Final Report Eco

Assignment on Questionnaire Survey on Industry Competitiveness

Course Name: Managerial Economics Course No. : E 501

Prepared for: Sheikh Morshed Jahan Assistant Professor IBA, D.U. Prepared by: Mujtuba Kabir Roll# 17 MBA 41D Md. Iftekhar Alam Roll# 01 MBA 41D Sheikh Nasir Uddin Roll# 38 MBA 41E Asheque Elahi Roll# 111 MBA 40D

Date of Submission: May 28, 2008 Institute of Business Administration University of Dhaka

After

deteriorating the contribution of agricultural products like

Jute, Tea to the country’s economy (in terms of export), the attention has turned to the role of manufacturing sector, especially in garment industry. The garment industry in Bangladesh has become the main export sector and a major source of foreign exchange since 1980. The last several decades have seen that Bangladesh’s dependency on the garment sector grow significantly. So is the competition among the entrepreneurs. Our survey was mainly designed to reveal the competitiveness of the garment industry as well to recommend steps based on the overall business environment which will offer a boost to the economy. The findings along with the profile of the entrepreneurs have been furnished below:

FINDINGS FROM

SURVEY

 Case-1 (Business type: Supplier of dye chemical) Company: Scarlet Services Ltd. (Distributor of DyStar Chemicals GBH) Product(s): Dye chemical(s), Color powder Year in business: 13 years Key Customers: Knit factories, Yarn factories

‘As more and more entrepreneurs are looking for value addition, demand for dye chemicals and color powders have been steadily increasing’, said Mr. Russell. There is no dearth of textile engineers to market this kind of product. However producing this sort of material is not feasible in Bangladesh because of high cost of machineries 2

and raw material as well as dearth of technical capabilities of local chemical engineers. As a distributor, Scarlet Service Ltd. Faces competition from giants likes BASF. It also has to compete with cheap Chinese and Indian products. Most of the producers come from developed countries like Germany and Switzerland. The entrepreneur is, however, optimistic about demand for such products to rise. However competition will also increase from cheap brands. Fake products are a problem in this industry. Since he is a distributor, he does not have any idea about role of government in this regard. He hopes government will encourage more dyeing and knitting factories because that will also increase his sales. Scarlet Service has been able to expand its customer base steadily for the last couple of years. The M.D. attributed this success to availability of quality textile engineers in the marketing process and a working culture at Scarlet where everybody respects each other’s works. However not all companies were that lucky. Finally producing this type of product is not ruled out once the local industries create a substantial amount of demand. However the technological deficiencies would be a huge task, he noted. Fewer complexities in opening a L.C. will facilitate his business. Banks demand large amount of collateral and impose some undue conditions, which discourages small businessman like him. Also interest rate is quite high to go for short-term borrowing. He proposed a specialized bank for the textile sector catering to the needs of textile and garments sector. To improve the quality of locally made knit and dyeing products (woven), the basic materials like dye color and colored powders can make significant difference. They play significant role in improving

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the quality of the final products made in the form of cloth and accessories.

 Case-2 (Business type: RMG) Company: Mirpur Garments Ltd. Product(s): T-shirt, polo-shirt, top, shorts Year in business: 04 years Key Customers: European market The main drive to be in this business is money and freedom of choice and it’s booming indeed. According to the interviewee, bigger market and wider customer range is the greatest opportunity. While China and India are losing price competitiveness, our industry can take this advantage to explore. He thinks that unstable labor market is the threat for this business. The weaknesses of this firm are Poor management,

compared

to

garments

within

EPZ,

and

low

productivity. Main challenges include tough competition within the industry in terms of price, employee dissatisfaction with low wage structure. He thinks that workforce is not a problem for the entrepreneur as mostly unskilled or semi skilled labor force is required. But providing job specific training could improve the situation. As most of the labors are illiterate, it’s hard to develop a culture within the firm. The industry standard itself is very low in terms of local suppliers but the entrepreneur is unable to provide any specific suggestion to improve

the

situation

in

this

regard.

Demand

and

growth

opportunity is already pretty good in this sector. He claimed that technology is world standard in the firm but due to Euro being costlier everyday, machines manufactured in Europe will soon be not cost effective any more. The entrepreneur thinks that the government lacks proper direction and commitment regarding policies although it has cash incentive support for backward linkage 4

industries. Government might give this industry higher priority in terms of allocating electricity and gas. To the entrepreneur, private initiatives are the main factor that has contributed to the growth of this sector and they should be highly encouraged for the sake of further growth of this industry.

RECOMMENDATIONS The recommendations furnished below are based on our surveys that we believe have the greatest potential to result in improved business environment. There is no order of importance to the factors discussed below:  Skill in this sector doesn’t require formal education so

government institutions which are arranging or are supposed to arrange trainings must not be too rigid for the would-beworkers for having a minimum educational qualifications rather those should be flexible and welcoming.  Finance and credit facilities should be welcoming. Some

initiatives like LC opening needs to be easier, loan facilities should be increased and interest rate revised.  Government may need to change regulations regarding

Bond Licensing which says there’s a restriction in importing threads but that shouldn’t hamper local producers.

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 The new entrepreneurs are encouraged with their outputs

which tells us there’s a healthy competitive atmosphere around and rather steady growth in the business.  Government can ensure continuous supply of electricity &

gas by government backed power plant & gas exploring & distribution companies.  Government and other business associations can help local

competing firm to cope up with globalization effect.  Business associations can encourage global players / make

them aware to give contract to local firms. Even they can involve throughout negotiation, shipment & cash disbursement process.  Entrepreneurs learnt that looking at short term goals (low

and irregular salary, lower quality) may hamper growth. It is essential for a firm to follow a competitive strategy that enhances quality, flexibility, innovation and customer service. If they depend on low costs by reducing workers’ wages and other services, they will loose workers’ commitment to work.

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