Saiham Textile Mills

Limited, Bangladesh
SWOT ANALYSIS
 Abstract:

Saiham Textile Mills Limited is one of the pioneers among the private sector textile
mills in Bangladesh. The company was incorporated in 1981. And later the
construction started in the year 1983. The construction work was finished in 1984 and
the production started at the same year. The founders decided to make the textile
industry at Noyapara, in Habiganj district. The main objective of Saiham was to
substitute imported fabrics. Creating job opportunities for the local people was
another consideration that made the decision of making the factory in that rural area.

The industry has two production units. Unit 1 produces textiles along with weaving,
printing and dying. Unit 2 is the spinning mill, which produces the yarns, needed for
production of fabrics as well as for selling them in the local market to meet local
demands.

The company has created a strong base in the local market over the years. The
company has a pretty good financial base as it has been able to pay off all its debt and
also the company has been able to pay dividends to its stockholders for the years. The
company has a good prospect to grow and it’s competing very strongly in the local
market. Also, the quality products at a reasonable price helped people to rely more on
the local products. Saiham also do not spend a huge amount of money on the
promotional campaign but engages in various social activities and donations.

There is a huge prospect for our textile sector to develop as a supplier of quality raw
material for the much-developed RMG sector of our country. This is a huge prospect
for Saiham if they can utilize this opportunity they could have come out to be a pretty
strong competitor in the textile sector as well as contributing to our economic
development.

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 1. Introduction:

Textile and spinning industry are very important industry in the perspective of our
country. This sector not only contributes a significant portion in the national income
of the country, but also the textile sector gives employment to a lot of people.

Saiham Textile Mills Limited is one of the known names in the textile industry, which
has been operating for more than 20 years. The company later added up a spinning
unit with its previous operation in the textile unit. Over the years Saiham has been a
familiar name to the people of middle and lower middle income as it has been
providing quality products at a very reasonable price. The products of the company
have been pretty much good in quality and targeted to substitute the imported fabrics
for the end users. It can be said that the company has achieved some degrees of
success as it has proved to be a strong local company, which has created its own
position in the local market.

2. Textile Sector in Bangladesh:

Textiles have been an extremely important part of Bangladesh's economy for a very
long time for a number of reasons. The textile industry is concerned with meeting the
demand for clothing, which is a basic necessity of life. It is an industry that is more
labor intensive than any other in Bangladesh, and thus plays a critical role in
providing employment for people. Currently, the textile industry accounts for 45% of
all industrial employment in the country and contributes 5% of the total national
income.

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2.1. History:

Traditionally, artisans working in small groups, in what are often referred to as

cottage industries, produced most of the textile in the sub-continent. There were many
such artisans in the area that was to become Bangladesh. In fact, from prehistoric
times until the Industrial Revolution in the eighteenth century, East Bengal was self-
sufficient in textiles. Its people produced Muslin, Jamdani, and various cotton and silk
fabrics. These were all well regarded even beyond the region as very skilled craftsmen
Manufactured them.

However, after 1947 and the partition of East and West Pakistan from India, most of
the capital and resources of Pakistan came under the control of West Pakistanis. The
textile industry thus stagnated in East Pakistan as momentum for development shifted
from the eastern part of the country to the west. The west also grew more cotton than
the east, which was used as a plea for developing the industry in the west instead of in
the east. West Pakistani industrialists also owned the majority of all industries in the
east.

When Bangladesh gained its independence from Pakistan in 1971, the new
government nationalized the textile industry, as it did with many other businesses in
which West Pakistanis had been the principal owners. Although there were some
Bangladeshi industrialists, they did not form a large or politically powerful group and
thus had to surrender control of their factories to the government as well. All of the
country's textile factories were then nationalized and organized under the BTMC.

The government then gradually denationalized the production of textiles. Factories

were privatized, beginning with the dyeing and weaving units. Since that time, much
of the industry has been privatized through auctions and other means.

