Project Report on marketing analysis & Strategy
Large-scale production of ready made garments (RMG) in organized factories is a relatively new phenomenon in Bangladesh. Until early sixties, individual tailors made garments as per specifications provided by individual customers who supplied the fabrics. Since the late 1970s, the RMG industry started developing in Bangladesh primarily as an export-oriented industry. The sector rapidly attained high importance in terms of employment, foreign exchange earnings and its contribution to GDP. With the growth of RMG industry, linkage industries supplying fabrics, yarns, accessories, packaging materials, etc. have also expanded. In addition, demand for services like transportation, banking, shipping and insurance has increased. The total indirect employment created by the RMG industry in Bangladesh is estimated to be some 65000 workers. The hundred percent export-oriented RMG industry experienced phenomenal growth during the last 15 with the government giving high priority to the development of RMG industry.
One of the garment manufacturers is Sentier Apparels Ltd. who has widespread contribution to the success of RMG sector in Bangladesh. This report is based on one of the nine strategic business units of SENTIER which is called Sentier Mode Apparels Ltd., a complete knit composite unit. I have tried my level best to analyze the entire work process in terms of departmental coordination of this unit. I have also tried to identify major shortcomings of various departments as well as potential risk factors which affect overall marketing of SENTIER.
History of RMG
The Ready Made Garment industry in Bangladesh is made up of 3,486 manufacturers and accounts for 76% of total foreign exchange earnings. It employs about 180,000 managers and 1.5 Million workers, of whom 1.2 Million are women. In Bangladesh, the RMG industry has emerged as a major economic sector and has had its impact on the financial services sector, communications, transportation, and on other related industries The RMG industry has had a major social impact. It has empowered 1.2 million women with employment and economic independence, which in turn has earned for Bangladesh recognition as a modern and enlightened society. The RMG sector in Bangladesh was not etched out by a competitive and efficient industry. It came about as a result of benevolent accommodations extended to Bangladesh as a developing country. Buyers came to Bangladesh of their own volition and it was at their behest that the industry grew and thrived. Since quality, competitiveness, and efficiency were not required to attract buyers, these aspects have remained largely ignored by the manufacturers of RMG in Bangladesh. The output of the RMG sector in Bangladesh is typified as low cost, low value added and poor quality. The high-end market niches, which demand high value addition and high quality, are well beyond the reach of the RMG manufacturers in their present state. When the preferential accommodations are withdrawn in 2005, other countries with preferred status will take Bangladesh’s place as low cost producers. The RMG sector in Bangladesh, with its poor quality and low productivity will be no match for the competitive producers. Sri Lanka has a smaller industry, but the annual turnover in volume and in dollar value is comparatively far superior to that of Bangladesh. The higher volume is explained by productivity. Factories in Sri Lanka operate at 80% – 90% of potential capacity. Whereas in Bangladesh, according to some experts, productivity are between 35% and 55% of potential capacity with very few exceptions. For the RMG sector in Bangladesh, productivity alone can make a difference between life and death. The higher dollar value is explained by the addition of value. The consumer surplus is drastically greater in the market for high end products. Consequently, the profit margin is much higher for high end products. Trained people are at the heart of the successful RMG manufacturer: Trained designers, in tune with designers at the buyer’s end, adapt the buyer’s needs into the manufacturing process. And skilled managers organize the production floor for efficiency and quality. Sri Lanka invested in creating the human resource that mans their industry: CITI, Phoenix College, University of Moratuwa, are only some of the academic institutions in Sri Lanka that train people for the RMG sector. In India, the Ministry of Textiles has set up National Institutes of Fashion Technology in all major cities. In addition there are a large number of elite private institutes.
It is in this context that the BGMEA visualized and established the BGMEA Institute of Fashion & Technology in November 1999 and opened its doors to students in April 2000. Presently there are about 250 students enrolled in two Bachelor degree programs under the National University. 675 people employed in the industry have attended certificate courses on various aspects of the manufacturing process. Academic activities at BIFT are stimulated by the apparel manufacturing industry. The degree programs, though distinct, require students to develop some skills that are basic to designing and making apparels. These basic skills are learned through the first two semesters. Thereafter students are able to declare their candidacy for one of the degrees.
Garments Industries of Bangladesh
The ready-made garment industry in Bangladesh is not the outgrowth of traditional economic activities but emerged from economic opportunities perceived by the private sector in the late 1970s. Frustrated by quotas imposed by importing nations, such as the United States, entrepreneurs and managers from other Asian countries set up factories in Bangladesh, benefiting from even lower labor costs than in their home countries, which offset the additional costs of importing all materials to Bangladesh. Bangladesh-origin products met quality standards of customers in North America and Western Europe, and prices were satisfactory. Business flourished right from the start; many owners made back their entire capital investment within a year or two and thereafter continued to realize great profits. Some 85 percent of Bangladeshi production was sold to North American customers, and virtually overnight Bangladesh became become the sixth largest supplier to the North American market. After foreign businesses began building a ready-made garment industry, Bangladeshi capitalists appeared, and a veritable rush of them began to organize companies in Dhaka, Chittagong, and smaller towns, where basic garments–men’s and boys’ cotton shirts, women’s and girls’ blouses, shorts, and baby clothes–were cut and assembled, packed, and shipped to customers overseas (mostly in the United States). With virtually no government regulation, the number of firms proliferated; no definitive count was available, but there were probably more than 400 firms by 1985, when the boom was peaking. After just a few years, the ready-made garment industry employed more than 200,000 people. According to some estimates, about 80 percent were women, never previously in the industrial work force. Many of them were woefully underpaid and worked under harsh conditions. The net benefit to the Bangladeshi economy was only a fraction of export receipts, since virtually all materials used in garment manufacture were imported; practically all the value added in Bangladesh was from labor.
