The Readymade Garments Industry Of Bangladesh

The Readymade Garments Industry Of BangladeshThe fastmade coiffures intentness of Bangladesh is the fastest growing export oriented industry of the country. Starting in late seventies, the ready made garment industry of Bangladesh now accounts for over 64% of the countrys total export earning.A close look at the written material of RMG export of Bangladesh over the last both decades reveals that the woven garments sub- welkin constituted the lions share. In fact, the beginning of the development of RMG sector started with woven garments in 1985. In the first half(a) the 90s, the share of woven garments was above 80%. However, the share gradually started to decline to ab pop 70% in five divisions late and to 62% in 2004 and to 38.80% in 2005-2006 (Export Promotion Bureau Bangladesh, 2006). In addition, compared to its double-digit fruit in the 90s, the woven garments export grew only about 8% in 2000. Such a declining growth rate and a steep decline of the share of woven garme nts export in the total RMG export makes it urgent to re-evaluate the status of the sector of Bangladesh vis--vis with that of the competing countries. Moreover, with the dominance of the proponents of impeccant commercialize economy, rough transposes are taking place in the global trade regulations affecting the readymade garments sector of Bangladesh in general. One example of such change is the phasing out of the apparel quota on December 31, 2004.Under these circumstances, it is imperative to assess the competitiveness of the woven garments sector of Bangladesh in the global commercialise place. Hence the researcher studied the general woven garment industry in group and this piece of extend analyzes the woven garments industry competitiveness of a single organization from strategic management perspectives.1.2 Rational of the StudyThe objectives of the enterprise analysis are the quest.To rank the fancy, mission, objectives, and encourages of the fraternity.To iden tify the process of crafting and executive system.To analyze the alliances resources and competitive position.To find out the application of the five generic competitive strategies.To find out the application of various accompanimentary strategic options.To find out the fit of the strategies to the troupe and the industry situations.To identify various diversification strategies.To find out the application of ethics and corporate social responsibility.To identify the leadership styles and corporate market-gardening.1.3 S handle of the StudyThe study has some boundaries. The interest points delineate those boundaries.Because of the highly fragmented nature of the industry even in the domestic market (with about 400 woven producers give way in different parts of the woven garments value chain), aggregation of enterprises could not be endured. Rather, a whole view point of the enterprise has been taken. This limits the researchers of this study not to use fiscal aggregation as salubrious since only a a couple of(prenominal) woven garments industries (not more than 5) are en distinguished with the stock exchange.The analysis has been confined to the key out markets of the woven markets. The markets where Bangladesh occasionally exports or where the amount of export is very small, those markets are excluded from the scope of the study.1.4 Methodology1.4.1 Research designThe study, accustomed the nature of the objectives, has a descriptive research design. Since this study is going to be one of the earliest studies with mistakable objectives about the woven garments sector, the research would be of reporting kind. According to Cooper and Schindler (2003), at the very elementary level a reporting study is done to provide an account, or to make a summation of data, or to generate some statistics. They scram to a fault argued that a reporting study requires very little inference. However, the current study answers what and why of Macro environment, industr y and competitive conditions, and thus, requires a majuscule deal of inference. Hence, the current study would be more appropriately termed as a descriptive study. Therefore, the research design for the study is descriptive research design.1.4.2 data collection1.4.2.1 Primary sourcesThe researchers collected the enterprise data organizing and a number of key informant converses (KII) with the key persons in Rahim textile mill around Ltd. as I rescue selected this organization for the enterprise analysis.Due to while limitation, the participants were chosen through personal contacts and participants willingness to participate in the discussion. The key informants considered were senior managers of the selected organization and a few bankers related to the organization.1.4.2.2 Key Informant InterviewThe researcher will select at least 7 owners or managers to interview as key informants. This interview will focus on the enterprise level information homogeneous the vision, missi on, objective, current performance in some(prenominal) local