As the overall view suggest, Bangladeshi RMG had a rapid growth because of liberalised trading policy (MFA & GSP facilities) and now facing the challenge of competitiveness from its competitors as the biggest importer like USA and EU have demolished the quota system. RMG industry is facing this complications as the MFA phase out since 1st January 2005 and consider as the Armageddon for all the potentiality of the mostly buyer driven Bangladeshi apparel export. The prediction of various studies during the period 1995 to 2005 have been proved fundamentally wrong by the robust performance of the Bangladeshi RMG industry in a relatively uneven playing field. There was a 5.6% decrease of the woven export in the first three months of 2005 but the overall RMG export did not decline as predicted specially the 31% unique growth in the knitwear export (Mohiudden, M. 2008). From this little instance, it can be said that it is not beyond capability for the industry to survive in the fierce global competitiveness. In relation, this research has a certain aim to identify the factors those have a direct influence on the performance in the contemporary competitive ground and it is necessary to determine a fertile theoretical framework to critically scrutinize the degree of global competitiveness which is imperative to find the research answers. According to Bourner (1996), in order to widen the margin of wisdom, it is indispensable to spend time and effort reviewing related work by means of a sound theoretical framework. According, the researcher tested a wide range of theories in order to find the most suitable and the fittest one. It is to be noted that the author found the strategic theoretical ground is more relative rather than looking only from a macroeconomic point of view while choosing the theories.
2.2 Global scenario of Apparel Trade
According to Dickerson (1999), the apparel trade thrives as the global export sector in the world. It was thrived as the ancient industries as well (USTIC, 2004). The garment industry countries to be global leader by increasing its share in the manufacturing community. During the tenure of 1980-92 the growth supersedes all other activities in manufacturing sector (Ramaswamy and Gereffi 1998). Their growth rate was 10.2% annually while the overall growth rate was 4.9% for the world trade (Exim Bank of India, 1995). In textile and garment’s sector, the global trade has seen a boost of around $347 billion over a period of 40 years from $6 billion in 1962 to $353 billion in 2002 (Appelbaum,2005). The low and middle income countries were the most beneficiary because of the high labour engagement. They have shared 70%of global apparel export business, rocketing from $53 billion to $123 billion in 1993 to 2003 periods (Sattar et al.2006, p2). However the ready-made garments and textile industry are one of the few industries in which developed world countries to apply distinctive protectionism through different clause, import tax and treaty which dates back to the seventeenth century (Bardhan 2003; Rock 2002). In spite of the developed countries hard grip on this trade, it managed to make substantial impact on economies of Newly Industrialized Economies (NIE) e.g. south Korea, Taiwan, Hong Kong etc. throughout the 1960’s and 1970’s.Later production was relocated in Indonesia, Thailand and Mexico and Philippines (Hale 2000). These emerging Asian economics have gained eminent per capita growth rates, relatively low income inequality, and high education achievement, record levels of domestic saving and investment, the booming exports from the 1960s to the mid-1990s (The World Bank 1993). Growth in the textile sector benefits ‘upstream’ agricultural or manufacturing sectors through increased demand for raw material inputs or machinery and equipment. In addition, the textile and apparel sectors depend on the prevalence of many modern economic activities. A country fetches other knowledge and skills such as advertising, marketing, transportation, and communication through developing export-oriented textile and apparel industries. These remarkable advances pinpoint the importance of the textile and apparel industries to a country’s on-going development (Diao and Somwaru 2001, p2).
The industrialized world particularly the US, restricted imports of garments under the pretext of market disruption, known as Multi Fiber Arrangement (MFA) from 1974. This was a framework for bilateral agreements or unilateral actions that established quota limiting imports into countries whose domestic industries were undergoing serious damage from rapidly increasing imports. Since 1995, Agreement on Textiles and Clothing (ATC) has taken over from the MFA (U.S ministry website) for a 10 year period, from 1995 to 2004. Gradual withdrawal of quota system was in place to allow time for both importers and exporters to cope with new circumstances. By 1 January 2005, the quotes came to an end. The quota system has been an extremely cost-effective method of maintain socio-political stability to a very needy part of the world (Peter Craig, 2005).
