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RMG INDUSTRY
PREPARED FOR: SHEIKH MORSHED JAHAN,
ASSOCIATE PROFESSOR
COURSE INSTRUCTOR: BUSINESS STRATEGY, SPRING-2017
PREPARED BY:
J.M. Aminur Rahim, MBA 53E, Roll 03
Parag Pal, MBA 53E, Roll 04
Mohammad Mushfiqur Rahman Khan, MBA
53E, Roll 10
Asif Islam, MBA 53E, Roll 40
Md. Tanvirul Kader, MBA 53D, Roll 41
Literature Review-RMG Industry
Inner Domain
1. Culture: The $450 billion global fashion industry is one of the most
important sectors of the global economy that creates jobs and clothes
for people all over the world. It employs over 25 million workers in over
100 countries. The reality of this industry is that many individual
producers in the developing countries work long hours under strenuous
conditions for pennies on the dollar, far less than a living wage.
Readymade Garment (RMG) is the leading sector of Bangladesh
interms of employment, production and foreign exchange earnings
(Ali, 2008). Despite the fact that Bangladesh does not produce cotton,
the country is the second largest exporter of garment products. At
present there are 5,400 factories in the country and over four million
workers (BGMEA, Members Directory 2013-2014). However, there
exist many unacceptable working conditions which will be illustrate in
the following. In Bangladesh more than 85 percent of the RMG workers
are women. (Islam and Zahid, 2012). Employers prefer female
workers because they are cheaper and abundantly available, more
vulnerable, docile and manageable than male workers. They accept
the flexible terms of employment, without protesting and are also seen
less likely to be organized and susceptible to anti-management
propaganda from outside. (Khan 2001) Most of workers are aged in
between 22-25 years which is the about 42.22% of the total workforce.
(Farhana, March 2015) Employers do not prefer aged workers as
they can get worker at low cost if the hire new fresh workers. Study
shows the industry remuneration culture enables workers in providing
schooling to their children and basic residential facilities and they can
also provide financial support to their parents as well. Study shows 50
percent of workers working hours is 10 hours although standard
working hour is 8 per day (ILO, 2005). Minimum wage is BDT 5300
(Approx. USD66) (Wage Gazette, 2013). per month. But about
47.78% workers income is 9000-10000 BDT/month. (survey, 2015). In
India the scenario is almost the same with 80 percent of the workers
there are women. Minimum wage in India is around Rs. 5000 per
month. Minimum wage in china is a bit higher compared to other
places. Its RMB 13 per hour (A little more that $2). It is almost 4-5
times the Indian minimum wage. (MANI, 2013) For India it is tough to
increase the minimum wage as the price they get at manufacturers
end is just around 25% of the final retail price. Labor union strength is
weak, high labor turnover restricts union to organize and push for
collective bargaining.i In Cambodia In terms of the salary structure, as
highlighted earlier in the report the minimum wage currently stands at
100 USD per month for unskilled workers. Based on Cambodian Labour
Laws, in addition to the minimum wage, there are a number of
guaranteed earnings (transport/housing allowance, seniority bonus)
and variable earnings (overtime, attendance etc) which in total can
drive the salary of a worker with a minimum wage upwards of 180 USD
per month. (D Amico S. , 2014) In case of China companies
routinely shortchange their employees on wages, withhold health
benefits and expose their workers to dangerous machinery and harmful
chemicals Chinese workers were frequently working a seven-day week
in peak seasons and sometimes they sit working non-stop for 13 to 14
hours a day. In Thailand garment employees sometimes have to work a
day shift and a night shift. Overtime is usually obligatory and if workers
cannot work the additional hours they face penalties, verbal abuse and
dismissal. In an article published by ILO in 2012, the working condition
of workers are discussed. (ILO , 2012)
Textile is Vietnam second largest export industry and it hosts for
around 2 million workers. The working culture that drives this industry
is high productivity. But there are also complains about poor working
condition. But one of the main motivational factor here for the workers
is, the stability of the work (Angie Ngc Trn , 2012). A report
named, Made in Vietnam published by Workers RIghts Consortium
(WRC) in 2013, focused on the working culture in Vietnamese
manufacturing industry with special focus on textile industry. Some of
the important findings from the report is, the industry is reputed for
violation of freedom expression of rights, forced labor with detainees,
gender discrimination, especially pregnancy based discrimination, child
labor by bring minor laborers from rural to urban areas, inadequate
wages and not giving any rest in a week. Bangladesh has done
remarkable well in improving these areas. (WRC , 2013)