Contribution of RMG to the economy
Globalization, especially the intensification of trade liberalization in the 1990s, has had a significant impact on the Bangladesh economy, opening up opportunities in the export sector and subjecting the import-competing sectors to greater international competition.
Overall, exports in the 1990s have increased by a factor of four, with imports also rising. The ratio of exports to GDP rose from around 5.5 percent in the early 1980s to around 13 percent in 1997. GDP increased to nearly 5 percent on average over this period, leading to a modest rise in per capita income. Unfortunately, the growth in income has also been accompanied by a rise in income inequalities, the national Gini coefficient rising from around 0.36 in 1983/84 to around 0.43 in 1995/96. Absolute poverty, at around 47.5 percent of the population, has registered hardly any decline from 1988/89 to 1995/96, although the percentage of the hardcore poor (those unable to meet 1,805 k. cal per person per day) has declined a few percentage points, and still accounts for 25 percent of the population. Within the export sector, there has been a shift away from more traditional exports such as tea and jute, to items such as RMG, fish and seafood, and leather.
Figure: RMG exports from Bangladesh
The current manufacturing growth experienced by Bangladesh is thus by and large driven by the growth of the RMG industry. In 1992, knit and woven RMG accounted for 7 percent of units, 11 percent of fixed assets, 21 percent of annual investment, 30 percent of the employment and wage bill, and 23.5 percent of gross value added and returns on capital attributable to Bangladesh’s private manufacturing sector.2 A study of the country’s manufacturing sector’s performance in the 1980s found that the top 11 sub-sectors were, in terms of growth in value-added, RMG, fertilizer, tea processing and blending, compressed liquefied gas, biddies, leather shoes, printing and publishing, bakery, fish and sea food, silk and synthetic textiles, dyeing and bleaching textiles, soft drinks, hand and edge tools, china and ceramic wares, and tanning and finishing.3 According to a more recent study, RMG and pharmaceuticals are the two sub-sectors which demonstrated the most robust growth in output between 1988/89 and 1995/96, and thus commanded the most significant weight in the manufacturing structure.
Growth of the Ready Made Garments (RMG) Industry
Since its beginning more than two decades ago, the RMG industry has shown phenomenal growth, despite Bangladesh’s generally sluggish industrial base, turning the country from a traditionally jute-centered export economy to one primarily based on RMG exports.
Between 1983 and 1984/85 the number of garment manufacturing units increased from only 47 to 487. In the 1990s, Bangladesh Garments Manufacturers and Exporters Association (BGMEA) membership experienced an annual average growth rate of 18 percentage points
Exports the Ready Made Garments (RMG)
The dynamic performance of the RMG industry has transformed Bangladesh from Jute exporting country into what is primarily a garment exporting economy. From about 4 percent of Bangladesh’s total export earnings in 1983-84, within a time span of 15 years, the RMG industry currently accounts for about 76 percent of the country’s total export earnings, making Bangladesh one of the 12 largest apparel exporters in the world. More than 95 percent of the output of the RMG units and about 90 percent of that of the knitwear units cater to the foreign market. The success of Bangladesh’s RMG exports is in part attributable to availability of cheap labor; preferential treatment received from the European Union (EU) under the GSP scheme; and substantial quotas available in the USA (as against quota restrictions imposed on its principal competitors, e.g. China, India, Pakistan, Sri Lanka, and Thailand).
In the late 1970s and early 1980s, intermediate buyers began to shift sources of RMG products from neighboring countries, due to the imposition of quotas, to countries like Bangladesh. Abundant cheap labor in Bangladesh ensured competitive prices, and thus acted as a primary incentive, while political turmoil in neighboring countries (e.g. Sri Lanka) further induced this transfer process.
By relaxing the need for working capital and allowing duty-free access to inputs for the RMG sector, conductive domestic economic policies such as the granting by the Bangladesh Bank of back-to-back letters of credit (L/C) and bonded warehouse facilities further accelerated the process of establishing new RMG units. Superimposed on this process has been the impact of the North American quota system and the European Union’s preferential treatment under various schemes, e.g. the General System of Preferences (GSP). While in the USA and Canada, quotas imposed on apparel imports mean guaranteed access for developing countries
Like Bangladesh, the GSP provided by the EU lends crucial support in maintaining competitive prices, and thus a competitive edge for Bangladesh’s RMG exports. Consequently, RMG exports have boomed (see Table 2.1 below). Over the last decade (1987-1997) the compound growth rate of RMG exports was more than 25 percent. Between 1992 and 1997, the annual compound growth rate of RMG exports experienced a robust growth of 19.4 percentage points, four times higher than GDP growth rates registered over the same period
Table-1: Macro Contribution of RMG Sector:
|RMG Earnings||Amount(billion US$)||As Percentage of GDP|
|Total RMG Exports||4.5||9.5|
|Local Value Retention||2.1||4.4|
|Direct Value-Addition by RMG||1.2||2.4|
Source: Export Promotion Bureau
Diagram-1: Product-Wise Contribution to GDP on 2004-5:
Source: Export Promotion Bureau
Emergence of Knit-RMG
The growth dynamics of the sector over the last decade evince two clearly discernible phases: during the initial period it was the woven-RMG which dominated the structure of apparel exports, whilst in recent years which could be termed as a second phase, it is the knit-RMG which emerged as no less of an important segment in the RMG sector with its share growing up steadily and local value retention fast approaching the level of woven-RMG. During the July-November period of fiscal year 2007-08 woven export fell by 3.17 per cent while knitwear exports increased by 6.19 per cent.
Table-2: Statement of monthly export’ 09 (Value in thousand Taka)
|SL.No.||H.S. Code/Heading No.||Name of Commodities||December2006||July-Dec.2007-2008||July-Dec.2008-2009||% of total|
|9.||H.S Code||Woven Garments||31931629||124838687||163467864||38.07%|
Source: Export Promotion Bureau
Diversification of RMG Industries
Within the apparels sector, Bangladesh has been able to accomplish product diversification by extending product line from T-shirts, pajamas, ordinary shirts, shorts, caps, women’s and children’s wear to shirts of complicated designs and jackets; and some brand items have also emerged where the value was added to both the export earnings and the local value retention.
Table-3: Main apparel items exported from Bangladesh (in Million. US$)
Source: Export Promotion Bureau
Barriers of RMG Industries
Bangladesh’s Ready Made Garments (RMG) sector today operates in a highly competitive global environment. The phasing out of quota privileges and varied facilities from developed countries offers new challenges as well as opportunities. The challenges include becoming more competitive in terms of quality, price, timely delivery, financial capacity, labor compliance standards, customer base, vertical setup, design and product development capability, advanced production facilities and long term business relationship. Increasing its international market share of existing exports, product diversification, efficiency gains through economies-of-scale and possible gains from vertical integration (e.g. establishment of composite industries for garment) can be characterized as the key opportunities.
There are several weaknesses of the RMG industry of Bangladesh like low labor productivity, the industry is vulnerable because as highly dependent on the imported raw materials, underdeveloped infrastructure, problems in power supply, transportation and communication, inadequate port facilities and port congestion. For RMG sector, the backward linkages are weaving the fabric, spinning the yarn, and dyeing, printing and finishing operations.
The Marketing Environment.
The marketing environment surrounds and impacts upon the organization. There are three key perspectives on the marketing environment, namely the ‘macro-environment,’ the ‘micro-environment’ and the ‘internal environment’.
This environment influences the organization directly. It includes suppliers that deal directly or indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this context, micro describes the relationship between firms and the driving forces that control this relationship. It is a more local relationship, and the firm may exercise a degree of influence.
This includes all factors that can influence and organization, but that are out of theirdirect control. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute products and new entrants. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology.
The internal environment
All factors that are internal to the organization are known as the ‘internal environment’. They are generally audited by applying the ‘Five Ms’ which are Men, Money, Machinery, Materials and Markets. The internal environment is as important for managing change as the external. As marketers we call the process of managing internal change ‘internal marketing.’
It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning. The organization’s marketing environment is made up of:
1. The internal environment e.g. staff (or internal customers), office technology, wages and finance, etc.
2. The micro-environment e.g. our external customers, agents and distributors, suppliers, our competitors, etc.
3. The macro-environment e.g. Political (and legal) forces, Economic forces, Sociocultural forces, and Technological forces. These are known as PEST factors.
The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:
1. How stable is the political environment?
2. Will government policy influence laws that regulate or tax your business?
3. What is the government’s position on marketing ethics?
4. What is the government’s policy on the economy?
5. Does the government have a view on culture and religion?
6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?
Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:
1. Interest rates.
2. The level of inflation Employment level per capita.
3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.
The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:
Ø What is the dominant religion?
Ø What are attitudes to foreign products and services?
Ø Does language impact upon the diffusion of products onto markets?
Ø How much time do consumers have for leisure?
Ø What are the roles of men and women within society?
Ø How long are the population living? Are the older generations wealthy?
Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:
Ø Does technology allow for products and services to be made more cheaply and to a better standard of quality?
Ø Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?
Ø How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?
Ø Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?
Ø Which marketing topic are you studying?
Analysis: For Ready Made Garments (RMG)
SWOT analysis should distinguish between where your organization is today, and where it could be in the future. SWOT should always be specific. Avoid grey areas. Always apply SWOT in relation to your competition i.e. better than or worse than yourcompetition. Keep your SWOT short and simple. Avoid complexity and over analysis SWOT is subjective. SWOT is a very popular tool with marketing students because it is quick and easy to learn.
S = Strengths
W = Weaknesses
O = Opportunities and
T = Threats
SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stand for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internalfactors. Opportunities and threats are external factors.
In SWOT, strengths and weaknesses are internal factors. For example:
Strength could be:
Ø Your specialist marketing expertise.
Ø A new, innovative product or service.
Ø Location of your business.
Ø Quality processes and procedures.
Ø Any other aspect of your business that adds value to your product or service.
A weakness could be:
Ø Lack of marketing expertise.
Ø Undifferentiated products or services (i.e. in relation to your competitors).
Ø Location of your business.
Ø Poor quality goods or services.
Ø Damaged reputation.
In SWOT, opportunities and threats are external factors. For example:
An opportunity could be:
Ø A developing market such as the Internet.
Ø Mergers, joint ventures or strategic alliances.
Ø Moving into new market segments that offer improved profits.
Ø A new international market.
Ø A market vacated by an ineffective competitor.
A threat could be:
Ø A new competitor in your home market.
Ø Price wars with competitors.
Ø A competitor has a new, innovative product or service.
Ø Competitors have superior access to channels of distribution.
Ø Taxation is introduced on your product or service.
