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 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 poised to remain most preferred destination for international apparel majors for sourcing world class fabric and finished clothes. According to this report, Bangladesh Apparel Industry Analysis, Bangladesh apparel industry has grown manifold in the last decade. The country’s 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 EX. buyers and expanding their production capacities.
The study revealed that factors including new plant setups, opacity expansion in existing ones, technological up-gradation coupled with government favorable policies will enable apparel production to grow at an unmatched CARR of 14. 3% during FYI 2011-FYI 2014. But Bangladesh ARM industry requires better and improved ARM competitive business analysis with a mixture of competitive analysis of Bangladesh. This paper reveals the competitive and business analysis of ARM industry of Bangladesh along with the competitive forces of Bangladesh own. The Ready-Made Garments (ARM) industry contributes to the Bangladesh economy in a distinctive manner.
The last 20 years witnessed unparalleled growth in this sector, which is also the largest exporting industry in Bangladesh. It has attained a high profile in terms of foreign exchange earnings, exports, industrialization and contribution to GAP within a short span of time. The industry plays a significant role in terms of employment generation. Nearly two million workers are directly and more than ten million inhabitants are indirectly associated with the industry. In addition to its economic contribution, the expansion of ARM industry has caused noticeable changes by bringing more than 1. Million women into the workforce. Hence it is quite apparent that this sector has played a massive role in the economic development of the country. Arm’s contribution in terms of GAP is highly remarkable; it has reached 13 percent of GAP which was only about 3 percent in 1991. It also plays a pivotal role to promote the development of other key sectors of the economy like banking, insurance, shipping, hotel, tourism, road transportation, railway container services, etc. One of the key advantages of the ARM industry is its cheap labor force, which provides a competitive edge over its competitors.
The sector has created employment opportunities for about two million people of which 70 percent are women who mostly come from rural areas. Thus the industry helps in the country’s social development, women empowerment and poverty alleviation. Currently ARM earns the lion’s share of foreign exchange earnings. Figure: Operational Business Model OF Bangladesh ARM manufacturers. Bangladesh Despite recent, highly publicized wage protests, Bangladesh apparel industry says it is gearing up for high speed growth in the New Year, fuelled by new EX. SSP rules, new export markets and government support.
According to the Bank, the country’s financial sector regulator, from July to September 2010, exports of woven garments increased by 30% in value terms, while exports of knitwear increased by 31. 91% in value terms, compared to the same period 2009. Exports in the last quarter of 2010 are also expected to show growth. New markets While the bulk of exports are still shipped to the EX. followed by the US, the made-in- Bangladesh label is also slowly going to new places. During the recession in 2008, the government gave a bailout package on condition that the industry develops new arrest and new products.
By now, the industry has started exporting to new markets like Japan, Russia, Saudi Arabia and Australia. These exports are still small but there is potential for growth, because our garment industry is very competitive. Talks are also on the cards with big neighbor India – to build on the current duty-free quota of mm pieces of garments annually, from Bangladesh into India. In 2009, this huge industry, which provides livelihoods for around mm people directly and indirectly, accounted for 77% of total country exports at IIS$12. Bin.
Meanwhile, in 009, the World Trade Organization listed Bangladesh as the fifth largest clothing exporter to the world, behind China, the ELI, Turkey and India. Growing Seawards While the clothing dependent, least developed country does not have preferential access into the US, the EX. is expected to be more accessible from 2011. We do not get any duty-free access into the US for garments. In some cases they charge us higher duties than what they charge developed countries like France. We are doing well in the US because our garment industry is highly competitive.
The industry is also expecting growth in the EX. with the new SSP rules. Industry sources say that from 1 January 2011, under new EX. SSP rules of origin, more Bangladesh apparel will qualify for duty-free entry into Europe. “We have not tested the new system yet, but we are expecting exports to the EX. to increase with the new EX. SSP rules,” says Mr. Nannies Hug, chairman of the Mohammad’ Group of companies, one of the largest apparel manufacturing groups in Bangladesh and a former president of the Bangladesh Garment Manufacturers and Exporters Association (BAGMEN).
Under these new SSP rules, the fabric can come from anywhere in the world, to qualify for duty- free. Because we import a lot of fabric, this will make a lot more garments eligible for duty-free status. Government support Meanwhile, the Bangladesh government has also started addressing back-end bottlenecks to apparel industry growth. For instance, work on gas transmission lines has started in order to increase the supply of gas for electricity generation over the Another speed bump, labor unrest, is also being targeted.
