Marketing strategy of sentiner mode apparels

Project Report on marketing analysis & Strategy Introduction Large-scale production of readymade 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 2

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

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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 6

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 Total RMG Exports Local Value Retention Direct Value-Addition by RMG Source: Export Promotion Bureau

Amount (billion US$) 4.5 2.1 1.2

Diagram-1: Product-Wise Contribution to GDP on 2004-5:

Source: Export Promotion Bureau

As Percentage of GDP 9.5 4.4 2.4

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 wovenRMG. 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) H.S. SL. Code/ No. Heading No.

Decembe Name of Commodities r 2006

8.

H.S Code

Knitwear:

9.

H.S Code

Woven Garments

July-Dec. 20072008

11709521 7 12483868 31931629 7 31063216

July-Dec. 20082009

% of total

16306880 37.98% 5 16346786 38.07% 4

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$) Year 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 8

Shirt 805.34 791.20 807.66 759.57 961.13

T-Shirt 225.90 232.24 366.36 391.21 388.50

Trousers 80.56 101.23 112.02 230.98 333.28

Jackets 126.85 146.83 471.73 309.21 467.19

Sweater 70.41 196.60 296.29

2004-2005 1043.11 2005-20006 1021.17 2006-2007 1073.59 2007-2008 (December) 666.18 Source: Export Promotion Bureau

471.88 563.58 597.42 403.98

394.85 484.06 656.33 449.18

393.44 439.77 573.74 296.82

271.7 325.07 476.87 362.23

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. ]

terature Review

The Marketing Environment.

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’.

The micro-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.

The macro-environment: 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.

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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.’

PEST Analysis Pest Analysis: 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.

Political 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?

Economic Factors.

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.

Sociocultural Factors.

The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:  What is the dominant religion?  What are attitudes to foreign products and services?  Does language impact upon the diffusion of products onto markets?

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 How much time do consumers have for leisure?  What are the roles of men and women within society?  How long are the population living? Are the older generations wealthy?

Technological Factors.

Technology is vital for competitive advantage, and is a major driver of globalization.

Consider the following points:  Does technology allow for products and services to be made more cheaply and to a better standard of quality?  Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?  How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?  Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?  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 internal factors.

Opportunities and threats are external factors.

In SWOT, strengths and weaknesses are internal factors. For example: Strength could be:  Your specialist marketing expertise.  A new, innovative product or service.  Location of your business.  Quality processes and procedures.  Any other aspect of your business that adds value to your product or service.

A weakness could be:  Lack of marketing expertise.  Undifferentiated products or services (i.e. in relation to your competitors).  Location of your business.  Poor quality goods or services.  Damaged reputation.

In SWOT, opportunities and threats are external factors. For example: 14

An opportunity could be:  A developing market such as the Internet.  Mergers, joint ventures or strategic alliances.  Moving into new market segments that offer improved profits.  A new international market.  A market vacated by an ineffective competitor.

A threat could be:  A new competitor in your home market.  Price wars with competitors.  A competitor has a new, innovative product or service.  Competitors have superior access to channels of distribution.  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.

Employment generation 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.

Banking Sector 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 Sector 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.

Shipping Business 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 Gannett 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.

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Tax on Export Earnings As source tax only, presently the RMG industry is paying over Tk.40 Crore.

Population Control 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.

Linkage industries 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.

Transport 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.

Real Estate 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.

Utility services 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 18

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.

Further industrialization 

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.  with a 

The 1.4 million workers in the industry are appearing in the consumers market demand worth US$ 1.59 million (Tk1.7 Crore) The.4 mi11ion workers are spending about US $ 0.30 million (Tk1.4crore) as

Mess rental per month. 

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 realties of the country.

Government Solution 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

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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.

22

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.

Buyer Position accordingly quantity New Diagram-2: Graphical representation of major buyer’s positions of Wave Sentier Mode Apparels 0% 3% Ltd. 4% Good Man 4% 8%

29%

Joules Lion Star

1% 0%

Markstyle Danys Fashion First textile ZXY 51%

4.1.3 Table-4: Production Capacity of Sentier Mode Apparels: Items/Products Finished Fabrics Basic T-Shirt Polo Shirt Sweat shirt (One side brush) Yarn died Brush Emarizing Printing Embroidery Total Production Capacity

Per month 1800 Kg. per day 104 000 pieces per month 33000 pieces per month 13000 pieces per month 4000 kg. per day 4,000 kg. per day 3,000 kg per day 25,000 pieces per day 30,000 pieces per day 179, 4000 pieces per month

4.1.4 Table-5: Export history of Sentier Mode Apparels: Year 2005 2006 2007 2008 2009

Amount in USD 1 million 3 million 3.5 million 3.75 million Order pending

Source of all information: Corporate office of Sentier mode Apparels

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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 Managing Director Director Marketing Director Commercial Director Finance Director Printing Executive Director

Embroidery & Stock Lot

Director Apollo

Director Cotton Concern Director Knitting Director Dyeing Director Montrims

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: 1. Order collection 2. Performa invoice 3. L/C receive 4. Back to back L/C open 5. Fiber Collection 6. Spinning for making yearn as per order sheet 7. Knitting of fabric making as per order sheet 8. Dyeing for fabric color and shrinkage as per order sheet 9. Cutting as per style 10. Sewing as per style 11. Finishing as per customer requirement 12. Packing as per customer requirement 13. Shipment 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

Total length 70+5 (allowance)

= 75cm

Sleeve length 30.5 (allowance)

= 35cm

----------------------------------------------------------------Full length (body sleeves) Total fabric required 26

= 110cm

150GSM (Gram Square Meter)

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.

Concept Analysis 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’.

Marketing 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.

Controllable: 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

Place/(Means Distribution)

Price

Promotion

Individual goods,Includes Product/Service features and benefits product lines orthat meet consumer wants and needs as services identified through market research. ofGetting the productChannels, distribution systems, middlemen, to the customer. warehousing, transportation and shipping as identified in research as meeting consumer expectations.

Setting a price thatPrice of the Product/Service, level pricing, serves theintroductory pricing, discounts, allowances, customer well andgeographic terms. Again, this is established in maximizes relations to consumer willingness to pay as justifiable profits toidentified via market research. the company.

Communicating Public Relations, Advertising, Personal selling with the customer,and Sales Promotion. If the Product, Price and developing Place are in sync with what consumers relationships want/need, Promotion reminds them the needssatisfying Product/Service is available.

Uncontrollable: 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 28

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.

Competitor analysis 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:  Collect information on competitors that will directly influence the firms’ strategy.  Help the firm anticipate what the actions of their competitors will be, to their entry within the marketing.  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.  Who are your competitors?  What is the size and dominance within the market?  Which customer base are they aimed at?  What is their positioning within the market?  What are their objectives?  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

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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:  Identifying, satisfying, retaining and maximizing the value of a firm’s best customers.  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.  Creating a full picture of the customer.

Major components of the successful implementation of CRM are:  A front office that integrates sales, marketing and service functions across all media.  A data warehouse that stores customer information and the appropriate analytical tools with which to analyze that data and learn about customer behavior.  Business rules developed from the data analysis to ensure the front office benefits from the firm’s learning about its customers.  Measures from performance that enable customer relationship to continually improve.  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  What major task groupings are feasible design alternatives?  What linkages are necessary between groupings?  What support systems are needed?

Key Linking Mechanisms 1. 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.

2. Team: A group is selected from various activities in the organization to respond to recurring problems that cross over group boundaries.

3. Integrating role: An individual is charged with formal responsibilities for coordinating between two groups.

4. Integrating Department: A department with independent resources and staff whose task is to ensure coordination between two groupings.

5. 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.

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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.

