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Sample Research Proposal on Bangladesh Garment Manufacturing Industry

1. Abstract:

 

Following trade liberalization Bangladesh garment manufacturing industry face severe challenges to retain its export market. This study is focused on the identification and evaluation of future competitive strategy for the Bangladeshi RMG (Ready Made Garment) Industry and the challenges B. S. A. Garments Industry Pvt. Ltd is facing to maintain the competitiveness in the global market after MFA (Multi – Fiber Agreement) in January, 2005.

 

2. Introduction:

 

In the expiration of the Multi Fiber Arrangement in January 1, 2005, a number of countries will be affected, particularly those in the South Asian regions. Not all of them will be affected in a positive way, some will come out as losers and some in an ambiguous position. It is in the latter category that the country of Bangladesh is perceived to belong (Haté et al. 2005). This study is focused on the identification and evaluation of competitive strategies that the Bangladeshi RMG industry especially B. S. A. Garments Industry Pvt. Ltd. may adopt in order for the country to retain its position in the global market after the MFA phase. There are, naturally, change and strategic management issues that the RMG firm will face considering the transition from being under the wings of the MFA to being out of it beginning January of last year. This research will also focus on such issues that the organisation will face in the light of the phase of change. On the side, it is also edged on finding how important are backward linkage industries to the RMG industry.

 

3. My Reason for Choosing the Research Topic:

 

My reason for choosing this topic is that I have been working with this company as an Assistant Executive (Commercial Department) about three years and I know that it is very easy for me to get data and collect interview from senior management and from the other official colleagues. For that reason after my research I will expect that I am able to get information about

 

-          ­The identification and evaluation of future corporate strategies for the RMG industry in Bangladesh, particularly the B. S. A. Garments Industry Pvt. Ltd. in the expiration of the MFA in January of 2005.

-          The identification of the importance of establishing a relationship between the backward linkage textiles.

-          B. S. A. Garments Industry Pvt. Ltd to retain its competitive position in the global RMG market and assist in the future development of garments sector in Bangladesh.

-          The change and strategic management issues that the RMG industry in Bangladesh, with emphasis on the B. S. A. Garments Industry Pvt. Ltd., is facing, in light of the expiration of the MFA in January of 2005.

 

3.1. Organization background:

 

B. S. A. Garments Pvt. Ltd is basically a private limited company and established in January, 1980. This company situated at 56, Gosail Danga, Double Mooring, Chittagong, Bangladesh. The company is fully export-oriented garments industry.

 

4. Literature Review:

 

Textiles, clothing and apparel industry are segmented components to manufacture garments for domestic consumptions and exports. In many countries these segmented industries have developed concurrently like India, China, Indonesia, Thailand, Taiwan etc. The companies of these countries are not importing material like yarn, fabrics and accessories to manufacture garments for exports that is why they have more flexibility to offer reduced lead times and wider product range. But there are countries that export clothing but depend on imported textile items to manufacture clothing for exports. These countries are Sri Lanka, Nepal, Dubai, Mauritius, and Bangladesh. The companies of these countries have been importing textiles from countries like China, India, or Indonesia and so are not as independent in business compared to the others.

 

The cost of manufacturing textiles and clothing in all these countries, though, are not identical but not very apart in weighted average on the ultimate product cost. The companies in these countries with integrated textiles always possess more strength but their export sector is confined by quota restrictions. The buyers are always searching for countries without such restrictions and which have cheap skilled labor force and other potentialities to manufacture clothing at a competitive price. These determinants have developed export oriented garment industries in countries like Bangladesh based on imported textiles from other countries.

 

The RMG export industry in Bangladesh commenced during 1977-80 for quota free status to U.S.A. This quota free status was the single largest factor for rapid development of this industry in Bangladesh augmented with the advantages of abundant cheap and skilled labor force. Bangladesh continued to procure fabrics and yarn from textiles surplus countries abroad until 1990. Thereafter, a few companies in Bangladesh have started setting up textile industries to fabric and yarn for export-oriented RMG industry. However, Bangladesh does not produce cotton, therefore they need to import the material while India and China have domestic cotton for their textiles. So, Bangladesh textiles are 10 to 15 % higher priced than those imported price from India or China creating a cost disadvantage for Bangladesh RMG corporate (Quddus & Rashid 2000).

 

 Since 1974 many global changes have been taking place under MFA that gave developed countries the opportunities to impose quota restrictions on textiles and clothing whenever they fill necessary to protect their interests. Under such agreements, many exporting countries were receiving differential treatments from developed countries. All these trade regulations so far created advantages one after another for the Bangladeshi RMG corporate. These agreements compensated some of the disadvantages like the higher price of locally manufactured textiles. But the World Trade Organization (WTO) has set a time frame of 1st January 2005 for textile and clothing to be fully liberalized and trade or quota barriers will no longer remain in developed countries to eliminate all deferential treatments imposed on exporting countries. The rule of the game will then be determined by the vectors of price competence, just on time delivery (JIT) and quality standards.

 

'The Multi Fibre Arrangement (MFA) (a.k.a. Agreement on Textile and Clothing (ATC)) governed the world trade in textiles and garments from 1974 through 2004, imposing quotas on the amount developing countries could export to developed countries. It expired on 1 January 2005. The MFA was introduced in 1974 as a short-term measure intended to allow developed countries to adjust to imports from the developing world. Developing countries have a natural advantage in textile production because it is labour intensive and they have low labour costs. According to a World Bank/IMF study, the system has cost the developing world 27 million jobs and $40 billion a year in lost exports' (Wikipedia 2006).    

