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A critical appraisal of the competitiveness in international market: The case of Bangladesh Readymade garments industry

Submitted to:Mr. David Hall

Date 25/03/2013

Submitted by Mohammad Shah Mizan

B0629RORO0411School of business and law

UNIVERSITY OF GLOUCESTERSHIRE

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Declaration

I confirm that, the intellectual content of this study is result of my own works. This dissertation in part of my BA course and it is my independent research except where otherwise stated.

Signature……………………………..Date…………………………………..

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Abstract.

In the 1970s, a new era of business has started its run in Bangladesh, the readymade garments (RMG) industry. Today RMG is the biggest player in the field of Bangladesh economy and export. In last 4 decades, this industry has contributed a lot for earning foreign capital and to create employment for woman of Bangladesh, which helps on large extent to build up Bangladesh. At present, Bangladesh is worlds 2nd biggest producer and exporter of readymade garments cloths worldwide after China, who is 68 times bigger than Bangladesh by size. Cheap labour availability is one of the big reason why Bangladesh doing very good in this industry. There are also some other reason behind this success, such as government policy and quota system, huge supply of manpower etc. Jackets, sweaters, trousers, T-shirts etc are the major products manufactured and exported worldwide by Bangladesh. European Union and United States of America are the main importer and clients of Bangladesh, this 2 destination contributes 85% share of the country’s total earnings from garment exports. At the moment, this sector contributing around 75 % of Bangladesh’s total export earnings, which means more than 10 % of total GDP.

In this research, the researcher tried to examine how Bangladesh is facing problem in competition with China, India and other countries in international market or what challenges is waiting for readymade garments industry of Bangladesh in future and also tried to discuss what is the solution for this . The first chapter introduces the research aim and objectives. In following part, the author reviewed all literature and objectives related to the research topic. In the third chapter, the researcher discussed about the procedure research done. In the next chapter, the author presented all collected information and analyzed them serially. In the end, this research has been concluded with suggestion and recommendation for RMG industry of Bangladesh for future.

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Acknowledgements

At first, I would like to grateful Almighty who made me capable to finish the dissertation on time. Also, I am very thankful to my supervisor Mr. David Hall for his help and support to complete my work. Without their help this study would never be completed on time.

Finally, I must say big thanks to my parents and friends for their co operation throughout my research and studies which made me strong.

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Table of Contents

Declaration..............................................................................................................................................2

Abstract...................................................................................................................................................3

Acknowledgements.................................................................................................................................4

Chapter 1: Introduction ......................................................................................................................8

1.1 Enquiry overview...................................................................................................................8

1.2 Background of the study .......................................................................................................8

1.3 Research aim, objectives and questions ...............................................................................9

1.3.1 Research aim and Objectives: ...........................................................................................9

1.3.2 Research questions: ..........................................................................................................9

1.4 Performance of Bangladesh in RMG industry .......................................................................9

1.4.1 Product and Market concentration...................................................................................9

1.5 Summary..............................................................................................................................10

Chapter 2: Literature review.............................................................................................................11

2.1 Overview..............................................................................................................................11

2.2 Factors affecting by Bangladesh RMG industry...................................................................11

2.3 Definition of competitiveness .............................................................................................12

2.4 Competitive performance ...................................................................................................12

2.5 Marketing mix......................................................................................................................13

2.6 Environmental analysis........................................................................................................14

2.7 Internal analysis...................................................................................................................15

2.7.1 Pest analysis ....................................................................................................................15

2.7.2 Political factors................................................................................................................16

2.7.3 Economic factors.............................................................................................................16

2.7.4 Social factors ...................................................................................................................16

2.7.5 Technological factors ......................................................................................................16

2.7.6 Porter Five forces ............................................................................................................17

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2.8 External analysis ..................................................................................................................18

2.9 Business strategy.................................................................................................................19

2.9.1 Supply Management .......................................................................................................19

2.9.2 Lead time management: .................................................................................................20

2.9.3 Diversification..................................................................................................................20

2.10 Global competition..............................................................................................................21

Chapter 3: Research methodology ...................................................................................................22

3.1 Introduction.........................................................................................................................22

3.2 Research philosophy............................................................................................................22

3.3 Research approach ..............................................................................................................22

3.4 Research Paradigm ..............................................................................................................23

3.5 Research Strategy (case study)............................................................................................23

3.6 Research method.................................................................................................................24

3.7 Data collection and analysis ................................................................................................25

3.8 Ethical consideration ...........................................................................................................26

3.9 Strength of methodology ....................................................................................................26

3.10 Weakness of methodology..................................................................................................26

Chapter 4: Data analysis, Findings and discussion .......................................................................27

4.1 Summary..............................................................................................................................27

4.2 competitive performance (Findings from the survey) ........................................................27

4.2.1 Export performance in US market ..................................................................................28

4.2.2 Export performance in EU market ..................................................................................30

4.2.3 Price and Time analysis ...................................................................................................33

4.2.4 Labour cost of manufacturing garments product ...........................................................34

4.3 Backward linkage expansion ...............................................................................................34

4.4 Swot analysis .......................................................................................................................37

4.5 Analysing 5 forces................................................................................................................38

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4.6 Conclusion ...........................................................................................................................40

Chapter 5: Recommendation and Conclusion ..................................................................................41

5.1 Introduction.........................................................................................................................41

5.2 Evaluation of findings ..........................................................................................................41

5.3 Recommendation ................................................................................................................42

5.4 Limitation of the research ...................................................................................................44

References ............................................................................................................................................45

Appendix ...............................................................................................................................................48

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Chapter 1: Introduction

1.1 Enquiry overview

Aim of this part is to discuss about research topic and objectives of the study. In 1st chapter, history of the research has been included in order to create a understandable concept about research. The background of Bangladesh Ready- made garments industry has been introduced. Finally, objectives of this study along with research findings and question has been discussed briefly. In the end, the researcher tried to specifies total structure of this study.

1.2 Background of the study

Today Bangladesh RMG industry is the biggest export business sector in the country. Ready-made garments industry has a huge influence in the economy of Bangladesh. From the last 30 years, Bangladesh emerged as one of the most successful country worldwide in this sector. Low cost labour, global agreement, contribution of private sector and quota free market helped Bangladesh for being a giant in this industry by achieving large share of international market .However, there is now more competition than before due to the end of MFA (multi-fibre agreement). It is very much predictable that, in future Bangladesh is going to face even more competition in this industry.

Since late 1970, after Ready-made garments industry started its journey in Bangladesh with a narrow investment and facilities, it has mange to continue progress every year .From the early 90,s Bangladesh experiencing significant development in this sector with large amount of profit. Very soon it has managed to earn notice from government when this sector was contributing highly on countries total GDP. Last year, Bangladesh has earned more than $19 billion by exporting clothing product worldwide which is equal to 80 % of total exports done by the country. Nearly 18 billion people have been involved with this sector either directly or indirectly which is 40 % of total industrial employment. (Source-World Bank). Nearly 6 million people directly working in 5000 garments factory of Bangladesh and among them approximately 85 % are woman .Now; Bangladesh is worlds 2nd biggest producer of clothing products.

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1.3 Research aim, objectives and questions

1.3.1 Research aim and Objectives:

• Competitive performance of Bangladesh in garments industry and what kinds of problem this sector facing now

• Recommendation about what strategies should Bangladesh takes to improve the situation.

1.3.2 Research questions:

Ø How Bangladesh could perform surface and deep level strategies in ready-made garments industry?

Ø what are major problems for the Bangladeshsustain in foreign market?

Ø whichpolicies will the best for Bangladesh to improve in future?

