SOLUTIONS TO IMPROVE EXPORT PROCESSING FORWARDING OPERATION AT MAT THANH JOINT STOCK COMPANY |

55 SOLUTIONS TO IMPROVE EXPORT PROCESSING FORWARDING OPERATION AT MAI THANH JOINT STOCK COMPANY .... Solutions to improve export processing forwarding operation at Mai Thanh Joint Stock

Supervisor: MBA PHAM THI NGOC BICH

Student: VU THI THU HOAI

Student ID: 70900321

Intake: 13

HO CHI MINH CITY, 2013

Supervisor: MBA PHAM THI NGOC BICH

Student: VU THI THU HOAI

Student ID: 70900321

Intake: 13

HO CHI MINH CITY, 2013.

I would like to thank Business Administration Faculty of Ton Duc Thang University has created the best conditions to help me finish this thesis

I sincerely thank to MBA Pham Thi Ngoc Bich who has conducted me to complete this thesis with the dedicated care

I thank to the managers and staffs who instructed me during time I interned at Mai Thanh Joint Stock Company

I want to say “thanks” to all teachers and friends who helped and supported me through the study period

Even though I tried my best to finish my thesis, some mistakes still happed I hope you could conpathyze and make suggestion to help me perfect it

Thanks!

Tôi xin cam đoan đây là công trình nghiên cứu của riêng tôi và được sự hướng dẫn khoa học của Thạc sĩ Phạm Thị Ngọc Bích Các nội dung nghiên cứu, kết quả trong đề tài này là trung thực và chưa công bố dưới bất kỳ hình thức nào trước đây Những số liệu trong các bảng biểu phục vụ cho việc phân tích, nhận xét, đánh giá được chính tác giả thu thập từ các nguồn khác nhau có ghi rõ trong phần tài liệu tham khảo

Ngoài ra, trong luận văn còn sử dụng một số nhận xét, đánh giá cũng như số liệu của các tác giả khác, cơ quan tổ chức khác đều có trích dẫn và chú thích nguồn gốc

Nếu phát hiện có bất kỳ sự gian lận nào tôi xin hoàn toàn chịu trách nhiệm

về nội dung luận văn của mình Trường đại học Tôn Đức Thắng không liên quan

đến những vi phạm tác quyền, bản quyền do tôi gây ra trong quá trình thực hiện

(nếu có)