 

A glaring example of Bangladesh RMG industry is its gross dependence on imported raw materials when compared with some other exporting countries. A small portion of textiles is now domestically produced. The dependence on external sources for fabrics results to longer lead times to complete apparel export cycle. Although this is so, Bangladesh has held its own in the competitive world textile and clothing market since the end of quotas in early 2005, with the value and volume of its exports rising a modest 2% and 4% says the UNDP (as cited in Textile Asia n.d.).

 

The clothing sector will become more dynamic with the enlargement of domestic textiles offering reduced lead times and additional flexibilities to the buyer. It must be accepted that with the existence of a weakness of a domestic based textile industry, the RMG industry will collapse in the long run. Therefore, all out efforts are necessary to become self sufficient in textiles and to reach the same level with that of other competing Asian countries, those that provide textiles domestically. This will provide the back up strength to the RMG industry to create additional values at its industry and company levels to remain competitive in global export market.

 

The business opportunities of a company or an industry have always been related with the macro environment of the country and its government. Bangladesh is no exception to that. RMG export businesses are very time sensitive and as a result, domestic time spent for transportation of the products, the transit times for inland sea or airports to the ports of destinations are essential. These businesses are also price sensitive and relate cost of transportations to each of these segments. The RMG industry of other countries is of different cultural environment and human values where the image of exporting country and its peoples are related. An ideal combination of all these aspects has values to determine the business perspective besides other issues of prices and lead times. Again the price competitiveness relates to the macro environment's strength, service standards and prices for those services. A good macro environment will add business opportunities and a poor environment will erode these prospects.

 

There are three organization levels involved in the strategic management process; corporate, business unit, and functional. There is a hierarchical relationship among these strategy levels. The first task in the strategic management process is the formulation of a set of goals for the organization (Schendel & Hofer 1979), in this case the future of RMG business. The corporate level asks what business the country should be in. The business unit level asks how a firm should compete in a given business. The functional level is concerned with two issues. The first issue is the integration of the functional activities of the firm. The second issue is linking the functional strategies with changes in the functional area environments.

 

The competitive environment has five basic competitive forces including suppliers, buyers, potential entrants, substitutes and industry competitors (Porter 1980). Depending on the firm, it may choose to compete with other firms in the industry using a cost leadership, product/service differentiation, or market segmentation strategy (Porter 1980). However, looking beyond the recent crisis, corporations are realizing that in the long term they have to survive in a newly opened market environment. In addition, corporations are finding out that they are less able to depend on political and business relationships to bail them out during bad times in the increasingly democratic Asian economics. Thus, there is a shift in corporate culture "firm ego-driven conglomerate to market-driven niche player" (Wall Street Journal 1999).

 

 

4.1. Backward Linkage Industry Relationship to RMG corporate:

 

A glaring example of Bangladesh RMG industry is its' gross dependent on imported raw materials when compared with some other exporting countries. A small portion of textiles is now domestically produced. The dependence on external sources for fabrics results longer lead times to complete apparel export cycle. For imported fabrics, Bangladeshi company needs lead time of 120 to 150 days compared to other Asian countries offering lead times to 15 days (Textile Asia: June 1999 p-61). There remains a great set back for Bangladesh RMG both for present and the future and will be further intensified beyond the year 2004 when trade advantages will no longer exist.

 

4.2. Supplier's competitive forces:

 

The trade relationship RMG industries now have with the supplier abroad will change in post MFA phase. These suppliers are one of the five forces of model of Porter (1985) which shape the competitive force of an industry. Suppliers can create both opportunities and threats for an industry. The weaker the supplier the better the price the company will get from suppliers but when suppliers will have more opportunities they will raise the price and will become a threat for the industry. Until the year 2004 suppliers from abroad had surplus materials but were not converting those textiles into clothing for exports into the same market as Bangladesh were exporting because of trade restriction. But that scenario might no longer persist beyond the year 2005. Naturally these suppliers will then transform textiles to clothing for exports to all extent where prices are competitive, lead times are less, quality parameters satisfied; and cost of manufacturing are equal to Bangladesh. In such event, sourcing of textiles from abroad   will dry out in post MFA phase.

 

All these arguments demonstrate the necessities of backward linkage textile industries and establish multi direction business corporate within the country to create domestic based cost effective supply chain similar to other Asian exporting countries to retain future RMG business in Bangladesh.

 

4.3. Government macro environment:

 

The business opportunities of a company or an industry has always been related with the macro environment of the country and its' government. Bangladesh is no exception to that. Within this spectrum, the study will review the related macro environment to RMG corporate and their relationship to future RMG business especially in post MFA era.

 

RMG export business is very time sensitive and so is related to domestic time spent for transportation of the products, the transit times for inland sea or airports to the ports of destinations. These businesses are also price sensitive and so are related to cost of transportations of each of these segments.

 

The business related with industry from abroad of different cultural environment and human values where the image of exporting country and its peoples are related.

 

An ideal combination of all these aspect has values to determine the business perspective besides other issues of prices and lead times. Again the price competitiveness relates to macro environment strength, service standards and prices for those services. A good macro environment will add business opportunities and a poor environment will erode these prospects.

 

 

4.4. Corporate business strategy:

 

 

4.4.1. Competitive environment:

 

The competitive environment has five basic competitive forces including suppliers, buyers, potential entrants, substitutes and industry competitors (Porter, 1980). Depending on the firm, it may choose to compete with other firms in the industry using a cost leadership, product/service differentiation, or market segmentation strategy (Porter, 1980).