1.4 Performance of Bangladesh in RMG industry

So far, Bangladesh has managed to create a strong image in world market in this industry. Bangladesh is doing well in this industry because of cheap labour cost. Bangladesh mainly exports woven and knit garments worldwide.Bangladesh is exporting nearly $5000 million woven product in foreign market every year (mainly in US and EU). Though, the exports performance is increasing over the year rapidly. Other side, in knit garments sector Bangladesh supplied more than $ 7000 million products in 2012. Bangladesh exported an amount of $12500 knit and woven product from 2005 to 2010 time period. All this statistics indicates Bangladesh garments industry having good performance in this market so far. However, this industry had a bad time when quota restriction was withdrawn. On that time, in 3 months period woven exports of Bangladesh has declined by 5.5 %. But, later it has managed to rise up again in 2011-2012 and kit garments experienced a positive growth of 40 %.

1.4.1 Product and Market concentrationBangladesh mainly exports product in 2 specific markets, America and Canada and other side in Europe. Around 95 % total exports go there with the advantage of quota free restriction. But, after the MFA took place, Bangladesh facing some difficulties in US market now.

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Compare to other major rivals, Bangladesh failed to perform aggressively to market diversification and concentration process. Beside good performance in foreign market, Bangladesh has got some negative point too. So far, Bangladesh managed to perform well in only 5 major categories in US and EU market. Trousers, Shirts, Jackets, Sweaters and T-shirts these are the item which covered 85 % of total exports Bangladesh doing. Bangladesh just needs to be a bit careful in this competitive market to maintain all this good record and to develop this sector in this competitive world market. Also, to keep moving with over 6% economic growth, Bangladesh must implement proper innovative theory in order to help the biggest private sector of the country.

1.5 Summary

The exports growth of Bangladeshis outstanding in competitive international market from long time. But Bangladesh must enforce product diversification to keep strong position in world market. Bangladesh need to build up a strong market concentration like other competitive country did. Also need to concentrate on product up gradation to achieve strong brand image globally. Government is working hard to reducing lead time so that Bangladesh can compare his industry with any other nation. Furthermore, all this factory needs to make sure they are maintaining a good standard of quality by maintain a high value addition of product.

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Chapter 2: Literature review

2.1 Overview

The purpose of this part is to review objectives and theories related to the subject of the study. The aim is to gather all related information and in order to make a strong base for research. This chapter helps to makes a clear idea about the topic. In this chapter, mainly reviews about the literature concept on the competitiveness of Bangladesh Readymade Garments industry.

2.2 Factors affecting by Bangladesh RMG industry

Almost 2 decades ago, two famous writer and economist of Bangladesh have done a research based on factors affecting garments manufacturing in the country named, “Key Factors Affecting the Export Decision of Garment Products”. According to the research survey, competitive rivalry is the big reason along with government export policy, lack of experience, marketing distance, poor transportation, political situation , shortage of gas and power supply ,Are the main problem why Bangladesh not performing better. On the report, Both of the writer also focused on diversification of market rather than depends on only US and EU ,legal support for the industry , reduce of taxation , export promotion including other major barriers . Furthermore, they also discussed about MFA quota and what is the inconvenience of post quota period on BD garments industry.

Furthermore, some western researched said on that time, Bangladesh must improve transportation facilities and infrastructure otherwise it would be a disaster for the industry is waiting with exports may decline by nearly $ 2 billion means approximately 800,000 jobs would disappear. Later, the World bank predicted before 2005 , Bangladesh could losses 18 % of workforce in appraisal and 5 % from textiles , that means loss of over 1 million job because of Global Trade Analysis Project (GTAP) model . Therefore, local researcher such as Islam (2001), Khundker (2002) was warned about post MFA situation and concern about what could be garments export in the changed situation. All of them suggest for new export policy, infrastructural development, labour law and some of them suggest for 100 % trade union facilities should include to maintain workers right .At the end, Bangladesh did well and make all of this researcher wrong .On that time, the total export grow up from $80 billion to $120 billion and it was widely discussed among the local researcher that

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Bangladesh could achieved 3% of the market share and( Rahman,2000).Which Bangladesh has done later in very short period of time, today Bangladesh produce nearly 3.5% of worlds garments product, while China is the number 1 with more than 30 % market share .

2.3 Definition of competitivenessCompetitiveness is a common concept for business firm who has involved with international trade. It is mostly presents the ability of organizations to produce better design goods and service in order to get the best price and profitability in competitive market . It also means the capability to generate goods and services to the consumers on right time with maintain price and quality standard. In another word, fulfil customers demand by supplying goods and services effectively rather than any other existing competitors in market. (Budd &Hirmis, 2004). However, market share, cost, productivity and profitability these are some other factors that could affect the competition.

Therefore, competitiveness is a functional factor which is very much related with total cost of producing unit. Not only cost it also connected with non price factors like reliability of systems, company/brand image etc. For being a competitive company, organization should practise cheaper price policy or either need to supply better quality product. Altogether it is a broad and huge concept for business management and different kinds of definition are active on market. Implications, adaption, planning, implementation all this are part of that. The overall achievement of this theory may differ company to company by place to place. Michel E.Porter is the first person who comes forward with competitiveness theory first time at 1990. On the other hand, many researchers attached competitiveness with cost of labour, exchange rate, Production cost and other price related matters for measuring the profit and oSuccess rate of an industry (Edwards and gloub, 2004) .Here in this research, our attempt is to address the international competitiveness of Bangladesh Readymade garments product.

2.4 Competitive performance

Product prices, quality of product and market share are the some common factors to measure competitiveness of an industry. Also, salary, promotion, cost of production, productivity rate may influence the total performance. About competitiveness Japanese author Fujimoto (2001) state in his writings.He said firm’s competitive performance influenced by overall industries totalCapacity and enhancement of competitive performance related with improvement of productivity.

Moreover, it is a lengthy process to improve the capability of an industry. It takes time but at the end, it helpful to do better in the field of long term sustainability. Also, improvement of competitiveness without productivity may not be easy to ensure for long time period.

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There are some approaches which should be followed to measure the perfect competitive performance .such as surface level competitiveness, deep level competitiveness and profit competitiveness.

We must say, Bangladesh exercised the surface-level performance strategy which means the readymade garments industry of Bangladesh is practising thecompetitive performance theory under the quota free trading agreement. Surface-level performance strategy improved inside firm by the development process of deep-level performance in order to ensure the long term sustainability and profitability.

2.5 Marketing mixMarketing mix is very important part of modern business strategy. It consist mainly 4 parts, such as product, place, price and promotion. In marketing mix, a week element can affect another strong element.

McDaniel & Gates (1998), who was founder of the University of Texas at Arlington's MS in Marketing Research program, stated that target market conception is the first part of

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building a market related business organization. For this, a marketing model should be formed inside the organization and industry. Marketing mix influence target market and intend to go for specific group of customer. And, this entire element can be controlled by management in any situation.

The readymade garment industry in Bangladesh can generate by marketing mix concept with the help of appropriate environment analysis and hugenumber of strategies by discussing its internal and external affect. Marketing mix with proper Strategic management process could play a very vital role in international trade.

2.6 Environmental analysis

Till now, a huge number of articles and books have written based on the internal and external environmental analysis of garments industry to estimate the present and future condition. (Barney, 2007)

To recognize the ultimate threat and to discover the future opportunity of Ready- made garments industry, it is important to practise external analysis for competitive environment (Hitt, Ireland, Hosskison, 2009). Furthermore, internal analysis may help for strength up the organization and could help to find the weakness. It also helps to review specific resources of the company and its wealth, information /technology and productivity (Barney, 1991).