and international markets, the competitors in both markets, merchandises and so on.1.4.2.3 Secondary sourcesThe researchers have explored the following secondary sources to meet the objectives of the report.Data inventory of Bangladesh Export Promotion Bureau Bangladesh (EPB) relating to readymade garments export.Data inventory of Bangladesh Garments Manufactures and Exporters Association (BGMEA)on-line news archive of newspapers and news agencies home and abroadAnnual report of the conjunctionBooks and journals at the library of Institute of Business Administration and University Press trammel1.5 Limitations of the StudyThe current study is limited by a number of factors. First, the participants for KII have been chosen conveniently. Second, the list of questions KII has been developed from the scratch by the researchers themselves. However, these limitations are not analogously to invalidate the conclusions. The rea sons are the following. First, the researchers will appear on both primary and secondary sources. Second, the primary sources have been bifurcated into managers of woven garments companies in Bangladesh. Third, the list of questions has been checked for recasting by the instructor of the course. The refinement of the list of questions following the suggestions of such an expert enhances the relevance and reliability of the questions asked. Hence, these two approaches ensure cross-validation of information mandatory to fulfill the objectives of the report.Strategic Planning process for Rahim Textiles LimitedMission and GoalSWOTExternal Analysis Opportunities and ThreatsInternal Analysis Strengths and WeaknessFunctional take aim StrategyBusiness Level StrategyGlobal StrategyCorporate Level StrategyCorporate Performance, Governance and EthicsImplementing Strategy in a Single IndustryStrategy FormulationImplementing Strategy across Industries and Countries2.0 Company Profile2.1 Vision The vision statement of Rahim Textile mill about Ltd is to create added value to the common wealth and to benefit the society.From the discussion with company managers, the researcher revealed that by the above stated vision statement they want to mean to improve the well being of valued equity holders, investors, employees and members of the society without interrupting or dis magnitudeing the universal socio-ecological-economic position and the process of human civilization leading to peaceful co-existence of all the living beings.The vision statement of Rahim Textile mill about Ltd. lacks the important feature films of a vision statement. First of all, from the vision the kind of company cannot be identified. It is too much generic and fails to identify the line of merchandise organisation or industry to which it is supposed to apply. This vision can be applied to companies of any kind of industry. Secondly, the vision statement is not focused to provide managers with guidan ce in making decisions and allocating resources. The vision is also bland and lacks motivational power. Finally, the vision statement of the company is vague in meaning no cover objective is mentioned in the vision.2.2 MissionRealize the vision the mission of the company is to play a leading roll in export oriented stuff sector through reasonable application of Knowl rim and Skills.This mission is also very ill-defined in meaning. There is no description of the companys presend melodic line scope and purpose in the vision statement.2.3 objectivesThe objective Rahim Textile Mills Ltd is to maximize our productivity on strict ethical standards at minimum greet to ensure optimum growth of wealth of the company.This is basically falls in the type of strategic objective. Since the company is making profit satisfactorily and the existing financial condition is healthy enough, they are concentrating on the strategic objective.2.4 HistoryRahim Textile Mills Ltd started its journey in 3 1 December, 1981. The company commenced production in the year of 1987. Initially the company was producing only woven garments, afterwards with the expansion dodging the company built its cleverness in both woven and knit sector as well as in dyeing. They already established huge factory at shafipur, Kaliakar and Gazipur, all outside but very much penny-pinching to the capital city. The company has four sister concerns. They are as followsMalek Spinning Mills Ltd.Knit Asia Ltd.New Asia Ltd.Salek Textile Ltd.Rahim Textile Mills Ltd. enlisted in capital of Bangladesh stock exchange on 29 March, 1988.2.5 ProductsThe main woven products of Rahim Textile Mills Ltd are shirts, trousers, hats and jackets, mostly made from cotton. Recently the company are enlarging its product width and producing inner wears for different worldwide famous brands. On the other hand, the company also produces knit garments products, e.g. sweaters and socks.ProductsCotton productsShirts, trousers, hats and jacketsKnit garments productsSweaters and socks2.6 Export Volume and goalAs we discussed with the key persons of the company, the