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Crafting strategy for apparel industry 2025
- 1. BRAC UNIVERSITY ASSIGNMENT TITLE CRAFTINGSTRATEGY FOR APPAREL INDUSTRY -2025 SUBMITTED TO: Muhammad Mahbub Alam (FCA) Faculty PGD-KIM BGID-Brac University SUBMITTED BY: Name ID Md. Al Hafij Prodhan 19381057 Md. Nazmul Huda 19381070 Mostaq Ahmed Khan 19381064 Md. Maidul Islam 19381039
- 2. 2 | Pa g e CONTENT 1) Introduction a. Definition of theApparel Industry b. IndustryOverview i. IndustryHistory ii. Product &Service iii. MarketSize orMarketShareor Market Presence 2) EnvironmentAnalysis a. External environment (PESTLEanalysis) b. Internal environment(Porters five forces ) 3) CorporateAppraisal(SWOTanalysis) a. Strength b. Weakness c. Opportunity d. Threats 4) Setting Mission ,Goals and Objectives (Objectives should be SMART) a. Operational /QuantativeObjectives b. Non Operational/QualitativeObjectives 5) GAP Analysis a. Future Market/Growth Trend(Expected) b. Targeted Market/GrowthTrend(Targeted) c. DetermineGAP d. Gap minimizationplan: > Existing Market penetration > Source New Market > Introduce new Technology > R&D for new product > Offer New Product 6) Strategic choice a. Cost Leadership b. Differential 7) ImplementationplanofChosenStrategy 8) Review and Controlling process 9) Recommendation for the appeal industry business 10) Conclusion
- 3. 3 | Pa g e INTRODUCTION RMG (Ready Made Garment) is very important and helpful for Bangladesh. Bangladesh has emerged as key player in Ready Made Garment since 1978. Textile and clothing for about 85% export income for Bangladesh out of which 75% comes from apparel sector which covers the major product knit and woven shirt, blouses, trouser, skirt, shorts, jacket, sweater sportswear and many more casual and fashionable outfit. This sector at present employs approximately 1.5 million plus worker mostly female who are comes from under privileged social class. RMG industry contributed significantly through creation of physical infrastructure which is demonstrated by 4222 RMG units along with the development of human capital as around 4 million workforce are directly involved in this industry. It has also contributed tremendously through empowering women as almost 90 percent of its labor force is female which ranked the highest in SouthEast Asia. In terms of core economic consideration RMG holds almost 14.07 percent of the GDP of Bangladesh as well as the 81 percent of the total export earnings. Like other 3rd world countries Bangladesh is a developing country. Her economic development depends firstly on agriculture and secondly on industry. Although Bangladesh is not developed in industry, it has been enriched in Garment industries in the recent past years. In the field of Industrialization garment industry is a promising step. It has given the opportunity of employment to millions of unemployed, especially innumerable uneducated women of the country. It is making significant contribution in the field of our export income. Apparel Industry: Apparel industry means where the clothing design ideas are converted into physical things and then supply it to the customer. Apparel industry in Bangladesh, we are taking order from foreign county and producing garments fulfilling their requirement using our internal resources and or foreign resources of raw materials. Bangladeshi apparel industry is a quintessential part of the national economy, constituting more than 10 percent of the GDP, 80 percent of earnings from exports, and well over one-third of the employment. History: The industry is around 40 years old and began from nothing. To offer some perspective, the export of RMG from Bangladesh was only USD 3.5 million in 1981. This figure had increased to USD 10.7 billion in 2007, in large part thanks to the favorable trading arrangements that resulted in industrialized countries outsourcing garment and textile production to Asia.