A very common matter in clothing industry is fashion which is changing very rapidly. Fashion is dynamic like technology and to maintain the international standard of fashion, it is mandatory to have skilled workforce, perfect raw materials and best technology in factory. Perfect working and proper supervision can bring the best performance from workers. Frankly speaking, all this factors is able to enhance the organizations performance but there are some other factors which are much more important because they can affect export. By example, government policy for export, marketing situation and comparative distance, lack of commitment etc external factors are capable to change the total situation. Government should take enough steps to look after the trade by establishing foreign and local trade fair to attract buyers and customer from different part of the world. Multinational based service should be continued to improve economical situation like recession. Finally, we need to understand Bangladesh is doing well because of its cheap labour supply which is the core competence. An alternative transportation is not so easy to manage but still it may reduce the cost in overall.

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2.7 Internal analysis

In recent time, internal analysis is a very common fact in business strategy to improve the environment. Identifying problem, developing solution and policy, improving strategy with new resources, protecting problem and finally monitoring core competencies are the part of internal analysis.

Furthermore, internal analysis consist changes inside the organization on basis on previous performance graph .According to (Hitt et al, 2003) garments industry needs practical analysis, productivity measurement and core competencies to gain competitive advantages. Hence, recourses means production process unit like finance and management equipment and employee, labour skill and capital etc.

In productive industry like garments business, tangible and intangible resources both can be modified by internal analysis system which may lead to a strategic advantage. An organizations capability largely depends on skill manpower and well organized recourses which could be a combination of integrated target. Productivity of a firm means the capabilities and used resources of company that created foundation for competitive advantage in market. Now a day, some economist suggests that every business firm must develop many more competencies than past. Resources and capabilities are continuous process of internal analysis which cannot change within aday because both are created through organization past performance . Capability of an organization largely depends how the works had been motivated to perform a better job with greater work knowledge and experience. Also, need to make sure company is paying a good wages to all employees so that they will be influenced to give hard efforts.

2.7.1 Pest analysis

Pest analysis mainly consist 4 environmental factors of business such as political factors, economical forces, social environment and technological factors.

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2.7.2 Political factors

How far the Government involves and intervenes is economy depends on political environment. Tax policy, legal system, labour low, tariffs and restrictions on trade, political and economical stability all these are part of political factors. Also , some author believe governments goods and service policy are part of political factors such as which they want to provide and which the government does not wish provided or provide .So, Bangladesh must find out a solution to keep a good political environment to inside the country so that foreign businessman may come freely with new investment without hesitation . Because, the local government has a great role to play to create a better political situation so that foreign businessman may come freely to invest with greater interest. A suitable political situation could lead the country to a better place for not only garments industry but for any other business too.

2.7.3 Economic factors

Economic growth of a country, bank interest rates, inflation situation and exchange rate, value of money all these are factors in economical environment. How businesses operate and make profit or either not largely depends on those factors because they have impacts on taking business decisions. Central bank policy and economic ministry of government is big player of a countries economical environment.

2.7.4 Social factorsSocial and cultural factors include health aspects, growth rate of population, health and safety policy, career opportunity in a country, age and sex distribution etc. Organizations should make their policy so that they could adopt those social trends. Because trends could affect the whole demand rate of products and also the operational process

2.7.5 Technological factorsThose factors determine barriers to entry such as automation, technological changes and incentives, new developed machine activity etc. Technological lacking can affect cost of unit, quality standard and poor innovation process. Here, minimum level of efficient production and the influence of decisions taking process on outsourcing need to included with technological environment. Technological factors are the most important thing to achieve for a firms business prospective in order to qualify for better business environment at the end. Furthermore, if an industry is not modernized by instruments, it will be failed to delivered good performance and quality products. So, the overall production will be hampered and it will affect the total business. In order to make profit in business, latest technology is most needed.

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Now a days, there are also some other thing included in pest analysis such as environmental and legal factors which make it now become PESTAL analysis.

2.7.6 Porter Five forces

5 forces are like a framework for business policy and industry analysis developed by Michael E. Porter in 1979. These 5 forces determine the competitive attractiveness of market and industry profitability.

Porter (2008) staid that, “Rivalry among existing competitors of the market takes familiar leads to competition between them and it create similar kindsforms, including price discounting and new product introductions. Porter's framework analysis is known as the five forces model. It focuses on 5 particular things that shape competition inside a business organization. It provides an idea to the management about industrial analysis. Business success largely depends on their own strategy and this is why each Firm should develop

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a positive strategy by researching different matters.

The 5 forces are Threat of new entry, threat of substitute product and service, bargaining power of consumers and buyers, bargaining power of suppliers and intensity of competitive rivalry.This strategy is based on structure –performance –conduct in industrial economics and it is helpful for business to become more profitable and stabilize industries.

In this business era, most of the industrial products and services executing almost same functions. For this reason, the satisfaction of customers and the positive impact of sales mostly depend on products availability the nearest market. Afterwards, threat of new entry in business and substitute in market need to be handled carefully and plan should be developed by time in order to implement latest technology. According to Porter’s statement, to overcome such kind of condition, organization should use new feature in existing goods or offer Sale promotion with better value of money which could help to create wider accessibility indeed.

2.8 External analysis

Duncan (1972) and Milliken (1987) stated that, “uncertainty exists in a firm To its external environment, if the management failed to predict the futureEvents or are unable to assign probabilities about the changes that will

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Be happened”. An environmental change is one of the great motivations for business performance. Those developments could affect the whole industry for some reason. Environmental analysis means both political and economical factors along with social, cultural and technological matters. (Morden, 2007)

Bangladesh Ready-made garments industry is facing a lot barriers because of political instability, legal regulation and government rules along with bureaucratic process. Moreover, if we consider economic matters, Bangladesh RMG factories do have some obstacles and problems due to global economic crisis such as recession, inflation and unconditional exchange rate. But, Bangladesh cannot do anything in such factors and to stay safe in global competitive market they must acquire technological advancement by 100 %.So far, Bangladesh failed to fulfil this issue and this is one big reason why Bangladesh loosing market to China and other competitive countries.

Here, SWOT analysis is also need to include in external environmental factors in order to come forward with a plan for not only potential threat and strengths but also opportunities and weakness. This could be a very important strategic analysis which may help to find out the actual problem and solution for the industry for e better way of business operation.

2.9 Business strategy

Now we are going to talk about some corporate business strategy for this industry such as diversification, lead time management, supply and demand management, global market situation etc.

2.9.1 Supply Management

It is a major factor in recent competitive business relationship. Supply management is used for generate more profits in order to increase competiveness. Even in Bangladesh, in garments industry implementing supply chain management (SCM) so they can reduce operation time.

SCM is a complete process and that cover not only the inventory process of raw materials but also finish stocking and counting goods to point of consumption. Generally in garments business, SCM operate many activities such as concerned with the effectiveness of product with consumers demand and so on. Countries may increase value and could achieve more earnings if local garments industry maintains a strong communication with export industry.

Here, in Bangladesh garments industry supply chain management is basically recognize as backward linkage between textile business and import or transport from nearest country. To realize the importance of supply chain, we should focus on outsourcing growth like global

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competitive market where company strategy effects corporate decision. Furthermore, at present time, supply chain management is a combination of customer satisfaction and quality management too. It may perform the functions distribution work to the customers and immediate transfer or procurement of materials etc. So, Bangladesh needs to develop a better supply chain management in order to maintain a good speed of export process.

2.9.2 Lead time management:

In recent business era, garments market in global context is a competitive place for business and highly concentrates on quality of product .Manufactures demands a high standard of quality and in the mean time cheap price for the product. All this conscious is to deliver products to the end user/ customers in a better price with great value of money. It helps companies to achieve competitive advantages on certain product at least. Murgiano,( 2007) stated that , lead time differentiate the firm from competitors by building strong brand image in market . At the end of the day, all this has a positive influence to increase sales overall. That is why lead time process takes a gap between placing order and delivering product.