The textile industry has been the catalyst for industrialization in numerous countries.
For example, in England, the Industrial Revolution with the new development in coal

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and steel led to the establishment of a mass textile industry, which catalyzed the
industrialization process in the eighteenth century. Similarly textiles played a major
role in the industrialization of Japan, South Korea, Taiwan, Hong Kong, and
Indonesia. The same has been true to a certain degree in this country. After
privatization, the quality of the fabrics produced improved significantly, leading to a
great increase in the demand for Bangladeshi textiles in both the international market,
as well as the export oriented garment industry of Bangladesh. This launched the
industry into a period of rapid growth that is continuing at present.

2.2. Prospect:

Today, the textile industry of Bangladesh can be divided into the three main
categories: the public sector, handloom sector, and the organized private sector. Each
of these sectors has its advantages and disadvantages. Currently, the organized private
sector dominates, and is also expanding at the fastest rate.

 Public Sector

The public sector is that portion of the industry controlled by organizations that are
part of the government, such as BTMC. The factories in the public sector enjoy
certain privileges such as government funding. However, in Bangladesh, factories in
the public sector are not well supervised. There are frequent changes in officers, and
many of these officials do not have a personal interest in the factory for which they
are responsible. In addition, the equipment in this sector is not well maintained, as
much of the money allocated for this purpose is not spent as planned, but is wasted
through corruption and poor accounting.

 Handloom Sector:

The rural group of textile producers includes operators of handlooms and a number of
organizations, which employ rural women, such as BRAC. The Handloom industry

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provides employment for a large segment of the population of Bangladesh. The
industry also supplies a large portion of the fabric required by the local market.
Factories in this sector are usually well looked after by the owners and are quite
productive, considering the equipment available. However, the inferiority of their
machinery, mostly due to their narrow width, means that the fabric production is slow,
and usually the quality of the products vary a lot on these products.

 Private Sector:

The private sector has the opportunity to grow most. The private investors are coming
up with new projects and these new projects with quality machinery and management
has the opportunity to compete internationally. If this sector can flourish, it would
help the garments sector of the country with quality threads. This is how the private
sector can help Bangladesh to gain a place in the international market.

3. Company Background:

This portion of the report will discuss about the background of Saiham Textile Mills
Limited. It would include the history of the company, how and where it was
established. Then the report will give ideas about the plants and machineries of
Saiham. And finally, it would talk about the much-needed utilities of the factory.

3.1. History:

The planning of making a textile industry by the initiators of Saiham Textile Mills
Limited was taken at that time in the year of 1979, after the government decided to
give permissions to the local entrepreneurs to form and operate textile industries.

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The project of taka 20 crore was sanctioned in 1981 and BSRS approved the project
and agreed to give loan facilities at the same year. And then the construction started in
the January of 1983. The construction work was finished in 1984 and the production
started at the same year. The initial project included weaving, dyeing and printing
facilities with a production capacity of 3 million yard per annum. For that they
decided to setup 150 looms, which were semi automatic.

The founders decided to make the textile industry at Noyapara, in Habiganj district.
Though the location was chosen in a rural area, the communication was not all that
bad there. The plant site is just opposite of the Noyapara railway station and not very
far from the Dhaka-Sylhet highway. The main objective was to substitute imported
fabrics. Creating job opportunities for the local people was another consideration that
made the decision of making the factory in that area.

In the early 1990s the company got approval of making a spinning unit. It was a 32
crore-taka project. This time the main funding was provided by BSRS too. The
company started the construction work in 1992. The spinning unit started its
operations and production in 1994. The spinning unit consists of 25,900 spindles.

The company used Chinese and Japanese machineries for their production process.
The high quality machine has been serving them pretty well till now. For the
electricity they first used electric supply from the rural electric supply for their first
unit. Later, because of the increasing number of power failure, diesel run stand by
generator of same capacity has been established. And for the unit II, they decided to
use their own gas generator, as it proved to be more cost efficient.

For the raw materials they depend heavily on imported raw materials. They import
cottons from USA, Former Soviet countries, West African countries and Egypt. They
use these materials for the spinning unit. And for the unit 1, they use both yarn
produced from the unit 2, as well as imported yarns. They also have to import dyes,
bleaching powders and other chemicals for producing quality products.

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In these years the company has created a good position in the textile and spinning
market of Bangladesh. The quality products at a reasonable price helped people to
rely more on the local products. Moreover, the company also got some financial
success in these years. The most significant among these is the company’s success in
repaying the entire amount of its loan to BSRS before its due date. In the increasing
competitive market the company has been able to hold its strong position over the
years.

