International Business: Analyzing M&S Offshoring to Bangladesh Report

This report provides an executive summary and in-depth analysis of the opportunities and challenges associated with M&S Textiles offshoring its manufacturing facility to Bangladesh. The report begins with an introduction outlining the importance of cost leadership in contemporary business and the strategy of offshoring to reduce operational costs. It then presents a country profile of Bangladesh, highlighting its political, socio-cultural, economic, and ethical environments, and assesses the potential advantages and disadvantages for M&S. The political environment section considers government policies, trade relationships, and investor protection, while also acknowledging potential challenges like government bureaucracy and instability. The socio-cultural analysis focuses on population demographics, labor availability, and education quality. Economic factors such as FDI growth, tax rates, and access to finance are also evaluated. Ethical considerations, including work ethic and organizational behavior, are also explored. The report concludes with recommendations, such as adopting an ethnocentric staffing approach and partnering with a domestic player, to mitigate identified barriers and maximize the benefits of offshoring. References are provided at the end of the report.

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Executive summary
The aim of this report is to discuss about the opportunities and challenges in off shoring the
manufacturing facility in Bangladesh. M&S textile is considering off shoring their manufacturing
facility to Bangladesh in order to reduce their cost of manufacturing. This report considered
different parameters in order to determine the advantages and disadvantages of doing business in
Bangladesh. This report concluded with a few recommendations, which will help to overcome
the identified barriers and leverage the advantages more effectively.

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Table of Contents
Introduction......................................................................................................................................3
Country profile.................................................................................................................................3
Political environment.......................................................................................................................4
Socio-cultural environment.............................................................................................................5
Economical environment.................................................................................................................7
Ethical factors..................................................................................................................................8
Potentiality of the selected country..................................................................................................8
Recommendations............................................................................................................................9
Conclusion.......................................................................................................................................9
Reference.......................................................................................................................................11

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Introduction
Initiation of cost leadership is important for the contemporary business organizations due
to the reason that it helps the organizations to gain competitive advantages by reducing the cost
of operation. On the other hand, the less will be the reduction of the cost of operation, the more
will be the profitability of the organizations. This is motivating more business organizations to
initiate different strategies of reducing the cost. One of these strategies is off shoring of the
manufacturing facilities to a major developing country. This strategy gained momentum in the
recent time due to its effectiveness. Some of the developing countries are having lower cost of
human resources and infrastructural elements, which is attracting more business organizations
from the developed countries to invest (Ellram, Tate and Petersen 2013).
M&S is the largest producer of aboriginal fabrics in the world. They are based in
Australia and are having their presence in number of countries around the world. Currently, they
are having their offerings in different forms and designs. However, M&S is having their
manufacturing facility only in Australia (M & S Textiles 2018). Cost of operation in Australia is
increasing with the economical development. Thus, it is becoming more important for them to
off shoring their facilities in some of the developing countries in order to reduce their cost of
operation.
This report will discuss about the potentiality of Bangladesh as the county of choice for
M&S for their off shoring facility. In addition, different advantages and disadvantages that will
be faced by M&S in operating in Bangladesh will also be discussed. In accordance to the
identified factors, a few recommendations will be provided in this report.
Country profile
Bangladesh is a country located in South Asian region and part of Indian subcontinent.
They are considered as a developing nation and are showing positive growth in the recent time.
One of their major developing sectors is the textile industry. According to the reports,
Bangladesh is the second largest producer of textiles in the world after China (Habib, 2016).
More textile companies are entering the country due to the availability of cheap labor along with
having favorable transportation and logistics facilities. Thus, Bangladesh is selected as the most
potential country for off shoring the business for M&S. The following sections will discuss

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advantages and disadvantages that can be gained by M&S in of shoring their business in
Bangladesh.
Political environment
Bangladesh is having democratic republic type of government. Thus, the political
scenario in Bangladesh changes after every five years. In some cases, the change may have
positive and favorable implications for the business organizations and vice versa (Jahan 2015).
However, in the recent time, government is initiating different activities in order to promote
more foreign investments in the country. One of the major initiatives take by the government is
special economic zones for tax benefits. One of the major advantages that can be gained by the
business organizations in operating in Bangladesh is the positive diplomatic relationship with
other countries. Bangladesh is trading partner of China and India in the South Asian region. In
addition, Bangladesh is also having favorable trade relationship with Australia with trade volume
touching the US$ 500 million mark as per 2015. Thus, M&S will have the advantage of running
their manufacturing facility in Bangladesh.
Another major advantage that will be faced by M&S in operating in Bangladesh is the
strength of investor protection. According to the global competitiveness report, Bangladesh is
standing at number of 66 in terms of strengths of investor protection. Thus, it is denoting that
Bangladesh is having efficient regulations in maintaining the protecting the rights of investors.
This will reduce the risk associated with the foreign investments of M&S in Bangladesh.