2.3 Theories of Competitive Advantage
One of the fundamental objectives of this paper is to resolve the suitable skeleton to analyse the competitiveness of the Bangladeshi RMG industry by testing a suitable mode. It is a very complex topic why some nations get success while other fails in acquiring the competitive advantage in both domestic and global competition. ‘Competitiveness’ itself is wide notion. Trade agreements have compelled industries to confront completion from global competitors and hence the significance of competitive advantage is enormous (Requier – Desjardins et al., 2003). This is the present basic situation for Bangladeshi RMG industry. However some theorists like Ricardo (1817) and Smith (1776) identified government deficits, currency strength, exchange rates and other macro- economic factors as the pertinent objects of competitive advantage. But, the practical evidence shows, some nations gained success in international business in spite of having an unfavourable macro-economic condition. Besides, Murphy (2001) identifies the desire of obtaining business agility, comparative cost advantage and the availability of labour as the factors of gaining corporate competitive advantage. According to the Heckscher-Ohlin (1991) model competitiveness depends on the hierarchical demography, resource and the endowments which a country is inherited (Subasat, 2003). The two basic commodities of trade are labour and capital. If a country is endowed with labour, it should have advantage on labour oriented industry and on the other hand if a nation has got abundance of capital, it can be getting competitive advantage on capital intensive industries. But, the theory has been identified as a controversial one by many critics as the commodities can be freely mobile in the present era of globalisation and the trade liberalisation. Countries with different endowment can make equilibrium by exporting, importing or sharing their abundance or endowments (Subasat, 2003). Moreover, in his analogy Karl Marx (2008) shows, labour can add an extra value to the existing capital which can work as the formation of capital and according capital can be the output of labour. Through the Heckscher-Ohlin model of trade is in practice, it cannot alone describe the total pattern of modern trade and competitive advantage in both the macroeconomic and microeconomic level. Some theorists recognized the government policy of a nation is highly responsible for achieving the corporate success (Dunning, 1995). But as an antidote, Harling (1989) and Wint (1998) states the result or output is often negative in economic terms while government have focused on a particular industry to progress in competiveness. A good business management practice has been identified as the main determinant of competitive success by many theorists. But management practice cannot be alone feasible as sometimes same management practice might have very different and inefficient outcome (Bloom & Van Reneen, 200). Finally, it can be said, most of the models and theories obviously contain some relative ‘truth’. Nevertheless they alone failed to account all the relative factors to explicitly describe the competitiveness in specific business arena (Deraniyagala & Fine, 2001). Bhattacharjea (2004) states, the new strategic theories have endeavoured to adjust the embodied flaws of the traditional theories by inaugurating the concepts like product differentiation, economics of scale and so on. But still, the new theories instilled with many flaws like the traditional theories in the way of describing the perfections for competitive advantage.
After reviewing a wide range of theories, Michael Porter’s (1998) theory of competitiveness has been found as most influential and relevant on order to describe the global competitive situation for the Bangladeshi RMG industry. In spite of having some limitation, Porter’s (1998) theory of competitive advantage explicitly fulfils the requirements at national and firm level. The theory not only analyses the industry level competitors but also talks about the firm level activities (O’ Shaughnessy, 1996). Porter’s competitive advantage theory or ‘Diamond’ model endows with most dynamic and complete perspective as it integrates more than the factor conditions and notably incorporates both macroeconomic and microeconomic influences to describe competitiveness of a nation (Jin, B. 2004)
2.4 Bangladesh and its one of the major competitors (China)
The ready-made garment industry experienced the initial tremor during the early few months after the withdrawal of the quota system as predicted by the events in the early literature study such as the World Bank 2003, 2005, Rahman and Raihan 2001, Satter et al. 2006; Satter et al 2005, Montfort and Yang 2004 etc. However, no sign of declination was seen in the overall garment export from Bangladesh in the post-MFA era. Rather, according to Satter et al. 2006, the gathered data reveals a modest 13% export growth at the end of FY 2004-2005, along with knitting garments exhibiting exuberant growth of 31%.
