How Economic Crisis Affects Sri Lankan Apparel Industry Economics Essay

At present, the whole universe has been negatively affected by the planetary fiscal crisis ( 2007-2010 ) . Not merely the most powerful counties in universe such as US and Europe, but besides developing states such as Sri Lanka been touched by the crisis more negatively.

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The ultimate intent of this is to measure the impact of planetary economic crisis on Sri Lankan dress industry. The full Sri Lankan dress industry has been negatively touched by the planetary economic crisis and finally it has been led to increase uncertainnesss within the industry.

The chief purpose of this article is to measure how the Global economic crisis has been affected on Sri Lankan dress industry. The impact of Macro environmental factors & A ; MESO factors due to planetary economic crisis will be discussed.

Cardinal words: Global economic crisis, Sri Lankan dress industry, Macro environment, MESO environment

Undertaking 01

1.1 Introduction

The intent of this article is to measure and mensurate how the economic crisis affects to the Sri Lankan dress industry. Thus, I have taken economic downswing as the Macro subject and the decreasing demand due to the economic downswing as the Meso subject in my article and besides discussed how it impacts to the selling as a whole.

To print my article, I have already selected few of import magazines which are expected to spread out my ideas to the relevant mark audience.

Macro subject: The economic downswing

Economic downswing of the universe affect straight to the most of the states negatively. It affects Sri Lanka every bit good, particularly for the dress industry in Sri Lanka. Most of the garment mills were closed down and downsized their activities, so it has been affected negatively to the Sri Lankan dress industry and employment every bit good. Under Macro subject, we have discussed about the Economic downswing and its fondness to the selected industry.

Meso subject: Decreasing demand

Decreasing demand drastically of the dress industry in Sri Lanka is seen as the consequence of the negative alterations of the economic crisis which straight affect providers, distributers, rivals and the clients. Due to the fluctuation of the exchange rates and the decreasing of per capita income, the all above factors have been affected negatively. Further I have discussed how the Meso factors respond to the selected Meso subject and the actions they have already taken and the relationship between them.

1.2 Most suited possible publications

1.2.1 Business hebdomad ( Bloomberg Business Week )

This is a planetary concern magazine which inspires leaders to turn new thoughts into action. This article of the magazine can make planetary conversation among the concern professionals. This magazine has more than 4.7 million readers each hebdomad in 140 states. This magazine founded in 1929 and the current publishing house is Stephen J.Adler and its publication hebdomadal footing. This magazine chiefly focuses on concern professionals, high-income and extremely educated people as its mark audience to make its thoughts.

Due to more than 4.7 million readers, distribution among 140 states and the sing about its mark market, this magazine would assist me to administer my findings among more than 4.7 million people in the universe. Its ‘ hebdomadal frequence would assist to remind my ideas every bit good.

( www.businessweek.com )

1.2.2 Time

This is an American intelligence magazine ; it covers most of the states in the universe. TIME EUROPE covers the Middle East, Africa and since 2003 it covers Latin America besides. TIME introduced to Asia as TIME ASIA is based in Hong Kong. TIMEs south Pacific edition covering more developed states such as Australia, America, New Zeland and the Pacific islands based in Sydney. The publishing house of this magazine is the TIME Inc. and besides as the mark market, TIME concentrating on concern audience which printing every hebdomad.

Most of the investors of Sri Lankan dress industry are from states such as America, Europe and Australia etc. So, this article helps them to acquire a clear image about the current state of affairs of the Sri Lankan dress industry. To acquire the investing determinations, I believe this article truly helps them to accomplish more success.

1.2.3 LMD Magazine ( Lanka Monthly Digest Magazine )

This magazine is non restricted in one country. It covers the gamut of concern, political, direction, current personal businesss etc. which truly helps to corporate leaders, directors, managers & A ; executive to show their positions & A ; bring forth new thoughts. Not merely Sri Lankan content, but it besides covers both Sri Lankan & A ; international corporate, finance, economic, political etc. This magazine chiefly targets concern and sentiment leaders, senior directors and professionals, the academic & A ; diplomatic communities and civil society organisations. It publishes every month under the publishing house of Media service ( Pvt ) ltd.