3.2. The Plant and Machineries:

The plant is situated over 4.08 acres of land at Nayapara, a village under Madhabpur
Upazilla in Habiganj district. It is about 500 yards away from Nayapara railway
station. The company is the owner of the land by way of transferring land by way of
transfer from the directors. The land is regarded as least developed area by the
government. The project enjoys all the infra-structural facilities including electricity,
gas and communication.

The company was made by the financial assistance of Bangladesh Shilpa Rin
Sangstha (BSRS), to produce fabric. Later the spinning unit was made with the
financial assistance of BSRS and Sonali Bank. The machineries of the project were
both imported and local ones. The main machinery of the project has been imported
from Japan, China, USA, Germany, Switzerland and Thailand. The machineries of the
project were installed with the technical assistance of Japan. Some local machineries
were also installed such as deep tube well, scale, cable and fittings, workshop
machinery, fire fighters etc.

The factory of the company consists of 3 parts.

I. Weaving
II. Dyeing and finishing
III. Spinning

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The dyeing and finishing and the weaving part were made in the first stage. It was a
taka 20 crore project. Later the spinning unit was made, which was a taka 32 crore
project.

The production capacity of the fabric section is 500,000 million yard monthly. That
means the yearly production capacity is 6 million yards. The spinning unit has the
capacity to produce 1.6 million kg of yarn annually.

3.3. Utilities for the Factory:

The plant requires 35 cubic meters of water per day. The supply of water will be
available from the company’s own the deep tube well. The project has an overhead
water tank with the capacity of 15 cubic meters of water. There will also be an under
ground reserve water tank.

The project’s maximum demand for electricity is 1900 KW. Rural Electricity Board
(REB) supplied the amount of electricity. To reduce the electricity consumption and
adversities of load shedding the company has installed two-power generator of 1000
KV each

4. Company Analysis:

In this part of the report the company analysis has been done. It mainly focused on the
competitors of Saiham Textile Mills Limited. Also it discussed about the SWOT
analysis to find out the strength, weakness, opportunity and threat of Saiham. And
finally Porter’s 5 forces model of industry analysis has been used to find out the
competitiveness of Saiham Textile.

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4.1. Competitors:

Saiham Textile Mills Ltd is one of the pioneers among the private sector textile mill
in the country. Their target market is the middle class and lower middle class
population of the country, which is consists a significant portion of the population. So
there is huge number of competitors who tries to capture these customers. So Saiham
has to compete with all these local and foreign products all the time. The main
competitors of the weaving, dyeing and finishing unit are as follows.

 Foreign goods available in the market that comes to the market legally.
 All smuggled foreign goods in the market.
Among the local textile mills Saiham faces competition mostly from Dandy Textile
Mills. There are some more competitors such as-
 Kashem Textile Mills
 Rahim Textile
 Monno Textile
 Monno Textile

For the 2nd unit, the spinning unit the main competitors are
 All foreign yarn that comes in the market legally or illegally.
Local spinning mills are good competitors for the spinning unit. Some good
competitors are
 Pride textile
 Prime Textile
 Padma Textile
 Safko Spinning Mills

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4.2. SWOT Analysis:

 Strength:

Competitive Price:
The price of the products of Saiham Textile Mills is very competitive. It gives them
the edge to attract its target customers.

Advantage of cheap labor:

Both the factories of Saiham Textile Mills are situated in rural areas in Habiganj. It
helped the management to get some cheap labor from the rural areas. This is a good
advantage to Saiham and it also helped to get some disciplined work force for the
good management of the company.

Advantage of being in the business for a long time:

Saiham has been in the business from more than 20 years. Most of its competitors
were not in the scene at that time. So the management has gained a lot of experience
from then on. So it has given Saiham a competitive edge over its competitors.

Product Quality:
The qualities of the products produced by Saiham are very good. These products are a
very good substitute for imported foreign goods. And in these two decades of its
operation, the products of Saiham have gained a good reputation amongst the target
population of the company.

Potential Market:
There is a good need of yarn and fabrics in the country. So Saiham has a great market
for their goods throughout the country. And it is also possible for the company to
expand its market outside the country.