 

4.4.2. Market environment:

 

A survey of Asian business executives, by the Far Eastern Economic Review (June -1997) before the Asian financial crisis, indicates overwhelming support for the notion that "connections are more important that strategy for a company to succeed in Asia". However, looking beyond the recent crisis, corporations are realizing that in the long term they have to survive in a newly opened market environment. In addition, corporations are finding out that they are less able to depend on political and business relationships to bail them out during bad times in the increasingly democratic Asian economics. Thus, there is a shift in corporate culture "firm ego-driven conglomerate to market-driven niche player" (Wall Street Journal, 1999).

 

4.4.3. Change Management Issues

 

According to Randall (2004 p. 28), 'claims about change as an increasingly common event in the experience of business life are impossible to quantify in a comparative way'. It is therefore essential to look at this change in the B. S. A. Garments Industry Pvt. Ltd. in Bangladesh in the most objective light. According to existing management literature on change, there are two types of change in an organization. One is emergent, the other, planned. The former term means that change originates from any level in the organization, while the latter refers to initiatives that are driven "top-down" in an organization, specifically, those imposed by the management upon the members of the organization. Planned change efforts can focus on individual, group, or organization behaviour (Harvey & Brown 1992, p. 57), and is a systematically proactive way of coping with business developments, in this case, developments in the RMG industry in the post-MFA phase, especially on how it affects the B. S. A. Garments Industry Pvt. Ltd. In the case of a company that is wholly export-oriented like the B. S. A. Garments Industry Pvt. Ltd., planned change should always focus on organizational behaviour, taking the firm as one efficiently working whole rather than subdivisions of an organization.

 

In planning and implementing change, organisational members and practitioner jointly plan and implement organizational development interventions (Cummings, 2005, p. 30). After having gathered sufficient information vital to the effective implementation of change, the organization could then proceed to the process of first planning, and after it is found out that the plan is feasible and beneficial to the firm, executing the plan company-wide for the compliance of everyone involved. The final stage involves 'evaluating the effects of the intervention and managing the institutionalization of successful change programs.  In this stage, feedback is a key attribute because it can provide information about whether the changes should be continued, modified, or suspended' (Cummings 2005, p.30). There are ever-present forces in every organization that tend to dampen out and reverse changes. It is vital to create ways to monitor and reinforce the planned changes until they become stabilized and part of the organization's culture. Major organization changes tend to take years to complete and stabilize, rather than the initial few weeks or months in which the more visible changes may seem to occur (Mitchell 1998). These stages are what the RMG firm B. S. A. have to face in the post-MFA stage after it has expired in January of 2005.

 

4.4.4. Strategic Management Issues

 

The term strategy originates from the Greek language, where the word means the art of a general. The person who makes strategies is the strategist who is the leader of an army (Mintzberg & Quinn 1991).Management of a firm needs strategy, to make sure that everything goes well in the company, through the use of strategic management everything done in the company is well organized and no detail is being left out. The company needs strategic management to make sure that the company is doing well internally, especially in a transition phase, where the problems of change management arise. The strategic management paradigm is built on the notion that strategic decision making results from intentional actions in the name of individual or collective purpose. The paradigm accords central importance to the cognitive elements of understanding and intention as basic drivers of strategic choice. Managerial thought is critical to processes of strategy formulation, for example, which require managers to envision and prioritize future states that are appropriate and proper. Similarly, managerial thought is critical to environmental analysis, which requires managers to forecast and make predictions. These tasks all depend on individual cognitive capabilities and on cognitive processes such as attention, perception, reflection, and understanding (Hunt & Phillips 1992).

 

For some, strategic management is just another commercial technique being foisted on an unwilling sector which is losing its soul. For others, however, strategic management has provided a useful set of tools and techniques to draw on and adapt to enable them to be more focused, to create a stronger sense of unity and direction, to understand the external environment better and to manage more effectively the development of the organization (Courtney 2002). It is therefore important that the B. S. A. organisation position itself in a way which would assist the whole firm into going through the change phase in a hassle-free manner. Strategic management is one management tool in where such change management issues can be effectively and efficiently remedied.

 

4.5. Resource utilizations:

 

The liberalization of markets has resulted in a shift in emphasis from asset and market-share building to improving productivity, innovation, and strategic planning (Hamlin, 1999). An outcome of globalization is that quality and productivity standards are being applied more uniformly across markets. There is a greater awareness of the importance of improved resource utilization. Bryan et al. (1999) pointed out that companies will use outsourcing to get the best components at the lowest possible price. An interesting observation, concerning Asian manufacturers, is that they tend to be contract assemblers where margins are thin owing to intense competition. These manufacturers have been successful because of their ability to provide consistent quality, timely service, and low labor costs (Hamlin, 1999).

 

4.6. Risks:

 

Risk is another factor the companies encounter as they take advantage of cross-geographic arbitrage. These risks include operating, reputation, and financial risks (Bryan et al., 1999). Deciding to produce locally, especially in emerging markets, can be particularly risky owing to foreign exchange risks, availability of quality raw materials/suppliers, labor productivity and skills necessary to produce quality products. The opportunity to take advantage of low-cost assembly will be lost if the products to be assembled at given quality level cannot be brought together in a cost effective and timely manner.

4.7. Innovations:

 

The adoption of a strategy of fast innovation implies a change in production processes those requires close cooperation with suppliers' to maintain appropriate inventory levels. Empirical practice suggests that innovation is accelerated when firms incorporate suppliers' expertise in raw materials into the new product development process (Lewis, 1990). With customers, exporters must understand the customers' future buying needs in order to meet their changing requirements with a continuous stream of new product innovations.