Diagram-4: PLC 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: 1.

2.

3.

4.

5.

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-toback 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 34

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 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 buyers from start to end of an order process.

Execution: An effective execution of the entire order process that requires utmost coordination of all departments and value chain partners of the company.

SENTIER marketing policy is to serve its existing buyers with priority as they have long term relations with the existing buyers (10 years with most of the buyers) and also to seek new buyers through websites, trade fairs and from other sources. Currently SENTIER has target US market which is emerging one.

However, SENTIER marketers approach a new buyer with a well-equipped presentation. The marketer needs high skills of communication, clarity, appealed conversation, leadership, technically and analytically sound and must have knowledge of all areas in order to introduce the company in a confident and realistic manner. A SENTIER marketer also possesses followings to perform all related marketing tasks:  Extensive knowledge of the associated service to be rendered.  Sound knowledge of merchandising and procurement of raw materials.  Industry knowledge of own region as well as those of the competitive regions.  A complete idea of own company’s strengths and weaknesses as well as potential threats and market opportunities in order to gain more buyers.  Technologically and operationally sound and be well-known of the company’s capacity of producing units. SENTIER volume handling capacity (two million units) is also used as an effective marketing tool by its marketers.  Outstanding knowledge of product costing and pricing policies.  Last but not the least, SENTIER principle of business is quality and on time delivery for which its marketers must have commitment. To observe this commitments, marketers duty not only ends by getting orders but also follow up with other operational departments to provide buyers confidence and feel happy about SENTIER. This practice also adds value to overall corporate image of the organization.

Marketing process at a glance: Seeking buyer Price quotation Price negotiation Order approval Order confirmation 36

Preparing pro-form invoice LC opening by Comm. Dept.

Order Sheet receive Order Sheet send to Follow-up with production & Keep buyers updated 6.1.2 Merchandising Department Merchandising, as commonly used in marketing, means maximizing merchandise sales using product selection, product design, product packaging, product pricing, and product display that stimulates consumers to buy more. This includes disciplines in pricing and discounting, physical presentation of products and displays, and the decisions about which products should be presented to which customers at what time.

The person especially involved in garment trade is known as merchandiser. Garment merchandisers buy raw materials and accessories, producing the garments, maintain required quality level and export the garments within scheduled time. ďƒ˜ Checking Purchase Order such as Size Spec, Measurement Sheet. ďƒ˜ Collection of Consumption such as Fabrics Y.P.D and others from pattern maker or other as per Size Spec. ďƒ˜ Preparing Price Quotation.

When an export order is placed to a merchandiser he has the following main functions to execute the export order perfectly on time.

Merchandising process at a glance: Order sheet receive from Mkt. Dept.

Sample development & send to buyer Sample approved by buyer Sourcing of Accessories

Fabric requirement calculation Accessories requirement calculation Sourcing of fabrics Possible date of arrival of fabrics and

accessories in the garment factory

Costing Production planning Pre-shipment inspection

Flow chart-1: Follow-up of merchandising department J=Job A+J = Admin + Job Place Order by Buyer

Negotiating Price with Marketing & Costing Dept.

Once Price approved Submit Sample with Artwork to Merchandiser Will Come to Sample Section R-1 Go for Fabric Booking Yarn Booking R-2 Taking Fabric color shade approval by buying house R-3 Go for imported accessories booking if any R-5 Go for Accessories booking R-4 Once sample completed Last & Final Review will be done by the Merchandiser again R-6 Sending Sample to Buyer Once Sample Approved by the Buyer its come to Merchandiser dept. again for Bulk Production Merchandiser will follow the R-1,R-2, R-3,R-4,R-5 Follow up with Commercial Dept. for L/C Opening Purpose A-1 A-2 Follow up with Knitting Section A-3 Follow up with Dyeing Section A-4 Follow up with Cutting Section A-5

38

Follow up with PM for Sewing Fabrics correctly.

A-6 Follow up with Logistic Dept. for Packing Instruction A-7 And Lastly Products are shipped by the Logistic Dept.

Organogram of Merchandising Department DIRECTOR

Bulding-01 Bulding-02

A.G.M.(Mr.Robiul Alam) G.M.(Mr.Abul Kalam Azad) Knitting (J) Dyeing (J) Sewing (A+J) Quality (A+J) Sample (A+J)

Merchandising (A+J)

(A+J) (A+J)

Mr.Mannan & His Associates Mr.Reza & His Associates Knitting (A+J) Dyeing (J) Sewing (A+J) Quality (A+J) Sample (A+J)

Mershandising (A+J) Mr.Raza & His Associates

(A+J)

Buyer Merchandiser 1) Good Man (M.B) = Mr. Chan Mia + Atiar 2) Mark Style = Mr. Joy + Naser 3) Danish Fashion = Mr. Joy + Naser 4) Higlotex = Mr. Joy + Mr.Naser 5) TMS = Mr. Joy + Mr.Naser 6) Sols = Mr. Joy + Mr.Naser 7) Lion Star = Mr.Nazir 8) Classic Fashion = TBC 9) Samples = Mr.Shohag Buyer Merchandiser 1) New Wave(Conway + Alpena+Pittsburge+ Hefa+ Any Fleece Prg.+Any Spl. Order = Mr.Badsha Mia. 2) New Wave(Clique+Spinning) = Mr. Abu Syed+ Ms.Jesmin.

3) First Tex = Mr. Abu Syed+ Ms.Jesmin.

4) DTO = Mr.Hasan 5) Free Zone = Mr.Hasan.

Buyer Merchandiser 1) Good Man (Ladies+Girls) = Mr. Alam + Mr.Shohel 2) Good Man (Todlers) = Mr.Hossain + Mr. Babul.

3) Joules = Mr. Saquib 4)Samples = Mr.Awal

Production Department Once the merchandising department issues order sheets and buyer’s all requirements, production department starts its works. A composite knit unit starts from procurement of yarn, then the process starts knitting of gray fabrics, dyeing of fabrics, finishing of fabrics for making of garments and finally of readymade garments. A typical flow process for the manufacturing of the above products Mix is show below: Production process at a glance: Yarn KNITTING

Grey Fabrics Knitting Inspecting Measuring

Fabrics Turning DYEING

Scouring & Bleaching Dyeing Washing Fabric unload Squeezing (Tube) Dyeing

40

FINISHING Compacting Inspection Measuring Fabric laying Fabric cutting Garments sewing GARMENTS

Cuff/collar/button Washing Finishing & packaging

Logistics Department After the production has been complete as per buyer’s specification, order sheet and other documents of production quantity are supplied to Logistics departments. Then they prepare packing list and invoice as per production quantity, arrange cartoons packaging and trucking of goods and send good to the nominated freight forwarder/carrier with all required documents and ‘truck challenge’. They also provide packing list and invoice of goods being dispatched from the factory to commercial department for further processing.

Logistics process at a glance: Order sheet & finished goods received from production dept.

Arrange cartoon packaging and loading goods on truck Prepare p/list & invoice and provide to Comm. Dept.

Prepare truck challenge and dispatch goods to forwarder.

Commercial department As soon as an order is placed, commercial department starts its work. Once the LC (Letter of Credit) is opened by buyer and order is received by SENTIER, commercial department received a copy of that LC from marketing department. Then the L/C has been scrutinized by them. Unit price, quantity, clause, expiration terms and conditions, payment clause, bill of lading clauses, amendment clauses of yarn and accessories and other terms and conditions based on negotiation between buyer and seller must be examined very carefully by this department. At the one end while the production is running, commercial department also is involved in arranging related documentation on the other end for the shipment of goods.

