RMG Sector & Buying Houses in Bangladesh

Background of RMG sector of Bangladesh

The ready-made garments (RMG) sector emerged in late 1970s. By 1980s about 800 factories, there was very good growth in the 1990s; about 3400 factories came into operation. Today more than 4000 units exporting more than $7.5 billion and contribute 48 percent of our national export earnings, about 11.33 percent of GDP. The total number of workforce employed in this sector is 1.8 million, which is half of the total industrial workforce of the country. Besides this, more than 15 million people work in related industries from button makers to truckers to insurance underwriters. Almost 85 percent of garments workers are women and most of them have come from village. At present, garments are the largest foreign currency earners industry in Bangladesh. Bangladesh earns Seventy six percent of total foreign exchange from RMG. The ups and downs of the world economy have its direct effect on it. Because, the development of this sector is depended on other allied industries Such as: Textile sector, Sewing thread, Cartons and other accessories. So we need to study RMG sector clearly to ensure the development of this sector in the world competitive market.

1.1 Ready Made Garments (RMG) in Bangladesh: A perspective analysis

In the beginning of the seventies, the returning from garment exports stood at just a few cores for the whole country. This figure increased and expanded and is likely to touch the magic figure of US dollar for our economy in the mid-nineties. Although the competition both national and international is getting together every day and most of the advanced countries are resorting to some kind of protectionist practices, the impact of the law of comparative advantages bound to be felt. Therefore, there is no reason to doubt further increases in this sector. The multi-fiber arrangements (MFA) and the quota system are expected to undergo a drastic revision in the coming years in a direction which will be of benefit to us, provided we are ready to grasp the opportunity.

Yet another development of great significance is the emerging European Union with a single currency and a single tariff on the imports and free moment of goods from one member nation to another. For goods of a high standard and quality, this offers a unique advantage of making the goods availability to different nations of the EU, which have a population of over 350 million people.

Apart from the international developments, the new national policies are offering greater opportunities to the garment exporters. The winds of globalization and liberalization are sweeping the nation. Access to foreign markets and buyers is getting easier. The full convertibility of taka should give a big boost. The government is aware that garments exports are the largest net foreign exchange earners.

The money earned by garment, exports is much more than other sectors. Fortunately, thanks to the pioneering effort of many dedicated individuals, there are a number of fora, through which the government can be approached and assisted to make a policy, which will be conductive to the garment industry and exports.

Another healthy development, which will go a long way towards the enhancement of the capabilities of the producers and improving the quality of the exports, is the expanding indigenous base following an increasing national demand. Our countrymen are gradually changing their preferences and opting to buy manufactured products rather than make a number of trips to the tailor to get their garment stitched. Indigenous industry is therefore poised for a major breakthrough. The biggest advantages of this development are the indirect help, which will be available to the manufacturer exporter by way of experienced technicians and operations.

The stage is thus set for competent and capable people to export garments to practically all the corners of the world. Yet if you ask any one who deals in garments, he will tell you that garment export is not a bed of roses by any stretch of imagination. The tough specifications of buyer, High quality requirements, scarce availability of high quality fabric, production problems, delays in dispatches and finally in shipment are but a few hurdles. The cut threat competition, acute scarcity of competent managers, frequent migration of managers, supervisors and operators to other garment organizations create mind-boggling problems.

There are however the challenges which have to be met. Do not forget that there are thousands of firms, big and small, which are overcoming these challenges day in and day out and carrying on their business. There are the firms, which have emerged as the market leaders of today.

1.2 Our comparative advantages in RMG Sector

We therefore, have a tailor-made scenario for a thriving business in the RMG sector. The important factors that are supporting and enriching our RMG Sector summarized in the following:

Ø  Lower production costs, low capital intensive and employment oriented industry.

Ø  Availability of increasing numbers of trained operators.

Ø  Expanding Export requirements.

Ø  Easier availability of local fabrics and imported opportunities from our neighbor countries live: India, China, and Japan etc.

Ø  Government policy to encourage export.

Ø  Recent trends on globalization and liberalization of economy.

Ø  Reasonable availability of other Materials import of trimmings and packaging e.g. thread levels, buttons, poly bags, shirt backers etc.

Ø  There are a number of institutions importing tramping on different aspects.

1.3 Current trend of RMG Sector

To discuss about the current position of RMG Sector in the world Market at first we have to know the previous facilities under MFA and quota system.

After introduction of the multi-fiber Arrangement   has become the worlds fur most exporter. Initially production was concentrated in the East Asian Countries Korea, Hong Kong, Singapore, China and Taiwan, but by the middle of the 1980s other Asian Countries become major producers. Bangladesh, Cambodia, Nepal, Haiti, Laos, Madagascar and Myanmar emerged as major exporters of garment Manufactures.

Bangladesh is a good example of a country that was benefited from quota restrictions on other countries exports under the MFA. Both MFA and general system of preference (GSP) introduced in 1971, gave Bangladesh generous access to European union (EU), Canada and USA markets. Within 10 years RMG had over taken the countries leading exports of jute, tea, shrimp and leather and developed into the countries single most important industry for employment and foreign exchange earnings (export earnings of this sector reached hear $8 billion in 2006-07 from 2.5 billion in 1995-96)

It is apprehended that Bangladeshi readymade garments export might decline 50% percent in the post MFA (Multi-fiber arrangement) period beginning in 1^st January 2005. In response after 2004, our RMG sector does not face the negative apprehension of the exports. So far our RMG is doing well day by day.

Actually, in the period of MFA customers consider quota, price, quality and compliance for selecting the vendor. After MFA there will be no quota, quality and compliance will be taken for granted. The deciding factor will be quick delivery and competitive price.

So far Bangladeshi garments are dependent on USA and EU markets. About 45% of our total apparel exports to USA markets 50 percent to EU countries, 2.5 percent in Canada and remaining 2.5 percent go to other countries.

To sustain our competitive edge, After MFA our authority emphasized on:

Ø  Diversification of market is essential.

Ø  Development of the product quality and design

Ø  Changes of fashion and taste frequently

Ø  Import of the suitable technologies etc.

As a result, implementation of above policy and other opportunities like unrestricted duty free access under LDC initiative presently our RMG exports in USA, EU and Canada markets. Finally we can say that the current trend of our RMG sector is capable of competing in the global market because of our absolute comparative advantage i.e. labor-intensive country.

1.4 Comparative Exports trend of RMG sector

In 1976 the RMG export was only 0.001 percent of the total export of Bangladesh. In 2006 it rose to 77 percent of the total export. In the world market, the position of RMG is in the 4^th place in the USA and 8^th position in EC countries. It was possible for the tireless efforts of the owners of the RMG industries, the entrepreneur and the patronage of the government. The figures below show the export of RMG since last several years.

Year	Export of RMG (In Million US$)	Total Export of Bangladesh (In Million US$)	% Of RMG'S to Total Export
1986-87	298.67	1076.61	27.74
1987-88	433.92	1231.2	35.24
1988-89	471.09	1291.56	36.47
1989-90	624.16	1923.70	32.45
1990-91	866.82	1717.55	50.47
1991-92	1182.57	1993.90	59.31
1992-93	1445.02	2382.89	60.64
1993-94	1555.79	2533.90	61.40
1994-95	2228.35	3472.56	64.17
1995-96	2547.13	3882.42	65.61
1996-97	3001.25	4418.28	67.93
1997-98	3781.94	5161.20	73.28
1998-99	4019.98	5312.86	75.67
1999-00	4349.41	5752.20	75.61
2000-01	4859.83	6467.30	75.14
2001-02	4583.75	5986.09	76.57
2002-03	4912.09	6548.44	75.01
2003-04	5686.09	7602.99	74.79
2004-05	6417.67	8654.52	74.15
2005-06	7900.80	10526.16	75.06
2006-07 (Dec)	4730.36	6220.61	76.04

QUANTITY AND VALUE OF WOVEN AND KNIT EXPORT DURING 2005
VALUE IN MN. US$, QUANTITY IN '000 DOZ
MONTH	EXPORT OF WOVEN AND KNIT (VALUE IN MN. US$)			EXPORT OF WOVEN & KNIT (QUANTITY IN '000 DOZ)
	WOVEN	KNIT	TOTAL	WOVEN	KNIT	TOTAL
JANUARY	296.07	221.74	517.81	7536.75	9383.89	16920.64
FEBRUARY	292.92	196.06	488.98	7580.54	8397.53	15978.07
MARCH	264.55	231.41	495.96	6731.88	9869.20	16601.08
APRIL	236.57	215.08	451.65	6005.58	9033.66	15039.24
MAY	313.24	272.33	585.57	7935.77	11606.30	19542.07
JUNE	377.89	283.68	661.57	9771.15	12089.91	21861.06
JULY	362.79	345.25	708.04	10365.43	15010.87	25376.30
AUGUST	338.74	317.44	656.18	8095.89	13799.13	21895.02
SEPTEMBER	265.88	256.59	522.47	6922.93	11147.39	18070.32
OCTOBER	319.04	310.76	629.8	8461.8	13281.57	21743.37
NOVEMBER	247.43	230.28	477.71	7595.57	10231.91	17827.48
DECEMBER	374.48	329.92	704.40	9383.77	14339.13	23722.90
TOTAL	3689.60	3210.54	6900.14	96387.06	138190.49	234577.55
***Data Source Export Promotion Bureau Compiled by BGMEA

QUANTITY AND VALUE OF WOVEN AND KNIT EXPORT DURING 2006
VALUE IN MN. US$, QUANTITY IN '000 DOZ
MONTH	EXPORT OF WOVEN AND KNIT (VALUE IN MN. US$)			EXPORT OF WOVEN & KNIT (QUANTITY IN '000 DOZ)
	WOVEN	KNIT	TOTAL	WOVEN	KNIT	TOTAL
JANUARY	354.15	296.67	650.82	9509.41	12502.99	22012.40
FEBRUARY	352.36	282.98	635.34	9374.56	12192.85	21567.41
MARCH	349.64	314.32	663.96	9316.63	13542.16	22858.79
APRIL	293.41	322.95	616.36	7739.40	13956.32	21695.72
MAY	391.06	387.68	778.74	10410.34	16789.89	27200.23
JUNE	437.11	421.37	858.48	11639.48	18228.70	29868.18
JULY	451.91	452.94	904.85	12937.59	19779.04	32716.63
AUGUST	461.89	446.91	908.80	13172.7	19604.33	32777.03
SEPTEMBER	351.87	349.05	700.92	10044.76	15292.34	25337.10
OCTOBER	311.38	351.68	663.06	8881.19	15368.05	24249.24
NOVEMBER	330.3	314.96	645.26	9423.23	13766.74	23189.97
DECEMBER	459.71	447.21	906.92	13199.67	19571.99	32771.66
TOTAL	4544.79	4388.72	8933.51	125648.96	190595.40	316244.36