 

4.8. Co-operation and relationship:

 

Another aspect of an exporter's strategy is the extent to which the exporter recognizes the interdependence between its customer and supplier relationships. Cooperation with suppliers is hypothesized to predict cooperation with customers. Since informal cooperation rests on norms of behavior those may be different in different countries, it is particularly problematic for exporter dealing with foreign customers. Exporters are more likely to cooperate with their foreign customers once they have already gained experience in cooperation with their domestic suppliers.

 

4.9. Diversification:

 

Much has been talked about product & marketing diversification. Two majors diversification are 'related' and 'unrelated'. Related diversification is diversification into a new activity that is linked to a company's existing activity by commonality by more or more components of each activity value chain. Normally, these linkages are based on manufacturing, marketing, material management and technological advancements. Unrelated diversification is a diversification into a new activity that has obviously no commonality with any of company's existing activities.

 

Most companies consider diversification when they are generating fund in access of those are necessary to maintain a competitive in their original, or core, business. The in versification has bureaucratic costs. Michael Porter observed that the track record of corporate diversification has been dismal. (Porter, 1987, PP.43 – 59)

 

4.10. External Environment:

 

"A company's external environment can be broken into two parts. One part is the company's industry environment consisting of elements those directly affects the company. The other part is the macro environment, the outside of broader economic, social, political, legal, global, technological settings within which the industry and company is placed"  (Charles and  Gareth  'Strategic Management Theory').

 

As for the B. S. A. Garments Industry Pvt. Ltd., their industry environment is the local RMG industry of Bangladesh. Some of the elements that directly affect the RMG organisation in focus are: (1) the price and quality of the raw materials available for purchase or acquisition in order to make a RMG end product; (2) the availability of the RMG workforce within the country; and (3) all the other existing RMG manufactures in Bangladesh which are their main competitors. The macro environment pertains to the economic (current state of the Bangladeshi economy), social, political, legal (the scope of which the defunct MFA agreement covers), global (the state of the RMG market worldwide), and the technological settings (the extent of technological advances for the industry being introduced the world over).

For the company to succeed, the B. S. A. strategy must be consistent with external environment. For a good business, internal and external environment must have a good fit. The internal environment of the industry may be good but external environment, e.g. communication not enough, political disorder will endanger the interest of the company. The external environment of the RMG industry may create environmental opportunities and threats for B. S. A., which they would have no control of, but which would be an essential aspect for consideration in making good business decisions.           

 

Opportunities arise when company can create more values from favourable external environment. Threats arise when company cannot create values and endanger the business of the company. Strategy manager should always consider, formulate & recommend strategically national & international policies to create and sustain environmental opportunities for the business.

 

4.11. The RMG Industry Environment:

 

An industry can be defined as a group of companies offering products & services that are close substitute to each other. Close substitutes are products or services that satisfy basic consumer needs. The task facing strategic managers is to analyze competitive forces in an industry environment in order to identify the opportunities and threats that confront a company. Michael E. Porter (1985) of the Harvard School of Business Administration has developed a framework that helps managers do this. Porter's framework is known as the five forces model. It focuses on five forces that shape competition within an industry:

 

q       The risk of new entry by potential competitors

q       The degree of rivalry among established companies within an industry

q       The bargaining power of buyers

q       Bargaining power of suppliers

q       The closeness of substitute s to an industry's products.

 

Porter's argument is that the stronger each of these forces is, the more limited are established companies in their ability to raise prices and earn greater profits. Within Porter's framework, a strong competitive force can be regarded as a threat since it depresses profits. A weak competitive force can be regarded as an opportunity since it allows a company to earn greater profits. Because of factors beyond a company's direct control, such as industry evolution, the strength of the five forces may change through time. In such circumstances, the task facing strategic managers is to recognize opportunities and threats as they arise and to formulate appropriate strategic responses. In addition, it is possible for a company, through its choice of strategy, to alter the strength of one or more of the five forces to its advantage.

 

As for the B. S. A. Garments Industry Pvt. Ltd., their competitive forces which can be shaped by the risk of new entry by potential competitors, the degree of rivalry among established companies within an industry, the bargaining power of buyers, bargaining power of suppliers, the closeness of substitute s to an industry's products is added to by the recent change in the RMG industry environment, this change being the expiration of the MFA in January of last year. Combined, these forces must be analysed and evaluated for all they are worth in order to formulate effective strategies which would help the company retain its position for local and, potentially, global market leadership. As it is within the power of the firm to alter the strength of one or more of the five forces to its advantage, the strategies to be formulated must therefore be aligned to achieve the best possible combination of these competitive forces.

 

4.12. Trend towards globalization in the supply chain:

 

The growth in world trade has continued to outstrip growth in most countries' Gross National Product throughout the closing years of the 20th century and looks set to continue for the foreseeable future. (Christopher, 1998) In part expanding demand in new markets drives this trend but also the liberalization of international trade through GATT/WTO accords has had a significant.

Once, companies established factories in overseas countries to manufacture products to meet local demand. Now, with the reduction of trade barriers and the development of global transportation infrastructure, fewer factories can produce in larger quantities to meet global, rather than local, demand.

 

Paradoxically, as the barriers to global movement have come down so the sources of global competition increased. Newly emerging economies are building their own industries with global capabilities. At the same time, technological change and production efficiencies mean that most companies in most industries are capable of producing in greater quantity at less cost. The result of all of this is that these is now over-capacity in virtually every industry meaning that competitive pressure is greater than ever before.

