SWOT BANGLA

8/2/2019 SWOT BANGLA

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EXPORT MERCHANDISING

SWOT ANALYSIS OF APPAREL EXPORT BUSINESS FOR

BANGLADESH WITH RESPECT TO INDIA

Submitted By:

Govindasamy.A

Kimjoujam Leivon

Kristy N. Shangpliang


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Malavika Pemmaya

Rosemary Jacob K.

INTRODUCTION:

Bangladesh has emerged as a new destination for apparel exports. Bangladesh has registered a

40 percent hike in its apparel exports in the last six months, with its increased exports to India

and new markets wrested from global leader China. With many importers switching from

China, Bangladesh has new destinations such as Japan, South Africa, Canada, Australia, New

Zealand and some Latin American countries.

The total exports were USD 12.19 billion against the USD 10.27 billion target. The annual

export target has been set at USD 18.5 billion for fiscal 2010-11.The sector, however, is

plagued by poor wages and working conditions that have frequently provoked workers to take

to the streets. With manufacturers exerting pressures on the government for more concessions, awage increase that the government oversaw last year is yet to be fully enforced. The exports are

set to rise in coming months, as manufacturers have already bagged bigger orders than before.

The government data shows Bangladesh exported knitwear worth USD 5.07 billion during the

July-January period of the current fiscal year, registering 43.22 percent growth compared with

the same period a year ago. In the seven-month period, the country exported woven garments

worth USD 4.38 billion, a 39.09 percent rise.


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The higher prices of raw materials, such as cotton and yarn, are also increasing the export

earnings, as the buyers are paying more to help the makers cope with the costly imports.

Bangladesh needs to import most of the raw materials for its garment industry.

According to the data available, India's readymade garment exports moved up to $11.16 billion

in April-March 20110-11, registering a growth of 4.23% when compared to April-March 2009-

10. It is also observed that four months of May, June, July and November showed actual decline

over corresponding months in the year 2009-10. The overall annual growth of 4.23% is

anything, but cheerful.

India always has an advantage over Bangladesh in terms of raw materials, infrastructure,

quality, and technology. But India lost in terms of labour wages, lead time, semi skilled

labourers and import duties.

BANGLADESH

Bangladesh has been witnessing tremendous industrial growth across its industrial sector; textile

and apparel have especially dragged the focus of government bodies and private 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 labour wages

and raw material prices in other major regional counterparts, such as China, India, Thailand etc,

Bangladesh is well poised to remain most preferred destination for international apparel majors

for sourcing world class fabric and finished clothes.

Bangladesh apparel industry has grown manifold in the last decade. The countrys recognition

as low cost-high quality apparel production base resulted in apparel production boom. Both

small- and large-sized firms are booking huge orders from the US and EU buyers andexpanding their production capacities. The study revealed that factors including new plant


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setups, capacity expansion in existing ones, technological up-gradation coupled with

government favourable policies will enable apparel production to grow at an unmatched CAGR

of 14.3% during FY 2011-FY 2014.

On demand fronts, the growth has been slow but steady. Drastic improvement in income level

encouraged the countrys middle-class population to opt for good quality apparels. The impact

of improving buying power is quite visible on domestic market as consumers are now buying

branded apparels and spending a considerable part of their disposable income on textile and

clothing.

READY MADE GARMENTS IN BANGLADESH:

Ready Made Garment (RMG) is the leading industry in Bangladesh. It is basically a labour-

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).

STRENGTH

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

decades has surpassed the most optimistic expectations. At present Bangladesh ranks fourth in

the ladder of international garment exporters, accumulating US$13.2bn in export revenues in

the period July 2010 to March 2011, according to official figures. This accounts for about 80%

of Bangladesh's total exports, with 5m people employed across the country.


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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.

Bangladesh enjoys duty-free access of its apparel products to the European Union, Canada,

Australia and some Asian countries, including Japan, Korea and China.

WEAKNESS

It is the 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. The country still faces problems 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

Bangladesh.

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 hasa very limited capacity to produce fabrics required by the RMG factories. Her competitors


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India, Pakistan, Thailand, Malaysia and other countries have their textile mills that can produce

quality fabrics for the respective apparel industries.

OPPORTUNITIES

This sector will remain in intense competition in the context; it is very necessary to find out

opportunities and challenges of RMG industry of Bangladesh in order to face firm competition

in the free market environment.

Japan is one of the potential markets for exports from Bangladesh. Quality and fashion

conscious Japan is importing readymade garments from Bangladesh at an increasing rate even

though this increase is very negligible. An extremely large program has to be taken to increase

the exports. There exists supportive policy environment in the RMG sector of Bangladesh.

The package of textile sector incentive has been aimed at primarily to boost up the exporters.

Government has extended some major incentives and facilities for the local and foreign

investors to help increase investment in the country for all industrial sectors including textiles

and clothing.