VALUE AND QUANTITY OF TOTAL APPAREL EXPORT
Fiscal year basis (value in mn. US$ quantity in mn dozen)
Year	Total apparel export in mn.US $			Total apparel export in mn.dz
	Woven	Knit	Total	Woven	Knit	Total
1992-93	1240.48	204.54	1445.02	36.05	10.66	46.71
1993-94	1291.65	264.14	1555.79	34.35	10.81	45.16
1994-95	1835.09	393.26	2228.35	47.21	15.30	62.51
1995-96	1948.81	598.32	2547.13	48.82	23.18	72.00
1996-97	2237.95	763.30	3001.25	53.45	27.54	80.99
1997-98	2844.43	937.51	3781.94	65.59	32.60	98.19
1998-99	2984.96	1035.02	4019.98	64.79	36.66	101.45
1999-2000	3081.19	1268.22	4349.41	66.63	45.27	111.90
2000-2001	3364.32	1495.51	4859.83	71.48	52.54	124.02
2001-2002	3124.82	1458.93	4583.75	77.05	63.39	140.44
2002-2003	3258.27	1653.82	4912.09	82.83	69.18	152.01
2003-2004	3538.07	2148.02	5686.09	90.48	91.60	182.08
2004-2005	3598.20	2819.47	6417.67	92.26	120.13	212.39
2005-2006	4083.82	3816.98	7900.80	108.82	165.02	273.84
2006-2007 (Dec)	2368.07	2362.29	4730.36	67.65	103.38	171.03

           

MAIN APPAREL ITEMS EXPORTED FROM BANGLADESH (Value in mn. US$)
Year	Shirts	Trousers	Jackets	T-shirt	Sweater
1993-94	805.34	80.56	126.85	225.90	….
1994-95	791.20	101.23	146.83	232.24	….
1995-96	807.66	112.02	171.73	366.36	70.41
1996-97	759.57	230.98	309.21	391.21	196.60
1997-98	961.13	333.28	467.19	388.50	296.29
1998-99	1043.11	394.85	393.44	471.88	271.70
1999-2000	1021.17	484.06	439.77	563.58	325.07
2000-2001	1073.59	656.33	573.74	597.42	476.87
2001-2002	871.21	636.61	412.34	546.28	517.83
2002-2003	1019.87	643.66	464.51	642.62	578.37
2003-2004	1116.57	1334.85	364.77	1062.10	616.31
2004-2005	1053.34	1667.72	430.28	1349.71	893.12
2005-2006	1056.69	2165.25	389.52	1781.51	1044.01

VALUE AND QUANTITY   OF TOTAL APPAREL EXPORT
Calendar year basis (value in mn. US$ quantity in '000 dozen)
Year	Total apparelExport in mn.us$			Total apparel Export in '000 dz
	Woven	Knit	Total	Woven	Knit	Total
1994	1544.89	341.53	1886.42	41642.49	13768.85	55411.34
1995	1976.40	512.18	2488.58	49377.11	19828.10	69205.21
1996	1942.37	686.27	2628.64	47536.84	26107.21	73644.05
1997	2621.33	810.49	3431.82	60560.49	27997.84	88558.33
1998	2871.06	976.29	3847.35	64229.77	34587.54	98817.31
1999	2987.73	1169.90	4157.63	64938.82	41303.64	106242.46
2000	3376.49	1448.22	4824.71	71634.03	51588.27	123222.30
2001	3162.28	1432.72	4595.00	67724.50	50180.09	117904.59
2002	3076.28	1573.40	4649.68	83443.78	70714.60	154158.38
2003	3398.84	1850.36	5249.20	85829.29	80503.80	166333.09
2004	3686.78	2532.62	6219.40	94223.23	104904.34	199127.57
2005	3689.60	3210.48	6900.08	96387.06	138190.49	234577.55
2006 (Dec)	4544.79	4388.72	8933.51	125648.96	190595.40	316244.36

The Bangladesh Garments Industry is the perfect evidence of how Bangladesh grew from a struggling economy in 1972 to one of the biggest garments exporters in Asia, rising to over $5 billion in exports over a span of 33 years. This has been made possible by the total commitment, determination and hard work of all the manufacturers and exporters. Today, the Bangladeshi garments sector has earned a place on the global export market map as a strong and mature industry whose apparels are known for their quality and price competitiveness.

Bangladesh apparels are now being exported to 90 different countries. The United States is the single largest buyer of our apparels. Although the EU is our largest export market, Bangladesh is now in the process of expanding its market to countries like Australia, Canada, Japan, Norway and New Zealand in order to avail of the duty free market access and GSP benefits provided by these countries to LDCs.

 

Total Garments Exports of 2003-2006 to the Global Market

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) is the largest exporters’ guild in the country, with a membership of 4094, which is no mean achievement considering its inception in 1977 with only 12 members. This spectacular progress has been possible through its total commitment towards promoting a congenial atmosphere of interaction and co-operation at all levels of production and marketing. This sector has provided employment to two million workers and has put to use the invaluable talent of a large female workforce, leading not only to their positive contribution to their family and society, but also to their own self-realization and freedom from age-old economic overthrow. BGMEA is harnessing all the divergent sectors of the garments industry through policy making, marketing and overseeing the interests of the parties involved. It is also involved in facilitating the intercommunication of its member companies with overseas trade bodies and organizations.

1.5 The contribution to GDP by RMG sector

Bangladesh is an agricultural country. The industrial development is far away. Only the RMG sector developed in our industrial sector because of our availability of low cost labor. Actually our foreign earnings depended on RMG export. As result the industrial contribution to our GDP must be considered the RMG sector. In 2005-06, the agricultural contribution to GDP was 19.32% and industrial contribution to GDP was 17.14%. But the RMG sector contribution to GDP 9.5% on self of industrial contribution to GDP. So the RMG sector must be played a great role to increase our GDP.

1.6 The contributions to Employment by RMG sector

The problem of unemployment seems to be one of the most painful problems in the modern world. Not only the underdeveloped countries are suffering from this problem even the highly industrialized and developed countries are not free from this difficulty. It is quite frustrating that more than 40% of the labor force is unemployed in Bangladesh. This problem is one of the major constraints toward economic development of our country. So it is proved that to solve this problem we need to create working scope for the unemployed labor force. Only the RMG sector employed huge number of labor force at least 1.8million male & female labor. So it is clear to us that RMG sector must have contribution to our employment sector.

Mention that the wages level is very low. As a result, it creates human problem for our labor force. But it is positive news to us that our authorities have already set up minimum wage rates for the workers and amended of our labor law.

1.7  Buying House of Ready Made Garments

Buying House of ready-made garments has developed with the growth of   garment export of our country. It is the combination of all marketing activities relating to searching foreign garment buyers for the order of garments products, taking order of ready made garment products from them, placing order to local factories and providing overall support to the both prospective buyers and suppliers.

I have not been a long time since Garments Buying House has started sprouting up here and there. Only a few years back where it was difficult to find a reliable and quality Buying House, but now, there are so many of those.

Buying House industry is one of the essential supports of Garments Export. In one hand foreign Buyers of garments products are largely depended on this industry for searching suppliers, who are capable to produce and supply buyers demanded products.

In other hand garments producers are also dependent on this industry for searching buyers, who places the order of certain garment item such as sweater that the producer produces. So the relationship between garment industry and buying house industry are interdependent. The existence of one without other is hardly possible. The reason for this again exporting garment product involves so many stages from marketing to distribution, which is not possible by any single group to do alone. For the convenience of both buyer and suppliers, the buying house industry today has developed enormously with a vision to perform marketing and distribution task of garment industry.

2. INDUSTRY ANALYSIS

2.1 RMG Buying House Industry' in Bangladesh

Buying House industry is a substantial proportion of the industrial sectors of

Bangladesh. Compare to other industrial sectors of Bangladesh, this specific industry plays a significant role in the economy of our country. This industrial sector has been expanding rapidly, since its inception. The aggregate order of garments products through all the buying houses sums up to a huge monetary value and thus plays a prominent role in enhancing the GDP of the economy. According to recent survey there are about 200 to 300 buying houses in the country. Most of them are centered in the capital Dhaka. However, only few of them are in Chittagong.

The importance of Buying House and the role it can play in the socio-economic development of a nation can not be over emphasized. The Third world has witnessed phenomena growth in this, over the last decades, and the countries which made a conscious decision to take advantage of such growth, have made unprecedented progress. Examples are in abundance: India, Malaysia, Thailand, and China.

2.2 Relationship between Buying Houses and RMG Industry

Garment industry is involved in the production of ready made garment items. They can take order from two sources. One is from local Buying Houses another is from foreign buyers.  The commonality between Garment and Buying House industry is that both have the ultimate objective to deal with garment exports. The difference between these two industries is that one is in the service industry and other is in the production, meaning- Buying House Industry is involved with the marketing of garment products and the Garment Industry is involved with the production of garment products. Apart from this difference these two industries is very much alike and they share the same problems. If any problem, buying house faces ultimately it becomes the problem of garments producers. In the same way if any problem the producer faces, ultimately buying House become pail of that. For example, for any reason if the producer fails to finish the production on schedule and the buyer refuses to take the product; both the producer and buying house suffer in that case. Producers suffer because they lose the money and buying houses suffers because it loses its commission as we]] as its relationship with that buyer.

The idea of Buying House is developed to perform the marketing activity of garment industry and thus in turn to help the producers only to concentrate only on production so that they don't need to anxious to search buyers for their garment products. Again, as exporting garments products involves too many layers of activities, and is not possible to be performed efficiently and effectively only by garment manufacturers, the buying house industry has exciting their hands as a true friend helping them to concentrate only on production and thus to ensure efficient and effective export process.

2.3 Importance of Buying Houses in RMG Industry

Simple wording cannot shed proper light to the immense importance of buying house industry. There are so many reasons for which it is so important for garments industry. This industry indeed plays a significant role in mostly marketing related activities for garment industry.

        Marketing is the most important and crucial parts in business. If anyone lacks marketing skill he has the danger of sink in the business. On the other hand, in innovative marketing skill one needs to outperform its competitors easily by increasing its market share by selling more of its products. Like other businesses, marketing is a big factor in exporting garment products. Buying House performs this activity for garment manufacturers. They take the responsibility of searching buyers, convincing them and finally making the deal final. So, producer can fully concentrate in its business. The producer does not need to wont about selling its product since buying house bring them buyers.

        Exporting garments product involves so many stages from marketing to distribution. If the producers perform all these stages by him with out the help of buying house, they may lose the efficiency or effectiveness in the marketing activity as well as in the production activity. As a result competitor who is taking the help of buying house may only concentrate on the production and become comparatively very successful in business. So, it is wise for garment manufacturer to take help of buying houses for increased efficiency and effectiveness in both marketing and production and to beat competitors.

        Buying houses assures efficiency in total export process. By transforming the marketing responsibilities on the shoulders of buying houses, garment manufacturers cars achieve specialization in' production as their functions are limited and it ' can increase its reduction capacity with more efficiency and effectiveness. In the same way Buying House becomes specialize in its marketing skills and create new techniques to search and convince buyers and thus perform the activity with greater efficiency and effectiveness.

        A producer, who is very much successful in production, may lack appropriate marketing skill to convince buyers. For ibis reason it is better for him only to keep doing what he knows best and delegate the rest of the work to the person who is specialized on marketing functions such as buying house.