informants were declined to disclose the exact quantity of exports from their production, but they mentioned the proportion of export to total production. They mentioned that the company exports about 92% of its products. Most of the export is sent to USA as well as the other major portion in EU countries.From figure 2.3, it can be concluded that earning per share of the company is consistent and higher in the last year. In the last year Rahim Textile Mills Ltd. diversified its occupation in knitting sector and the proceeds is increased earning per share in the last year.3.0 Internal Analysis3.1 Core competenciesBy the definition of core competence, it is a competitively important activity that a company performs better than other internal activities. In case of Rahim Textile Mills Ltd. its core competence is the quality of its products. In production the company has been victimisation its highly experient and skilled professional in its manufacturing process. Therefore it already gained loyalty from its buyers. The company not only concentrates in quality, but also maintains the bell of the product so that the cost becomes competitive among the rivalry in the industry.3.2 Distinctive competenciesFrom literature, searchingive competence is a competitively valuable activity that a company performs better than its rivals. The researchers tried to identify classifiable competence of Rahim Textile Mills Ltd. through key informant interview with the top level managers of the company. But from the resolution of the KII participants, it has been revealed that the company has no distinctive competence to attract the vigorous buyers in the market.3.3 Key resourcesKey resource strengths of a company generally form the cornerstones of strategy and make the company competitive in the industry. From the KII with the top level managers o f Rahim Textile Mills Ltd. the researcher identified that key resources of the company are super experienced professionalBetter technologyBetter market access3.4 SWOT AnalysisIn say to accomplish SWOT analysis the researcher followed the stairs below.Figure 3.2 Steps of SWOT analysis.3.4.1 Resource strength and competitive capabilitiesFrom primary data of KII and secondary data, the researchers identified the following resource strength and competitive capabilities.Highly experienced and skilled workforce as its intellectual capital relative to rivals which provides the company learning and experience curve advantages.Better product quality compared to the median(a) size competitive rivalsBetter customer base as compared to the small garments companiesTechnology is on average updated, but not like that of Square framework or Bex-texCapacity is well-matched with its production volume.3.4.2 Resource weaknesses and competitive deficienciesPotential resource weaknesses and competitive deficiencies of the company, as identified by the researcher, are mentioned below.The company has no happen strategic vision to direct the company towards specific targetsBehind rivals is using e-commerce for their promotion purpose whereas the company even has no website for the convenience of information meeting place by the foreign buyers.Its product line is narrow compared to the other rivals in the industry.It has no brand image in local market and very weak influence of brand in the global market, only with the selected suppliers.Long lead time is another crucial factor for which the foreign buyers are declined to buy its products.3.4.3 commercialize opportunitiesAlthough Rahim Textile Mills Ltd. had been running their business in woven sector only, they are now expanding their business horizon in the knit sector also. The company realized that its skilled and experienced workforce can be use in the knit sector effectively and efficiently. We foresee a brighter future for us. affect and dyeing orders shall increase overall. We must continue to strive to achieve more orders which shall ensure great progress and prosperity. It has become essential for us to embark upon capacity enhancement and balancing of our dyeing create machineries urgently to meet the stringent quality assurances imposed by the buyers. We need to improve labor productivity and harmony in quality. We will face tougher competition both from within and outside. We need to resolve issues related to bond and customs to ensure faster disposal of import raw materials. We need to work extensively and pursue the government to have provision of subsidy and other incentives at different stages of production and process to ride out competitive in the international market. The concerted and coordinated efforts will ensure higher production, better quality to make the production year 2007-2008 the year of greater progress and prosperity.3.4.4 Threats to the future profitabilityDay by day the strong rivals are capturing the markets available to the industry in Bangladesh. Another threat is coming from proficient change. Rahim Textile Mills Ltd. is not large enough to regularly update its