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Innovation of New Products:
Innovation of new products is a very good strength for Saiham. Saiham is well
reputed for there innovation of new goods in local fabric market.

Skilled Management:
Saiham has got a very skilled management team. In this few years the management
team has been able to operate the company pretty strongly. So the skilled management
is another very good strength for Saiham.

 Weakness:

Poor distribution network:

The distribution network of Saiham is not very well designed. There are only 3
distribution outlets for Saiham. They rely more on the wholesalers rather than on their
own outlets. This is not a very good strategy as it makes people more confused getting
goods of Saiham in the market.

Directors involved in the management:

The Company hasn’t yet developed a corporate structure. The directors are heavily
involved in the management of the company. This is not a very good sign for any
business organization.

Unskilled Labors:
As the factory is located in rural areas and as the labors are recruited mostly from the
nearby villages, therefore the labors are not very much skilled. The unskilled labors
can become a very big weakness for the company, as the company needs to train up
the unskilled labor, which incurs cost.

Scarcity of Technical Person:

There is scarcity of skilled technical person all over Bangladesh. For Saiham the
problem is a more intense as their factories are located in the rural areas. So Saiham
faces a lack of technical experts and it often causes problems for the company.

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Old Machineries:
Saiham has been in the business since quite a long time. They are still most of the
machineries they installed initially. Of course the productivity of those machineries
has decreased over the years. As a result the company has to sacrifice many
opportunities they might have got by increasing more materials by using new
machineries.

 Opportunity:

Raw Material for RMG sector:

In our country there is a huge market for the textile industry to work as the backward
sector of the RMG sector. Only 5% of the raw material for the RMG sector has been
provided by the local textile and spinning mills. Because of the low quality of the
local textile mills due to lack of efficiency and good machineries, the textile industry
has not been able to keep its part in the export of RMG sector of Bangladesh. So it is a
great opportunity for Saiham to use its expertise and invest more on its machineries
and work as the supplier of raw material for the RMG sector.

High Demand Of Yarn:

Demand of yarn is very high in Bangladesh. Local yarn meets only 3% of the total
demand. So there is a lot of opportunity for Saiham as they produce quality yarn in
the country.

Increase market share by new design:

There is always demand for textile products of new designs and varieties. So there is
an opportunity for Saiham to increase its market share if they can come up with new
designs and products.

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  Threat:

New Entrants:
As the market for textile and spinning goods are really huge in Bangladesh, there are
new companies coming up with new technology. These companies have new
machineries, which are more technologically advanced. Saiham might have to face
stiff competition from these new entrances.

Smuggled Yarn and Fabric:

In Bangladesh, there are abundance of smuggled foreign yarn and fabric. These
smuggled goods are lower in price. So the local companies producing yarn and fabrics
face a severe competition from these smuggled goods. Saiham is facing the same
problem of smuggled yarn and fabric and therefore they have to fight hard to compete
with these goods.

Unstable Political Situation:

The political situation of Bangladesh is very volatile. Strikes and other problems
persist all the time, so it becomes very difficult for the businessmen to operate their
business fully. Unstable political condition is a big threat for Saiham.

Declining Law and Order Situation:

The declining law and order situation is another big threat to any company to run
properly. This might cause a lot of problems for Saiham to run properly in future.

4.3. Porters 5 factors model of Industry Competitiveness:

Porter’s 5 forces model of industry attractiveness would be used to find out the key
structural features that determine the strength of the competitive forces within the
textile and spinning industry for Saiham Textile Mills Limited.

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  Rivalry Among Firms:

The rivalry among the competitors is a very important factor for any company to
achieve industry competitiveness. For Saiham we found out that they face serious
competitions from the companies like Dandy Dyeing, Prime Textiles, Pride Textiles,
Beximco Textile etc.

We will have a look at some of the factors that decides the rivalry among the firms.

 Number of Competitors: There are a huge number of competitors for

Saiham. In the competition of the Textile goods Saiham faces
completion from a lot of companies as mentioned earlier. For the yarn
produced by Saiham the number of competitors is high, but still as the
market is so huge, the number of suppliers of yarn is still less than the
demand of the market.

