Chapter I OVERVIEW OF VIET LINH TRADING JOINT STOCK COMPANY 1.1 About the foundation and development 1.1.1 History of the company Vietnamese name of the company: CÔNG TY CỔ PHẦN THƯƠNG MẠI VIỆT LINH International trading name of the company: VIET LINH TRADING JOINT STOCK COMPANY Brief name of the company: VIET LINH.JSC Viet Linh Trading Joint Stock Company was established under the business license No 0600491751 issued by Department of Planning and Investment of Nam Dinh Province on 11/10/2005 Address: Headquarter: No 130, Area I, Con Town, Hai Hau District, Nam Dinh Province - Representative office: No 258, Nguyen Van Troi Street, Phu Ly city, Ha Nam Province Phone: 03516298639 Fax: 0351 3829 078 Email: vietlinhnd@gmail.com.vn Number of account: 3209201000531 opened at Agribank, Con town – Nam Dinh 1.1.2 Phases of development The initial total capital of the company is 7.250.000.000VND Initially, the company set up production lines with the personnel of 92 members Over the last years, Viet Linh has continuously developed in all aspects The capital of the company was 7.250.000.000VND in 2005 and went up to 12,460,364,000VND in 2009 The company has renewed machinery and technological process Also, Viet Linh applied scientific technology on production and expanded the scale of production The annual output has increased steadily, creating more jobs for workers and more profits for the company At the present, the company is a reliable partner of both domestic and foreign customers 1.2 Evaluation of the company’s operation Viet Linh Joint Stock Company has won many awards for the attained success: - In 2007, the company is merited for outstading achievements in operating business by the Nam Dinh People’s Committee - In 2007, the company is given the certificate of merit for outstanding task completion by the Department of Taxation - From 2007 to 2009, Mr Bui Duc Thien, director and president of the board is awarded by Association of Young Business in Nam Dinh Targets of the company are the stability, the development, the expansion of production and customer attraction Thus, the company has strived to stablize business methods, improve the management of production at the same time with looking for new business opportunities and new customers to achieve the highest result Chapter THE EXPORTING SITUATION OF VIET LINH JOINT STOCK COMPANY 2.1 General accessment of exporting situation 2.1.1 Exporting structure of markets: In recent years, Viet Linh Joint Stock Company has boosted the activity of market research to understand the demands and tastes for garments in the world market Currently, the company has partnerships with many foreign companies and customers, products of the company have been exported to many countries like Germany, Russia, France, Japan, Korea Table 2.1: Exporting markets of the company Unit: million VND Market Germany Japan Korea Russia 2006 3.600 1.500 2.100 1.850 2007 3.955 2.845 2.684 2.340 2009 2008 4.350 2.150 1.775 2.650 4.500 2.245 2.055 2.400 (Nguồn: Department of accounting finance) It can be seen from the table 2.1 that: Export turnover gained from markets changes differently but the total export turnover of the company still is quite stable in general Ending quotas of some markets and the influence of the global economic downturn in 2008 are the causes for the phenomenon However, some markets like Germany and Russia have been expanded since these markets have been gradually recovering from the crisis, leading to the increase of exports Therefore, total export of the company also increases * German market Germany is one of the largest textile importers in the world In 2006, the country imported 90 billion USD of textiles (in which garments accounted for 60 billion USD) Imported textiles which are diverse, traditional and competitive provided by big garment exporters such as Mexico, Canada, China, Pakistan, South Korea, India, Taiwan Textiles which are imported to German market must have trademark, meet regulations and comply fully with customs laws Customers often order big batches of goods and require good quality as well as in-time delivery Businesses must follow the contents of the SA8000 standard for social responsibility Over the last years, the company has exported to the German market over 30,000 products each year, mainly shirts with a total export turnover of over 3.5 billion USD * Korean Market This market has a moderate population but the standard of living and the level of garments consumption are quite high South Korea is one of the largest garment processing markets of the company In details, the company's exports in 2006 amounted to 2.1 billion USD Thus, exports to this market also account for large proportion in the total export turnover of the company (over 20%) and contributed to increase sales and make profits for the company However, in 2008, the export value decreased of about 0.31 billion USD compared to 2007 due to the impact of the world economic crisis However, South Korea is still a large market that the company needs to exploit more thoroughly in the future since exports to this market are mainly easy-to-do products like Two-layered and Three-layered Jackets * Japanese market Japanese garment market is a huge market without quotas Since the labour cost of garment workers in Japan is more expensive, Japan switches to import from outside Japan's current population is about 140 million people and income per capital is about 33,700USD/year, making a great demand for garments Every year, the demand for imports of Japan is 3.5- billion USD Imports from Vietnam reduced by 15-20% and some partners had ended the contracts However, in 2006, the volume of exports of Viet Linh was 14,500 units and the highest number is in 2007 with 30,000 products * Russian Market Russia is the familiar market of the company This is a huge market with the population of over 300 million people who need to import annually billion USD of garments and Russia is also a relatively easy-to-please