technology to compete with other key rivals and so losing market share gradually. Besides, the company is facing cost cut competition from the rivals.3.5 Prices and costs competitivenessThe rise in the price of chemicals and dyes by over 30% also affected the order acceptance and overall production. Exporting countries of dyes, Chemicals and Colors especially China, India increased their prices making the market very competitive and difficult. Buyers took advantage of the competition amongst similar dyeing printing Factories and offered lower price. Despite such a situation we could improve both export and local market prices. Dearth of the trained manpower had led to scurvy labor productivity and inconsistency in the quality of textile products.3.6 Business modelA companys busine ss model relates to whether the revenue-cost-profit economics of its strategy demonstrate the viability of the business enterprise as a whole. In case of Rahim Textile Mills Ltd. business model of the company is not only viable but also it shows its success in many consecutive year as the company is making huge amount of profit regularly. The business model of Rahim Textile Mills Ltd. is a proven model which ensures the companys viability in the market for a long period- from 1986.3.7 Value chain of the companyThe value chain of Rahim Textile Mills Ltd. is similar to the following value chain model.AbsentFigure 3.3 Value chain model for Rahim Textile Mills Ltd.On the value chain model, Rahim Textile Mills Ltd. lacks efficiency in gross sales and marketing. Therefore the company is loosing market share to the competitive rivals. Also there is no R D department in the company. This is why they are lacking in product innovation and product differentiation.3.8 Dimensions of organizati onal growCulture of an organization consists of the characteristics as described in the following figure.Figure 8.1 dimensions of organizational cultureFrom the perspective of the woven garments industry in Bangladesh, most of the employees in the industry come from inferior background in legal injury of both academic and social status. Almost all the workers educational background is either SSC or below SSC. They are mostly unaware about the culture of the organization. Even the managers are very little concerned about the culture of their organization.From our focus group discussion, the discussants give richness on the following characteristics of organizational cultureAggressivenessThe managers are aggressive with their workers rather than easygoing. The managers always give pressure to the workers about their performance. Even a worker is performing satisfactorily she or he is not given any kind of motivational incentive or compliments to continue his performance.Team prefe renceIn this industry team orientation among the employees is nearly absent. The managers, in most of the cases being unaware about synergy, do not bother about the performance of team, rather always prefer man-to-man performance.People orientationPeople orientation reflects the degree to which the management decisions take into consideration the effect of outcomes on people within the organization. By definition and comments of the discussants of FGD, this characteristic of organizational culture is rarely practiced by the managers in planning, design and implementation of production.Outcome orientationOutcome orientation measures the degree to which management focuses on results or outcomes rather than on the techniques and processes used to achieve those outcomes. In most of the woven garment industry the production managers are outcome oriented. They attach importance to the quality of the products rather than their production process and technology used in production.Attention to detailAttention to detail is the degree to which employees are expected to designate precision, analysis, and attention to detail. Since most of the workers in the garment industry are unskilled and even they are not provided any kind of training, they must follow the guidelines of their work literally as mentioned by the managers.4. External Analysis4.1 Competitor AnalysisMajor competitors of the Rahim Textile Limited is given belowMonno fabric,Babylon Garments,Desh garments andViella-texSquare Textile MillsBeximco TextilesThe factors of similarity are mostly activism in marketing and selling, availability of local raw materials, delivery reliability, and level of backward linkage.4.2 Competitive PositioningIn order to identify the competitive position of the company, the researcher used strategic group mapping considering the selected 7 companies by the group. In strategic group mapping researchers has given importance to the cost of the products, product quality, active mark eting, lead time, delivery time, and export quantity.The figure above shows that Monno fabric, Rahim textile, Babylon Garments, Desh garments and Viella-tex have similar ranking on the basis of the two attributes. All these five companies have higher quality while they