 Industry Growth: The textile and spinning goods market is still

growing in Bangladesh, as Bangladesh still has to import a lot of fabric
and yarn from abroad. So for the producers, there is a high chance to
grow their industries to catch the untapped segment of the market.

 Asset Intensity: Saiham has a very good advantage over others as they
have paid up all of its debts. So the chances for the company to expand
would not be very tough, as it can always get new funds from its
financers.

There are a lot of companies in the same business as Saiham is in. But the supply of
textile goods and yarn is yet to fulfill the demand of local market. So we cannot say
that the degree of rivalry is very intense for Saiham, rather it has very high scope to
expand its business.

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  Potential Entrants:

The entry or chance of potential entrants can create a threat to the existing companies.
Potential entrants make the competition harder and thus the existing companies often
cant cope with the new companies and loses its market share. Some of the factors
make the entrance in a business difficult. We will be seeing the factors and then get an
idea whether the potential entrants would be easy or not and how it can affect Saiham.

The factors below would give some more idea about the potential entrants and how
these could affect Saiham.

 Economies of scale: Saiham has been operating for more than 20 years.
In these years it has been supplying goods all over the country. It has
certainly reached economies of scale, and there is opportunity for
Saiham to expand more.

 Absolute cost advantage: Saiham has absolute cost advantage, as it has

plants in the rural areas. Moreover it has got cheap sources of labor.
Also the company has installed its own gas power generator to reduce
electricity cost.

 Brand identity: Saiham is a common name to its target customers.

Even Saiham do not advertise much, Saiham is a common name to the
people of middle income and lower middle income. Which gives the
idea that Saiham has got a distinguishable brand identity.

 Access to distribution: Access to distribution is very important for any

business to operate successfully. Saiham has very few outlets. It mostly
supplies goods through the wholesalers of the country. This
distribution network is not a very good one, as it makes the company
depend more on the wholesalers.

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 Saiham has been operating very well in the sector of fabric and yarns. The
factors that affect potential entrants are very high for Saiham. But still there is
a chance for the new entrants to enter the market, as the market is so huge. But
it would not be very easy to create an impact on Saiham, as it would take a lot
of time for them to reach the cost advantage that Saiham is getting.

 Substitute Products:

The prospect of substitute products entering the market causes a great threat to the
existing companies. As the substitute products serve the same purpose as the product
itself does, so a substitute product with a competitive price can take away the market
of any product. For Saiham, the threat of substitute products is not very threatening
because it would be very difficult to come up with products that substitute the fabric,
clothing or yarn.

 Bargaining Power of the Buyers:

Bargaining power of the buyers means the ability of the customers to have a control
over the prices. When the buyers have more options they can switch from products of
one company to the products of another. If the bargaining power of the buyer is high,
the companies have to reduce the price and increase the features of its product to get
the customers. As a result they have to be satisfied with less profits. Some of the
factors that affect bargaining power of the customers are as follows.

 Number of suppliers: In the industry of Textile and Spinning, there are

some competitors who can challenge Saiham. But most of the
companies do offer prices of similar kinds. The buyers therefore have
to be satisfied with the prices set by the manufacturer like Saiham.

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  Switching cost: The products made by Saiham or other companies are
not very expensive. So the cost of switching from one brand to another
is not very high for the customers.

It is clear that the bargaining power of the buyers is somewhat high in the case of
Saiham. The customers can switch from product of one brand to another. And it
doesn’t make them think twice to switch from one product to another if he or the
product of one brand dissatisfies him or her. So Saiham is not in an advantageous
position in this regard, as they have to compete pretty hard to offer goods at similar
prices like other companies. So they have to compromise with their profit margin
sometimes.

 Bargaining Power of the Suppliers:

The suppliers of raw materials can dominate the industries to accept the higher prices
or reduced service. The manufacturer acts as buyers at this time. If the number of
suppliers is low, then the suppliers will dominate and if the number of supplier is low
the buyer will dominate. For Saiham, number of suppliers is not low as Saiham
outsource its raw material from abroad in most cases. And once they find one supplier
to charge higher prices, they can shift to another supplier easily. So Saiham does not
have to pay higher price for raw materials and thus decrease profit because of the
pressure from the suppliers.