market Main pattern of exports to markets of the company are direct exports The company's traditional product for this market is Shorts However, Russia is a volatile and risky market Since Vienamese output is slow, the design is simple and the payment method is less flexible in comparison with other countries, the share of Vietnamese garment enterprises also reduced The company strived to fulfil the requirements on product quality and delivery schedule One the one hand, the company tried to create jobs for workers On the other hand, Viet Linh did the best to improve the reputation with foreign customers In the future, the company will increase the rate of processing garment under the method of definitive purchase, be active in the production and make up of domestic materials In recent years, the company has established long-term relationships with many potential customers Some customers desire to long-term business with the company These customers not only provide orders but also introduce new customers to the company 2.1.2 Exporting structure of products Table 2.2: Exporting products of the company Products Shirt Elected Skirt Shorts Children’s cloths Jacket Total 2006 2007 2008 36.986 73.133 385.231 86.186 581.535 36.985 38.245 88.821 80.240 0 394.089 400.442 94.194 75.420 614.089 594.347 2009 40.699 82.617 933 350.572 130.018 604.839 (Source: Department of export and import planning) Table 2.2 shows that there are different changes of number of different products over the years, especially on children’s cloths and jackets However, there are some products which still remain stable, even the German market is expanded Shirts Shirts are traditional products of the company Viet Linh is very reputable in producing and processing all kinds of shirts made of cotton and viscose fabric Annually, the company exported approximately 40,000 units to the German market This is because of the higher quality of clothes and better designs In recent years, the number of this product is constantly increasing In 2009, the amount of this product increased more than 2008 by 2454 units, reaching 40,699 units This shows that company has invested much in modern machinery and equipment, improved management and skills of workers to produce more effectively As a result, the export turnover of this product reached 3.6 billion USD last year, showing that the product has attained a certain position the foreign market Currently, Viet Linh has been having modern technological lines such as neck presses, dryers, washing machines…which can contribute to produce all kinds of shiny and durable shirts which meet international standards for exporting Shirt which is one of the goods that the company will continues to invest, develop and expand the market is one of the key goods of the company Jacket In recent years, Jacket is sold in large numbers in both the domestic and the market In 2006, the number of exported jackets and coats on the market is 86,186 units and increasés to 94,194 units in 2007, an increase of 9% In 2008, exports of this product have decreased compared to 2007 due to the impact of the global economic crisis However, this product tends to increase due to the cost of processing in Vietnam is relatively lower than that of other countries Production continues to grow strongly in 2009, showing that this product is still invested by the company The proportion of this product in total export turnover is quite high Shorts Short jeans and khaki shorts account for the smallest proportion of the exports of the company In 2009, exports of short jeans wass nearly 1,000 units Russia is a relatively easy-to-please market so that the company need pay more attention to invest to this product Currently, the company has invested more modern equipments which are used to manufacture fabrics of jean Jeans are consumed in large amount by both the domestic and foreign market, bringing back high profits for the company since the materials for jeans are produced domestically Children’s cloths In 2006, the company exported 300,000 products to some Eastern Europe countries Export turnover of this product reached the highest point in 2008 with 2.4 billion USD In 2007, exports reached 394,089 products, which increased by 2% over the previous year In 2008, the company exported more than 400,000 products Currently, Viet Linh is looking for sources of raw materials and making unique designs so that the company can actively produce and export products to many more countries In the future, if the domestic fabric producing companies improve the quality of denims and Viet Linh has suitable designs for the domestic market, the company’s jeans obviously are consumed in large number due to high demands of young people 2.2 Analysis of measures taken by Viet Linh 2.2.1 Situation of maintaing and expanding markets Over the past time, though Viet Linh has tried to find new customers and expand the market but the level of consumption is still lower than the production capacity In the near future, the company should be more active in maintaining, expanding traditional markets and preparing to reach new markets like US and EU, utilizing production capacity of companies to increase profits Exporting markets in Asia like South Korea and Japan are the main and relatively stable market of the company However, these markets are also important for other domestic garments and textiles companies Therefore, in order to keep traditional customers, to maintain and further expand market shares, the company needs to strengthen the competitiveness in comparison with other companies The competitive advantages must base on renewing technologies and materials, continuously improving the quality of products and gaining the trust of customers For some markets in Asia, the products of the company are re-exported once again to markets in Europe and US because of the low production costs in Asian countries including Vietnam The company should figure out a way to export directly to re-exported markets