A word of caution, SWOT analysis can be very subjective. Do not rely on SWOT too much. Two people rarely come-up with the same final version of SWOT. TOWS analysis is extremely similar. It simply looks at the negative factors first in order to turn them into positive factors. So use SWOT as guide and not a prescription.
Finding and Analysis
Contribution of the RMG industry to the socio-economic development of Bangladesh
The RMG is earning over 70% of the nation’s total foreign currency. 1n addition to earning lion’s share of the country’s total foreign exchange, this sector has brought about a positive transformation in the over allspice economic condition of the clotty. Some of the contributions that the sector marks to the nation are:
Total Earnings till Date
The industry has earned nearly USS 22 billion (Tk.103.4 Thousand Crore) for the country. The Value Addition portion has been about US$ 6.6 billion (Tk.31 Thousand Crore). However the earning is approximately about four times the investment in the industry. Estimated, present total investment is about Tk.3, 9000 Crore the earning is about Tk.16, 00 Crore.
The RMG industry of Bangladesh has enjoyed a meteoric rise, from less than 50 factories in 1983 to 2600 in 1997. In the same period, the level of employment has risen from some 10,000 to approximately 1.4 million (14lacs) today, with its share of employment in the manufacturing industry increasing ton a mere 2% to 15%.
About 90% of the workers are women, constituting almost 70% of all female employment in this nation’s manufacturing sector. Thus has created a vast scope family, families of about 1.4 million (14Lacs) workers depend on this industry. This industry has created a large-scale employment scope (About 1.5Crore, each garment factory is providing employment opportunity for about 550 workers.
The RMG sector has been playing role as one of the main catalyst contributing to the tremendous development of Banking and Insurance sector in our country. Presently, our commercial banks are earning over Tk.2, 000 Crore per year from our sectors. By now, some bank charges have increased to even three times the charges in 1985.
Insurance companies, even after reducing different rates by about 54%, are presently earning about 12.5% or about Tk.1800 Crore per year from the RMG industry as various types of premiums for insurance policies.
The manifold increase in the shipping business in Bangladesh including setting up of a several container yards (including an Inland Container yard at Dhaka by the Bangladesh Railway), expanding the port facilities to handle large containers, introducing special container – caning – trains, and the increasing of cargo handling and storage facilities at the Dhaka International Airport (ZIA) have also been due to the Gan nett industry.
C &. F business
The unprecedented increase in the C & F Stevedoring is because of the huge import of the gannet raw materials & export of ready made gannets. On average, they earn I % on all exports and imports which amounts to nearly TK. 230 Crore per year.
Tax on Export Earnings
As source tax only, presently the RMG industry is paying over Tk.40 Crore.
With the opportunity of earning more, they now want to enjoy their lives. Tills need is helping girls avoid early marriage and frequent pregnancy. It is contributing to the birth control program of our clotty also. From 1985 – 86 till date, the country has been saved from a burden of at least 4 million new mouths to feed.
Women emancipation and social transformation:
The industry is helping women emancipation and employment. The women workers, if enter this sector then continue to stay because of the very working condition congenial for them. They are enjoying recognition and dignity in the society. This sector helps approach social equilibrium between men and women. Having the capability of earning, girls/women are well treated by their families. They are no longer any burden to their families.
Prospect for a huge textile industry capable to supply over 3 billions yards of fabrics a year to the export oriented garments industry has also been developed by the industry. A large number of ancillary have been emerged and growing keeping pace with this industry as well. Estimates shows that about 80% of garment accessories like cartons, threads, buttons, labels, and poly bags.
Waste recycling industry
About 0.2 million people are engaged in (mainly, the waste cut pieces of fabrics) recycling industry. With these wastes, they are stuffing toys, pillows, quilts, cushions etc. and earning about Tk.1, 500 – 2,000 per month. It earns, on an average, at present, they are earning about Tk.30 – 40 Crore per year.
The road transport business has been expanded because the lion’s share of cargo, moving between Dhaka – Chittagong and Dhaka – Beanpoles by road, is on account of the gannet sector. Those who once started transportation business with rented trucks, many of them by now are the proud owners of even 10/12 trucks.
Enormous demand for real estate development generated by the garments industry to accommodate offices and factories of over 2,600 garments units deserve consideration. About 26,000 mid – level manages in the industry have been renting 26,000 posh housing accommodations in Dhaka and Chittagong. Moreover, one study shows that real estate industry could now look forward to launching prospective housing projects feasible and viable in both financial and social tennis for about one million single Women working in gannet industry.
Credit of manifold increase in the revenue of utility services also goes to this industry to a great extent. For example, this sector is paying on an average US $ 2.26 million (Tk.10.40 crore, @Tk.40,’000 per factory) per month. As telephone and fax bill, this industry is paying US $ 0.56 million (Tk.2.60 crore) per month.
Emergency Consumers Market
About 1.4 million workers in the industry are appearing in the consumers’ market with a demand worth US$ 1.59 million (Tk.7 Crore). An increasing demand for moderate cost cosmetics, sharee, footwear, fast food and other consumer products is also a direct result of about 1 million new consumers entering into the market with new living standard backed by increasing purchasing power. The industry is helping women emancipation and empowerment. (10 Track Records enclosed). For food (Mainly fast-food items), they are affording about US$ 0.61 million (Tk2.80 Crore) per day.
Ø The industry has proved itself to be the most prospective industry for a country like Bangladesh, which is endowed with the huge cost – effective labor force. Moreover, it has further been emerged to the soundest base for the hem} industries. As the stock market has been collapsed, Ri\1G offers itself as to be the only base for further industrialization in the clotty.
