Southeast University School Of Science & Engineering

Department Of Textile Engineering

Assignment On

SWOT Analysis Of Textile Sector For Bangladesh

Submitted To:

Tipu Sultan Lecturer

Department Of Textile Engineering

Southeast University

Prepared & Submitted By:

Victor Roy 2011200400066 (18th) Md.Ahsanul Habib 2011200400053 (18th)

Md.Suja Ud Douwla 2011200400018 (18th) K.M Kamrul Huda 2011200400057 (18th) Shajjad hossain shahid 2010200400017 (15th)

Batch: 18th Group: B

Date Of Submission: 16/04/2015

Introduction:

A SWOT analysis is a structured planning method used to evaluate the strengths,

weaknesses, opportunities, and threats involved in a project or in a business venture. A

SWOT analysis can be carried out for a product, place, industry or person. It involves

specifying the objective of the business venture or project and identifying the internal and

external factors that are favorable and unfavorable to achieve that objective.

SWOT analysis

A SWOT Analysis on Readymade Garment Industry in

Bangladesh:

RMG is the leading industry in Bangladesh. It is basically a labor-intensive industry and it needs

limited financial investment and relatively simple technology compared to other high technical

industries. The success story of Garment Industry in Bangladesh is the story as to how the

readymade garments starting in the late seventies as an insignificant non-traditional item of

export. In 1998-99 this sector has earned 4019.98 million US$ through exporting which is

75.67% of the total export (Redwan, 1995).

The tremendous success of Readymade Garment (RMG) exports from Bangladesh over last two

decades has surpassed the most optimistic expectations. At present Bangladesh is the 6th largest

exporter to USA and in 1997 Bangladesh becomes 18th largest exporter in the world. Now

Bangladesh ranks first export of T-shirts to Europe (BGMEA, 1997-98). The overall impact of

the readymade garment export industry is certainly one of the most significant social end

economic developments in contemporary Bangladesh. The remarkable achievement of RMG

sector is now exposed to each and every country. Despite these impressive achievements and the

probable challenges in the near future, if properly managed, the prospects for further expansion

and growth for this sector remain bright. There are some major threats still exits in this sector but

Bangladesh has the ability to overcome these threats. Readymade Garment (RMG) industry

holds a key position in the economy of Bangladesh in terms of foreign exchange earning,

employment generation and poverty alleviation. Right now RMG sector is the highest foreign

currency earner in Bangladesh. Apart from contributing to huge foreign exchange earnings,

RMG industry has become the largest source of employment generation. Around 2 million

people are presently involved of whom 90% are distressed women in the RMG industry of

Bangladesh. In addition a rough estimate shows that the sector through linkage effects is

currently generating about US$ 2 billion worth of domestic economic activities (Bhattacharya,

2000) . RMG industry is the most important sector for the economy of Bangladesh. It accounts

for 75.14% in 2000-2001 of the country’s total export earnings (BGMEA Newsletter, 2001)

About 1.5 million workers of whom 90% are distressed women are engaged in about 3200

garment factories as on June 2000(BGMEA, 1997-98). It is largest manufacturing sector

contributing about 5% to the GDP. But this RMG sector is now facing some challenges

especially after 2004. Bangladesh is still at its infancy in terms of quantity production in the

readymade garments industry. We still have problems in our country for the production of

quality goods. Standard is also not satisfactory. The quality of the readymade garments of Korea,

Hong Kong, Taiwan and other countries is far superior to that of ours.

In RMG sector, value-addition is 30% only because a RMG unit has to import 70% of the total

value of the product. The low value added represented that the backward linkage industries such

as fabrics and accessories, which directly feed into the garment sector, have not satisfactorily

developed. The weakest point of the Bangladeshi apparel industry is that it is still at the mercy of

the exterior suppliers of its main raw materials namely the fabrics. Right now Bangladesh has a

very limited capacity to produce fabrics required by the RMG factories. Quality and standard of

RMG products can be improved by practicing Total Quality Management, preparing and

following a quality manual for the products, training Quality Control and Quality assurance

Personnel etc. The growth and development of Bangladesh Ready Made Garment is highly

satisfactory as it is found in number of factories, share in total foreign exchange earnings and

value added to the economy. The major problems of RMG are low net exporting, low value

addition, low quality and standard, low productivity, elimination of quota and GSP, intense

competition, scarcity of backward linkage industries etc. to comply with the set standards by the

importing countries and global RMG marketers, Bangladesh need to improve its working

condition. Appropriate training to the workers focusing on awareness of safety and what is to be

done during the time of emergency will be effective in improving employee morale. Government

of Bangladesh, Ministry of commerce, Ministry of textile, Export Promotion Bureau, BGMEA,

Institute of Fashion Technology and other concerned authorities should work strengthening the

RMG industry of Bangladesh.