China one of the main competitors of Bangladesh, on the other hand, showed an impressive growth pattern. According to the data supplied by US department of commerce, Chinese import of cotton-made trousers of US rocketed by 1500% and knit cotton shirts by 1250% in the first quarter of FY 2005 compared to the same period in FY 2004 following the withdrawal of quota (usinfo.state.gov,2006). Observing this rapid growth, the US government had to impose temporary quotas (uninfo.state.gov/usinfo/archive/2005) under WTO (World Trade Organisation) agreements. Accordingly, China had been made to export in some certain categories of apparel and textile with up to a much controlled 7.5% growth rate each year until 2008 (United Stated International Trade Commission, May 12,2006). The EU market showed a similar booming trend. According to The European Commission record, in general, in the first half of 2005, the export in China has been increased by over 48% by value to the EU. China’s market share for products liberalised in 2005 saw a noteworthy increment in volume as well in value by 145% and 95% and it reached 500% in other categories. On the basis of this record, there is an agreement settled in between EU. The Chinese clothing and textile growth would be managed until 2008 in ten categories as a result of negotiation (Europa.eu.int). The safeguard measures gave the firms more breathing space. The knitwear alone showed a 60% growth in the US market during July-May period of fical year 2004-2005 when its exports fetched $371 million. The total exports to USA stood at around $2 billion during the period. Anisul Huq, ex-president of BGMEA directly attributed this growth to WTO safeguard clause against China and commented this trade growth in the US market would sustain more or less until 2008, when the WTO safeguard clause would eventually go.
Woven exports also experienced growth after a downward trend in the last couple of years. Tipu Munshi, President of BGMEA, asserted that the growth in woven exports slumped up to September 2005 after the withdrawal of the quota. The grim situation gradually started to improve in later period, with a growth of 8.35%. He commented that knit having their own backward linkage, is growing faster than woven, which is heavily dependent on imported fabric (The Daily Prothom Alo, 23 April issue, business section). This study also indicates the same; the firms were expanding their capacity, even up to 300% in some cases, to meet this ever-growing huge demand. Bangladesh is showing a tremendous trend in growth now (Apparelmag.com, in October 2005). So predicting the future in really challenging in a situation which is more dynamic than any other industry. Moreover, the tension between US and EU trade with China made the situation more critical, as China’s rapid surge of growth in clothing and garments is the main concerns. Many of the importers currently consider China as the ‘best place’ (Bod Mckee, Fashion industry solutions Director for Intentia, a global Mid-market ERP system vendor). Neither quality nor production costs that are identified by most garment producer as biggest challenge, as Bangladesh is cheaper in some ategories than China, lead time is their main problem (Source Apparel magazine)
But when aggregated altogether all the factors like decent factories, political stability, time, availability of fabric and relative speed to market, China has definitely some more favourable components compared to other Asiain counterparts (Tom Glaser, Vice president of Global Sourcing and Managing Director, VF Asia). However, hope sustains as well in terms of tendency of outsourcing, as ‘Nobody is moving all their sourcing to China’ says Kurt Cavano, Chairman and CEO of TradeCard, a company that automated financial trade transaction from procurement though payment. What are looking for, is a set of vendors in appropriate strategic locations to allow them to manufacture if safeguard-or anything else-become an issue (Kusterbeck, 2005). People seem to follow the slow and steady way of dealing the situation by the retailers and others buyer, which make them stick with their traditional supply chain sources instead of any dramatic shift. This is not the end though, Tom Glaser also commented that China cannot take the all world, and there would definitely be some other places which could be better for certain products too.
