expansion of bd rmg in foreign markets bypassing middlemen

7/29/2019 expansion of bd rmg in foreign markets bypassing middlemen

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The expansion of BD RMG inforeign markets bypassing

Middlemen


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Submitted by-Submitted by-

Emdadul Haque 3-09-17-061Emdadul Haque 3-09-17-061

Jewel Das 3-09-16-062Jewel Das 3-09-16-062

Md. Abdullah Al Mamun 3-10-19-054Md. Abdullah Al Mamun 3-10-19-054

Nahid RijwanNahid Rijwan 3-09-17-0333-09-17-033

Submitted to-

Prof. Md. Altaf Jalil

Dept. of Management Studies

Dhaka University

Dhaka


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What is RMG?

Ready-made garments manufactured inBangladesh are divided into two broad categories:woven & knit products.

Shirts, T-Shirts and trousers are main wovenproducts.

Undergarments, stockings, socks, T-Shirts,

sweaters and other casual and soft garments aremain knit products.

Knit fabrics are made of one long continuous

thread worked into interlocking loops. Wovenfabrics are held together by weaving the warp and


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What is the RMG market structure?

The RMG industry is the only multi-billion dollarmanufacturing and export industry in Bangladesh.In 2005 RMG contributed to 75 percent of totalExport earnings. Bangladesh exported garmentsworth $6.9 billion. The countrys RMG industry

grew more than 15percent in the last 15 years.

Currently there are more than 4,000 RMG firms inBangladesh. More than 95% are locally owned afew Foreign firms located in export processing

zones.

The share of knit garment products still dominatethe garment export earning 40% of total RMGsector .


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Brief OverviewBangladesh Exports its RMG mainly to EU and to

the United States of America. The twodestinations account for more than 90% exportearnings from RMG industry.

The RMG industry of Bangladesh expandeddramatically over the last three decades; theexport-quota system in trading garment product

system played an important role in the success ofthe industry.


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Continued.Years Issue

1977-1980 Early period of Growth

1982-1985 Boom Days

1985 Imposition of Quota Restrictions

1990 Knitwear sector developed Significantly

1993-1995 Child labor issue and its solution

2003 Withdrawal of American Quota

restrictions

2005 Phase out of export quota system


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The phenomenal growth of clothingindustry can largely be attributed to simplelevel of technology.

Supply of Cheap Workforce.

Supply of Cheaper Energy.

Most Significantly benefits of reservedmarkets by MFA (Multi Fiber Agreements)

Factors affecting this Boost


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Discussion Details

Business Process of RMG sector

Raw-Materials Supply Process

Strategy of Operation in existing andForeign Markets

Scope for Improvement

How to Bypass Middlemen

Existing Environmental Advantages/LocallyActual Examples & Taking Competitive

Advantage


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Business Process of RMG sector

Buy Raw materials from suppliers.

Arrange Organize Production methods.

Get Buyers requirements design, style, colour,material.

Prepare demo sample product and get approvedby Buyers QC.

Product Requirements from Customers aftersatisfactory sample delivery.

Get Order and Shipment Details.Process L/C.

Before shipment go through Quality CheckingInspection.

Revised pricing.


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Raw-Materials Supply Process

Strategy of Operation in existing andLocal Markets

Distribution and Supply Chain

Retail Outlets

Fashion Houses

Buyers

Resellers

Stock-lot sell out to external buyers


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Strategy of Operation in Foreign

Markets

Distribution and Supply Chain

BuyersMiddlemen

Resellers


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Future Opportunities for

RMG Field: Bangladesh has now a scope to go for more

fashion oriented products deserving high pricein the global market.

With the help of further increase ofproductivity & quality and design support.

Bangladesh can minimize cost and maximize

profit and export value. Bangladesh, as a proven experienced RMG &Textile manufacturer, can expand share in the

existing market (USA, EU, Australia, Canada,

etc.) and can also explore opportunity in Japan


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Continued

In the long run, Bangladesh has a scope totarget huge populated country like China andIndia- where demand as well as cost of

manufacturing will be wider.