In recent time an average shipment lead times means around 90 – 120 days. Lead time usually consist order taking and processing, along with manufacturing process and delivery by different stages in supply chain management. Also, need to know that, it is quite possible to reduce the time period if shorten the delivery process is possible. For that, it’s important to make sure supply the product instantly after produced in factory. In clothing industry, lead time begins from after getting the buying order confirmation. After that, the next step should be preparing raw materials along with fabrics or other accessories for supplier. Then it is easy to start production and other process to place a shipment towards final destination to buyers.

2.9.3 DiversificationAccording to Porter, (1998) “diversification creates based on relationship inside the organization with greatest likelihood of increasing overall competitiveAdvantages in the existing industries or leading to sustainable competitiveadvantage in new industries”.

Diversification is very important in modern business because market based strategy tell us about new customers and market to reap the benefit inter relationship. If a company manufacture same product like competitive firms then they must try product oriented diversification.

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2.10 Global competition

Because of global competition, garments business facing strong challenges both domestic and international market. All business firms are now trying to expand their business new market place and looking for new area of business and customer in order to achieve competitive advantages. In this process, some company getting facility from low cost production unit and others using government legal policy .Spulber stated in 2007, 4 types of trade costs (tariff and non tariff cost , transaction cost , time and transportation cost ) may vary to place to place in global business but different countries have different meanings. By example, marketing methods and business practise along with culture, customs, tradition, believes that could be different. Bangladesh can achieve competitive advantages by analysing some issue such as practising innovation inside firms, improvement in technology and upgrade in machineries. High transportation cost in garments industry (shipment, distribution) is a trade barrier in some countries According to Barney (2007) , cost advantages of firms , production capability , business size ,equipment and business plant set up cost , market distance , policy issues , technological advantages through modern machineries , labour and land capital etc . All this have a direct impact on production cost and business.

On the other hand, a firm can achieve competitive advantages in business practising by improving in a dynamic process through delivering quality goods and better service. Innovative idea and new product orientation lead to successful story of business and that can create a total structure of business analysis or environment. To achieve competitive advantages in market share, experiment with new product is always vital .Also, there are some factors could affect in competitive advantages. Rivalry Company, business structure, demand and supply condition and firms business strategy are some example of environmental factors. No wonder why these matters are very casual in Bangladesh garments industry like other country. In order to determine product cost, Bangladesh RMG industry still needs to recognize those issues to make a strong competition with other neighbouring nations.

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Chapter 3: Research methodology

3.1 Introduction

In this chapter, from the beginning research methodology along with philosophy process have been analysed openly and then discussed total research approach in formative way. Here, first of all research design has been introduced with research philosophy and approach. Secondly, research policy and data collection methods (data sampling, information gathering) has been conducted in an index. Both deductive approach and inductive approach have been discussed in order to make thing easier to understand. Last but not least, discussion through ethical behaviour has been mentioned too.

3.2 Research philosophy

In research philosophy, we need to focus on practical inferences. In 2007, famous writer Saunder stated that, “Philosophical framework effects on theSummarizing and perceiving all social phenomenon and business behaviour ”.

According to Don Ethridge (2004), the art of positivism discovers the validity of prescriptive knowledge of Real world’s situation. In order to understand the philosophical approach, it is important to focus on research and summarize what is happening. Furthermore, the consideration of different perspectives, researcher participation and study data to analyse phenomena situation all are parts of research philosophy. (David Carson, 2001)

3.3 Research approach

Here, need to discuss 2 kinds of research approach, deductive and inductive as given below,

Deductive approach:

In deductive approach, we need to focus on some factors and issue to apply as a theory so that it is going to be easy test a specific hypothesis. The nature of relationship between research and theory is normally used in this approach. (Bryman and bell, 2001)

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Also, it has always a connection with quantitative method and research relationship with hypothesis inflection to test the theories. This theory represents similar environmental analysis like all other nature of relationship does. Another important thing is , the conceptual structure is developed must be tested by empirical observation with general influences . In one sentence, deductive approach means moving from general to a fixed experimental observation.

Inductive approach:

Inductive approach usually involves with specific methods such as case liked with moving to general. Detailed observation moves to broader research theories and consideration in this approach .All this theory together known as bottom up approach. In addition, researcher has collected information by continues observation and question based interview. Byman and Bell stated in 2007 on their book, Qualitative approach emphasizes on inductive theory because of the relationship between research and approach. Also, it highlight place on generation of studies as a grounded approach to analyse data. Hence, researcher has conducted all this approach with qualitative research findings.

3.4 Research Paradigm

The aim of this study is to find out how research designs play a important rule in the framework of collecting data. Onion research model is a famous way of research study which has been invented by Saunders, Lewis and Tronhill in 2009. According to their statement, there are six layers in research onion. Five layers need to be fulfilled to get into the centre point. Research Approach, research philosophy, research strategy, method and choice, Data collection and analysis, finally time horizon all this 6 layers are equally important. (Saunders et al, 2009).

3.5 Research Strategy (case study)

Yin (1993) found 3 types of case study related with this approach, which areexploratory, descriptive and explanatory. Later Stake invented 3 other types in 1995 named Intrinsic, Collective and instrumental. As he stated, if researcher have enough interest on the case study then it is Intrinsic , if a groups studied the case then it should be collective and otherwise if the case is developed through understanding of observer than it will be example of instrumental .

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On the other side, according to Yin, this model is a social research case where casual investigation took place. AS she said, Exploratory case are most useful than others and Descriptive approach need to form before developing a project. Research strategy consist research way and supports to do the study in a planned way. Basically 2 types of research strategies been used widely so far, Qualitative and Quantitative. Both of this strategy is important for the research in issues like methodological and ethical point of view. In order to determine the difference between both strategies, need to classify several methods of business research.

Qualitative Research Strategy

Quantitative research quantifies market measurement with appropriate data. Information about size of market share and market growth situation is the main research approaches. Afterwards, this approach used for reviewing customer’s attitude and satisfaction along with previous market data collection technique, which can be useful as statistics questionnaire. Bryman and bell (2007) stated that, information analysis procedure that generates numerical research queries may create a relationship between research approach and deductive theory.

Qualitative research:

In this approach, it’s important to gather data according to research objective with real issues regarding the business situation. It helps to verify different business covering a range of issues. Furthermore, this strategy normally emphasis sentence rather than quantification in data analysing and collection process. Bryman and Bell stated that, this strategy used as a synonym for data gather process, like interview or data categorizing procedure. They said, “This research theory is supposed to be result of an investigation and invention process rather than something that precedes it”. So, qualitative research considered as a method of group theory that develop itself by classified data.

3.6 Research method

There are 2 types of data collection method available normally. First of them called primary data collection and another one is secondary data collection process. They are important element of any research studies to gather methodical data. Beside this, Semi structured interview widely used when researcher have enough interviewing knowledge and experience. It normally founded with open question to enter in details answer from participants.

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Primary data:

In primary data, researcher basically focused on competitive status and performance based question and objectives. It is important to conduct research about international market. Bangladesh RMG industry related questionnaires and semi structured interviews need to be focus .Here , the author select 5 garments factory in Dhaka and Chittagong city to take interviews from the owners, chairman and directors ,chief executives . By using sample criteria author tried to cover a list of question which may depend on interview process. Researcher omitted question in given specific firms in some context that is encountered with research topic relationship. At the end, open ended questionnaire need to perform to justify all this primary data that covered a list of ideas and which can be quantitative or qualitative by nature.

Secondary data:

This data normally collect from publications , journals , books , articles , literature, post or email ,statistics , annual audit and report , internet , magazines , social site etc . Here, researcher has been gone with a process of understanding of the readymade garments industry.

3.7 Data collection and analysis

Data analysis and collection process is a technique of making consolidated evaluation of relevant theory with collected information. According to Bryan Nolan, all this data has to be observed through gloss of theoretical framework to answer problem statement. Patton (2002) stated that, “examining an interview after it is completed can also be the beginning of research”. In addition Quantitative data analysing process involves knowledgeable investigation and interview.

