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The textile industry in Bangladesh operates through a vertically integrated business model that begins with the production of raw materials and culminates in the delivery of finished products to consumers. The process starts with the cultivation and processing of natural fibers like cotton or the production of synthetic fibers, which are then spun into yarns. These yarns are woven or knitted into fabrics, which undergo various dyeing and finishing processes to create textiles. The finished textiles are used to manufacture a wide range of products, including clothing and home furnishings. This intricate process ensures that each stage, from raw material production to fabric creation, is meticulously managed to maintain quality and efficiency.
A significant portion of the textiles produced is used to create ready-made garments (RMG), a major component of Bangladesh’s textile industry. The RMG sector involves cutting, sewing, and assembling fabrics into finished apparel products, ranging from everyday clothing to high-fashion items. The industry also collaborates with contractors for specialized tasks such as embroidery or printing, leveraging specific expertise and equipment to enhance production capabilities. A large part of the RMG and textiles produced in Bangladesh is exported to international markets, significantly contributing to the country's economy. The export activities are vital, driving revenue and employment, and positioning Bangladesh as a global leader in garment manufacturing.
Domestically, textile products are distributed through traditional retail and wholesale channels, reaching consumers across various markets. With the rise of digital platforms, the industry has also embraced e-commerce, expanding its reach and adapting to modern sales channels. Online sales provide convenience and accessibility, allowing manufacturers and retailers to tap into new markets and trends more rapidly. This comprehensive business model, from fiber manufacturing to the final sale of finished products, highlights the industry’s vertical integration and adaptability, underpinning its substantial role in the global textile and garment market.
The major revenue drivers are listed below:
1. Ready-Made Garments (RMG) Exports: RMG exports constitute a significant portion of Bangladesh’s total merchandise exports, contributing over 80% of export earnings, reported by Mordor Intelligence. Bangladesh’s competitive advantage lies in low labor costs, duty-free market access, and a skilled workforce, attracting global fashion brands for garment production.
2. Primary Textile Sector (PTS): The PTS encompasses spinning, weaving, knitting, and dyeing. It meets approximately 85-90% of the yarn demand for knit RMG and 35-40% for woven RMG. Mordor Intelligence published in a report that investments in the PTS have reached around $15 billion, reflecting commitment to growth and modernization.
3. Government Support and Trade Policies: Bangladesh’s proactive approach in embracing globalization and favorable trade policies has stimulated the industry’s competitiveness.
4.Domestic and International Demand: Increasing demand for Bangladesh’s textiles in both domestic and international markets drives growth. The industry has grown at an average rate of around 10% per year, informed by a blog from The Textile Network.
The key drivers of cost are discussed below:
1. Raw Material Availability: The availability of high-quality raw materials is a significant cost factor.
2. Technological Upgradation: High-volume investments on technological upgradation and R&D are key cost drivers.
3. Manufacturing Costs: These include costs related to spinning, draw texturing, weaving, knitting, and finishing.
4. Supply Chain Disruptions: The industry can suffer from supply chain disruptions due to shortages of cotton and other raw materials.
The Porter’s Five Forces analysis for the Textile industry in Bangladesh are outlined below. These factors impact how businesses compete and conduct business in Bangladesh's Textile sector, hence defining the sector's strategic landscape.
1. Bargaining Power of Buyers: If the buyers buy in large volumes, they can get more benefits. The Bangladesh textile industry is largely export-oriented, and thus, the bargaining power of international buyers is high.
2. Threat of New Entrants: Companies in the textile industry have a recognized brand and a customer base. To attract and retain customers, new businesses would have to enter with strong and attractive investment products. The economies of scale in the industry can also pose a high barrier to new entrants.
3. Rivalry Among Competitors: There is strong internal rivalry in this sector. The textile industry in Bangladesh is highly competitive, with many firms vying for market share.
4. Bargaining Power of Suppliers: There are various suppliers of raw materials and inputs with slight differences in quality and price, so the industry doesn't have significant problems in negotiating with them.
5. Threat of Substitutes: Products in the textile industry have short life cycles and a trend towards improved quality/price. The threat of substitutes can be high due to the availability of similar products from other countries at competitive prices.
The textile industry is increasingly embracing the circular economic model, prioritizing sustainability as an alternative to the traditional linear economy of 'take, make, dispose. This shift encompasses several crucial practices aimed at reducing environmental impact and promoting resource efficiency. Firstly, there's a focus on rethinking production processes, with an emphasis on designing textiles for easier recycling and incorporating sustainable materials. Additionally, efforts are underway to minimize waste generation during manufacturing processes. Furthermore, promoting the reuse and repair of garments, alongside the transformation of old clothes into new products through recycling, is gaining momentum. Facilitating the resale of second-hand clothing further extends the lifespan of garments. Moreover, there's a push towards rethinking consumption habits, encouraging consumers to opt for fewer, higher-quality items, or to explore renting options rather than outright purchasing, thus fostering a more sustainable approach to fashion consumption.
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