to gain higher prices and profits EU is a large and expading market The population of EU is over 460 million people, forming an economic area with the largest consuming power in the world In recent years, EU has admitted more new members Moreover, EU includes developed countries with high income per capita, large quotas for garments and easy goods transportation The company should take advantage of this opportunity, actively researching the demands and the characteristics of EU market to give out reasonable production plans Because EU is a relatively new market for the company, the company needs to set up an advertising strategy, large-scale introduction of products to attract customers 2.2.2 Situation of promoting research activities for new markets Market research is especially important for garments products since the products are very sensitive, highly-demanded for conformity with the requirements of society, cultures and fashion trends It is even more important for Viet Linh since the products of the company are exported to many countries However, market research activities of the company have not been paid serious attention Annual revenues of the company among various markets are indifferent The company needs to find out more information about law, culture, society, customs and consumer tastes of the current market as well as future targeted markets including US and EU Collecting and interpreting information are the key factors to make right decisions on production and business strategies Viet Linh should organize a department which is in charge of market research and under the control of Department of import-export planning The work of the research force is unclear the majority of staff in the Department of import-export planning only set up production plans for meet signed orders and perform import-export tasks Officers who are in charge of market research are both inexperienced and in shortage One of the results of the market research indicates the basic characteristics of some targeted markets Table 2.3: Comparison of garments consuming characteristics between US and EU Market US EU - Color Prominent Diverse Design Convenient Formal Quality 7/10 6/10 Price High Average US market which is diverse must be carefully studied since there are many factors behind the diversity People from different continents and different races flock to live in US, creating the diversity of race, religion and style of dress Being a nation with the early developed industry, US people are very active on working with high intensity In such conditions, they often preferred to products which are simple, convenient in order to save time Their favorite colors are not outstanding ones, so the company needs to pay special attention to this Moreove, US market is also divided into different regions with specific characteristics of each region The company also needs to study carefully the characteristics to launch products that meet their requirements Table 2.4: Consuming characteristics for Garments in US Region South West Characteristic Fashionable Middle West Comfortable South Casual Other regions Diverse Additionally, another feature of this market is the inequality of imcome, which has becomed more rapid and deeper along with the development of the 10 US economy So, the company needs to strengthen market research for middle and low-classed customers since the current garments are only meet the demand of this market segment Currently, the market research activities are still weak By actively collecting and analyzing market information as well as coopertating information centers, the company will have certain understandings and data to meet the demands of markets 2.3 Advantages and Disadvantages 2.3.1 Advantages It is essential for any company in self – accessment regarding to the bussiness operation Viet Linh has several advantages when the company exports to foreign markets: - Besides main items like jackets, pants, shirts, knitted product, Viet Linh has strived to exploit other goods such as hand-made embroidery and other cloths for exporting Though these exports not have great value, they contribute to diversify export structure and increase revenues for the company - Processing is the company's main export form And the company has tried to take advantages to directly access to this market Small and mediumsized importers with orders of about 2,000 USD or overseas Vietnamese are partners to whom the company aimed in the first step to reach new potential markets - Price is the main competitive method of Vietnamese textiles In order to improve the competitiveness of textile and apparels, the company has actively been looking for domestic sources of raw materials to increase the localization rate of products, to lower the production costs and to attract more importers Regarding to the quality of products, Viet Linh has focused on selecting 11 reputable and capable manufacturing units to confirm the quality of the company’s product Moreover, the company has imported sewing lines and sold to producing units with the friendly price to help them innovate the equipment and improve the quality of product - In order to retain old customers and attract new customers, the company has implemented the attractive payment policies like: deferred payment, payment for every shipment with binding conditions, T/T payment - Regarding to the design activity, the company is very active on looking for new models to introduce to customers If the customers agree, the production will be carried out afterwards - For market research activity, the company has set up teams of market promoting and developing who are in charge of collecting information from different sources such as international publications, the internet, the Chamber of Commerce and Industry, the Vietnam Textile and Apparel Association in order to make the right decisions on meeting the demands of customers 2.3.2 Disadvantages Despite efforts to increase exports, the company still faces up