This department has to communicate with other departments as well as suppliers, shipping lines, freight forwarders, clearing and forwarding agents and several other parties including buyers for preparing and dispatching accurate documents as per L/C. Beside this, this department also has to prepare several more documents which have been stated in ‘Appendices Part’.

Below are the two most important documents commercial department deals with: Letter of Credit (LC): Originally, a Letter of Credit (LC) was quite literally that - a letter addressed by the buyer's bank to the seller's bank stating that they could vouch for their good customer, the buyer, and that they would pay the seller in case of the buyer's default.

They were used then, as they are now, for any transaction wherein one or more parties to the transaction require the comfort zone of guarantee of payment by a reputable bank. The sequence of information on an LC and the trade terms used are set forth in the standards established by International Chamber of Commerce (ICC).

Back-To-Back Letters of Credit: Back-to-Back Letters of Credit are used in international and domestic trade. The parties to a Back-to-Back Letter of Credit are:  The buyer and his bank as the issuer of the original LETTER OF CREDIT,  The seller/manufacturer and his bank,  The manufacturer's subcontractor and his bank.

This type of credit transaction is used when a seller/manufacturer has to purchase a component or farm out part of the manufacture of a product, but may not have the cash flow to do so. In this case, the seller/manufacturer applies to his bank for a letter of credit, identical to the original Letter of Credit he received from the Buyer, except that it is for a 42

lesser value. This second letter of credit, called a Back-to-Back, is sent to the subcontractor's bank and therefore the subcontractor knows that he will be paid and can proceed with his part of the transaction - supplying components or service to the manufacturer.

Departmental coordination of Sentier Mode Apparels Ltd. All departments of Sentier Mode Apparels Ltd. must work in concert for the nature of the business. Marketing department passes the order received to merchandising department and also follow up with every departments in order to update buyers. At the same time they pass the L/C to commercial department for necessary amendments. Merchandising department once process the order and related supply negotiation as per buyer’s requirements pass all specifications to production departments and keep a follow up for smooth production within the set time frame. Also they coordinate with marketing and commercial departments for any changes, amendments and shipment process. Logistics and commercial departments also work side by side for smooth flow of goods and documents until payment received from buyer. At the end of the day all the departments are required to have great coordination among them to keep the commitment of the company (quality, performance and timely delivery) to satisfy the buyers. A flow chart has been illustrated below to have a graphical understanding of departmental work coordination of Sentier Mode Apparels Ltd. Flow-chart-2: Departmental work relation Marketing Department

LC sent

Merchandising Department

Order sheet Production instruction Production Department

Commercial Department

Provide docs

Provide finished goods Logistics Department

Finished goods for packaging and dispatching from factory

Finance Department

IT’S Department

Support

Departmental shortcomings Like any other organizations Sentier is also not free from risks and shortcomings. Major factors affect its day to day operational and marketing processes have been categorized into two groups- controllable factors (which SENTIER can rectify) and uncontrollable (which cannot be solved but to be adjusted with). Below are the department-wise shortcomings: Marketing department: Size & position of the buyer in home country (Controllable): A major decision-making element of SENTIER’s marketing is the size and position of the buyer in international arena.

Since the profit margin in RMG sector is minimum (2-3%) and heavily depends on volume thus this decision is crucial. A marketer needs continuous study on buyer’s nature of business. In this regard SENTIER has good long term relationship with their buyers and have sufficient competitive advantages to attract new customers.

Fall in end-user demand (Controllable): Since apparel is a non-essential product in general, thus end-user demand may fall because of unexpected economical change or newly imposed high govt. tax or devaluation of money in importing country. There are many other reasons for which people cut-down their budget on clothing in order to increase budget in other accounts. A marketer must understand and anticipate such factor in marketing. In this regard SENTIER usually seek buyers who holds high ticket items that have high brand value and demand for these items usually doesn’t fall at times. Thus SENTIER’s strategy is to gain limited large buyers who will generate high revenue for them. On the other hand SENTIER is

44

very much careful in selecting small buyers who hold low ticket items because fall in enduser demand for these products can drastically drop the sales.

Large volume (Controllable): Though SENTIER has capacity to produce 2 million units per month; it is reluctant to offer this full capacity to a single buyer. This is because in this process buyer’s bargaining power increases to a greater extent and if the order is canceled for any reason, the impact is immense. Sometimes timely supply also hampered for large volume production. In this context SENTIER used to divide their capacity and offer to a number of buyers in relatively small quantity in a particular period of time in order to reduce potential risk.

Overbooking & repeat orders in pick season (Controllable): Another major challenge a marketer has to face in apparel marketing is the overbooking and repeat orders in the pick season. SENTIER marketer has to deal this situation very carefully and must judge his capacity and resources before processing an order. Sudden repeat orders always come in pick season. Many marketers take these orders irrespective of knowing own capacity and rush situation in production during pick season and thus lead to disaster. Often they go for sub-contacts with other factories to supply these orders in a very rush condition and thus fail to ensure optimum quality and maintain short lead time. In such a situation SENTIER marketers always coordinate with production departments before taking these repeat orders. This facilitates them to work in concert and increase high professionalism in the business. Another strategy to face these problems is their regular buffer stock.

Change in existing laws & regulations in both export & import countries (Uncontrollable): This is a factor a company must comply with. Since SENTIER is one of the market leaders, thus they can easily comply with any rules imposed by govt. In such context SENTIER has high marketing capacity to attract new customers.

Merchandising department: Since this department is involved in processing buyer’s requirements thus any change in buyer’s specification may affect existing work process. Also since this department also involved in raw materials purchasing, thus delay from suppliers or change in supplier decision may affect the business comprehensively. These risks are controllable and may solve through strong negotiating and management capacities.

Production department:

Power and gas (Uncontrollable): These problems hamper production and reduce productivity to greater extent. This is an uncontrollable factor and requires govt. intervention.

Labor skill and migration (Controllable): Most of the labors of Bangladesh have lack of education and proper skill. This controllable factor can be overcome by better training. One biggest problem in RMG sector is labor migration. Most of the labors used to switch after they get training. This controllable factor may also rectified by proper intensive and effective HR policies. Govt. also needs to take initiative as labor wages are too poor in this sector in Bangladesh. Labor unrest can also be a threat which still not affects SENTIER because of their strong administrative and organizational structure.

Accidents (Controllable to some extent): A garment factory consists of heavy machineries.

Any accident may occur anytime and loss of life cannot be repaired. However proper work place protection and security and compliance measures must be undertook in this regard.

Logistics department: Lead time (Controllable): Lead time—the turnaround time from receipt of an order to the delivery of the product—has emerged as an important issue in the global market and retailers value those manufacturers who can respond quickly to orders. For Bangladesh lead time was 120 to 130 days during 90s. This controllable factor, however, reduced to 30 to 60 days because of improved manufacturing and transportation technologies and govt. support to RMG sector. Still this lead time can be affected by problems in any departments and the impact can be colossal.

Infrastructure support (Uncontrollable): Infrastructure support of Bangladesh is very poor and disorganized which require govt. initiative.

Environmental & weather (Uncontrollable): Environmental changes and bad weather condition in sea might affect a shipment that causes loss of huge amount of money. This uncontrollable element is however addressed to some extent by insurance coverage.

Political unrest (Uncontrollable): Political unrest of the country causes significant loss in RMG sector and needs a favorable political environment to survive.

Commercial department: Contract amendment (Controllable): Since commercial departments used to serve documentation need for the organization, thus any change or amendment in contract might 46

affect current shipment process. On time delivery sometime may also hampered due to this reason. However, highly skilled workforce and systematic work process can quickly adjust with such difficulties.

