IMPORTANCE of each
item to sustain in competition by writing number within range 1 to 7 (1 is for NOT
important at all and 7 VERY important). SECOND, please rate the IMPACT of the each
item over your company by giving (X) signal within the determined range (-3 most
unfavorable, 0 average and 3 most favorable). Number 1 is giving example

No A. Macro environment

Important
Level

Most unfavorable
-3

1
2
3
4
5
6
7

EXAMPLE
Economic grow
Interest rate
Inflation rate
Technological change
Environment issues
government legislation and
regulation

-2

-1

Most favorable
0

1
X

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Important Most unfavorable

No B. National Environment
Level
1
2
3
4
5
6
7
8
9
10
11
12

13
14
15
16
17
18

-3

-2

-1

Most favorable

Investment climate
Industry location
Production
Skilled Labor
Arable land for material plantation
Natural resources
Dept & Capital
Infrastructure
High educated labor
Network& alliance among local producer
Country & brand image as garment
producers
Impact domestic rivalry over lowering
cost, improving quality, creating new
product
Government subsidy
Political/security stabilities
Bureaucracy
Corruption, collusion, nepotism
GMAC relation
ILO Intervention

How do the following factors regarding the presence of new competitors affect to
your company? (if the following factors encourage or support the new competitors to
present in the competition, you should answer unfavorable, reversely, if these following
factors discourage the new competitors for competing, you should answer favorable (-3
most unfavorable, 0 average and 3 most favorable).

162

Important
No

C. Threat of new
entrant

Most unfavorable
Level
-3

Economies of scale

2
3

Tariff & international

restriction
Capital requirement

Government incentive

Industry growth

Government policy

Most favorable

-2

-1

How do you think the following factor regarding intensity of rivalry among exiting
competitors affect to your company? (-3 most unfavorable, 0 average and 3 most
favorable)
Important
No D. Intensity of rivalry among
existing competitor

Level

Most unfavorable
favorable
-3

1
2
3
4
5
6
7

Number of competitors
Business size of competitors
Industry / market growth
Product differentiation
&switching cost
Diverse competitor
Exist barriers
Pressure from substitute product

-2

-1

Most

163
How do you think about these following statements related to the power of your
products buyer and please indicate the significance of each item over the power of your
products buyer?

Important
No E. Bargaining Power of
buyer

Strongly disagree
Level
-3

3
4

Your company sells

product to limited
number of buyer but in
large size amount
Your products are
identical among your
competitor
Switching cost spent by
your buyer is low
Your buyer gain low
profit
Your buyers have a
chance to do backward
integration
Your buyers have
ability to postpone
purchase your products
Your buyers have full
information

Strongly agree

-2

-1

164
How do you think about these following statements related to the power of your
raw material suppliers please indicate the significance of each item over the power of
your input suppliers?
Important
No

F. Bargaining power of
supplier

Strongly disagree
Level
-3

4
5

Your factory is
dominated by limited
number of supplier that
sell in large amount
There are few supplier
for a specific input for
your company
The suppliers product
is an important product
to your company
Needed products are in
short supply
The supplier groups
products are
differentiated or build
switching costs
Your company is not
important customer for
supplier
Your supplier threaten
your company to
integrate forward

Strongly agree

-2

-1

165
Part III
In this part you will be asked to answer series of questions concerning on some
factors related to performance of the company where you work for. There are two kinds
of question for each point. FIRST, please indicate the IMPORTANCE of each item to
sustain in competition by writing number within range 1 to 7 (1 for NOT important at all
and 7 VERY important). Second, please rate the POSITION of your company
COMPARE TO INDUSTRY by giving (X) sign within the determined range, -3 for every
poor, 0 average and 3 for excellent. Number one is given as an example.

No A. Financial Measure

1
2
3
4
5
6
7
8

EXAMPLE
Total sales
Cost of working capital
Customer and product line
Profitability
Profit from operation
Availability of long term
investment
Cost of long term
investment
Capital investment

Important
Level
7

Very weak
-3

-2

Very Strong
-1

3
X

166

No B. Customer measure

Important

Very weak

Very Strong

Level
-3
EXAMPLE
1

Market share

Customer retention

Customer acquisition

Customer satisfaction

Customer profitability

No

C. Internal business
Measurement
Number of production

Capability utilization

Worker and production

motivation

Lead time

Import & export

procedure

-1

3
X

Very weak
Important Strong
Level
-3

-2

-2

Very

-1

167

No D. Learning & growth

Important
Level

Measurement
1

Employee productivity

Employee retention

Employee motivation

Market research

Investment training

Investment

Very weak
-3

-2

Very Strong
-1

development
7

Human Resource
development

Thank for your time and kind cooperation!