Intermediate Domain
4. Competition: Readymade garment (RMG) export from Bangladesh are
now facing stiff competition in the international market and
experiencing slower growth than its competitors. Although
Bangladesh's apparel exports to the US bounced back in the first half
of the year (January-June, 2015), it is still lower than that of the
competing countries. A fear looms large over the country's RMG sector,
which is apparently losing its edge in the US market to Vietnam, India
and Pakistan. According to Bangladesh Garments Manufacturers and
Exporters Association sources, exports from Vietnam to the US have
increased by about 16 per cent, Korea cent, India 11 per cent during
the period. Vietnam, the main competitor of Bangladesh, is gaining
more ground in the market while India is emerging. (BGMEA, 2016)
As per statistics of the Office of Textiles and Apparel under the US
Department of Commerce, shipment of local garment products to its
single largest destination reached at US$ 2.68 billion during January to
June of 2015, marking a 9.47 per cent growth. The earnings stood at $
2.45 billion during the same period of last year. Bangladesh's apparel
export to US fell to $ 4.83 billion in 2014 from $ 4.94 billion in 2013.
(OTEXA, 2015), Although Bangladesh's garment export earnings from
the US market grew by 9.47 per cent over that of last year, it is still
lower than that of its competitors and the price of locally-made apparel
items did not increase in line with the rising production cost, industry
sources said. Apparel exports to the US by Vietnam, India and Sri
Lanka grew by 15.43 per cent, 10.02 per cent and 16.46 per cent
respectively during the period. Vietnam's earnings stood at $ 4.94
billion during the first six months of 2015, which was $ 4.28 billion
during the same period of 2014, the OTEXA data showed. India
exported garment worth $ 2.0 billion against $ 1.82 billion during the
same period of last year, it revealed. Sri Lanka fetched $ 999.83 million
which was $ 858.53 million in the same period of 2014. On the other
hand, Chinese apparel products export grew by 1.69 per cent to $
12.60 billion during the January to June of 2015 from $ 12.39 billion in
the last year. (RMG In Back Seat In World Competition, 2017)
"The US economy has started to recover and Vietnam and India are
doing well in the market but Bangladesh is losing the opportunity as a
negative campaign took place in the international community due to
the industrial incidents," said economists while talking to The Business
Outlook. According to industry sources, Vietnam and Cambodia
targeted to grab the space China is losing in the US and EU markets.
India is also taking advantage of the depreciation of its currency.
Bangladesh would have to increase its productivity and
competitiveness to compete with the Vietnam and India in the US
market. He also said that ensuring compliance and promoting brand
Bangladesh were important for the expert growth. (Rahman, 2017)
Outer Domain
7. Creative Domain: Innovation in technology plays a great role in the
RMG industries in various aspects. Mainly it contributes in the industry
to achieve the economies of scale, producing in a cost effective way,
and taking consideration of environmental sustainability. Recent
technological developments in clothing production equipment have
centered on machinery for knitting, linking, pleating, decorating and
embroidering. In particular, new computerized flat knitting machines
have enabled knitwear to be created in one piece without the need for
linking or sewing. In linking, an intelligent machine has been developed
which features an easy-to-use screen and an intelligent camera. In
pleating, a Japanese machine has been invented which takes the
physical strain out of the pleating process. In decorating, Barudan has
produced a machine which makes it possible to cross-seam embroidery
on the legs of finished jeans for the first time. TPM Germany has
launched a machine which can perform many printing and finishing
operations, while several companies have developed special systems
for lasering patterns on to jeans. In embroidery, Barudan has
introduced one of the first triple combination machines, Brother has
developed a machine which allows appliqu to be attached at the
same time as mainstream embroidery, and Koma- Tech has invented a
machine to produce three-dimensional fuwari embroidery. (Textile
Outlook International , 2010) In 2015, spinning industry witnessed
a trend of smaller order sizes which is likely to continue in 2016. The
combination of high demand and decreasing raw material costs has
also provided spinners with the opportunity to enhance margins, which
have historically been very thin for this industry. Perhaps the biggest
change in 2015 over past periods of sustained prosperity is the size of
orders. Orders are relatively small, at least for most specialty spinners,
and the variety of yarns spun is on the rise. (Fashionating World, 2016).
