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Industry
Competitiveness in
World Market
Reason and way to regain
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Introduction
‘Golden Fiber’ of Bangladesh Jute’s production was industrialized as early as in
Pakistan period. During the 60’s and 70’s Jute was the major contributor to the
export of the total country then It also was the important contributor to the Gross
Domestic product.[1] But after the liberation of Bangladesh and as the time
increased it declines to the 2.63% in the recent time(2006-07)[2] which is very
insignificant in comparison with the export volume in the 70’s like this
percentage was 89.9% in the year 1979.[1]
Facing many problem Bangladesh’s jute industry has lost its competitiveness in
the world market as its is facing a declined demand pattern and tough
competition. ‘The term “competitiveness” itself is a broad concept. Its meaning,
implications, adaptation and achievement vary from firm to firm, industry to
industry, or country to country. Michael E. Porter is a pioneer of the
“competitiveness theory” (Porter, 1990) at the national or macro level (Cho and
Moon, 2000). Firm/industry-level (micro level) competitiveness depends on
various parameters. However, the literature provides no universal agreement on
the definition of competitiveness. For example, some researchers consider the
labour cost, unit cost, exchange rate, interest rate, prices of material inputs and
other price- or cost-related quantitative factors for measuring the
competitiveness of a manufacturing firm/industry (Edwards and Golub, 2004;
Fukunishi, 2004; Cockburn and others, 1998; and Edwards and Schoer, 2002).
Some other researchers consider product quality, innovativeness, design,
distribution networks, after-sales service, transaction costs, institutional factors
relating to the bureaucracy of export procedures and other non-price factors for
measuring the competitiveness of a manufacturing firm/industry (Abdel-Latif,
1993; Chen and others, 1999; and Sachwald, 1994). The influences of both price
and non-price factors on the competitiveness of a firm/industry are reflected by
market share and profit (Toming, 2006).’ [1]
Here in this study I have focused on the price and non price aspect of our jute
industry to measure the competitiveness and to indentify the reason causes this
declined competitiveness. Factors I am going to work with in this study are
production, productivity, export trend, cost of production, price of product and
portfolio dynamism. I will also focus on the industry dynamics which will be
based on the competitiveness theory of Michael E. Porter.
Though the export seems to be rising after the initial drop in the year 2003
Bangladesh jute industry is suffering from other issues which are hindering their
competitiveness in the world market. These factors of competitiveness and their
effect on Bangladesh jute industry are discussed below.
India has been the leading jute producers since the 1970s. Today it produces
1.977 million metric tons of jute while Bangladesh produces only 963,000 metric
tons in 2003-04. The more recent growers like China and Thailand decreased
output in the 1980s and 1990s. Myanmar, Nepal and Brazil are just some small
producers on the edge. Bangladesh's total production of jute goods decreased by
53.94 percent while India's increased by 42.5 percent. Jute growing area in
Bangladesh reduced by 8.3 percent over the last six years although jute
production increased 3.2 percent mainly because of a yield growth of 12.5
percent. And in 23 years since 1981, Bangladesh's total production of jute goods
decreased by 53.94 percent while India's increased by 42.5 percent. [6]
Recent changes in global financial condition declined the price of jute in the
world market. This forces down the jute price below the production cost in
Bangladesh as this reduction of price In the world market is nearly 15%. So
Bangladesh is getting a tough time to cope up with the production cost and
changes in financial dynamics. At the same time India’s rupee got devaluated in
terms of dollar so the importer are moving to the Indian market as their product
become cheap than the Bangladesh product. [4]
Bangladesh export jute to India and china in raw form, china and India produces
jute products with those jutes and then export those in the world market. It is
becoming a problem for Bangladesh as Bangladesh is losing a major value of
their goods in the world market. According to the vice chairman of Bangladesh
jute export association Bangladesh is losing TK 22000 per tones for just
exporting raw jute. If they can export jute product they could have fetch more
from the market.
Bangladeshi product are more conventional than the other exporter in the world
market they still relying on the raw jute, sacking cloth, sacking bag, hessian
cloth, hessian bag etc. But they do little focus on the diversified products and
handicrafts made of jute, which is experiencing a growing demand in the world
market.
Here from the graph we can see that India and Myanmar is giving a tough
competition in pricing terms. But still India mane to keep it price low and the
quality and the diversification in jute production is also giving them an edge to
score a critical hit to the competitiveness of Bangladeshi market.
7.0 Technology
Jute industry is also starving for new technologies as maximum machinery are of
1960 models some are even running from 1930. So now a days it take 40 man-
days to produce a ton of yarn or fabrics[6]. It is because Bangladeshi
entrepreneurs had imported second hand machinery from the Europe, Pakis tan
and some other where they had already abandoned those things.
This table shows that farmers earning more if they produce rice in the same area
of land than they will get from the jute’s production. Though jute gives them a
initial payment of high price per tones than rice but ultimately they gain less in
producing jute. That’s one of the major drawback Bangladesh’s jute market is
experiencing in recent times. That is why farmers’ are not getting interested in
producing jute more.
Industry Dynamics
1.0 Threats of New Entry:
Market we are concerned here is the world market and it’s a free market here
the quality, price and availibility is the determinent of market entry if any
country thinks that they can comply with these charecteristics they can make
their entry into the market without any obstacle.
Here the power is equalized because buyers are large quantity buyers and good
in number but the approximately Bangladesh and india contribute 90% to the
total market’s supply. So in that terms they are also powerful so this market is
not dominated by neither parties.
Synthetic is becoming substitute for jute in many industries. But at the same
time there is a concern rising to protect our environment. And synthetic is one of
the reasons why environment is getting polluted. That is the reason of not facing
competition from synthetic even after being closest competitor of jute.
• Should ensure the sources of resources (e.g. land, labor, fertilizer, water)
are consistent in the production season.
Conclusion
As Bangladesh is facing problem more from inner side than the outer side
Bangladesh has to solve this problem in restructuring some of their traditional
views and thoughts about jute market. India inspite of being the largest
producer almost 60% of their portion are internally consumed so if Bangladesh
can mobilize their resources in a good manner than it will be soon when this
‘Golden Fiber’ will bring golden foreign currency to them. So it is high time to
pick up and take some positive steps to develop this market before it is too late
and other producer build their capacity.
References: