Analyzing business activities at trade import export electronics company (tie co)

HO CHI MINH CITY UNIVERSITY OF FOREIGN LANGUAGESAND INFORMATION TECHNOLOGY SCHOOL OF FORE IN LANGUAGES GRADUATION PAPER ANALYZING BUSINESS ACTIVITIES AT TRADE IMPORT EXPORT ELECTRONICS C

HO CHI MINH CITY UNIVERSITY OF FOREIGN LANGUAGES

AND INFORMATION TECHNOLOGY SCHOOL OF FORE IN LANGUAGES

GRADUATION PAPER

ANALYZING BUSINESS

ACTIVITIES AT TRADE

IMPORT EXPORT ELECTRONICS COMPANY

(TIE CO)

ADVISOR: Ms LE THl KIM DUNG, MBA

-STUDENT'S NUMBER: 0071175CLASS:-KA0002

~ Second, I would like to express my gratitude to Ms Le Tht ~

* * Kim Dung, my advisor, for recommending, providing information * *

* Thanks also to Huflit University and teachers teaching and *

*: providing me knowledge, which helps me, a lot in my job in the *:

Student: DOAN HANH UYEN

CHAPTER I: LITERATURE REVIEW 2

I Definition: What is Management? 2

III Management: The Control Function 4

IV What is Effectiveness of Business Management? 6

V Criteria to evaluate the Effectiveness of Business Management: 7

6 Other factors 10VII The necessaries of raising effectiveness of Business Management 11

B.Analyzing Business and Production Activities 18

I Analyzing business activities in TIE Co 18

II Analyzing business management in TIE Co 33

1 Analyzing activities of managing and using capitaL 33

2 Analyzing structure of working capital and the effectiveness of

3 Analyzing situation of cash 38

4 Analyzing activities of using expenses 39

Student: DOAN HANH UYEN

6 Direction of Business Management Activities at TIE 41

CHAPTER III: EVALUATION AND SUGGESTION TO RAISE EFFECTIVENESS OF BUSINESS MANAGEMENT IN TIE Co

A Evaluating the Business Activities in TIE Co 42

II.Advatages and Disadvantages 43

B Suggesting to raise Effectiveness of Business Activities in TIE Co

1 Strengthening available market : 44

4 Strengthening marketing activities 46

II. Raising effectiveness of using cost 47

III.Raising effectiveness of controlling capital 48

IV Reforming the management activities and raising labor productivity 50

Vietnam economy has changed from the planned economy into amixed one based on the market mechanism Simultaneously, the open doorpolicy in Vietnam opened not only new opportunities but also challenges forVietnam enterprises However, they have still encountered a lot of obstaclesbecause our economy is in the first step to experiment Every company haswanted to maximize profits and to gain satisfactory results So in order to dothat, management activity is the first factor which decides whether thatcompany has been successful or not

There are lots of kinds of enterprises such as state-owned enterprises,joint-venture companies, and limited companies, etc which makes Vietnammarket flexible and fiercely competitive Therefore, analyzing businessactivities in one enterprise to understand how well people manage theircompany

The aim of this research is to analyze and evaluate business activities

at Trade Import Export Electronics Company (TIE Co)

Analytic and synthetic methods were used to undertake this research.The first part of this research is a summary of relevant theories ofmanagement

The second part provides introduction, business activities andeffectiveness that TIE Co has gained in previous years

And the final part is evaluation on the business management andsome suggestions to improve the effectiveness in TIE Co

Student: DOAN HANH UYEN .(]r.aduulililL rpllpl!l'

Chapter I: LITERATURE REVIEW OF

BUSINESS MANAGEMENT

I Definition: What is Management?

