The shift to a free trade regime led to lower labor cost. Bangladesh specializes in high volume, low-cost production of technology simple textile, and uses the world's largest cheap labor pool. (Masum, 2016)The labor cost is currently lower compared to the competitors such as China. The investments by textile manufacturers in productivity boost technology lowered the labor costs and subsequently, it is among the world's low-cost producers. Consequently, significant importers are getting their textile from Bangladesh
The change of trade regime also boosted strong networks of supporting industries, and thus, those dealing in the garment industries saved considerably on transport, storage expenses, and import duties, which subsequently led to a boost in their profits.
The western exporters also took advantage of the change of trade regime which came with a cheap cost of production and thus low market price and increased their imports from Bangladesh. The b increase of imports from Bangladesh was also due to the need of diversifying the source of their imports. Ultimately, Bangladesh benefited in a significant way due to the increased market.
When countries such as the United States source textile from low wage countries such as Bangladesh, the countries that stand to benefit are the countries that are doing the importation. This is because they are getting the materials at low prices compared to how they could have ordinarily gotten them. The main losers, in this case, are the countries that are in competing for business with the countries that export the produce as it is clear that they lose business. However, it is also interesting to note that even the exporting countries do not gain much as they sell their produce at a much lower price than they should have done initially.
The porters theory of competitive advantage could be used to explain the rise of Bangladesh as a textile exporting powerhouse. The method primarily illustrates the position that a business has over its competitors. The theory explains that this advantage can be gained by a firm offering better terms compared to its competitors. The method of competitive advantage starts from the principles that the only relevant concept at the national level is the national productivity (Frasineanu, 2016). The rise of Bangladesh textile industry can be subjected to this theory as it is reliant on the better prices that the country offers in relations to its main competitor, China.
Currently, the Bangladesh textile industry is quite secure, and there are chances that the industry will still thrive. The growth and the stability in the Bangladesh textile industry are dependent on the fact that over time, importers have to acquire new sourcing ground and to stop over-reliance on China. The cheap cost of wages in Bangladesh that subsequently mean that its produce is reasonably affordable makes it the best alternative.
The stability of the textile industry in Bangladesh may, however, be disrupted due to the poor state of infrastructure which could over time be seen as a bother by the importers.
List of works cited
Frasineanu, Paul L. The Porter's Theory of Competitive Advantage. The University of Craiova. 2016
Masum, M. The Bangladesh Textile-Clothing Industry: A Demand-supply Review 2016
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