To cover most of the sections in Sri Lanka and the international, this magazine can assist to go through my message of the article to its mark market. Not merely the professionals, but it besides covers the civil society. Therefore, I think this magazine would assist to me to spread out my ideas to each & A ; every section of the concern universe. Subsequently, I can anticipate a good respond, suggestions and fresh thoughts of readers through this magazine.

( www.lmd.lk )

1.2.4 The Seller

The Marketer is an official magazine of hired institute of selling which is printing by the Redactive Publication Ltd as a monthly magazine. This magazine is sent to all members of hired institute of selling in UK and it ‘s available for non-members every bit good. The purpose of this magazine is to offer in-depth analysis and practical ushers to assist sellers to remain at the cutting border of the profession, uniting the Institute ‘s academic expertness with sellers ‘ existent life experience to advance selling as a nucleus concern map. This magazine chiefly focuses on sellers, professionals as its mark market. This is really popular magazine among all sellers around the universe.

( www.themarketer.co.uk )

Therefore, I can show the current state of affairs of the Sri Lankan dress industry to the sellers through this magazine. And besides it ‘s easy for sellers and professionals to acquire a better thought to organize their selling determinations & A ; activities in Sri Lanka.

1.3 The Selected magazine

Out of the above four magazines, I have selected LMD magazine to print my article because both its mark market and my article ‘s mark market seems similar. Not merely the local readers, but LMD has besides reached planetary readers as its general client base.

Sri Lankan dress industry is one of the taking industries before the economic crisis hit Sri Lankan economic system. Since universe economic system is been retrieving from the crisis once more, Sri Lankan dress industry has a good chance to turn up one time once more. Since LMD extremely focuses on concern and sentiment leaders, diplomatic communities as its mark market, I can anticipate a good respond from them through my article.

To take selling determinations and implement new selling activities, selling professionals should be cognizant about the current alterations of the industries like dress. Therefore this article would assist them to acquire a better thought about the current state of affairs & A ; future tendencies of the Sri Lankan dress industry.

Due to the above factors, I have selected LMD magazine in order to print my article and it would assist me show my positions to my mark readers.

Undertaking 02

2.1 Introduction

The current planetary fiscal crisis ( 2007-2010 ) occurred with the failure of several big US fiscal houses in September 2008. Even though many concern diaries and economic specializers warned to US and European mortgage Bankss, investing Bankss and fiscal houses about a fiscal crisis, no 1 was ready to confront such a state of affairs. As a consequence of loose cautionary policies, inordinate capital flows and high adoptions, the US and European economic systems led to an economic crisis that caused to recognition jobs and major losingss. By the first hebdomad of September 2008, the planetary recognition market, investing Bankss and fiscal establishments were extremely affected and threatened by the crisis and started to play a critical function in economic systems in all over the universe

Causes for the planetary fiscal crisis ( 2007-2010 )

Harmonizing to Acharya V, Philippon T, Richardson M and Roubini N ( 2009 ) , there are two cardinal causes for this crisis.

Recognition roar

Recognition roar could be explained as the inability for consumers and companies to acquire loans. Harmonizing to Dell’Ariccia D, Igan D andA Laeven L, ( 2008 ) , while the chance of a banking crisis additions significantly ( by between 50 % and 75 % ) during roars, historically merely approximately 20 % of roar episodes have ended in a crisis.