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Figure: 1
Problematic factors in doing business in Bangladesh
Source: (Www3.weforum.org 2018)
According to the above figure, government bureaucracy is one of the major problems to
be faced by M&S. Report by world economic forum shows that Bangladesh is having inefficient
government policies and practices. Thus the business organization will face the issue of
instability in their operation in Bangladesh. Another major political demerit that will be faced by
M&S in operating in Bangladesh is instability of government and probability of coup. This will
have huge negative impact on the business performance along with having negative implications
on the trading pattern. Moreover, it is also reported that instability in policy is another challenge
to be faced by M&S in operating in Bangladesh.
Socio-cultural environment
Bangladesh is having diverse cultural and social structure in the country with majority of
the population is from the Islamic background. However, the major advantage for M&S that they
can gain in Bangladesh is the huge population. The rate of population is rapidly increasing in the
recent time and it is increasing the availability of cheap labor for the organizations operating
there. Moreover, it is also reported that Bangladesh is having majority of the younger population
in place. This further is increasing the potentiality of M&S to have eligible labor for their
operation due to the reason that the more will be the younger population, the more will be the
availability of labor.

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Figure: 2
Age demography of Bangladesh
Source: (Cia.gov 2018)
The above figure is showing that Bangladesh is having younger section of the population
for maximum of their entire population. The figure is also showing that age groups between 15
to 34 constitute the major section of the society. Thus, M&S will have the advantage of having
seamless availability of eligible labor in place. Another advantage that will be gained by them
will be the cheaper availability of labor. Moreover, textile sector being one of the major business
sectors in Bangladesh, majority of the society is accustomed with the industry pattern. Training
and development centers are helping to provide vocational training course for the potential
employees. This will also help M&S to have supply of seamless skilled labor for their
manufacturing facility.
However, apart from the advantages, there are number of challenges also to be faced by
the business organizations in operating in Bangladesh. One of the major social challenges is the
quality of education system. Bangladesh is ranked at 84 in terms of quality of education. This

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lower ranking denotes that they are having poor education system and it will restrict M&S to
have eligible and educated employees in place. Another demerit of operating in Bangladesh is
lower ranking in terms of training. This will also pose challenge for M&S in having skilled and
trained employees for their manufacturing facility in Bangladesh. M&S will also face the issue
of favorable relationship between employer and employee. This is due to the reason that
Bangladesh is having lower ranking in terms employer and employee relationship.
Economical environment
Figure: 3
FDI growth rate in Bangladesh
Source: (Tradingeconomics.com 2018)
The recent trend of inflow of foreign direct investments in Bangladesh is showing
increasing trend with maximum investments came in 2016. Thus it also denotes that Bangladesh
is having the positive business environment in the country. In terms of government budget
balance, Bangladesh is having the ranking of 78, which is moderate. This can be concluded that
M&S will have minimal risk in terms of economical and fiscal risk in the country. The
providence of special economic zones and providing tax incentives for manufacturing in
Bangladesh will also help M&S to regulate their manufacturing cost in the country.

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However, on the other hand, there are some challenges also to be faced by them in terms
of economical factors in Bangladesh. One of the major economical challenges will be tax rates in
the country. According to the global competiveness report, tax rates are one of the major
challenges for M&S in operating in Bangladesh. They may have to face stringent tax regulations
in operating Bangladesh, which will dent their business effectiveness. Another major challenge
for them in operating in Bangladesh is access to finance (Alam et al. 2013). It is also reported by
world economic forum. M&S may face difficulty in sourcing finance in the country for their
manufacturing facility. Bangladesh is currently standing in 95 in terms of country credit rating. It
denotes that investing in Bangladesh will be a risky affair for M&S and it will have negative
implication on the future business potential for M&S. Trade tariff is also another major challenge
for M&S in operating in Bangladesh. Negative implication of trade tariff will be more for M&S
due to the reason that they are going to have their manufacturing facility in the country and will
export their goods to the foreign countries. Thus, the cost of operation will get increased and
M&S may not gain the competitive advantages from off shoring their manufacturing facility in
Bangladesh.
Ethical factors
Ethical factors are also important to consider in off shoring the facilities in Bangladesh
due to the reason that this is have long term implications on the business effectiveness of M&S.
According to the global competitiveness report, poor work ethic in the national labor force is one
of the major ethical challenges in doing business in Bangladesh (Kamal and Deegan 2013). It is
also being stated that Bangladesh fare poor in terms of ethical behavior of the firms. They are
ranked at 106 in terms of the ethical organizational behavior (Wadud, Huda and Ahmed 2014).
This will have negative implication on the business performance of M&S due to the reason that
unethical business practices will contradict with the global organizational practices of M&S.
This will also reduce the long term viability of off shore facility of M&S.
Potentiality of the selected country
Thus, Bangladesh is having a few opportunities as well as challenges for business
organizations including M&S. the availability of the cheap and huge number of labors will be the
most effective advantage for M&S in operating in Bangladesh. Cost of human resource is one of

