RMG INDUSTRIES ,

BANGLADESH

Submitted to:
Sir Haseeb Ahmad
Faculty of Management Sciences

Submitted by:
Roll No 3701
Rubab Khan
MBA Semester 4
(Morning)
Letter of Thanks

23rd May, 2016.

Haseeb Ahmad
International Business
Faculty Member of management sciences , University of Education lahore.

Subject: A report on Bangladesh Ready Mate Garments Industry .

Dear Sir,

With due respect, I would like to inform you that I have completed the international business report on Bangladesh Ready Made Garments

Industry . It is immense pleasure for me because I have successfully completed this report by receiving your continues guideline as a

supervisor.

I have endeavored to prepare this report from my level of best to accumulate relevant & insightful information. If I am included

any wrong information in unconsciously so please forgive me as your student. It is a great experience for me to make this report. I have

tried to make the report comprehensively within the schedule time & limited resource

Your s sincerely

Rubab Khan
Roll no 3701
 INTRODUCTION
Bangladesh has been witnessing tremendous industrial
growth across its industrial sector, textile and apparel
have especially dragged the focus of government bodies
and private foreign investors. Vast availability of lowest
manpower, one of the most competitive energy costs and
a proven track record in apparel production and exports
have positioned Bangladesh as a regional apparel industry
development hub in the Asian continent. In context of fast
increase in labor wages and raw material prices in other
major regional counterparts, such as China, India,
Thailand etc. Bangladesh is well controlled to remain most
preferred destination for international apparel majors for
sourcing world class fabric and finished clothes.
 ACKNOWLEDGEMENT

The ideal way to commence documenting this project would be to extend me profound

gratitude to Almighty Allah and all those great minds that have touched this project in

the path of its success, encouraged me and guided me .This Report has proved to be a

wonderful opportunity to know about an international business. It was fortunate for me

to do this project under the guidance of SIR HASEEB AHMAD. I shall remain indebted

to him for his assistance and sustained encouragement throughout the semester. His

practical insight and valuable support from the beginning was extremely obliging to

me.

 EXECUTIVE SUMMARY
This is international business report on Bangladesh garments industry. The main objective of the report is
to know briefly about the readymade garments industry of Bangladesh, to know the external environment of the
industry which are mainly influence the overall industry and the internal environment in which it is discussed that
what a company need in order to compete their business in RMG sector of Bangladesh. By conducting Macro
environment analysis, Porter's Five Forces Bangladesh Garments industry is very much locative in terms of the
external and internal environment due to the lower production cost, Bangladesh plays a major role in substituting
the Chinese and Indian manufacturers. This opportunity has to be nurtured by the Bangladeshi industry to ensure
its growth and profitability. Bangladesh possesses the ultimate weapon of cheap labour and thus at times, it has to
use it to substitute opportunities from its competitors.
A close examination of the SWOT analysis reveals that the sample companies as well as the RMG sector has threat
from the Socio-economic sector , competitor sector , supplier sector, ecological sector and customer sector. The
sample companies have strength in the production and operation sector, corporate resource and personnel sector.
Since the sample companies are private limited companies and do not provide balance sheet data we could not
diagnose about the financial health of the sample companies. However, our sample companies have shown
satisfactory performance due to distinctive competitive advantage in the personnel sector. But there is also threat
from the personnel sector because labours go on strike all on a sudden and creates unrest in the factory.
The RMG industry is the only multi-billion-dollar manufacturing and export industry in Bangladesh. Whereas the
industry contributed only 0.003 per cent to the country's total export earnings in 1999, its share increased to
about 85 per cent of those earnings in 2014. Bangladesh exported garments worth the equivalent of $7.9 billion in
2014, which was about 2.5 per cent of the global total value ($286 billion) of garment exports. The country's RMG
industry grew by more than 15 per cent per annum on average during the last 15 years.

OPERATING MODEL FRAMEWORK OF

RMG INDUSTRY OF BANGLADES
BDs RMG goods attract customer with cheaper RMG
products
Value Proposition: Producing in cheaper cost using lower
cost of labors and selling RMG products in a competitive
rate
Customers Offering: Reach: Pricing Unique
: Mainly RMG Bricks and Strategy: Resource:
USA and Product in mortar + Competitiv Cheaper
EU and cheaper Bricks and e Pricing Human
Asian cost. Clicks Capital
countries

Competitive pricing is the unique revenue strategy Unique

return
which
places
Banglad
Unique competitive advantage on cost of labor esh in a
high
RMG
exportin
EPZ manufacturing and lower cost of energy g
country
FIVE FORCES MODEL OF COMPETITION
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.

FIVE FORCES MODEL OF COMPETITION
PORTERS FIVE FORCES ANALYSIS FOR RMG INDUSTRY

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 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 Bangladeshs export industry
would always be the enthusiasm and the prospect of growth it provides to the stakeholders in
terms of success and prosperity. Bangladeshs 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
manufacturers work load 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.

Bangladesh has a good reputation in terms of timely payment to the suppliers. This reputation
is helping create a longer term relationship with the suppliers (foreign) and is also giving the
local firms initiative to step into the supply chain. Bangladesh gives the suppliers a large
scale advantage as the industry is quite concentrated in area basis.
A good global reputation is helping Bangladesh match the price with international quoting
with the suppliers both foreign and local ones. Suppliers although having a sort of upper hand
over Bangladesh, also regard Bangladesh as a reliable source of repayment. This reputation
FIVE FORCES MODEL OF COMPETITION
PORTERS FIVE FORCES ANALYSIS FOR RMG INDUSTRY

C. BARGAINING POWER OF CUSTOMERS:

Bangladeshi manufactures realize that the buyer possess more power

than themselves. Chinas lead and Indias 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.
FIVE FORCES MODEL OF COMPETITION
PORTERS FIVE FORCES ANALYSIS FOR RMG 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 growing
stage. Its 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.