 

To remain competitive in this new global environment, companies will have to continually seek ways in which costs can be lowered and service enhanced, meaning that supply chain efficiency and effectiveness will become ever more critical.

 

4.13. The Supply Chain and Competitive performance:

 

According to Christopher (1998) the supply chain is the network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer. Thus for example a shirt manufacturer is a part of a supply chain that extends upstream through the weavers of fabrics to the manufacturers of fibers, and downstream through distributors and retailers to the final consumer. Each of these organization in the chain are dependent upon each other by definition and yet paradoxically by tradition do not closely co-operate with each other.

 

Supply chain management is not the same as 'vertical integration'. Vertical integration normally implies ownership of upstream suppliers and downstream customers. This was once thought to be a desirable strategy but increasingly organizations are now focusing on their 'core business – in other words the things they do really well and where they have a differential advantage. Everything else is 'out-sourced' – in other words it is procured outside the firm. So, for example, companies that perhaps once made their own components now only assemble the finished product, e.g. automobile manufacturers.

 

4.14. Generic business level competitive strategy:

 

According to porter (1985) Companies pursue a business-level strategy to gain competitive advantage that allows them to outperform rivals and achieve above-average returns. They can choose from three generic competitive approaches: Cost leadership, differentiation, and focus. There strategies are called generic because all businesses or industries can pursue them regardless of whether they are manufacturing, service, or not-for-profit enterprises. Each of the generic strategies results from a company's making consistent choices on product, market, and distinctive competencies—choices that reinforce each other.

 

4.15. Just in Time (JIT):

 

There have been many new ideas and concepts in business management over the last thirty or so years, some of which have endured and others discarded. However, perhaps one of the most significant principles to become widely adopted and practiced is that of just–in–time, or JIT, is a philosophy as much as it is a technique. It is based upon the simple idea that wherever possible no activity should take place in a system until there is a need for it. Thus no products should be made, no component. Essentially JIT is a 'pull' concept where demand at the end of the pipeline pulls products towards the market and behind those products the flow of components is also determined by that same demand. This contrasts with the traditional 'push' system where products are manufactures or assembled in batches in anticipation of demand and are positioned in the supply chain as 'buffers' between the various functions and entities.(Sherman, 1991)

 

 

 

 

 

 

Retail

Demand

pull

 

Buyer

Warehouse

Corporate RMG

Corporate

Textile

 

RMG

Industry

Textile Industry

Demand Pull

 

 

 

 

 

 

 

 

 

 

 

 

Product push

    

 

 

 

 Source: Sherman (1991)

 

 

 

 

JIT pull and push concept:

 

The conventional approach to meeting buyer's requirements are based upon some form of statistical inventory control which typically might rely upon reordering when inventory levels fall to a certain predetermined point –the so-called reorder point (ROP).

 

Under this approach a reorder point or reorder level is predetermined based upon the expected length of the replenishment lead time. The amount to be ordered may be based upon the economic order quantity (EOQ) formulation which balances the cost of holding inventory against the cost of placing replenishment orders.

 

To reduce buyer inventory cost, JIT concept is developing very rapidly for quick turn over at a less cost. But at the same time, buyer will need apparel on time in the shelf or warehouse. Textile and clothing are products spread over four seasons with very compact timing. This timing cannot be achievement without compositeness and integration of textiles and clothing within one geo-political boundary.

 

4.16. The Competitive Advantage of Nations:

 

Companies, not nations, are on the front line of international competition. Yet, the characteristics of the home nation play a central role in a firm's international success. The home base shapes a company's capacity to innovate rapidly in technology and methods and to do so in the proper direction. It is the place from which competitive advantage ultimately emanates and from which it must be sustained. A global strategy supplements and solidifies the competitive advantage created at the home base; it is the icing, not the cake. However, on the one hand, while having a home base in the right nation helps a great deal, it does not ensure success. On the other hand, having a home base in the wrong nation raises fundamental strategic concerns Porter (1980).

 

4.17. Size of a Country:   

 

In general, smaller countries are more exposed to the international context than larger countries. Smaller countries commonly export more of their gross domestic product than larger countries, and import more as well. Hence, their companies are more used to dealing with, and adapting to, a high number of foreign suppliers, customers and competitors. Moreover, companies from smaller countries, confronted with a limited home market, are forced to seek growth in foreign markets earlier than their counterparts in larger countries. During this early internationalization, these companies do not have the benefit of scale economics in the home market and therefore are usually more inclined to adapt themselves to the demands of foreign markets. Companies in larger markets normally grow to a significant size at home, thereby achieving certain economies of scale through national standardization, while also establishing a domestically-oriented management style. When they do move abroad, as a more mature company, their international activities will tend to be modest compared to domestic operations and therefore they will be less inclined to be locally adaptive (Bartlett, and Ghoshal, 1995).

 

5. Literature Review Summary:

 

As a summary, the RMG sector to date is protected by external trade and tariff concessions allowed by importing countries. Bangladesh until now is classified as least developed country in the world of nations. These concessions are extended on the presumption that Bangladesh will make progressive economic development to reach the stage of a developing nation similar to India or China the two other major clothing exporting Asian countries. But the opportunities derived from such protection will not exist beyond the year 2005. What then the should the B. S. A. do to save this industry with a very high exit barrier? Based on these backdrop and to answer the research objectives following strategies are identified pertinent to the present and future of the textile and clothing industry of Bangladesh, in particular attention, to the B. S. A. company. The change and strategic management issues literature were likewise discussed in detail in the previous sections, in order to provide insight for the formulation of the questionnaire which will serve as the tool for this research.