Hence, data can be analysed in 2 ways, • Consolidation and reduction: Continually collect relevant topic, innovativeIdea and identify categories.• Data Interpretation: Information transferred from comparisons andInterpretation then draws the final point shortly.

According to Biklen, "working with collected information and summarizing Or organizing it, breaking it into meaning able units, synthesizing it, searchingIn different patterns, discovering what is useful and what is to be learned, and deciding what you will tell others". (Qualitative data analysis)

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3.8 Ethical consideration

For every independent research, ethics is very important part. It considered as the morality and value of the study (Bell, 2007). Although, there are some loyal issue which need to consider in every part of research and problem like plagiarism should be a concern. Appropriate usage of referencing and permission to use figures from public sources may reduce those kinds of problem. Ethical standards always have a vital rule to promote the knowledge and truth of study .The researcher are responsible to inform the participants that they must have right to withdraw from the participations of research without hesitation.

3.9 Strength of methodology

A qualitative approach should be properly suitable in this strategy. For this reason some data were collected to understand the topic. To avoid errors in interviews, the researcher made the structure by focusing participant’s flexibility and complexity. It was presume that interviews would be interpreted honestly to bring effective results.

According to the study aim and objectives , research method and strategy , research philosophy and purpose are very specific or sharp .Furthermore , at the end of the study there is a clear establishment of justification too .Therefore, researcher did a good job by managing primary data with enough interviews of employees . The author tried to demonstrate all possible explanations for the result interpretation. For the valuation of research similar field context considered as a part of research methodology.

3.10 Weakness of methodology

Although the research methodology has good topic and information based idea, still got some weakness. According to strategy, researcher worked in Bangladesh Ready- made garments factory to collect data about research method, the researcher must take more interviews and questionnaires from workers. Here, researcher faced lots of problem and because of short time, researcher might not able to do the survey properly in this case. Despite the strength, the research methodology does have some drawbacks. The research is a bit hard to do, because primary data collection method means direct interview. Also, some people don’t want to disclose all the information they hold because of business safety and secrets.

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Chapter 4: Data analysis, Findings and discussion

4.1 SummaryIn this part, the competitive advantages and overall performance of Bangladesh Ready-made garments industry will discuss and consider the surface /deep level dimensions too. From the very beginning EU and US is the major 2 market for Bangladesh. Here, is this study researcher bring out the competition with China, India and turkey and investigates both external-internal factors to find out the competitive results. A t the end, recommendation will be included on the basis findings.

4.2 competitive performance (Findings from the survey)

Bangladesh heavily depends on 2 specific markets, United States and European Union. Bangladesh exports their over 90 % cloths in these two regions. Major competitors of Bangladesh face quantitative restrictions while Bangladesh getting quota facilities in some extent. From last 2 decades, China is leading the clothing industry (at present they got more than 32 % market share worldwide). But, good news for Bangladesh is that, a recent news says that, China is trying to develop his other technological sector rather than garments industry and planning to move out from this business in next 15 years time .China central government is aiming to move forward and they now supporting their businessman for other industries . (Business standard, 20th march, 2013) . But still Bangladesh has lacking in cotton industries; they rely on India for this. Still Bangladesh is worlds 2nd biggest exporter of cloths because of the availability of cheap labour , which is 20 % cheaper than Indian labour market .In the economical year of 2012 , India has exported $13,500 corer where Bangladesh crossed $19,000 corer . Beside these 2 countries, Turkey is the other country who is following the race from a very close distance. This research also examines the composition of clothing exports From Bangladesh. All this data showed that, Bangladesh still need to shift toward high value added categories whose demand is incising in world market.

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Distribution of Firms by M arkets

0

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It is clearly mentioned that, several Asian countries facing financial crisis, but still those countries have managed to increase their market share in big market like US and EU. From the data of World Bank, East Asian countries like Malaysia, South Korea, Thailand, Indonesia etc clearly experienced a high rate of exports of knitted and non knitted clothing. On the other side, south Asian country like India, Pakistan, Bangladesh, Sri Lanka is doing good day by day in Ready- made garments industry because of cheap labour. All this statistics, these selected countries has facing more and more competition in advanced economical situation in comparative advantages of clothing industry. Moreover, the competition of these courtiers are still concentrated on low value added categories. China is in the best level with comparative advantages in all categories with better technology and government policy. Also they have got a stable infrastructure and dynamic supply of skilled workforce compare than any other country in this region.

4.2.1 Export performance in US market

Bangladesh has got very little product diversification on its exports in American market as compare with other countries. However, the situation is much better than the past, especially in garments product export. Bangladesh continuously increasing exports in US market from 1990 .while in 2002-2003 economic year shown the declined for the first time in last 1 decades .But, since then the export rate is sharply increasing till now . Meanwhile, Indian exports of clothing has experienced a slow progress while China have gain dramatically increased in US market in last few years .By statistics, China has experienced a $ 33 billion increase of garments product export from 1990 t0 2010 in this 20 years time .In

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the same period, India managed to increased nearly $9 billion, while Bangladesh has done nearly $4.5 billion extra than before 2 decades.Hence, China is challenging all major exporting courtiers including Bangladesh by their rapid growth of exports expansion in US market. At the moment, Bangladesh is exporting more than 100 types of textile and fabrics product in US but most of them has a minimum contribution only. Whereas, China exporting nearly 167 types of clothing product and India has 161 categorical garments product on US market. Big clothing company of Bangladesh KDS stated,despite good performance of Bangladesh in international market, we are still not enough aggressive for product diversification in this industry but our major rival’s are doing a lot thing than us.

Major Garment Exporters in the US Market before 1 decade

US Garment Imports(HS Catagories 61 & 62)

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Bangladesh has gained highest earnings from US market in category 340 (Cotton jackets, trousers, non-knit shirts) which is approximately $800 million and only 8 other types exported nearly $500 million. Furthermore, 15 to 30 categories have contribution of almost $200 million. Beside this, India has highest earnings from category 369 (cotton manufactures) which represents nearly $580 million, while they earn $440 million from selected 12 categories of garments product in US market. (Source- BGMEA)

If we look forward to China, they had significant difference than any other competitor’s country. Only from category 670 (fibre flat goods, luggage, ladies handbags) they have

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earned over $5.2 billion 10, 78 and 124 categories crossed respectively $1.8 billion,$1.3 billion and $790 million .

So, it is wise to say that Chinese garments industry is much more diversified in US market than both India and Bangladesh .While Bangladesh garments industry largely concentrated by man- made fibre or cotton, China has significant advance in all sector and category .(source BGMEA and ILAB /United States department of labour .

Total Garment Exports(HS Catagories 61 & 62)

1874.0

2117.1 2081.7

1689.2

1897.6

1339.5

220.8 201.8 175.1

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4.2.2 Export performance in EU market

Bangladesh garments products export earnings in EU countries has risen up by 8.5 billion Euros from 1996 to 2010. On the same period of time, China and India both increased their exporting by 37 billion and 5.7 billion Euros. Famous Garments Company of Chittagong (economical capital and port city of Bangladesh) Clipton group said, Europe is our largest market than US and our performance is much better than any other country except China so far. In EU country, Bangladesh exports 95 % garments product including 5 % earning from textile and fabrics design. But the good sign is very recently Bangladesh is doing well in textile /embroidery industry too. On the other hand, India has a massive 75 % exports performance in the combination of garments product and textile. Meanwhile, China standswith 90 % represents from this sector in contrast .So, this statistics arguably shows,

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Bangladesh still need to improve a lot in the field of textile sector to make competition with

India and China.