Ø The 1.4 million workers in the industry are appearing in the consumers market with a demand worth US$ 1.59 million (Tk1.7 Crore)
Ø The.4 mi11ion workers are spending about US $ 0.30 million (Tk1.4crore) as Mess rental per month.
Ø About 0.7 million workers are spending about US $ 0.02 mil1ion (Tk.7lakh) for conveyance per day.
Child labor elimination and education to the reloaded under age worker
Today, thanks to the wide media coverage received by the famous Harkin’s Bill, a General awareness about and appreciation of the noble aim and objective of the Bill has been created among the members of the BGMEA. Each and every Bangladeshi garments exporter is convinced that child labor is indeed” Abusive and Exploitative”. And as proof of that consciousness we at the BGMEA, with the corporation of the ILO, UNICEF, the Govt. of Bangladesh and active guidance of the US Mission in Dhaka, managed to sign on the 4111 of July, 1995 a historic document, known as memorandum of Understanding (MOU) on the elimination of child labor from the gaIll1ent sector of Bangladesh. Following implementation of that MOU, in both letter and spirit, the entire garments sector of Bangladesh has been declared child labor free with effect from October 31, 1996. Although the level of implementation is estimated by ILO at 95%, that should be considered a remarkable debt fee of implementation of the MOD in the socioeconomic realities of the country.
Major issues and prospects in the garment industry
(I)Need for market diversification
If Bangladesh were to remain competitive in the post MFA era, one inevitable strategy would be to take the necessary steps to increase labor productivity. In order to realize the incremental gains from the expansion of the global apparel market, the country also needs to diversify its market, instead of putting all its eggs in one basket, i.e. continuing to exploit the same niche market. Though Bangladesh now exports garments to about 25 countries around the world, the USA is the single largest importer of its RMG products, amounting to 43 percent of total garment exports. Bangladesh is the sixth-largest supplier of apparel in the US market (Rahman and Rahman, 2001). Considering the European Union as a single market, the USA then becomes the second largest. Over the past few years, Bangladesh’s RMG exports to the EU have expanded rapidly, with the EU currently importing about 52 percent of Bangladesh’s total garment products. The inter-temporal evidence of the narrow market base of Bangladesh RMG exports in the 1990s is provided by the concentration of exports to the US and EU market (almost 96 percent in 1998-99, see Table A2.8 in Annex). While the export share to the USA has witnessed an annual average rate of decline of 1.5 percentage points, however, the corresponding share to the EU has experienced an annual growth rate of 1.6 percentage points. Thus, the increment in the EU share has simply replaced the declining share in the USA market, which suggests that, instead of diversification, Bangladesh’s export market has remained concentrated over the past decade. The combined market share of the USA and the EU has thus increased from 95.5 percent to 95.6 percent between 1991-92 and 1998-99. Bangladesh so far has been unable to gain access to ASEAN or Indian markets, although it imports a huge quantity of fabrics and yarn from these countries. Similarly, although it imports about 95 percent of its total garment machinery from Japan, its market share of apparel export to Japan is a mere 0.1 percent.16 Bangladesh’s inability to gain access to these large markets in turn suggests that the country has yet to establish its claims, as advocated by the WTO, to the principles of reciprocity and market access.
Establishing backward linkages
A fundamental constraint on the potential of the RMG industry is the general absence of backward linkages. In their absence, despite abundant cheap labor, the country’s local value addition has so far been only 25-30 percent of gross exports. The RMG industry is currently heavily dependent on imported raw materials. Roughly 80 percent of the woven fabrics and 50 percent of the knitted fabrics are imported17, despite some improvements in this regard since the mid-1990s, in terms of investments in backward linkage industries, especially with the announcement of the Textile Policy, 1995, and the granting of various incentives by the Government. With the phasing out of the MFA, Bangladesh may face a supply shortage of required fabrics, some stakeholders argue, since the current suppliers will find it more profitable to use their domestically produced fabrics to produce their own RMG products, which they will be able to export competitively in the quota-free world apparel market. Recent trends and relaxation of the GSP to allow for accumulation within the SAARC region, however, suggest that the availability of fabrics may not be such a severe constraint. Nonetheless, Bangladesh’s excessive dependence on imported raw materials has adversely affected its competitiveness by increasing the lead time and cost of production.
Improvements in productivity
It is clear from the discussion so far that one issue facing the RMG industry in Bangladesh is the slow rate of increase in productivity, and the gap that exists between this country and other competitors in this regard. There is also scope for capacity building in different types of skills and processes. The aim should be to move the industry up to a different regime, wherein competition is based on higher productivity, an improved working environment, and backward and forward linkages to meet the new challenges of the post-MFA era. A more concerted action plan is needed in this regard. Interviews with entrepreneurs, for example, have suggested that Bangladesh is at a disadvantage compared to other countries in South Asia; such as, Sri Lanka, where a more educated labor force, especially at the supervisory and managerial levels, increases labor productivity. Thus, training schemes for managers and supervisors are an important element in increasing productivity, including the introduction of functional English courses for higher-level employees, improving their ability to read operating manuals and so on. To these ends, the Government should also increase its allocations to the education sector.
Responsiveness to consumer ethics and standards
New challenges facing the RMG industry and the export sector in general include greater consumer awareness of quality, health, and environmental standards. These issues may well act as non-tariff barriers, but entrepreneurs have little option other than to meet these requirements and codes of global transactions. Similarly, working conditions—including safety, health, and the earnings of workers, together with issues such as child labor—are growing concerns on the part of international consumers. The industry needs to improve its image in this regard, advertising recent achievements such as the abolition of child labor and improvements in occupational safety. Efforts to further improve standards, furthermore, are likely to have longer-term payoffs.