Other parties (Controllable): Commercial department has to work with some external parties, e.g., freight forwarders (nominated by buyer who handles their shipments), carrier (shipping/containers lines), and C&F agent (clearing and forwarding agent who performs custom formalities for manufacturer). Sometime these channels become vital and noncooperation from them shall cause delay for the shipment. In order to avoid such risks, the department should maintain good relation with them, provide timely data when they need and comply with their work processes. To be familiar with their work process is also helpful in smoothening entire supply chain.

Threat of Garments Industries Condition of garments industry: The ready-made garment industry in Bangladesh has enjoyed a meteoric rise, from less than 50 factories in 1983 to 2600 in 2007.In the same period, the level of employment has risen from some 10,000 to approximately 1.4 million today, with its share of employment in the manufacturing industry increasing from a mere 2% to 15% about 90% of the workers are women, constituting almost 70% of all female employment in this nation manufacturing sector. This has created a vast scope for employment and uplift of the hitherto neglected section of our population, thus radically transforming the socioeconomic condition of our country. The apparel export trade today accounts for as much as over 75% of Bangladesh’s total foreign exchange earning. Contribution to the sectors like Banking, Insurance, Hotel and Tourism, Linkage and Recycling, Consumer’s Goods, Utility Services, Transportation, Real Estate and C and F Stevedore only, roughly estimated, the RMG industry is now playing the catalyst role behind the consequential economic activities in the country to the time of the tune of nearly Tk.12000crore per years.

The strengths of Bangladesh: The strength of a firm or country in the Market depends on its specific comparative advantage(s), which its competitor does not have. A particular uniqueness of a supplier shapes up its strategic profile. In case of Bangladesh, this uniqueness is the unlimited

availability of unusually cheap labor that stands out as a low technology and labor intensive industry. The workers can be employed at a very low wages, not only in comparison to other competitor countries, but also in comparison to other domestic industries in Bangladesh. In domestic market as well, the wages of the workers of the RMG industry happen to be the lowest. This should be apparent from the figure presented in table below.

TABLE: Average minimum wages of RMG industry as % of average minimum of wages of twelve selected industries.

SECTOR/INDUSTRY

%

JUTE BAILING MATCH HOSERY REROLLING PRINTING CINEMA COLD STORAGE PHARMACEUTICAL SHOE PATROL PUMP FISHING TRAWLER ROAD TRANSPORT

82 83 86 70 92 86 72 79 83 77 57 72

Source: Calculated by Dr. Hafiz G.A Siddiqi, Professor and Academic Dean, North south University and Former Director IBA, Dhaka University, based on World Bank Report.

The figures in the table indicate, for example, that the average minimum wages of the workers in the RMG industry in 1997 was 82% of that in jute bailing industry, 70% of that in re-rolling industry, and so on. All of the 12 industries included in the table paid average minimum wages, which were higher than that of TMG industry.

In high competitive international market, it is the price and quality, which determines the competitive position of a supplier, on the account of price, Bangladesh can beat all its competitors. Price is related to cost of production which in case apparel industry is greatly determined by the labor costs. Wages in Bangladesh is remarkably low. Naturally it will continue to enjoy competitive advantages in international markets because it has virtually unlimited supply of cheap labor who can learn the low technology operation necessary in producing RMG without much investment in terms of money and time. That 48

Bangladesh has a tremendous labor-cost advantage can be seen by looking at the comparative average hourly wages (including fringe benefits) of some 39 countries, both develop and developing, presented in the table. Werner International data on hourly wage cost in the clothing industry (inclusive of social contributions) is shown in the TableTABLE : Hourly wages costs in the RMG industry (Selected countries) COUNTRY

WAGES ($)

COUNTRY

WAGES ($)

Norway

18.09

Taiwan

4.61

Denmark

17.29

Hong Kong

3.85

Germany

17.22

Sri Lanka

0.35

UK

8.42

China

0.25

USA

8.13

Bangladesh

0.16

Weakness of Bangladesh The problems in the industry pre-date the riots which took place just over a month ago and which were attended by deaths, injuries and the destruction of property. Over the years, hazardous working conditions have resulted in the deaths of many workers through factory fires and collapses. The Spectrum Factory building collapse of April 2005 killed 64 people, injured over 70 and left hundreds jobless. In February 2006 a fire destroyed the four-story KTS Textile Industries in Bangladesh’s port city of Chittagong again killing scores of mostly young and female workers. Workers, who are mostly young women, also face an acutely difficult working environment - wages are low, hours are long, forced labour is practised, child labour exists, sexual harassment exists, freedom is curtailed, whether it be locked doors or rights of association, and there are a multititude of other practices which go against international labour standards and codes of conduct (= non-compliance). At the level

of legislation and business dealings, lack of implementation of laws, restrictive laws and unfair buying practices by buyers compound the issue of non-compliance.

Banking sector anomalies: Our banking sector, which once played a very positive role behind the development of this sector, based on the bank-client relationship, this relationship has been strained due to the creation of forced loan/demand loans as a result of non-shipment of goods during the period of political impasse in 2005/06.The creation of demand loans/forced loans and their subsequent classification as bad loans resulted in a strained relationship whereby client were refused to open Back-to Back L/C facilities inspite of having the ability to secure export orders and to execute them.

Electricity crisis: For over the last two years, electricity crisis has been at its peak the last one-decade or more. Presently, on an average, we are losing production worth of about US$1.6 million per day just owing to the electricity crisis.

Taxes on export earnings: The tax burden on export oriented garments sector is reducing competitiveness of Bangladesh made garments in the international markets against products from competing country. With other incentive for aggressive marketing, several countries including our neighboring ones are totally exempting their export sectors, including RMG, from all export taxes to help supplement their competitiveness and boost up export in the international markets.

Communication: Good communication system is a pre-requisite of economic development. Lack of it creates road congestion, takes longer time in shipping raw materials and finished products to the port from the factory and thus increases cost.

Law and order situation:

50

Sound law and order situation and congenial political environment are pre-requisites for development. Due to the lack of it, interest of both the employees and the employers are being affected.

Wage problem: The National Wage Board is likely to announce today a minimum wage for the workers in the export-oriented garment sector with a gross salary of around Tk2,000 for the entry-level employees. The announcement may invite strong protest from both the garment owners and workers, as it is a bit higher than what the factory owners had agreed and much below than the workers' demand for Tk3, 000 as the monthly salary. The board so far held 23 meetings after it was formed on 31 May but it could not reach any consensus in the face of strong opposition from both the garment owners and the workers.

Gross salary package of Tk2,000 include the basic salary of roughly Tk1,400, sources said. In a revised proposal, garment owners insisted on a take home package of about Tk2,000 for a worker with two-hour overtime but it was not accepted. Anisul Huqe, representative of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) on the wage board, said, "We will not accept anything like a gross salary package of around Tk2, 000 [excluding the overtime] as it will make a huge difference with what we proposed." The take home package including a two-hour overtime and attendance allowance will virtually stand at around Tk2,800 which the garment owners will not be able to bear, he said, adding, "Factory is like our child and we will not take the responsibility of killing our child." Terming the board's 24th meeting today a crucial one, Zafrul Hasan, who represents the workers as a permanent member on the board, said, "In view of the rising living cost, it will not be possible for the workers to accept any deal fixing the wage below Tk2,000, as there was no pay raise in last 12 years." Minimum wage for the workers is now Tk950 that was fixed around 12 years ago. The three-month deadline for fixing minimum wage for the garment workers ended on August 31 without any settlement on the issue and different workers' organizations started street agitation the following day in protest against ignoring the tripartite deal. Following the severe labor unrest in the country's premier export-earning garment sector, the government formed the wage board and asked it to recommend a pay

structure for the workers within three months. The government, garment owners and workers' leaders at a meeting on June 12 inked a 10-point memorandum of understanding (MOU) after a series of discussions on May 24, June 1 and June 4 among the stakeholders in the garment sector and decided to implement those in phases to address the labor unrest, ensure labor rights and peaceful atmosphere in the factories. Meanwhile, National Garment Workers Federation (NGWF) laid siege to National Wage Board office at Topkhana Road yesterday and handed over a memorandum demanding immediate announcement of minimum wage for the garment workers. More than one hundred garment workers participated in the siege programmed ignoring heavy rain yesterday, NGWF said in a statement. The workers have become frustrated and aggrieved because wage was not announced as per the agreement signed at the June 12 tripartite meeting, it said, adding that the workers have already started agitation and it may create an unstable situation again.