 

To protect this industry from the future threats of the suppliers abroad and simultaneously to reduce lead times in order to make the business more attractive to the buyers, there are no other alternatives other than full backward integration. This will add confidence of the buyers and improve the image. The textile sector thus developed will create supplementary co-operation relationship among textile and RMG industry instead of opposing competing relationship. Both will become interdependent on each other. This should be the core issue of relationship. The development of these two independent but interrelated corporate will create business opportunities for both. The profits gained out of these business opportunities should be equitably shared. One can urge why a company should go for high capital-intensive textile industries in this critical transition stage. The argument against such question is simple; textiles will create synergy for both the industry based on relationship, cooperation and trust. The sum of values added by both industries will exceed the value of each industry. But value of an individual industry will have no or less meaningful value.

Government macro-environment has always been the key issues for any business. These issues are more pertinent for an underdeveloped country like Bangladesh. For general economic interest, macro environment must be improved to an international standard. Though RMG industry is domestic based but are conducting global business; so, it demands an efficient good environments. Development of macro environment will not only improve the business opportunities but will further improve the image of Bangladesh creating advantage one after other. The RMG industry has many weaknesses as well as strengths. But the real asset it has is the responsive work force. This asset when intelligently trained and developed will turn into a great force to remove many weaknesses. The RMG firm level competencies are not the same. Some of them have competencies in one form or other. So, firms should identify exploit these competencies first and extend these competencies to the optimum level utilizing all the existing intangible and tangible resources they already have. Next they can add and create new competencies to meet the changing demands. During last twenty years the clothing business developed within confined and protected trade environment. This has lead to an apparent stability. But with the changes to free trade environment, changes are now needed at each organizational level to meet new business demands in an unprotected trade regime of uniform global competition in term of prices, lead times, environments, image and the services.

 

6. Possible Research Questions:

 

The following are open-ended questions are resultant from the literature review, which will allow the researcher to come up with answer in the dissertation:

 

  1. How do you think has the implementation, and the subsequent expiration of the Multi Fiber Arrangement affected the RMG industry of Bangladesh and your company in particular?

 

  1. What are the strengths and weaknesses (internal factors) of the B.S.A. Garments Industry Pvt. Ltd. that you think could contribute to competitive strategy formulation?

 

  1. What are the threats and opportunities (external factors) of the the B.S.A. Garments Industry Pvt. Ltd. that you think could contribute to competitive strategy formulation?

 

  1. How do you think change management issues will affect the successful implementation of competitive strategies of the organisation? What is the best possible approach to tackle these issues?

 

  1. What are the parts that suppliers play in the RMG industry of the country? Do you think they will significantly affect the future of your company?

 

  1. In what ways do you think backward linkage industries help the RMG industry and your firm in particular?

 

  1. How can backward linkage industries help the RMG industry in the country and the B. S. A. company to retain its position in the global RMG market?

 

  1. In a scale of 1 to 10, 10 being the highest, gauge the chancesyou're your company in retaining its competitive edge in the global RMG market. Kindly justify your answer.

 

  1. What strategic policies may the government adopt in the future to help the RMG industry in the retention of its position in the global market now that the Multi Fibre Arrangement has expired?

 

  1. How do you think these policies would affect the B. S. A. Garments Industry Pvt. Ltd. in particular?

 

7. Methodology:

 

7.1. Research Method:

 

 

This chapter describes the procedure with which the researcher is planning to conduct his case study. It will begin with a description of the chosen research method followed by the selected research approach and strategy, and then it will proceed to present the research instrument which this study plans to use: the questionnaire. This section will also refer to the credibility of the dissertation's probable findings in terms of validity and reliability.  Ethical issues that may arise in the course of doing this study will also be pointed out by the research methodology. Throughout the chapter, the researcher will attempt to justify the reasons for using such and such method, approach, strategy and instrument.

7.2. Research Design:

 

According to Berry (1983), data collection and the rules for confirmation is not only the part of research methodology, it is more about the way of explanation and the resources by which explanations are produced. So knowledge of explanation is developed from research methodology. On the other hand, research design provides the plan and structure as how to explanation could be acquired. The research design was influenced by the following factors: (1) The need to meet the learning objectives of the garments industry developments; (2) The requirement for credibility of academic research and; (3) The potential and limitation for development of backward linkage textile industry and its implementation.

 

This study employs the descriptive research method, which uses observation and surveys. In this method, it is possible for the study to be convenient and quick.  This dissertation aims to identify and evaluate future competitive strategy for the Bangladeshi RMG (Ready Made Garment) Industry and the challenges B. S. A. Garments Industry Pvt. Ltd is facing to maintain the competitiveness in the global market after the expiration of MFA in 2005. Descriptive research could also suggest unanticipated hypotheses. Nonetheless, it would be difficult to rule out alternative explanations and especially infer causations. Thus, in this dissertation it is practical and reliable to use this kind of research approach.  This descriptive type of research also utilizes observations in the study. To illustrate the descriptive type of research, Creswell (1994) guides the researcher when he states: Descriptive method of research is to gather information about the present existing condition.  The purpose of employing this method is to describe the nature of a situation, as it exists at the time of the study and to explore the cause/s of particular phenomena. The researcher opted to use this kind of research considering the desire of the researcher to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations for the study.