2.5 RMG contribution to other sectors of Bangladesh
The influential growth of read-made garments hugely benefitted by some factors. Those are, accessories, textiles, transportation, packing etc. According to Quddus (1996), the garments export industry of Bangladesh has spread its dominance over the manufacturing and export related economic scenario in a comparatively very margin time. Areas such as banking, transport, packing, real estate, utility services and customer goods have embraced an economic activity worth of almost $2 billion (Hiller and Olfames 2003, p.2). Approximately 70% of businesses are garmenting related in port city Chittagong (Anisul Haque, 2006). The port authority earn 40% of their total income from the garments sector accounts as a port use fee. In FY 2002, the sipping business earned $65 million through RMG by let them use their port, from C&F, freight charges etc. RMG sector plays a big roll over insurance and banking sector. There is a big share between commercial bank and RMG and textile sector. Almost one-tenth of the commercial banks’ assets are because of RMG and textile sector of Bangladesh. 46.14% of the total export had been financed by commercial bank went for RMG in 2001-02., the commercial bank has got almost all firms (around 98%) as client and this bank works for working capital and procurement of machines and equipment (57%) for all firms or sectors (World Bank survey). Another big beneficiary from garment sector is insurance. It is very much important to get insurance for machines and plants of the sectors. In total, the effect of apparel trade for Bangladesh is quite substantial. In spite of enormous obvious growth, the negative impact is that our country has become too much dependent on this sector. According to Sattar et al. (2006) that the RMG sector has become the back bone of Bangladesh’s economy. The entire nation’s fortune is riding somewhat precariously on this one sector. With the two million direct employees, and another one million in linkage industries, it supports the livelihood of some 10 million Bangladeshis who managed to alleviate to a remarkable extent.
2.6 Market Concentration
The huge market concentration towards US and European Union (EU) and the huge product concentration in certain items have been identified as the prominent disadvantages (Khundker 2002; Rahman and Raihan 2001). EU and USA are the main export country of Bangladesh where 90% of garments being exported.
2.7 Product Concentration
Product concentration has been another worrying fact for apparel industry. According to BGMEA and Export Promotion Bureau, the export history of Bangladesh says that mainly five items are leading the export market. For RMG industry contribution analysis shows that about 80% of total clothing exports are constituted from this dominated five items. Even in the open market, in two months of FY 2005-06 the export market was dominated by them. The safeguard restriction and the related firms are main reason of this leadership (Debapriya Bhattacharya, Mustafizur Rahman and Ananya Raihan, 2002).
Therefore, a variety of studies have been carried out to examine the significance of the textile and ready-made garments industry in Bangladesh. Some researchers (Paul-Majumder and Begum 2000; Rock 2002; Sajeda Amin et al. 1998; Paul-Majumder 2002; Khunder 2002; Afsar 2000; Grumiau 2000; Heweet and Amin 2000; Hossain, Jahan and Sobhan 1990; kebber 2004) emphasized the impact of garment industry in terms of migration of rural women towards urban city and how the RMG industry brings forth drastic changes in women’s life in every aspects from empowerment in household work to their economic rights. These researcher also depicted how the cheap labour particularly of women worker, have been exploited by lower wages, more working hours and unhealthy conditions. Other studies focus on trade unionism in the garment industry (khan 2002) or consider the burning issue of ‘sweatshops’ in the garment industry (Kearney 2003; Wilkins 2003; Frynas 2000). Appelbaum (February 5, 2005) praised two universities for taking stand against the sweatshop production for their logoed apparel. A lot number of researcher has painted the fabulous increase in growth of garment industry, as for example the export has increased from 0.2% to 75% in between 1980’s to 2004-05 and the effect on globalization has come out as a point (Bow 2001; Muqtada, Singh and Rashid 2002; Ahmed 1989; Dowlah 1999; Haider 2003; Mohmood 2002). These studies also describe how MFA and GSP schemes of EU nurtured the growth of RMG industry with a fixed market and at the same time developed a ‘segmented’ backward linkage. The gross contribution of garment industry towards Bangladesh economy in accordance with attracting Foreign Direct Investment (FDI), to banking, insurance, education shipping and logistic has been investigated by Bhattacharya, Rahman and Raihan (2002). Rhee (1990) analysed entrepreneurial skill acting as a catalyst along with the MFA. Quddus (1996; 1993) extended this further to show the brilliant entrepreneurship as one of the main factors for this enormous growth. Kathuria, Martin and Bhardraj (2001) asserted that the incredible growth of Bangladesh apparel industry was a result of combined effort of MFA and favourable governmental policy with adequate infrastructure. Other researchers (Khundker 2002; Dowlah 1999; Haider 2003; Mohmood 2002) identified similar patterns on the ascension of the RMG industry.
