Porter Diamond Model Case Study II

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Pakistani Ready-made Garments Industry Export Competitiveness:

Evaluation in The Context of Porter's Diamond Theory
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Pakistani Ready-made Garments Industry Export Competitiveness: Evaluation in The
Context of Porter’s Diamond Theory
Revista Publicando, 5 No 18. (3). 2018, 228-246. ISSN 1390-9304

Muhammad Abrar1, Mohsin Bashir2, Asif Ali Safeer3, Rizwan Shabbir4, Sajjad Ahmad
Baig5*
1 Associate Professor, Lyallpur Business School, GC University Faisalabad-Pakistan

2 Assistant Professor, Lyallpur Business School, GC University Faisalabad-Pakistan
3 School of Management, Huazhong University of Science and Technology, Wuhan,
China
4 Assistant Professor, Lyallpur Business School, GC University Faisalabad-Pakistan
5 Assistant Professor, Department of Management Sciences, National Textile University
Faisalabad-Pakistan, sajjad.baig@hotmail.com
ABSTRACT
The research study evaluates the export competitiveness of ready-made garments industry of
Pakistan by applying Porter’s Theory. The Porter’s Diamond Theory is vastly applied in many
industries to analyse the export competitiveness of a particular industry. The study is based
majorly on secondary data and on primary data discussions with top managers of more than 24
garments companies of Pakistan. The study evaluates the competitive advantages of the
Pakistani garments industry by utilizing effective competitive advantages, Pakistan can gain a
leading position in the world markets. The term competitiveness is a vital issue in the world
economies; each country is putting efforts to be competitive in all areas and products to acquire
a leading position worldwide. If a nation becomes competitive in various products, it is definite
that its economic performance will be boosted up significantly. The Pakistani garments
industry is seriously exaggerated just because of competitiveness in global markets. The
findings of this research study direct decision makers to take effective decisions to improve
garments industry export competitiveness in international markets, which is also extremely
supportive to promote economic growth of a country. Also, the research has considerable
practical implications for several garment enterprises, regional governments, garment
associations, R&D institutions for assessing garments industry competitiveness. In future, this
prevailing competitiveness model can apply in other textiles segments of Pakistan such as
spinning, and weaving sectors.
Keywords:Pakistan Ready-made Garments Industry, Exports, Competitiveness, Porter’s

Diamond Theory, Competitive Advantages
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1. INTRODUCTION
The textile sector of Pakistan plays a significant role in the growth of economy and contributes
about 57 percent to the exports of Pakistan. The textiles sector employs labor force about 40
percent of the country and it contributed US$ 1.22 billion dollars in the foreign earnings of
Pakistan during the year 2014. Also, it is anticipated to grow continuously for the development
of the country. Pakistan has also got the GSP plus status granted by the European Union. This
is beneficial to become competitive in global markets and useful to seize large consumer
markets of the world. In Pakistan’s textile industry, readymade garment industry is growing
and contributes for the economic growth of the country (Competitiveness and Value Chain
Analysis, 2016). The readymade garments industry exports improved from US$ 1,426.826
million dollars in 2013 to $1,548.282 million dollars in 2014, which witness that exports values
have increased to 8.51 percent (Economic Survey of Pakistan, 2014-15).The readymade
garments manufacturing industry is labor intensive with highest contribution and value
addition sector within the textiles value chain of Pakistan (Nabi, & Hamid, 2013). Pakistani
garments has good potential to contribute meaningfully to the economic growth of the country.
Due to increasing labor costs, China is continuing pulling out from the exports of garments, in
this scenario Pakistan has right opportunity to capture a large part of global markets for
garments export (Nabi, & Hamid, 2017).
The readymade garments industry creates up to 54 percent of exports income within the textile
industry of Pakistan. This segment is an important source to creating employment
opportunities. Currently, this sector has employed labor force about 2.38 percent in the
manufacturing of textiles products in Pakistan. The Pakistan’s apparel sector is mostly in
clusters like in major cities of Pakistan i.e. Lahore, Karachi, and Faisalabad. In spite of
Pakistan’s good comparative edge of being the fourth largest cotton crop producer in the world,
its overall market shares in textiles and apparel garments sectors’ global exports are
discouraging resulted weak competitiveness in the global markets (Khan, & Abasyn, 2017).
The readymade garments industry of Pakistan started working in 1970's. Due to enormous
developments and industrialisation, garments industry expanded rapidly. Majority of garments
manufacturers, large, medium and small scale are producing cotton fashion garments for global
markets to meet the requriments of different customers. The readymade garments industry is
using all types of yarns raw materials either locally produced or imported yarn raw materials.
However, due to abanduant resources of cotton, readymade garment industry mainly use it and
other yarns for producing different types of garments according to customer requirments
(Memon, 2017). Although, Pakistan is rich in cotton and different yarn resources despite it has
less than 1% market shares in the global markets, which required lot of work to improve this
market share in the global markets (Textile statistics of Pakistan, 2013). Following are the
Pakistan’s readymade garments export data from the year 2008 to 2016 for evaluation:
Table 1: Pakistan Ready-made Garment Exports