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.

Indian Government announced the duty-free access to 46 apparel items from Bangladesh;

exporters from that country have reported orders for readymade garment worth an estimated

$90 million from India.

The country has registered a 40 per cent hike in its apparel exports in the last six months, with

increased exports to India and new markets wrested from global leader China. With many

importers switching from China, Bangladesh has new destinations such as Japan, South Africa,

Canada, Australia, New Zealand and some Latin American countries, government officials and

exporters said.

THREATS

According to the Ministry of Textiles, the local fabric manufacturers currently supply less than

19% of total woven fabric requirement. About 70% of the total fabric requirement of the knit

sector is domestically produced as reported by the BTMA. Textile policy 1995 envisages


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established of 246 spinning mills with 25000 spindles each, 481 weaving mills each with

capacity to produce 17 million meters of fabrics, 481 dyeing-printing-finishing units each with

same capacity for yarn and woven fabric by the year 2005. Thus it is a challenge for RMG

sector in Bangladesh to get right quantity of fabrics. The recent US Trade and Development Act

2000 provide duty free and quota free access to the US market from 48 countries of Sub-

Saharan African (SSA) from October 1, 2000 to September 13, 2008.Though after 2004 quota

system will be benefited for access duty free to USA till 2008. As USA is the single largest

importer of Bangladesh RMG, Bangladesh will lose competitive position relative to those 72

countries.

The labour productivity in RMG factories has improved during the last 11 years. The

experiences of Japan, Hong Kong, South Korea and other suppliers of RMG confirm this type

of relationship between productivity and wages. Unlike in the public sector of Bangladesh, in

RMG sub sector, wages have increased during the last 11 years but productivity has increased

more than wages have.

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.

Bangladesh has to improve their infrastructure

Irregular gas and electricity supply, pitiable rail and road communication systems, political

instability, and high bank interest as the stumbling blocks to the sectors further growth

Bangladesh is having competition with China, Vietnam, Cambodia and Sri Lanka.

The EU being the Bangladeshs biggest single market (take over half of Bangladesh exports) is

a great concern. The impact is not less in China, India and ASEAN countries also

About 50-60 percent of Bangladeshi garment goods are exported to EU, where a lot of

companies are going through economic crisis. So, due to this the garment exports are little low.


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SWOT ANALYSIS OF INDIAN APPAREL & TEXTILE INDUSTRY

The Indian Textile industry adds 14% to the industrial production and 8% to the GDP of India.

It provides employment to 38 million people and thus, is the second largest employment

provider after agriculture. The Indian Apparel & Textile Industry is one of the largest sources of

foreign exchange flow into the country with the apparel exports accounting for almost 21% of

the total exports of the country. Indian apparel industry contributes 45 % of Textile exports. A

systematic SWOT analysis of the textile and apparel industry indicates the following:-

STRENGTH

Raw material base

India has high self sufficiency for raw material particularly natural fibres. Indias cotton

crop is the third largest in the world. Indian textile Industry produces and handles all

types of fibres.


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Strong entrepreneurial skills have always been the backbone of the Indian Apparel and

textile Industry.

Flexibility

The small size of manufacturing which is predominant in the apparel industry allows for

greater flexibility to service smaller and specialized orders.

Rich Heritage

The cultural diversity and rich heritage of the country offers good inspiration base for

designers.

Domestic market

Natural demand drivers including rising income levels, increasing urbanisation and

growth of the purchasing population drive domestic demand.

WEAKNESS

More dependence on cotton

Due to over specialization in cotton, the bulk of the international market is missed out,

synthetic products in India are expensive and fabric required for items like swimsuit,

sky-wear and industrial apparel is relatively unavailable.

Less attention on man power training

Poor quality standards

Distance of the potential market

Lower average consumption in domestic market

Lack of professionalism and integration of supply chain

Dependence on quota system

Very low investment on R&D

Limited exploitation of economies of scale

Higher production costs on account of power and capital costs

Lower labour productivity

Infrastructure bottlenecks causing delays

Under developed supply chain management and 3PL logistics service providers

Outdated and Inflexible labour laws

Fluctuation in the currency exchange rate


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Lack of capacity and value addition.

OPPORTUNITIES

Growing Industry

World textile trade would continue to grow at a rate of 3-4% Market access through

bilateral negotiation

The trade is growing between regional trade blocs due to bilateral agreements between

participating countries.

Integration of Information technology

Supply Chain Management and Information Technology has a crucial role in apparel

manufacturing. Availability of EDI (Electronic Data Interchange), makes

communication fast, easy, transparent and reduces duplication.

Opportunity in High Value Items

India has the opportunity to increase its UVRs (Unit Value Realization) through

moving up the value chain by producing value added products and by producing more

and more technologically superior products.