 

The researcher will use the QUANTITATIVE METHOD of research in the making of the dissertation. Basically, quantitative method is compatible with this study because it allows the research problem to be conducted in very specific and set terms (Frankfort-Nachmias & Nachmias, 1992). Besides, quantitative research plainly and distinctively specifies both the independent and the dependent variables under investigation (Matveev, 2002). It also follows resolutely the original set of research goals, arriving at more objective conclusions, testing hypotheses, determining the issues of causality and eliminates or minimises subjectivity of judgment (Frankfort-Nachmias & Nachmias, 1992). Furthermore, this method allows for longitudinal measures of subsequent performance of research subjects (Matveev, 2002). Finally, it provides the attainment of high levels of reliability of gathered data due to controlled observations, mass surveys, or other form of research manipulations (Balsley, 1970). This study will be based on surveys and employ statistical treatment, so basically the quantitative approach fits well with it. Additionally, instead of attempting to sample across a large number of garment owners, a small number will be focused on and investigated over a period of two weeks. During the data gathering, the choice and design of methods was constantly modified, based on an ongoing analysis. This allows investigation of important new issues and questions as they arise, and allows the investigators to drop unproductive areas of research from the original research plan.

 

This method will help the author describe the present condition of the RMG industry in Bangladesh, and consequently analyze the nature of future competitive strategy that the particular industry will adopt in order to retain its position in the global market after the expiration of the Multi Fiber Arrangement in 2005 and how the integration of the backward linkage textile industries will provide impetus for such retention. As every research project is built on a methodological approach, this study will the philosophical position of interpretivism, which relies on the underlying assumption that the general condition needs to be taken into consideration in order to fully understand a phenomena, in this case, the phenomena being the retention of the position of Bangladesh in the global RMG garment industry market through competitive strategy in a time when forecasts to the county's industry are showing that the post-Multi Fiber Arrangement effects to Bangladesh are ambiguous (Haté et al. 2005). From there, the researcher will attempt to identify and evaluate competitive strategies from the descriptions of respondents garnered from the survey questionnaires.

 

The study will use an inductive research strategy that is based on the interpretation and understanding of the subject. Abduction starts with the consideration of particular observations (in this case, the observation will come from the questionnaire results and related literature), then that consideration will give rise to a hypothesis, which relates them to some other fact, or rule that will account for them. This involves correlating and integrating the facts into a more general description, which is, relating them to a wider context (Givón 1989). The use of abduction to generate a hypothesis will help the author subsequently formulate a conclusion based on the questionnaire's findings through development of a theoretical pre-understanding, while still maintaining enough interest to develop a theory (Yin 1994). Using the inductive approach will enable the author to gain insight and to develop a theory as resulting data from the questionnaires are gathered.

 

This dissertation will use a case study as a basis of generating a theory and making use of existing theories against which materials gathered can be compared. According to Abercrombie, Hill & Turner (1984), the detailed examination of a single example of a class of phenomena, a case study cannot provide reliable information about the broader class, but it may be useful in the preliminary stages of an investigation since it provides hypotheses, which may be tested systematically with a larger number of cases (p. 34). A case study was chosen as a particular method of this quantitative research because it involves an in-depth, longitudinal examination of a single instance or event, rather than following a rigid protocol to examine a limited number of variables thus providing a systematic way of looking at events, collecting data, analyzing information and reporting the results (Wikipedia 2006). According to Bent Flyvbjerg (2006), case studies lend themselves to both generating and testing hypotheses (as cited in Wikipedia 2006).

 

7.3. Research Instrument:

 

This dissertation will make use of a questionnaire to facilitate the study of competitive business strategies for the Bangladesh RMG industry. This self-made questionnaire was chosen as a method for data collection for reason of its convenience to the researcher and the respondent, as there exists time constraints. The researcher could opt to leave the questionnaire for pick-up at a time both convenient for the respondent and within the time plan of the author. While the questionnaire is in the hands of the respondent, the researcher could attend to the other aspects of the dissertation such as application of the finishing touches to the review of related literature and preparation for how the data to be gathered will be treated. It was also chosen because of the geographical distance of Bangladesh to the researcher's current location. The questionnaire for this research has been designed in such a way that would give an insight of the perception of the respondents about the current position of the garment factory, and what are its chances of retaining its current position in the global RMG market when future competitive strategies are adopted. Most of the questionnaires were open-ended and the questionnaires were addressed.

         

            q To collect the background information of RMG industry.

            q To know the respondent's opinion regarding backward linkage          

                 industry.

            q To know the respondent's opinion regarding government's role in this

                 industry and finally.                                             

            q To determine what the respondent has in mind to meet the future       

                  business challenges emerging from globalization.

 

7.4. Data Collection Methods:

 

To collect the primary data, in-depth personal interviews over the phone with company owners will be facilitated in order to learn about the judgment, evaluation and their understanding of the weakness and strength of the industry and the future action plans they have in mind using an open-ended questionnaire. Time constraint and geographical distance are the reasons for choosing the particular data collection method. The respondents will be twenty garment factory owners living in Dhaka and Chittagong purposively selected by the researcher using a sampling criterion. Secondary data is planned to come from books, journals, the Internet and other resources relating to the RMG industry of Bangladesh. 20 respondents (Sample size, n = 20) where the majorities of RMG companies are located were chosen for the survey to get a convincing outcome. Data was collected using purposive sampling. Personal contacts will be used to gain a higher response and to minimize the language problem, and as the author has worked in the RMG industry for a number of years, it will considerably give leverage to his access to the factories.  The following personnel will be interviewed that who are:

1) Mr. Amzadul Ferdous Chowdhury, Managing Director, B. S. A. Garments Industry Pvt.  Ltd.