        Through regular inspection of the production the buying house help the producer to produce quality products. It also monitors the production to ensure that the production is on schedule.

        Buying house works as a support for garments industry. This specific industry performs marketing activities for garment industry. Besides this marketing activity it supply accessory for garment industry which is necessary for production such as fabric, button and also supply Polly bag, back 'board which is necessary for finished good.

2.4 Industry Life Cycle of the Buying House Industry

The industry is growing and as this is an emerging industry, in the Industry Life Cycle model it is in the growth stage, so new entrance of competitors is obvious is this regard. New competitors will also want to take a pie in this attractive industry.

2.5 SWOT Analysis of the Industry

Strength of the Industry

Quota facility

As a developing country, Bangladesh got the quota facility in garment export. Quota facility means allowing a certain portion or percentage of total garment export to a certain country. This is a blessing for the country like Bangladesh. For this quota system buying house can easily get orders from buyers and our country export 250/0 of the total exported garment products of USA. This quota reduces the competition between the international and local buying houses. For this facility now buyer has lees scope to switch to different country.

GSP facility:

This is a new facility very recently given by European countries to Bangladesh. Under this facility Bangladeshi exporter will get special discount if they import fabric from any of the SAARC countries. Previously this facility was restricted to only home country that is Bangladesh will get GSP facility only if it buys fabric from its local market.

Cheap Labor:

Still now Bangladesh falls under third world country. It suffers from huge unemployment. Here the reality is that any entrepreneurs can be blessed by cheap labor. Again today our country is suffering from speedy urbanization. People are migrating from village to city. As a result, in the city areas wages are getting down. Our garment industry can take the advantage of cheap labor and become the most lucrative for the foreign buyers for their low priced garment products because of this cheap labor.

Export Incentive:

As buying house is involve in the channel of garment export, new export, incentive provided by government of Bangladesh is blessing for them. .In the light of the objectives and strategies of the Export Policy 1997-2002 several new incentives and facilities have been made available to the garment exporters. Besides, some existing incentives have been modified and improved to make them more workable. Globalization is very much cordial to the genuine garment exporters and thus providing too many incentives. However, a few of these are as follows:

        Income Tax Rebate: Previously, 500/0 rebate on taxable income generated from export earning was admissible under the Finance Act every year. From now on 50% of the income tax on any income on export will be exempted through incorporation of a new provision in the Income Tax Ordinance itself rather than as a temporary relief hitherto granted under the Finance acts on a. yearly basis. Buying house industry benefits by these rebate facilities under the Finance Act as producer (garment industry) is able to supply the garment products at lower cost.

        Limit of Export Credit: Exporters may obtain export credit from commercial banks up to 900/0 of the value of their irrevocable letter of credit / confirmed order. This advantage gains buying house industry by providing financial initiative to its suppliers.

        Utilization of Foreign Exchange: So long exporters were allowed to retain 200/0 of their FOB earnings in their respective foreign currency accounts in US dollar or Pound Sterling. From now on, they will be entitled to retain either 400/0 of such earning or at a rate fixed by the government from time to time, after proper review. However, in cases of export items where import components are relatively high and in the case of export of services, the exporters will be entitled to retain only 7.50/0. Exporters may utilize such foreign exchange for bona fide business purposes. This advantage also encourages garment industry to be involved at ease in the production which in turn benefits buying houses.

        Tax Holiday: To encourage a rapid growth of exports and in order to attract entrepreneurs to export -printed industries tax holiday places a great initiative to the exporters and the existing tax holiday incentive in the garment initiative is ten years. The industrial enterprises enjoying the benefit of tax holiday shall be exempted from deduction of tax at source. As a result they are able to produce the Jow priced garment products. This phenomenon helps buying industry to be on a strong platform of survival.

Weaknesses of this industry

        Lack of communication skill: In our country the employees of buying houses posses lack of communication skills. The reason of this gap may be slow introduction of foreign languages in our country. Not to say that one of the most important skills is the communication skills because it is the first of attracting buyers. As a result often we become deprived of the good contract with profitable foreign buyers.

        Lack of technical skills: In the industry the two most important functions are quality control & determining CM (Cost of making). But in our country workers provide less technical skills than required because still now there is lack of organized training facilities.

Opportunities of this industry

        Increasing demand: The population allover the world is increasing very fast with the intense increase of fashion trend among people. As a result the demand of fashionable garment production is increasing in a high rate. This represents a great opportunity before the buying house industry as intermediaries.

        Globalization: Entire world is facing the wave of globalization. Now the world business comes out of the boundary of its own country or nation. Business people allover the worlds are seeking intuitively the low cost, quality, effectiveness & efficiency all over the world. Fashion industry in its generic form is manly based on cost versus quality. Our country is a red apple for foreign buyers for its lower manufacturing costs. As a result of this globalization, buying houses industry can be benefited as it is a part of garment product making organizations by attracting more foreign buyers by convincing them on these, advantages provided by our country. Besides increasing demand & globalization, buying house can have bright future opportunity to survive by the following opportunity given to garment investors & foreign buyers by GOB.

               Exporters enjoy tax holiday for the period from 5 to 10 years depending on location of the project & for 15 years for power generation. As a result garment exporters easily can export low priced garment products toward foreign buyers.

               80% - 100% accelerated depredation of actual cost of machinery & plant in lieu of tax holiday. Which again helps exporters to keep their garment product low priced.

               Avoiding of double taxation on the basis of bilateral agreement. Tax avoidance is the means of avoidance cost.

               Import duty at the rate of 7.50/0 ad-valuation is payable on capital machinery & spare imported for initial in station or- for BMGA/ BMRE of the existing industry which is another map of avoiding higher production cost.

               No duty on imported capital machinery & raw materials by 100% export oriented in industries. It is infect hot news for the garment industry of such nature.

               Tax exemption on the interest of foreign loans and on capital gait from the transfer of share. Exemption also makes a supplier to be lucrative to the eyes of foreign buyers for his lower priced garment products.

               Tax exemption of royalties, technical know-how and technical assistance fees. This helps garment export not to incur introducing costs. As a result they are able to supply low priced garment products from their inception.

               Exemption on income tax up to three years for foreign technicians employed under registered industries. This helps garment industry to take help of foreign technician for its increase efficiency.

               Six months multiple visa for the investors. Investors are also welcomed again by this rule.

               330/0 of IPO reserved for foreign investors.

               Facilities for repatriation on invested capital, profit & dividend. It is also helpful for the bulk garment industry.

               No discrimination on duties and taxes for similar industries in public and private sectors and also within sector local & foreign investment.

Threats of this industry

        Foreign Competitors: Bangladesh is competing with giant RMG manufacturing countries like China, India which are very much big manufacturers of RMG products. Competing with them is very hard to survive.

        Political crisis: As a third world country, our country is vulnerable to political unrest. Success of buying house depends on the on time delivery of quality garment products. But often the buying house shall back upon their commitment to buyers as their suppliers (garment factories fail to manufacture garment product within the schedule time as a result of any political consequences (i.e.hartal).

        Load shedding: As mentioned earlier, the success of buying houses depends on timely delivery of qualities garment products. In our country power failure (i.e. while load shedding) doesn't allow garment factories to manufacture their products. As a result buying houses also fail in shipment within scheduled time.

        Bureaucracy: In order to perform its primary activities buying houses need to go through some supporting procedures (i.e. establishment of power & water connection, banking procedures, shipping procedures). Successful performance of any buying house depends on the smooth accomplishment of these procedures. But in our country, bureaucracy acts as constraints against the smooth accomplishment of these supporting procedures.

        Law and order problem: For any secured deal the existence of supporting laws and their enforcement is must. But the performance of law enforcements is very frustrated. As a result, foreign buyers often feel insecure to deal with Bangladeshi buying houses as they don't get enough production by laws.

        Child labor aspects: Recent movements in consumerism against the utilization of child labor all over the world posses’ great threat against this industry as the consumerism restricts foreign buyers to involve will us for this matter.

        Gender inequality aspects: Still now, some sort of gender inequality is exists in our country. Normally in our country, especially in garment sectors female workers are discriminated in their workplaces; some times they are getting less salary than male workers even sometimes they don't get any salary in their maternity leave. Consumerism in the developed countries virulently opposes this and foreign buyers feel reluctance to place order in our country where such injustice takes place. As a result it gets difficult for buying houses to convince foreign buyers to place order in our country.

        Cultural ethnocentrism: As our country is categorized as third world country and third world country is seen in the eyes of business people of developed countries as the black skin people defaulter of commitment. So it becomes hard for our buying houses to convince the foreign buyers having the cultural ethnocentrism to place orders in our country.

2.5 Achievements

Bangladesh has been dependent gradually on the garment export for the largest part of it earns in garment export for the largest part of its own foreign exchange. Our country is blessed with its buying house sector as the foreign exchange it earns in garment export is gained via buying houses. The immense contribution of buying house, for its importance existence in the garment export process, can be highlighted as follows:

             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 looks very bright. This achievement can be credited partially to the buying house industry because it is an inseparable part of garment export process.

             Bangladesh presently hold 6th largest apparel sector in USA & 5th largest in ED. Country's RMG producers 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 garment market of Japan and created a niche for itself. In 1994-95, export of garment to Japan from Bangladesh jumped up to US$ 5.61 million or by 168% on previous years export figure. In 1995-96 export of garment to Japan was US$ 5.72 million and in 1996-97 it was US$ 9.35 million.

             EU took the largest share followed by US; Germany has led the EU market in the last few years followed by France, UK, Italy and the Netherlands. In 1997-98, Germany alone imported apparels worth US$ 482.87 million against the purchase of US$ 392.09 million in 1996-97. Only shirts & T-shirts worth of US$ 202.36 million were imported to Germany in 1995. However, as single country, US have been the highest apparel importer from Bangladesh. 

3. Organizational profile

3.1 Introduction to setup strategy

After liberation Bangladesh was in a mist of political and social disorder. It took nearly a decade to overcome the situation and begin the era of commercial and industrial Banking in the country. Private entrepreneurs started coming in to the front line of development. Primarily local market based products got the main focus of the investors. At the same time entrepreneurs started looking for industries based on export oriented products. Jute based product industries begin to flourish. Right after that, a new opportunity of export came in to focus. That was Garments manufacturing. Experimentally few industries came up with Bank investments. Rapid development in managing and preparing industry standard manpower begin. At the same time Export promotion sector of Bangladesh Government started promoting this sector to Europe based countries like France, Spain, Germany, Italy, Poland and many others. United States was the largest market to focus on. Private entrepreneurs begin to market and promote their Factory and production capabilities to US buyers. The quality and rapid development catch the interest of all the buyers from US to Europe. From the beginning of 90’s a successful era Garments export were launched to change the entire economy of the country.

3.2 Focus to the export market

Samsons Group of industries begins its export business with Samsons Sweaters Limited.

With the countries new beginning in the development of business in export, Samsons Group started its journey in the export market.