- 4. 4 | Pa g e Bangladesh has continued to benefit from duty-free access to some developed countries, especially the European Union, the result being that by 2018, RMG exports from Bangladesh had reached USD 30.61 billion in the last fiscal year and are continuing to grow. Bangladesh is now firmly established as the second largest garment and textile exporter in the world, behind only China. Vietnam is the next closest rival to Bangladesh, while other major exporters include Cambodia, Turkey, India and Myanmar. Currently, Bangladesh has 73 green factories certified by the US Green Building Council and 320 are waiting to be certified by the American organization. Of the top 10 green factories, seven are in Bangladesh. Product and Services: Bangladesh exporting T-shirt, Trouser, Jackets, Shirts, Sweaters and footwear and other clothing. lingerie product is also rising in Bangladesh. MAIN APPAREL ITEMS EXPORTED FROM BANGLADESH (VALUE IN MN. US$) YEAR SHIRTS TROUSERS JACKETS T-SHIRT SWEATER 2005-2006 1056.69 2165.25 389.52 1781.51 1044.01 2006-2007 943.44 2201.32 1005.06 2208.9 1248.09 2007-2008 915.6 2512.74 1181.52 2765.56 1474.09 2008-2009 1000.16 3007.29 1299.74 3065.86 1858.62 2009-2010 993.41 3035.35 1350.43 3145.52 1795.39 2010-2011 1566.42 4164.16 1887.50 4696.57 2488.19 0 5000 10000 15000 20000 25000 30000 35000 1983-84 1985-86 1987-88 1989-90 1991-92 1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 2015-16 2017-18 EXPORT OF RMG (IN MILLION US$)
- 5. 5 | Pa g e 2011-2012 1733.54 4686.39 2231.16 4713.11 2340.34 2012-2013 1972.89 5185.48 2634.28 5143.22 2620.73 2013-2014 2173.73 5690.78 2973.16 5863.81 2932.94 2014-2015 2271.43 5697.83 3183.17 6064.13 2829.16 2015-2016 2317.09 6319.00 3774.08 6118.53 3182.47 2016-2017 2108.38 6026.69 3546.88 5861.98 3361.53 2017-2018 2063.57 6389.38 3978.47 6292.25 3674.70 Data Source Export Promotion Bureau Compiled by BGMEA. Market Size or Market Share: Bangladesh remains the second largest apparel exporter in the world, after China, according to the World Trade Organization (WTO) data. The data said that Bangladesh held on to its status in the world in FY 2017-18, accounting for 6.5 percent share of the market. Figure 1: Bangladesh’s share of the global apparel market (in percent, Source: WTO) In 2016, Bangladesh’s share of the global apparel market was 6.4 percent. In 2017, Bangladesh exported garment items worth $29 billion. China remained the largest apparel supplier globally; the value of exported clothing items from China last year was $158 billion. Vietnam exported $27 billion worth of garment products in 2017 with its 5.9 percent market share, the WTO data said. India, with its garment exports of $18 billion in 2017, ranked fourth. Turkey came fifth with a 3.3 percent market share. The WTO data also showed that in 2017 the top 10 exporting nations’ shares was 87.8 percent and the value was $457 billion.
- 6. 6 | Pa g e Figure 2: Country-wise global market share. Where Bangladesh remains second. Source: WTO Almost all top clothing retailers like H&M, Walmart, JC Penney, Inditex, Zara, Gap, M&S, Uniqlo, C&A, Tesco, Hugo Boss and Adidas have been souring billions worth of garment items from Bangladesh every year.Rising garment shipments to new and emerging Asian markets such as India, China, and Japan have also contributed to the higher earnings.
- 7. 7 | Pa g e ENVIRONMENT ANALYSIS External environment: Political analysis: Among various features of our political situation, most noticeable and important conditions may be identified as follows – · Absence of democratic political culture · Absence the rule of law · Absence of strong civil society · Absence of strong political leadership · Confrontational politics · Corruption and terrorism · Negativity/Double standard despite of many drawbacks, our government has taken some positive initiatives in favor of foreign investors. There are no distinctions between foreign and domestic privateinvestors regarding investment incentives or export and import policies. Incentives for investors include - 100% ownership in most sectors, tax holidays, reduced import dutieson capital machinery and spares, 100% duty-free imports and tax exemptions. · Government policies for Foreign Investments: The stated policy of the government of Bangladesh (BDG) is to pursue foreign investment actively, and it has enacted a number of policies to this end. There are no distinctions between foreign and domestic private investors regarding investment incentives or export and import policies. Incentives for investors include: 100% ownership in most sectors; tax holidays; reduced import duties on capital machinery and spares; duty-free imports for 100% exporters; and tax exemptions. Economic analysis: The apparel industry, employer of 40 million workers, mostly rural women, contributed 83.49% to Bangladesh’s total exports of $36.66 billion to date Bangladesh’s export earnings from the apparel sector registered an 8.76% growth reaching $30.61 billion in FY18, thanks to safety improvements.