The other studies singled out the problem associated with the RMG industry infrastructure constraints are found to be the main bottleneck (Bow 2001; Sattar et al. 2005; Montfort and Yang 2004). But in case of capacity building constrained much of the research to date has focused on job training and primary education for labours. Khundker (2002) looked for the capacity building through training and introduction of skill related course, while World Bank put funding on fashion and design development. Bhattacharya and Rahman (2002) suggested for skill development, facilitating technology transfer through short term incentive packages.
A good number of researchers focused on quota issue of MFA and concentrated on the ramification of post quota period. This includes different organization like The World Bank (2003, 2004, 2005) through separate individual study, United Nations (2005), USITC (2004), BIDS (2004) to individual such as Appelbaum (2004), Bhattacharya and Rahman (2002), Toai (2004), Nordas (2004), Naumann (2005), Sattar et al. (2005), Minor (2002), Montfort and Yang (2004), Hayashi (2005), Islam (2001), Dowlah (1999), Bow (2001) etc. all of these studies predicted more or less, extreme to moderate downfall of Bangladesh apparel exports after the quota free period. However, western researchers indicated negative result while the local researcher’s outcome was rather challenging. The local researcher Islam (2001), Dowlah (1999), Bhattacharya and Rahman (2002), Khundker (2002) took cautious approach in analysing the post MFA situation. In spite of others’ concern about the fall of the garment export, their studies concentrated on survival and growth by policy reforms, infrastructural development, compliance and labour law implementation but with local tacit knowledge.
2.8 Porter’s Diamond:
The diamond model of Porter has been exalted as one of the most authentic tools to spot the competitive place of a country in the way of sustaining the global advantage. The theory exhibits a more comprehensive model having a resource based outlook and an integrated concepts from traditional theories to a new strategic view. It tells the function of innovation and modernisation. Grant (1991) states after ‘Porter’ gave the theory for the first time in 1990 that the diamond model has a rational framework which identifies the most relevant variables those have a direct influence on the industry competitiveness the three most important levels of aggregation nation, industry and firm. Then he modified and presented the theory in a broader concept again in 1998. Though there is no difference in both of the publication, this study utilises the book published in 1998. However, to examine why certain countries get competitive advantage in certain industries or sectors of business, Michael Porter of Harvard Business School conducted a four years investigated study on the ten important trading nations of the world. The diamond model stands on four inter linked determinates- factor conditions, demand conditions, related and supporting industries and lastly firm’s strategy, structure and rivalry. This study endeavours to interpret the competitive factors lie in the world apparel industry and put an emphasis on gazing how Bangladeshi RMG industry can boost its performance in this competitive arena by identifying the obstacles in both national and international levels under the light of summarizing Porter’s Four determinants.
2.8.1 Factor Conditions
The factors related to the production are necessary to compete in an industry. Porter (1998) identifies the factors of production are the most imperative onject for a country to get competitive advantage. He categorised the factors or endowments into some broader features like labour, knowledge, skilled human resource and infrastructure. Traditionally it is likely to say capita, labour, technology and a competent infrastructure is mandatory to achieve the competitive advantage (Hill, 2009). Porter’s excellence is shown when he further places a discrimination or in essence places an excellence by extending the factors into two more broad categories - Basic and Advance Factors. Porter (1998) describes, the basic factors like unskilled, semi-skilled labour force, friendly climate or capital itself are the passive inheritance of a nation but on the other hand the advanced factors like technological development, skilled or educated human resource are the factors created by a nation rather than getting endowment. He advocates, the basic or generalised factors can bring a competitive advantages but it would be less sophisticated and transitory and hence a successful integration of both the basic and advanced factors can bring a competitive advantage which is more sophisticated and perpetual (Jin & Moon, 2006). Now the question comes how the advanced factors can be crated? The specialised factors can be generated through factor improving mechanism like training, education institutions and so on and Porter states that this is the place where innovation, specialisation, practical improvement, knowledge and science start. According, in describing the Porter’s factor determinant and relating it to the Bangladeshi apparel industry, it can be said, the fresh competitive advantage lies in the advancement of the advance factors. The basic factor or cheap and available labour force is not a alone viable to fetch the degree of competitive advantage that Bangladeshi RMG industry is looking for. Rather a convergence of the basic and advanced factors is imperatively a burning question. The universal cheap labour force is the biggest endowment Bangladesh has so far simultaneously strive for crating the technological advancement and expertise personnel like adept fashion designer is the fatal question where the actual competitive performance exists.