The aim is industry stability and gradual transition to higher value output. Because there is such a massive workforce in the sector, labor unrest can interrupt growth. So the overspent is implementing many welfare schemes and participatory decision making mechanisms for garment workers, to ensure labor stability in the sector, The industry has already started shifting into little more high value, higher return areas. There has been a lot of technology and skill upgrading happening.
Government and industry representatives say Bangladesh is aiming to become the leading manufacturing destination for apparel over the next decade INDUSTRY ANALYSIS The Redeemed Garment (ARM) industry of Bangladesh marked the leadership of private enterprise and the country’s successful transition to a major export-oriented economy. The key products of this industry are Knit and Woven Shirts and Blouses, Trousers, Skirts, Shorts, Jackets, Sweaters, Sportswear and many more casual and fashion apparels. ARM industry has enjoyed an impressive rise from less than 50 factories in 1983 to over 3600 in 2006.
Garments sector’s continual success can be attributed to the following: 0 Quotas under Multi-Fiber Arrangement (MFC) in the North American market 0 Preferential market access to European markets The country has a small textile industry, but the volume and quality of its output are unable to fully meet the demand of the garments industry. Most of Bangladesh garments exports are made from imported textiles. ARM exports have grown rapidly after extensive trade and other economic reforms were undertaken in the early sass. Exports increased by 16. 5 percent per year during the past one and half decade.
Knitwear sector has performed particularly well over time. The sector’s share in total ARM exports has grown from about 17 percent in 1995 to almost 40 percent in 2003. In context of Bangladesh total export, Arm’s contribution is approximately 76%. Excepting 2002, the industry has developed rapidly with significant positive Roth. Over the years, it has experienced around 18% growth rate PEST Analysis of Bangladesh Business environment The PEST analysis is a useful tool for understanding market growth or decline, and as 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- Figure: Pest analysis for Bangladesh Business Environment Political Environment of Bangladesh: The political system of Bangladesh is followed by representative democracy. Despite being a democratic country the safeguards of democracy are not being exercised properly which have negative impact on business operation.
Political unrest is almost a daily occurrence in Bangladesh which hinders the daily national and international trading system of the country. Foreign firms are feared to come in Bangladesh with FED. Bangladesh is a democratic country in name but not in action. The following biased democracy safeguards are some of the main hindrances of international business in Bangladesh. Individual right to freedom of expression, opinion and organization are restricted. Media are more or less biased to the current government. There is more or less regular election sometimes major parties avoid election.
There are often face to face clashes among the leading political parties. Despite being the court system is independent most of the times its functions are directed by current government. Corrupted political state bureaucracy Corrupted political police and armed force. This situation does not support entrepreneurship that’s why it can not make a man innovative. That’s why local business can not be strong. To be competitive in international business such political system and government is failing to make local business more efficient and more effective. That’s why Bangladesh is lagging behind in international business competition.
Since that time Bangladesh is facing huge challenges, including a political and economic, serious poverty problems as one of the world’s poorest countries, annual floods on its low-lying coasts, power shortages and rampant corruption. However, some recent political and economic developments are encouraging. The economy grew 6. 5% during the 2007 fiscal year, following a growth rate of 6. % in 2006. According to the World Economic Forum Global Competitiveness Report 2007-2008, corruption is seemed to be the greatest problem by companies facing economic development and doing business in Bangladesh.
Most of the leaders of the leading political parties are highly corrupted. The leading parties are dominated mostly by the family members of the chairperson of the parties. Economical Environment of Bangladesh: Bangladesh certain sectors of the economy are left to private ownership and free market mechanism while other sectors have significant state ownership and government planning. Once there was a large state sector in Bangladesh but recent tend to prevarication has reduced state ownership of various businesses. Some of the recent privatized sectors are airlines, banking, customs etc. His tend to prevarication is creating a favorable atmosphere for international business. As foreign firms can invest in the privatized sector there will be a positive impact on the economy of Bangladesh. Social Environment of Bangladesh: Social value consists of social custom, practice, religion and social moral standard. Social value shows the moral standard of ours. Without social values we cannot grow up as a complete social man. In the past social values were more conservative, rigid and strong. We all know that Bangladesh is a conservative Muslim country. People used to live a more religious.
The young were more respectful to the old and superior. Smoking in front of the superior was forbidden. People used to believe in joint families. But now people are getting more and more liberal. They follow religion in a more relaxed way. Men and women now mix frequently. Our social values are changing fast. There is a clear western influence on our culture and values. Many people now accept western values. The causes of the present social values are titillate, television, globalization, free exchanges among the nations and free trade. There are certain effects of our social values.