TP Hồ Chí Minh, ngày tháng năm

Tác giả

Vũ Thị Thu Hoài

TABLE OF CONTENTS

CHAPTER 1 1

INTRODUCTION 1

1.1 Introduction 1

1.2 Rationale 2

1.3 Research objectives 2

1.4 Research methodology 3

1.5 Data source 4

1.6 Research organization 5

1.7 Research structure 5

CHAPTER 2 7

LITERATURE REVIEW 7

2.1 Concepts related to processing, export processing, forwarding 7

2.1.1 Processing 7

2.1.2 Export processing 7

2.1.3 Forwarding 8

2.1.4 Forwarder 9

2.1.5 Processing norms 11

2.1.6 Processing liquidity 11

2.1.7 Processing fee 12

2.2 Scope of forwarding 12

2.3 The benefits of using forwarding services 13

2.3.1 For the exporter 13

2.3.2 For the importer 14

2.4 Role of forwarder in global trade 14

2.4.1 The Customs broker 14

2.4.2 The agent 15

2.4.3 The consolidator 15

2.4.4 The carrier 15

2.4.5 Multimodal transport operator (MTO) 15

2.5 Export processing modes 16

2.5.1 By the ownership of raw materials during production 16

2.5.2 By processing fee 16

2.5.3 By the level of supply of raw materials, ancillary materials 17

2.5.4 By production modes 17

2.6 Forwarding process of export processing goods 17

2.7 Factors affecting the company’s forwarding operation 18

2.7.1 External factors 18

2.7.1.1 Legal/political factor 18

2.7.1.2 Infrastructure 19

2.7.1.3 Social/cultural factor 19

2.7.1.4 Macroeconomic management policies 20

2.7.1.5 Competitors 20

2.7.2 Internal factors 21

2.7.2.1 Corporate culture 21

2.7.2.2 Human resources 21

2.7.2.3 Technology 22

2.7.2.4 The company’s trademark and reputation 22

2.7.2.5 Development experience of the company 23

2.7.2.6 Marketing activities 23

CHAPTER 3 24

THE COMPANY BUSINESS OVERVIEW 24

3.1 The development history 24

3.1.1 The company’s brief 24

3.1.2 The development history 24

3.2 Organizational structure 26

3.2.1 Organizational chart 26

3.2.2 Key roles and responsibilities of each department 26

3.2.2.1 Board of directors 26

3.2.2.2 Sale department 26

3.2.2.3 Accounting department 27

3.2.2.4 Line department 27

3.2.3 Business areas and missions of the company 28

3.2.3.1 Business areas 28

3.2.3.2 Missions 29

3.3 The operations of the company 30

3.3.1 Forwarding 30

3.3.2 Global transportation 31

3.3.3 Business results of the company (2009 - 2011) 33

3.4 Forwarding process of export processing goods 34

3.4.1 Registering the processing contract with the Customs 34

3.4.2 Importing materials, machinery and equipment for processing 36 3.4.2.1 Receiving Delivery Order from Shipping Line (D/O) 36

3.4.2.2 Implementing the Customs declaration 37

3.4.2.3 Inspecting goods 43

3.4.2.4 Receiving goods 44

3.4.3 Exporting finished-products 45

3.4.3.1 Receiving Booking Note from Shipping Line 45

3.4.3.2 Implementing the Customs declaration 45

3.4.3.3 Delivering products 47

3.4.3.4 Applying for C/O 48

3.4.3.5 Receiving Bill of Lading from Shipping Lines 49

3.4.4 Liquidating the processing contract 49

3.4.4.1 Contract liquidation process 50

3.4.4.2 Solutions for extra materials 50

3.5 Evaluation on Mai Thanh Joint Stock Company 52

3.5.1 Advantages 53

3.5.2 Disadvantages 53

CHAPTER 4 55

SOLUTIONS TO IMPROVE EXPORT PROCESSING FORWARDING OPERATION AT MAI THANH JOINT STOCK COMPANY 55

4.1 SWOT analysis 55

4.2 Solutions to improve export processing forwarding operation at Mai

Thanh Joint Stock Company 57

4.2.1 Solutions for Mai Thanh Joint Stock Company 57

4.2.1.1 Developing marketing activities to attract the customers 57

4.2.1.2 Planning the long-term strategies to maintain relationships with customers 59

4.2.1.3 Solutions to enhance staffs’ professional qualification 61

4.2.1.4 Building reasonable price policies 62

4.2.1.5 Improving and updating technology 63

4.2.2 Recommendations for the Government related to improve technology and infrastructure 63

4.2.3 Recommendations for the Customs authority 63

4.2.3.1 Speeding up the process of upgrading the Customs procedures 63

4.2.3.2 Enhancing the qualification of the Customs managers and staff, and promoting training activities 64

4.2.3.3 Building infrastructure, investing equipment, applying to technology and modernizing the Customs 65

4.2.3.4 Reforming administrative procedures 65

CONCLUSION 66

 ASEAN: Association of Southeast Asian Nations

 FIATA : International Federation of Freight Forwarders Association

 B/L: Bill of Lading

 C/O: Certificate of Origin

 D/O: Delivery Order

 C/I: Commercial Invoice

 FOB: Free on board

 CIF: Cost, Insurance and Freight

 MTO: Multimodal transport operator

 CFS: Container Freight Station

 VNL: Vietnam Logistics

 THC: Terminal Handling Charge

 L/C: Letter of Credit

 FCL: Full Container Load

 LCL: Less than a container load

Table 3.2 The forwarding operation by mode of transportation (2009-2011) 30

Table 3.3 Imported-exported goods transportation of 3 first months of 2012 31

Table 3.4 Business results of the company (2009 – 2011) 33

Table 3.5 Processing norms 35

LIST OF FIGURES

Figure 1.2 Research organization 5

Figure 2.1 Export processing activity 8

Figure 2.2 Forwarding process of export processing 17

Figure 3.1 Organization chart 26

Figure 3.2 The contract performance of 3-year 2009-2011 31

Figure 4.1 SWOT matrix 57

CHAPTER 1 INTRODUCTION

1.1 Introduction

Nowadays, international economic and regional integration is one of the trend that any country or territory are also towards to contribute for development of their country So, one of the ways to bring the countries to the international economic integration is foreign trade – an important activity in the economic development, which enhances country’s position all over the world Thanks to long coast and belonging to large and important transport route of the world, Vietnam has great potential of marine economy, especially supporting forwarding services, which boosts the stable growth and development of the country

Recently, Vietnam has been taking part in international organizations as WTO, ASEAN This opens Vietnamese enterprises many chances to exchange with nations worldwide Vietnam is promised to be a commercial potential nation as well

as opportunities for developing forwarding operation – logistics However, Vietnam also faces the competition challenges

Being established in the stage of Vietnam and world economy gradually recovering after world financial crisis (2008), Mai Thanh Joint Stock Company has

a great development chance Besides, import-export enterprises have the huge demand of foreign trade and forwarding services However, Mai Thanh also faces competition pressures from big forwarding companies with strong finance and experiences Therefore, it is important that Mai Thanh has to improve its forwarding operation, especially export processing forwarding operation – a new area which

few companies carry out That the reason I choose topic: “Solutions to improve export processing forwarding operation at Mai Thanh Joint Stock Company”

for my graduation thesis

1.2 Rationale

Mai Thanh Joint Stock Company has been operating in the logistics industry since 2001 The company has achieved many accomplishments in the development duration In the recent years, the company has carried out forwarding operation for export processing This is kind of good different from the other goods Usually, when producing export processing goods, companies are responsible for importing raw materials – exporting finished products but this will take the time of them, so they need source to follow up Therefore, forwarding companies supply this service for those companies To maximize revenue, profit and bring commercial benefit for its customers and satisfy them, the company needs to give the solutions to make its export processing forwarding operation better

So the following questions must be answered through this research:

- What is the export processing forwarding operation of Mai Thanh Company?

- Which external and internal factors affect export processing forwarding operation of the company?

- How to improve the forwarding operation?

1.3 Research objectives

The research aims to:

- Understand export processing forwarding operation of Mai Thanh Company and find out strengths and weaknesses of the operation

- Analyze the external and internal factors that influence the company’s export processing forwarding operation Based on those factors, find out the opportunities as well as threats that affect export processing forwarding operation of Mai Thanh Company

- Suggest the solutions to improve export processing forwarding operation of Mai Thanh Joint Stock Company

be used in the framework of this research

Analyzing the current export processing forwarding operation of the company helps to find out its strengths and weaknesses Then, examining and evaluating domestic and overseas export processing contribute to find out opportunities and threats that affect to company export processing forwarding operation

The model of SWOT then will be applied to assess the above strengths, weaknesses, opportunities and threats related to export processing forwarding operation and based on it to give solutions to improve export processing forwarding operation of Mai Thanh Joint Stock Company

- Strength: positive internal factors within your control on which you could capitalize

- Weakness: negative internal factors within your control that should be limited

Figure 1.1 SWOT matrix

1.5 Data source

This research is based on the secondary data

- The information and figures every year are available at Mai Thanh Joint Stock Company:

 Business results reports from 2009 to 2011

 Forwarding turnover by categories from 2009 to 2011

- Data on the international website, magazines and newspapers, public media are useful for this research

- Data is also collected discussion with supervisor, experts at Mai Thanh Company to have valuable information to support this research

1.6 Research organization

Figure 1.2 Research organization

1.7 Research structure

The content includes 4 chapters:

Chapter 1: Introduction – this chapter consists of the rationale, research

objectives, research methodology, data sources and research structure to give the solutions for problem

Research Objective

Secondary Data

Literature

Review

Factors Affecting Export Processing

Performance

Analysis

Chapter 2: Literature review – this chapter consists of processing, export

processing, export processing modes, processing norms, forwarding operation and factors affecting the company’s forwarding operation

Chapter 3: The company business overview – this chapter generalizes Mai

Thanh Joint Stock Company, the company’s activities, objectives and orientation the company’s development

Chapter 4: Solutions to improve export processing forwarding operation at Mai Thanh Joint Stock Company – from SWOT analysis, solutions are given to

improve export processing forwarding operation of the company

CHAPTER 2 LITERATURE REVIEW

2.1 Concepts related to processing, export processing, forwarding

Secondly, good processing is understood as a method of production as orders and samples of the ordering parties The processors carry out producing and sell finished-products to the ordering parties or someone nominated by the ordering parties and prices are agreed by 2 parties