Since it was the beginning period of this particular industry, like any other specialized sector in Bangladesh, the major problem was to create a large group of industry standard manpower, ready to coup up with the requirements of international Fashion Houses around the world. The second biggest problem was, to build a professional management team to run the show and satisfy the export requirements. Such as, time management, quality assurance, raw-material import and timely shipment. Samsons sweater had to train its own manpower with most minimum resource and then build the management team to manage the operation. Not to mention the Banks were also not experienced enough to support export operation and secure the interest of the exporting factories. Therefore, a strong commercial division was required. Samsons Sweaters Limited, had to find capable and educated people understand finance and banking operation, to design a strong line up to create commercial section that will operate as a support and parallel with the beneficiary bank. At the same time, unlike today, there were no factories producing the basic raw materials for manufacturing the Garments such as, Yarn, Yarn dyeing, and Fabric manufacturing and especially accessory for the garments. All these had to be imported from neighboring Asian countries. It was one of greatest hassle of all time to maintain the timing between importing raw-materials and then producing the main product for export and after that keeping the shipment schedule. The management of Samsons sweaters Limited developed entire setup without any expert help as it was totally un-available. With the mercy of All Mighty and the hard work, a professional setup was born and developed over the years.

3.3 Core sectors of the company

Production accessory, commercial works and freight forwarder are the most important sectors on which all the buying business based on Samsons limited have all of these sectors by its own. As I mentioned to get accessories as per buyer requirements is really a tuff job. Samsons has solve the problem by establishing its own accessory company-TAGS ACCESSORIES. The orders that Samsons ltd. gets, separate it into its different sector. The main garment goes to Samsons sweaters factory. The accessories related to it go to TAGS ACCESSORIES.

The commercial dept. works out for banking procedures to ensure the payment against the (L/C) letter of credit. After this, they gathered information from their manufacturer or shipper about the goods which tobe shipped. By making all the necessary documents this commercial dept. provide those documents to the C&F agent  & instruct them to ship the goods timely as per given documents which are packing list, com.invoice, certificate of origin, bill of lading, inspection cert. etc.

Another most important sector is the C&F agent (clearing and forwarding agent). Again Samsons played a vital role by setting up its own C&F company-“ALLIED FREIGHT”. THIS C&F companies ensures the shipment of the goods  as per buyer required delivery time & their duty ends when they get clearance & confirmation from the buyer that the goods has been reached at buyer’s required port or destination.

3.4 Development and progress

With the increase of buyers and export quantity, the development took place for rapid increase of production with the increase to machineries and manpower. The operation got divided in to two parallel phases such as marketing/buying operation and the Factory/production operation like to modern day setup.

The buying/marketing unit has been developed to a separate entity to operate individually and some what exceed the limit of it’s own Factory production capacity. Therefore, started it’s function of controlling other factories under sub-contract operation.

This is dimension that helped many newly established Factories un-able to market for their production on their own. This unit also created additional revenue for the company that did not require large scale investment. This operation, now a days has become a hub for the international fashion house to out source their requirements of Garments product in Bangladesh.

3.5 Other functionality in Association

In mid 90’s, an important association was born to accumulate the integrity and look after the safety of the exporting factories all over country. It was named BGMEA (Bangladesh Garments Manufacturers and Exporters Association). The management of Samsons Sweaters Limited had been an active member of BGMEA from the beginning of their active operation in the country.

With the active operation and support, the managing director of the Samsons Sweaters Limited has been elected to Co-Chairman of the association. Therefore, the company is also participating in taking up vital decision in development of the Garments sector of Bangladesh.

3.6 Export and Marketing

The company is also participating various world wide Fashion Festival and Export Festivals. The factory and buying house has become a dependable name for several international brands. It finds its products, now a day in most of the shopping complexes in Europe and USA.

It is now willing to increase its operation into double of its current production capacity by 2010. Its export volume will be promoted to a large scale industry from the medium range industry status. It is also willing to expand its buying operation and promote its operation to a liaison management system of few worlds famous Garments Brand.

Buying Houses business is Samsons’ another business concern. It has its own buying house named ‘Samsons Ltd.’ and I worked here as an internee for three months. This is also a renowned firm in the buying houses industry. As an old player of RMG industries in Bangladesh, Samsons received a lot of orders, some are completed by its own factories and some are done by outsourcing. This buying house is a sister concern of Samsons Group and it is contributing a lot in generating its entire revenue.       

3.7 Mission of Samsons Ltd.

To be the most preferred garment sourcing agency for global clients, so as to maintain Samsons reputation for credibility and integrity with our clients, vendors, and employees.

         To provide customized solutions to global clients as per their requirements and to achieve consistent high quality levels and on-time delivery schedules, through a team of committed personnel and a proven set of vendors with world class manufacturing facilities.

         To operate without compromising on quality, delivery and profitability.

         Samsons mission is to be the market leader, To be a market leader we are committed to produce high quality, sophisticated and deviation-free products in our affiliated factories and make on time delivery to our customers.

3.8 Vision of Samsons Ltd.

According to Samsons Ltd, ‘Quality is never an accident; it is always the result of high intention, sincere effort, intelligent direction and skilful execution’.

Its strategic visions are:

          A truly international outlook for exporting

          A long term commitment for exporting

          A strategic approach to the development of new export market

          Credibility and long term relationship in export market

          An international reputation fro quality

          Resources available for export support

3.8 Goal of Samsons Ltd.

Its goal is to provide its clients with a high quality product that meets their quality expectation. Samsons Ltd. maintains quality assurance staff to assist in the selection and development of manufacturers who manufacture products according to Standards and who meet Samsons policy, principles and guidelines. This field function is also responsible for monitoring production as it is being made, and communicating with the buyers and production representatives their findings.

3.9 Functional department of Samsons Ltd. and their activity

All the functions of Samsons Ltd. is operated under six departments.

1. Merchandising department
2. Sampling department
3. Commercial department
4. Accessory supply department
5. Production department
6. Distribution department 

Merchandising department

This department is responsible for the following activities

Searching buyers: the task of this department starts with the search of buyers, who want to import RMG product from our country.

Introduce letter: after finding the right buyers this department issues an introducing letter to the respective buyers that describe the firms years of experience in this business, its parameter of total activity, efficiency and effectiveness and relationship with existing buyers.

CM: CM is another important activity that stands for Cost of Making. This department determines things that required making a unit or dozens of an order. Then he calculates per unit costs on the basis of accessories consumption, fabric consumption, labor cost and other relevant costs.

Price negotiation: when this department has the clear idea about the cost involved in the desired transaction, they start price negotiation to determine a final price that the buyer agrees to pay.

Select suppliers: Merchandising department recognizes the effectiveness of their commitment to buyers and that’s why it is their responsibility to find out the efficient buyers. The bases of efficiency include suppliers’ adequate administrative setup to prepare all necessary documents for exports, suppliers’ financial status and adequate capacities etc.     

Sampling department

It starts its activities after receiving the original sample or sketch sample from the buyer with an intention to testify the capability of the buying house to meet the desired standard of the product. Two people contribute towards the efficiency of sampling department. They are the sampling man and the pattern master. 

Commercial department

The commercial department of the buying houses prepares pro forma invoice for the respective buyers. This invoice includes the quantity of the buyers order, its unit price and total price. This department also transfers the master LC in the name of the selected suppliers.

The commercial department also maintains all clerical activities such as maintaining the accounts of daily transactions, maintaining payroll, keeping the accounts of daily expenditure etc.

Accessories supply department

For a smooth manufacturing, the assurance of on time delivery of fabric and accessories is must. The responsibilities of supplying accessories to the suppliers landed on the ground of this department. To assure these supplies, the buying houses utilize two sources. One is its sister concern FM printing and packaging company and another is the outsourcing from its suppliers of long term relation. As a result, the manufacturers don’t need to worry about the availability of the necessary accessories. 

Production department

Although it’s named as production department, this service department follows up production dividing its activities into following sections of responsibilities:

Quality monitor and control: this department supervises the manufacturing process to maintain the quality and scheduled progress of the manufacturing on behalf of the buying houses.

Final inspection: for its reputation, buyers usually delegate the responsibility of final inspection on the shoulder of quality inspectors of the buying house.

Shipping department

As the name mentions the task of shipping department of Samsons Ltd. starts from receipt of final goods from the suppliers’ factory after the final inspection and end with loading of the goods bound for supplier. This department also prepares the supporting documents for exporting such as bill of exchange, bill of lading, commercial invoice, certificate of origin, packing list etc.  

3.10 Value Chain analysis of Samsons Ltd.

As Buying Houses provide service as intermediary between garments manufacturers and foreign buyers, its success depend on the value they are avail to provide to both of these groups. Value chain analysis is a useful framework for systematically identifying strength and weakness of any organization. Value chain analysis assumes that a firm is a collection of activities necessary to design, produces market and supports its product and each of these activities could add value to product or service. Each of them can be a competitive advantage of that firm.

This value chain activity is divided in to two major categories- primary activity and supportive activity. Primary activities contribute to the physical creation of the product, its sale and transfer to the buyer and after sales service. Support activities assist the primary activities and each other.

The following are the primary and supportive activities that create the value chain of the firm.

Inbound Logistics:

Ø  Firms effectiveness

Operation:

Ø  Productivity of personnel compared to that of key competitors of Samsons Ltd.

Ø  Efficiency of services of Samsons Ltd.

Ø  Effectiveness of service control systems of Samsons Ltd.to improve quality and reduce cost

Ø  Its efficiency to plan layout and workflow design

Outbound Logistics:

Ø  Timelines and efficiency of delivery of finished goods and services of Samsons Ltd.

Ø  Efficiency in shipping activities of finished goods

Marketing and sales:

Ø  Its effectiveness of market research to identify customer segments and needs

Ø  Innovation of sales promotion and advertisement

Ø  Motivational competence of HR capital

Ø  Development of image and favorable reputation of the firm

Ø  Its extend to brand loyalty among its customers

Ø  Extend of market dominants with in the market segment or overall market

Customers:

Ø  It means to solicit customer inputs for service improvement

Ø  Its promptness of attention to customer complaints service

Ø  Its appropriateness of warranty policy

Ø  Its quality of customer education and training

Ø  Its ability to provide replacement parts and repair service

Human Resource Service:

Ø  Efficiency in recruiting, training and promoting all level of employees of the firm

Ø  Its appropriateness of reward system for motivating and challenging employees

Ø  A working environment of Samsons Ltd.that minimize absenteeism and keeps turnover at a desired level

Ø  Active participation by managers and technical personnel in this professional organization

Ø  Level of employee motivation and job satisfaction in Samsons Ltd.

Technology Development:

Ø  Success of research and development activities of Samsons Ltd.

Ø  Quality of working relationship between employees

Ø  Timeliness of technology development activities in meeting critical deadline

Ø  Qualification and experience of technological personnel in Samsons Ltd.Its ability of establishing working environment to encourage creativity and innovation

Procurement:

Ø  Development of alternate sources by Samsons Ltd. for input to minimize dependence to a single supplier

Ø  Procurement of raw materials by the firm on timely basis, at a lowest possible cost and at an acceptable level of quality

Ø  Its procedure of procurement plant, machinery and building

Ø  Its development of criteria for lease verses purchase decision

Ø  Its long term relationship with reliable supplier

Firm Infracture:

Ø  Its capability to identify new product market

Ø  Opportunity and potential environmental threat

Ø  Its quality of strategic planning system to achieve corporate objective

Ø  Its coordination and integration of all activities associate with the value chain among organizational sub unit

Ø  Its ability to obtain relatively low cost funds for capital expenditure and working capital

Ø  Its level of information systems support in making strategic and routine decision

Ø  On time and accurate information for management on general and competitive environment of Samsons Ltd.