Year Quantity (Million Dozs) Value (US $ Million)
2008-09 29 1230
2009-10 28 1230
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2010-11 34 1774
2011-12 25 1616
2012-13 27 1800
2013-14 30 1909
2014-15 31 2095
2015-16 32 2195
Source: Trade Development of Pakistan (Taken from: Ready made garment industry surviving
against intense international competition, Memon (2017), Pakistan Textile Journal
Here, the research study is worked on the competitive advantages and related theory, which
was originally given by Porter (2000, 1998b, 1997a, 1990a). The diamond theory of Porter
improves and guides about the firm’s global export competitiveness in different product range
(Porter, 1990). The Porter diamond theory is first competitiveness theory that convincingly
associated to nations, industries, and firms (Peng. 2014).
Competitiveness formed from the Latin word, i.e. competitor, it means to contribute in
business competition of different corporations for various markets. Competitiveness is well-
described that the financial elements of strength as indicated by its rivals in worldwide market
economy in which services, items, individuals' abilities and ideas correspondence
spontaneously through the international limitations (Buckley, 1991). Outcomes could be
accomplished through the competitive opportunities and competitiveness procedures (Dorosh,
Niazi, & Nazli, 2004; Kazmi, 2012; Kazmi, Naaranoja, &Tuomi, 2013).
2. RESEARCH OBTECTIVES
To accomplish the objectives of this research paper, following points are very much important
to explore in the context of Porter theory and readymade garments industry of Pakistan:
• To know the competitive advantage factors keeping in view the Pakistani readymade
garments industry
• To find out how Pakistan’s ready-made garments industry can improve export
competitiveness in the global markets
• To analyse the readymade garments industry of Pakistan in perspective of Porter’s
Theory
3. LITERATURE REVIEW
This research study describes the present anxieties of competitiveness that have been
increasing in the Pakistani ready-made garments industry. To better utilizing the value added
products, potential opportunity in Africa, Asia and other regions, there is an enormous place
and potential to effectively exploit opportunities for textile products in different markets. There
is around 80 percent textiles products manufactured in Pakistan, which are exported with value
added and in different forms to different international markets. This means around 20 percent
of the textiles production account for domestic markets only. Domestic manufacturers are
underprivileged of the national market prospective due to trafficking, massive used import
products, and wrong invoicing. China and India exploit opportunities of their local markets
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about 75-80 percent and they are exporting around 20-25 percent of goods and services
internationally. This is very much supportive and helpful to protect their textile business from
worldwide recessions. On the other hand, textile industry of Pakistan is immensely helpless to
all types of losses in the global markets (Export to Europe, 2014).
Krugman (1994), defined a nation’s competitiveness is attained by producing the highest
number of products and services that globally compete,which allows a nation’s people to enjoy
better and sustainable living standards. Garelli (2006) identified that competitiveness is a
capability of states to generate and sustain an environment which backings competitiveness of
enterprises. Kalimeris (2012) demarcated competitiveness is the degree to which a country can
produce products and services that can survive in global markets, under free market conditions
and fair commerce, while sustain in gand growing the real incomes of its people on the long
term basis.
Porter (1990) described in his book “The Competitive Advantage of Nations”, who developed
Diamond Model with the objective to understand and analyze the reasons for certain industries’
success in a particular nation as compared to others. It found that rather than nations, industries
compete and further develop to create the competitive advantages in a specific industry (Jhamb,
2016). A "diamond" involves four components and two auxiliary components, which
coordinate and interact with each other. Four components: production factor, demand factor,
related industries and industry's performance support, a company's strategy, structure and
external competitors performance. To become a successful enterprise, a company should
develop good corporate strategy and develop the organizational structure according to
businesss environment and situation of a particular industry (Li-Xia, Chao, & ZHANG, 2017).
3.1 COMPETITIVE ADVANTAGE FACTORS IN PORTER’S DIAMOND THEORY PERSPECTIVES
To execute this research in an academic way, a comprehensive and appropriate theoretical
framework is designed. The theory and application may describe data precisely and focused on
significant and an expressive description (Cochrane, 2011). To achieve this purpose, the well-
known Porter’s diamond model theory is applied. The Diamond Model is a common
competitiveness theory presently available (Zhang & London, 2013), delivers a comprehensive
framework for knowing differences in competitiveness at national levels (Fainshmidt, Smith,
& Judge, 2016).The competitiveness model of Porter is often cited as the best model that is
helpful to benchmark of industry competitive advantages. This model also demonstrates that
why several nations are prosperous in certain businesses whereas some are not (Porter, 1990;
Chobanyan& Leigh, 2006; Grant, 1991; George Stonehouse, 2007; Byoungho Jin & Hwy-
Chang Moon, 2006; BalaBhaskaran, 2011). The Porter model defines, shift of new competition
pattern amongst organizations (Greckhamer, 2010), this model attempts to reply questions,
means why some countries & certain industries can get competitive advantages in the
worldwide markets whereas some are not.
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Figure 1:Competitive advantage of Porter's diamond model (M.E Porter, 1990)