- 8. 8 | Pa g e The apparel industry, employer of 40 million workers, mostly rural women, contributed 83.49% to Bangladesh’s total exports of $36.66 billion to date. According to Export Promotion Bureau (EPB) data released on Wednesday, Bangladesh’s export earnings from the RMG sector stood at $30.61billion, posting 8.76% growth in the last fiscal year. The figure is 1.51% higher than the target of $30.16 million for FY18. In FY17, Bangladesh’s export earnings registered a 0.2% growth to $28.15 billion, the lowest in the last one and a half decade. Of the total amount, Knitwear products earned $15.18 billion, which is 10.40% higher than the $13.76 in the same period a year ago. Woven products earned $15.42 billion, up by 7.18%, compared to $14.39 billion a year ago. Meanwhile, Bangladesh’s overall export earnings rose about 5.8% to $36.66 billion, which was $34.65 billion in Fy17. Social Analysis: Companies are facing the challenges of adapting effectively to the changing environment in the context of globalization andin particular inthe export sector in Bangladesh. Although Consumer Rights Movement, enforcement of government regulations and a structured view regarding the economic importance of Social responsibility are not yet so widespread in the corporate world in Bangladesh, companies have gradually attaching more importance to Social responsibility in the local market as well. They are increasingly aware that Social responsibility can be of direct economic value. Companies can contribute to social and environmental objectives, through integrating Social responsibility as a strategic investment into their core business strategy, management instruments and operations. This is an investment, not a cost, much like quality management. So, business organizations can thereby have an inclusive financial, commercial and social approach, leading to a long-term strategy minimizing risks linked to uncertainty. Technological Analysis: The need for faster technological development is increasingly felt in Bangladesh. Development plans of Bangladesh have emphasized science and technological research to develop technologies through adoption of imported technology as well as development of indigenous technologies. As the country is heavily dependent on imported technologies, proper planning is required for its effective transfer through acquisition, assimilation and adoption. A National Science and Technology Policy has been formulated and adopted by the
- 9. 9 | Pa g e Government. It has laid downthe directions for S and T activities andresearch, institutional and manpower development Dissemination and documentation facilities. The National Council for Science and Technology (NCST) determines S and T policies, reviews the activities of different institutions and provides direction towards S and T research and activities. Internal environment: Porters five forces analysis for RMG industry A. Competitive Rivalry between Existing Players Bangladesh is the 6th largest apparel and textile supplier in the US & EU market. It is shaping itself as a potential market player by providing the most quality with the cheapest price possible. Whilst the market is controlled by the bigger players like China and India, the role of Bangladesh is still important. Among the very few suppliers, Bangladesh imports most of its raw materials, but utilizes other factors of production to produce in a cheaper manner. It offers investment friendly atmosphere for the brand names to outsource their production process in Bangladesh. Bangladesh is putting up a show against other competitors like China and India. by providing available cheap labor. It has been facing tremendous growth even after the alleviation of the quota from the US market. This is due close customer relationship and quality production. Bangladesh has this advantage against its rivals. Bangladesh is one of those countries who cannot fulfill its quota provided by the larger markets. As a result of that, many foreign companies are merging in to use Bangladesh as a hub to prepare their product by outsourcing in Bangladesh and then gaining entrance to markets which were previously unavailable to them. Bangladesh is taking advantage of this and inviting investors, and foreign companies to place orders to attain this facility. It should focus on placing more orders instead of making its export rates efficient and strong. B. Bargaining Power of Suppliers Bangladesh has always been enjoying the upper hand in ordering its inputs from its suppliers. Bangladesh has very few input or raw materials of its own. Most of them are imported. Although this leads to a problem in reducing the opportunity to initiate backward
- 10. 10 | Pa g e linkage, and thus increasing the supplier power, Bangladesh still manages to acquire the inputs at world price from its suppliers. But the most importing aspect of Bangladesh’s export industry would always be the enthusiasm and the prospect of growth it provides to the stakeholders in terms of success and prosperity. Bangladesh’s domestic suppliers’ power is increasing in a slow but steady manner as more and more local companies are stepping up to the task. They are creating an integrated system of supply channel management by which the manufacturer’s workload is reduced. Companies are more prone to order through local suppliers who themselves apply to the task of importing raw materials and components necessary for the production process. And the favorable attitude of the government is also helping this growth. The back to back LC process was approved by the government to facilitate the growth of the industry. C. Bargaining Power of Customers Bangladeshi manufactures realize that the buyer possess more power than themselves. China’s lead and India’s march to the top keep the Bangladeshi manufacturers/ suppliers on their toes. Bangladesh is providing a large space of choice to the provider in terms of quality and cost. It is offering the lowest possible production price and also work that is best in quality. Due to high switching opportunities for the customers, Bangladesh has to perform or allow the customers to win in many cases. Bangladesh plans to use cost- effectiveness to present itself as the best option to the buyers. The important factor here is that many of the companies in Bangladesh are either franchises or subsidiaries. Along with them the local companies are giving Bangladesh a look of the best outsourcing place of the lot. Many of the reputed companies, brands are outsourcing their products in Bangladesh as they get the most quality in the cheapest price possible. Buyers are also interested in the growth aspect of the Bangladeshi suppliers. Bangladesh is growing as a major player in the textile and apparel industry globally and due to the quota system, it is quite an important player in the field. Bangladesh still has its quota left in the EU market where countries like China don’t have the entry. So, many countries are planning to use Bangladesh as a hub and buy the service to export under its label. That
- 11. 11 | Pa g e gives Bangladesh a comparative advantage against the buyers of its services. And due to immense quality assurance, Bangladesh is continuing to be the best choice for many buyers in the industry. D. Threat of New Entrants Bangladesh has yet to reach economies of scale in terms of production. Thus it allows potential entrants to pose a threat to its growth. But again, if we just analyze the growth of textile and RMG sector, this threat might seem negligible. Textile in Bangladesh is in a growing stage. It’s growing in a rapid pace and is posing itself as an entrant to the more established players. Thus, the threat of new entrants is quite minimal to its concern. Moreover, new entrants would have to gain an advantage against Bangladesh whose growth ratio is almost 20% per year even after the MFA. A newer entrant would thus cause fewer troubles to Bangladesh. The greatest advantage that Bangladesh has right now is its cheap labor. Cheap labor would continue to be available until the living standards go up. Till that happens, labors will have low rates in terms wages and keep Bangladesh safe from any sort of new entrants. One factor has to be kept in mind that, due to the unstable political scenario in recent years, investors and foreign firms are reluctant in investing in Bangladesh. Using this opportunity, countries like Sri Lanka and other small Latin American countries can steal away potential buyers from Bangladesh. E. Threat of Substitutes Bangladesh, in terms of substitutes, plays both the roles of an affected and an opportunist. China and India are growing their customer base at a higher pace than Bangladesh. This is due to poor country branding, and less power to influence customers. Due to these reasons, customers sometimes prefer China or India to Bangladesh. More to add, Bangladeshi products are being substituted due to lack of supplier power and government’s reputation. Many firms, buyers, investors are now hesitating to invest in Bangladesh due to unstable political scenario. Thus, the opportunity for Bangladesh is being substituted to either China or India. Also, the substitute cost is not that high for buyers to switch to a Chinese producer or even to a Sri Lankan producer.
- 12. 12 | Pa g e CORPORATE APPRAISAL Corporate appraisal brings together the results of the external and internal analyses so that the business can assess its strengths, weaknesses, opportunities and threats (SWOT analysis).By SWOT (Strength, Weakness, Opportunity & Threat) we can analyze the Problems & Prospects of RGM industry. SWOT is an acronym used to describe the particular Strengths, Weaknesses, Opportunities, and Threats that are strategic factors for a specific company. A SWOT should represent an organizations core competencies while also identify opportunities it cannot currently use to its advantage due to a gap in resources. Strengths and weaknesses are often internal to your organization, while opportunities and threats generally relate to external factors. For this reason, SWOT is sometimes called Internal-External Analysis and the SWOT Matrix is sometimes called an IE Matrix. Strength: · Energy at low price. · Easily accessible infrastructure like sea road, railroad, river and air communication. · Accessibility of fundamental infrastructure, which is about 3 decades old, mainly established by the Korean, Taiwanese and Hong Kong Chinese industrialists. · FDI is legally permitted. · Moderately open Economy, particularly in the Export Promotion Zones · GSP under EBA (Everything But Arms) for Least Developed Country applicable (Duty free to EU). · Improved GSP advantages under Regional Cumulative. · Looking forward to Duty Free Excess to US, talks are on, and appear to be on hopeful track · Investment assured under Foreign Private Investment (Promotion and Protection) Act, 1980 which secures all foreign investments in Bangladesh. · OPIC's (Overseas Private Investment Corporation, USA) insurance and finance agendas operable. · Bangladesh is a member of Multilateral Investment Guarantee Agency (MIGA) under which protection and safety measures are available. · Adjudication service of the International Centre for the Settlement of Investment Dispute (ICSID) offered.
- 13. 13 | Pa g e · Excellent Tele-communications network of E-mail, Internet, Fax, ISD, NWD & Cellular services. · Weakness of currency against dollar and the condition will persist to help exporters · Bank interest@ 7% for financing exports. · Convenience of duty free custom bonded w/house. · Readiness of new units to enhance systems and create infrastructure accordant with product growth and fast reactions to circumstances Weakness: · Lack of technology-oriented types of machinery & production system · Lack of marketing tactics · The country is deficient in creativity · In-house design & development team are not strong enough · Absence of easily on-hand middle management · A small number of manufacturing methods · Low acquiescence: there is an international pressure group to compel the local producers and the government to implement social acquiescence. The US GSP may be cancelled and purchasing from US & EU may decrease significantly · Lack of training organizations for industrial workers, supervisors and managers. · Autocratic approach of nearly all the investors · Fewer process units for textiles and garments · Sluggish backward or forward blending procedure · Incompetent ports, entry/exit complicated and loading/unloading takes much time · Speed money culture · Time-consuming custom clearance · Unreliable dependability regarding Delivery/QA/Product knowledge · Communication gap created by incomplete knowledge of English · Subject to natural calamities Opportunity: While there is bank, bond, port, road- and infrastructure-related issues to handle within the country, there are also markets and policies that we need to tap into. For example, markets like Saudi Arabia import over USD 3,000 million from the world and yet source only 75.61 million from us at 5 percent duty. Russia imports USD 7,000 million against 5-10 percent and imports
- 14. 14 | Pa g e only USD 427 million from Bangladesh. China has zero import duty and yet out of USD 7,560 million, only USD 391.64 million is sourced from this country of ours. Brazil and Mexico are the same stories as Brazil imports only USD 158 million out of USD 1,794 million against a duty figure of 35 percent and Mexico with 20 percent duty sources only USD 148 million out of USD 3,775 million of its total exports. Opportunities of Bangladesh Knit Garments Sector · Buyer attention on the Asian subcontinent market · Open costing facility of many international buyers · Research & education on these helps to flourish knowledge · Government & non-government skill improvement programs · Buyer own initiatives to productivity improvements projects · Competitors are moving in other business trends · Green revolution attracts buyers to expand business · Presence of economic zone & infrastructure facility attracts a buyer · Business expansion in the African subcontinent · International Expo, textile fairs attracts global markets Threats: · E-shop & variety of on-demand shops worldwide · Internal competition of knit factories to grab order · Shorter lead time & product diversity accepted cordially by China · High making cost & freight on board cost · Gendered diversion of workforce makes shields for improvements · Political & environmental crisis · Competitors producing trendier & fancy items · Global retailer lower price offer because of grading product systems
- 15. 15 | Pa g e MISSION, GOALS AND OBJECTIVES Vision 2025 is implicated by the robotic production system where there will be higher used of technology in place of manual production process. The expertise thinking by using extraordinary technology there will be saved 60 labors cost and production efficiency increase 300%. Mission 2025 is fulfill the vision 2025 there need to adopt some short term strategy. By achieving below technology should be implemented by 2025. ERP, SCM AND CRM for internal and external management, like material requisition management, Production schedule management, financial transaction bring in live, Customer to supplier activity management. CAD Technology is involves the efficient use of computers for drawing and designing parts of garments for going the costing consumption as well as production consumption Automated Material handling Device: This device will helps to automatic material handling devices like loading, unloading, or sorting unit loads, parts feeding and finally delivery devices. High Speed Sewing Machines are run on high speed with fully or semi-automated operation, digital panel and control systems…… By fulfilling aforementioned technology advanced can able to challenge the limit. Goal & Objective: There are basicallytwo objective has to achieve first Operational/quantitative objective: These objectives can be measured by the numeric expression like 1. Production efficiency has to be increased significantly. 2. Slandered minute value need to be reduced by using super speed sewing machine 3. Reduced factory idle time and maximizing production capacity 4. Reduced the number of process by automation 5. Production Hit rate need to be increased