Need for a data bank
Interviews with entrepreneurs suggested considerable uncertainty regarding the behavior of competitors and their responses to the new global environment. A considerable gap also exists in knowledge about trade and investment flows. This is understandable, given that most entrepreneur interactions are with buyers who merely specify their product needs, provide the designs, etc. The emerging global environment, however, calls for more strategic action with regard to major competitors. In this respect, international organizations such as the ITC, UNIDO, and the ILO can have special roles to play. The relevant ministries can also maintain easily accessible data banks on trade flows by country and region, including information on product line, changes in unit costs, special opportunities, new technologies, cost effectiveness of different technologies, etc., especially in the backward linkage industries. The BGMEA should also try to disseminate such information to all types of entrepreneurs.
Dark Side of the Garment Industry
This most flourishing industry of Bangladesh has its dark side. A large number of the units are located in dilapidated buildings. In April 2005, an entire building, housing hundreds of mainly female workers in the outskirts of Dhaka, collapsed. Sixty-four laborers, at work on their machines, were crushed to death, and 84 injured. What is worse, most of these buildings do not have adequate fire escapes. On February 24 this year, more than 50 people were killed and about 100 injured in a fire at a textile mill in Bangladesh.
Company Overview: Sentier Mode Apparels Ltd.
Introduction to Sentier Apparels Ltd.
Sentier Apparels Ltd. is one of the fast growing companies in RMG sector of Bangladesh, started in 2005 and since then it has expanded its business from the Far East to the West with Europe, America and Canada. The Group has nine units with 1456 skilled professionals, 227 set of Circular Knitting Machine, 1213 set of Sewing Machine and 465 set of Sweater Machine.
Products of Sentier Mode Apparels:
|Basic T-Shirt, Polo Shirt, Tank Top, Ladies Dress, Night Gown, Fleece Shirt, Jogging Suits, Fleece Jacket, Rugby Shirt and Sweater, Medicine & Foods.|
Buyer and Exporting Country of Sentier Mode Apparels:
|Sweden, France, UK, Spain, Tuscania,, Italy, Germany, Italy.|
Diagram-2: Graphical representation of major buyer’s positions of Sentier Mode Apparels Ltd.
4.1.3 Table-4: Production Capacity of Sentier Mode Apparels:
|Finished Fabrics||1800 Kg. per day|
|Basic T-Shirt||104 000 pieces per month|
|Polo Shirt||33000 pieces per month|
|Sweat shirt (One side brush)||13000 pieces per month|
|Yarn died||4000 kg. per day|
|Brush||4,000 kg. per day|
|Emarizing||3,000 kg per day|
|Printing||25,000 pieces per day|
|Embroidery||30,000 pieces per day|
|Total Production Capacity||179, 4000 pieces per month|
4.1.4 Table-5: Export history of Sentier Mode Apparels:
|Year||Amount in USD|
Source of all information: Corporate office of Sentier mode Apparels
4.1.6 Backward Linkage:
This is a term related to various raw materials required to fulfill a contract and produce an ordered garment. Major components of BL consist of fabrics, accessories (sewing, thread, buttons, labels, etc.), packing materials (poly bags, cartoons, pp band, etc.). Most of the time production has to depend on various suppliers for accessories.
4.1.7 ERP System:
Sentier Apparels Ltd. has well-established software called ‘Enterprise Resource Plan’ which facilitates all departments/SBU required information flow, buyers’ info and shipment data.
Below is the graphical representation of one of the system’s pages.
Diagram-3: Graphical view of total volume in ERP System
Organogram: Sentier mode Apparels
Organogram: Sentier Mode Apparels Ltd.
4.2.1 Procedure of producing Knitwear:
Following procedure shows how knitting garments shipped out after the confirmation of the order:
- Order collection
- Performa invoice
- L/C receive
- Back to back L/C open
- Fiber Collection
- Spinning for making yearn as per order sheet
- Knitting of fabric making as per order sheet
- Dyeing for fabric color and shrinkage as per order sheet
- Cutting as per style
- Sewing as per style
- Finishing as per customer requirement
- Packing as per customer requirement
In each phase of production, samples are to be sent to buyer for checking. More elaboration has been depicted in ‘Production Department’ part.
4.2.2 Example of estimated cost per unit of knitwear:
Full chest 112cm+8cm (allowance) = 120cm 150GSM (Gram Square Meter)
Total length 70+5 (allowance) = 75cm
Sleeve length 30.5 (allowance) = 35cm
Full length (body sleeves) = 110cm
Total fabric required
Consumption= 120cm*110cm*150GSM*12dz*/10000000=*10%/+ =2.62kg
Fabric price= 2.62*$5 (FOB price) = $ 13.10
Collar & cuff= $ 5
Cutting/Machine charges= $ 5
Print/embroidery= $ 2.4
Accessories= $ 3
Commission= $ 1.8
Total= $ 30.3 per dozen
Per unit price of a complete knitwear= $30.3/12 = $2.53
Note: Price varies from item to item.
Since the research topic is on explaining work process of Sentier Mode Apparels Ltd. and also to find out related shortcomings and ways to improve those in light of marketing, therefore available literature on this subject must be reviewed. In this context, available studies, from where important information has been collected, are outlined in ‘Bibliography’ part. And different marketing concepts and models suggested for SENTIER in light of objectives of this study are discussed in this chapter as per the sequence of suggested strategies stated in ‘Recommendation Chapter’.