Ø  Its relationship with public policy makers and interest groups. 

Findings of value chain activities

The value chain activities have two major categories and findings are discussed based on those two categories separately:

Findings related to primary activities:

        Although for their unsatisfactory services at the beginning stages, Samsons Ltd. lost some big American buyers but now Samsons Ltd. receives order mostly from European countries. Most of these buyers are permanent for their satisfactory service, which shows their effectiveness in achieving order.

        For the both in source and out source policy of accessory control Samsons Ltd. timely receives the accessory and other materials with out any bottle neck situation.

        Employers of Samsons Ltd. is satisfied with the existing productivity of the employees of Samsons Ltd.

        The acceptable level of satisfaction of both of its buyers and suppliers shows their efficiency in their existing; service processes.

        Only a small percentage of their total annual orders are usually rejected by their buyers, which proves their efficiency.

        Samsons Ltd. is able to deliver the finished goods on time for the advantage of owning a shipping business.

        They overlook the necessity of market research to identify the customer segment and needs.

        Although it encourages the customer feedback but any advantageous means is absent in this regard.

        It doesn't provide any official guarantee or warranty to buyers for the products or services they provide.

Findings related to Supporting activities

        They don't provide any training to their employees

        Absence of employee reward system except their normal pay scale

        Luxurious working environment is a strength for this organization

        Professional pace of work exist within the management

        Existence of technological support such as e-mail, fax, scanner., phone, printing device etc. in the organization

        Company doesn't hold any policy regarding employee creativity or inanition

        Company holds international outlooks for exporting.

3.11 Key Success Factors

Key success factors (K.SFS) are important areas in archiving good results which ensure successful competitive performance for Samsons ltd. Its industrial key success factors are-

Ö         Good communication skill

Ö         Supervision to maintain desired quality

Ö         Committed to the on time delivery

Ö         Selection of efficient and honest garments manufacturers as suppliers

3.12 Competitive Forces of Samsons Ltd.

Buying Houses is a growing industry in our country. Samsons ltd. has surpassed a strong competition for its success. To analyze its feasibility as a Buying Houses, it is necessary for a buying house to analyze its competitive forces.

The five competitive forces model, developed by Michael Porter is a widely used business environment-scanning model and that can be used to analyze the competitive forces of Samsons ltd.

 

 

 

 

 

 

 

 

 

 

 

Threats of new entrance

This industry is a growing in our country; any experience person related in this industry with having enough contact person can establish a new Buying House. Initially not enough capital is required in this industry, only personal experience; enough contact with related parties in this industry, minimum set up is required to enter in this industry. So threats of new entrance are very high.

Bargaining power of supplier

The supplier of this industry is the RMG manufacturer and a little bit of bargaining power is exists in this industry. Price is being negotiated while an order is received from the buyers and there is a lot of suppliers are exists in this industry. That means a lot of RMG

Manufactures are available, so bargaining power is available to the buying houses hand. Again there is a lot of buying houses are also available. So the suppliers is not bother only with one buying houses. So the bargaining exists in both ways. So it can be said that the bargaining power of supplier is quiet low.

Bargaining power of buyer

The buyers of this industry are the foreign firms who want to buy RMG products from this country. Again there are a lot of buying houses exists in this country and doing business reliably and sustain in a good manner. So buyers have enough bargaining power in terms of choosing their suppliers. So the bargaining power of buyers is high enough in this industry.

Threats of substitute industry

Buyers of this industry have a little contact with the RMG manufacturers. Again from order to delivery, a lot of process required and the buying houses maintain all these steps. A manufacturer is concentrate only with production process. So there is no substitute institution in exporting huge RMG products to foreign buyers except the buying houses. So they’re no threat of substitute industry for the buying house industry.

Rivalry among competitive firms

As there are a lot of buying house firms and threats of new entrance is high, so the rivalry among competitive firms is high enough. Each firms work hard in getting its buyers and to maintain it, keeps close contact with him for farther contract. Again they take different means to attract more buyers. All the firms keep busy in doing this. So there is a strong competition among the existing firms.

3.13 SWOT analysis of Samsons Ltd.

Strength

Long term in this industry

One of the important advantage of Samsons Ltd. Is that this firm is in this buying house industry for last 16 years. In fact a small numbers of buying houses were there in this country. So with a long term business experience, it is able to achieve efficiency in running its business effectively.

Permanent buyers

This is the biggest strength of Samsons Ltd. It has its permanent buyers mostly in the European countries. It engaged in sweater merchandising and its key buyers are in the European countries and with its long term business efficiency, it is able to maintain a strong and reliable relationship with those foreign buyers.

Own sweater manufacturing units

Another key competitive advantage of Samsons Ltd. is that it has its own sweater manufacturing units naming Samsons sweater Ltd. This is also exists for last 16 years. This firm is so big and it takes such large quantities of order than these two units are not sufficient to cover those orders. That’s why it needs to out source those orders and then fall under the category of buying houses industry.

Skilled work force

Experienced, smart, hard working and dedicated work force is must to success in this industry and Samsons Ltd. is able to foster that group of work force. They pay a handsome figure of salaries and can retain that skilled work force. It motivates its employs in all sort of corporate ways and that’s why get a dedicated work force and get success in this industry.

Communication skills

Only experienced persons know how to communicate with foreign buyers in this industry and persuade them to receive an order and Samsons Ltd can do this successfully. That’s why for a long period of time it is able to hold a large numbers of buyers. Even it employed French speaking personnel as because many European countries prefer to communicate in this language. This is a strategic advantage to hold many of the European buyers.

Strong collaboration with the suppliers

To provide higher value in its value delivery process, Samsons Ltd has built a long term relationship with its component suppliers. This collaboration makes this organization honest to its commitment of quality and scheduled delivery to its buyers.

Collaboration with backward linkage

To be ever successful in their commitment to their buyers they always assure the on time delivery of the accessories needed in the manufacturing process. Samsons Ltd has taken the responsibility of supplying these accessories to the manufacturing process for its assured supply. For the convenience of this responsibility, it has built long term relationship with the suppliers of accessories that they don’t manufacture and done necessary paper work with strict terms and conditions with these accessories suppliers.

Weakness

Employee instability

This is the only weakness of Samsons Ltd. In the buying houses industry, there are a lot of players and all of them want to shine even by incurring a little bit of extra cost and that’s why they offer more salary for the experienced people. In this way, a lot of people get experienced from this well reputed firm and jump to other firm for higher salary.

Opportunity

Increasing labor force

Merchandising is becoming an emerging profession and becoming popular among many skilled people. They found it more interesting and challenging profession and want to start their carrier in this industry. This is a good opportunity for Samsons Ltd as a well reputed and established firm who is able to hold those skilled work forces with higher compensation.

Reliability among the buyers

This is another good opportunity of Samsons Ltd as still now it achieve strong reliability among the existing buyers this reliability will lead it to catch more buyers.     

Withdrawal of quota

This can be an opportunity an in international market, quota system has with drawn; each firm has to compete to catch an order and those who are in this industry for a long period of time would get enough order if can consistence with its service.

Threats

Increasing competition

Entrance in this industry is not that much hard. Any experience person related in this industry with having enough contact person can establish a new Buying House. In fact, people working in a buying house for a long time and after getting idea, he started his own buying house. In this way, competition increases. So its existing employees can be good sources of competitors in this firm.

Buyers and Suppliers bargaining might increase

In the event of increasing competition, bargaining power of buyers in one side and suppliers in another side might increase as now buyers will have more available sources to order and suppliers will have more firms to deliver. 

     

4. Diagnosis of marketing process

4.1 Over view of marketing process of RMG buying houses

Philip Kotler has defined marketing as the social and managerial process by which people and organization gets whatever they want by creating, offering and exchanging the goods of value with each other.

In our country, the marketing process of buying houses can be seen as below:

Not are currently importing or new importers are not mentioned in the list as the lists or records are quiet old. For this reason, now a day buying houses are very much encouraged to search buyers through method.

The activities of buying houses are a sequential process. Their activities starts from searching the buyers and ended up by follow up distribution. Here is the diagram of sequential activities of buying houses:

Searching buyers

The first and the most important job of buying houses is to search the foreign buyers who wants to import RMG from Bangladesh to their own country. The searching process or sources of buyers are different types.

1)          The preliminary sources of searching buyers once used to depend heavily on the record of Bangladesh Export Processing Bureau known as EPB or simply the list of Bangladesh Garments Manufacturing and Export Association known as BGMEA. But these records or list of importers delivered by EPB or BGMEA are some times backdated meaning some of the listed importers may the medium of the questionnaire was in English. The questionnaire was administrated face to face, with the respondent either-by ticking the answer by the respondent itself or by answering the questions of the researcher. Some of these were filled up after a small conversion relevant with the subject of the study.

2)          The second sources of searching buyers is to contact with the respective foreign country embassies of our country and ask them to provide the list of garment importers of their country who import garments product from the south Asian region mainly from Bangladesh.

The Buying Houses can also send its representative to foreign countries and over there they can contact our local high commission who has also the records of importers. They can help the Buying House representatives in this respect. So either of the ways the Buying House can get information of the importers.

3)          The third and most updated way of searching buyers is to get information of international buyers from the web sites and then contact with them through e-mail, fax or telephone. This way of searching buyer is very new and helpful in this technological age. With almost no money or a little bit of expense, they can contact with the buyers and make their dealings. However our country is not that much technologically advanced, this method of communication is not very much common to the old Buying Houses but the new ones are adopting with this method.

4)          By organizing different exhibition and trade fair in our country or in other countries, the Buying Houses can participate in those fairs and can represent themselves to different foreign buyers. This method of searching is very helpful. Many times these types of exhibition held in our country and in different countries of the world, where both the buyers and sellers met, can able to know each other deeply and make their dealings. This is also the safest dealings and that’s why the most popular one.

5)          The fifth and most common way of searching buyers is getting new buyers from the existing buyers. Some Buying Houses request its existing to make introduced with some new buyers from his known sources. This can be happen when he can satisfy his existing buyer by fulfilling all the requirements that provide benefit to the buyers. This makes a good and friendly relationship between them and from his reference some other new buyers will come. This method is very trustworthy to all the parties because in one hand the Buyers with reference of its existing buyer and on the other hand a new buyer can also feel safe as he gets the reference.

Introducing letter

Buying Houses issues an introducing letter to the respective foreign buyers. This is a letter which states the total experience year of the Buying Houses, its parameter of top, activities, its total age, and its previous relationship with suppliers and at the present with how many buyers and suppliers they are doing business. The introducing letter also states what kind of orders they usually take from buyers and their efficiency and effectiveness of handling an order as well as an appropriate time and procedure of a typical order process.

