How OVERALL ECONOMY Affects Sri Lankan Outfits Industry Economics Essay

At present, the whole world has been adversely affected by the global financial crisis (2007-2010). Not only the most effective counties in world such as US and European countries, but also expanding countries such as Sri Lanka been handled by the problems more negatively.

The ultimate purpose of this is to evaluate the impact of global economic turmoil on Sri Lankan clothing industry. The entire Sri Lankan garments industry has been negatively touched by the global economic crisis and finally it has been resulted in increase uncertainties within the industry.

The main objective of this article is to judge how the Global economic crisis has been damaged on Sri Lankan apparel industry. The impact of Macro environmental factors & MESO factors credited to global economical turmoil will be mentioned.

Key words: Global financial turmoil, Sri Lankan garments industry, Macro environment, MESO environment

Task 01

1. 1 Introduction

The reason for this article is to evaluate and measure how the economic crisis affects to the Sri Lankan clothing industry. Thus, I've taken economical downturn as the Macro theme and the lessening demand because of the monetary downturn as the Meso theme in my article and also mentioned how it effects to the marketing all together.

To publish my article, I have already picked few important journals which are anticipated to extend my thoughts to the relevant market.

Macro theme: The economic downturn

Economic downturn of the world have an impact on right to the the majority of the countries adversely. It affects Sri Lanka as well, especially for the apparel industry in Sri Lanka. A lot of the garment factories were shut down and downsized their activities, so that it has been damaged adversely to the Sri Lankan clothing industry and career as well. Under Macro theme, we have reviewed about the Economic downturn and its love to the selected industry.

Meso theme: Decreasing demand

Decreasing demand drastically of the garments industry in Sri Lanka is seen as the result of the negative changes of the economic crisis which immediately affect suppliers, vendors, competitors and the customers. Because of the fluctuation of the exchange rates and the decreasing of per capita income, the all above factors have been damaged negatively. Further I've discussed how the Meso factors react to the determined Meso theme and the activities they have taken and the relationship between them.

1. 2 The most suitable potential publications

1. 2. 1 Business week (Bloomberg Business Week)

This is a global business newspaper which inspires market leaders to carefully turn new ideas into action. This post of the publication can create global talk among the business enterprise professionals. This newspaper has more than 4. 7 million viewers every week in 140 countries. This journal founded in 1929 and the existing publisher is Stephen J. Adler and its own publishing weekly basis. This magazine mainly targets business professionals, high-income and highly educated people as its target audience to attain its ideas.

Due to more than 4. 7 million visitors, distribution among 140 countries and the considering about its marketplace, this publication would help me to distribute my findings among more than 4. 7 million people on the globe. Its' weekly frequency would help remind my thoughts as well.

(www. businessweek. com)

1. 2. 2 TIME

This is an American news mag; it covers almost all of the countries in the world. TIME EUROPE includes the center East, Africa and since 2003 it includes Latin America also. TIME unveiled to Asia as TIME ASIA is situated in Hong Kong. TIMEs south pacific edition covering more developed countries such as Australia, America, New Zeland and the pacific islands located in Sydney. The publisher of this magazine is enough time Inc. and also as the prospective market, TIME focusing on business audience which posting weekly.

Most of the investors of Sri Lankan clothes industry are from countries such as America, Europe and Australia etc. So, this short article helps them to get a clear picture about the current situation of the Sri Lankan outfits industry. To have the investment decisions, I believe this article really helps them to accomplish more success.

1. 2. 3 LMD Publication (Lanka Monthly Process Magazine)

This journal is not constrained in a single area. It includes the gamut of business, political, management, current affairs etc. which really helps to corporate leaders, managers, directors & professional to express their views & make new ideas. Not merely Sri Lankan content, but it also protects both Sri Lankan & international corporate, funding, economic, politics etc. This mag mainly targets business and thoughts and opinions leaders, senior professionals and experts, the educational & diplomatic areas and civil contemporary society organizations. It publishes every month under the publisher of Media service (Pvt) ltd.

To cover almost all of the segments in Sri Lanka and the international, this mag can help pass my concept of the article to its marketplace. Not only the experts, but it also protects the civil society. Thus, I believe this magazine would help me to develop my thoughts to each & every segment of the business enterprise world. Subsequently, I could expect a good respond, suggestions and novel ideas of visitors through this magazine.

(www. lmd. lk)

1. 2. 4 The Marketer

The Marketer can be an official newspaper of chartered institute of marketing which is posting by the Redactive Posting Ltd as a regular magazine. This magazine is delivered to all participants of chartered institute of marketing in UK and it's really available for non-members as well. The purpose of this publication is to provide in-depth analysis and practical manuals to help marketers to remain at the leading edge of the occupation, merging the Institute's academic experience with marketers' true to life experience to market marketing as a main business function. This journal mainly targets marketers, specialists as its marketplace. This is extremely popular magazine among all marketers around the world.