- 16. 16 | Pa g e Non- Operational /qualitative objectives: are none other than the ultimate the customer satisfaction, below has to be in note to get this 1. Product quality as per the final sample 2. On time delivery 3. Innovation new design and fashion. 4. Priority customer demand 5. Swift communication 6. Extra –ordinary activity on customary attraction . GAP ANALYSIS We have fixed our target $ 60 b by 2030, government foxed $ 50 by 2020-21. if we can achieve $ 50 b by 2020-21 then we can meet the target $ 60 b by 2030. The government has set earnings target from RMG at $32.69 billion for the current financial year and it would be exceed the target but the earnings for the FY 20 would be $35.62 billion against the target of $44.68 billion for the fiscal.The country’s export earnings from readymade garment in the financial year 2020-21 would be $11 billion short of the target $50 billion set by the government, according to a recent estimate of textile and jute ministry.
- 17. 17 | Pa g e GAP Minimization plan Existing Market Penetration: Market penetration refers to ways or strategies that are proposed or adopted so as to be able to create a niche in the already existing market. Although it can be performed throughout the business's life, it can be especially helpful in the primary stages of set up. It helps establish the businesses current station and which direction it needs to expand in to achieve market growth. We can increase the existing sell of Bangladesh apparel industries by following way · Product improvements · Market development · Penetration pricing Market diversification: In Fiscal Year (FY) 2017-2018, export of readymade garments (RMG) products registered an 8.76 percent growth reaching to $30.61 billion. Exports to non-traditional markets have seen a nearly 10% rise to $4.67 billion which is more than 15% of total RMG export. With the current product mix of Bangladesh RMG industry, when major export markets are reaching to almost saturation point, growing in non-traditional market diversification has become even more important to minimize the Gap. Accept key export destinations such as the European Union, the United States, and Canada, other countries are defined as non-traditional markets. Non-traditional export markets include India, China, Russia, Japan, South Africa, Turkey, Brazil, Chile, Mexico, South Korea, Malaysia, Australia, New Zealand and any other countries for the Bangladeshi garment sector. These markets are being defined as the non-traditional market by the Bangladesh government. The government has been giving some advantages or incentives to the exporters to the nontraditional market New Technology in Bangladesh Apparel Industries To get higher value products, we have to concentrate on tech-driven manufacturing. Global buyers do not want to teach Bangladesh to go into tech-driven manufacturing as they want to source basic and cheap products from Bangladesh. It will help us enter a new era of tech-driven manufacturing, ultimately taking Bangladesh to value added products. For example in
- 18. 18 | Pa g e sportswear, the manufacturer has introduced technology, which absorbs sweat and gives comfort. The global market of technology driven clothing is about 150 million, where Bangladesh stake is about zero. As a result, we have to investment in such a factory which is not current and can manufacture higher-end products such as smart wear products. This will also increase the sector’s efficiency. Price is a challenge for Bangladesh and introducing technology like robots can reduce products cost and makes exporters price competitive in the global market. In today’s tech-based industry, no one can deny the necessity of technology in the clothing industry as e-commerce and online sales are increasing every day, while technology is changing fashion trends. Customers and fashion brands can be benefited by innovation of fashion technology as it helps get the update of the latest fashion trend as well as brands can reach their targeted clients. Relationship between technology and fashion industry will continue to grow and the manufacturers will have to adapt to satisfy brands and buyers. Bangladesh Apparel Exchange, an initiative to promote the country’s ready-made garment sector, is going to organize the day- long international summit with the aim to attract a wide spectrum of fashion, technology and innovation stakeholders across the entire sector. We need to bring the most inspiring and innovative thinkers and companies from around the globe together under one roof to initiate the much-needed conversations around technology, digitalization and innovation in the apparel and fashion industry. This will help to guide our nation and transform it into the next-generation apparel manufacturing and marketing hub using latest digital technology and advancements. Need to Improve in R&D: we need to promote Bangladesh as a desirable resource that not only follows the highest international levels of safety, environmental and ethical standards, but also as a resource with integrity, capable of both understanding customer needs and having the necessary R&D facilities and value-added services. To achieve this, we will need increased investment in R&D facilities the design or product development arenas, increased development of our human resources and increased promotion of the capabilities available within the country in the international community.