Buyer’s inquiry to Buying Houses

Once the buyer received the introducing letter from the buying houses, now its his time to introduce himself to the buying house. Actually in this letter buyers inform the Buying Houses about his demand of the product. A typical inquiry sheet includes the requirements of the products in quantity, item description, order detail and order specification etc. This inquiry sheet is very important to Buying Houses because with the help of this sheet they set cost and price. In this inquiry sheet buyer also want to ask the Buying Houses to inform him the total price the buyers have to give for his order.        

Merchandising

Then the job of merchandising starts. The merchandiser first determines what are the things required to make a unit or a dozen of an order. Then he estimated the per unit fabric consumption, accessory consumption, cost of making (CM) and other costs such as freight cost. Price is usually per dozed.

Service charge of Buying Houses

Service charge of a Buying Houses is implied in most cases. It is because most of the times buyers tell Buying Houses to set a price in such a way so that it covers the charge of a Buying Houses. In such case Buying Houses set a price which includes its charge but it is not explicitly mentioned ay where. However buyers also give an option to the Buying Houses to include its charges per unit or dozen.

Up to this stage all the information is transferred between both parties is usually done by e-mail, fax or phone.

Price negotiation

Once the buyer received the price list from the Buying Houses, both parties then sits for negotiation and finally set a price and agreed with it.

Sample making

Sample can be defined as two types. One is the original sample that the buyers sends to the Buying Houses and other one is known as customer sample, which the house sends to the buyers for the buyers approval. Once the price is set, the task of buying house is to make a sample of the product. To do this, buyers has two options. The first one is buyers can buy the original sample of the product from the market of his country, send that to the Buying Houses and ask the Buying Houses to make some copy of the sample. Second option is buyers can make a sketch of the product by using Computer Aided Design (CAD) and send that to the buying house and ask them to make an original sample according to this. The Buying Houses can make a counter sample of the product and again sent it to the buyer for final approval. The buyer can check the sample to ensure the quality, size and color of the fabric and accessories. In case the buyer not satisfied with the counter sample then he sends remark to the Buying Houses and asks them to send correct sample.  

Preparing Pro-forma Invoice

This is the job of the commercial department of the Buying Houses. They prepare the pro-forma invoice. The pro-forma invoice includes the quality of the buyers order, its unit price and total price. This pro-forma invoice is very important to avoid any sort of communication gap or future confusion between the parties. When the buyer receives the invoice, he sends work order to the Buying Houses. In the mean time the buyer forward the pro-forma invoice to his bank to open a LC (Letter of Credit) in favor of the Buying House.

Selecting suppliers

The Buying Houses need to be very careful in selecting its suppliers where it will place the buyers order. The future relationship between the buyers and the Buying Houses is very much dependent on this because if the suppliers fail to make product as buyer specification or as per schedule, Buying Houses will loose this buyer in future. Usually they select suppliers on the basis of certain things. First, they examine whether the supplier has enough machine capacity, machine speed to do the work and to finish it on time.

Second they also see whether the supplier has adequate administrative setup to prepare all the necessary documents for export such as shipping document, document of CO (Country of Origin) issued by EPB to export the goods and others.

Another importing issue in selecting is his banking status. Now days this has given the highest priority. Suppliers usually need to open back to back LC (BB LC) in order to import necessary raw materials to make the product. The capability of opening BB LC means that the suppliers have a loan capacity. But some times banks don’t allow opening LC due to its bad debt or previous bad reputation. In such case buying house has to change the supplier and find another supplier who has good bank status. Selecting another supplier is time consuming and expensive as well. This may also result late delivery and poor quality of product.

So in order to avoid to this situation, buying houses has to be very careful in selecting its supplier’s right at the first time.

LC Transfer

Once the buying house is confirmed that the supplier has the capability to do the word, they negotiate for the price. Once the price is set with the supplier the commercial department of buying house immediately transfer the master LC in the name of supplier.

Production Follow-up

Once the production is going on, the buying house firms’ role is to monitor the production process, product and its quality right at the very beginning. This period is crucial for the buying houses. As anything goes wrong, his entire reputation might be in a stake as if quality don’t match or delay in delivery. So he has to monitor the production activities to keep all the promise of his buyer.

For this, it has a department called Quality Controller (QC) who inspect all the activities and ensure the product quality.

Final inspection

Buyers usually delegate the responsibility of final inspection on the shoulder of buying house

Follow up shipping

When the order of the buyer is ready, the buying house takes the responsibility of loading the goods on the ship with all necessary steps. They also prepare and arrange the necessary documents for export such as bill of exchange, bill of lading, commercial voice, certificate of origin, packing list etc.

Finally when the product is ready by supplier, the buying house gets its commission immediately after the shipment.     

This is how the roles of buying houses end.

4.2 Analysis of marketing roles of buying houses

Roles of buyers

One of the most important roles of Buying Houses is to perform a role of a buyer as a representative of its ultimate foreign buyers. The foreign buyers give the authority to Buying Houses to inspect, supervise, monitor and control the suppliers’ product so that quality product is delivered right at the scheduled time.

Role of suppliers

Buying Houses supply accessory raw materials to its suppliers. Here we need to discuss the role of merchandise. Merchandiser is a especial task of Buying Houses. This task includes determining the unit price of a product on the basis of total fabric and accessory consumption per unit, cost of making and freight charge per unit. The role of merchandise also includes selecting of right suppliers on the basis of ability to maintain expected quality with on the time schedule and suitable location.

Role of intermediary

They are known as intermediary of garments exports for their activity. As an intermediary they work as a representative of a foreign buyer, take order from them and then search an appropriate supplier to except the order. The Buying Houses is also is a source of accessory supplier and work as a shipping agent for the producer of garments product. So, their role can be described as a role of intermediaries.

Role of service provider

A Buying Houses is a service based organization. From searching buyer to loading the final goods on board they provide services both the buyer and it suppliers. For example, searching buyer for its supplier is a service provided to its suppliers. On the other hand, selecting appropriate supplier for the buyer is also providing service to its buyers. Other services such as supply accessories, quality control, follow up production and distribution is also a part of its services.

Role of Quality Controller

When the production process is going on in the factory, the job of Buying Houses is to monitor whether the production is on schedule. They also inspect quality of the production by sending its QC known as quality controller in the factory.

Role of shipping agency

When the order of the buyer is ready, the Buying Houses take the responsibility of loading the goods to the ship with all necessary steps. They also prepare and arrange the necessary documents for export such as bill of lading, bill of exchange, commercial invoice, certificate of origin, packing list etc.

4.3 Socio-economic Role of Buying House

Development of garments industry:

For immense support and service of Buying House, today the garments are earning over seventy percent of the nation’s total foreign currency. In addition to earning the lion percentage of share of the countries foreign currency, this sector has brought a positive transformation in the overall socio-economic condition of the country. Since its inception till date, this industry has earned nearly $22 billion to the country. The value addition portion has been $6.6 billion. However the earning is approximately about four times the investment in the industry.

Linkage industry

Garments are now the only base for further industrialization in the country. Currently the total fabric requirement of our captive market is for about 3 billion yard, of which 85-90 percent we import from abroad. Fabric requirement is increasing at the rate of 20% per annum. This offers a tremendous opportunity for developing textile industry in our country.

Thanking the global context within the preview of open market economy by the year 2005, we can exploit the benefit of the potential textile industry of the country by immediately establishing 60 moderate sizes.

Composite textile mills are capable of producing 30 million yards of fabric per factory. With local capital, this size of composite mills satisfies the economies of scale in our country.

Beside, a large number of ancillary industries have been emerged and growing as well. Estimate shows about 80% of garments accessories like cartons, threads, label, ploy bags, gum tapes, shirt board, neck board and shine ace etc. are now being produce in our country, contributing to the national GDP. It is creating further employment opportunity in the country as well.

The development of Insurance Sector

Insurance companies, even after reducing different rates by about 54 percent, are presently earning about Tk 150 core per year from the garments export as various types of premiums for insurance policies.

Shipping Business

The main 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 carrying trains, and the increasing of cargo handling and storage facilities at the Z1A International Airport have been due to a garments export.

C & F Business

The unprecedented increase in the C & F and Stevedoring business is because of the huge import, of garment raw material and export of ready made garments. On average, they earn 1 percent on all exports and imports which amounts to nearly TK. 230 core per annum.

Tax on Export Earnings

The government is earning TK 40 core from garment exports in addition to its regular corporate taxes.

Waste recycling Industry

About 0.2 million people are engaged in waste (mainly, the waste cut pieces of fabrics) recycling industry. With these wastes, they are, stuffing toys, pillows, quilts, cushions etc. and earning about Tk. 1500-2000 per month.

Population Control

With the opportunity of earning more, girls now want to enjoy their lives. This need is helping girls avoid early marriage and frequent pregnancy. It is contributing to the birth control of our country also.

Hotel and Tourism

About 20000 overseas apparel buyers and their representatives visit Bangladesh each year to meet the local manufacturers and exporters. Taking an average stay of three days and spending approximately US$ 500 per day. This sector earns about Tk. 140 crores annually.

Women Emancipation and Social Transformation:

Lots of women are today engaged in RMG industries; these women workers are enjoying recognition and dignity in the society. They have the capability of earning; they are now well treated by their families. They are no longer any burden to their families.

Transport

The road transport business has been expanded because the lion's share of cargo, moving between Dhaka to Chittagong and Dhaka to Beanpole by road, is on account of the garment exports. Those who once started transportation business with rented trucks, many of them by now are the proud owners of even ten to twelve trucks. As blessing of this sector each day, on an average, trucks are taking about Tk. 2 crore a day, this transport sector's contribution to the GDP now stands at about 12 percent.

Emerging Consumer Market

The 1.5 million workers in the industry are appearing in the consumer market with a demand worth US$ 1.70 million (Tk. 7.5 crore). An increasing demand for moderate cost cosmetics, sharee, footwear, fast food and other consumer products is also a direct result of about 1.5 million new consumers.

4.4 Problems and Barriers of RMG Buying House Industry of Bangladesh

The problems and barriers that are hindering the growth of the export oriented Buying House industry are classified under the following major functional areas:

q   Human resource development

q   Infrastructure

q   Marketing

Human resource problems of Buying House

Unskilled Employee

Most of the employees of Buying Houses are not enough skilled in their job area. In the Buying House there are some post such as quality controller, design maker, merchandiser that require technical skill to be performed but in spite of having technical training institute, they are less interested of going there and employers also emphasize less on these. Only way they can learn is through on the job training. Convincing foreign buyers and establishing long term relationship with them is one of the most important tasks of Buying Houses. To perform this, job employees of Buying Houses need proper language and communication skill. As the medium of education in our country is mostly Bengal and there is less opportunity and interest to learn other foreign languages, so employees lack communication skill to convince and establish long term relationship with foreign Buyer.

Lack of interest of career development

The potentiality of this industry is still undiscovered. People are less aware of this industry and that’s why less interested in developing his/ her carrier in this industry. In fact, this industry is booming in a silent way. Anther matter is that work load is very high, people has to work hard from dawn to dusk even till late night to get his work done. So huge pressure and work load is another reason for not interested on this industry.      