2.8.2 Demand Condition
It is unavoidably true the local teaching has a massive influence for a firm to compete globally. In his second determinant, Porter (1998) refers to the pattern of home-market requirement for a firm’s service or product. He identifies demand in terms of size of home or local consumers and their nature whether they are sophisticated and demanding. Porter (1998) believes, home demand accelerates the competition between the firms which work as an assistance for the local business to contest internationally. If the local market demand for a company’s product is large in volume, it would teach the company to gather the economies of scale. Besides, countries where the home consumers are sophisticated and urbane, firms there are forced to achieve the high standard and maximisation of performance in responding to the tough nature of the local buyers. Social norms, passions and distribution channel which are the main reasons work behind the demanding needs. As for example Porter (1998) states, the elevated level of Italian consumers’ urbanism are contributed by the distribution channel of the country. In Italy, clothing, furniture, shoes and lighting are sold through giant stores and the constant pressure from these giant retailers put a huge stress to the Italian manufacturers to innovate new models and designs. Same instance, the people of France have a strong passion in fashion genetically which put the nation globally in a competitive position in the fashion industry (Jin & Moon, 2006). Porter (1998) also admits, the domestic demand in an industry is important for a significant economy of scale but he identifies the occurrence of elegant and challenging buyers is more important to impose a successful product diversification through creative designs, branding and obviously with competitive prices. Accordingly, in a country where the apparel trade is not that developed, the mere availability is fair enough to mitigate the consumers get higher which notably influence the overall lifestyle. As for example, the progression of the RMG industry and the availability of readymade garments, the Bangladeshi teenagers now feel more comfort in wearing woven jeans and tops rather than traditional three piece of salwar kamiz (Mohiuddin, 2008).
2.8.3 Related and supporting industries
The strong existence of related suppliers or industries whining the nation is very vital tool to make a specific industry globally competitive. Porter (1998) says, the potentially of international success of an industry is positive only when a nation gets competitive advantage in good amount of associated industries as the innovation, technological and product development are being possible which helps the downstream industries, Porter (1998) bring forward the Italian Ski Boot and its colossal connection with the leather industry as an example. Italy has got the world’s finest and standard quality leather industry which has made the Italian Ski Boot industry enable of making the greater quality ski boots in the world market. This determinant of Porter is most important in relation to the Bangladeshi RMG industry which is still far away from being the leader in apparel export because of having lack in the adequate supply of related raw material from supportive industries. If the industry is bought forward, it can be seen that the presence of relative and supportive industry has an enormous influence in the backward linkage and the reductive of the lead time. Because of having shortage in adequate textile production, Bangladeshi RMG’s woven production is highly dependent on the the imported textile from competitor China and other countries which has a direct influence on price competitiveness and delaying in manufacturing and increasing the lead time (Haider, 2007). Simultaneously, the knit department of the RMG is growing more rapidly after the MFA phase out competitive situation because of having a good infrastructure of linkage suppliers.
2.8.4 Firm strategy structure and rivalry
It is more than important how a firm is created, governed and managed domestically. Porter (1998) states, nations with having success in good management practices are ease to achieve the competitive advantage. Besides, the domestic rivalry is very important as it has the powerful influence on the other dominants of Porter (Jin & Moon, 2006). Porter also suggests that managerial style directly relates to the countries’ getting competitive advantage. If the Bangladeshi RMG is brought as an example, the firm structure is a big issue regarding the practice of code of conduct or compliance. Weak organisational structure in the Bangladeshi apparel firms with a feeble governance practice put a huge question mark in getting orders from the world standards buyers or retailers (Baral, 2008). Most of the small firms are in the lack of a well organised management structure which resulted as the low revenue generation. However, Porter also states, the note of geographic concentration expands the power of domestic rivalry. If the rivalry are more localised, the competition will more intense.