2.1.2 Export processing

Export processing is a method of production exported goods, while the ordering parties in one nation supply orders, samples, machinery, raw materials or semi-finished products… according as norms for the processors in the other nation The processors organize production process Total finished-products are delivered to the ordering parties to receive processing fee

Figure 2.1 Export processing activity

2.1.3 Forwarding

Forwarding is the service of transport cargo from shipping place to destination Forwarders sign transportation contract with shippers as well as homologous one with carriers to make the service

The International Federation of Freight Forwarder Associations (FIATA) mentions the concept of the field as following: “Forwarding is any services related

to transportation, consolidation, storage, handling, packaging or distribution as well

as ancillary services and consultant relevant above services They include making Customs declaration, procuring insurance, collecting payment.”

According to “Article 233 in Section 4 of Vietnamese Commercial Law 2005”, Logistics Services are actually trading behaviors Traders organize the performance

of activities, such as receiving goods, carriage, packing, warehousing, completion of customs procedures, distribution and other services related to commodities based on agreement of customers to get the service fees

Forwarding services guarantee that products will get to the proper destination

by an agreed upon date, and in good condition The forwarding service utilizes established relationships with carriers of all kinds, from air freighters and trucking

companies, to rail freighters and ocean liners Forwarding services negotiate the best possible price to move the product along the most economical route by working out various bids and choosing the one that best balances speed, cost and reliability Forwarding includes operations and procedures that relate to moving goods from shipping place to delivery place In Viet Nam, this kind of service is one of potential sectors that have many chances to develop However, the serious problems which relate to lack of human resource, poor infrastructure or trouble in current Legal System… cause disadvantages in restructuring this economic sector, developing the foreign trade and international integration So improving activities in this sector is a current urgent requirement

Forwarding is a type of service, so it has general characteristics of service Because it is intangible good, there is no standard to evaluate homogeneous quality, not to store, produce or consume simultaneously; its quality depends on customers’ comments However, it has specific characteristics:

- Forwarding does not create physical products, it only makes objects change position spatially, not technically But forwarding has a positive impact on the development of production and improve people’s lives

- Passive: forwarding depends on customers’ demands, carriers’ regulations…

- Seasonality: forwarding serves import-export activities, so it depends on the amount of goods Normally, because these activities are seasonal, forwarding is also influenced by them

- Depend on the infrastructure and level of forwarders

2.1.4 Forwarder

A forwarder, or forwarding agent, is a person or company that organizes

shipments for individuals or corporations to get goods from the manufacturers or producer to a market, customer or final point of distribution Forwarders contract with a carrier to move the goods A forwarder does not move the goods but acts as

an expert in supply chain management A forwarder contracts with carriers to move cargo ranging from raw agricultural products to manufactured goods Freight can be booked on a variety of shipping providers, including ships, trucks, airplanes and railroads It is not unusual for a single shipment to move on multiple carrier types

“Article 234 in Section 4 of Vietnamese Commercial Law 2005”assigns that trader provides Logistics Services (Forwarder/ Freight Forwarder/ Forwarder Agent) is obligated to satisfy the conditions for business Logistics services based on law of Government It means that he must carries on business with the Certificate of Business Registration in Freight Forwarding field and follows all rules of Vietnamese Legal System When he signed a contract with a customer, he must complete his job with hard working and high responsible spirit If the forwarders causes any loss or damage of commodity, he must be responsible for his mistakes Forwarder keeps an important role in Foreign Trade and International Transportation In the past, the Forwarder just did some required work, such as loading and unloading commodity, charter ship, storage, making customs procedures or payment procedures… Nowadays, due to the development of International Trading as well as the advantages of technological transport progress, there are many opportunities to expand the forwarding activities Many Forwarding Companies not only provide the retail Forwarding Services (storage, handling, packing, distribution commodities…) but also other value-added services, such as multi-model transportation, maritime broker, consolidation, insurance consulting… Further, they operate a system of offices and agents for export and import to create

a wide Logistics Network completely

Freight forwarders provide several significant services such as:

- Advising on exporting costs including freight costs, port charges, consular fees, costs of special documentation, insurance costs and freight handling fees

- Advising on the most appropriate mode of cargo transport and making arrangements to pack and load the cargo

- Reserving the necessary cargo space on a vessel, aircraft, train, or truck

- Making arrangements with overseas customs brokers to ensure that the goods and documents comply with customs regulations