SWOT analysis of textile sector for Bangladesh:

Strength :

Low labor cost.

Energy at comparatively lower price.

Easily accessible infrastructure like sea road, railroad, river and air communication.

Wide ranges port facilities.

Accessibility of fundamental infrastructure, which is about 3 decade 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 Center for the Settlement of Investment

Dispute (ICSID) offered.

Excellent Tele-communications network

Weakness of currency against dollar/euro and the condition will persist to help

exporters.

Bank interest@ 7% for financing exports.

Convenience of duty free custom bonded w/house.

One of the strengths behind the success of RMG of Bangladesh is the availability of low

cost labor compared to other countries in the region. The labor rates in textile industry

(compiled by Warner International) show that the average hourly wage rates for

Bangladesh, India, Pakistan and Sri Lanka were respectively US$ 0.23, $0.56, $0.49 and

$0.39 (Bhattacharya 1999a). Being in the manufacturing of RMG for two decades,

Bangladesh now possesses a large pool of skilled & semiskilled manpower. Moreover,

there are many unemployed young men and women who can easily be converted into a

skilled workforce if needed.

Given the fairly long learning curve in this industry, extensive experience in dealing with

foreign buyers, offshore bankers, shippers, and Clearing and Forwarding (C&F) agents is

a valuable asset for the exporters of Bangladesh.

Weakness :

Long lead-time

Lack of marketing tactics.

The country is deficient in creativity.

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

The machinery required to assess add on a garment or increase competence are

missing in most industries.

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.

Dependence on others for raw materials, low productivity, limited knowledge in

international marketing information, poor infrastructure, political instability, disruptive

trade unionism, inefficiency in port management, and excessive dependence on RMG

sub-sector are the major weaknesses of the industry. The industry is heavily dependent on

others for outsourcing of raw materials such as clothing and accessories. Bangladesh is

currently importing raw materials (gray fabrics) for its RMG factories from countries like

India, China and Thailand under back-to-back L/Cs. In a quota free environment, these

countries will obviously try to export finished apparels to North American markets rather

than sell fabrics to countries like Bangladesh .With equal access to the world market,

these direct competitors will either stop selling materials to their competitors like

Bangladesh (a strategic move) or charge higher prices for their materials (because of

increased internal demand).

Exporters of Bangladesh also have limited access to current market intelligence and

international trade information because, so far, foreign buying houses have been

dominating the marketing part of the business. In a post MFA era, if these buying houses

shift their bases to other countries, Bangladeshi exporters may face serious problems in

finding their ultimate buyers.

At present problems in port management is a serious challenge to RMG industry of

Bangladesh. The Chittagong Port is the most important entry and exit point for trade and

commerce of the country. Almost 90 percent of the exports and 75 percent of the imports

of Bangladesh are accomplished through the Chittagong Port. Therefore, it is considered

as the country’s economic lifeline. The Chittagong Port is one of the most inefficient and

corrupt ports in the world. A World Bank study estimated that handling charges for a 20-

foot container were $640 in Chittagong compared with $220 in Colombo and $360 in

Bangkok. The study added, inefficiency at Chittagong port could be costing the economy

as much as $600 million annually. Besides this, there are numerous demands for “under-

the-table” payments that are reportedly required at every step of export processing, from

opening of letters of credit to the clearance of goods from Customs. According to a

survey, the hidden costs paid by importers per consignment ranged from Tk.4, 700 to

Tk.36, 800 (about US$100 to $735). These inefficiencies and corruption seriously

hamper the competitiveness of Bangladeshi garment in the world market.

Opportunity :

EU is willing to establish industry in a big way as an option to china particularly for

knits, including sweaters.

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 port’s service much faster, it will also reduce lead-time as well as total cost will

be decreased.77

Bangladesh is going to gain its political stability, which will make foreign trade

much smoother and will foreign buyers will be more convinced.