Gender discrepancy in job type and wage rate: Within the RMG factories, gender discrepancy in wage levels for comparable jobs is Small especially when accounting for factors such as age, education, and experience. In the production process, however, female workers are mainly concentrated in “less skilled” operations, and thus are low paid. In the RMG industry, most women work either as operators (where almost all workers are female) or as helpers (40-60 percent of the total work force in this category are females). It is extremely rare to find women working as production managers, supervisors, finishing and machine operators, or as “in-charges” who draw salaries varying from 2-10 times that of the average operator, depending on the type of operation involved.

Elsewhere, 12 the author has thus argued that the female labor market in Bangladesh is largely segmented by jobs (tasks) and by type of industry, as is clear from the discussion in Section 3.1.4, above, and factors such as age, education, and marital status13 account for the low average wages of female workers, since they are prone to “crowd in” to certain Specific jobs and occupations. Thus, discrimination in wage payments between male and 52

female workers may be very limited, but discrimination in terms of education and training and various barriers to entry explain the low wages and low opportunity costs of female labor, a factor which needs to be addressed at the policy level.

Agreement with garment worker not honored: A study by Bangladesh Institute of Labor Studies (BILS) has indicated that garment manufacturers and exporters in Bangladesh have yet to implement four agreements signed between 1997 and 2005 to defuse problems following labor unrests. A number of labor leaders believe that owners reached accords with workers just to defuse troubles whenever there was unrest. Instead of implementing deals, the owners even filed a writ petition against the government notification about minimum wages for laborers circulated in 2001.

The factory owners also did not implement the 24-point suggestion offered by the Department of Inspection for Factories and Establishment in November 2000. The department pointed out 24 kinds of irregularities in the garment industry that went against labor laws. Inspection by the department also found that non-implementation of labor laws resulted in discontent and anger among the workers.

Opportunity of Bangladesh Buyers like Pelle Karlsson now have the fate of millions in their hands. He works for H&M, a chain that has shops across Europe and the United States. The company is now deciding which countries to keep doing business with. "We have our price strategy; we have our quality level and also if the country can work with a good lead time," he said. "Based on these three factors we will select both our suppliers and the countries that can cope with these things.

We still think Bangladesh is able to compete in these areas." H&M has moved some of its operations in Asia to Dhaka from Hong Kong in anticipation of buying more of its supplies here from now on. But what is good news for Bangladesh will be bad news for workers in other developing countries.

Threats of Bangladesh

Phasing out of MFA threat: It seems that the phenomenal growth of the RMG exports from Bangladesh has become a threat to its powerful competitors. Naturally, the competitors are eager to snatch away the markets from Bangladesh with aggressive and innovative business strategies. They will certainly take advantage of the new provision included in the final acts of the Uruguay Round. One such provision is the phasing out of MFA (Multi Fiber Arrangement).

The GATT system as it well known, GATT/WTO prohibits not only unjustified tariff barriers but also all from of non-tariff barriers like the imposition of quota. In the sixties, while the GATT prohibited discrimination between trading partners, it allowed certain exception to the GATT principles and one of the m was the MFA. USA and several other developed countries argued that if developing countries that enjoy comparative advantage in terms of labor cost are allowed to export RMG without any restriction the apparel and the RMG industry in their country will be severely hurt. They felt the need to develop certain protection method, which will be severely hurt. They felt the need to develop certain protection method. GATT will recognize which will reduce this problem and which as well.

To achieve this goal, a special provision known as a FA was instituted under the Bangladesh to take advantage of its non quota status and chap labor, and they for their own interest provided the initial motivation and help to Bangladeshi entrepreneurs to acquire the position of a powerful supplier in the world market. With the phasing out of MFA the position of Bangladesh in the world market will change.

After the year 2005, if MFA is really phased out, these countries may not remain our partner in progress due to the change in the circumstances. Then, all countries including those, which are now under quota restrictions, will be on quota free status and might emerge our strongest competitors. This means that, Bangladesh \\"ill have to compete with a larger number of established and powerfl.11 suppliers of RMG on equal terms.

Other non tariff barriers: The final acts of Uruguay Rolled negotiations strengthened the GATT principle of reducing all tariff barriers. But it is not in the case of non-tariff, becalms they take so many subtle fonts that they face disagreement that agreement in their definition. The child labor, 54

environmental and human right issues are such non-tariff barriers.

It is quite likely that by restructuring, improving managerial efficiency and increasing productivity Bangladesh will be able to compete in the intentional market. But problems will arise if the importers apply subtle non-tariff barriers under the disguise of humanitarian issues like child labor. Here the main challenges for the producers of RMG of Bangladesh lies how to tackle the problems of child labor. The much-talked about "Child labor" issue can be an effective non-tariff ban-ire. The Harking Bill design to prevent adduce of child labor is based on humanitarian ground.

Child labor Issues:

Should be for both labour welfare and occupational safety. For safety use of aprons, gloves, dust masks, eye masks, ear protectors, gum boots, smoke detector and early rehearsed fire fighting arrangement is very important. Water treatment plant is a must to avoid pollution in the industry. Social environment related to labor rights, product safety and intellectual property rights are considered to be of increasing importance now-a-days. Ensuring social compliance is very important in the industries involved in production of RMG for maintaining quality of products as well as rules for export market. On protection of labor rights and improvement of working conditions, international standards have been developed and adopted by major markets. In contrast with labour rights, product safety issues are mostly mandatory requirements. Compliance issues like working environment, salary, maternal leave for female workers, and safety and health conditions of apparel sector workers have come to the forefront of attention of the international buyers. There is no option other than ensuring social compliance to maintain quality of products. Because labour can never enhance their skill without having a minimum wage for living and favorable environment for work. The compliance issues have become more important after the expiry of the MFA. Though these issues are very fundamental as far as the workers' interest is concerned but at the same time these are very capital intensive for implementation.

More non-tariff barrier:

Bangladesh also faces other issues like environmental issues or minimum wage rate issue, apparently on humanitarian ground. But questions arises that are these issues truly on humanitarian grounds or it is a hidden agenda designed by the competitors of Bangladesh exports to increase the cost of production with the ultimate result of making Bangladesh exports less competitive in the world.

Dreams and uncertainty: It is so new parts of it are still being built by laborers who carry bricks and cement in baskets on their heads. Wages in Bangladesh are low, around half those paid in China, giving the country a competitive edge. "Everybody dreams, you know, so we are also dreaming," said the owner as he walks around his new production lines. When the factory is up to full speed it will be making 1.5m shirts a month. "It could be good, I think. A lot of customers are positioning themselves in Bangladesh, like Tesco, like Carrefour, like H&M. So all the indications are that this will be the greatest opportunity for Bangladesh." But for garment workers like Shanaz Parvin Reka this is a period of uncertainty. She's still looking for a new job. And it will be some time before it becomes clear whether Bangladesh will be a winner or a loser in the new global free market for garments. Developing countries around the world face upheaval after the quota system governing the garment industry was finally phased out at the end of last year. For Bangladesh the stakes are especially high - it relies on garments for more than three-quarters of its exports. About 1.8m people, most of them women, work in garment factories. As many as 15 million more in support industries depend on the trade for their survival. Around the world the big and the efficient see the change as an opportunity.