2.1.5 Processing norms

Production norms as agreed in the contract comprises that norms for the use of materials are the amount of necessary and suitable materials to produce a processing product unit; norms for material consumption are the amount of material consuming

to produce a processing product unit; and the loss proportion of material is the amount of loss material including natural loss, loss because of making scrap, defective, processing junk… which is calculated as percentage ratio with norms for the use of material or norms for material consumption

Norms separating components from initial materials is the amount of material separated from initial materials To material components separated from initial materials, the loss proportion is the amount of loss initial materials calculated as percentage ratio when divided into component materials

2.1.6 Processing liquidity

When processing contract is finished or expired, the parties participating in the contract must liquidate contract and prepare procedures with the Customs For over-one-year processing contract, every year, the processor must liquidate the contract with the Customs

Base of processing contract liquidity is the amount of import raw and ancillary materials, the amount of products exporting as norms for the use of raw and ancillary materials, norms for material consumption, loss proportion agreed in processing contract

After the end of the contract, leased equipment and machinery, redundant materials, scrap, junk… are handled as agreement of the contract which suitable for law of Vietnam

The disposal of scrap and junk (if any) may only be made after the written permission of Department of Natural Resources – Environment and must be done under the supervision of the Customs

2.1.7 Processing fee

Processing fee is stipulated in Article 183 of Vietnam Commercial Law 2005

- The processors may receive processing fee by money, or processing products, machinery, equipment

- In the case of processing for organizations or foreign individuals, if the processors receive processing fee by processing products, machinery, equipment, they must comply with the regulations of import that ones

2.2 Scope of forwarding

The scope of forwarding service is a basic content of forwarding business Unless the shippers (or the consignees) want to join in any stages, procedures or documents, forwarders will help them to handle shipping process Forwarders can make services directly or through any agent The services are conducted as:

- On the behalf of the shippers:

 Consulting for the shippers in transportation organizing: forwarders advise them to choose the route, mode of transportation, the carriers that is suitable for them

 Signing the carriage contract with the selected carrier

 Receiving goods and supplying the appropriate documents, consolidating for shippers if necessary

 Researching the terms of L/C and all the laws or regulations of Government applicable in import-export nations

 Packaging goods (if necessary)

 Weighing, measuring goods and making the examining and quarantining procedures

 Purchasing insurance for goods (if necessary)

 Transporting cargo to the port, declaring the Customs

 Consolidating goods to use capacity of mode of transportation best, which helps reduce the cost

 Making payment of costs of freight

- On the behalf of the consignees:

 Supervising the transport

 Announcing arrival of mode of transportation

 Receiving and checking all the documents relating to the carriage of goods

 Getting goods from the carrier and paying freight

 Declaring the Customs

2.3 The benefits of using forwarding services

2.3.1 For the exporter

Using forwarding services can help the export company reduce the human resource in case these activities of company are not set on too much value on benefit they bring to the company They also help to reduce risks caused by lacking forwarding experience of staff or even help to save cost and time due to the knowledge and relation of professional forwarding companies The forwarder often contacts with shipping lines, so he will know which shipping line has good prestige, reasonable costs, suitable schedule… In case the commodity has to transit in third country, the transition from first ship to another ship to final destination is done by the forwarder without the representative agent in third country of the export company More than, after the export company authorized forwarding company

complete all procedures relate to export commodity, they can avoid troubles, such

as complaints about delivery delay or deputation because of denial payment of the customer…

2.3.2 For the importer

The importer also can reduce the human resource, transportation cost as well as avoid risks when making complex receiving commodity process due to using Freight Forwarding services The Forwarder can help his customer complete the all import procedures professionally, receive commodity quickly to avoid the storage cost and protect the interest of importer in case any loss or damage of commodity happens In some trouble cases, such as: the delivery is delayed, lacking of commodities or mistakes in procedures… the Forwarder as the representative of importer will set up the necessary documents for claiming with port, shipping line

or insurance company

2.4 Role of forwarder in global trade

Due to the expansion of international trade and the development of mode of transportation, today, forwarder plays an important role in commerce and international transport He not only does customs procedures or hires ships but also provides lump-sum services