.
FIVE FORCES MODEL OF COMPETITION
PORTERS FIVE FORCES ANALYSIS FOR RMG INDUSTRY

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
Governments 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.
FIVE FORCES MODEL OF COMPETITION
PORTERS FIVE FORCES ANALYSIS FOR RMG INDUSTRY

Threat of new
country with low
cost labor
coming into RMG
production

bargaining Competitive Bargaining

power of the rivalry Power of
Knit and within the the
cotton industry for customers
getting the from the
supplier large
countries countries
buyer's
like china orders
without
and India quota
facilities

Threat of the rise

of synthetic
products, jute or
banana fiber
clothes
 SWOT ANALYSIS
The usefulness of SWOT analysis is not
limited to profit-seeking organizations.
SWOT analysis may be used in any
decision-making situation when a desired
end-state (objective) has been defined.
Examples include: non-profit
organizations, governmental units, and
individuals. SWOT analysis may also be
used in pre-crisis planning and
preventive crisis management. SWOT
analysis may also be used in creating a
 SWOT ANALYSIS
o STRENGTH
Low labor cost.
Energy at comparatively lower price.

Our sample companies in Bangladesh have already created a good impression in

world market. So, the only thing to do is to improve the quality of the production
according to international standard.

In the production and operation sector, the main advantage of sample companies is
low labor cost compared to that of other countries in the world. This is the only competitive
advantage of our sample companies. Average wage per hour is the minimum in our
country in comparison to that of other countries in the world.

In the Research and Development and Engineering sector, BIFT (Bangladesh Institute
of Fashion & Technology) is a new dimension in the garment sector of Bangladesh.
Through this Institute sample companies can attract foreign customers. Because quality
of fashion designing will come out from this Institute and our sample companies will
also be benefitted from the technological development created by BIFT.
 SWOT ANALYSIS

O WEAKNESS

We do not have enough raw material of our own, as a result we have to import raw
material from outside the country.
Our Government policies are not structured enough.

The market is not diversified enough.

Instability in law and order situation: The law and order situation is not suitable in
our country. For this reason the sample companies are in problem. The labors of the
sample companies create unrest. Sometimes they create unrest in the factory and even
physically assault the people of management. In addition to this, the political parties
frequently become involved in political agitation. Consequently, the sample companies
have to suffer.
 SWOT ANALYSIS

O OPPORTUNITY:

Bangladesh is included in the Least Developed Countries with which US is committed
to enhance export trade.

If skilled technicians are available to instruct, prearranged garment is an option

because labor and energy cost are inexpensive.

Foundation garments for Ladies for the FDI promise is significant because both, the
technicians and highly developed machinery are essential for better competence and
output

Japan to be observed, as conventionally they purchase handloom textiles, home

furniture and garments. This section can be encouraged and expanded with continued
progress in quality.

Chittagong port is going to be handed over to the foreign operator ,which will make
the ports service much faster, it will also reduce lead-time as well as total cost will be
decreased.

Bangladesh is going to gain its political stability, which will make foreign trade much
smoother and will foreign buyers will be more convinced.
 SWOT ANALYSIS OF RMG
INDUSTRY IN BRIEF:
O THREATS
China is a most likely the biggest
threat for Bangladesh as this country has
relatively high labor productivity and applies more capital-intensive modern
technology and it has less lead-time because of its relative advantages in getting locally
available raw materials like fabrics, various RMG accessories.

China has also relatively better infrastructural facilities like energy supply,
transportation and communication system.

Some African countries have enjoyed zero-tariff facility under AOA act (Agreement
on Agriculture) that helps them to be more competitive relative to Bangladesh.
 PEST ANALYSIS OF BANGLADESH BUSINESS
ENVIRONMENT

The PEST analysis is a useful tool for

understanding market growth or decline, and as such
the position, potential and direction for a business. A
PEST analysis is a business measurement tool. PEST
is an acronym for Political, Economic, Social and
Technological factors, which are used to assess the
market for a business or organizational unit.

Here PEST Analysis is done for evaluating the

business environment of Bangladesh focusing
complexities and potentiality-

 PEST ANALYSIS OF
BANGLADESH BUSINESS
ENVIRONMENT
Technologi
Technologi
cal
cal

Socia PEST Economi

Socia PEST Economi
l of BD Business c
l of BD Business
Environment c
Environment

Political
Political
PORTERS DIAMOND MODEL
ANALYSIS FOR RMG
INDUSTRY
SUPPORTING INDUSTRIES RIVALRY, STRATEGY,
Accessories STRUCTURES
Power plants Strong Rivalry among the Foreign manufacturers
Packaging Good Syndication among the main
Transportation manufacturers and sub-contract manufacturers.
Shipping Good syndication among the supporting industry
Bank and financial institutions Good forward and Backward linkage as strategic
advantage

FACTOR CONDITIONS: DEMAND CONDITION:

Competitive advantage in lower cost of labors
Good FDI inflow
Good condition in capital collection.
Availability of lands for establishment of
industry
facility with tax benefits
Relaxed regulations for RMG organizations.
Strong demand for cost benefits
Strong Demands under GSP facilities
Positive demand condition in local market along
with the cross border market
Increasing demands for Bangladeshi RMG
products in new markets.
PORTERS DIAMOND MODEL
ANALYSIS FOR RMG
INDUSTRY
Thank You
Any
Question?