Choice of Export M arket

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Bangladesh performed 70 % of total clothing exports in five top categories in 1995 , which has increased nearly 11 % in 2012 , while India and China were decreased their respective main group product by 29 % and 7% share in order to improve other sectors . This report shoes Bangladesh has got a very low rate of diversification on exports in EU market. Now, when Bangladesh is depending on this 2 market, other two major competitor is looking for diversify products mixer to exports. Moreover, Bangladesh managed to grow up production and productivity and has greater turnover than India recently but still got weakness to make competition with China.

Bangladesh has make heist earnings from category 340 amounting nearly $3 billion in EU market, while category 8 contributed approximately $550 million .Furthermore, total 16 other categories has earned only $350 million. On the other hand, if we consider India, the highest earnings from category 369, which has nearly $2billion contribution and other 32 categories represents more than $450 million in exports. (Source BGMEA)

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Unit Value, Total Export by Number of Markets

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un

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In total, Bangladesh exported approximately $4000 million knit garments in 2010 at EU countries. India has make nearly $2900 in the same time while China has significant advantage with $12150 million exports earning .In addition, Both India and Bangladesh has negative impact on non-kit product exporting in European countries . Bangladesh normally exports more knit garments product in EU markets rather than woven garments. Knit garments share is large because of quantity and value of total exports in EU on the given period of time .But, unfortunately, in last 10 years share of woven/no-kit products has been decreased in large margin. At the moment, Bangladesh is modifying its product value and categories by adding more design and quality cloths such as embroidered outerwear, fashionable shirts, long jeans, leather jacket and jumper. The chart below shows the performance of BD garments industry on Knitwear sector.

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Knitwear

30512952 2917

2038

1561

2033

818

5044 5044

4195

2888

2570

1510

79

502583

944996

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sales export cost material imp material employee prod worker capital investment

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Domestic Firm

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Bangladesh exports risen by 8% in Knitwear products while world exports increased by 2.5% in recent time at this sector. China still had a massive growth of 32 % while Vietnam joined the race with a rapid 12 % increased of exports in 2009 /2010.

4.2.3 Price and Time analysisOne of the most important factors for global competition is Price indeed. Very recently China and other competitor of Bangladesh have applied low price strategy and that why they are trying to cut cost of production in garments industry. Although, Bangladesh does not have any specific policy for price cutting in garments export, but they are still producing the lowest price garments products while maintain good quality too. So far china is the biggest threat who already decided to drop 30 categories of garments product in US market which is 45 % by percentage. All other major exporting countries had reduced their price 2%. Overall, China experienced price competitiveness in both EU and US market but on the other side Bangladesh failed to do so in comparison in specially quota free market. One of the big reasons is that, Bangladesh depends on import to supply raw materials for its garments factory, which is becoming more expensive than previous time. Production costs are going in a high also because of irregular supply of electricity and broken political condition.

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On the other side, Time required for supplying an order after the order formally received from clients means Lead time. Before 30 years back, it was over 120 days which came close to 1 month for specific products later after 1990. Though, for woven garments it take long and Bangladesh takes more than 3 months for the shipment. Meanwhile, for knit garments products the lead time is over 2 months. For china , the average lead time period is 40 -60 days for woven products and more than 2 months for knit products, while India delivers woven products in 50 to 70 days and takes 60 to 70 days for knit products . In order to improve in lead time situation, Bangladesh must develop backward linkage to avoid high dependency on other country for raw materials. The best way Bangladesh can develop a strategy by improving deep-level and surface –level performance and also reducing lead time period.

4.2.4 Labour cost of manufacturing garments product

So far, labour cost is the main competitive advantage in Bangladesh ready-made garments industry .Because of huge population size of 160 million people (7th biggest in the world), Bangladesh never struggle with shortage of employee. Furthermore, due to cheap life style and rate of inflation , the living standard of Bangladesh is low and people can afford basic needs with very little money, That’s why the average salary is very low, less than 1 £ per day . At the moment the basic salary for a garments employee is nearly 3500 taka, which is not more than $45 per month(less than £30). This is the2.5 times lower than China. Bangladeshi garments industry offering lowest labour cost in the world includes bonuses and salary. This is why Chinese garments product cost at least 20 % more than Bangladesh, no wonder why Chinese garments products price increase by 40 % since 2005 to 2010. Big companies of US and EU (example –Wal-Mart) shifting their order from China to Bangladesh due to cheap cost in Bangladesh. Supplier is now looking forward to take full advantages of restriction imposed by other countries.

4.3 Backward linkage expansion

Ready-made garments industry has got continues support from backward linkage expansion to maintain production cost under control and supply of enough raw materials .In this sector, each year Bangladesh spend large amount of money for huge volume materials the needed . Most of the manufacturer prefers to import raw materials from outer country instead of local market because of quality and price.

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According to Managing director of one famous garments factory , Yarn price in local market is $2.90 per kilogram ,while in India the price is $2.2 per kg .In Bangladesh the textile sectors is not that strong, whereas India /China expanded textile sector as a prominent supplier in world . In these country, the government influence to produce more materials from external sources export raw materials rather than import like Bangladesh does. This trend demotivates their businessman to use outer market materials, which has added value addition. So, it is very clear that, to make a strong competition, Bangladesh must develop a clear backward linkage system.

4 different stages in backward linkage chain of clothing exports

Stage-1: exporting in global market

In first stage, the discussion is about market destination. Bangladesh must find out the best place in global market to exports garments product. Now-a-days, big firms are going more and more aggressive than even before to sustain in competitive market. Bangladesh garments industry does have the ability to support new backward linkage facilities. However, Bangladesh needs to export more garments clothing by backward linkage initiatives to follow growing up market in order to prevent cheaper rate trend. Discovering new markets through extensive market research is important otherwise Bangladesh is going to face strong challenges in future. By example, Bangladesh needs to be careful in intermediate goods sector like yarn, grey, fabrics etc.

Stage-2: Garments production and export situation

In this day, Bangladesh failed to meet the demand of textiles for garments from local market. Bangladeshi textile mills got ability to produce not more that 15% of total demand and also the price is even higher than foreign products. Another issue is lead time because Bangladesh cannot afford to deliver exports demand in quick time. Poor management, less transportation facilities and week communication are the main culprit. In addition, other minus point of Bangladesh is low diversity of products in garments industry.

On the other hand, Bangladesh must involve itself to capital intensive technology like other developed exporting country does. For example, Thailand and South Korea adopted simple but high technology to increase working speed based on capital. In order to develop effective system of production in garments industry, Bangladesh should improve management system such as information system and better engineering which may cost

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higher but later the overall performance will improve and organization will get benefits for long period.

Stage -3 producing fabric (weaving /knitting)

Bangladesh has short of production in weaving mills which affects yarn marking in spinning sub sector too. Last fiscal year, 3.50 billion metres of grey fabrics import took place due to owning to chain link with shortage of production. Including tax and transport cost the fabrics turned out so expensive .Imagine, if Bangladesh can produce fibre in local factory in order to supply in cheap rate to own garments industry, then there is no doubt that, this country will able to put others on a risk strongly, even China. Afterwards, knitting segment of grey cloth making rate locally is good and has able to fulfil market demand of Bangladesh. Though, still this sector needs some kinds of care to protect them and to grow up with modern technology.

Bangladesh knitwear and manufactures and exporters association (BKMEA) demanded some favour from government such as measurement support, dispose tax in spares parts, dyes and chemicals imports etc .They also asked for helps in setting up a training centre to develop manpower skill, reschedule of container handling charge in Chittagong port, subsidy in electricity and fuel charges and continues water supply, advance interest free loan scheme from bank and flat interest rate etc. At the moment, the bank interest rate is 5% in India, while 7 % in Bangladesh in this sector.