Porter described the National Diamond theory (1990) which is categorized as under:
3.1.1FACTOR CONDITIONS
A country must have appropriate sources like capital, land and labour. The factors of sources
are inborn however, advanced factors requirement speciality, like dedicate trained labour,
infrastructure and instructive organizations, etc. (Rimantas Didziokas, Rasa Viederyte, 2014).
Resources of a nation like infrastructure, factors of production and trained labour. These
resources are suitable for rivalry environment in some particular businesses. These sources of
elements could be utilized in different businesses in different nations. Bellak & Weiss (1993),
suggested knowledge resources such as stock of technical, market and scientific knowledge
bearing on products and service. Moreover, information resources like government research
institutes, universities, government statistical agencies, scientific and business literature,
reports database, market research, etc. are also considered important factors of a country
(Kharub, & Sharma, 2016). Porter’s competitiveness concept emphases on prosperity formed
through economic activities rather than inherited prosperity i.e. the national resources
exploitation. Porter believed that dependence on inherited prosperity frequently becomes a
dominant fence against advancement of true competitiveness (Kharub, & Sharma, 2017). A
firm’s prosperity depends upon economic productivity made for each element unit accessible
for economic activity (Cairncross, 1997).
3.1.2DEMAND CONDITIONS
Demand conditions are affecting business competence to strive internationally. Local
markets are depending on domestic demands of buyers. Sophisticated demand of national
consumers anticipates requirements of international buyers. Quality and quantity level of
domestic demand enable a firm to make product innovation and to get advantages of production
economy of scales (Seçkin, Deniz & Cüreoğlu, 2013). Porter’s suggestion about national
requirements could be checked through main three features: combinations of them, i.e.
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combination of buyers’ wants and needs, development, growing rate, scope, and mechanisms,
which are linked to domestic demands and to other markets. To satisfy mature customers’ high
demands, companies are enforced to manage high quality standards along with taking
improvement effect respond to different challenges (Beise & Cleff, 2004; Deniz et al., 2013).
Demand conditions are measured by distributed into two variables like market value (market
value, size and growth pattern) and sophistication (new regional investment, and distribution
channels).
3.1.3 RELATED AND SUPPORTING INDUSTRIES
It means bunch of industries in national economy, which are connected to everyone through
vertical and horizontal relationships amongst competitive buying segments, delivering to
commercial consumers, and delivery networks. Focused national supplies can grow good
returns in downstream businesses by giving great inputs with effective product costs, speedy
and quick assets (Hodgetts, 1993; Moon, 2000). Best supplier industries are helpful to create a
good competitive advantage by providing inputs, new techniques and opportunities in order to
employ new technology and knowledge transfer by providing valuable information
(Stonehouse & Pemberston, 2002). Moreover, with fast and quick access to cost effective input,
there are marvellous opportunities for ongoing coordination among buyers and suppliers’
industries. Related industries closeness deliver quick response to market changes and trends,
which is supportive in creation of rapid and easy innovation (Singh et al., 2009; Thürer,
Godinho Filho, Stevenson, & Fredendall, 2013). Furman, Porter, & Stern (2002) suggested that
first-class organizations’ clusters through value chains create positive externalities both from
transactional efficiencies, and knowledge spillovers. Therefore, an ecosystem of progressive
industries yields economy enriching technology spillovers and enhancements of productivity
(Cantwell & Mudambi, 2011; Phene & Tallman, 2014).
3.1.4 FIRM’S STRATEGY, STRUCTURE AND RIVALRY
It comprises of business structures, strategies of local organizations and degree in which
tough opposition amongst them exist (Khan, & Rodrigues, 2015). A firm’s strategies could be
devised by examining local and global market demand. Several organizations articulate
strategies on short run basis where as some corporations articulate strategies on long run basis.
Moreover, according to organizations’ products and services, strategies can be formulated
keeping in view business environment in a country.
Porter discusses that there is none any distinctive management style that is suitable in every
nation. This alludes most great styles of working may contrast among ventures. A few nations
may work specifically on administration styles, which may have upper hands of these nations.
The best styles of management working are continuously generates competitive advantages for
any businesses and for nations as well. Proper business environment among companies to do
business freely has become an important factor where thay can establish themesleves (Castro-
Gonzáles, Peña-Vinces, &Guillen, 2016). Porter suggested good competition among industries
always leads to good innovation and new product developments in various sectors. He also
suggested that countries tend to flourish in industries where management system and
organizational approach favoured by government are well-matched to producers’ competitive
advantage source. Further, Porter (1990) described that if successful companies compete
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actively at home, markets, and compel each other to develop markets and innovate in products.
The competition pattern has a consequence of the innovation process and ultimate plans for
global achievements (Oz, 2002).
3.1.5 THE ROLE OF GOVERNMENT
Government rules, regulations are developed through government representatives at all