The greatest opportunities lie on the unlimited market outside Bangladesh. In a quota free

world, the United Nations Commission for Trade and Development estimated that

removal of the MFA and tariffs by developed countries will expand exports of clothing

by 135 percent and textile by 78 percent. Trela and Whalley using a global general

equilibrium model, estimated that the change will be much larger: the value of imports of

textiles and clothing will rise by 305 percent in the US, 200 percent in Canada, and 190

percent in EU. This indicates that phasing out of quota will expand the market

tremendously. Asia by far is the largest player in the world textile and clothing market

and, industry experts are confident that, overall, Asia still will dominate.

Although Bangladesh lags behind in the textile sub-sector, it is very likely that the sector

will get a boost through forward integration with RMG.

In the knitting sector, Bangladesh gained substantial competitive advantage over her

competitors. According to the Bangladesh Knitwear Management and Exporters

Association (BKMEA), the cost of yarn production per kg. In the private sector of

Bangladesh is only US$1.48, whereas in India it is $1.78, in Pakistan $1.60, in Japan

$2.38, in Korea $1.73 and in Thailand $2.78 (IFC 1998 cited in Bhattacharya 1999).

Therefore, knit-RMG has a good prospect for Bangladesh in post MFA period.

The apparel sector of Bangladesh mainly exports low-cost products to the international

market. But she can move into high value added products through diversification. This is

not impossible given her two decades of experience, good relationship with buyers,

worldwide reputation, and presence in quality-conscious United States and EU markets.

Recently it has already penetrated the difficult but lucrative quality-conscious Japanese

market.

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 and Caribbean countries have enjoyed zero-tariff facility under AOA

act (Agreement On Agriculture) that helps them to be more competitive relative to

Bangladesh

Environmental issues, labor standard, Trade Related Aspects of Intellectual Property

Rights (TRIPs) etc. might also appear as a deadly threat to developing countries like

Bangladesh. In the words of Reza. Although developing countries are not being singled

out for environmental issues, being poorer, they cannot obviously maintain rigorous

environmental standards. Moreover, the fact that their competitive advantage often lies in

natural resources and pollution-intensive industries implies that they are vulnerable to

being pressured to enforce stricter standards or face less market access for their exports to

developed countries.

Other issues like child labor have already proved as a sensitive issue in the western

market. Compliance to the Rules of Origin4 (ROO) may threaten the future market access

and performance of RMG sector of Bangladesh. In the case of woven-RMG, a two-stage,

and in the case of knit-RMG, a three-stage transformation (cotton to yarn, yarn to fabrics,

and fabrics to RMG) process is required for imported yarn from India. Bangladesh

exporters also had to pay back exempted duties amounting to about US$60 million (as

per an agreement in October 1997) to EU on the grounds of ROO violation and

circumvention (Bhattacharya 1999).

Regionalism is another threat to the industry. The World Bank country study (1995)

expresses its concerns that “Over the medium term it is also possible that NAFTA may

lead to a displacement of East Asian RMG imports into the U.S. and Canada. To the

extent these exports by the more efficient East Asian producers are then diverted to the

European Community, they may tend to displace Bangladesh’s RMG exports into

Europe”. In the US market another challenge will come from Mexican apparel industry

where it has zero tariff access because of NAFTA. Mexico’s share in US clothing imports

increased by over 200% in the period 1993-98. Extension of NAFTA membership to the

other Latin American and Caribbean countries may aggravate the situation further.

When to use SWOT

A SWOT analysis can be used to:

Explore new solutions to problems

Identify barriers that will limit goals/objectives

Decide on direction that will be most effective

Reveal possibilities and limitations for change

To revise plans to best navigate systems, communities, and organizations

As a brainstorming and recording device as a means of communication

To enhance “credibility of interpretation” to be utilized in presentation to leaders or

key supporters

Importance of SWOT Analysis

The importance of SWOT analysis lies in its ability to help clarify and summarise the key

issues and opportunities facing a business. Value lies in considering the implications of

the things identified and it can therefore play a key role in helping a business to set

objectives and develop new strategies. The ideal outcome would be to maximise

strengths and minimise weaknesses in order to take advantage of external opportunities

and overcome the threats. For example, the environment may present an opportunity for a

new product but if the company does not have the capacity to produce that product it may

either decide to invest in new plant and machinery or to just steer clear.

