Jute Industry in Bangladesh (Essay Sample)

Jute industry in Bangladesh
Introduction:
It's regarded as the "golden fiber" since jute is a natural fiber. It's one of the most affordable and durable natural fibers available, and it's often regarded as the fiber of the future (Sami, 2018). It is Bangladesh's most significant cash crop and plays a key part in the economy of the nation. Although the jute industry's current and future success and expansion are under jeopardy. Jute is the world's second-largest producer of textile fibers, behind cotton. Jute is produced mostly in India, Bangladesh, China, and Thailand. It is also made in Brazil and the southwestern part of Asia. Pat, kosta, nalita, bimli, and mesta (kenaf) are all other names for jute fiber. (Shaharia Pavel, 2017 )
Many of the intrinsic qualities of jute, such as lustier, high tensile strength and low extensibility, moderate heat and fire resistance as well as long staple lengths may be attributed to its natural fiber status. It is environmentally friendly and biodegradable. Ecological balance is maintained by using natural materials instead of manufactured ones. Jute fibers have recently been employed in a broad variety of diverse items, including beautiful textiles, elegant saris, salwar kamizes, soft luggage, footwear, greeting cards, and molded door panels, among countless other helpful consumer products (Nujhat, 2020).
Rural Bangladesh has a high concentration of jute plantations, and as a result, the country's roadways and transportation infrastructure are less than ideal. This results in high transportation costs for merchants moving raw materials from farmers to other intermediaries or clients (Shaharia Pavel, 2017).
Background of Jute industry:
Bengal's jute industry had a significant impact on the state's economic growth. Jute was Bengal's sole manufacturing sector at the beginning of the twentieth century. About half of Bengal's industrial workers was engaged there. Jute exports accounted for approximately a third of Bengal's total export value in 1900-1.
In 1855, an Englishman named George Auckland built the first jute mill. Bengal became a significant exporter of sacking bags with the construction of jute mills.
Because of its location in East Pakistan, Bangladesh gained ownership of the country's public jute industry after the country's 1971 independence. About 68% of Pakistan's loom owners fled the country, resulting in an industry in chaos. Looting of abandoned jute mills was rampant. To reconstruct the economy, Bangladesh's new government has to take on the burden. Jute mills were among the 85 per cent of enterprises that were nationalized by a Presidential decree.
BJMC was established to administer and oversee all 73 Jute Mill Corporations (JMCs) with a total of 23,836 looms at the time of its establishment.
It had 77 mills and two carpet-backing mills and two spare-parts factories at the end of the year.
Jute mill denationalization began in July 1982. Only 10 mills could be turned over to Bangladeshi owners by December 16, 1982, the deadline set by the Bangladeshi government for BJMC to finish the transfer procedure.
For years, jute mills were losing money on a regular basis, and donors pushed hard for denationalization. The denationalization list became steadily longer. BJMC had 33 mills operating in 1999. (Nujhat, 2020).
Market analysis:
Target market:
37293558445500Bangladesh exports to the EU at a rate of 55.83 percent on an annual basis, according to the graph. Bangladesh's apparel exports to the European Union are the most common. The European Union, with whom Bangladesh has a strong commercial ties, might be a market for Bangladeshi jute products. European jute use accounts for 55.83% of worldwide jute product consumption, according to Packing Strategies magazine CITATION 19ht \l 1033 (2019), CITATION Sha17 \l 1033 (Shaharia Pavel, 2017).
Market Entry:
Due to the abundance of raw jute, cheap labor costs, lush terrain, and government assistance, Bangladesh's jute industry has limited opportunities to expand outside of the country. As a result, export marketing, both direct and indirect, is the most effective strategy for breaking into the global market (Shaharia Pavel, 2017).
Porter’s five forces models:
A methodology for monitoring and evaluating a company's competitive strength and position was established by Harvard Business School professor Michael E Porter in 1979.