levels that could take good benefits or damagingly influence capability of the business
segments (Barragan, 2005). Therefore, government can improve or damage nationwide
competitive advantages, and affect the competitiveness level (Nilsson & Peterson, 2002).
Governments can accomplish competitiveness efficiently. “Catalyst” & “Challenges” are
measured in midpoints of the characters (Pakneiat & Hosein Rezazadeh Mehrizi, 2008).
Governments may effect on previously mentioned four stages through moving on factors,
situations, demand situations, related and supporting industries, firm’s structures and rivalry
practices amongst diverse businesses. Governments role is to develop regulations and policies
that affect all other factors. Governments develop several policies and positions that might
affect several factors both in negative and positive ways (Thürer, Godinho Filho, Stevenson,
& Fredendall, 2013). According to the Loader (2007); Sharma & Kharub (2014) a well-
developed government structure backing economic activities. It includes natural resources
access, functional system of business, communication, transportation systems, information
technology, educational system and environment protection.
3.1.6 CHANCE
Chance circumstances reflected external elements of business organizations’ control,
however, it might generate powers that re-frame different sectors’ structures, authorizing
changes in competitive advantages condition (Öz, 2002). The chance actions mostly are outer
dynamics, which cannot anticipate before time. Nevertheless, they can influence such as new
innovations, discoveries, overseas government important decisions, radical currency markets
variations, increased demand of local or international, gap of raw material costs and other main
automated fluctuations (Pakneiat & Hosein Rezazadeh, Mehrizi, 2008; Tasevska, 2006).
4. RESEARCH METHODOLOGY
This is qualitative research paper and mainly based on the Michael Porter’s Diamond Theory.
The research methodology comprises the review of theoretical concepts of competitive
advantages of the Pakistani garments industry and Porter’s diamond theory application on
Pakistani garments industry.
This research work is focuses both secondary and primary data. For secondary data collection,
this research applied diverse data bases including top ranked journals, souces of internet
websites, newspapers, official data basis, articles, published books, and magazines. To
complete this research study, primary data is collected through a semi-structured questionnaire
with open-ended questions, based on discussions with top marketing executives and marketing
managers of more than 24 garments companies of Pakistan.
This research study applied the simple random sampling and particulary purposive sampling
technique. The sample size consisited on 115 top marketing executives and marketing
managers, having master degree qualification preferably in marketing with five or over five
years experience in reneowned garments companies of Pakistan.
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The research study analyse export competitiveness and competitive advantages of the Pakistani
readymade garments industry through explanatory approach.
4.1 THE GARMENTS INDUSTRY OF PAKSITAN IN THE CONTEXT OF PORTER’S DIAMOND
MODEL
In modern business world, technology plays central role to develop business such as textiles’
products, which are becoming more sophisticated concerning product diversity and achieving
production economies on massive scales. In resources exploitation, forming efficiency is
significant for competitiveness. In the same way, positive environmental situations are also
vital to accomplish the purposes. There are some essential elements involved in assisting and
easing a nation. There are many factors, which are influencing directly or indirectly the exports
of Pakistani garments industry.
There are many textile associations that are functioning to safeguard the textiles industry of
Pakistan such as All Pakistan Textils Mills Association (APTMA) which is primarily focusing
on the Welfare of Spinning and weaving division of Pakistan and suporting the functioning of
textiles processing business whereas PCMA is primarily functioning for clothing business of
Pakistan. PAKSEA is primarily functioning for the sweater and knitwear business of Pakistan
and PTEA is primarily functioning for exports of textiles products. Moreover, PHMA is chiefly
functioning for exporters of apparel hosiery products in Pakistan. PRGMEA is primarily
functioning for exporters of readymade garments in Pakistan. PDMEA is primarily functioning
for exporters of denim products in Pakistan, and PCFA is primarily functioning for exporters
of cotton apparel products in Pakistan. There are many facets, which are helpful to make the
country more competitive in local and global markets. Several countries have best approach to
natural resources or the best climatic conditions, like Sri Lanka. They are manufacturing Tea
and Rubber. Similarly, Pakistan's environment is best fit for producing cotton, rice and wheat
etc. Natural resources might contain specific developed resources such as skilled labour force
etc., which can create differentiations between an underdeveloped and a developed country.
For gaining the best competitive advantages by nations, industries and firms, Michael Porter
has categorized three main types of comprehensive strategies. By utilizing these strategies,
competitive advantages can be gained. These strategies comprised of Cost Leadership Strategy,
Differentiation and Focus strategy. These strategies can differ according to condition of an
industry, irrespective of organizational structure and culture. For instance, Pakistani garments
industry has good edge in cotton productions and cotton yarns; therefore, it has a great reason
to get the advantages in garments production. Michael Porter put forward the four main
determinants which have huge impact on industry.
4.3.1 Factor Condition