are low in price. So, these five companies emerge as a strategic group. On the other hand, Square and Bex-tex have average performance on each of the considered factors of the mapping and hence, they can be said to fall in the same group.4.3 Textile IndustryThe textile industry in Bangladesh occupies a prominent position within the countrys industrial structure. It is the largest manufacturing sector, providing jobs for some 50% of the total industrial workforce and modify 9.5% of the countrys GDP.Also, it accounts for almost 77% of total exports, making itBangladeshs leading foreign exchange earner.In the early 1980s exports were dominated by jute while garment sales were insignificant. But today garment exports are by far the leading export category. In 2001/02 the clothing sector generated as much as US$4.58 bl in foreign exchange.The industry benefits from special access to markets in the EU, Canada, Norway and Japan. Because Bangladesh is a least developed country, its textile and clothing exports enter these countries quota-free and duty-free. This concession, together with low tote costs, provides the garment sector with a strong competitive advantage.But in order to produce garments for export, the sector has to purchase a large share of its ribbon and fabric needs from abroad, especially woven fabrics. Few local textile firms are able to produce materials of the required quality or in becoming quantities.The Bangladeshi government is attempting to remedy this situation. To reduce the countrys import bill, it is offering tax concessions and incentives aimed at encouraging investors to develop the necessary backward linkages.Profitability of a market/industry depends on strength of fi ve threats to profitability4.4 Porters Five Factor Analysis4.5 Industry life-time cycle AnalysisA useful shot for analyzing the effects of industry evolution on competitive forces is the industry life model, which identifies five sequential stages in the evolution of an industry that lead to five distinct kinds of industry environment embryonic, growth, stakeout, mature and decline.EmbryonicShakeoutDeclineMaturityGrowthTextiles industry is at maturity stage in the industrial product life cycle stage.5.0. Strategy Analysis5.1 Generic Competitive StrategyA competitive strategy concerns the specifics of managements game plan for competing successfully and achieving a competitive edge over rivals. A company achieves competitive advantages whenever it has some type of edge over rivals in attracting buyers and coping with competitive forces.There are countless variations in the competitive strategies that companies employ. Mainly because each companys strategic approach entails custom-d esigned actions to fit its own circumstances and industry environment. The mostly used five competitive strategies are shown in the following figureFigure 4.1 Five generic competitive strategies5.2 Low-cost provider strategyAmong the five mentioned competitive strategies, Rahim Textile Mills Ltd. achieve overall low-cost provider strategy. The company is the lowest cost provider rather than just being one of perhaps several competitors with comparatively low costs. The companys strategic target is meaningfully lower costs than rivals but not necessarily the absolute lowest possible cost.5.3 Fitness of the strategyReady made garment industry is moving very fast, new competitors are emerging in the market frequently growth rate is decreasing year after year. To cope with changes Rahim Textile Mills Ltd. must tailor its strategy so that the company can become profitable and competitive to surrounding rivalry establishing a distinctive competence.5.4 Strategies for move into the market More and more companies are finding themselves in industry situations characterized by rapid technological change short product cycles because of foundation of important and fast-evolving customer requirements and expectations -all occurring at once. Due to the entrance of new competitors the market for Rahim Textile Mills Ltd. is shrinking. To compete with these fast moving changes, this company has to be technologically sound, product innovative to attract the change-demanding customer and product diversification.5.5 Strategies for coping with rapid changesIt is very important to understand the key driving forces of an industry to decide upon the strategy of any company inside the industry. By searching the internet, reviewing related literatures, implementing key informant technique, and by organizing focused group discussion the following key forces have been identified.Growing use of internet technology and applicationsIncreasing globalizationChanges in the buyers requirement sChanges in cost and efficiencyChanges in global regulations in the textiles and apparels industryIn Bangladesh internet technology and web applications play a vital role in establishing collaboration between importers and buyers abroad. Exporters communicate with Importers though internet where buyers put their aim and ask for