(www. themarketer. co. uk)

Thus, I can express the existing situation of the Sri Lankan clothes industry to the marketers through this newspaper. And in addition it's easy for marketers and specialists to get an improved idea to create their marketing decisions & activities in Sri Lanka.

1. 3 The Selected magazine

Out of the above mentioned four magazines, I have selected LMD journal to create my article because both its marketplace and my article's target market seems similar. Not only the local visitors, but LMD has also reached global visitors as its general customer bottom.

Sri Lankan clothing industry is one of the leading market sectors before the monetary crisis hit Sri Lankan economy. Since world economy is been dealing with the problems again, Sri Lankan attire industry has a good chance to grow up once more. Since LMD highly focuses on business and thoughts and opinions leaders, diplomatic communities as its target market, I can expect a good respond from them through my article.

To take marketing decisions and put into action new marketing activities, marketing professionals must be aware about the current changes of the industries like garments. Thus this information would help them to get a much better idea about the current situation & future trends of the Sri Lankan apparel industry.

Due to the above mentioned factors, I have selected LMD publication in order to publish my article and it could help me express my views to my aim for readers.

Task 02

2. 1 Introduction

The current global financial meltdown (2007-2010) took place with the failing of several large US financial companies in September 2008. Even though many business journals and monetary specialists warned to US and Western mortgage banks, investment banking institutions and financial businesses about a financial meltdown, nobody was prepared to face such a predicament. Due to loose monitory procedures, excessive capital moves and high borrowings, the US and Western economies led to an economic problems that triggered to credit problems and major deficits. By the first week of Sept 2008, the global credit market, investment bankers and financial institutions were highly influenced and threatened by the problems and started to play a critical role in economies in all above the world

Causes for the global financial crisis (2007-2010)

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

Credit boom

Credit boom could be discussed as the shortcoming for consumers and companies to get loans. Corresponding to Dell'Ariccia D, Igan D and Laeven L, (2008), while the possibility of a banking problems boosts significantly (by between 50% and 75%) during booms, historically no more than 20% of boom episodes have finished in an emergency.

Housing bubble

housing sector was the largest progress, this because the finance institutions gave large sums of money to purchase homes, and brought with it that individuals started out to buy homes, causing an increase in demand for these, this resulted in Homes are trading at high prices in many instances came to the speculation. People borrow to buy your home, then expect the price for the same rise and sold, which obtained the money to pay the debt owed to the bank and demanded a fresh loan to buy another home, this trend called "property bubble". This lasted a short while and interest levels commenced to climb to try to lower the high degrees of inflation, obtaining credit was no longer very easy, and housing demand dropped and prices of the.

According to Akrasane N (2009), the following causes have been directly affected to generate the world monetary crisis in to this stage.

1. Global macroeconomic imbalance

- The industrialized Western consumed too much.

- The rest of the world, especially Asia produced too much

(Refer Appendix 1)

2. Free flow of capital in the global financial market helped facilitating and accumulating the imbalances

(Refer Appendix 2)

Consequences of the crisis

(Source: 23rd Asia-Pacific Roundtable)

Even though many people emphasized that Sri Lanka offers no result by the economical crisis, there is no chance of success for a tiny market like Sri Lanka as the whole world getting damaged by the economical recession. Sri Lanka too now has began to feel the consequences of the turmoil since a sizable range of private sector organizations have been shut down and our main exports such as garments, tea, rubber, coconut, cinnamon, jewel plus some other main exports have been burning off the demand and the marketplace and their prices are slipping down as well. A large number of employees have been burning off their jobs therefore of that.

One of the key fields that afflicted by the problems is Sri Lankan attire field. Sri Lankan clothing sector is highly influenced by this problems and the sector is facing substantial problems such as closure of garment processing plants, loss of forex and doubt of employment. Predicated on a detailed survey conducted, around 75 garment creation plants have turn off and thousand of garment employees have been getting rid of their jobs they never thought could be realities.

The reason for this article is to judge the impact of global financial crisis on Sri Lankan garments industry. Mainly the key problems that Sri Lankan clothing industry has been faced due to the global economic problems, how they impact Sri Lankan current economic climate and their impact of MESO level changes like suppliers, rivals, marketers and customers.

2. 2Macro Environment

Under macro environment, Cost-effective changes upon Sri Lankan apparel industry credited to Global financial problems will be talked about.

The world economic turmoil (2007-2010) has been participating in a major role not only in the economies folks and Europe, but also in the economies of the other producing countries in the world. The main trading banks, finance institutions and world credit market has been highly handled and collapsed by the crisis and led to various economical and cultural issues.