Exploitation of Workers: Unions say garment workers are angry over low pay and long hours. Wages in Bangladesh's garment factories can be as little as $20 a month. Thanks to poor working conditions, employer-worker clashes have been recurring in the textile industry. Workers often take to the streets with complaints of poor pay and working conditions.

Impact of globalization on RMG Sector The possible impact of globalization on employment and quality of jobs in the RMG industry will depend on Bangladesh’s ability to withstand a more competitive global33 environment.

56

It is arguable that this competitiveness on the other hand will depend amongst other things on measures taken to improve productivity and job quality. In the worst scenario, a failure to maintain competitiveness will lead to enterprise closures and increased sub-contracting from larger to smaller units. This will obviously lead to unemployment among mostly women workers, a possible reverse trend of rural-urban migration, and a reduction in the household earnings of workers. A greater degree of subcontracting may also adversely affect job quality, since working conditions and job quality have been found to be inversely related to the size of RMG units.14 Deterioration in job quality is likely to have serious consequences. Entrepreneurs must recognize that labor is not simply a commodity; and that better working conditions are desirable from the point of view of productivity and efficiency, as well as from that of fairness and justice. Workers’ rights include freedom of association, which is currently prohibited in the export processing zones, while unionization is actively discouraged in the industry as a whole.15 Interestingly, the entrepreneurs interviewed as part of this study expressed divergent views regarding job quality. Most were worried about the impact on costs, and some regarded labor retrenchment and subcontracting as a way out. A few more enlightened entrepreneurs believed attitudinal changes were needed, and that wider dissemination of information would help. Others thought that the imposition of a social clause should be delayed, giving entrepreneurs a chance to adjust to the phasing out of the MFA, as well as helping them to relocate factories outside Dhaka, where there could be more available space for canteens and other facilities, and where factories could be functionally designed to meet safety standards. In any case, measures to increase productivity and competitiveness may involve some rationalization of the workforce and technology upgrading such as the introduction of computer-aided design (CAD). It has been suggested that the latter will lead to a substitution of male for female workers, given the higher educational and skill requirements of the new technologies, and the currently disadvantaged status of women in this respect. Sub-contracting may again be more actively pursued as a cost-cutting strategy by larger and more successful firms. Other measures to improve productivity and competitiveness such as skill upgrading will, on the other hand, improve job quality and earnings for workers.

Achievement of Garments Sector ďƒ˜

BGMEA membership starting with only 19 in early 1983 has reached 2503 in 1996-

97, increasing at the rate of 20% each year.

The growth of garment export in terms of dollar is proportional to the rate of



increases of factories; it depicts a healthy steeper growth of the industry per se. 

Garment export has been increasing on an average 24% each year. AS the rate of increase, not less than 20 % per year is expected to continue through the MFA phasing out transition, growth prospect of Bangladesh’s apparel industry loads very bright.

 Bangladesh presently holds 6th largest apparel exporters sector in USA and the 5 th largest in EU. Country’s RMG products are steadily moving toward high value sophisticated items like high quality suits, jackets, branded jeans items, embroidered ladies’ wear etc. increasing @ 25% per year, over the last few years, they have utilized quota and diversified their products into non-quota items.  Bangladesh has recently entered the extremely quality conscious RMG market of Japan and created a niche for itself. In 1994-95 export of RMG to Japan was US$ 5.72. And in 1996-97 it was US$ 9.35 Mn.  EU took the largest share followed by US. Germany has led the EU market in the last few years followed by UD, France, Italy and the Netherlands. In 1996-97 Germany alone imported apparels worth US$ 392.09 million against the purchase of US$ 326.89 million in 1995-96. Only shirts and T-shirts worth US$ 202.36 million were imported by Germany in 1995. However, as a single country, US have been the highest apparel importers from Bangladesh.

Year wise Membership Table of Figure Year 1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 58

No. of Garments 834 1163 1537 1839 2363 2503

1993-94 1995-96 1997-98 1999-00 2001-02 2003-04

STATUS OF READY MADE GARMENT INDUSTRY Table: Sl.

Year

Total

Employment

Fabrics:

Exports in Export in

No.

No. of Workers

B-Yards

THs-dozs

M-US $

1

RMGs 180

0.102

1143.55

31.57

1993

-

2 3 4 5 6 7 8 9 10 11 12 13 14

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

587 601 658 712 737 780 934 1354 1695 1839 2182 2352 2503

0.198 0.283 0.306 0.317 0.335 0.402 0.582 0.802 0.827 1.20 1.29 *1.30

0.105 0.225 0.410 0.490 0.579 1.780 1.020 1.225 1.590 1.900 2.300 2.600 *2.86

4209.09 4762.58 10818.68 15717.81 17064.21 22608.84 30566.63 42836.02 46717.44 45166.00 62512.00 72005.00 80986.40

Source: BGMEA, RDTI Cell. March 1998 Column: 1 Sl. No.=> Serial Number.

Column: 3 Year =>Estimated Column:3 Total No. of RMGs => Total Number of RMG Factories Column:4 Employmet Workers=>Employment in million workers Column:5 Fabrics B-Yards=> Fabrics used in billion yards Column:6 Exporty ion THs-dozs=>Export in thousand dozens Column:7 Export in M-US$=> Export in million US$ FIGURE :

60

116.20 131.48 298.67 433.92 417.09 624.16 866.82 1182.57 1445.02 1555.79 2228.15 2547.13 3001.25

TABLE OF FIGURE Year 1991-92 1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06

Garments Export By Major Regions

Export of RMG Industry (In Mn. US$) 811.00 934.43 819.21 1076.61 123.20 1291.56 3882.00 4418.28

Table: Countri es

2005-06 Taka

Dollar

% of total

2003-04 Taka

%

USA UK German

36004383 9213240 8954528

880303 225263 217937

45.17 11.56 11.24

36422670 4723725 7701752

908070 185084 192016

total 49.48 10.09 10.46

y France Ltaly Neterla

7063214 5368625 3594023

172695 131262 87873

8.86 6.74 4.51

5232454 5800193 2917715

130453 144607 72743

7.11 7.88 3.96

nds Belgium Canada Sweden Spain

2194483 196973 1129470 1110720

53655 48158 27615 27157

2.75 2.47 1.42 1.39

1264699 1959567 742623 959207

31531 48855 18515 23914

1.72 2.66 1.01 1.30

17. Share of RMG in Country’s 2004-05 Total Export Table of Figure Commodities RMG JUTE GOODS RAW JUTE TEA LEATHER CHEM PRODUCTS OTHERS

Figure 62

Dollar

Export Share % 67.93 7.12 2.63 0.86 4.42 2.46 14.51

of

From the table no. 8 and corresponding figure no. 4 we see that the RMG exports exceed that of other countries by a very wide margin. By far it is the single largest foreign currency earner of Bangladesh.

RMG Exports to Different Countries Table of Figure

Markets US Europe Canada Others

Figure

Exports in Different Countries (%) 39.3 54 2.5 4

From the table no 9and corresponding figure no 5 we see that the single largest inporter of RMG from Banbgladesh country wise is the US. It imports more than 39 % of total RMG export of Bnagldesh.

Apparel Export To Us Table of Figure Year 1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 (July-February)

Value in million US $ 581.1 703.96 592.46 1006.08 1001.68 1245.14 1054.7

Potential risks factors that might affect Sentier Mode Apparels Ltd. Below are some summarization of some factors or risks that are found through analyzing above shortcomings, company’s strengths and weaknesses, observations and employee interview. These potential risks can harm the organization’s business and marketing performance in international areas. However the factors are divided into controllable and uncontrollable headings in below chart. Different marketing tools and strategies have been 64

suggested in ‘Recommendation Chapter’ in order to overcome the potential controllable risk factors. The potential uncontrollable elements however are out of control of the organization. Therefore Sentier Mode Apparels Ltd. must be organizationally, operationally, financially and technologically sound enough to face these problems anytime.

Table: Potential risks of SENTIER Controllable Demand fluctuation of products Change in buyers’ taste and preference Fail in order fulfillment (overbooking) Changing trends in garment fashion Price of raw materials increase Threat of competitor Bargaining power of buyer and supplier Labor unrest New technologies and operation methods

Uncontrollable Change in govt. regulations Change in international trade policies Infrastructure problem Political unrest Terrorism (if alarming) Utility problems Change in global environment Global recession Inflation in economy

Solutions to the Problems Industrialization is an important part in the economic development of Bangladesh and textile is regarded as the engine in the industrialization of any country. The textile industry in Bangladesh is also the mother industry. But unfortunately the textile industry is facing different kinds of challenges in different times.

The textile industry is not free from the burden of loans from banks that was created the BTMC before the denationalization in the 1980s. So cotton factories without modernization cannot be inter linked with the high rate of import tax, vat, advance income 5tax payment, un adjustable workers pay with production and high rate of electric charge given to the government, so that they cannot compete with the Indian textile goods., Indian textile goods are smuggled into the country and for lack of administrative control of bonded warehouse and infiltration in the internal market through corruption, so that productive textile goods cannot be marketed in the country. In spite of that creation of enough opportunity acceptability of income tax structure and argument bank rate of interest can boost the export of textile goods.

It is often said that the quality of the cloth produced is not at par with foreign cloths and the textile mills in our country are not able to supply cloths according to the demand.

Recommendations This chapter covers specific objective 5 of this study. In this chapter I have tried to recommend some do’s for Sentier Mode Apparels Ltd. based on the findings of this study in order to overcome existing shortcomings, potential risks and to become successful in future in the industry. All the tools and strategies recommended are based on different marketing concepts and models that have been described in ‘Concept Analysis’ chapter.

In light of major existing bottlenecks and potential risks discussed in ‘Findings Chapter’, SENTIER as involved in international business, should reshuffle their international marketing mix strategies tailored to face future possibility of reduce buyers’ demands, tastes, changing global fashion trends, fail to deliver access orders at the quality and quantity level and price increase of raw materials. SENTIER to face these challenges should go for research and development activities to find more opportunities and scopes for new market entry, adopt new technologies and production methods quickly and so on. They can use below marketing mix strategies in this regard:  Product strategy: Since apparel fashion trend varies from country to country, thus SENTIER should adopt their products and make those customized in order to serve different local markets. At the growth stage SENTIER should go for product extension or design extension of existing product for repeat orders. Product features, design, packaging, distributing must associate value added service in order to meet target market specifications.  Pricing strategy: Their international pricing strategy should also be undertaken in accordance with company objectives, position planning, global competition, costs and customer needs and willingness to pay.  Distribution strategy: SENTIER should also know more about the power of intermediaries that are vital for their international distribution strategy. Adapting modern supply chain management and partnership with main value chain players can help them build an effective distribution system which is a prime demand of buyer to get their goods on time.

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 Promotional strategy: As for promotion in international market, SENTIER should attend more trade fairs and arrange the same for their buyers to be more familiar with them. They should also go for their image promotional campaign by sponsorship or event management internationally. SENTIER can also go for different sales promotional activities like providing incentives, premiums and specialty advertising by giving buyers calendars, ballpoint pens, cigarette lighters, baseball caps, etc.

Competitor is a vital threat for any business and especially for international marketer in this rapid growing globalization era. SENTIER should go for competitor analysis in order to gain competitors’ insights, anticipating own actions in return to their moves and to gain advantage over competition. They should keep below points in mind when go for competitor analysis:  Recognizing competitors  Competitors’ size, position and dominance in the market  Which area of customer relation are they targeting and what their objectives are  Their strengths and weaknesses Important data of competitors can be collected from their websites, annual reports, observing them, news and articles, from customers, visiting trade shows, visit them as a customer, from their suppliers, recruiting competitors’ employees, using marketing espionage, etc.

Beside competitors, SENTIER should also beware of new strong entrants, bargaining powers of buyers and suppliers and emergence of substitute products. In order to face any new strong market entrant, SENTIER should concentrate to be financially strong, introduce economies of scale in production, strong distribution channels, gaining cost advantage and have rich product lines and variety to serve different market segments. In order to handle buyers’ bargaining power, SENTIER should follow its group corporate policy of order receiving, for instance, production capacity should be distributed and offered a number of buyers so that one single buyer cannot be a threat for entire business. As SENTIER has its own yarn and accessories plants, thus it has low risk from suppliers’ bargaining power.

Diversifying product line and variety and target different segments is the best way to face emergence of substitute products.

Besides above, since SENTIER is involved in industrial business as much as in international business, long term relationship with the existing customers as well as attracting and retaining new customers is of utmost importance. In order to create a strong customer relationship base, SENTIER should calculate its customer retention rate and thus find out major customers and serve them in a more systematic and effective manner. In this regard, SENTIER may use modern methods of ‘Customer Relationship Management’ as stated in ‘Concept Analysis’ part in order to identify, satisfy, retain and maximize the value of a their best buyers.

In order to comply with technological and operational improvements and mitigate labor migration problem in new competitive age, SENTIER can utilize modern ‘Organizational Design for Inter-functional Cooperation’ (described in ‘Concept Analysis Part’) from industrial point of view. This will also help them in developing new structural departmental coordination and to be more competitive to face any potential challenges in future. Also they can be more organized and operationally sound to adjust with the potential ‘uncontrollable factors’ that might cause them problems in future.

Using ‘Organizational Design for Inter-functional Cooperation’ SENTIER can coordinate all the departments in such a way to individually serve customers’ entire needs. Also they create a ‘Team’ consisting people from each department and trained them to solve departmental disputes to get competitive advantage. In order to address interdepartmental conflict they can also introduce ‘Decision Support System’.

Based on SENTIER business activities, we can conclude that their position is in ‘Growth Stage’ in ‘Product Life Cycle’. In this regard I would like to suggest them to emphasize on its existing customers and new customers at the same time. At this stage, SENTIER should go for below strategies:  SENTIER should penetrate different markets by offering competitive price.  They should concentrate on rapidly maximizing sales, profit and market share.  In order to be cost effective average cost per customer must be calculated and promotional budget should be reduced to take advantage of demand.

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 They should go for product extension and provide more value added services like guarantee, warranty, etc.  They should build up a strong intensive distribution strategy in order to reach geographically dispersed customers.

At this stage, SENTIER can also utilize ‘Market Expansion strategies’ that emphasizes on below two tasks:  Try to grow Sales with existing products primarily by getting new market segments (buyers of different segments) to buy, and/or  Try to grow Sales with new products by introducing new models containing different sets of features in order to attract new buyers as well as encourage repeat ordering by existing buyers.

Conclusion Despite of all shortcomings stated above, Sentier Mode Apparels Ltd. is very much successful over the years in gaining customers’ confidence. Their continuous efforts of keeping the commitment in terms of high quality, performance and timely delivery took them at the pick of the industry. The way of their business development, growth rate, increased orders and profit and future expansion plan will continue to help them be more competitive in this sector as well as contribute to the country’s national revenue increase to a larger extent. However, Sentier as well as this sector must need govt. initiative in establishment of composite mills or individual units of weaving, spinning and processing that will reduce lead time and increase value addition and employment, in addition to improving the cost advantages.