It is very difficult to find a standard definition for commonly usedterms in management

A current definition is that management is working with and throughother people to accomplish the objectives of both the organization and itsmember

Besides, management is both a science and an art:

+ The science is represented by the theories and knowledge requiredthrough the management process

+ The art is the application of knowledge to reality

One of the arts of management is delegation because it makesmanagement possible and management is the process as well as the art andskill of getting results accomplished through other people

II Functions of Management:

Fayollasserted that the activity of management was characterized byfive specific functions

1 Planning:

This function consists of forecasting future events and determiningthe most effective future activities for the company

2 Organizing:

This function consists of the ways in which the organizationalstructure is established and how authority and responsibility are given tomanagers, a task called delegation

3 Commanding:

This function concern how managers direct employees Fayoladdressed such activities as effective communications managerial behaviors,and the uses of rewards and punishment in discussing how a manager shouldcommand employees

4 Coordinating:

This function concerns activities designed to create a relationshipbetween all the organization's efforts (individual tasks) to accomplish acommon goal

Student: DOAN HANH UYEN

TheManagementProcess

LeadingInspiring people towork hard to achieve •••

high performance

OrganizingArrange tasks,people, and otherresources toaccomplish thework

Figure 1.1:The four functions of management: planning, organizing, leading

and controlling.2

III. Management: The Control Function:

The control function is one of important criteria in management

1 The control process:

The basic process remains:

• Setting performance standards

• Measuring the performance

• Evaluating the performance

• Making effective use of feedback and taking correctiveactions

Feedback

Meetstandards

Create

performanc

e standards

Measureactualperformanc

Evaluateperformance

Feedback

Does notmeetstandards

Takecorrectiveaction(s)

The Control Process

2 Phases of control:

• Input controls:

They are budgets, job design, training programs with skillsevaluation, MBO (Management by Objective), production and operationtechniques and scheduling of work activities

• Process controls:

These following activities represent this kind of control: performanceappraisals, quality controls, Management by Objectives and contingencyplans

• Output controls:

The control process may operate after the activity but before delivery

to the end-users This is an output control

This form of control may include quality control of the final output,the final MBO evaluation, and ex post

Student: DOAN HANH UYEN .{jnuLllatiriIL fj)apn'

Audits are formal evaluations of an organization's financial situations

A management audit examines managerial effectiveness

4 Behavioral Control:

Behavioral controls in organization focus on the human side of theenterprise, evaluating an employee's behavior as it relates to taskaccomplishment

Such performance appraisals serve as important management toolsproviding information on the current state of the organization, the strengthsand weaknesses of employees, and the needs for the future

IV What is Effectiveness of Business Management?

Effectiveness is, at its most basic, about getting effects An effectivemanager is one who is able to get the effects that he or she wants

In another words, effective is maximum profit over minimum cost

OutputInput

• Output is measured by criteria such as industrial producing pnce,revenue and profit

• Input may include labor, salary, trading cost, material cost and capital

So, when evaluating the effectiveness of business management, weevaluate not only the final results but also the quality of process creatingthose results.

And profit is the most important criterion However, that profit doesnot influence to the benefit of the economy and society

V Criteria to evaluate the Effectiveness of Business Management:

Working capital consists of:

Capital in cashShort-term investment Advance

Mortgage, collateral, short term depositInventory

Student: DOAN HANH UYEN .(jFlLlLlIalilJIL qJafUl'

Based on the balance sheet, we compare the opening balance with theclosing balance so that we can give the conclusion of the effectiveness ofusing the capital

An enterprise is considered as an effective one when it is active inusing the source of capital

- Tax, fee and charge

- Expenses from provisions

- Sundry cash expensesEvaluating the general and ad expenses help to reduce unnecessaryexpenses in order to increase profits And based on this evaluation, we findelements that influence to expenses and have solutions to decrease them

3 Profits:

Profit is also an important criterion to evaluate the effectiveness of

pay attention to the inflation and foreign exchange, because after calculatingthe net present value of the margin, it maybe lower than the origin prices.