Housing bubble

lodging sector was the biggest growing, this because the fiscal establishments gave big amounts of money to buy places, and brought with it that people began to purchase places, doing an addition in demand for these, this led to Homes are merchandising at high monetary values in many cases came to the guess. Peoples borrow to purchase your place, so anticipate the monetary value for the same rise and sold, which obtained the money to pay the debt owed to the bank and demanded a new loan to purchase another place, this phenomenon called “ lodging bubble ” . This lasted a short clip and involvement rates began to mount to seek to take down the high degrees of rising prices, obtaining recognition was no longer so easy, and lodging demand fell and monetary values of these.

Harmonizing to Akrasane N ( 2009 ) , the undermentioned causes have been straight affected to make the universe economic crisis in to this phase.

1. Global macroeconomic instability

– The industrialised West consumed excessively much.

– The remainder of the universe, peculiarly Asia produced excessively much

( Refer Appendix 1 )

2. Free flow of capital in the planetary fiscal market helped easing and roll uping the instabilities

( Refer Appendix 2 )

Consequences of the crisis

( Beginning: 23rd Asia-Pacific Roundtable )

Even though many people emphasized that Sri Lanka has got no consequence by the economic crisis, there is no opportunity of endurance for a little economic system like Sri Lanka while the whole universe acquiring affected by the economic recession. Sri Lanka excessively now has started to experience the effects of the crisis since a big figure of private sector constitutions have been shut down and our chief exports such as garments, tea, gum elastic, coconut, cinnamon, treasure and some other chief exports have been losing the demand and the market and their monetary values are falling down every bit good. Thousands of employees have been losing their occupations as a consequence of that.

One of the chief Fieldss that affected by the crisis is Sri Lankan dress field. Sri Lankan dress sector is extremely affected by this crisis and the sector is confronting monolithic jobs such as closing of garment fabrication workss, loss of foreign exchange and uncertainness of employment. Based on a elaborate study conducted, around 75 garment fabrication workss have shut down and thousand of garment employees have been losing their occupations they ne’er of all time thought could be worlds.

The intent of this article is to measure the impact of planetary economic crisis on Sri Lankan dress industry. Chiefly the important jobs that Sri Lankan dress industry has been faced due to the planetary economic crisis, how they affect Sri Lankan economic system and their impact of MESO degree alterations like providers, rivals, distributers and clients.

2.2Macro Environment

Under macro environment, Economical changes upon Sri Lankan dress industry due to Global economic crisis will be discussed.

The universe economic crisis ( 2007-2010 ) has been playing a major function non merely in the economic systems of US and Europe, but besides in the economic systems of the other developing states in the universe. The chief investment Bankss, fiscal establishments and universe recognition market has been extremely touched and collapsed by the crisis and led to assorted economical and societal issues.

Not merely the most powerful economic systems in the universe such as US and Europe, the developing economic systems such as Sri Lanka excessively has been touched by the crisis now as chief sectors such as dress, touristry, tea, coconut, treasure etc have been losing their markets and some of the fabrication workss have shut down every bit good.

Sri Lankan dress sector besides has extremely affected by the crisis since it ‘s confronting some important jobs due to the uncertainness of the international market. Ultimately this has been taking to originate many unexpected jobs in Sri Lankan dress industry as discussed below. The issues that have been raised due to the economic crisis could be illustrated as below.

( hypertext transfer protocol: //www.worldfederation.org/Relief+and+Economic+Development/Articles/Economic_Bulletin_No2_Global_Economic_Crisis.htm )

Loose demand in the international market therefore sing crisp falls in monetary values every bit good as demand.

Since dress industry is Sri Lanka ‘s biggest industrial export, it plays a major function in Sri Lankan economic system. Our chief export markets such as US and Europe have non recovered from the crisis yet ; it has been led to diminish the demand for Sri Lankan garments. Therefore non merely the dress industry but besides the full economic system would endure because of lose of demand and decrease of the market portion. Harmonizing to the latest studies, garment exports fell by 20 per centum in February 2010 and by a similar per centum in January.

Conversely with competition increasing from the other cardinal rivals such as Bangladesh, Vietnam, China and India, the dress sector of Sri Lanka is continuously under force per unit area to stay cost competitory during these recession clip.