with obstacles and limitations The challenges of the company are reflected in the following points: - The company has painstakingly exploited many other products, but these products still account for only a very small value of key exports which are twolayered jackets, men's shirts made by or children’s clothes in simple designs - Policies of reducing the weight of processing exports and increasing the proportion of direct exports were implemented but the share of direct exports did not increase significantly - The quality of products has not been significantly improved After the cases of fabric colors in the contract with a Japanese company and of incorrect shirts in the contract with a Korean partner, the company has 12 focused on controling the quality of fabrics and sewings before exporting to limit the errors However, the domestic fabrics can not meet the quality requirements, so the company has yet exploited the opportunity of domestic sources of fabrics Drawbacks of the quality of products are the common limitations of the Vietnamese textile industry - The design of products is poor These products are often very simple and not fashionable The company mainly uses foreign models to produce Therefore, the company has yet had unique products to attract customers - Market research and Customer Searching activities are not effective The information about the market is mainly secondary information, so the accuracy of market assessment is not high The company is inactive on searching for new customers so clients always come to the company first - Promotion and Advertising activities are not improved - To limit on signing big contracts Chapter SOLUTIONS TO PROMOTE EXPORTING ACTIVITIES OF VIET LINH JOINT STOCK COMPANY 3.1 Direction for development 3.1.1 Missions set for the company With the goal "The quality of product is the decisive factor of competitiveness," the company has tried to the following tasks: improving the management, arranging and using labors rationally, producing and managing in line with international standard in order to penetration and build the credibility for customers Identifying key products like shirts and jackets, and exploiting the strengths of new products (pants, jeans) are also important The company will design and provide products which are not only in high 13 quality but also fulfil the tastes and habits of customers Classifying market segments by age, gender, income and different geographical areas reasonably is also a important mission Looking for new customers, signing exporting contracts, making a certain position for the products in the US market are important missions Enhancing the management to reduce production costs and increase competitiveness of products in both domestic market and exporting markets 3.1.2 Directions and targets of the company About the markets: + Domestic market: Continue to expand markets of southern and central provinces, invest more in personnel of design to introduce products which are in line with the changes of market + Foreign market: Strengthen and develop markets for ready-made garments in the Eastern Europe, Germany and Japan At the same time, with the efforts to establish diplomatic relations between US and Vietnam, the company will study the business environment in US to gradually penetrate and develop this market Exports to this market are expected to account for 50% of the total revenue of the company About the investment: + Invest in facilities and technologies of plants in Nam Dinh where the company has many advangtages + Build sewing plant with new technological lines in Nam Dinh to increase the competitive advantage of products About the revenue: 14 The growth rate of export revenue to 2012 must reach 40 billlion VND About the volume: The company targets to increase the volume of exports by 10% every year About the income of larbors: The average income of workers increased by 3% compared to the same period last year The cause is the switch from the mode of processing production for export to the mode of self-trading, making use of machinery to meet the customers’ demands Labor productivity increased by raising the level of skills and innovating equipments The company also maintains the average labor rate of 200 people 3.2 Solutions for promoting exports 3.2.1 Promote and enhance market research activities Market research is the first necessary job for any company to maintain and expand the market Market research in the broad sense is the process of investigation to find out the prospects of consumption for a specific product or group of products and the methods to achieve goals The market research process consists of collecting information and data about markets, comparing and analyzing the data and giving out conclusions These conclusions will help managers make the right decisions for marketing plans Market research contributes mainly to the implementation of the guideline "only sell what the market demands instead of selling what the company has" In recent years, Viet Linh Joint Stock Company has focused developing market research activity to capture the demands The information about export markets is not much and incomplete The market research staff is often assigned to perform some other work so they are usually not professional and work inefficiently These are the difficulties encountered by the company in 15 market research activity To solve these difficulties, the company needs to: - To better job of gathering information about the demands for products The systematic information is collected directly or indirectly from all media channels (newspapers, radio, television, the information from the Government) - To improve professionalism in activities of processing information: set out the criteria to classify and synthesize information correctly - To study market and other relevant factors - To organize a department for market research under the control of the department for market planning The questions which must be answered are: what to produce, which volum the market demands, who customers are, what trading methods are, what business strategies for each stage are 3.2.2 Invest to new technologies Besides the development in width, depth dimension development will be considered to be mainstream direction in the future When the advantage of cheap labor is fading, the high level of technology becomes the basic factor which attracts foreign partners and increases the competitiveness in the market The decision of investment should be depended on the financial capability and required tasks of instead of on modern equipments Inspection and reevaluation of the entire machinery to make preferred investments in technological innovation for producing key commodities such as shirts, jackets The company should prioritizes labor-intensive technologies because labors are abundant and the costs are not high To make effective investment, the company needs to improve the quality of the formulation and evaluation of investment projects The company also needs to diversify plans of funding 16 Funds can be raised from the own company, the State, financial organizations or even employees 3.2.5 Invest to build and develop the Brand of products Brand building is actually important for Viet Linh when the company is trying to assert its position in the market Thus, in order to make a good impression to customers, to promote and advertise products, the company needs to create sepecial characteristics for the brand To build and develop the brand of products successfully, the company needs to the following tasks: - To improve the quality of production and management activities so that the company can create the prestige for the brand through the quality of products, gaining customers’ support and trust - To export directly to foreign markets because if exports are in the form of processing to foreign countries, the company can not build the own brand By direct exporting, the company is fully autonomous in business and has legal rights for the products - Finally, after building an own brand, the company must the management and protection of trademarks in order to develop the reputation of the brand as well as the reputation of the company If Viet Linh becomes successful in the development and implementation of goods brand, the company will gain more profits and achievements: - The reputation of Viet Linh’s products will increase, creating favorable conditions to promote, advertise products and improve the effectiveness of sales promotion The export of products will also become easier - Developing the brand of goods will create favorable conditions for the 17 company to penetrate into hard-to-please markets but full of potential like US, EU which requires very strictly about the origin and the brand name of products - When the reputation of Viet Linh has been well known through the brand name of goods, the company can export new products with the brand name which has been popular 3.2.6 Invest to design activities Currently, products the company have not met the consumption needs of customers Company is facing with the competitiveness of domestic enterprises and the Chinese goods while the designs of products are not diverse The company just pays attention to ordered designs of customers in stead of focusing on making models which can fulfil the customers’ needs To actively produce for meeting the demands of customer in terms of gender and providing goods seasonally, the company must: - Build and develop specialized parts for fashion design - Recruit more employees to perform the task Employees can be graduates of universities, colleges or other candidates having experience in the garment sector in other companies - Have policies to encourage the enthusiastism of design teams who can design products meeting the demands of customers At the same time, the company can cooperate with Fadin fashion Institute to create products which are diversified of designs and meet the demands of consumers - To examine and evaluate the implementation of designing plans are essential The inspection must be carried out regularly in order to improve the designs and to avoid the boredom This work needs to be coordinated with the department of marketing This is necessary because customers not like 18 identical products - Also, regular cheking help the technical department to improve the design in the production so that the products have new features to attract the customers Seasonal designs can have many different styles and colors but customers prefer only a certain number of designs Thus, designers need to make samples for new designs, display at the exhibition or attend fashion shows to introduce to clients, and then using the questionnaire to find out customer tastes and decide the appropriate sample for mass production For the garments, plans of designing should be regularly monitored to adjust to the reaction of customers and limit mimic problems of other companies Therefore, designing new models is very important to the company The benefits of designing new models are: + Shorten the development cycle of products + Demand-oriented designs help the company meet the needs of customers These benefits will contribute to improving the competitiveness REFERENCES http://www.vietlinh.com.vn Vietnam Trade Promotion Agency, Ministry of Industry and Trade Vietnam Chamber of Commerce and Industry –VCCI 19 ... deeper along with the development of the 10 US economy So, the company needs to strengthen market research for middle and low-classed customers since the current garments are only meet the demand... - Recruit more employees to perform the task Employees can be graduates of universities, colleges or other candidates having experience in the garment sector in other companies - Have policies... products + Demand-oriented designs help the company meet the needs of customers These benefits will contribute to improving the competitiveness REFERENCES http://www.vietlinh.com.vn Vietnam Trade Promotion