Saiham Textile Mills Limited, Bangladesh

SWOT ANALYSIS

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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:

Fig: Porter’s Model Of Industry Analysis

Potential Entrants

Degree of Rivalry

Substitutes

Buyers Suppliers