The Chartered Institute of Marketing defines marketing as ‘The management process responsible for identifying, anticipating and satisfying customer requirements profitability’. Philip Kotler defines marketing as ‘satisfying needs and wants through an exchange processes.
Elements of Marketing
Marketing decision variables are those variables under the firm’s control that can affect the level of demand for the firm’s products. They are distinguished from environmental and competitive action variables that are not under the firm’s control.
The 4 Ps represents elements of marketing strategy that the marketer can control and are called ‘Marketing Mix’. They depend upon such “givens” as budget; personnel or human resources; physical resources, such as office equipment, space, etc. But the marketer can do a lot to influence them.
Table-6: Marketing mix
|Product/Service||Individual goods, product lines or services||Includes Product/Service features and benefits that meet consumer wants and needs as identified through market research.|
|Place/(Means of Distribution)||Getting the product to the customer.||Channels, distribution systems, middlemen, warehousing, transportation and shipping as identified in research as meeting consumer expectations.|
|Price||Setting a price that serves the customer well and maximizes justifiable profits to the company.||Price of the Product/Service, level pricing, introductory pricing, discounts, allowances, geographic terms. Again, this is established in relations to consumer willingness to pay as identified via market research.|
|Promotion||Communicating with the customer, developing relationships||Public Relations, Advertising, Personal selling and Sales Promotion. If the Product, Price and Place are in sync with what consumers want/need, Promotion reminds them the needs-satisfying Product/Service is available.|
The current economic environment includes elements such as consumer confidence, unemployment, new technologies that threaten to displace one’s own, competitors that suddenly appear on the horizon, government regulations thought up by the marketer’s favorite controlling or anti-business political party, and changing consumer references. This also includes things like famine, flood or natural disasters. The marketer just can’t control these and they can play havoc with his marketing and promotional plans.
The International Marketing Mix
When launching a product into foreign markets a company can adopt to use a standardized marketing mix around the world or an adapted marketing mix in each country.
International Product Strategies Standardization Vs Adaptation:
In international markets, one has to take into consideration consumers’ cultural background, buying habits, levels of personal disposable income etc in order to deliver a tailored marketing mix program to suit their needs. The arguments however for standardization suggest that there is no need to adapt products to local markets. In many circumstances a company will have to adapt their product and marketing mix strategy to meet local needs and wants that cannot be changed.
International Promotion Strategy:
As with international product decisions, an organization can either adapt or standardize their promotional strategy and message. Advertising messages in countries may well have to be adapted because of language barriers or the current message used in the national market may be offensive to overseas residents.
International Pricing Strategies:
Pricing on an international scale is difficult. The organization needs to consider the costs of transport, any tariffs or import duties that may be levied on their product(s) when they are sold on the international scale. Exchange rate fluctuation will also impact profitability and influence pricing decisions. Other factors to consider include local incomes, general economic situation of the country and their influence on pricing.
International Distribution Strategies:
A standard distribution channel may go from a manufacturer, wholesaler and retailer to consumer or direct from a manufacturer to a retailer. In an overseas market there may well be more intermediaries involved.
Any organization that wishes to succeed and survive in their market needs to analyze their competitors’ strategies. Competitor analysis is a vital part of the marketing planning process.
Competitor analysis enables an organization to:
Ø Collect information on competitors that will directly influence the firms’ strategy.
Ø Help the firm anticipate what the actions of their competitors will be, to their entry within the marketing.
Ø To exploit the competitor’s weaknesses so the firm can gain an overall competitive advantage.
If a firm is to enter a market, some of the information they would need to know about competitors is listed below.
Ø Who are your competitors?
Ø What is the size and dominance within the market?
Ø Which customer base are they aimed at?
Ø What is their positioning within the market?
Ø What are their objectives?
Ø What are their strengths and weaknesses?
Data of competitors can be acquired as below:
Recorded data: This is data on competitors that already has been published. This data could be internal to the organization e.g. annual reports or external e.g. newspaper articles or magazine reviews of competitor products.
Observable data: This is data collected through observation of competitors. This could include looking at competitors marketing mix strategy, product or service ranges.
Opportunistic data: This data involves the firm talking to those who have or have had contact with the competitor’s suppliers.
These people could give inside information on the company. The company could also actively recruit people who worked for their competitors, or head hunt others.
Relationship marketing is a form of marketing developed from direct response marketing campaigns conducted in the 1960’s and 1980’s which emphasizes customer retention and continual satisfaction rather than individual transactions and per-case customer resolution. It differs from other forms of marketing in that it targets an audience with more directly suited information on products or services, which suit retained customer’s interests. Relationship marketing relies upon the communication and acquisition of consumer requirements solely from existing customers in a mutually beneficial exchange. A key principle of relationship market is the retention of customers through varying means and practices to ensure repeated trade from preexisting customers by satisfying requirements above those of competing companies through a mutually beneficial relationship. Theories suggested that the cost of acquisition occurs only at the beginning of a relationship, so the longer the relationship, the lower the amortized cost. Long-term customers tend to be less inclined to switch, and also tend to be less-price sensitive. This can result in stable unit sales volume. They may also initiate free word of mouth promotions and referrals.
Customer Relationship Management (CRM)
CRM consists of three main elements:
Ø Identifying, satisfying, retaining and maximizing the value of a firm’s best customers.
Ø Wrapping the firm around the customer to ensure that each contact with the customer is appropriate and based upon extensive knowledge of both the customer’s needs and profitability.
Ø Creating a full picture of the customer.
Major components of the successful implementation of CRM are:
Ø A front office that integrates sales, marketing and service functions across all media.