Factor conditions are primarily allocated into two main factors i.e. basic factors and
advanced factors.
The basic factors are comprised of natural resources, labour force (containing unskilled and
skilled labour), infrastructure, geographical, raw material, climatic conditions and domestic
financial markets, which are utilized in textiles products production processes.
The advanced factors are comprised of specialized knowledge, technical equipment,
innovation, capital working procedures and education, which are designed and developed
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through innovation and investment to specific dynamic forces. These formed innovative factors
which are foundation for maintainable competitive advantages of every nation.
4.3.1.1 Natural Resource
Pakistan is marked as being the 4th biggest cotton crop producer in the whole world, so
Pakistan has ample cotton resources to convert into value added products for exporting to
various countries. Effectively utilization of cotton resources is helpful to boost up the Pakistani
economy in the world. The prominent cotton producing countries are shown below in figure 2.
The data is updated till 2014-2015:
Figure 2: Prominent Cotton Producing Countries Worldwide in 2014-15 (in 1,000 metric tons)
Source from: The Statistics Portal, (2016) www.statista.com
4.3.1.2 Raw Materials

Pakistan is also ranked the 3rd biggest yarn manufacturer in the whole world after China and
India. For value addition in textiles products especially in readymade garments, various cotton
yarns can be utilized to innovate products. These yarns included cotton yarns, PC yarns,
coolmax yarns, bamboo yarns and tancel yarns etc. Current yarn spindles installed with
working capacity and production capacity are as under:
Table 2: Installed Capacity and Production of the Yarn Spindles (000)
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Source: Pakistan Spinning industry, Memon (2016), Pakistan Textile Journal)

4.3.1.3 Labour Force Resources
Pakistan has also ranked the 6th in overall population of the country in the world. This has
big advantage for Pakistan to supply huge labour force for the garments industry of Pakistan.
It includes some skilled, semi-skilled and unskilled labour with minimum wages as compare
to other advanced countries. Garments industry can utilize skilled labour to gain the
competitive edge in comparison to other countries. Also, Monthly wages comparison of
different countries are as under:
Bangladesh $68
Cambodia $140
China $155 $321
India $137 $179
Indonesia $104 $266
Malaysia $280
Pakistan $116 $125
Philipine $180 $321
Thailand $281
Vietnam $107 $156
$0 $100 $200 $300 $400 $500 $600
Lowest Highest
Figure 3: Monthly Minimum Wage of the Apparel Industry: 2016
Source from: Minimum Wage of the Apparel Industry Continues to Rise in Most Asian
Countries (2016)
4.3.2 Demand Conditions