Understanding an organization's existing competitive position as well as its ability to move into new positions might benefit from this information (Entreprenureship ).
1 Competitive rivalry
This analyzes the number of competitors and their relative strength. In an industry where synthetic fiber is consuming a large portion of the market share, rivalry has been fiercer amongst the sector's competitors (Sampath, 2010).
Rivalry is fuelled by low switching costs. In an environment where consumers may quickly move from one product to another, established companies must compete fiercely for market share. With cheaper alternatives to fiber goods, customers' switching costs are much lower.
The public and government's support for the usage of jute goods has resulted in a large return on investment. A growing number of companies are interested in entering the market and thereby increasing the level of competition for current firms.
2 Threat of New Entrants
A falling market has resulted in a decrease in profits. This industry has seen very little investment in R&D, and as a result, it lacks sophisticated technological know-how. According to the Financial Express, she urged all stakeholders to take proactive actions to make the jute sector lucrative so that the business may continue to grow and prosper in the long term (Ahmed, 2019).
The danger of new entrants is minimal because to obstacles to entrance, such as large stockpiles, export slums, costly license fees, etc. New entrants will find it difficult to join the market (Ahmed, 2019). Because of this, when the danger of entry by new firms is minimal, the market is regarded desirable for current players (Entreprenureship ).
Raw materials, equipment, and beginning costs for the jute industry are enormous.
3 Threat of Substitution
As the name suggests, a replacement product is one that fulfills similar market demands, but is manufactured using a different set of processes or technologies. There are several alternatives to jute items in every category. jute is mostly a fiber used in the manufacturing of the final product, and there are other artificial and natural fibers that may serve as extremely close alternatives.
Jute is a versatile material for packaging. Other flexible packaging materials such as plastic, nylon, and other synthetic fibers threaten to replace it, and it may also be used to make non-flexible packaging materials like boxes, cartons, and aluminum alloys (Bonsal, 2014).
A major danger to the use of jute as agricultural product packaging is posed by the latest advancements, such as modified environment packaging cans, which lock in the air to ensure freshness and smart materials that can "breathe" specific gases and keep food unspoiled.
According to present global overcapacity and diminishing demand for cotton, jute textiles are likely to see a decrease in demand as the closest equivalent with the same natural appeal of cotton textiles (Sampath, 2010).
4 Supplier power
In a competitive industry, suppliers are the companies that offer supplies, components, and the like to its rivals.
In the jute business, suppliers' negotiating strength reflects their ability to keep a lid on raw material costs. Farmers in the villages sell the bulk of the jute excess that is viable. As a result, a network of intermediaries was established between the farmers and the industrial mills because of this. While purchasing and selling raw jute, these middlemen typically undertake key responsibilities, including the assembly and storage of crops, transportation of crops to the secondary market, and financing numerous transactions. Farmers may not have much clout, but the intermediaries do have considerable sway. Jute growers are also encouraged to move to rice, which is farmed on the same area, as a result of the current economic climate. Mill employees, not farmers, seem to be the biggest losers if jute output continues to drop. So supplier power seems to be quite high to medium.
Because there are so many suppliers in the jute sector, I believe that suppliers have a lot of negotiating leverage.. Because of the abundance of major suppliers, moving to another one is inexpensive (Entreprenureship ).
5 Buyer power:
How much clout your clients have over the selling pricing of your industry's goods is measured by their negotiating power. Jute's price is mostly determined by supply and demand, hence the power of purchasers is collectively considerable. There are just a few main commodities sold worldwide that have as much price and supply volatility as the jute fiber (Mahmud, 2017).
Buyers are purchasing jute as a luxury item rather than a necessity because of the high cost of packaging compared to the cost of its alternative items.
PESTEL analysis of Jute industry:
1 Political:
The government has always had a hand in business and continues to do so. Consequently, politics is a major concern. As a company, we must adapt to certain political developments in order to function efficiently. With the help of PESTEL analysis, it is possible to get a better understanding of the real-world situation ...