Dictatorship of employer

Employers of buying houses are usually autocratic with their subordinate employees as a result of which employees are often de-motivated to work. They feline they are always under pressure.

Infrastructural problem of Buying House industry

No vision

Buying house industry is a growing industry but this growth is a result of so called blessing of quota system but not the achievement of their efficiency. Even the constituents of this industry buying houses have never been shown any vision of prospect, both in their attitude and actions. This is the warming of undesired maturity for this industry. Even though they are aware about the guillotine of year 2005, but it seems that they are ready to dye out.

Insufficient and Poor Backward linkage industry:

Threat, button, cartoon, backboard these are treated as accessory of garments product. Industries of these products are treated as backward linkage industry of garment exports. Most of the times Buying House supply these accessories to garment manufacturers. But due to insufficient number of factories, Buying House faces difficulties to supply these accessories on time. The quality of these accessory most of time do not matches, as it demanded due to their inefficiency and effectiveness in production.

Rules and Regulations

There are also no written rules and regulation for operating this industry. Still government does not officially count it as an industry. So the industry is running under norms. So some times these norms are maintained or some times violating by the stakeholders but no action is taken against those violators.

Marketing problem of Buying House Industry

Short Shipment

This means delivering goods with inappropriate quantity. This is a very common problem for all Buying Houses. Garment manufacturers of our country are the victim of many natural contingences including strike, hartal or political instability: So a result they often fail to finish their on time which result short shipment. Due to this short shipment respective buyer become dissatisfied with the Buying House and the Buying House
loses that buyer forever.

Poor product quality of supplier

Another important problem of Buying House is the poor quality of its supplier (garment manufacturer). Desired quality is the first condition of the foreign buyers to the Buying Houses. Garment manufacturers due to their unskilled worker cannot produce the product with expected quality. As a result buyers reject the product.

Improper document

At the time of releasing goods from the port, a buyer needs to show some documents to prove his authentication. These documents are sending to buyer from buying house or the respective supplier. However, sometimes due to lack of experience or knowledge they sometimes fail to send appropriate documents for which the buyer cannot discharge his goods from the port. As a result the buyer becomes dissatisfied with the buying house.

Document Delay

Besides improper document, some times the supplier or buying house fails to send documents on time. With out proper documents the foreign buyers cannot discharge goods from the-ship. This problem is very irritating to buyer as the product has arrived at the port but due to unavailability of proper document he is unable to discharge goods from the port. For this reason sometimes the buying house has to break relationship with its buyers.

Commission Recover Problem

This problem mainly occurs due to unethical practices of few people. Normally, the amount of the commission of buying house is specifically written at the back of letter of credit. So, no body can deny paying the commission to the buying house. However sometimes the wrong intention of the people, the buying houses face difficulties to receive its commission.

Other Problems

As the buying house is related with garment export, any problem occur in any stage of export channel from manufacture to distribution ultimately becomes the problem of Buying House. Thus the following problems of garments export can be consider as an indirect problem of the buying houses:

Problems regarding exporting garments through air

1. Open cargo shade.

2. Lack of security.

3. High royalty rates.

4. Handling system.

5. Problem of damaged cargo inspection and not allowing of short landing and short     deliver certificate.

6. Temporary .bonded warehouse for garment industry at the airport.

Problem in banking sector for exporting

1. Force / demand loan.

2. Back to back P.ADjforce loans.

3. Overdue RB.P.

4. Exporter cannot open the LjC due to clear the liability.

5. Stock-lot problem cannot permit BBL/C open.

6. Banking irregularities.

7. Bangladesh Bank does not provide enough money for cash incentive.

8. Need the separate bank for generals industry

9. ECG policy.

10. Exporting goods against stock lot.

11. 20% discount is not allowed in the National Bank.

12. Bangladesh Bank does not relax the discount amount.

13. L/C acceptance charges of the commercial bank.

14. Procedure of making down payment for rescheduling loans.

5. Data Analysis and Interpretation

To bring my findings while working in buying houses and provide my own recommendation, I prepare some questionnaire. These questions are set based on different aspects of buying houses, different parties and matters involved with it. My sample respondent was knowledgeable people of different buying houses who know these matters very well. I surveyed on 50 respondents to find out my findings while studying in buying house industries. All the findings are based on the respondents’ response in different questions. No statistical software is being used to analyze the findings. Only MS Excel was used to find out the graphs and charts. That’s why it becomes time consuming but I got the findings based on each of the respondents’ personal opinion.    

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Q-1: For which of the following reason, you are not satisfied with your buyers (you can choose several options)

1)      High bargaining tendency in exchange.

2)      Uncompressing attitude in exchange towards contingencies situations (like hartal).

3)      Tendency of undesirable rejection.

4)      Fleeting tendency in business relation.

5)      Cultural ethnocentrism 

This question is selected to find out the reasons dissatisfactions with buyers, as the satisfaction of buyers is important to survive in the industry.

Among the criteria’s, high bargaining tendency in exchange is one of the most selected criteria’s that chosen by all the respondents. This criteria is chosen to investigate whether foreign show the bargaining tendency and how much this exists in this industry. With the highest response (100% respond this criterion), it is shown that the tendency prevails and it dissatisfied the respondent buying houses.

The second criteria are chosen to look into whether the foreign buyers are patience to different desired contingencies in our country. Again the highest response (100% respond this criterion) shows that they face strong impatience in these types of contingencies.

The third one is chosen to investigate whether buyers desirably reject garments product and how the buying houses views it. Here 34% respondents had chosen this one. So it is revealed that the buying houses are strongly against the product rejection.

The fourth one is chosen to investigate the existence of fleeting tendency of foreign buyers. With 28% response, it is revealed that a portion of buyers do not value the long term relationship with buying houses rather for trifling reasons they break their relationship with existing buyers.

The fifth criteria are chosen to see the existence of cultural ethnocentrism among the buyers. As only 4% response in this criterion, we have seen that the buying houses hardly face this problem.

  

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Q-2: For which of the following reason, you are not satisfied with your suppliers (means the garments factories) (you can choose several options)

1)      Failure to manage according to the desired way or based on the situation

2)      Failure to maintain delivery on schedule

3)      Inconvenient location

4)      Fleeting tendency in business relation

5)      High bargaining tendency

The reason of dissatisfaction towards the suppliers is asked to investigate the criteria that may hamper the smooth function between the buying house and its suppliers.

The first criterion is chosen to find out the importance of suppliers product quality. 98% respondent select this one that means the buying houses is often disturbed for poor quality product of suppliers.

The second one is chosen to investigate the emphasis on the scheduled time product delivered by the garments manufacturers. With the response of 88% it is cleared that the industry is also very much annoyed with the late delivery.

The third criteria are selected to see the emphasis of buying houses to the suitable location of garments manufacturers. With an only 10% response, it is clear that the buying houses put little emphasize in this matter.

The fourth one is chosen to determine the fleeting tendency of suppliers towards the buying houses. The 8% responses in this criterion reflect fewer tendencies of suppliers.

The fifth criteria are chosen to see the existence of cultural ethnocentrism among the buyers. We have seen that the buying houses hardly face this problem. Only 4% select this one.

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Q-3: Which of the following obstacles to export garments products through buying houses can be treated as major? (You can choose several options)

1)      Casualties such as natural calamities or political crises

2)      Failure to delivery on time

3)      Un skilled garments workers

4)      Fraudulence in trading

This question was asked to find out the severity off major obstacles to RMG export process as this problem of export process makes the job of buying houses more difficult to convince buyers.

The first major problem that is natural calamities and political crisis is ranked first. This reveals that the activities of buying houses are very much vulnerable to these types of obstacles.

Failure to delivery on time got the second rank as major obstacles as it is another suffering matter to the smooth function of exporting products.

The third obstacles are inefficient garments workers- a virulent gangrene in the production system. This criterion is marked by two third of the respondent and that’s why it ranked third. 

The final one is the fraudulent in trading which is the clear violation of the rules in the agreement by garments manufacturers. This is found as less frequent as other major obstacles to RMG export, in the eyes of buying houses.

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Q-4: Which of the following obstacles to export garments products through buying houses can be treated as minor? (You can choose several options)

1)      Rejection of product resulting from in efficient supervision

2)      In efficiency of buying houses in negotiation

3)      Gender inequality

4)      Shortage of sound base heavy factory

The highest response among the minor obstacles is the rejection of product resulting from in efficient supervision during the production process of the buying houses. 80% respondents select it as a minor problem

The second one is inefficiency of buying houses in negotiation, a large part of the respondent select it as another minor obstacles and the percentage is 50.

The third minor obstacles according to the respondent are gender inequality in Bangladesh. Buyers all over the world have an opinion against this matter.   

The final rank minor obstacles to export garments products through buying houses are sound base heavy garments manufacturing industry in Bangladesh and 25% respondents mark this. As a result we are depriving from a high level of order which could be availed otherwise.

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Q-5: Which of the following problems of buying houses can be treated as major? (You can choose several options)

1)      Suppliers poor product quality

2)      Short shipment

3)      Stock lot or total LC  unutilized

4)      Document delay

5)      Improper documents

This question was asked to know some of the major problems faced by the buying houses. The major problems cause a serious hamper to the buying houses.

The most major problem is the suppliers’ poor product quality and 48 respondents marked it and ranked it as number one problem. For this problem, buyers become dissatisfied and avoid further contract with that firm.

Short shipment or failure to supply the desired products is another significant problem which gets huge response and got as ranked two.

Stock lot or the cancellation of total shipment is another important problem and marked by 40 respondents and thereby ranked as third.

Document delay and the improper documents are the concluding major problems of the buying house industry.

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Q-6: Which of the following problems of buying houses can be treated as minor? (You can choose several options)

1)      Shortage of backward of backward linkage

2)      Commission recovery

3)      Poor accessories supplier

Out of 50 respondents, 40 choose the problem Shortage of backward of backward linkage as number one minor problem of buying houses. With a slight difference response, commission recovery problems have ranked second and the poor accessories suppliers got third.  

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Q-7: Rank the following problems regarding backward linkage industry of garments export.

v  Insufficient number of such industry to meet the total demand (………)

v  Poor product quality (……….)

v  Lack of consciousness to understand the consequences of later or poor product delivery (………)

Poor accessories product quality has been ranked 1 as 27 people ticked it as 1. As a result the smooth production of RMG products is hampered.

Insufficient number of such industry to meet the total demand has been marked 2^nd by 15 people. So these people opinion is that still there is shortage of delivering supporting accessories.

Lack of consciousness to understand the consequences of later or poor product delivery is chosen as third as only 8 people respond it.

  

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Q-8: What are the problems you face in your supplier selection process?

1)      Tendency to stay with existing suppliers ignoring the necessity to find out more efficient one

2)      Employee personal relationship with suppliers

3)      Failure to choose desired suppliers during seasonal excess demand

4)      Difficulty in choosing committed suppliers

This question was asked to investigate the problems in selecting the effective and efficient suppliers. The selection of effective and efficient suppliers is must for the effectiveness of export marketing process of RMG products.

70% respondents select the first one. This is a traditional tendency of business people to depend on their existing stakeholders.

The second one that is employee personal relationship with suppliers is also an important reason of inefficiency in selection process of suppliers because in this process the employees who have strong influence in this business and their biasness may select a wrong supplier that hamper the business. 60% select this one.

The third one is failure to choose desired suppliers during seasonal excess demand and is marked by 40% of the respondent. As their choice become limited during the excess demand in the seasonal demand.

The last one is difficulty in choosing committed suppliers and also marked by 40% as they are not tasted before.

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Q-9: According to your opinion, what percentages of total order of R.M.G. products bring through buying houses in Bangladesh?

q  Above 70%

q  Between 50%-70%

q  Below 50%

This question is asked to know the effectiveness and efficiency of buying houses in bringing RMG orders for the country.

Majority of the respondent believe that buying houses brings the most RMG products order in Bangladesh (53%), however 31% believe that only 50%-70% order are brought by buying houses and only 16% believe that it can bring less than 50% of RMG product orders.

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Q-10: Approximately, what percentage of your total order per year is rejected by the foreign buyers after final inspection?

q  Above 15%

q  Between 10%-15%

q  Below 10%

In this question, the efficiencies of buying houses are implies. The most efficient buying houses incur less rejection where as less efficient buying houses incur more. I ran my survey on different buying houses; some of the respondents were not sure about the percentage. That’s why; this question was not touched by 18 respondents. The rest of the 32 respondents’ response was like this: 

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Q-11: Do you take any promotional strategy in order to attract buyers; if yes, which are the strategies?

q  No

q  Yes (You can choose several options)

o   On line advertising

o   Personal selling

o   Promotional display

o   Trade fair exhibition

This question is asked to know about the promotional attempt taken the buying houses to attract the foreign buyers. The low emphasize on promotion attempt has revealed the apathy or the little knowledge of buying houses about their future.

Out of 50 respondents, only 10 people select NO that means they do not take any promotional activities. The other takes some promotional activities.

                       

The first criteria is online advertising, the highest used communication method in modern world. Here it is seen that the buying houses emphasize on this method a little. Only 8 respondents select this one. It might be the result on stiletto introduction of this promotional system in the buying houses sector in our country.

Personal selling, the second criteria marked highest by most of the respondents. 30 respondents tick this one. So they sent their representative to the buyers to collect orders.

Promotional display and Trade fair exhibition are also less emphasized factors in buying houses. Only 5 persons select this criterion. So it is seen that the buying houses emphasize a little in promotional strategy. They might not realize the value of taking those strategies. Later if they realize this, they will take necessary steps to adopt with these promotional methods.             

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Q-12: What steps you usually take to confirm the product quality? (You can choose several options)

1)      Selection of quality suppliers

2)      Schedule supervision

3)      Selection of efficient quality controller

4)      Prioritizing quality to cost

5)      Periodical report on quality

The first criterion is very much important to all the buying houses and that’s why all of them marked this one. They remain anxious in selecting their suppliers.

The second one is chosen to look into the emphasis of buying houses own activities to maintain the quality of their ordered product. 100% respondents select this one. So ensuring the quality product they remain busy to supervise the production process.

The third one is chosen to know how much they emphasis in utilizing quality controller as a weapon of maintaining quality. The entire respondent put emphasis in employing quality controller to supervise and maintain the desired quality of the product.

The fourth one is taken to know whether the buying houses are ready to sacrifice profit to gain the desired quality. It’s a very hesitating issue to my respondents and I found 50% marked in this option. So the buying houses equalize the costs with quality and try to achieve success in both.

 

With a response of 30% I found that only few buying houses maintain periodical report on quality to its buyers.

6. Research Findings

The following findings are perceived from the answer of the questionnaire. Through these findings I tried to present the existing scenario of buying house industry of Bangladesh under two classifications. Under First classification the finding regarding the efficiency and effectiveness of buying houses is presented and under second classification the findings regarding the present and future problems of the industry is presented.

Findings regarding their efficiency and effectiveness

           According to the survey most of the buying houses are not efficient in supplier selection process because of their tendency of long time inefficient trade, harmful employee bias and lack of discretion to certify the efficient suppliers for the first time as the soar of the system.

           The study also shows that a large part of RMG orders are brought annually by the buying houses which determines their effectiveness in bringing order of RMG products but efficiency remains unknown.

           While looking into the efficiency of backward linkage industry it is discovered that this industry is afflicted with poor product quality, inadequate capacity and the lack of consciousness to committed delivery.

           It has found that the foreign buyers reject small portions of goods shipped. It is a good sign for buying house although indicating the lenient view of foreign buyers towards the buying house.

           Their inefficiency once again has proved w hen I found that they are very much reluctant in taking any promotional step to convince buyers.

           Buying houses attempt their heart contents to maintain the product quality.

           For the blessing of quota system the buying house, industry can be mentioned as effective but not efficient one.

Findings regarding the present and future problems of buying house

           The dissatisfaction of buying houses toward their buyers mainly based on the buyers' uncompromising attitude toward the failure of commitment due to contingencies.

           The dissatisfaction of buying houses toward their suppliers because of their inefficiency to supply product in right quality and quantity.

           From the study I have seen that obstacles to garment exports can be separated into two parts: major obstacles and minor obstacles. Among the major obstacles causalities such as natural calamities, strike, hartal or political instability are affecting the export marketing of garment products severely. Among the minor obstacles inefficiency of production process supervision by the buying house is most noteworthy.

           Again from the study I have seen that problems of buying houses can be separated into two parts: major problems and minor problems. Suppliers' poor product quality attacks most severely as major problems of buying houses and as the minor problem shortage of backward linkage industry disturbs buying houses drastically.

           The employees of this industry are 'lacking required communication and technical skills.

7. RECOMMENDATION

Solution of Human Resource problem

        After recruitment of employee, buying house should provide them enough time for training to learn the technical work to perform the technical job such as the job of merchandiser, quality controller, quality inspector, sample maker etc.

        The buying house should provide enough support to its employee to develop communication skill in particular language in order to communicate with the particular buyer for the buying house.

        Instead of full autocracy or democracy, the employers of buying house should show lenient view in all aspects so that they get motivated to work.

        Buying house should introduce enough bonus or service benefit in order to encourage and motivate their employee.

Solution of the problems of Infrastructure

        Having no visions of prospects the buying house industry in our country is bound to suffer from the worst deterioration with their withdrawal of quota system. So the only remedy to develop this scenario is to strengthen their infrastructure through combined effort of both government and non-government for proper support and facilities.

        Encourage people to develop industry such as threat, button, interlining and other packing materials treated as backward linkage industry of garment export by make short term or long term contract of taking goods so that buying house do not have to import those at higher price or the local supply can the fulfill the required demand of the industry.

        Government of our country should also provide incentives to develop backward linkage industry of RMG export, for the smooth supply of accessories by buying house to garment factories.

        Company owned accessory supplier can also the developed to maintain quality or on time delivery.

Solution of marketing problems

        Buying house should be more careful and attentive in monitoring the production of the garment manufacturers so that production goes on schedule and any unwanted occurrence such as short shipment may not occur due to late delivery.

        In the findings they have mentioned that buyers do not want to negotiate on quality. So, maintaining product quality for buying house is very important. To maintain appropriate quality, buying house should take necessary steps such as training course for their quality controller or inspector etc.

        For improper document or document delay buyers cannot receive his product from the ship in his country for which relationship between he and buying house may break up. So buying house should be always careful in preparing right documents. They also should send documents at right time.

        The total industry should keep in mind that they need a truly international outlook for exporting to attract buyers as well as long-term commitment with both of their buyers and suppliers.

        The total industry must achieve an international reputation for quality to challenge the quota free environment.

        They should ensure that they have all the resources for garment export.

        They should start marketing through trade fair.

        They should start marketing through internet.

Solution of banking sector problems

        Requirement of obtaining approval from Bangladesh Bank for creating Forced/Demand loan by the lien banks should be withdrawn.

        Back to back A.D/Force loans should not be considered as default loans. Loans of this nature should be converted into interest free block Accounts and amortized against future proceeds.

        The overdue F.B.P created against the liability of any L/C should also not be considered as default loans.

        Exporters failing to clear the liabilities in case of Back - to back P.A.D / Forced Loans, overdue F.B.P etc. Should be allowed to open L/Cs.

        Bangladesh/bank should provide the lien banks with adequate funds for necessary payment of cash incentives to our exporters without delay.

        Procedure of obtaining prior permission from Bangladesh Bank for exporting goods against stock-lot should be withdrawn.

        Negotiation Bank should be authorized to take into consideration for deciding upon discount unto 20%.

        Condition for obtaining approval for discount from the Bangladesh Bank should be relaxed and discount approval by the EPB should be treated as valid.

        From the date of document negotiation, forty-five days should be allowed for fund remittance. Overdue interest should not be charged in the event if remittance is delayed.

        All private sector commercial banks should immediately cease charging L/C Acceptance charges like the nationalized Banks of the country.

        Procedure of making down payment for rescheduling loans should be withdrawn. It should be rescheduled in accordance with the applications, when submitted, by the exporters concerned. In such cases, the rescheduled amount may be adjusted by charging @ 20/0 on the future exports proceeds. Legal action may be taken in case any of the exporters fail to adjust the dues after three consecutive rescheduling.

        RMG exporters should not be held responsible if proceeds against their exports are not realized owing to the reasons beyond their control.

Solution of Air shipment problems

        To strengthen the security in cargo shade of Airport forming and to take necessary steps to exporting through air at the pick time of RJVIG.

        To waive the high royalty rates at specific times of the tear so that the emergency import of raw material and export of readymade garment could remain steady.

        To formulate a joint action plan with the chairman of the BG MEA standing committee on port and transport.

        Duty free market access should be allowed for essentially all products exported by the LDC's on a non-reciprocal basis to improve their economies.

8. LIMITATIONS

First of all, I found very little secondary data on the buying house of Bangladesh. For this reason, to get the answer of certain questions I have to rely on people's opinion. While doing the survey lots of people did not want to respond to many questions. Sometimes they even did not fill out the questionnaire properly for the busy schedule. For this reason, sometimes I had to ask them questions from my questionnaire instead of giving them hard copy.

Secondly, Time was one of the major constraints. As our internship program is only three-month long, it was difficult to cover and collect all the necessary materials for completion of such a large report within this time boundary.       

I also would like to mention that the people of Merchandising Incorporation are under tremendous workload. Although, they wanted to co-operate in writing my report, their busy schedules sometimes did not allow them to do so. On the other hand, due to confidentiality of official information, sometimes they showed unwillingness to provide me enough information.

9. CONCLUSION

Garments export contributes major foreign exchange to our economy. To ensure a rich fulfillment, it needs a channel, which works as a bridge between buyers and manufactures of garments a win- win relationship. No doubt the role of RMG Buying House Industry that starts from marketing to distribution is very important to establish this bridge. However the exuberance of foreign currency through garment export is very much dependent on the effectiveness and efficiency of this industry. So removing all its inefficiencies and ineffectiveness this industry should move ahead with a vision to support the garments industry in marketing its products.

          

                                                          

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