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the major costs in running the manufacturing facility. Thus, reduction of this cost in off shoring
the manufacturing facility will help M&S to have much less cost of operation in place. On the
other hand, the barriers in relation of the trade regulations and poor working environment are the
major challenges that will be faced by them in operating in Bangladesh (Curran and Nadvi
2015). The following sections will discuss about some of the recommended steps that should be
initiated by M&S in overcoming the barriers in operating in Bangladesh along with leveraging
effectively the advantages.
Recommendations
 It is recommended that M&S should initiate ethnocentric approach of staffing in the
organization. This is due to the reason that Bangladesh is having the issue of unethical
business practices and poor working environment. Initiation of the ethnocentric approach
of staffing will enable to recruit the home country staffs in the upper level management in
Bangladesh. This will ensure that the global business policies and practices of M&S will
be maintained in Bangladesh also along with the maintenance of their patent country
organizational culture.
 It is also recommended that M&S can partner with a domestic player in the market of
Bangladesh. This will enable them to adhere to the local rules and regulations effectively
along with having less risk associated with foreign investments. This is due o the reason
that in case of the partnership ventures, the cost and risk invested in Bangladesh will be
less for M&S and thus they will face less complexity in operating in Bangladesh.
 M&S should also have vocational training program n Bangladesh in order to have skilled
employees in place. This will have dual benefits for them due to the reason that initiation
of the vocational training facilities will help them to meet the social responsibilities by
empowering the communities and overcoming the issue of unskilled labor.
Conclusion
Thus, it is concluded that off shoring the manufacturing facility of M&S in Bangladesh
will have multiple benefits. This report discussed number of benefits and challenges that will
emerge in doing business in Bangladesh. Different parameters are being used to evaluate the
opportunities and challenge that to be faced by M&S in doing their business in Bangladesh. A

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few recommended steps are being discussed in this report in order to have most advantages from
their operation in Bangladesh.

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Reference
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Ullah, S., 2013. Planning “exceptionalism”? Political economy of climate resilient development
in Bangladesh. In Climate Change Adaptation Actions in Bangladesh (pp. 387-417). Springer,
Tokyo.
Cia.gov. (2018). www.cia.gov. [online] Available at:
https://www.cia.gov/library/publications/the-world-factbook/geos/bg.html [Accessed 27 Apr.
2018].
Curran, L. and Nadvi, K., 2015. Shifting trade preferences and value chain impacts in the
Bangladesh textiles and garment industry. Cambridge Journal of Regions, Economy and
Society, 8(3), pp.459-474.
Ellram, L.M., Tate, W.L. and Petersen, K.J., 2013. Offshoring and reshoring: an update on the
manufacturing location decision. Journal of Supply Chain Management, 49(2), pp.14-22.
Habib, M.R.I., 2016. Backward Linkages in the Ready Made Garment Industry of Bangladesh:
Appraisal and Policy Implications. The South East Asian Journal of Management, pp.129-146.
Jahan, R., 2015. The parliament of Bangladesh: representation and accountability. The Journal of
Legislative Studies, 21(2), pp.250-269.
Kamal, Y. and Deegan, C., 2013. Corporate Social and Environment‐related Governance
Disclosure Practices in the Textile and Garment Industry: Evidence from a Developing
Country. Australian accounting review, 23(2), pp.117-134.
Kamal, Y. and Deegan, C., 2013. Corporate Social and Environment‐related Governance
Disclosure Practices in the Textile and Garment Industry: Evidence from a Developing
Country. Australian accounting review, 23(2), pp.117-134.
M & S Textiles. (2018). www.mstexaustralia.com/. [online] Available at:
https://www.mstexaustralia.com/aboutus/ [Accessed 27 Apr. 2018].

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Tradingeconomics.com. (2018). Tradingeconomics.com. [online] Available at:
https://tradingeconomics.com/bangladesh/foreign-direct-investment [Accessed 27 Apr. 2018].
Www3.weforum.org. (2018). Www3.weforum.org. [online] Available at:
http://www3.weforum.org/docs/GCR2017-2018/05FullReport/TheGlobalCompetitivenessReport
2017%E2%80%932018.pdf [Accessed 27 Apr. 2018].