2) Mr. S.N. Kibria, General Manager, B. S. A. Garments Industry Pvt. Ltd.

3) Mr. Zahid Hussain, Executive Commercial, B. S. A. Garments Industry Pvt.  Ltd.

4) Mr. Istiaque Hussain, HR manager, B. S. A. Garments Industry Pvt. Ltd.

5) Mr. Fazlul Karim, Accounts Manager, B. S. A. Garments Industry Pvt. Ltd.

 

 

7.5. Sampling Criteria:

 

The samples were selected on the basis of the characteristic required to answer the research questions. Four types of respondent were chosen in order to cover all segment of the garment industry to reflect the overall picture.

 

q       Respondents of companies employing five hundred workers in RMG industry. These companies do not have backward linkage industry.

q       Respondents of companies employing one thousand workers of which eight hundred workers engaged in RMG industry and two hundred in backward linkage industry of knitting & dyeing.

q        Respondents are from companies employing more than fifteen hundred workers   in RMG industry.

q       Respondents are from companies employing more than fifteen hundred workers; of them one thousand workers in RMG industry and rest workers in backward linkage industry of weaving, fabric dyeing, printing and finishing.

 

7.6. Secondary Data:

 

Secondary data was collected from literature, book, relating to the manufacturing industries and of garment industry of Bangladesh.

                                                                                                                                                                                                                                                                                                                                 & nbsp;                                                                                                                                                                                                                                                               & nbsp;                                                                                                                                                                                                                                                               & nbsp;                                                                                                                                                                                                                                                               & nbsp;                                                                                                                                                                                                                                                               & nbsp;                                                                                                                                                                                                                                                               & nbsp;                                                                                                            

7.7. Validity and Reliability of Probable Findings:

 

According to Trochim (1999), validity is the best available approximation to the truth of a given proposition, inference or conclusion (as cited in 'Designs to rule out threats to internal validity' n.d.). Research reliability refers to the repeatability of measurement, and how accurately a technique actually measures the phenomenon under investigation (as cited in Paul 2006).

 

The researcher will relate the findings of the study to existing theories of business strategy and find out which aspects of the findings are generally more valid than the others. Through that way, the findings could contribute to the generalization of some aspects of the theory, while opening another avenue for potential future research. The credibility of the findings will depend mainly on the results of the questionnaire, and as the respondents will be asked to remain anonymous, the impartiality and objectivity of their answers will heighten. The author, however, does not guarantee one hundred percent validity and reliability, as subjective interpretations cannot be simply avoided. This is an ethical issue that may arise from the making of this dissertation. Maintaining impartiality in the formulation of findings is not outright easy. A dissertation is ideally characterized by the maintenance of an attitude of impartiality and objectivity and by extreme care to convey information accurately. Thus, the researcher, in all aspects of the dissertation, will attempt to maintain an impartial view about the subject and leave the readers to decide if the study has achieved such unbiased position. Another ethical issue that may arise is the respondents' consent to participate in the study. The author will attempt to address this problem by giving the respondents a clear description of the nature, form and implications of the research, and their role in it should they choose to participate.

 

7.8. Access:

 

I have already talked with the company Managing Director (Amzadul Ferdous Chowdhury) in April 06 regarding my access to his organisation for my research purpose. I explained to him regarding my research objectives. After that, Managing Director has assured about my access to his company.  He also confirmed me that he will extend full cooperation in terms of interview with mangers as well as other managerial staffs.  I am keeping touch with him regarding my access to the company. I have also working relation with the company that will help me to get easy access to conduct my research for my dissertation.

 

7.9. Ethical Considerations

 

Ethical issues considered upon the implementation of this research project are the rights to privacy, informed consent and confidentiality. Rest assured the researcher will adhere to all the guidelines set by the Social Research Association and the British Psychology Society Code of Conduct, both of which aims to safeguard the rights and safety of research participants (SRA 2003; British Psychological Society 2003).

 

7.10. Practicability and Identification of Constraints

 

This dissertation proposal is deemed feasible because it could provide the author with all the necessary information needed to effectively carry out the rest of the research. The methodology is designed to be practicable to all concerned, and time constraints were largely considered in the formulation of the questionnaire. Another possible constraint to the research is the refusal of the respondents to participate, as it is an uncontrollable factor. The researcher thus took measures to ensure the respondents that what they will put in the questionnaire will be treated confidentially and will be promptly destroyed after the form has served the purpose of the research.

 

7.11. Summary:

 

To conduct an effective research it is very important to design the research properly. In the preceding chapter the research methodology has been elaborated. In order to collect the information from the different perspective in-depth personal phone interview has been conducted. Key informants of the B. S. A. Garments Industry Pvt. Ltd have been interviewed to know about their perception, the present scenario and future strategy of this company.

 

 

8. TIME TABLE:

 

Target Date

Month Number

Task To Be Achieved

 

End Of November

 

1

Start  thinking about the Project and Decided

 

Beginning of December

 

2

Resource collection and clearly outlined the work

 

End of  December

 

3

Literature review written

 

Beginning of January

 

4

Further data collected and analyzed

 

Middle Of January

 

5

Primary and final draft completed including bibliography

 

Beginning of March

 

6

Submission of proposal

 

March - June

 

7&8

Further literature review with latest update

 

 

 

July - September

 

 

 

9 & 10

Review the research method and agreed on research strategy and formal access to organization

 

October

 

11

Analysis the findings and start writing the report

 

November - December

 

12

Prepare a final draft for further check with supervisor

 

Middle of January

 

12

Final Submission

 

N: B: Time Table may change discussing with supervisor.


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