(Net profit before tax= Net Operating Income +Extraordinary gains)

VI Elements influenced to the Effectiveness of Business Management:

1 Market:

It is socio-economic relationship between Vietnam and othercountries Simultaneously, Vietnam has not got admitted to economicorganizations in the world as well as received privileged tariff policies Sothe ability of selling goods is low

2 Human and the quality of managing:

They include the level of managing and organizing import and exportbusiness, the level of being well-informed about inside and outside markets,the ability of marketing, the ability of negotiating and signing contracts, andpractical experience

3 The quality of products:

It is the most important factor Therefore, Vietnam products mustachieve a high quality in order to penetrate into foreign markets

Student: DOAN HANH UYEN

Eg: Vietnam products are often returned because they did not attainthe level of quality that foreign markets required; especially, Japan andAmerica markets

4 Price of products:

+ Competition between producers

+ Supply and demand in the domestic market as well as foreignmarkets

assure of the effectiveness of import and export managing

5 International Business Environment:

First, it is the socio-economic and political relationship betweenVietnam and other countries Second, now Vietnam has joined ASEAN This

is a big opportunity for Vietnam enterprises to bring their products into a lot

of markets in the world However, WTO is the final goal that Vietnam mustattain So Vietnam must integrate to WTO as soon as possible

6 Other factors:

+Mechanism of managing import and export business

.+ Supporting and developing policies such as credit policy, financialpolicy and foreign exchange policy

VII The necessaries of raising effectiveness of business management:

In this sector, profit is the most important criterion Profit reflects theresult of operating an enterprise Therefore, we should concern the role of

profit

1 The role of profit:

Profit is a final purpose of an enterprise It is one of the sOurces forgetting budget in order to re-invest in the following years Thus, in order toincrease more profit, an enterprise has to pay attention to the demand of thesociety as well as the quality and the price of the products

Profit is also the source for government budgets through paying tax.Based on this, the nation also develops and increases its budget And the rest

of profit will be retained so that the company uses it for re- investing,

Profit is an important element to push up production in an enterprise

2 The role of effectiveness of business management:

Effectiveness of business management is a measure to evaluate theactivities of the company It reflects how well the company operates It alsoperforms the standard of managing a company

Namely, in the market economy, an enterprise wants to exist, thisenterprise has to gain profit

In an import-export company, effectiveness of business management

IS the standard of organizing and managing, promoting advantages andgrasping information about the supply and demand of the market

But how to raise the effectiveness of business management is a bigquestion

In order to do that, the company should usually take a control,evaluate its situations exactly and on time The company must find the

Student: DOAN HANH UYEN

information about the market (inside and outside), the demand and thecompetitors

VIII Eguitization:

Objectives of Equitization:

Changing a part of state-owned assets into the ownership of shareholders

in order to raise the effectiveness in producing and trading in anenterprise

Mobilizing a huge amount of capital at home and abroad develop Inproducing and trading activities

Creating more convenient conditions for laborers to really ownenterprises

The real situation in Vietnam economy:

After the 6th Congress in 1986, Vietnam has been renovating Thenew economic policy aims at changing the centrally planned economy into amixed one based on the market mechanism The economic structurebecomes more industrialized In the process of reforming the many-sidedautonomy, state-run companies now enjoy autonomy in many aspects:making business plans, securing materials and techniques, pricing andmarketing their products, and deciding on finance management, labor costand other financial matters Since 1992, the Vietnam Government made plan

to carry out a reform program for state-owned companies, includingprivatization, corporatization and liquidation of a number of state-runcompanies This is a part of a master program to shift the economy from thecentrally planned mechanism to the market one And initial results from thepilot corporatization and equitization program were positive

Studying the business performance of former equitized companiesone year after the equitization, we could see:

The State still holds the decision-making power because it holds from30% to 50% of share capital

In comparison with the period before the equitization, the value ofcapital increases by 299%, revenue by 237%, after-tax profit by 305% andcontribution to the National Budget by 260%.3

In spiie of the above-mentioned achievements, the equitizationprogram in Vietnam still meets some difficulties:

First, the equitization procedures are too complicated

Second, an exact method of evaluating company' assets is not available because the existing ones pays attention only to tangible assets

Third, Vietnam stock market has been established recently and still notbeen operated effectively, shareholders find it difficult to buy or selltheir shares

3Dr Nguyen, T.e Developing the private sector and Restructuring the public sector in the transitional period Internet

Student: DOAN HANH UYEN I;PatlultliolL qJU(U!fl

CHAPTER II: BUSINESS AND PRODUCTION ACTIVITIES IN TIE CO.