2.4.1 The Customs broker

In the past, the traditional role of forwarder is only in the domestics The activities of forwarders took place in their country Now, the forwarder attends import-export activities by completing customs procedures for goods as a customs broker Simultaneously, the forwarder does customs documents for exported goods and saves freight (for transport by sea) Usually, according to custom of exporting goods by FOB, function of the forwarder is known as FOB – freight forwarding In some nations as France, US…, activities of forwarders are requested to have statutory licenses as customs brokers

2.4.2 The agent

Previously, the forwarder does not take responsibilities of the carrier He was just a bridge between shippers and carriers as the agent of shippers or brokers When the forwarder is the agent, his main task is asked by customers He is trusted

by shippers or carriers to execute various tasks such as receiving, delivering, forming documents, declaring customs… based on trust contract

2.4.3 The consolidator

In Europe, the forwarder played a role of the consolidator from railway to sea route, air route and multimodal transport When he is the consolidator, he takes responsibility of consolidating and issues House B/L or certificate of receipt to customers Then, the consolidator can be the carrier or the agent Nowadays, the forwarder is an important consolidation provider and this is a field the forwarder works very efficiently

2.4.4 The carrier

In many cases, the forwarder is the carrier He directly signs transport contract

to shippers and carries goods from this place to that one Then, the forwarder is not only responsible for his faults, but also his employees’ errors If he signs contract but not directly carries, he is a contracting carrier: if not, he is a performing carrier

2.4.5 Multimodal transport operator (MTO)

In the multimodal transport, only one person is responsible for goods in whole

of itinerary, that is multimodal transport operator According to powerful development trend of this mode, the forwarder takes the opportunities and supplies service of multimodal transport MTO’s profession depends on shipment extent of customers and actual possibility of MTO MTO can undertake all tasks such as transporting from this depot to that depot, palletizing in the container, inspecting goods, declaring the Customs… however, MTO only undertake those tasks from

Container Freight Station (CFS) to CFS or from CFS to forwarder’s depot and vice versa

2.5 Export processing modes

2.5.1 By the ownership of raw materials during production

- Get raw materials – deliver finished-products: the ordering parties transfer raw materials or semi-finished products to the processors and after production, they repossess finished-products and pay processing fee to the processors In this case, during production time, the ownership of raw materials is the ordering parties

- Sell materials – purchase products: this type is based on long-term contracts with the ordering parties The ordering parties sell materials to the processors After production, they purchase finished-products from the processors In this case, the ownership of materials is from the ordering parties to the processors

- Type of combination: the ordering parties deliver main materials, the processors supply auxiliary materials

2.5.2 By processing fee

- Actual cost payment contract: Using this method, the ordering parties are accountable to pay local manufacturers all the costs incurred during the production plus the processing fee Moreover, the processors have the right to

actively look for raw material suppliers

- Lump-sump contract: Under this method, a statement of used material is established for each product that includes the agreed production cost and processing fee This statement is important base to determine the payment for local manufacturer In case of any differences between the actual cost and the agreed norm, the normed price is applied to calculate the cost payment to the processors It is important that when using this processing mode, the processors must have a careful calculation of raw material usage and detailed production costs to avoid the risk in profit loss

2.5.3 By the level of supply of raw materials, ancillary materials

- The ordering parties deliver total raw and ancillary materials to the processors Every batch of cargo has detailed tables of material norms for each product which 2 parties agreed in the contract and are reviewed by the authorities The processors produce goods as samples of the ordering parties and deliver finished-products to them or third party nominated by them

- The ordering parties only deliver main materials as norms The processors are responsible for exploring auxiliary materials

- The ordering parties are not responsible for supplying any materials to the processors Their partner must look for materials to produce

2.6 Forwarding process of export processing goods

Figure 2.2 Forwarding process of export processing

Step 1: Registering processing contract with the Customs

Step 1: Importing materials and machinery, equipment for processing

 Receiving Delivery Order from Shipping Line (D/O)

 Implementing the Customs declaration

 Inspecting goods

 Receiving goods

Step 3: Exporting finished-products

 Receiving Booking Note from Shipping Line

 Implementing the Customs declaration

 Delivering products

 Applying for C/O

 Receiving Bill of Lading from Shipping Line

Step 4: Liquidating the processing contract

2.7 Factors affecting the company’s forwarding operation

Political factor

Economics and politics are two groups of factors related to each other Political stability is condition of economic development and vice versa In the other hand, institution and political line decide economic policies

Different countries have different political environment solving problems related to business activities between enterprises Therefore, considering political environmental affects must pay attention:

- Attitude of government of the importing countries to attract foreign investment

- Bank system: the development of bank system makes the enterprises convenient for payment and raising capital Besides, bank system is a factor to ensure benefits for the enterprises by payment services through the bank

- Insurance and quality controlling system allows export activities to be carried out safer and reduce level of loss

2.7.1.3 Social/cultural factor

Activities of human have always existed in a certain social conditions Therefore, the social factors influence greatly activities of human The social factors are very large, so to understand effects of these factors, we can study effects of cultural factors, especially signing the contract

Culture makes the lifestyle of each community This will decide the consumption patterns, priority for the needs of people So culture is the factor dominating the lifestyle and exporters as well as importers must take care of this factor in the market they conduct their activities

2.7.1.4 Macroeconomic management policies

In additional to the legal system, depending on the period of development of the country, the government promulgates macroeconomic management policies related

to import-export activities The policies are erecting more barriers to protect the weak domestic manufacturing The tools used are tariff and non-tariff tools (quotas, import licenses, foreign currency management measures and local standards)

- Exchange rate policy:

The exchange rate has a great impact to import-export activities because it is the basis for comparing price between domestic goods and foreign ones; and for movements of currency and goods between the countries, the importers Based on exchange rate between domestic and foreign currency, it will push up or limit activities of the enterprises When the domestic currency depreciates, import activities are not good, the enterprises must pay more money for a good unit and vice versa, they must only pay less money The rate regulation of the state: fixed, floating or floating control… has a great impact on the performance of the enterprises

- International economic relationship:

The relationship interacts with import-export activities of the enterprises An enterprise will be more convenient if their partner is a neighboring country, in the same area or territory The governments have preferred policies for those enterprises as preferential tariff system And import-export activities strengthen relationships between nations

2.7.1.5 Competitors

The enterprises must make their own policies of price, product and service to attract many customers The competition will eliminate the weak enterprises, not meeting demand of market and increase possibility of some enterprises And the

competition will make the enterprises refresh themselves, create strategies to adapt the market

2.7.2 Internal factors

In each field, each organization has its own strengths and weaknesses The special abilities – strengths of an organization are factors which competitors can not easily copy and do them

To build competitive advantages, the organizations need to utilize special abilities One of the key objectives of strategies is to improve the weaknesses, turning them into special abilities

Analyzing internal factors is important to strategic management If not identify the strengths and weaknesses of the organization, they will not be able to set up the perfect strategies

2.7.2.1 Corporate culture

Corporate culture is an inevitable requirement of trademark development policy Through culture images, the enterprises will promote their trademark And corporate culture is an intangible asset of each company

In a company, especially large companies, they are a collection of different people on qualifications, education, level of awareness, social relationship, geographical regions… these differences create a diverse and complex working environment Besides, the competition of the market economy and globalization trend make the enterprises explore new things and create to survive, develop and change suitable for reality

2.7.2.2 Human resources

- Leadership: they are high-level managers of the company They create the strategies, run and carry out the business of the company They are qualified, experienced, creative and have good relationship, so they not only bring the

company benefits such as increasing revenue, profit but also make long-term prestige for the company

- Staff: human is considered as top factor for success of a company Human resources contribute efficiency and profit of the company The managers must explore these sources, make staff enthusiastic with their jobs Furthermore, it is essential to have policies for developing potential employees, help them have

opportunities to promote in their profession

2.7.2.3 Technology

Technology is a process by which an organization changes inputs into outputs Technological environment is the important factor to enterprises Technological elements can increase the working productivity, efficiency and effectiveness Especially, thanking to the development of post and telecommunication system, in foreign trade, the enterprises can contact customers by telex, fax, telephone, and internet…This can reduce the relocation, economize time and costs

Nowadays, equipping technological devices can be made easily However, the enterprises need to know how to use them reasonably and efficiently

2.7.2.4 The company’s trademark and reputation

How do the enterprises measure their success? In business, most of enterprises measure their success through financial index such as turnover, profit or market share Those are measurable indexes, however, an intangible factor important and undeterminable is trademark value

The trademark value is calculated based on the connection between financial advantage, business position and company’s trademark The value of trademark depends on many ways the enterprise manages business and the name of the company is a large value

The intangible values which trademark contributes for the company’s success: making customers feel safer, promoting the recognition of new products, attracting more talents, helping salespersons to carry out their business easily

2.7.2.5 Development experience of the company

Development experience is considered as an import factor of competition For long-term development companies, they are experienced in business as well as create the trademark for their companies With the experiences, they make their prestige in the market Those create competitive advantages to the developing companies or little experience

2.7.2.6 Marketing activities

Marketing activities play an important role in the development of the company Marketing is known as a tool helping the company approach with the customers as well as introduce the company’s image to people The marketing factor includes the ability to capture market information, sales network and advertising activities, the product introduction forms such as advertising, promotional gifts On the other hand, now marketing activities of forwarding industry have not been focused, this makes not attract many customers So, promoting marketing activities for forwarding is necessary and more interesting

CHAPTER 3 THE COMPANY BUSINESS OVERVIEW

3.1 The development history

3.1.1 The company’s brief

- Name of the company: Mai Thanh Joint Stock Company

- International name: Mai Thanh Corporation

- Headquarter: 28 Mac Dinh Chi St – District 1 – Ho Chi Minh City

The company has 5 shareholders, detailed as following table:

Table 3.1 Ratio shareholders’ equity of the company

3.1.2 The development history

Mai Thanh Joint Stock Company officially came into operation on December 3, 2001; from a company with a charter capital of 5 billion VND With the motto:

- Providing reliable solutions and quality of import-export forwarding

- Constantly striving to meet the highest demands of customers

- Maintaining and developing good relationships with customers

After many years of operation, with the development and integration of the country, Mai Thanh has steadily grown to the size of 100 employees in various areas business

The country has been growing and demand for exporting, forwarding has rose, the company has become trusted choice of many domestic and foreign companies Besides import-export forwarding, the company has its own branch specializing field of sea and air freight to the name “Vietnam Logistics (VNL)”

Starting a small office with about 6 staffs, VNL has grown and now become one of the first-rate forwarding agency in Vietnam with more than 50 staffs experienced network of multi-national operations The company has expanded global forwarding network and succeeded in having the ability to provide the highest standards

“We take you to the world and bring the world to you.” That is the company’s aim With VNL, customers always receive the best attention to the highest services and minimum cost

In the other hand, the company also has a wood factory specializing in providing interior decoration items to US market, the construction projects

Mai Thanh Joint Stock Company believes that the company is capable of serving customers by services, high quality products with competitive price

3.2 Organizational structure

3.2.1 Organizational chart

Figure 3.1 Organizational chart

3.2.2 Key roles and responsibilities of each department

3.2.2.1 Board of directors

- Director: the legal representative of the company is responsible for all company’s activities and business results He undertakes to supervise and control financial activities, handle the transactions

- Vice director: he is responsible for supporting the director in the management and administration of all business operations of the company He undertakes to advise expertise, prepare plans, meetings He helps the director to check departments and orders

3.2.2.2 Sale department

Responsibilities of sale department are researching and analyzing foreign and domestic markets; advising board of directors business activities and mode of business, planning to maximize profit for the company; expanding network and

Director

Vice director

Line department

Sale department

part

Transport part Air route

scope of business; checking and supervising contract practicing; searching strengths

of competitors and developed countries to apply to the company

- Sea route department: provides and consults forwarding services by sea both in domestic and over the world, such as: import/export procedures, voucher for goods in quota list, packing and storing for all kinds of goods, consolidation, transportation by container, multi-modal transportation

- Air route department: Provides and consults all forwarding services by air, include import/export procedures and relevant required documents, receiving and packaging goods in warehouses, transportation by container, cargo ship planes

3.2.2.3 Accounting department

Responsibilities of accounting department are monitoring revenues and expenditures, conducting business payment through the documents; managing the company’s finance and coordinating capital in-time for business of the company; analyzing accounting transactions, synthetizing financial statements, periodic reports; carrying out tax obligations and financial inspection strictly by the government

3.2.3 Business areas and missions of the company

3.2.3.1 Business areas

Forwarding and global transportation

Services the company conducts:

- Choose the suitable route and mode of transportation

- Save the freight and make the payment

- Arrange the transport during the itinerary

- Supervise the transport to the consignee through the relationships with carriers and oversea agencies

- Acknowledge the loss and help the shippers complain