The Impact of Geopolitical Risk on the International Supply Chain Strategies of Bangladesh’s RMG Firms

Abstract

Geopolitical risk (GPR) has become one of the most critical challenges for global supply chains, particularly in developing economies where industries depend heavily on international trade and imported inputs. Bangladesh’s Ready Made Garment (RMG) sector which contributes over 80 percent of national exports, remains acutely vulnerable to external shocks such as tariffs, sanctions and political conflicts. The recent U.S. tariff measures, coupled with growing U.S.-China tensions and regional conflicts, have intensified uncertainties across sourcing, logistics and buyer relationships for Bangladeshi exporters.

This thesis investigates how geopolitical risk influences the international supply chain strategies of Bangladesh’s RMG exporters. Using a qualitative multiple case study approach, primary data were collected through semi structured interviews with eight merchandising professionals representing export oriented factories. The analysis employed thematic analysis supported by Re-source Dependence Theory (RDT) and Institutional Theory (IT) to input firm behaviour and adaptation strategies under external pressure.

The findings reveal that Bangladeshi RMG firms face dual dependencies on Chinese suppliers for raw materials and on U.S. and EU buyers for demand, making them especially suspectable to geopolitical disruptions. Firms adopt several coping mechanisms, including market diversification, sourcing from alternate countries, logistics flexibility and buyer relationship management. Institutional compliance and digital transformation (ERP, traceability, AI based forecasting) also emerged as key enablers of resilience, though adoption remains uneven due to resource constraints. The analysis shows that while Resource Dependence Theory (RDT) explains firms’ strategic efforts to manage dependence, Institutional Theory (IT) highlights their need to maintain legitimacy under global compliance pressures.

This study contributes to international business literature by integrating RDT and IT to explain firm adaptations in a labour intensive, developing country context. It provides practical insights for managers on enhancing resilience through diversified sourcing and digital tools, and for policymakers on the need for proactive trade diplomacy, backward linkage development and SME support. Overall, the research underscores that geopolitical risk is now a structural factor in the competitiveness and sustainability of Bangladesh’s RMG industry.