Ø A data warehouse that stores customer information and the appropriate analytical tools with which to analyze that data and learn about customer behavior.
Ø Business rules developed from the data analysis to ensure the front office benefits from the firm’s learning about its customers.
Ø Measures from performance that enable customer relationship to continually improve.
Ø Integration into the firm’s operational and support systems ensuring the front office’s promises and delivered.
Organizational Design for Inter-functional Cooperation
Organizations are typically designed what Galbraith and Nathan Son have defined as the “ Segmentation of work into roles such as production, finance and marketing and recombining roles into departments or divisions around functions, products, regions or markets and the distribution of power across this role structure. To resolve conflict and disputes between areas of specialty and to assure that board organizational goals will be obtained, coordination of the various functional activities is normally achieved vertically through the hierarchy of authority or through committee work and liaison roles.
Designing for Competitive Advantage:
Macmillan and Jones have suggested that an organization can better serve its purpose if it is designed to be competitive rather than efficient. In pursuing a competitive organizational structure, an organization must address such important issue as
Ø What major task groupings are feasible design alternatives?
Ø What linkages are necessary between groupings?
Ø What support systems are needed?
Key Linking Mechanisms
- Task Force: A group is selected from various activities to tackle a specific inter-group problem. It is automatically disbanded after the problem is solved.
- Team: A group is selected from various activities in the organization to respond to recurring problems that cross over group boundaries.
- Integrating role: An individual is charged with formal responsibilities for coordinating between two groups.
- Integrating Department: A department with independent resources and staff whose task is to ensure coordination between two groupings.
- Matrix: A person simultaneously reports to and has responsibility for a number of managers, each in-charge of different activities or resources which must be coordinated.
Decision Support Systems:
Decisions support system (DSS) contributes much towards integrating personnel in different departments, enabling a firm to use its competitive advantages better and to overcome interdepartmental conflict. Decision support system are computer systems develop to aid managerial decision making by employing state-of-the-art quantitative models that analyze proposed actions by evaluating how those actions would affect all primary areas of an organization.
Product Life cycle
The product life cycle concept suggests that a product passes through four stages of evolution: Introduction, growth, maturity and decline. As a product evolves and passes through theses four stages profit is affected and different strategies have to be employed to ensure that the product is a success within its market.
Introduction: As a new product much time will be spent by the organization to create awareness of it presence amongst its target market.
Growth: If consumers clearly feel that this product will benefit them in some ways and they accept it, the organization will see a period of rapid sales growth.
Maturity: Sales slow down as the product sales reach peak as it is accepted by most buyers.
Decline: Sales and profits start to decline, the organization may try to change their pricing strategy to stimulate growth, and the product will either have to be re-modified, or replaced.
Findings of the Study
This chapter covers specific objectives 1 to 4. How all the departments operates individually to furnish a particular order, what tasks they perform, what are the requirements, how they are interrelated, what are the requisites they share in a work, what are their major limitations and their impacts on overall marketing, all have been critically analyzed based on available information and observation. Also the possible controllable and uncontrollable risks factors that may affect firm’s survival in the long run have also been depicted in this chapter.
6.1 Departmental work process Sentier Mode Apparels Ltd.
Sentier Mode Apparels Ltd. is consists of 5 major departments as follow:
- Departments of Marketing
- Departments of Merchandising
- Departments of Production
- Departments of Logistics
- Departments of Commercial
However, the business of RMG starts with buyer’s confirmation of an order (for example, 50000 pieces T-shirts) to SENTIER. Terms of payments and all transactions are settled by opening LC (letter of credit) by both buyer and seller in their respective origin banks. After that marketing department of SENTIER receives order sheet and pass it to merchandising department to create sample as per buyer’s requirements. Once sample is approved, production department starts production as per instructions of merchandising department. Raw materials for production are ordered and purchased by merchandising department from suppliers against back-to-back L/C against the original/master L/C. Limit of back-to-back L/C is up to 80% of the total value of original L/C. Once production completes, logistics department pack the goods and send to buyer nominated forwarder/carrier to ship out the goods towards destination. Commercial department, in this occasion, prepares and provide all documentations of entire shipment as per buyer and organizational requirements and specifications. Once goods sailed, commercial department submits all documents to the L/C opening bank who again endorse and send those to buyer’s L/C opening bank for payment of goods being shipped out. Buyer needs to release necessary documents from their bank by payment of goods and use those documents for releasing goods from the custom/carrier. Once buyer paid to his bank, they instructed seller’s bank to pay the seller. Thus the seller gets their payment through their L/C opening bank.
Above tasks are performed by major five departments of SENTIER, which are well established and work in great concert in carrying on each of its orders. From importing raw materials to production and from packaging to ship out, SENTIER provides its customers highest value by ensuring quality production and on time delivery with full security and compliance. Behind the success of SENTIER is ensuring customer solution through commitment towards quality, operational performance and timely delivery.
Now let’s have a look at below departmental work processes and work coordination among all of them:
Marketing department of SENTIER plays the vital role for the entire business. Orders from buyers came through this department and all sorts of communication also pass through the marketing people. Thus marketers of SENTIER must possess high quality and high knowledge of the entire operational procedures as well as both exporting and importing countries’ laws and regulations. As involved in International Marketing, SENTIER has two types of buyers, such as direct buyers (who place orders directly with SENTIER) and buyers through buying agents (who place orders via buying agents). SENTIER believes its marketing process should encompass three aspects as follows:
Handling: The marketer should carefully handle all needs and wants of buyer keeping own interest intact.
Managing: Managing all requirements of