Competitive strategies the case of hanosimex tran thi thanh tu 2009 a l0 00062 Competitive strategies the case of hanosimex tran thi thanh tu 2009 a l0 00062
O v erv iew o f Competitive S tra teg ies
The com petitive strategies
Competitive strategy focuses on differentiation, which involves intentionally choosing to perform activities differently or engaging in distinct activities compared to rivals This approach aims to deliver a unique mix of value.
T h e e s s e n c e o f s tra te g y lies in c re a tin g to m o r r o w 's c o m p e titiv e a d v a n ta g e s fa ster th a n c o m p e tito rs m im ic the o n e s y o u p o s se s s to day [G ary
In competitive strategy, the emphasis is on successfully competing within each chosen line of business The primary goal is to enhance the company's competitive position across its various business segments A company gains a competitive advantage when it effectively attracts customers and defends against competitive forces better than its rivals Organizations aim to develop competitive advantages that possess some level of sustainability, although the term "sustainable competitive advantage" is often only valid dynamically, as firms strive to maintain it over time.
Successful competitive strategies involve developing unique and strong competencies in key areas essential for success, which help maintain a competitive edge over rivals Examples of these distinctive competencies include superior technology and product features, advanced manufacturing techniques and skills, enhanced sales and distribution capabilities, and improved customer service and convenience.
In establishing a competitive advantage, a business must make two fundamental decisions: first, whether to compete primarily on price, which is essential for maintaining competitive pricing that resonates with customers, or to differentiate itself by offering unique value that justifies higher prices; second, it must determine the breadth of its market target, defining its competitive scope These choices lead to three generic competitive strategies that encompass the essential range of options available to businesses.
Kinds o f competitive strategies
This strategy targets a wide range of consumers by offering products or services at the lowest prices To achieve this, businesses must position themselves as the overall low-cost providers in their market, similar to retailers like Costco.
C o s t lea d ersh ip D iffe re n tia tio n
C o st focus D iffere n tiatio n focus
Implementing a successful cost-reduction strategy in the automotive industry, particularly for manufacturers like Hyundai, necessitates ongoing and exceptional efforts to lower expenses while maintaining essential product features and services that buyers value Achieving cost advantages in ways that are difficult for competitors to replicate is crucial Certain conditions make this strategy an appealing option for manufacturers.
* T h e in d u stry 's p ro d u c t is m u c h th e s a m e fro m s e lle r to se ller
* T h e m a r k e tp la c e is d o m in a te d by p ric e c o m p e titio n , w ith h ig h ly p ric e- se n sitiv e b u y e r s
* T h e re are fe w w a y s to a c h ie v e p ro d u c t d iffe re n tia tio n that h a v e m u c h v a lu e to b u y e rs
* M o st b u y e rs u se p ro d u c t in s a m e w a y s - c o m m o n u ser r e q u ire m e n ts
* S w itc h in g c o s ts fo r b u y ers are low
* B u y ers a re large a n d h a v e s ig n ific a n t b a r g a in in g p o w e r
To successfully implement a project, it is essential to have sustained capital investment and access to financial resources Additionally, possessing strong process engineering skills is crucial for optimizing operations Intensive supervision of labor ensures efficiency and productivity, while product designs should prioritize ease of manufacturing Finally, establishing a low-cost distribution system is vital for effective market reach and cost management.
Effective organizational elements include stringent cost control, regular and detailed reporting, and a well-structured organization with clearly defined responsibilities Additionally, implementing incentives tied to achieving strict quantitative targets can enhance performance and accountability.
The risk of a cost leadership strategy is heightened by technological changes that can render past investments obsolete New industry entrants can undermine low-cost learning through imitation or by investing in advanced facilities Additionally, firms may struggle to recognize necessary product or marketing changes due to their focus on cost management Inflation in costs further constrains a firm's ability to adapt and maintain competitiveness.