Stage-4: Production of fibre

With comparing other countries like Pakistan, Turkey, China and India the ability of fibre production of Bangladesh is very poor. Extensive natural /cotton fibre making is not feasible. Due to high demand, massive import of cotton happens every year. Bangladesh does have some lacking in this case due to huge population. Bangladesh is not a large country like India or China and they have shortage of land to produce cotton beside all the main crops, rice and vegetables to feed own people. That is why other competitive country enjoying advantages in this sector with the benefit of local natural fibre. But, luckily this momentum failed to break up the spirit of other segments and Bangladesh is growing rapidly in a dynamic speed with lots of potential.

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4.4 Swot analysis

Strength

The main strengths of Bangladesh is enough available of workforce and cheap labour cost compare than any other countries. Average hourly wages for is not more than $0.24(it varies $.014 to .0$26) in Bangladesh, whereas in India salary rate is approximately $0.50, which is more than double. Also, if we consider other market, the average wages rate in Cambodia is $.29 and in Vietnam $.55.

Bangladesh got to manage a strong brand image in world market to dominate this sector, so far Bangladesh has maintained the international standard. Both government and BGMEA is trying to develop the trend, and they already established BUFT (Bangladesh University of Fashion & Technology) to create future idea of fashionable product diversification. This institute will help to produce new manpower that can develop fashion design to support Bangladesh ready-made garments industry in future.

Weakness

The big weak point of Bangladesh is dependency for raw materials from other countries market .In Bangladesh, products diversification still on primary level and China/India are far ahead in this matter. Some other problem such as shortage of knowledge management , low rate of capacity , instable situation of politics , unqualified port handling and poor transportation system are reason why Bangladesh facing difficulties .

The most harmful side is unpredictable nature of politics in Bangladesh. Political activities like strike cause delay in shipment process and uploading in port. Furthermore, Value addition is another weakness of Bangladesh. In ready-made garments industry, the rate of value addition is not more than 40 %, while 60 % of other value needs to be imported from outside. Compare to other competitor, this rate is very low due to undeveloped backward linkages .Last but not least, limited capability of fabrics and other materials production, compare than other countries is a major concern of this industry.

Opportunities:

Ready-made garments industry of Bangladesh has to find out the best way to move against global competition in borderless market. Foreign investors are interested to set up new factory in Bangladesh because of cheap labour cost. Even Bangladesh is getting shipment order from China also; due to the recent pay rise in there .Bangladesh has got superior

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geographical location along with a large group of sill manpower. The only thing Bangladesh need to do is make sure more investor is coming in this business with new investment. That could create new employment and also will help to rise up the economy.

One of the biggest opportunities for Bangladesh is Quota facilities in Europe’s and GSP in US market. (India and China is not getting this facility). Quota free world market and UNCTAD assessed that, developing countries like Bangladesh will have chance to exports their product without tax in some context.

Threat:

Hence, one of the biggest threats for Bangladesh is arising new competitor in this sector apart of India, China, Vietnam, Sri Lanka, Pakistan, Indonesia and Thailand in this region. Bangladesh has experiencing problem not only in marketing but also at outsourcing. The most awful thing is, Bangladesh largely depends on some of these countries for raw materials, and if any of them stopped supplying materials in Bangladesh for their business policy, then there would be more problem. It could be a disaster for Bangladesh ready-made garments industry if competitor will take decision against Bangladesh or demand higher price than past.

4.5 Analysing 5 forces

Threats of new entrants

Bangladesh has a good reputation for garments product exporting in world market. Because of this reason, more company coming in this business with new investment at domestic market. So, the competition is going high, meanwhile USA is about to cancel the GSP facility for Bangladesh. After the MFA ready- made garments export of Bangladesh has affected and many other countries is now exporting in US market too. So, in this competitive environment making difficult for the running firms to survive with increasing threat of cost advantages, economic scales and changing of government policies. Export oriented local and multinational company now trying to create strong power of economic scale by big investment. So, new firms coming in this business need to break the obstacle by supplying cheaper rate product but good quality. For doing this, they are taking loan from bank and bringing additional production capacity by setting up new machineries in initial level. This industry is already established well and any new comer will face strong challenges and competition.

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Threat of substitute products or services

Bangladesh is enjoying very low threats of substitute due to the necessity of clothing for human life. Customer cannot leave using garments product when they don’t have another choice. However, if any one intentionally looks for some other thing, it will cost more money than garments product indeed. So, actually there is no big threat for Bangladesh Readymade garments industry in total.

Bargaining power of customers (buyers)

After 2000, from the beginning of 21th century when MFA has changed and textile market becoming more competitive, buyer demands better product in cheap price. In garments industry, the clients got strong bargaining power because of open market, where they have got different opportunity. This is not a monopoly industry, thousand so garments factory operating business and producing cloths in cities like Dhaka and Chittagong. Other factor is high dependency on foreign buyer, nearly 5000 factory is running now in Bangladesh, among them 90 % sells product to only outside the country.

Furthermore, buying agent got high power for bargaining due to presence of more option. In this quota free trade, if Bangladesh fails to maintain appropriate price, then definitely will lose customers. Meanwhile, If local manufacturing factory failed to keep minimum quality requirements then buyer will cancel the shipment deal and must switch to other country. Such as, in 2005 Bangladesh had lost its huge T-shirts market in US to China due to poor quality.

Bargaining power of suppliers

Bangladesh usually collects large amount of raw materials from outside the country and collect most of the cottons from local market .Though, in domestic market raw materials price are higher than international market. Bangladesh managed 70 % of total fabrics accessories and materials by outsourcing. In contrast, Bangladesh imports 90 % woven and 70 % knit fabrics of total production. Here, the bargaining power of supplier is high due to

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lack of proper support from backward linkage systems. Bangladesh mostly imports materials from India and China. Local producer are not vertical integrated so they do not have capability to supply throughout the year.

Intensity of competitive rivalry

Rivalry between multinational and local firms is very high due to low diversity and higher industry growth. For Local firms, competition based on number of order they have. On the other side, big companies competing in international market by low cost policy .Bangladesh always have to make sure that they are offering the best price instead of other country. Otherwise, the buyer will switch to countries like China who can offer the same quality product in better price. Because of this structure, garments industry of Bangladesh has got few opportunities.

Afterwards, switching business for Garments Company is very hard because of costly machinery and high expense of infrastructure. Other hand, due to consistency of products quality and quantity, switching supplier is risky too. Bangladesh garments industry is largely dominated by some big company who managed to create a strong brand images. KDS, Pacific jeans, Clipton group are some example of them. KDS is the leader of manufacturing raw materials and also biggest company of Bangladesh with huge oriented product coverage who has exporting in different geographical area. There are also lots of independent local small /medium sized factory operating and all this companies considered as a potential threat because of quality and price along with capacity knowledge.

4.6 Conclusion

Ba ngla des h nee d f ore ign i nve s tm e nt to me e t g r owi ng dem an d i n th i s indust ry . T he go ve r nme nt a l r ea dy se t up f e w Ex po r ts proc ess ing zo ne ( EPZ ) thro ug hout t he c oun try .

Ready-made garments industry is responsible for around 75 % of Bangladesh’s foreign export earnings. More than $10 billion export Bangladesh has managing and which is growing up every year .This sector contributes 15 % of total GDP, which was less than 3 % before 20 years. Estimated 2.5 million people are involved with this industry, where 80 % of them are woman. Big Brand Company like Zara, Next, H&M, M&S, Armani, Debenhams, Peacock, Primark etc. all are importing cloths from Bangladesh.

So, this is time for Bangladesh to move on with appropriate strategy and proper guideline. Might be that is not that far, One day Bangladesh will rule the Clothing business worldwide and this would be possible if Bangladesh can come forward with new technology and innovative idea .