bidding. Prospective sellers bid through the internet and the lowest bidder is rewarded with sales contract This is how internet technology acts as a bridge in connecting business people across different parts of the world.In domestic market there is no such seller who uses websites as a part of their put up chain. Amazon uses website as a competitive tool in gaining customers. But such facilities havent yet gained prominence in a developing country like Bangladesh. So Rahim Textile Mills Ltd. can take an initiative eto develop website for buyers and suppliers.The overall global trade is increasing phenomenally every year and after. In business the process of going global is largely marked by increasing volume of export and import and greater number of licensing, franchising, strategic alliances, go venture and setting up of foreign subsidiaries by business houses. Thomas Friedman while describing the trend of globalization summed it up in one sentence that globalization is farther, faster, cheaper, and deeper.(Hossain and Sandhir 2004)Key informant interviews reveal that trade liberalization has made it much easier for entering into new market and carry out manufacturing activities by out sourcing them. Brands like Reebok, Marks Spencer, Denim, Wall Mart, Levies, Nike etc. out source their manufacturing activities to countries like Bangladesh where they can get value chain activities done cheaper than any other part of the world.Although the ready made garment sector is not so much speedy changing, it has to be proactive about the market demand and thereby make itself vigilant for the market demand. Other option is the company can react with the change. Rahim Textile Mills Ltd. is considering the latter approach. It is reacting with the changes. When the other companies are fighting to reduce lead time and improve delivery time, this company also trying to walk in the same way. The company is trying to incorporate new technology for its production process.5.6 Strategies for sustaining rapid company growthAs Rahim Textile Mills Ltd. is medium size company in the woven sector industry in Bangladesh, the company is following horizon 1 short-jump for sustaining rapid company growth. By this technique, the company is adding new items to the companys present product line, expanding into new geographic areas where the company does not yet have a market presence and launching offensives to take market share away from rivals. The objective of this short jump is to capitalize fully on whatsoever growth potential exists in the companys present business arenas.The sustainability of exports of woven garments in Banglade sh remains under question as the sector lacks backward linkages far from the requirements. At present, around 20 to 25 per cent of the raw materials required for the woven garments are supplied domestically whereas the same for the kit garment is 75 to 80 per cent. The manufacturers depend on the international market for the rest of the raw materials required for both the sectors. Given the pattern of growing demand for TC in the international market and the increasing competitiveness from the major exporting countries it would be difficult for Bangladesh to stand in the competition with her limited supply-side capacity. Bangladesh may supper a serious setback in outsourcing raw materials from the international market.5.7 Diversification StrategyThe big risk of a single-business company is having all of rhe firms eggs in one industry basket. If the market is eat at by the appearance of new technologies, new products, or fast-shifting buyer preference, then a companys prospects can quickly dim. For these reasons the company takes diversification strategy to broaden its business horizon. In the researchers case analysis, Rahim Textile Mills Ltd. has also realized the risk of single-business Company and also realized that the existing potential resources can be utilized efficiently if the business is broadened with the similar sectors. From this view point, Rahim Textile Mills Ltd. has extended its business in knitting sector as well as spinning.5.8 Strategies for entering new businessesFrom the view point of input side, Rahim Textile Mills Ltd. considered the following factors in expanding its business horizon in new businesses.Existing technologies and expertise complement to the expanded businessExisting competencies and capabilities are same valuable competitive assets for the expanded businessNew business in spinning and knitting is most related to existing woven garments and so opens new avenues for reduction of costThe existing suppliers expanded their s upply in spinning and knitting raw materials as well as buyers demanding products of knitting garments.Besides the management of Rahim Textile Mills Ltd. has thought about the outcome and the benefit of shareholders so that value is added to them.. There were trinity different choices for the company to diversify in the new business. The choices are as followsAcquisition of an existing business