168

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169

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170

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171

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172

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173

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174

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175

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176

APPENDIX C
LIST OF GARMENT INDUSTRY IN CAMBODIA
THE GARMENT MANUFACTURERS ASSOCIATION IN CAMBODIA
LIST OF GARMENT FACTORIES IN CAMBODIA
NO.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

NAME OF THE COMPANY

ACE APPAREL CO.,LTD.
ALL SUPER ENTERPRISE (CAMBODIA) LTD.
ANN TAYLOR SOURCING FAR EAST LTD.
APPAREL PLACE PTE LTD.
ARCHID GARMENT FACTORY CAMBODIA LTD.
ASD (CAMBODIA) CO.,LTD
ATAX (CAMBODIA) GARMENT CO.,LTD.
BC CAMBODIA GARMENT CO.,LTD.
BERRY APPAREL (CAMBODIA) CO., LTD.
B & N GARMENT (CAMBODIA) CO.,LTD.
BOREY KAMKOR CO., LTD.
BORIC GARMENT (CAMBODIA) CO., LTD.
BRIGHT SKY PTE LTD.
BROADLAND CAMBODIA GARMENT INDUSTRIES CO.,LTD.
(CAMBODIA) BOLAN GARMENT & HOME TEXTILE C/L
(CAMBODIA) HONGMEI IMP & EXP CO., LTD.
(CAMBODIA) SENBAO GARMENT MFG CO., LTD.
CAMBODIA SPORTSWEAR MFG. LTD.
CAMBODIAN HOI FU GARMENT & KNITTING FACTORY
CAMITEX (CAMBODIA) MFG CO., LTD.
CAMWELL MFG CO., LTD.
D.A CORPORATION LTD.
DA JOO CAMBODIA LTD.
DAE KWANG GARMENT CO., LTD.
DAI YOUNG CAMBODIA CO.,LTD
DIAMOND TOWER ENTERPRISE LIMITED.
EUROPEAN TREND FASHION (CAMBODIA) LTD.

OWNER BY
KOREA
TAIWAN
CHINA
SINGAPORE
HONG KONG
KOREA
BRITISH
KOREA
MALAYS
HONG KONG
CAMBODIA
HONG KONG
SINGAPORE
MALAYSIA
CHINA
CHINA
TAIWAN
HONG KONG
MACAU
TAIWAN
TAIWAN
KOREA
KOREA
KOREA
KOREA
TAIWAN
GERMANY

177
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63

EUROGATE GARMENT LIMITED

E GARMENT CO., LTD.
EAST OCEAN GARMENT FACTORY LTD.
EAYUAN (CAMBODIA) GARMENT CO., LTD.
EDA ENTERPRISE CO.,LTD.
ECLAT HIGHTER INTERNATIONAL GARMENT(CAMBODIA)
EUROPEAN TREND FASHION (CAMBODIA) LTD.
FINEGIS CAMBODIA GARMENT CO.,LTD.
FLYING DRAGON (CAMBODIA) GARMENT LTD.
FOREVER WIN GARMENT CO., LTD.
G.W ENTERPRISE LIMITED
GLOBAL TEXTILES CO.,LTD.
GOLDEN JET (CAMBODIA) GARMENT LIMITED
HAGAR DESIGN LTD.
HYUNJIN (CAMBODIA) CORP.
HAN SUNG (CAMBODIA) GARMENT CO., LTD.
HIGH BORN ENTERPRISE CO.,LTD.
HENG YU KNITTING FACTORY CO., LTD.
HORUS INDUSTRIAL CORP.
HS ENT (CAMBODIA) CO. PTE LTD.
HUA HSI GARMENTS CO., LTD.
JIANGSU DIAO (CAMBODIA) GARMENT CO.,LTD.
JIN CHAN (CAMBODIA) CLOTHING CO.,LTD.
JUSCA GARMENT (CAMBODIA) LIMITED
JRB ACTION TEXTILE & CLOTHING LTD.
J K FOREVER CO., LTD.
KONG HONG GARMENT CO.,LTD.
KP APPAREL MANUFACTURING CO., LTD.
KINMA INDUSTRIES PTE.LTD.
KA HING GARMENT KNITTING FACTORY CO.,LTD.
KIN TAI GARMENT CO.,LTD.
KUN KOOK (CAMBODIA) CO., LTD.
L.A. (CAMBODIA) GARMENT PTE.,LTD.
LEADER'S INDUSTRIAL CO., LTD.
LEADING INTERNATIONAL CO., LTD.
MEKONG TEXTILES LTD.