The present projected Pakistani population is more than 193 Million (United Nations, 2016)
and on-going, Pakistan’s economy is growing, which is supportive to increase the demand
directly for the garments within the nation. This demand is helpful to flourish the garment
industry with developments of domestic markets in the country. Increasing demand of garments
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in the country also support for creation of new employment opportunities in the country and
ultimately boost up life styles of people in the country. There are ample cheap labour sources
available for production of garments and these sources could be the best sources to exploit
prospective for growth and expansion of Pakistani garments industry. In Pakistan, about 80
percent textile products produced in the nation, which are exported in various forms with value
addition at low level, it explains that the local market is accounted for 20 percent in national
production. Domestic entrepreneurs are deprived to exploit the local markets potential just
because of trafficking, wrong invoicing and massive import of used goods (Textile sector
exports, 2014). ( check this as second time comes)
A country can get competitive edge when there is sophistication and buyers’ demand
provides clarity in their needs and wants, which is supported for innovation, research &
development, product growth and quality improvements of garments. According to Porter's
theory, the quality products are outcomes of the stresses put on the producers by external
customers to innovate the products along with domestic customers’ requirements ending up to
achieve the economies of scale. Accordingly, domestic demand should theoretically get the
best quality products. Unfortunately, customer demands are complicated and differ from
segment to segment in Pakistan. All exports oriented firms are not selling their products locally,
nor do they have their products exports good volume in the international markets (Murad,
1999).
The garments offered by domestic suppliers to the local markets are comparatively lower
quality garments than exports to the global markets. How can we are in operational activities
to accomplish targets? First, we should develop our domestic buyers in such a way that they
can respond to their garments demand effectively. Second, international customer guide is
required to local suppliers for innovation, product quality improvement, and new product
developments. To export the best quality garments in the global markets, the first step is to get
quality assurance certificates and retaining it over the longer time period. Pakistan is well
known about the credibility of the quality assurance certificates and international standards.
Pakistan Standard & Quality Control Authority (PSQCA) is well renowned and as per Board
of Investment (BOI) present report, the formation of ISO-9000 quality certifications
association within the PSQCA is in development phase. The quality standards are not only
helpful to decrease costs but also helpful to ensure rapid quality certification process for the
garment industry of Pakistan.
4.3.3 Related and Supporting Industries
Related & supporting industries are the most significant to get the competitive advantage in
an industry. These industries are functioning to help the ready-made garment industry by
providing the best quality of raw materials as per customers’ requirements. Porter called these
industries like a cluster. The supporting industries could be clarified through strong
relationships and bonding amongst the industry players, and provide chances for innovation in
value chain and new product developments.
For Pakistani ready-made garments industries, Raw cotton producers, Ecru yarn producers,
Polyester and accessories manufacturers, industry fair organizers, textile associations, etc. are
primarily related & supporting industries are providing support and help to the garment
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manufacturers while decreasing all other costs. On time raw material provision add value to
finished garments for export to foreign customers.
4.3.4 Industry Structure, Strategy, and Rivalry
Tough competition engaged companies for product innovation and design and such strategies
help them to compete with competitors in local markets as well as in international markets
effectively. The companies who has won their domestic battles significantly are utmost
possible to win global battles as well. There are working various associations and lobbies in
Pakistan amongst the key players of the industry who obstructed the market entry for the new
independent firms thus it is creating problematic situation for smaller firms for market entry to
develop nationwide markets (Murad, 1999).
Pakistani ready-made garments industry privately owned and ruled by local businessmen
and limited number of families. For instance, Faisalabad is the largest city to produce the
textiles products in the country. Here, mainly three families are dominant on business groups.
On the other side, they are keen to effectively promote trust and good contract administration.
Accordingly, it is helpful to reduce transaction costs; it is also engaged to regulatory
imprisonment thus confusing the government encouragements for benefit to few people and
stifled the competition (Ul Islam, 2006). There is strong competition amongst garments firms
in the country. In Pakistan, there are both bureaucratic and autocratic hierarchal structures
amongst companies. Small companies are normally operating with autocratic hierarchal
structures while large organizations are operating with a bureaucratic structure as they
dominant in Pakistan.
4.3.5 Role of Government
Porter suggested that governments plays its role alike a facilitator, increasing economic
stability to support companies for improving their position in local and global markets.
Governments’ participation can impact on all other key aspects at national as well as at
international level. Governments facilitate to deliver basic services and utilities, but at this time
the government is not interested in providing those infrastructure, which are compulsory large
sacle economy production and export of garments. Therefore, this is hampering the overall
growth process.
Pakistani textile garments manufacturing units needed incessant up-gradation and good
maintenance level for which more funds are required. Currently, the interest rate in Pakistan is
higher as compare to other textile exporting companies, For example, the prevalent market rate
is 10.25 percent in India. Indian textiles industry is also enjoying 5 percent exclusion i.e. It
means that Indian textile industry is paying the interest rate of 5.25 percent. In the similar way,
interest rate is 5.58 percent in China, while Bangladesh has 8.5 percent interest rate. The huge
increase in the interest rate of Pakistan has directed businessmen to condemn the policy makers
for designing destructive policies for the textile industry of Pakistan (Pakistan’s Textile
Industry, 2015). Due to the removal of subsidy on textile sectors and burden of different types
of taxes on import, imposed by the government, textile companies have no choice but to
increase monetary values of their merchandise. Due to higher prices of products and the
government procedures, collectively it has made it difficult for garments industry export
oriented firms to compete against key players in the international markets like China, India, Sri
Lanka, Nepal and Bangladesh.
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4.3.6 Chance
The Pakistani garment industry has profound opportunities for entering into the larger world
markets. The Pakistani garment industry has also abundant opportunities to discover new
markets and to improve business in the worldwide markets. However, what appears to be
lacking are companies’ own determination power? Company owners have always proposals
to provide subsidies and tax exemptions to become more competitive in the international
markets. Garments owned brand launching and new garments innovations in global markets
are very supportive for the Pakistani garment industry to get massive business volumes from
foreign markets.
4.2 HOW READY-MADE GARMENTS INDUSTRY OF PAKISTAN CAN IMPROVE THE EXPORT
COMPETITIVENESS IN THE GLOBAL MARKETS BY APPLYING PORTER’S THEORY?
According to Porter’s diamond theory, by utilizing existing factors of competitive