A. Introduction about TIE Co:

I Establishment of TIE Co:

- The predecessor of TIE Co was Electronics Factory, which wasestablished according to Decision 251 16/07/1990 and was directlydependent on District 10 Producing Trading and Import- Export Union

- Based on Decision licensed on 25/08/1992, the factory was changed

to Producing Electronics Company, which was directly dependent on DistrictlOPeople's Committee

- Until 25/11/1992, the company was assigned to a function ofimporting and exporting So the company was officially establishedaccording to Decision 135/QD_UB and it has operated up to now with thename of Trade Import Electronics Company (TIE Co.)

+The fixed capital: VND 727.4 million

+The working capital: VND 3,485.6 million

II The process of development:

- In 1990, TIE Co was only a small factory with a dimension of 500square meters and 20 workers The main duty was to produce rotors, statorsfor re-exporting to France, assemble televisions, radios and cassettes

- In 1992, after becoming independent, the company owned a land of

5000 square meters and attracted over 200 workers

Student: DOAN HANH UYEN

- In 2001:

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- Signing a contract with Ever Success Motorcycle Company ofHongKong to establish VICOPA joint venture Company to producemechanical mould and motorcycle parts, and being the main distributor forSHARP brand products

Add: +408 Nguyen Chi Thanh Street, District 10, HCMC

+ 162 Ly Thuong Kiet Street, District 10, HCMCDuty Free Shop:

Tan Son Nhat Airport

III Main products and services:

IT goods:

Sync-Master monitor, PC computer, CD Rom Samsung

Electric & Electronics products:

Refrigerator, air conditioner, washing machine, microwave oven,Sharp brand products

Electric components:

Degaussing coils, switching transformer

Radio sets, radio-cassette, CD, VCD, DVD, washing machine,

refrigerator, freezer

IV Organizational Structure in TIE Co:

Accounting Department

Administrative Department

TIE Co Organization Chart

Student: DOAN HANH UYEN

B Analyzing Business and Production Activities

in TIE Co:

In the market economy, every company competes to survive andmaximize profit Therefore, TIE Co has made an effort to do businesseffectively In recent years, the company has achieved remarkable results It

is a strong effort in the managing board at TIE Co

I Analyzing business activities at TIE Co:

1 General analysis at TIE Co:

In general, effectiveness in management is one of concerning factors

in TIE Co now The below table shows clearly the effectiveness TIE Cogained

Table l:General criteria in TIE Co in 2000, 2001, 2002, 2003

In 2000s, to overcome obstacles, TIE Co was dynamic in finding newcustomers and implementing programs of producing, assembling and sellinghousehold appliances The results were that the company sold 20,000 units

of household appliances and got revenue of VND 89,503,642,258 and profits

of VND 3,158,956,952 It was the good results because since 2000, TIE Cohad had changes in management

In the same year, the company invested a part in telecommunication

in order to meet the demand of the society and to increase revenue

With suitable strategies, company tried to become an officialdistributor of Sync Master monitor In this year, TIE Co also carried out thegovernment' policies to reduce price and to raise competitive advantages Inaddition, the company prepared documents to transform to joint-stockcompany in 2001

In 2001, Tie Co got desired results because the company organized aneffective sales network to distribute products to customers widely Withmanagers' efforts, TIE Co became a sole distributor of Sync Master monitorand official one of Sharp The company also diversified products byproducing degaussing coils, VCD, DVD for domestic market