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Chapter 5: Recommendation and Conclusion

5.1 Introduction

The aim of this part is to make a final end of this research. The author included total view of the study in this chapter by evaluating information and findings. Furthermore, some recommendation about Bangladesh ready-made garments industry has given and later discussed about the threat and difficulties Bangladesh might face soon. At the end, the author added some suggestion for future about Bangladesh RMG industry.

5.2 Evaluation of findings

Bangladesh needs to think about alternatives and diversification of products to keep strong competition. First of all, Bangladesh should avoid over dependency on other country for raw materials. Bangladesh need come forward with an effective global strategy to improve competitiveness.Very recently Bangladesh took some steps to upgrade product orientation in foreign market. But, still a bit more initiatives required to developed backward linkage expansion and deep-level competitiveness. Government should take actual game plan to support the industry to create e better image. All they need to do is help the sector to reduce lead time; otherwise one day buyers might switch to other market destination.

In addition, balance in surface and deep level competitiveness can help to achieve better position in worlds clothing market which might be not possible overnight .But, Bangladesh has to improve working condition and factory environment to keep moving this industry. So far, thousands of workers have been died in last few years due to fire occurred in factory. Bangladesh must ensure their garments workers safety otherwise; buyer will not feel interest to do business there. Corporate social responsibility must be followed by the factory owners.

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5.3 Recommendation

Market diversification

At the moment, Bangladesh is supplying products only in 2 region, EU and USA market. When Bangladesh already got a good reputation, they should try to demonstrate their business in more places like Middle East, Latin America, and Africa etc. Government need to encourage the industry to entre in new market place potentially. Some of the market share around have captured by the rivals already. Now Bangladesh is managing very few amounts of exports outside EU and USA and Bangladesh must utilize opportunities by entering new market.

Expansion of Backward linkage:

Backward linkage refers the actual developments of business and here in Bangladesh ready-made garments industry, subsidiary imports of materials should be stopped to reduce dependency to other market. Garments accessories and processing of gray fabric must maintain international standard within quick time. If Bangladesh can expend backward integration, it will positively affect the total sector to avoid over dependency. If manufactures get materials in low price and they can export garments product even cheaper rate. Bangladesh has got superior advantages on garments, but countries like Cambodia ,China is not that far to beat the present wages rate of Bangladesh .So, it is important to set up proper backward linkage to support the total business sector in order to reduce lead time and then manufacturer will able to send products quicker .

Lead time improvement

Long lead time always got bad influence on overall exports performance of any industry. Bangladesh must try to reduce lead time by modernizing port authority, speedy unloading of products by using new technology. Despite these matters , Bangladesh need to try something new to avoid over dependency to outside for raw materials .If Bangladesh can establish such policy than in no time they can do better in lead time performance . It will help to deliver product quickly and ultimately Bangladesh can build up a better image in world market .So, maximum importance should be focused on reducing lead time process. Anyway, Bangladesh failed to take initiatives, then one day the existing clients will not be interested any more when they got lots of other option in this quota free borderless market

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.That is why , reducing distribution time period is so important in order to improve both deep level and surface level competitiveness in long run .

Diversify garments product

In recent time major competitors (China/India/Turkey) is focusing on diversification on product range in world market. Whereas, Bangladesh still following the age old tradition. Bangladesh needs to have aggression and innovation on product orientation. Bangladesh may come forward with some complete new designed product, which no one seen that before. Wide range of product means diversity in international market helps to create threat and make hard environment for other competitor.

Strategy about price

One of the best things Bangladesh can do to reflect competitive status by bringing change in price strategy. Here the recommendation is about to keep going with cheap price theory. Bangladesh ready-made garments achieved competitive advantages due to low price with better quality products. Bangladesh need to maintain this pace by stay unchanged with price strategy in future. In the competitive market, if Bangladesh able to exports garments product in cheap price than all other competitor will feel the temper .At the end of the day, Bangladesh will get more shipment order instantly. This policy will help to get new customer and existing clients will stay longer with new shipment order. So, product cost strategy is a good thing to focus i order to keep this competition alive.

Supplying better quality product

Quality is the main concern of any business and in garments industry it is always a big factor. In this competitive world market, in order to achieve customers believe and loyalty, every retail chain always make sure they are providing good quality products. Otherwise the customer will not come back again in future. Quality can affect the total sales because customer is becoming more careful about fashion, design and standard this day. Modern customers are conscious about what they are buying. So, growth of exports highly depends on the product already been supplied. Good quality product with nice design and style has got the ability to attract customers and fulfil requirements for fashionable person.

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Labour productivity

Last but not least, Bangladesh needs to improve in rate of labour productivity scale. In order to get maximum from the employee and workers, first of all firms must pay a good salary, overtime pay with bonus and other faculties. At the moment the average basic monthly pay is nearly 3500 taka (not more than $45) which is not enough to maintain livelihood in this modern age. So, Bangladesh must think about salary increase of garments worker along with providing economical facilities like child care fees, free medical treatment for the workers, yearly bonus etc. If Bangladesh can make sure all 1.5 million workers of the country getting this equal rights, so then they can demand more effort from workers. By following this procedure total situation can be changed when workers will be motivated which may turn into more productive efforts.

5.3-Executive Summary

Bangladesh has benefited after the MFA and quota restriction applied by America for Chinese product. Now, USA is trying to cancel the GSP faculties for Bangladesh. Bangladesh must try to stop this process through discussion with US government. Today China has dominating this industry because their government helps and they have proper strategic planning. If Bangladesh can establish proper backward linkage system, then in future Bangladesh may avoid the over dependence for raw materials from outside. That could bring 2 more positive things, the production cost will fall down and lead time can be shortened. If Bangladesh can manage these criteria with a proper plan, there is no doubt that Bangladesh is going to be the next Asian tiger of economy only by this industry.

5.4 Limitation of the research

During this whole study, the author experienced some difficulties to collect information. First of all, the main problem was time limitation. It was hard to do the huge research in about 2 months time when someone is doing first time indeed. Respectively, restriction about excess use of word is another big issue. Because of that, author tried to avoid some necessary matters and totally ignored some fact too .Last but not least, it was very difficult to gather primary data due to information gap.

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Appendix

Part I: optional Questions

1. Gender:

A. Male B. Female

2. Age:

A. 17-30 B. 31-50 C. Over 51

3.Occupation

A. Student B. UnemploymentC. Business

D. Service holder E. Other

4. Work status:

A. Full time B. Part time C. Unemployed

5. How long you are using Bangladeshi garments product ?

A. not more than 1 year

B. 1 to 2 years

C. 3 to 5 years

D. More than 5 years

Part II Related to Research Study

6. Which following countries cloths do you like most?

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o Chinao Bangladesho India

a) Why?Open-ended answer

7. How frequently do you purchase Bangladeshi made garments product?

o monthlyo Several times in a month o lot of times in a yearo Not often /depends

8. Which retailer you prefer to purchase cloths?

o H&Mo Primarko peacockso Georgeo sports directo Others

9. Do you find Bangladeshi products/cloth value of money than any other countries product?

o Noo Yes

10. Please rank five of the following important factors while purchasing Bangladeshi garments product products.

i. ( ) Customer satisfaction rateii. ( ) Related reviews about products

iii. ( ) Essential information iv. ( ) good design and qualityv. ( ) Warranty of the products

50

vi. ( ) Product variety vii. ( ) long lasting

viii. ( ) Price and value of moneyix. ( ) Other (please mention)

11. How would you rank Bangladeshi garments product and cloths using experience? (Please circle one that meets your experience most)

o 0-5 pooro 6-8 Averageo 9-10 Excellent

12. Would you like purchase Bangladeshi garments products againin future?

o Yeso Noo No idea

13. What are issues Bangladesh should perform to improve products quality?

o Open-ended reply