Using swot model to analyze the potential impact of the eu vietnam freetrade agreement (evfta) on vietnam’s leather and footwear exports

Market Overview The growing need for fashionable, trendy, yet comfortable footwear among all age groups is a major driver of the worldwide footwear business.. Market LeadersWithin the gl

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CASE: Using SWOT model to analyze the potential impact of the EU-Vietnam FreeTrade Agreement (EVFTA) on Vietnam’s leather and footwear exports

1 Hoàng Việt Anh

1 INTRODUCTION ABOUT EVFTA AND ITS MEANING TO VIETNAM 3

2 CURRENT SITUATION OF THE LEATHER AND FOOTWEAR EXPORTS IN MEMBERS COUNTRIES OF EVFTA 4

2.1 CIRCUMSTANCES OF THE FOOTWEAR INDUSTRY IN THE WORLD 4

2.1.1 Market Overview 4

2.1.2 Market Leaders 5

2.1.3 Leading Footwear Market 6

2.2 BACKGROUND OF THE FOOTWEAR INDUSTRY IN THE EU 7

2.2.1 Contribution to the Economy of the EU 7

2.2.2 Exports 10

2.3 SITUATION OF FOOTWEAR IN VIETNAM 11

2.3.1 Market Overview 11

2.3.2 Competitive 12

2.3.3 Supply and Demand 13

2.3.4 Economical Factors 15

3 SWOT MODEL ANALYSIS 16

3.1 Strengths: 16

3.2 Weaknesses: 18

3.3 Opportunities: 19

3.4 Threats 21

4 RECOMMENDATION AND SOLUTIONS 22

5 REFERENCE 24

On June 30, 2019, the European Union (EU) and Vietnam signed the comprehensive andambitious European Union-Vietnam Free Trade Agreement (EVFTA) The agreementaims to promote long-term development, strengthen economic cooperation, and increasetrade and investment between the two regions.

Among the legal documents that comprise the EVFTA are the main agreement, annexes,and protocols The principal agreement concerns investment, intellectual property,government contracting, and sustainable development, in addition to trade in goods andservices

The EVFTA evolved throughout the course of discussions that began in 2012 and ended

in December 2015 In June 2018, the agreement's language was authorized, after which itwas reviewed and finalised Following several rounds of legal review and translation, theEVFTA was signed on June 30, 2019

The agreement became effective on August 1, 2020, following ratification by both the EUand Vietnam Since then, the two territories have been working to implement theagreement, including establishing the necessary political and legal structures

Overall, the EVFTA is expected to benefit both the EU and Vietnam through increasedtrade and investment, the creation of new employment, and economic growth Itrepresents a crucial turning point in the two regions' economic ties and is expected to lead

to more equal and profitable commercial partnerships

MEMBERS COUNTRIES OF EVFTA

2.1 CIRCUMSTANCES OF THE FOOTWEAR INDUSTRY IN THE WORLD

2.1.1 Market Overview

The growing need for fashionable, trendy, yet comfortable footwear among all age groups

is a major driver of the worldwide footwear business The rise in the expansion of focused footwear, such as football, cricket, basketball, and golf, combined withexponential government and worldwide organization expenditure to encourage sportsleagues and participation, has been a primary driver for the market Asian countries, such

sports-as China and India, are the leading exporters of leather footwear in the developed world.The growing demand for eco-friendly footwear is a new trend in the global footwearmarket There has been an increase in the use of sustainable materials and sustainablefootwear manufacturers that have incorporated sustainability into their brands since theirinception

Globally, 22.2 billion pairs of footwear will be produced in 2021 In comparison, globalfootwear production in 2019 was 24.3 billion pairs Asia accounts for just less than 90percent of global footwear production This footwear is then shipped all over the world,with Germany, Japan, and France among the world's major footwear importers TheUnited States, on the other hand, is by far the greatest importer, purchasing over 2.4billion pairs of shoes in 2021 In comparison, Germany imported over 631 million pairs

of shoes

One global footwear market trend is the rising popularity of athletic footwear, which isworn not only for sports but also as part of everyday fashion The sports shoe businesshas grown fast over the previous decade and is estimated to be valued approximately 77billion US dollars by 2025 In 2021, the United States again had the most income fromathletic footwear, followed by China

2.1.2 Market Leaders

Within the global footwear industry, there are a number of significant multinationalcorporations, with athletic brands widely represented, one of the most well-known beingNike With footwear category revenues of around 28 billion US dollars worldwide in

2021, Nike dominated its two direct competitors, Adidas and Puma TJX Cos was theworld's top clothes and footwear retailing firm in 2021/22, with 48.6 billion US dollars inrevenue Skechers had the most revenue of any specialty footwear company in 2021, at5.9 billion euros

2.1.3 Leading Footwear Market

New York and Los Angeles are among the most popular cities in the US for the clothingand footwear industry The clothing and footwear segment in the US influences the globalfashion industry On the other hand, China, and Japan had a market valuation of $438billion and $96 billion respectively in 2021, holding their position in the second and thirdspot globally The countries account for 23% and 5% respectively of the global marketshare Clothing demand in China is highly influenced by new generation shoppers whoare often involved in upgrading their lifestyle Also, China has been active in variousInternational sports events which have boosted the demand for sportswear in the region.Germany and Italy, with market values of $80 billion and $69 billion, respectively,remained in fourth and fifth place India, the United Kingdom, South Korea, France, andRussia are other prominent countries with a substantial presence in retail clothing andfootwear Following the pandemic COVID-19, nations around the world observed anincrease in overall demand Furthermore, after nearly two years of restrictions, bothbrick-and-mortar and online enterprises resumed operations Furthermore, consumerspending on leisure products has surged and is anticipated to rise further in the shortfuture as nations recover from the pandemic Nike, Adidas, Gap Inc, Louis Vuitton, andSkechers USA are among the top apparel and footwear players with a prominent presence

in worldwide marketplaces

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The European footwear business is diversified, with a wide range of materials (textile,leather, plastic, etc.) utilized in manufacture, as well as distinctions between non-athleticand sporty footwear In general, the footwear industry is organized into three segments:manufacturing, trading, and retailing.

Italy, Spain, and Romania create around two-thirds of all European footwear Italyaccounts for approximately half of total output This expansion highlights thesignificance of Italian footwear production The output value in 2017 was roughly 7.75billion euros, up from 7.12 billion euros in 2012 As a result, it's not unexpected that Italyranked top in Europe in terms of footwear component export value In 2016, Italyexported footwear valued around 740 million euros

The footwear sector is highly competitive as well In the Netherlands, Asics Europe wasthe biggest footwear brand Asics made nearly 700 million US dollars in revenue in 2016,while Under Armour and Ecco made approximately 425 and 421 million US dollars,respectively In 2016, Euro Shoe Group NV was ranked first among prominent footwearcompanies in Belgium They made over 152 million US dollars in revenue, nearly sevenmillion more than the second-placed Brantano NV

When consumer expenditure on footwear in the United Kingdom was compared year onyear, consumers spent more on footwear In 2007, spending was anticipated to be around6.1 billion pounds However, ten years later, this figure has nearly quadrupled: annualfootwear expenditure is expected to reach around 12 billion pounds in 2017 In Sweden, asimilar trend was observed in household consumption expenditure on footwear

2.2.1 Contribution to the Economy of the EU

In 2012, the footwear industry employed over 21 000 people, made €24 billion inrevenue, and added €6.2 billion in value (almost 0.5% of total EU manufacturing) Thereare 280,000 people employed directly by the industry

Three countries account for two-thirds of EU footwear production: Italy, Spain, andPortugal Italy produces about half of all goods The European footwear industry is made

up of a large number of small enterprises, each employing 10-15 people and earningslightly more than €1 million The majority of these businesses are clustered in locationswith low industrial diversity

The trend in the amount (metric tons) of footwear traded within the EU12 market EU) and imported from the Extra-EU zone is depicted in Figure 1 The trend rate ofgrowth of imports from both external and EU countries increased after the mid-1980s, butthe rate of increase of extra-EU imports was faster than that of internal EU trade.3 As aresult, external import penetration of the EU footwear market increased dramatically afterthe mid-1980s

(intra-In the 1990s, the volume of footwear imported from outside the EU surpassed the volume

of footwear traded within the EU for the first time Imports from outside the EUincreased by 41% between 1976 and 1981 Extra-EU imports soared by 168% between

1986 and 1994, while EU output increased by 25% and local consumption increased by43%

Figure 1: EU12 Intra-EC and Extra-EC Imports of Footwear in volume (1976-98)

Figure 2 depicts import penetration as well as the export intensity ratio for each of themain EU producing countries, Italy, Germany, France, and the United Kingdom, as well

as Spain and Portugal, whose shares in European output have grown since the 1980s.Imports have been increasingly penetrating the Italian, UK, German, and French marketssince the mid-1970s, although import penetration in Spain and Portugal increasedsignificantly only after 1986.

To examine more closely how the increase in import penetration may have influenced thestructure of EU footwear production, we will look at the geographical makeup of EUimports, specifically how the share of low-wage nations has evolved Figure 3 depicts thetrend in the share of total footwear imports from the NICs (4 Asian tigers), RoA (rest ofAsian countries), CEEE (Central Eastern European Economies), and RoW (rest of theWorld trade) from the EU12 The data demonstrate a notable increase in the penetration

of imports from less-developed, low-wage nations after the mid-1980s, which

corresponds with the quick increase in the number of EU footwear imports shown in thefigure above This occurred initially at the cost of OECD countries and has since beenlinked to a reduction in the share of NICs themselves This reflects, in part, the shift ofactivity in Asia away from the NICs and toward countries such as the Philippines andThailand, but especially China.

2.2.2 Exports

+ Between 2002 and 2006, EU exports increased by 0.4% in value, from € 21,242 to €20,489 million, and 3.1% in volume, from 1,007 to 1,137 million pairs, owing mostly tolower sales beyond the EU, excluding emerging countries

+ Despite the fact that intra-EU exports continue to dominate, footwear exports todeveloping countries are expanding faster than intra-EU exports In 2006, intra-EUexports amounted for 73% of overall exports by value (and 80% by volume) Non-EUexports (excluding developing countries) have fallen the most, primarily to the UnitedStates

+ Italy remains the most important exporter, accounting for 33% of all EU exports

+ Leather footwear was clearly the most important product category, accounting for €13,932 million, or 68% of total exports in 2006.

The clothing and footwear portfolio's share is predicted to only slightly fall, creating ahuge total growth potential, therefore the forecast for the fashion sector overall is stillgood The most significant force driving the global footwear industry is the growingsignificance of developing nations as consumer marketplaces as well as manufacturinghubs This suggests that manufacturers and retailers have a strong incentive to diversifytheir regional presence in order to support future development The athleisure trend,which mixes comfort and style and has turned utilitarian athletics into sought-afterfashion statements, is also likely to persist

2.3 SITUATION OF FOOTWEAR IN VIETNAM

 Market size: Vietnam's footwear industry is rapidly expanding and is already a

prominent player on the world stage The majority of the industry's more than 2,000 businesses, which employ over 1 million people, are located in the country's south

 Export destinations: The United States, Europe, and Japan are Vietnam's major

footwear export consumers, accounting for more than 70% of the country's total export value Other key markets include Canada, South Korea, and China

 Production capacity: Vietnam is a large shoe producer, capable of producing more

than 1.5 billion pairs of shoes every year The company sells a wide range of

items, from low-cost to high-end, and has been emphasizing the creation of green products.

 Competitive advantages: Include low labor costs, a large and well-trained

workforce, and free trade relations with major economies These characteristicsboost Vietnam's footwear industry as well Foreign investors looking to establishindustrial firms in the region find the country intriguing due to its ideal location inSoutheast Asia

 Challenges: The Vietnamese footwear industry is facing a number of challenges,

including rising labor costs, increased competition from other countries withinexpensive labor, and disruptions caused by the COVID-19 outbreak Theindustry has attempted to address these concerns by investing in automation andtechnology to reduce manufacturing costs and increase efficiency

Overall, Vietnam's footwear sector has a bright future and is expected to grow and prosper in the coming years as a result of the country's competitive advantages and healthy export demand

2.3.2 Competitive

Other low-cost manufacturing countries, particularly those in Southeast Asia, are placingpressure on Vietnam's footwear industry Vietnam's biggest footwear industry competitorsinclude China, Indonesia, and Bangladesh These countries provide similar advantages,such as low labor costs and a large workforce, as well as significant and expandingfootwear industries

Because of their plentiful natural resources and low production costs, certain developingcountries in Africa and South America are also becoming more competitive in thefootwear sector

To remain competitive, Vietnam's footwear sector has invested in automation andtechnology to reduce manufacturing costs and increase efficiency Furthermore, the sector