Job loses

The economic crisis has been led to originate many labour issues in Sri Lankan labour market today. Hardest hit are immature worker and adult females, who represent 90 per cent of the garment work force.

Harmonizing to T.M.R. Raseedeen, general-secretary of the National Association for Trade Union Research and Education ( NATURE ) , more than 50,000 workers lost their occupations in the 2008-09 periods as some 50 largely garment mills closed due to loss of orders.

( hypertext transfer protocol: //ipsnews.net/news.asp? idnews=51268 )

For illustration, Cinotex, a garment maker that has been in Katunayake for the past 25 old ages, let 3,000 of its workers go, but asked them to vacate voluntarily to avoid holding to pay compensation. The same happened last August to Jakalanka which shed 2,000 occupations. West Apparel cut approximately 1,000 occupations. MS Apparels, with workss in Liyanagemulla and Katunayake, told 1,300 of its people that they were out of a occupation.

( hypertext transfer protocol: //ipsnews.net/news.asp? idnews=51268 )

Closing garment mills

Most of the biggest garment houses have non extremely touched by the recession but largely little and average size mills have been severely affected.

It is largely little and medium-scale mills that have suffered the brunt of the economic crisis. Last twelvemonth the figure of garment mills fell to 250 from 300 in 2008.

Future chances and tendencies

Since the menace of the planetary fiscal crisis is been cut downing and universe economic system is been retrieving, there are some opportunities and chances to get the better of from the downward in Sri Lankan dress industry and increase the demand for the garments.

Enter in to new markets and captures new client locations.

Since our cardinal markets such as US and Europe has been knocked severely from the recession, Sri Lanka can happen out some other alternate markets in order to increase the gross revenues and demand for our garments. Sri Lanka can concern about other markets such as Middle-East, African states, Russia and other good developed states.

Introduce advanced & A ; originative merchandises to the market.

In order to derive new markets & A ; maintain the bing markets, industries can see about bring forthing more originative and advanced garments. Subsequently it would be easier to pull the clients and increase the demand for our garments. Industries should concern about the penchants of the international clients and new tendencies and emerges of the market every bit good.

Quality betterments

Many international clients are quality witting than monetary value witting. Thus it would be an advantage if industries can more increase the quality of the bing merchandises. High quality merchandises can derive high demand from the clients and develop the image of the productions as good.

Focus on high return activities.

Exporters can put on high return activities instead than travel for less return activities which means finally increase the net incomes and do our dress industry stable every bit good. Furthermore Sri Lanka can travel for long term or short term understandings with the other states or can concern about acquiring more revenue enhancement benefits and net incomes every bit good.

MESO Environment

Customers

When there ‘s an on-going economic crisis in the state, client ‘s purchase power automatically goes down and the demand for goods and services falls. Peoples might non hold adequate money to even carry through their basic demands. Therefore the demand for garments from clients goes down every bit good which forces garment mills to take down the sum they can put in their concern and diminish the production.

Suppliers

Chiefly the providers of the dress industry could be listed as follow,

Fabric industries

Thread industries

Machinery & A ; other tools providers ( Machinery & A ; tools that use for garment fabrication )

Chemical manufacturers that produce chemicals which use for garment fabrication.

The above mentioned parties have been extremely affected by the crisis since they are straight linked with the dress industry and they have been lost demand for their merchandises.

As mentioned earlier, 250-300 garment mills have been closed and the providers of those mills would negatively impact since they make losingss due to less demand.

Distributors

Local and international garment retail stores can be taken as the distributers of the dress industry. When there is a less demand for garments from the market, gross revenues of distributers fall down every bit good.

Rivals

When there is a less demand in the market, the competition among the providers besides goes down. A good competition leads to provide high quality n better goods and services to the market. When there is a less competition in the market, it leads diminish the reaching of new, advanced and originative thoughts to the market every bit good.

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