India now focusing more on Non EU and US markets like Japan, Latin Americas and

African Countries.

India has the huge opportunity in High quality and luxury products.

Government Initiatives

The Government of India has promoted a number of export promotion policies for the

Textile sector in the Union Budget 2011-12 and the Foreign Trade Policy 2009-14. This

also includes the various incentives under Focus Market Scheme and Focus Product

Scheme; broad basing the coverage of Market Linked Focus Product Scheme for textile

products and extension of Market Linked Focus Product Scheme etc. to increase the

Indian shares in the global trade of textiles and clothing.

I. Welfare Schemes: The Government has offered health insurance coverage and

life insurance coverage to 161.10 million weavers and ancillary workers under

the Handloom Weavers' Comprehensive Welfare Scheme, while 733,000


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artisans were provided health coverage under the Rajiv Gandhi Shilpi Swasthya

Bima Yojna.

II. Skill Development: As per the 12th FYP, the Integrated Skill Development

Scheme aims to train over 2,675,000 people within the next 5 years (this would

cover over 270,000 people during the first two years and the rest during the

remaining three years). This scheme would cover all sub sectors of the textile

sector such as Textiles and Apparel

III. Textiles Parks: The Indian Government has given approval to 21 new Textiles

Parks to be set up and this would be executed over a period of 36 months

IV. More Educational Institutes and Center of Excellence for Textiles

THREATS

There has been an increase in seasons per year which has resulted in shortening of the

fashion cycle.

India will have to open its protected domestic market for foreign players thus domestic

market will suffer.

EU has granted the status of Generalized Systems of Preferences to Sri Lanka, while

Bangladesh has got the Least Developed Country status from EU. Pakistan, meanwhile,

has got a zero duty tariff level from both EU and US. The non-tariff barriers, such as

anti-dumping and countervailing duties, quota restrictions, and packaging, labelling,

testing and quarantine requirements are affecting Indian exporters.

Poor Energy supplies ( almost 6 hrs per day electric cut in many states )

Increase in Petrol Prices, Real Estate cost, Wages

Lack of Semi-Skilled and Skilled labourers

High competition from Countries like China, Bangladesh, Pakistan, Srilanka, Vietnam

etc.

Dyeing problem in Tirupur.

Fluctuations of Currency in the world market.

COMPARISON


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PARTICULARS/COU

NTRYINDIA BANGLADESH

COST OF 1LAKH

SQ.FT FACTORY$ 800000 $ 500000

LABOUR WAGES Rs.8,000/month Rs.5,000/month

LEAD TIME90 days for Knit and

120 days for Woven

60 days for Knit and

90 days for Woven

PRODUCTIVITY 60 % Efficiency 90-95% Efficiency

WORKING TIME 8-8.5 Hours 12 Hours


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DUTY FOR EU &

OTHER COUNTRIES9.6 % Free Import

APPRAEL EXPORTS

(2010)$10 billion $13 billion

EXPORT GROWTH

(2005-2010)5.2 % 14.2 %

CONCLUSION

Many retailers and brands are looking at Bangladesh as huge opportunity for sourcing garments

and they are slowly shifting from India, China and other countries.

If duty concessions, labour and other costs are taken into account, garments produced in

Bangladesh is almost 20 per cent cheaper this apart, the aggressive monetary tightening policies

of the Reserve Bank of India (RBI) in the recent months has also made cost of capital expensive

and further added to the woes of Indian textile makers.

Textile companies are facing cut-throat competition. Profit margin is very low and 15-20 per

cent cost difference is a big thing. So people are getting attracted to Bangladesh.

China is not able to stand the competition and is losing its share of exports in US and European

markets to Bangladesh.


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Textiles are perhaps the most labour intensive industry. In Bangladesh labour is not only cheap

but also easily available when you compare it with India and China. Besides labour cost and

duty advantage, raw materials and real estate costs are also cheaper in Bangladesh.

Recently, Indian garment makers have invested about $79 million in 35 factories in Bangladesh,

according to Bangladeshs Board of Investment, which compiles the data.

This clearly shows the Shift of Apparel business towards Bangladesh.

BIBILOGRAPHY:

Mr.Vijaya Prabhakaran , Merchandiser ,Shahi Exports ,Bangalore Mr.Anton, Merchandiser, Must Garments, Bangladesh.

http://www.fibre2fashion.com

http://www.cci.in/pdf/surveys_reports/indian-textile-industry.pdf

http://www.usitc.gov/publications/332/PUB3401.pdf

http://www.apparelresources.com

http://www.livemint.com/2011/10/02234501/Indian-garment-makers-head-

to.html

http://www.indiantextilejournal.com/articles/FAdetails.asp?id=1546


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http://www.thehindubusinessline.com/industry-and-

economy/economy/article2592173.ece?homepage=true&ref=wl_home

http://texmin.nic.in/

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