advantages in an industry can flourish good business in other markets. In the same way,
Pakistani garments industry can improve market share in world markets through effective
utilization of existing factors of competitive advantages. As already have been described that
the factor conditions are in good concering the Pakistan’s geographic situation, Pakistan is
producing cotton on massive volume like she is the 4th biggest cotton producer and producing
yarns on a massive scale like Pakistan is the 3rd biggest yarn producer in the whole world.
Pakistani yarn manufacturing firms are producing diverse range of yarns; this different variety
of yarns can be used to produce various types of garments to attract foreign customers
according to their requirements. In this way, Pakistan can win big business volumes from the
global markets. Furthermore, In the current era, Pakistani Government is focusing more on
developing road infrastructure and transportation infrastructure as well; also Pakistan has a
world class telecommunication structure and deep sea ports (i.e Gawader). All of these factors
are supportive for garments industry to increase business in foreign markets.
Domestic sophisticated demand is also supportive to produce new innovated products and
achievement of economies on a massive scale. The domestic garments demand also supportive
for R&D (research and development) in both current and new products. These are also
supportive to develop new business opportunities in foreign markets.
Related & supporting industry’s role is very important to help the garment manufacturers to
incease production process in the value added chain. Related & supporting industries are also
very important to quick the shipment process and final shipment management for global
customers. When related & supporting industries will deliver all raw materials well on time
and this would be helpful to serve end customers effectively. Ultimately, this will be supportive
to create competitive edge as compare to other competitors. Related & supporting industries
are also significant to save the national business as well as international business. With all the
chain process cooperation, Pakistani garment industry can fetch good business from foreign
markets.
Firm strategy, structure & rivalry are very significant to develop competitive advantages in
domestic and worldwide markets. Good strategy formulation means there are good competitive
advantages in comparison to global firms. Organization structure & competition level also
build competitive advantages for local companies, since owing to hard competing firms will
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manufacture best quality garments with cutting costs and reasonable prices so that foreign
customers will desire to finalize business with Pakistani suppliers.
The government role is also very significant for the esistance of ready-made garment
industry because if the Pakistani government will design favourable and flexible environment
for the garment industry exporters, they can gain good profits from foreign customers.
Governments policies are also helpful to stabiliz business in a country, and supportive to
explore new markets in the word.
Exports can be increased if there are new market based innovated yarns are supplied in markets
to make innovated garments. This would be helpful for spinning and Garment industries to
explore new business opportunities in worldwide market. Furthermore, if garment companies
worked on and manufacture their own brands, they can rip out good profits from international
markets too. It is very necessary that governments should shrink interest rate and provide ample
opportunities for availability of credit to garment manufacturers; this would also be supportive
to expand business and make new innovations in it. Governments tax exemption may help
garment industry to reduce product cost and offer cheap prices to international customers.
Garment industry can gain good market share in foreign markets.
5. CONCLUSION
This research determined that so far the Pakistani garment industry is performing well in all
the concerned areas, however, there are some key areas which can be improved to enhance
export competitiveness of garments industry in global markets. Pakistan has abundant cotton
resources and better quality cotton yarns at very reasonable prices, which can be utilized like a
competitive advantage to get business in global markets. Beyond that, Pakistan has enormous
labour force resources availability; on the other hand, there are some unskilled and semi-skilled
labours but still labour cost is inexpensive than other countries, so these factors can be
supportive to become competitive in foreign markets. There is good communication and
transportation infrastructure to facilitate the garments industry of Pakistan. For communication,
there is modern and up-to-date technology to contact customers in different regions of the
world and cheap communication has also directly impacted to reduce production cost.
Garments industry companies are normally privately owned by domestic businessmen in