- 19. 19 | Pa g e Development of existing workforce: Alongside advances in technology and R&D, there is the necessity to train the workforce to manufacture these upgraded products. It may be necessary for certain RMG factories to invest in and develop standalone production lines that offer increased flexibility, can handle smaller quantities and can produce goods to the highest standards possible. Offer new product: Offering new product will help us to draw the attention of new customer. Whatever the existing product we have in the market, we have, beside this we need to introduce new product in the market every day. Offering new product will help us to minimize the GAP, where we will be able to expand our market, and the expansion will be possible. STRATEGYTO ACHIEVE THE TARGET While global demand for RMG products is expected to surge in coming years, Bangladesh's sector must continue to progress and evolve in order to take advantage of it. Some of the RMG industry's most pressing current issues include poor compliance, inadequate infrastructure, and meager power capacities, all of which hinder overall competitiveness. The first strategy aims to expand compliance industry-wide. Bangladesh has made progress toward eliminating child labor and curtailing long working hours, but the Tazreen Fashion fire of 2012 and the Rana Plaza collapse of 2013 demonstrate that compliance is still lacking in many respects, particularly when it comes to safety. These disasters have focused global attention on Bangladesh's sector, heightening consumer awareness about garment production and making improvements in compliance even more crucial to ensuring sustainable growth of the industry. Ensuring that companies comply with safety regulations is important not only for worker safety but also to increase opportunities to export. Better compliance across the RMG industry would require initial investments to improve physical infrastructure and fire protection, as well as funding for operations costs to maintain high levels of compliance from year-to-year. The authors estimate that industry-wide compliance would cost between Tk. 164 billion and Tk. 234 billion. The RMG industry would benefit in multiple ways. Greater compliance reduces the probability of accidents, increases productivity, lowers employee turnover, and makes the sector more attractive to both existing and new buyers. Based on the research, factory compliance instituted
- 20. 20 | Pa g e across the sector would boost export earnings by an estimated 10 percent. This would help ensure that the RMG sector reaches its self-defined target for a total export value of Tk. 3.9 trillion or USD 50 billion. Driven mostly by the export increase, the overall benefits from investing in RMG compliance would then be 14 times higher than the costs. Cost Leadership vs. Differential Competitive strategy for Bangladesh apparel industries refers to a way of creating competitive advantage over competitors like china, Vietnam, India, sri-lanka, Ethiopia, Cambodia and some others. It represents a greater value for the customer, created either by lower prices or by providing greater benefits and services that justify higher prices. Generally speaking, there are four possible ways to differentiate a business – to become a cost leader (meaning that you become the lowest-cost producer in the industry) and to become a differentiation leader (meaning that you compete in areas other than price valued by customers), both in a narrow or broad scope of business’ activities. Choosing the right competitive strategy is crucial to corporate as well as business unit and products and/or services strategy development. Cost Leadership strategy Cost strategy is built on no-frills. Cost leadership strives towards cutting costs to a minimum possible level in order to provide customers with lower prices and thus boost their savings. In most of the cases cost strategy for first-movers lead to significant increase in market share and capacity utilization that further drives down costs. Building a strategy on minimizing costs requires a company to achieve: · High productivity · Lower labour cost · Use of bargaining power to negotiate the lowest prices for production inputs · Lean production methods (e.g. JIT) · Effective production process · Effective distribution channels
- 21. 21 | Pa g e Leading cost leadership brands have obtained a major success by introducing revolutionary business models built on a single base – the lowest possible prices for a given perceived value. Differentiation strategy Differentiation strategy is built on a belief that one needs a clear and unique positioning. Differentiation leadership focuses in providing perks that add value for consumers, while higher prices are a sort of “make up” for their higher costs. Building a strategy on a differentiation requires a company to continuously invest in and develop: ü Superior product quality (features, benefits, durability, reliability) ü Branding (strong brand recognition, desire and loyalty) ü Industry-wide distribution across all major channels (i.e. the product or brand is an essential item to be stocked by retailers) ü Marketing capabilities (advertising, sponsorship etc.) Strategic Choice for Bangladesh- Cost Leadership Cost Leadership will be the best strategic choice for Bangladesh apparel industries. As Bangladesh has low labour cost compare to its competitors. Factors for choosing cost leadership strategy as strategic choice for Bangladesh apparel industries are given below. Garments industries are labour intensive industries. In this industry around 60-70% cost incurred from labour cost. Bangladesh can offer and already offer the lowest labour cost compare to others competitive. Bangladesh has established more than 10 times garments factory by number in last 32 years, who is responsible for increasing export percentage from 3.89 to 82. Two key factors have been identified which have played vital roles in this growth of the Ready-Made Garments (RMG) industry in Bangladesh — cheap labour and an opportunity to export under Multi-Fibre Arrangement (MFA) quota system Comparative labour cost are given below.
