The Impact of Revised Wage Rate on Firm’s Competitiveness in the Ready Made Garment Sector of Bangladesh: A Case Study Comparison Between Large vs SME Garment Manufacturers

Abstract

The objective of the paper was to critically analyse the impact of revised minimum wage rate on the competitiveness of different size garment manufacturers in Bangladesh. In doing so the paper adopted a case study approach and incorporated data from multiple case study companies. Notably, the paper aims to cover three main areas: industry conditions and its implications on profitability, the critical resources which are giving the large case study firms a competitive advantage and finally the impact of institutional change brought about by the Rana Plaza incident on different case study firms. Using relevant literature from these three areas the paper proposed 3 hypotheses which were in turn tested and re-developed by using the primary data collected from case study companies. The findings from the research highlighted that the profitability of the garment industry became particularly low only after the imposition of minimum wage; however the profitability in mid-market segment is still comparatively higher. The study also identified the two critical resources that are helping the large case study firms to strategize better in relation to tackling the impact of minimum wage, which were “Industrial Engineering Department” and “Vertically Integrated Supply Chain”. Finally the study identified the change in institutional paradigm and stringent monitoring brought about by Rana Plaza incident had a more significant impact for the SME’s due to issues such as decoupling which were much easier to pursue previously. Finally the paper also outlined some strategies which SME case study firms could adopt in order to minimize the impact of minimum wage. Notably, the revised minimum wage increase was only implemented from December 31st 2013 and there hasn’t been much academic work in relation to the context; therefore the study aims to provide a first-hand overview of the situation prevailing after the minimum wage which could be in turn used for further research in the area.