Pakistan. They are keen to develop and explore the garments business by using various
strategies according to competition situations in domestic and global markets. There is good
potential to materialize local demand in Pakistan because generally, local companies are
completely focusing on garments exports in different world markets and dealing with various
brands to manufacture garments according to their requirements. The garments business
companies must work to launch their own brands in domestic and international markets and
expand their business accordingly. This would be support for new innovation in present
garments products and the new garments as well to manage buyers’ demand accordingly.
Pakistan is the 6th largest populous country in the world with around more than 193 Million
populations, this is a huge market for local garments producers to capture and materialize
business in domestic markets.
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There are many hundreds of factors which are directly or indirectly influencing export
competitiveness of Pakistani garments industry such as energy prices, energy crisis, law &
order condition of the country, increasing prices of raw materials, lack of investment,
government policies, political instability and corruption, etc. All these factors are creating
obstacles to get the competitive advantage in worldwide markets. The government should
support in all these areas for survival and flourishing the garment industry of Pakistan. The
term competitiveness is the burning issue in the world economies; each country is putting
efforts to be competitive in all the areas and products to capture a prominent international
markets. For further research, this prevailing competitiveness of Porter’s Diamond model can
apply in other textiles segments such as spinning and weaving sectors to evaluate prospect of
results along with other factors, which are influencing the competitiveness of an industry.
6. RESEARCH STUDY PRACTICAL IMPLICATIONS

This research has significant practical implications for several regional governments, garments
associations, garment enterprises, R&D institutions for assessing the garments industry
competitiveness. Through applying this Porter Diamond model, a firm can identify their
strengths and weaknesses to confront the competition level and be supportive to make best
decisions accordingly. This research work provides guidance to industry managers,
consultants, experts and researchers to get to know that where garment industry stands at the
moment, after detailed analysis, they could take useful decisions to increase its competitiveness
level.
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Pakistani Ready-made Garments Industry Export Competitiveness:

Article · December 2018

Muhammad Abrar Mohsin Bashir

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Pakistani Ready-made Garments Industry Export Competitiveness: Evaluation in The

1 Associate Professor, Lyallpur Business School, GC University Faisalabad-Pakistan

Keywords:Pakistan Ready-made Garments Industry, Exports, Competitiveness, Porter’s

Table 1: Pakistan Ready-made Garment Exports

Figure 1:Competitive advantage of Porter's diamond model (M.E Porter, 1990)

4.3.1 Factor Condition

Source from: The Statistics Portal, (2016) www.statista.com

4.3.1.2 Raw Materials

Source: Pakistan Spinning industry, Memon (2016), Pakistan Textile Journal)

$0 $100 $200 $300 $400 $500 $600

Figure 3: Monthly Minimum Wage of the Apparel Industry: 2016

4.3.2 Demand Conditions

According to Porter’s diamond theory, by utilizing existing factors of competitive

Garments industry companies are normally privately owned by domestic businessmen in

6. RESEARCH STUDY PRACTICAL IMPLICATIONS

Jhamb, P. (2016). An Application of Porter's Diamond Framework: A Case of Sports Goods

Sectoral Competitiveness and Value Chain Analysis Readymade Garments (2016).

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