From the analysis of Porter’s 5 forces model of industry analysis, we can come to this
conclusion that Saiham is not in a very disadvantageous position in the market. There
is a chance for new entrants and also there are a high number of competitors in the
market. But if we look closely we can see that the existing companies cannot provide
all the needs of the domestic market. So these threats do not work well for Saiham as
there is deficit production in the country and we have to import from abroad. Saiham
has some problems too. They do not invest much on the research and development,
which might have helped to get the most out of the market. But overall the company
is doing pretty much fine in the domestic market of Bangladesh.

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 5. Problems:

As most other companies Saiham faces some problems. Most of its problems are
covered in the weakness parts. But there are some other problems that Saiham faces
too. Some of the major problems of Saiham are highlighted below.

1. Saiham has been in operation for over 20 years. In this time period they have
not invested much on replacing their machineries. So the company now is
facing some problems of lower production due to the old machineries.

2. The company has a problem of employees leaving the job after working for
few years. The employees especially, the mid level managers do not tend to
stay in the rural areas for too long. So they leave Saiham and seek job in a
similar organization with similar operations.

3. Saiham do not have too many outlets. Though this reduces its fixed costs, but
still the use of more distributors tend to increase the value of the products of
Saiham. This is a problem where the management should give more focus.

4. Saiham’s location though give some advantage to the company, but the
location has some problems that work as a drawback for Saiham. Other than
the problem of retention of the managers, Saiham faces some more problems
too. The factory has shortage of skilled person with technical knowledge. Also
the work force of Saiham, that is the labors are not much skilled. The use of
machineries by these unskilled labors created some serious damage to the
machineries of the factory.

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 6. Recommendation:

(1) Saiham textile needs to use newer versions of the machines to come up with better
and more efficient production. That would increase the productivity and of course
the profit margin of the company.

(2) Saiham textiles started using Chinese machines when they started off with their
operation, but it is clear that Japanese or any other European machines would
ensure even better production. So, Saiham should make sure that, they purchase
European, German to be precise for more efficiency.

(3) It has been seen for quite a long time that, employees often leave the firm without
staying there for too long. It is a very negative point considering Saiham’s success
in the textile industry. So, Saiham has to focus on employee retention much more
than it ever did to ensure smooth running of the company. For that they have to
develop their own employee retention strategy.

(4) Saiham has been an all manual firm throughout its beginning. It never used
computerized methods in its production purpose. But, computerized system has
become very popular all around the world as it saves time and also reduces costs.
So, Saiham definitely should introduce computerized system in its production
process.

(5) Saiham does not focus much on producing raw materials for the export oriented
garments sector. Thus they have been wasting a very good opportunity to capture
a very lucrative market. By doing so it might have kept a good contribution to the
economy of the country. So, Saiham should focus more on export-oriented sector
to ensure maximum profit.

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 7. Conclusion:

Saiham Textile Mills Ltd. is one of the leading textile mills in the country. The
company has gained goodwill for providing quality goods and services to the
customers. The company thus gained a number of customers. They give their first
preference to customer service and customer relations, which helped them to operate
successfully these years. Also, the management of the company is very skilled and
they had helped the company to minimize the cost and maximize the profit. The
company has a bright future and they are hoping to expand the plant and work as the
suppliers of raw materials for the export oriented garments factories.

Saiham has some competitive advantages over its competitors. By using those, the
company has been able to operate its business pretty strongly for the last many years.
There are immense opportunity for the whole textile and spinning industry in
Bangladesh. If the company can avail themselves with the modern technology, it
would be grab the opportunities and would be able to expand a lot. Thus it would be
able to come out as a top player in the textile sector of Bangladesh.

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 Bibliography:

Annual Report, Saiham Textile Mills Ltd. 2002-2003

Prospectus, Saiham Textile Mills Ltd.

Mr. A.S.B.M Humayun, Interview. By Shabbir Ahmed Mubin

Mr. A.S.A.F. Shahjahan, Interview. By Shabbir Ahmed Mubin

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 Appendix:

Potential Entrants

Suppliers Degree of Rivalry Buyers

Substitutes

Fig: Porter’s Model Of Industry Analysis