In 2002, TIE Co continued to promote its advantages by creating adistribution network nationwide The company sold over 100,000 units ofmonitor, accounted for 50% shares In that year, 137% of plan wascompleted

In two year 2000, 2001, the capital was stable, VND 42,882,431,513

In 2002, it increased to VND 43,628,256,833 because the governmentsupplied VND 745,825,320 Furthermore, TIE Co took an advantage ofshare in joint-venture and long-term securities with dividends of VND 26.8billion

Student: DOAN HANH UYEN

In 2003, the company was received VND 1,215,368,234 by NationalBudget Because of a state-owned company, TIE Co had obstacles frommobilizing the external capital But results proved that the company'sstrategies have been suitable in Vietnam market in recent years by utilizingcapital in co-operating

In general, Board of Managers had strategic view III investing.Namely, TIECo built good prestige in doing business Based on above table,

we could recognize that total assets, owner's equity increased very muchwhile capital was almost stable It means that TIE Co had suitable changes

in this open market Activities in cooperating helped the company usecapital from foreign companies In that situation, return on sales rose andreturn on capital also accounted for a stable proportion In addition to that,when TIE Co became the sole distribution of Sync-Master monitor in 2002,revenue increased considerably This was managers' effort when theycreated prestige with foreign partners

Furthermore, Tie Co had great concerns over employees' life Wecould see that average earnings increased considerably In 2002, it wasVND 3,306,073 and VND 5,484,783 in 2003 High salary creates motivationfor employees to work more effectively and to increase productivity

Besides that, the quantity of managers was also rising It means thatTIE Co concentrated on upgrading the qualification of employees,especially, in managerial level

In the global economy, people should consider how to improve theirability of management to get best results Moreover, production hastransformed manual work to semi- automatic or automatic one These aboverequirements ask high-qualified employees Therefore, TIE Co has hadplans of training courses for employees in order to operate more effectively

Also, TIE Co had right changes in preparing to transfer to joint-stock

so as to follow the government policies This was also motivatior to improvethe efficiency and effectiveness of the company

2 Net Revenue and Net Income after tax:

Table 2: Net Revenue and Net Income after tax in 2000, 2001, 2002, 2003

350,000,000 300,000,000

2000 2001 2002 2003

year

Net Revenue I

Chart 1: Net Revenue in TIE Co in 2000, 2001, 2002, 2003

Chart 1 shows the revenue in TIE Co in 2000, 2001, 2002, and 2003

It has increased year by year In 2001, the company gained VND

Student: DOAN HANH UYEN

'.

200,049,800 thousand, which increased by 224% compared with 2000 In

2002, the number was VND 324,663,972 thousand, which was raised to162% compared with 2001 And the result in 2003 was VND 365,284,459thousand, which increased by 113% compared with 2002 In each year, thepercentage of increasing revenue was more than 100%

In order to get those results, the managing board at TIE Co has hadsuitable strategies by co-operating with foreign companies Namely, Koreahas been one of the strong and effective investors in Vietnam, so co-operation with Samsung- Vina brought the huge amount of money for thecompany

Also, the company has focused on reinvesting and expanding thescale of production

In the open economy, competition IS too high and businessenvironment is complicated Those factors have impacted to TIE Co'sactivities So TIE Co's policy is to diversify its goods such as Samsungmonitors, Samsung mobile phones, RIC, refrigerators The company alwaysfinds new sources of goods and the appearance of them has broughconsiderale revenue in recent years

In addition, importing materials, components and equipment adapts todomestic market demand because such products have not still produced inVietnam However, since 2001, the quantity of these goods has decreasedbecause local enterprises could produce them

Therefore, the company imported other goods that were suitable tothe demand of the market such as Samsung computer components, paintsand chemicals

I

In the competitive market, the structure of import goods is fairlyreasonable TIE co implemented those activities based on The Ministry ofCommerce's regulation