Benefits and limitations of SWOT analysis

SWOT (strengths, weaknesses, opportunities and threats) analysis can help a company

identify and understand key issues affecting their business, but it does not necessarily

offer solutions. So a company should be aware of the limitations as well as the benefits of

a SWOT analysis before they decide to conduct one. Knowing what they can reasonably

expect to achieve will make the SWOT analysis more useful for their business, and will

save their time. Ultimately, they must be prepared to spend the time to review their

SWOT analysis and use it to determine the best way forward in their business.

Benefits of SWOT analysis

a. The main advantages of conducting a SWOT analysis is that it has little or no cost

- anyone who understands their business can perform a SWOT analysis.

b. A company can also use a SWOT analysis when it doesn't have much time to

address a complex situation. This means that a company can take steps towards

improving their business without the expense of an external consultant or business

adviser.

c. Another advantage of a SWOT analysis is that it concentrates on the most

important factors affecting a company’s business. Using a SWOT, one can:

understand their business better address weaknesses deter threats capitalize on

opportunities take advantage of their strengths develop business goals and

strategies for achieving them.

Limitations of SWOT analysis

a. While conducting a SWOT analysis, a company should keep in mind that it is

only one stage of the business planning process. For complex issues, business

companies usually need to conduct more in- depth research and analysis to make

their decisions.

b. Keep in mind that a SWOT analysis only covers issues that can definitely be

considered a strength, weakness, opportunity or threat. Because of this, it's

difficult to address uncertain or two-sided factors, such as factors that could either

be a strength or a weakness or both, with a SWOT analysis (e.g. a company might

have a prominent location, but the lease may be expensive).

c. A SWOT analysis may be limited because it doesn't prioritize issues doesn't

provide solutions or offer alternative decisions can generate too many ideas but

not help you choose which one is best can produce a lot of information, but not all

of it is useful.

Corporate Level Strategy:

Ready 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.

1.Strategies for entering the market

More and more companies are finding themselves in industry situations characterized by

rapid technological change short product cycles because of entry 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.

2. Strategies for coping with rapid changes

It 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.

A. Growing use of internet technology and applications

B. Increasing globalization

C .Changes in the buyers’ requirements

D. Changes in cost and efficiency

E. Changes in global regulations in the textiles and apparels industry

In 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 proposal 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 supply

chain.

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 prepared 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.

Conclusion:

No hurdles could resist Bangladesh achieving a modest growth in the first six month of

the financial year 2013-2014. The country has registered 19.55 % growth in knitwear

export and 20.37% growth in woven wear export despite so many political troubles.

Amid great internal tension & month long blockade, the sector could keep their

momentum going. Countries export growth in July to December hence now comes with a

great inspiration for the rest of the year to achieve even more. But such a well-built sector

could not really grow as the sector anticipated due to many reasons- most of which are

not abnormal for developing countries. Huge infrastructure deficiency, political

instabilities, high bank interest, frequent labor insurgency, unexpected accidents;

Bangladeshi RMG & textile sector is coping up everything very well. Now the country is

to face another big threat from the two big subcontinent countries due to the extra

leverages they are gaining. Bangladesh should penetrate into new markets, diversify into

new items, and relocate into new territories. If these measures are not taken in time, as

Spinanger concludes, “The rapid growth rates that Bangladesh exhibited in world trade

will be a thing of the past”.

References:

1. http://www.investopedia.com/terms/s/swot.asp

2. http://en.wikipedia.org/wiki/SWOT_analysis

3. http://www.thefinancialexpress-bd.com/2008/04/16/30828.html

4. http://en.wikipedia.org/wiki/Bangladesh_textile_industry

5. http://www.mightystudents.com/search?q=A+SWOT+Analysis+on+Readymade+

Garment+Industry+in+Bangladesh

6. http://www.bangladesh-web.com/view.php?hidRecord=261807

7. https://mkastleyvisuals.wordpress.com/tag/swot-analysis-of-bangladesh-

textile- industry/

8. http://www.academia.edu/3314975/Competitive_and_Business_Environm

ent_analysis_of_RMG_industry_of_Bangladesh

9. http://www.assignmentpoint.com/business/human-resource-

management/report-on-garments- industry-in-bangladesh.html

10. http://textilebulletin.com/present-situation-rmg-sector-bangladesh-2013/