In terms of sustainability, continuing with increased environmental
awareness the major trend for the sector would be significant
innovations in sustainability reducing water and energy consumption,
which are vital developments for the benefit of the environment and
saving costs. Environmental and economic considerations go hand in
hand, and have been the driving force for the last few years. Even in
areas such as finishing, where water consumption and pollution was a
particular issue. Another important development is the rise of digital
printing, which doesnt require water. Digital printing is an
environmentally friendly technology. In recent years, technical textile
has become a major segment globally because of several advantages
like functional requirement, health and safety, cost effectiveness,
durability, high strength etc. The global technical textile industry has
witnessed an increase in consumption from 25 per cent in 1998 to 37
per cent 2010. The largest segments are Mobiltex, Indutex and Sportex
which contribute to about 55-57 per cent of the total Technical Textiles
globally. In the US and Western European countries, there is legislation
for mandatory use of such products which has further fueled growth in
demand. China, Brazil and Canada are some other countries to play
important role in shaping the technical textile industry in 2016. A major
area which is promising for technical innovation, in digital printing, is
ink, which has the ability to get better and print on more types of
fabric. With a Silicon Valley-based company such as EFI getting deeply
involved in textiles, the market is going to see a very meaningful
innovation in software applications, helping color to be accurate and
improving efficiency in the printing process to save customers time
and money. There is no doubt that this is an exciting time for
innovation in the textile industry. (Fashionating World, 2016). In
terms of technological innovation, there is another filed of creativity
that is linked to the Defense Dept. of the USA along with universities
including MIT to develop new combat uniforms that might
communicate and change color, signaling friend or foe to help prevent
deaths by friendly fire, or uniforms filled with optical sensors to make a
soldier invisible to an enemys night-vision goggles. There are also
technologies to produce specialized fabrics that weave in ceramics,
metals and fiberglass. These high-value fabrics are used in products
like safety gloves for industrial workers and body armor for the police
and military. (New York Times, 2016)
BREXIT issue: Britains exit (Brexit) from the EU will hurt Bangladesh
exports especially the RMG sector to UK markets as it will cast shadow
on the exchange rates, fear the countrys economists and RMG
exporters.While UK is the third largest single export destination for
Bangladesh, it is very important for us as the exporters enjoy duty-free
market access for all products under Generalised System of
Preferences (GSP). That is why it has become a big question for the
country as to whether it will be able to enjoy the trade facilities after
the exit of UK. (Rashid, 2016)
Jinmin Wang et al.The expansion of textile and clothing firms of China to Asian Least
Developed Countries: The Case of CambodiaWorking Paper Series, No. 60,
December 2008, Asia-Pacific Research and Training Network on Trade
Ms. Alqa Aziz, RMG Trading Scenario in India and Other Major Countries- Comparative
Performance & Issues, International Journal of Business and Management,
Angie Ngc Trn, Vietnamese Textile and Garment Industry in the Global Supply Chain:
State Strategies and Workers Responses Institutions and Economies, Vol. 4, No. 3,
October 2012, pp. 123-150
Shahjahan Ali , Brexit and the Impact on Bangladesh Imperial Journal of Interdisciplinary
Research (IJIR) November 2016