In addition to the above four determinants Porter (1998) most importantly suggests two more important external factors-chance and government activities which greatly influence the implementation of the four dominants.
2.8.5 Role of Government
In this theory (1998) identifies, the government as the ‘’challenging and catalyst’’ which he said a body to employ push and pull to determine whether a moving or performing according to the high level of standard to affirm the competitive advantage. According to Porter (1998), the means of the anti-trust rules or lessening the direct assistance government has the direct influence on the domestic rivalry. Vice versa government can motivate the firms to excel the performance and by concentrating on the advanced creation.
Porter (1998) describes chance as an absolutely external entity on which an industry has no control. He states, chance just happens, but he argues nations with a good ‘diamond’ structure is likely to alter chance in to competitive advantage. The continues rising of the labour wages in the world’s apparel export leader China and other East Asian industrialised countries (NIC) like Korea and Hong-Kong would open a new window for the Bangladeshi RMG sector. Future market diversification or lessen the excessive concentration on the USA and EU is a question of the time for the Bangladeshi RMG now. He suggests and anticipates; soon China will remove them from the apparel export like other Asian NICs and other industrialist countries because of rise in wages. So Bangladesh can grab the chance to capture the mammoth Chinese market and the can be a big apparel exporter to China, if the RMG industry plans it from now on and strive to build a solid ground to grab the chance or facility which might create.
2.8.7 Criticism of Porter
Fitzgerald (1994) extremely doubts the feasibility of Porter’s diamond in the Eastern Asian context. Some other critics tell Porter put an exaggerated emphasis on the home base economic activities and failed to concentrate both outbound and inbound Foreign Direct Investment (Moon et al 1995, 1998). Singleton (1997) evaluates, the model can merely help the investigator to achieve the frame but not adequate to determine where the actual competitive advantage of a nation lies in a broad sense. Besides, in their new ‘double diamond’ doctrine Jin & Moon (2006) advocates the factor condition of a country lies in advanced or specialised factors; the use of basis factors are no more applicable in this era of modernisation. They put the realistic example of Nike, the GAP and Liz Claiborne and those retailers outsourcing of both raw materials and labours without owing any production facility just by means of having advanced technology. In criticism of Porter they Jin & Moon (2006) also says, now most in the apparel industry raw materials are widely outsourced, so having strong structure of linkage industries in the home market is not that important as Porter suggested. According to Lui and Chiu (2001), Hong-Kong is not competitive because of its having factor or demand condition rather having a strong coordination in apparel manufacturing with the production headquarters of giant retailers like GAP and many other USA and EU companies’ buying houses which can be called the ‘virtual factories’. Moreover, in relation to apparel industry, high quality design is one of the major tools for competitive advantage. Countries like USA, France and Italy have succeeded because of their ability to produce innovative designs and still they transfer their own designing method in most of the RMG orders to the countries exist in their procurement channel. However, Jin and Moon (2006) suggests, a new term named ‘agility’ should be added along with the high quality design. The apparel industry is proved as the most uncertain industry because of existence diversification in design and fluctuations of consumers’ demand. As a response to the rapidly changing market ‘Agility’ can be most important tool in achieving competitive advantage. According Moon et al. 2006, in fashion industry agility means something more than speed. Mcguire & Vitzthum (2001) states, agility means a firm’s ability to respond quickly according to the demand, to clear lines that do not sell, to avoid plenty of clearance sales, and finally the ability to with relatively smaller stockrooms and lesser inventory costs. ‘Zara’ is the most suitable example of getting competitive advantage by means of agility. A skirt takes no more than 2 weeks to reach in their Tokyo or Paris store. Moreover, the company can ship the fluctuated items twice a week worldwide (Jin & Moon, 2006). Besides, the internet economy is highly emerged since the last decade. Rocklies (2001) assumes, the present global economy has been altered immensely due to the rapid growth of globalisation, deregulation and digitization and the overall advancement of the business and hence he argues Porter’s theory is fully pertinent for the back age of ICT development.