- 22. 22 | Pa g e IMPLEMENTATION PLAN OF CHOSEN STRATEGY Create an RMG Palli “special zone” that's perfectly suited for garment production. This area would essentially be an industrial park, with ample infrastructure for factories and straightforward ways to monitor compliance, allowing firms to produce readymade garments efficiently and safely. A separate RMG zone would allow factories to cluster in a single geographic location, which would reduce production costs, allow for simple transfer of knowledge and technologies, make pollution mitigation easier, and promote other positive spillover effects. A Chinese firm has already performed feasibility and environmental studies for the 530-acre Palli zone for Bangladesh that would include utility services, medical facilities, pollution treatment plants, daycare centres, and other similar infrastructure. The zone would employ an estimated 300,000 people at more than 250 factories. The analysis estimates that due to the creation of such an RMG Palli, there would be an additional 142 factories over the next three years, when compared to the long-run growth of the industry. The incremental costs to build these additional factories are estimated to be Tk. 1.3 billion. Thanks to increased productivity and better capacity utilization within the special zone, the authors estimate that the total export earnings from the more than 250 factories would equal Tk. 312 billion. Each taka spent on the investment would do an estimated 8 takas of social good.
- 23. 23 | Pa g e Review of the Apparel Industry Textile and clothing sector plays a vital role in the growth of economy; generation of more than 65% of the country’s industrial employment and 81% of the export earnings. Until the liberation of Bangladesh, the textile sector was primarily an import-substitution industry. It began exporting ready-made garments (RMG) including woven, knitted and sweater garments in 1978, which grew spectacularly during the next two and a half decades from US$3.5 million in 1981 to US$10.7 billion in FY 2007. Until FY 1994, Bangladesh’s RMG industry was mostly dependent on imported fabrics- the primary textile sector (PTS) was not producing the necessary fabrics and yarn. It is essential to identify and analyze the problems of primary sectors. Supporting basic textile industries such as spinning, weaving/knitting, dyeing and finishing industries are known as backward linkage industries. Major Textile Sector and Its Product: Major textile sectors of Bangladesh and its products are given in following table: Table-1: Sector wise textile products Sector Products Spinning Yarn Weaving Grey woven fabric Knitting Grey knit fabric Dyeing and finishing Dyed or printed fabric Apparel or garments Men, women and baby wear Jute Carpet, twine, hessian, and sacking. Sericulture Silk yarn and silk fabric Hand loom Sharee (jamdani and banarosi), lungi and gamsha. Power loom Sharee, lungi, gamsha and different woven cloth.
- 24. 24 | Pa g e Present Scenario of Textile Sector in Bangladesh: A) Spinning sector: Different types of yarns are produced at this sector. 100% of yarn is used in domestic and exported oriented weaving and knitting mills in Bangladesh. The situations of spinning sectors are given bellow: Table-2: Number of spinning mills Ring spinning 97 Ring spinning with open-end capacity 195 Rotor/open-end 51 Synthetic yarn mills 30 · No. of spindle- 87 lakh · No. of rotor- 2.3 lakh · Production capacity-205.0 core Kg · Employment- 4 lakh Spinning sector is facing stiff competition from the competition like India due to the price fluctuation of raw cotton. B) Weaving section: There are various designs and structure oriented woven fabric are produced by this sector. Mainly plain weave fabric is major production. This sector can produce only 40% of woven fabrics for woven RMG. The situation of weaving sectors of Bangladesh is given below: Table-3: Weaving mills Woven 561 denim 21 Home textiles 18 · Looms -17,000 shuttle less and 13,000 shuttle · Production capacity- 215 core meter · Employment -80,000 C) Power loom sector: Mainly synthetic and specialized products are produced. Share, lungi, and gamcha also produced at this sector. Local primary textile industry meets 90% of domestic fabric demand · No. of units – 1065
- 25. 25 | Pa g e · Production capacity – 40 core meter · Employment -43,000 D) Hand loom: This sector is very old and traditional sector of Bangladesh. Jamdani, and banarosi like luxurious share are produced by this sector. The hand loom industry provides employment for a large segment of the rural population of Bangladesh. No. of units – 1,83,512 · Production capacity – 837 core mtr. · No. of hand looms – 5.05 lakh · Employment – 10.2 lakh (50% female) · Bangladesh hand loom board looks after the sector. E) Knitting, knit dyeing: There are two types of knitting and knit dyeing factory in Bangladesh. Some factory produce fabric for export demand and large no. of factory produce knit fabric for domestic need. Local knit sector can supply 80% of knit fabric for knit RMG. No. of units- · Export oriented 800 capacity - · Export 360.0 meter. · Domestic 50.0 core meter Employment- 60,000 F) Dyeing and finishing sector: These mill process the grey woven and knit fabric and produce different colored dyed and printed fabric. During wet processing of fabric these mills consume a huge amount of underground water and produced waste water (effluent). · No. of units – 320 · Production capacity – 172.0 core meter. · Employment – 33,000 G) RMG sector in Bangladesh: · No. of units – 5063 · Production capacity – 22.323 core dozen