GERMANY
CHINA
HONG KONG
CHINA
MALAYSIA
TAIWAN
GERMAN
KOREA
KOREA
HONGKONG
TAIWAN
CANADA
HONGKONG
SINGAPORE
KOREA
KOREA
TAIWAN
CHINA
TAIWAN
TAIWAN
TAIWAN
CHINA
CHINA
MALAYSIA
TAIWAN
TAIWAN
CAMBODIA
VIETNAM
MALAYSIA
BRITISH
TAIWAN
KOREA
MALAY
TAIWAN
TAIWAN
CAMBODIA

178
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
95
96
97
98
99
100

MARLYN INDUSTRIAL CORPORATION

MING HUI GARMENT CO., LTD.
MIN KUAN TEXTILE CO.LTD.
NEW WIDE (CAMBODIA) GARMENT CO., LTD.
NAN KUANG GARMENT (CAMBODIA) CO.,LTD
NEW ISLAND CLOTHING (CAMBODIA ) LTD
NEW MAX GARMENT CO.,LTD
NOW CORP.
NEW WIDE (CAMBODIA) GARMENT CO., LTD.
NIMBUS TEXTILE (CAMBODIA) CO., LTD.
PHNOM PENH GARMENT CITY LTD.
PHNOM PENH KNITTING (CAMBODIA) CO., LTD.
PHONG WAN ENTERPRISE CO.,LTD.
PANTESSA GARMENT (CAMBODIA)
PAK SHUN KNITTING FACTORY LIMITED
PERFECTA (CAMBODIA) GARMENT CO.,LTD.
P.D.C. GARMENT LTD.
PINE GREAT (CAMBODIA) GARMENTS CO., LTD.
PEACE GLORY (CAMBODIA) MANUFACTURING CO., LTD.
PCCS GARMENTS LIMITED
QSP APPAREL LTD.
QUALITY TEXTILES CO.,LTD.
ROYAL CROWNTEX INTERNATIONAL INC.
RAO YUAN GARMENTS CORP
RIVER RICH TEXTILE LTD.
RAO YUAN GARMENTS CORP.
SAN FONG INTERNATIONAL CO.,LTD
SANGWOO (CAMBODIA) CO., LTD.
SUN SHINE CO.,LTD.
S.H. INTERNATIONAL CO.,LTD.
SAN SAN GARMENT (CAMBODIA) CO.,LTD.
TACK FAT GARMENT (CAMBODIA) LTD.
TACTICIAN INTERNATIONAL CO., LTD.
UNIVERSAL APPAREL (CAMBODIA) CO., LTD.
VINSTAR GARMENT INDUSTRY CO., LTD.
VIVATINO DESIGN (CAMBODIA) PTE. LTD.

TAIWAN
CHINA
TAIWAN
TAIWAN
TAIWAN
BRITISH
TAIWAN
KOREA
TAIWAN
CHINA
CAMBODIA
CHINA
TAIWAN
TAIWAN
CHINA
TAIWAN
HONG KONG
CHINA
CANADA
HONG KONG
USA
MALAYSIA
USA
TAIWAN
CHINA
TAIWAN
TAIWAN
MACAO
TAIWAN
KOREA
INDONESIA
HONGKONG
TAIWAN
CHINA
TAIWAN
MALAYSIA

179
101
102
103
104
105
106
107
108
109
110
111
112

VIOLET APPAREL (CAMBODIA) CO.,LTD.

VOLOMECOCOMO APPAREL (CAMBODIA) INC.
WALL MARK ENTERPRISE (CAMBODIA) CO.,LTD
W & D (CAMBODIA) CO., LTD.
WEARWEL ( CAMBODIA ) LTD.
WONREX (CAMBODIA) CO.,LTD.
WOOSU CNS (CAMBODIA) CO., LTD.
XIN FANG (CAMBODIA) GARMENT MANUFACTURING LTD
XIN LAN (CAMBODIA) GARMENT CO., LTD.
YAKJIN (CAMBODIA) INC.
YEE WO (CAMBODIA) GARMENT & WASHING CO.,LTD
YGM (CAMBODIA) LTD.

MALAYSIA
KOREA
HONGKONG
TAIWAN
INDONESIA
TAIWAN
KOREA
CHINA
CHINA
KOREA
HONGKONG
HONGKONG

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BIOGRAPHY
Yin Yanno was born on the 2nd of June 1968 in Phnom Penh, Kingdom of
Cambodia.
He holds the degree in Bachelor of Business Administration (BBA) from the
National University of Management, Cambodia in 1994.
He worked for ASEAN Department, Ministry of Commerce of Kingdom of
Cambodia since 1994 to July 2005.
July 2005, he received a scholarship from Thailand International Development
Cooperation (TICA), Ministry of Foreign Affairs, Kingdom of Thailand for his Master of
Business Administration (MBA), in the field of International Business at the University of
Thai Chamber of Commerce (UTCC), Bangkok, Thailand.
Currently he is completing his Master of Business Administration (MBA) at
UTCC and is expecting to graduate in 2007.