TIE Co's goods are imported from many countries such as China,Korea, Singapore, Malaysia and America

Korea market provides televisions, VCD, computer monitors This isimportant market because TIE Co was chosen to be a sole distributor ofSamsung monitors However, they are expensive goods, so the inventoryeasily happens This will influence on the company's revenue and profits

At the same time, importing Sharp products from Singapore haspreferencial prices because the company now is also an official distributor ofthis trademark

Although value of importing goods from American market is not high,this is potential market in the future

Since 2001, TIE Co has promoted advantages of sole distributor ofSync-Master monitors

Table 3: Revenue of Sync-Master monitor in 2002, 2003

Student: DOAN HANH UYEN

300 250

Chart 2: Revenue of Sync-Master monitor in 2002, 2003

Because of being a sole distributor of Sync Master monitor, TIE Cotook this advantage to develop its scale of company and to increase itsrevenue The managing board at TIE Co had strategic view when theycooperated with Samsung Company The company saw a large profit fromthese goods In only two year, this product has contributed largely to thecompany's revenue

Also, TIE Co has also concentrated on many other fields Activities ofjoint venture have gained considerable results In 2002, the yield was VND26.8 billion and in 2003, the number was only VND 14.9 billion because ofmany objective reasons such as the changes of the market

In general, business activities in TIE Co have gained considerableresults, which is not an easy duty for a state-owned company in this time

Net Income After Tax

2000 2001

Year

2002 2003

Chart 3: Net Income After Tax in 2000, 2001, 2002, 2003

Chart 3 shows the Net Income After Tax in TIE Co in 2000, 2001,

2002, and 2003 From the above activities, Net Income After Tax in TIE Cohas also increased year by year In 2002, the company gained VND30,084,290 thousand, the highest number in table 2 However, the number in

2003 was lower than in 2002 because of many reasons such as unstablemarket, prices fluctuation

Since being the main sole distributor of Sync-Master monitor inVietnam in 2001, TIE 's revenue on this product has risen strongly And thetrademark "TIE" has been widely known by customers because TIE Co hasopened a lot of agencies in other provinces such as: Ha Noi, Hai Phong,Kontum, Mekong Delta,

Nevertheless, these were encouraging results that TIE Co has got inrecent years

Chart 4: Structure of Revenue in TIE Co in 2000, 2001, 2002, 2003

(Source: Income Statement in TIE Co)Table 4: Structure of Revenue in TIE Co in 2000, 200 I, 2002, 2003

This chart shows that TIE Co.'s revenue has been rising considerably,

in which the Sales from other activities accounted for a large proportion In

2000, it was VND 86,603,286 thousand and this number has increased innext years, especially, in 2002; TIE Co got VND 321,990,913 thousand inthat field Only during two year, the percentage has been increasing by over300% Realizing that was a good result, TIE Co has continuously promotedthis advantage

Revenue IS from two mam activities: exporting and importing.However, sales from export do not take a big proportion although this salehas risen year by year This also shows that TIE Co has encoutereddifficulties in exporting Revenue from export decreased and did not gainthe level that TIE Co planned Although this did not influence to TIE Co'sbusiness activities, the ability of exporting in the company has not beeneffective The reason is that entering foreign markets is not easy Therefore,the company should consider its ability of exporting in order to proposeproper adjustment on time In order to increase sales from export, thecompany has concentrated on marketing activities such as analyzing thestructure of export products, the structure of market and finding new foreign

partners

Furthermore, income from financial activities has been increasingsignificantly, which proves that the Board of Manager in TIE Co hasproposed suitable strategies Namely, in 2002 and 2003, the companyinvested in long-term investment and share in joint venture projects As aresult, those activities brought revenue and profits to TIE Co In 2000 and

2001, it gained about 3% of revenue, and in 2002, increased to 8% Investing

to financial activities is a EI-QpeLJUeasure at the moment Nowadays,