- 26. 26 | Pa g e Bangladesh has been a renowned low-cost labour resource for many years, but the world map is changing, with emerging resources from Africa that can compete with Bangladesh in terms of labour cost and that are receiving funding from both local and international governments and companies. However, taking the next step in producing elevated products which can command a higher purchase ticket price is not easy. To begin with, we must concentrate on upgrading the image of Bangladesh to attract a broader spectrum of international customers—to show them that we are capable of producing products with integrity, not only mass volume basic items. For this we need to provide more value-added services, including R&D, in terms of fabric development, design and innovation in the production process as a whole. We should consider investment in education, specifically in the design and development areas, and the establishment of standalone R&D centres for specific areas of the industry, together with increased investment by factory owners in the fields of R&D specific to the product they produce. Education in, and gaining an understanding about, dealing with this level of the market is critical, as is the method of approaching the business as a whole. High-fashion brands do not operate in the same way as mass-market high-street brands—their demand for quality is generally higher, they consider higher priced fabrics and trim items, and their order quantities, whilst attractive, are not at the level of mass-market brands. For this, managers and product developers need to consider a broader scope of partners—whether it be fabric suppliers or trim suppliers—and need to adopt a more qualitative approach where price, although important, should not be the first consideration (the right quality for the customer should be). This requires the necessary personnel acquainting themselves fully with both the target market and the target customer. The development of higher end products will necessitate a sea change in the way we approach the RMG business—from government and concerned bodies through to management and to the training of workers at the factory level.
- 27. 27 | Pa g e Firstly, we need to promote Bangladesh as a desirable resource that not only follows the highest international levels of safety, environmental and ethical standards, but also as a resource with integrity, capable of both understanding customer needs and having the necessary R&D facilities and value-added services. To achieve this, we will need increased investment in the education of the younger generations entering the design or product development arenas, increased development of our human resources and increased promotion of the capabilities available within the country in the international community. Secondly, there needs to be a concerted effort to improve investment in technology and infrastructure. Increasing factory efficiency and adopting practices that allow for the manufacturing of smaller production runs without significantly increasing costs are areas that need to be explored in depth, and the necessary investment support needs to be made available. This, coupled with improved infrastructure and concerted efforts to reduce lead-times, will greatly enhance the appeal of Bangladesh to higher end labels. Thirdly, alongside advances in technology and R&D, there is the necessity to train the workforce to manufacture these upgraded products. It may be necessary for certain RMG factories to invest in and develop standalone production lines that offer increased flexibility, can handle smaller quantities and can produce goods to the highest standards possible. There is also the broader issue of understanding this elevated level of product and the need for Bangladesh's RMG sector to reassess the way it handles price negotiations with customers. Investment in the development of higher end product does not come without price considerations and the product developed should be able to stand on its own and command a fair price based on the integrity of the product itself, as opposed to a price dictated by the customer purely on the basis that it is “made in Bangladesh”.
- 28. 28 | Pa g e CONCLUSION Looking forward, we are confident that Bangladesh will exceed the target of USD 60 billion with its current momentum. However, what we hope is that it can stand up to tap the potential for the quantum leap for USD 100 billion. Needless to say, it will require the continued investment in the sector both by the entrepreneurs of large and medium exporters as well as the financial sector. Creation of enabling infrastructural facilities will be an absolute necessity. As mentioned earlier, the key will be development of management staff for leadership and innovation. Few of the transformational changes that the industry would have to make to sustain growth and take an increasing market share are : Move from transactional relationships with buyers to more strategic partnership. RMG manufacturers increasingly will be required to take on more activities of the supply chain. Development and production of textiles and apparel combined with intelligent logistic and service concepts will be key to global leadership. It can reverse the current commoditization trends by offering high value solutions to buyers. A radical move towards rapid customized manufacturing in one of the most demand-volatile sectors through flexibility and integration of cost effective and sustainable processes from fabric processing through to customer delivery. the customer ultimately is only interested in total solution. Overall integration and organization of all individual processes and technologies into a highly efficient and flexible manufacturing shop floor. Working conditions and benefits must improve as the industry matures. In the long run, this would be the best defense against unionizedlabour unrest. Investment in worker training, motivational tools and in improved workplace conditions and bonus schemes would increasingly be the tools used for enhancing productivity.
- 29. 29 | Pa g e Reference: www.bgmea.gov.bd www.bkmea.com.bd www.textiletoday.com www.dailystar.com www.bb.gov.bd www.epb.gov.bd