Not only the most powerful economies on the planet such as US and European countries, the growing economies such as Sri Lanka too has been touched by the crisis now as main industries such as garments, tourism, tea, coconut, gem etc have been getting rid of their markets plus some of the manufacturing plants have turn off as well.

Sri Lankan clothes sector also has highly affected by the turmoil since it's facing some crucial problems because of the doubt of the international market. In the long run it has been resulting in arise many unforeseen problems in Sri Lankan attire industry as discussed below. The issues that have been raised due to the economic crisis could be illustrated as below.

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

Loose demand in the international market thus experiencing distinct falls in prices as well as demand.

Since apparel industry is Sri Lanka's biggest industrial export, it takes on a significant role in Sri Lankan current economic climate. Our main export market segments such as US and European countries have not retrieved from the turmoil yet; it has been led to reduce the demand for Sri Lankan apparel. Thus not only the clothes industry but also the complete economy would are affected because of lose of demand and reduction of the market show. Based on the latest records, garment exports fell by 20 percent in February 2010 and by an identical ratio in January.

Conversely with competition increasing from the other key opponents such as Bangladesh, Vietnam, China and India, the clothing sector of Sri Lanka is constantly under pressure to stay cost competitive of these recession time.

Job loses

The economic turmoil has been led to happen many labor issues in Sri Lankan labor market today. Hardest strike are young employee and women, who represent 90 % of the garment workforce.

According to T. M. R. Raseedeen, general-secretary of the National Connection for Trade Union Research and Education (Aspect), more than 50, 000 workers lost their careers in the 2008-09 durations as some 50 largely garment factories finished due to lack of orders.

(http://ipsnews. net/news. asp?idnews=51268)

For example, Cinotex, a garment producer that has been in Katunayake for days gone by 25 years, let 3, 000 of its staff go, but asked these to resign voluntarily to avoid having to pay compensation. The identical happened previous August to Jakalanka which shed 2, 000 jobs. West Apparel slice about 1, 000 careers. MS Apparels, with plants in Liyanagemulla and Katunayake, informed 1, 300 of its individuals who they were out of employment.

(http://ipsnews. net/news. asp?idnews=51268)

Closing garment factories

Most of the largest garment firms have never highly handled by the recession but mainly small and medium size factories have been terribly affected.

It is mostly small and medium-scale factories that contain experienced the brunt of the monetary crisis. This past year the amount of garment factories dropped to 250 from 300 in 2008.

Future opportunities and trends

Since the risk of the global financial crisis is been lowering and world overall economy is been recovering, there are a few chances and opportunities to defeat from the downward in Sri Lankan garments industry and increase the demand for the clothes.

Enter directly into new market segments and captures new customer locations.

Since our key markets such as US and Europe has been knocked terribly from the recession, Sri Lanka can find out some other alternative markets to be able to boost the sales and demand for our apparel. Sri Lanka can concern about other market segments such as Middle-East, African countries, Russia and other well toned nations.

Introduce ground breaking & creative products to the market.

In order to gain new market segments & keep carefully the existing markets, produces can consider about producing more creative and innovative garments. Subsequently it would be easier to attract the customers and boost the demand for our apparel. Manufactures should concern about the personal preferences of the international clients and new developments and emerges of the marketplace as well.

Quality improvements

Many international customers are quality conscious than price mindful. Thus it might be an edge if producers can more improve the quality of the prevailing products. High quality products can gain high demand from the customers and develop the image of the productions as well.

Focus on high come back activities.

Exporters can commit on high come back activities alternatively than go for less go back activities which means ultimately increase the revenue and make our apparel industry firm as well. Furthermore Sri Lanka can go for long term or short-term contracts with the other countries or can concern about getting ultimately more duty benefits and profits as well.

MESO Environment


When there's a continuing economic turmoil in the country, customer's purchase vitality automatically goes down and the demand for goods and services comes. People might possibly not have enough money to even satisfy their basic requirements. Thus the demand for apparel from customers falls as well which pushes garment factories to lessen the total amount they can invest in their business and reduce the production.


Mainly the suppliers of the clothing industry could be shown as follow,

Fabric manufactures

Thread manufactures

Machinery & other tools suppliers (Equipment & tools that use for garment processing)

Chemical manufacturers that produce chemicals designed to use for garment making.

The previously listed parties have been highly afflicted by the turmoil being that they are directly associated with the outfits industry and they have been lost demand for their products.

As mentioned previously, 250-300 garment factories have been sealed and the suppliers of those factories would adversely affect since they make losses anticipated to less demand.


Local and international garment retail outlets can be studied as the distributors of the clothing industry. When there's a less demand for clothes from the marketplace, sales of vendors fall down as well.


When there's a less demand in the market, the competition among the list of suppliers also goes down. A good competition brings about source high quality n better goods and services to the marketplace. When there is a less competition on the market, it leads decrease the entrance of new, impressive and strategies to the market as well.

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