If the govt. and the BGMEA take good care of this sector and implement the suggested measures for the purpose, experts expect the country will be able to attain the status of a major exporter to the extent of $25 billion a year in the next 20 years.

Appendix SWOT Analysis for Sentier Mode Apparels Ltd. SWOT analysis is a marketing audit that considers an organization's strengths, weaknesses, opportunities and threats. It is the first stage of planning and helps marketers to focus on key issues. Strengths and weaknesses are internal factors. Opportunities and threats are

external factors. Sentier Mode Apparels Ltd. SWOT analysis has been conducted based on information collected through interviewing SENTIER personnel.

Strengths: 1. One of the largest growing companies 2. Already shown Brand image and reputation 3. Mass production capacity and technology 4. 15 tons per day dyeing capacity 5. 40 tons gray fabric production per day 6. Wins third prize as largest exporter 7. Maintain all compliance issues 8. On time payment to supplier 9. On time delivery 10. High quality 11. Large volume handling capacity 12. Well established backward linkage 13. Well marketing and administrative skills 14. Well equipped production process 15. Highly skilled workforce 16. Accessibility to raw materials 17. Good relation with buyers 18. Financial stability 19. Entrepreneurial orientation 20.Technical qualifications TQM environment 21. Establishing Effluents Treatment Plan Weaknesses: 1. Limited space in terms of production volume 70

2. Labor migration 3. Factory location Opportunities: 1. USA market is growing 2. GSP facility 3. RMG Sector is getting more mature 4. China no more a competitive threat in terms of currency falls to 14% and wages increased 30% 5. Expected govt. subsidy to remain (currently 5%) as SENTIER uses its own produced earn.

Threats: 1. Vietnam is rising as new competitor 2. Expecting political situation to be worse in coming days 3. Other manufacturers are growing in terms of production and technology 4. IF GSP facility is withdrawn, it would be a vital threat 5. Increased costs and economic inflation Appendix Important Production Terms: Yarn: Yarn is the main raw materials for knit fabrics; knitting yarn is of special type different from weaving yarn. In general yarn of 20, 24,26,30,32 counts are used in the knit fabrics.

Gray Fabrics Knitting: After receiving the yarn in carton or gunny bag in cone from, it is measure and put in the creels of the Circular Knitting Machines. The machines continuous knits, whenever a cone is empty being replaced by a new one. Fabrics come out in rolled in Grey form. Rolls are stacked as per the sizes and GSM for delivery to dyeing section.

Inspecting: After the knitted fabrics are produced, it is inspected in running condition while passing over a table of the inspection machine. Inspection in this stage done by one Gray Fabrics. Collar and Cuff are inspected piece by piece.

Measuring: Before Delivery Fabrics for dyeing are inspected and measured in scales.

Scouring: Scouring is the clearing of textile materials of natural facts, waxes, dirt’s, oils, grease etc, by treating with alkalis. The bleaching process if essential for a good white effect

and may be carried out with peroxide a bleaching power solution. After scouring and bleaching, the Fabric becomes hydrophilic.

Dyeing: After scouring /bleaching, the knitted fabrics will be dyed in machine using Suitable dyes and chemicals, for dyeing of knitted goods specials treatment is necessary.

Temperature control in every stages of dyeing is very important.

Washing: After scouring, bleaching and dyeing necessary washing will be carried out.

Folding and Rolling: A folding and rolling machine to facilitate easy and convenient transportation of the goods will do folding and/or rolling baling of the finished goods.

Fabrics Lying: The finished fabric is delivered to the Garment section, for final production of T-shirts polo, Sportswear, Nightwear and dresses.

Fabrics Cutting: Finished fabrics in roll Orin plaited form dyed in a long table. The fabrics of same dial and weight lay in the table five/six layer. Pattern matter places market on the fabrics. Fabrics cut by brand knit or by any sophisticated cutter following the markers. So, after cutting the desired cut fabrics are ready for sewing.

Sewing: This is the main functional stage of a garment plant. All the fabric’s parts according to the desired pattern/maker are stitched together. If cuff/collar required, they are attached with the body. Different types of dresses has different requirement of trainings.

Tread Cutting: Finished garments it its ultimate shapes/ sizes were ready, now requires being cleaned pass inspection. Before inspection the threads remaining in the garment cut off.

Inspection: Before folding and poly packing the garments in finished form are inspected by the in-house quality controllers and cartooning.

Poly Packing: After passing inspection the finished garments are poly packed singly as per size and color and cartooned for final delivery. Cartoons contain the name of the buyer, pack size, Color and destiny, etc. Finally the cartoons are ready for delivery.

Appendix Important Commercial Terms: GSP Certificate: Generalized System of Preferences (GSP) is a preferential tariff system extended by developed countries (also known as preference giving countries or donor countries) to developing countries (also known as preference receiving countries or beneficiary countries). It involves reduced MFN Tariffs or duty-free entry of eligible products exported by beneficiary countries to the markets of donor countries.

Certificate of origin: A Certificate of Origin (often abbreviated to CO) is a document used in international trade. It traditionally states from what country the shipped goods originate.

The CO is primarily important for classifying the goods in the customs regulations of the importing country, thus defining how much duty shall be paid. But it may also be important for import quota purposes and for statistical purposes, and especially for food shipments, it may also be important for health regulations.

Pro-forma Invoice (PI): A PI is similar to a sales contract. It is issued by the seller addressed the buyer. Once pieces are agreed upon, the seller issues PI to the buyer where the unit price of the items as well as other sales conditions are stipulated. This PI is then submitted by the buyer to his bank and LC is opened in favor of the seller.

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Commercial Invoice: Commercial goods moving internationally must be accompanied by documentation reflecting the commercial transaction. This information is usually contained on the commercial invoice and will form part of the package presented to Customs at the time goods are released, or provided at the time of final accounting. In respect to export shipments, a commercial invoice is the basic document on which the importer (buyer) pays the exporter (seller).

Packing list: This contains the list of goods packed into the cartoons which is required for shipment of goods and by buyer to offload the goods from container.

BTMA Certificate: Certificate issued by Bangladesh Textile Mills Association for export purpose.

UD: This means ‘Utilization Declaration’ for fabric consumption which is issued by BGMEA. Bill of Lading: The Bill of Lading (B/L) is evidence of the delivery of goods to the carrier as well as constituting a contract of carriage between the shipper and the ocean freight carrier.

It is, when fully executed, constitutes the actual deed to the goods being shipped and is an official "document of title". Essentially, this means that the Ocean Bill of Lading can be used to meet banking requirements in issuing letters of credit as the bank may use this document to retain control over the merchandise.

Beside above documents commercial department also has to have clear concept of different types of shipment process like below: FOB: Under the Incoterms standard, FOB stands for "Free On Board". Indicating "FOB" means that the seller pays for transportation of the goods to the port of shipment, plus loading costs. The buyer pays freight, insurance, unloading costs and transportation from the arrival port to the final destination. The passing of risks occurs when the goods pass the ship's rail at the port of shipment. When the Incoterms version of the FOB term is agreed upon, the parties to the contract should expressly specify it, including the version of the Incoterms to be applied; e.g., "FOB New York (Incoterms 2000)".

C&F: C&F stands for Cost and Freight, is a contract between buyer and seller agreed to pay shipment cost by seller from origin to buyer’s door. Thus as per L/C negotiation, a particular order can be on FOB basis or C&F basis.

All sample documents have been illustrated in appendices part.

Note: Commercial documents are enclosed.

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Websites: http://www.google.com http://www.bgmea.com http://www.quickmba.com http://www.learnmarketing.net http://www.bangladeshgarment .com http://bdgarments.wordpress.com/overview/

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