People now abide by religion in a more relaxed way. Women are now playing a more important role in different parts of our society. As western music, culture, and modes of life are getting more and more familiar with us, our social values are also getting westernizes. People now prefer living in a small family. There are frequent exchanges among different communities in our society. Our social values reflect our moral standard, culture and tradition. We should be more alert to maintain these values. If we lose our values, we will have no individual identity as a nation.
Our social values show our identity. Bangladesh is noted for the remarkable ethnic and cultural homogeneity of its population. Over 98 percent of its people are Bengali; the remainder is Briars, or non-Bengali Muslims, and indigenous tribal peoples. Bangladesh are particularly proud of their rich cultural and linguistic heritage because their independent nation is partially the result of a powerful movement to uphold and preserve their language and culture. Bangladesh identify themselves closely with Bangle, their national language.
Technological Environment of Bangladesh: 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 acquisition, assimilation and adoption. A National Science and Technology Policy has been formulated and adopted by the Government. It has laid down the directions for S and T activities and research, institutional and manpower development.
Dissemination and documentation facilities. The National Council for Science and Technology (NCSC) determines S and T policies, reviews the activities of different institutions and provides direction towards S and T research and activities. Technology dimension plays an important role in enhancing the development activities and growth of Bangladesh business environment potentiality. The application of new technologies, particularly computers and software applications, has been a major factor driving productivity growth in recent decades. It is observed that information and communication technologies (ACT) development is running vapidly.
Basically, at this moment the business people are much more aware about technology because they know technology can enhance their operation. CIT is seen as an umbrella term for a range of technological applications such as computer hardware and software, digital broadcast technologies such as radio and television, telecommunications technologies such as mobile phones, and electronic information resources such as the world-wide web. The present government has recognized IT as one of the priority sectors and is providing all support to the private sector to enable hem to enter the export market for software and data processing services.
Recognizing the bright future of IT, a large number of students, young professionals and businessmen are taking keen interest in acquiring knowledge about computers and its applications. This is reflected in the tremendous enthusiasm generated in the on-going International Computer Show organized by Bangladesh Computer Sanity. It is expected that within the next 3 to 4 years, IT applications in Bangladesh would not only spread to various private and public sector offices and industrial units, but Bangladesh would emerge as a regional hub for software development.
PEST ANALYSIS FOR ARM INDUSTRY OF BANGLADESH A PEST Analysis can help us to know about the external environment situation of a particular industry of a country. The below analysis is the PEST analysis for the ARM industry of Bangladesh. Political analysis: Among various features of our political situation, most noticeable important conditions may be identified as follows – Absence of democratic political culture Absence the rule of law 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 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, 100% duty-free imports and tax exemptions. Government policies for Foreign Investments: The stated policy of the government of Bangladesh (BAG) 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 economy of Bangladesh ARM environment constituted by that of a developing country. Its per capita income in 2010 was est.. IIS$1,500 (adjusted by purchasing power parity) significantly lower than India, Pakistan, both which are also lower than he world average of $10,497.
According to the gradation by the International Monetary Fund, Bangladesh ranked as the 48th largest economy in the world in 2010, with a gross domestic product of US$224. 889 billion. The economy has grown at the rate of 6-7% p. A. Over the past few years. More than half of the GAP belongs to the service sector; nearly half of Bangladesh are employed in the agriculture sector, with ARM, fish, vegetables, leather and leather goods, ceramics, rice as other important produce. The inflation rate in Bangladesh was last reported at 10. 2 percent in May of 2011. The Deposit interest rate (%) in Bangladesh was reported at 9. 5 in 2008, according to the World Bank. Bangladesh is considered as a developing economy because of the GAP growth above 5% during the last few years. Microcircuit has been a major driver of economic development in Bangladesh. Bangladesh Corporate Tax Rates The standard rate of corporate tax in Bangladesh is 27. 5% in 2008 – 2009 tax years. This is the standard corporate tax rate applicable to publicly traded companies in Bangladesh, a list including tax rates for other corporations are as follows: ; Publicly Traded Company Company 27. 5% ; Non-publicly Traded 37. % ; Bank, Insurance & Financial Company 45% ; Mobile Phone Operator Company 45% If any publicly traded company declares more than 20% dividend, 10% rebate on total tax is allowed. Social environment in the context of globalization and in particular in the 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, impasses 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 Eng term m strategy minimizing risks linked to uncertainty. Technological 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 Government. It has laid down the directions for S and T activities and research, institutional and manpower development.