EU is willing to establish industry in a big wayas an option to china particularly for knits,including sweaters

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


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Basic Issues

An organization wishing to "gointernational faces three major issues :


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Market Choice Decision

The choice of foreign markets depend on theirlong run profit potential . Favorable markets are:Politically stable developedDeveloping nations with free market systemsRelatively low inflation rates and private sector

debtLess desirable markets are:Politically unstable developing nationsDeveloping nations with mixed or command

economiesDeveloping nations with excessive levels ofborrowing

Markets are also more attractive :When the product in question is not widely

available


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Channel of BangladeshRMG

PRODUCER

MIDDLE MAN

PROCESSOR

WHOLESALEMARKET

DISTRIBUTORIMPORTER

EXPORTER


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Entry Strategies


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Direct Export

The firm becomes directly involved inmarketing its products in foreign markets

The firm itself performs the export task rather

than delegating it to othersExpected benefits are:

Increased sales

Greater control

Better market informationDevelopment of expertise in international marketing


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Direct Exporting Strategy

Sending international sales representativesinto the foreign market.Selecting local representatives or agents to

prospect the market

Using independent local distributors who willbuy the products to resell them in the localmarket (with or without exclusivity).Creating a fully owned commercial subsidiary

to have a greater control over foreignoperations. (In most cases, the commercialsubsidiary will be a joint venture createdwith a local firm to gain access to localrelationships.)


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Foreign Manufacturing


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Ownership/FDI

The international firm makes a directinvestment in a production unit in a foreignmarket. It is the greatest commitment sincethere is a 100% ownership.

The international firm can obtain wholly foreignproduction facilities in two primary ways:It can make a direct acquisition or merger in the

host market

It can develop its own facilities from the groundup.

In many countries, governments prohibit 100%ownership by the international firm and

demand licensing or joint ventures instead.


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Comparative Entry

Strategies

Export

Licensing

Contract

Manufac-turing

JointVenture

FDI

HighRisk/

HighReturn

LowRisk/LowReturn

Risk

Retur

nEntry Method Control Risk ResourceCommitment

Flexibility Ownership

Investments High Low High Low High

Contracts Medium Med-High Med-High Medium Med-High

Exports Low Low Low High Low

an Organ at on on Entr


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an Organ zat on on EntryStrategy

Psychic distance has a negative affect

Decentralization of decision-making has anegative affect

Organizational culture has a positive affect

International experience has a positive affect

Firm size has a positive affect


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Entry mode choice

framework


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Advantages/Locally

Cheap LaborReady made skilled RMG Workforce

Experience

Cheaper cost of machinesRegulatory Organizations providing

support

Favorable terms of Trade

Geography & Time frame AdvantageUsing Govt Policies & Subsidies

Product Pricing


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Weakness & Threats1. Bangladesh produces mostly basic products-

which are low cost items; the share of fashionproducts i.e., high value added product is very

low.

2. Bangladesh does not produce the basic rawmaterials (only a negligible quantity of cottonbut no manufactured fiber) and as such has todepend totally on sensitive global market.

3. Because of inadequate backward linkage,lead-time happens to be long, nearly

3months.


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Continued4. Public power supply is erratic.5. Bank interest rate is still high enough,

particularly of private sector bank, for

investment of export oriented high valueproject.

6. HRD facility, productivity and quality support,testing and accreditation support, design

support and compliances are yet to beenhanced.

7. Cost of doing business is high because ofunder table money

8. Lack of marketin tactics


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Continued9. Absence of easily on-hand middle

management

10. A small number of manufacturing methods11. Lack of training organizations for industrial

workers, supervisors and managers.

12. Fewer process units for textiles and

garments13. Sluggish backward or forward blending

procedure

14. Incompetent ports, entry/exit complicatedand loading/unloading takes much time


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Continued..15. Unless new strong market is explored in

home or abroad, any non-cooperation fromUSA & EU may jeopardize the whole

Bangladesh RMG export business andconsequently the textile manufacturing.

16. Sudden price hike of cotton and yarn in theglobal market may push Bangladesh to a veryawkward situation to devastate the business.

17. The type of labor and political anarchies ofthe recent days if prevails in the future,

Bangladesh may lose the business in the waySri Lanka has lost.


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Scope for Improvement

Produce Better Quality

Expand in Foreign Markets

Incorporating external Organizations

BGMEA & BKMEAImprove Relations for SAARC countries

Infrastructure

Finance

Communication & Transportation

Streamline/Sourcing supply of Raw-materials


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ConclusionBangladesh economy at present is more

globally integrated than at any time in thepast. The MFA phase-out will lead to moreefficient global realignments of the textileand clothing industry. The phase out wasexpected to have negative impact on the

economy of Bangladesh. Recent datareveals that Bangladesh absorbed theshock successfully and indeed RMGexports grew significantly both in FY05 and

(especially) in FY06.


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expansion of bd rmg in foreign markets bypassing middlemen

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