8 m a in tain e n o u g h o f a price differential to offset c o m p e t i t o r s ’ brand im ages or o th e r a p p r o a c h e s to d ifferentiatio n
This strategy targets a wide market segment by offering unique features that encourage customers to pay premium prices, such as superior technology, quality, prestige, special features, service, and convenience, exemplified by brands like Nordstrom and Lexus Success with this strategy requires differentiation features that are difficult or costly for competitors to replicate Sustainable differentiation typically arises from advantages in core competencies, unique company resources or capabilities, and superior management of value chain activities Certain conditions tend to favor differentiation strategies.
* T h e re are m u ltip le w ays to differentiate the p ro d u ct/serv ice that b u y e rs think hav e substantial v alu e
* B u y e rs hav e d iffe re n t needs or uses o f the p ro d u c t/s e rv ic e
* P ro d u c t in n o v atio n s and tech n o lo g ical c h a n g e are rapid and c o m p e titio n e m p h a s iz e s the latest p ro d u ct featu res
* N o t m a n y riv als are fo llow ing a s im ilar d ifferen tiatio n strategy
To succeed in this industry, it is essential to possess strong marketing abilities and a creative flair in product engineering A solid foundation in basic research is crucial, along with a corporate reputation for quality and technological leadership Companies with a long-standing tradition in the industry or a unique combination of skills from various businesses can thrive Additionally, strong cooperation from distribution channels is vital for success.
O rganizational Elements: S tro n g c o o rd in a tio n a m o n g functions in
R & D , p ro d u c t d e v e lo p m e n t, and m ark etin g ; S u b je ctiv e m e a s u re m e n t and
9 incentives in ste ad o f q u a n tita tiv e m e a s u re s ; A m e n itie s to attract highly skilled labor, sc ie n tists, o r c r e a tiv e p eo p le.
The risk of differentiation arises when the cost differential between low-cost competitors and a differentiated firm becomes too significant, leading buyers to forgo certain features, services, or brand image for substantial cost savings As buyers become more sophisticated, their need for the differentiating factor diminishes Additionally, imitation can narrow perceived differentiation, a common occurrence as industries mature.
Combining two generic strategies with the market scope allows a firm to achieve a competitive advantage, leading to a focus strategy as defined by Porter This strategy involves selecting a narrow competitive scope within an industry, where the focus firm targets a specific segment or group of segments and tailors its strategy to serve them exclusively There are two variants of this approach: cost focus, where a firm seeks a cost advantage in its target segment, and differentiation focus, where a firm aims for differentiation within its target segment.
Price focus is a market niche strategy that targets a narrow customer segment by competing on the lowest prices This approach necessitates maintaining a lower cost structure than competitors, exemplified by a small shop on a side street that orders electronic equipment at reduced prices or offers the cheapest automobiles produced in former Bulgaria Certain conditions tend to favor this focus, whether on price or differentiation.
* T h e b u s in e s s is n e w a n d /o r has m o d est re s o u r c e s
* T he c o m p a n y lacks the cap ability to go a l t e r a w id e r part o f the total m ark et
* B u y e r s ’ n eed s o r uses o f the item are d iv e rse ; th e re are m an y different n ich e s and s e g m e n ts in the industry
* B u y e r s e g m e n ts d iffer w idely in size, g r o w th rate, profitability, and intensity in the five c o m p e titiv e forces, m a k i n g s o m e seg m e n ts m ore attra c tiv e than others
* In du stry leaders don't see the n ich e as cru c ia l to th e ir ow n success
* F e w or no o th e r rivals are a tte m p tin g to s p e c ia liz e in the sam e target se g m e n t
Differentiation focus is a second market niche strategy that targets a narrow customer segment, competing by offering unique features Examples include a high-fashion women's clothing boutique in Paris or luxury brands like Ferrari.
Required Skills, Resources and O rganizational Elements: C o m b in atio n o f the a b o v e policies d ire c te d at the p a rtic u la r s tra te g ic target.
The cost differential between broad-range competitors and focused firms can diminish, eroding the cost advantages of targeting a narrow market As the differences in desired products or services between the strategic target and the overall market narrow, competitors can identify sub-markets within the focused firm's target and potentially outcompete them.
The im p o rta n c e o f C o m p e titiv e S tr a t e g y
C o m p e titiv e strateg y offered a rich f ra m e w o r k for u n d erstan d in g the u n d e rly in g force o f co m p etitio n in in d ustries, c a p tu r e d in the “ Five forces”
The framework highlights the key differences among industries and illustrates how they evolve, assisting companies in identifying a unique market position Competitive strategy offers tools to capture the richness and diversity of industries and companies while providing a structured approach for analysis.
C o m p e titiv e strateg y identified a range o f p h e n o m e n a that ec o no m ists, arm ed w ith n e w g a m e -th e o re tic te c h n iq u e s , h av e b eg u n to ex plo re m a th e m a tic a lly for the first time.
Competitive strategy has been extensively utilized in education and has inspired various initiatives to apply economic thinking in practical contexts.
Pro cess to fo rm u late C o m p e titiv e S t r a t e g y
In p re ss C o m p e titiv e S trategies 1980 o f M ic h a e l P o rter, there are three m ain q u e s tio n s in the p ro c e ss to fo rm u late C o m p e titiv e S trategy.
The first question to address is, "What is the business doing now?" This question helps determine the company's current position The formal strategy process begins by defining the company's present state, including its current strategy and the assumptions that management makes about its position, strengths and weaknesses, competitors, and industry trends.
Most large companies have a formal strategy that they regularly review and refine They typically maintain a dedicated strategy committee that continuously monitors and evaluates the company's strategic direction.
T h e s e c o n d q u e stio n is “ W hat is h a p p e n in g in th e E n v iro n m e n t? ”
In the second phase of Porter's strategy process, the team assesses the current environmental conditions, setting aside existing assumptions They gather intelligence to create a statement on the environmental constraints and opportunities affecting companies within their industry This involves analyzing industry trends, evaluating competitors' capabilities and limitations, and considering potential societal and governmental changes that could impact the business Upon completing this review, the team re-evaluates the company's strengths and weaknesses in relation to the prevailing environmental conditions.
The third question to address is, "What should the business be doing?" This involves determining a new strategy for the company During this phase, the strategy team compares the existing strategy with the latest environmental analysis They generate various scenarios or alternative courses of action that the company could pursue Essentially, the company envisions different situations it may encounter in the coming months or years and works backward to identify the necessary policies, technologies, and organizational changes required to achieve each scenario Ultimately, the strategy committee, in collaboration with the executive committee, selects one alternative and begins implementing the necessary changes to execute the new strategy.
T h e fo llo w in g c h a rt s u m m a r iz e s th e p ro ce ss to fo rm u late a co m p etitiv e strategy:
1 I ii -V a lu e chain m odel i - M a cro a n a ly s is , A p p ro p ria te i i i , -S u sta in a b le i i
' - In d u stry a n a ly sis 1 i i i i i S trateg ies • i i i i i i u J
1 c o m p e titiv e a d v an tag e i id entificatio n p rocess
F ig ure 1.2: P ro cess to F orm ulate C o m p e titiv e S trategies
M ission d e fin e s the fu n d am en tal p u rp o se o f an o rg a n iz a tio n or an enterprise, basically d e s c rib in g w hy it exists an d w h at it d o e s to a c h ie v e its Vision
M issio n a n s w e r the q u estio n : “ W h a t is the p u rp o se o f ex isten c e o f the c o m p a n y ? "
A corporate mission can endure for many years or even for the lifetime of the organization It serves as the overarching goal rather than a time-bound objective, guiding the organization as it achieves various objectives aligned with its mission over time.
E lem en ts o f a m issio n statem ent:
- C le a r articulated: m e a n s that m issio n sho u ld be easy to un d erstan d the v alues an d purpose.
- R elev an t: in term s o f its history, cu ltu re and shared values.
- U n iq u e: not c o p ied from sim ilar units.
- E n d u rin g : sh o u ld g u id e, inspire and ch allen g in g
- A d a p te d to the targ et au d ien ce - sto ck holders, c o n s u m e rs , em p lo y ee s th ro u g h s h are d v alu es and stan d ard s o f beh avio r.
M issio n s h o u ld be clear both in te rm s o f in tentio n s and w o rd s used It sh ould be feasible, n eith e r too high to be a ch ie v a b le , n o r too low to
A company's vision and mission are essential for motivating its workforce They should be clear and explanatory, striking a balance between being too narrow, which could limit the company's activities, and too broad, which could render them meaningless Additionally, the vision and mission should be distinctive, highlighting the company's unique contributions to society and the ways in which these contributions can be realized.
A company's mission outlines its purpose and objectives, highlighting the primary stakeholders such as clients and shareholders It also defines the company's responsibilities towards these stakeholders and details the products and services offered.
A vision outlines the intended future state of an organization or enterprise, focusing on its fundamental objectives and strategic direction.
V isio n a n s w e r the q u estion : “ W h at c o m p a n y w a n t s to b e c o m e in the fu tu re?”
Vision represents a long-term perspective, often articulating how an organization envisions the world in which it operates For instance, a charity focused on alleviating poverty may have a vision statement that reads, "A world without poverty."
A clear and well-defined vision is essential for achieving organizational goals, taking into account various influencing factors It should align with the organization's mission, be rational and realistic rather than idealistic, and present a challenge to those responsible for its realization Additionally, the vision must yield specific results upon achievement and often begins with the word "to," followed by a specific accomplishment Consistency over time is crucial, and the vision should be periodically reviewed to ensure its relevance and effectiveness.
1 1 4 2 E x t e r n a l A n a ly s is aI M a c ro A n aly sis ( P E S T m odel )
When analyzing the macro-environment, it is crucial to identify factors that can impact key variables influencing an organization's supply, demand levels, and costs.
"radical and ongoing changes occurring in society create an uncertain environm ent and have an impact on the function o f the w hole organization"
Various checklists have been created to catalog the numerous potential issues impacting an industry One such tool is the PEST analysis, which serves as a framework for categorizing environmental influences into four key areas: political, economic, social, and technological forces.
PEST analysis, as noted by Kotler (1998), serves as a valuable strategic tool for assessing market growth or decline, business positioning, and operational direction This framework, alongside SWOT and Porter’s Five Forces models, aids companies in evaluating their strategic directions, including marketing propositions Its effectiveness is evident in business and strategic planning, marketing planning, product development, and research reports Additionally, PEST analysis ensures that a company's performance aligns with the significant forces of change impacting the business environment (Porter, 1985) It is particularly beneficial for companies looking to expand their operations into new markets and countries.
Main Aspects of PEST Analysis
Economic conditions significantly influence the success and profitability of businesses by affecting capital availability, cost, and demand When demand is high and capital costs are low, firms are more likely to invest and grow, anticipating profitability Conversely, in challenging economic circumstances, overall industry profitability may decline The timing and effectiveness of specific strategies are often shaped by these economic conditions; for instance, a growing economy can create demand for products or services that may not be viable during a recession While a depressed economy can lead to many businesses failing, it can also present unique opportunities for some organizations.
Economic conditions are significantly shaped by political factors and government policies, which play a crucial role in decision-making A pertinent example is the debate over whether European nations should adopt or stay outside the single European currency Currency exchange rates can make exported or imported goods appear either costly or affordable at any given time Additionally, government decisions impact organizations in various ways, presenting both opportunities and challenges.
Technology is w idely recognized by various literature on strategic management [Capron and Glazer, 1987; Johnson and Scholes, 1993; Jan,
V alue C h a in M o d e l
Figure 1.5: Value chain M odel [Source: Charles W L H ill and G arethr Jones, Strategic Managerment: A n Intergrated Approach (H oughton 1998)].
Prim ary activities: those that are directly concerned with creating and delivering a product and providing support an d after-sale service to the buyers of the product Those include:
Research and development play a vital role in a company's survival, especially in a rapidly changing industry Companies must consistently update their product designs and offerings to keep pace with technological advancements, competitor actions, and evolving customer preferences A marketing-driven approach prioritizes customer needs, focusing on producing goods that are in demand based on thorough market research Conversely, a technology-driven strategy emphasizes manufacturing capabilities, aiming to create products that are technically superior and efficient, thereby gaining a competitive edge in the marketplace.
Research and Development (R&D) holds significant economic importance beyond its traditional link to scientific and technological advancement Investments in R&D typically indicate a government or organization's readiness to sacrifice immediate profits for enhanced future performance and returns, showcasing their capacity to engage in effective research and development.
Production: the processes o f transform ing inputs into finish products and services.
Marketing and sales: the identification o f customer needs and the generation o f sales.
Service: A ll those activities associated w ith m aintaining product performance after the product has been sold.
Support activities which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g human resource
27 management) It is rare fo r a business to undertake all prim ary and support activities Those are:
Company infrastructures: these concerns w ith a wide range o f support systems and functions such as finance, planning, control systems, company culture, etc.
Human resources: these deals w ith employee recruiting, hiring, training, development and compensation.
Materials management involves the planning, coordination, and control of acquiring, storing, handling, and moving essential resources such as raw materials, purchased parts, semi-finished goods, tools, and other integral materials within a company.
A company's profit margin relies on its ability to efficiently execute activities within the value chain, ensuring that the price customers are willing to pay exceeds the costs incurred These activities present opportunities for firms to create superior value By reconfiguring the value chain, businesses can achieve a competitive advantage through either lower costs or enhanced differentiation.
Identify s u sta in a b le C o m p e titiv e a d v a n ta g e s and C o r e C o m peten ces
A competitive advantage occurs when a company can provide the same benefits as its competitors at a lower cost (cost advantage) or offer superior benefits compared to competing products (differentiation advantage) This advantage allows the company to generate greater value for its customers and achieve higher profits Therefore, a successful strategy should focus on establishing a sustainable competitive advantage rather than relying solely on core competencies or other factors.
T o id e n tify sustainable com petitive advantage, managers must understand:
- The role o f resources, capabilities, and d istinctive competencies in the process by w hich companies create value and profit,
- The importance o f superior efficiency, innovation, quality, and responsiveness to customers,
- The sources o f their com pany’ s com petitive advantage (strengths and weaknesses).
Figure 1.6: Identify sustainable com petitive advantages
Resources encompass various types, including capital, financial, physical, social, human, technological, and organizational factors Firm-specific resources that are challenging to imitate can foster distinctive competencies A valuable resource that generates significant demand for a firm's products is likely to contribute to these unique competencies.
Capabilities refer to a company's skills in effectively coordinating and utilizing its resources These skills are reflected in the company's decision-making processes and the management of its internal operations, all aimed at achieving organizational objectives.
C apabilities are the product o f organizational structure, processes, and control systems We must add people, p articularly leadership in building the structure, etc.
Core competencies are essential capabilities that enable a business to gain a competitive advantage Analyzing these competencies begins with understanding that competition is not only about market position but also about mastering specific skills A core competency is something a company excels at, which provides consumer benefits, is difficult for competitors to replicate, and can be applied across various markets and products These competencies are vital for a company's existence and success within its industry.
Distinctive competencies are unique strengths that enable a company to achieve a competitive advantage by differentiating its products or maintaining lower costs than competitors These competencies stem from the unique application of resources and the development of specific capabilities.
A sustainable competitive advantage is the unique edge that a company seeks to achieve, enabling it to meet customer needs effectively while outperforming competitors This advantage can stem from the distinctiveness of its products or from lower production and marketing costs.
Albert Humphrey developed the SWOT analysis technique during a research project at Stanford University in the 1960s and 1970s, utilizing data from Fortune 500 companies SWOT stands for strengths, weaknesses, opportunities, and threats, and it serves as a strategic planning tool to assess the various factors influencing a project or business venture.
In doing so, the external and internal factors that are favorable and unfavorable are identified in order to achieve an objective.
I f an objective has been identified, SW O T analysis can be used to help in the pursuit o f that objective SWOTs are identified as:
□ Strengths: attributes o f the organization those are help fu l to achieving the objective.
□ Weaknesses: attributes o f the organization those are harm ful to achieving the objective.
O pportunities: external conditions those are h e lp fu l to achieving the objective.
□ Threats: external conditions those are harm ful to achieving the objective.
Accurate identification of SWOT elements is essential, as the subsequent planning steps for achieving the chosen objectives are based on these assessments.
Decision-makers must first assess whether the objective is achievable based on the current SWOT analysis If the objective is deemed unattainable, an alternative objective should be chosen, and the evaluation process should be repeated.
F o rm u la tio n and C h o ic e o f C o m p e titiv e S t r a t e g y
When objectives appear achievable, the SW OTs serve as inputs for generating a range of potential strategies This process involves repeatedly asking and answering four key questions.
1 How can we Use each Strength?
2 H ow can we Stop each Weakness?
3 H ow can we Evxploit each O pportunity?
4 H ow can we Defend against each Threat?
A diverse team comprising members from various functions, such as an accountant, salesperson, executive manager, engineer, and government representative, should conduct the SWOT analysis to ensure a comprehensive range of perspectives.
The main goal o f any SW O T analysis is to id e n tify the key internal and external factors that are im portant to achieving the objective Key pieces o f
S W O T group inform ation into two main categories:
Internal factors - The strengths and weaknesses internal to the organization.
□ External factors - The opportunities and threats presented by the external environm ent.
The internal factors of an organization can be seen as either strengths or weaknesses, depending on their influence on the organization's objectives Meanwhile, external factors encompass macroeconomic issues, technological advancements, legislative changes, socio-cultural shifts, and variations in the marketplace or competitive landscape.
SWOT analysis is a valuable tool that extends beyond profit-driven organizations; it can be applied in any decision-making scenario where a specific goal is established This technique is commonly utilized by groups, departments, units, organizations, and individuals alike.
CHAPTER 2 FORMULATION OF COMPETITIVE STRATEGY FOR HANOSIMEX
I n t r o d u c t i o n
Name o f company: HANOI TE X FILE G A R M E N T CO M PANY (H A N O S IM E X )
Address: No 1 Maidong, Hoangmai District, Hanoi, Vietnam
We specialize in the manufacturing, trading, and importing/exporting of textiles and apparel, including essential raw materials like cotton and polyester fiber Our offerings encompass yarn, knit fabrics, knitwear, denim, jeans, woven garments, towels, as well as equipment, engines, spare parts, electronics, dye-stuffs, chemicals, and various other consumer goods.
- Business o f warehousing, transportation, office rental, factory rental, restaurant, hotel, supermarket, entertainment services.
Hanosimex is a big state run company in textile and garment industry o f Vietnam The process o f development o f the company can be viewed with these follow ing benchmarks:
The company officially commenced operations in November 1984 under the name "Hanoi Yarn Company." Initially, it focused on producing three primary types of yarn: Cotton, PE, and PECO, each with distinct technical characteristics.
• At June o f 1995, Ministry o f l ight Industry has changed the name to Hanoi Textile Company I he trading name is still being llanosimex.
• Feb 28th 2000 Hanoi 1 extile Companv was renamed to Hanoi Textile- Garment Comparn
• From 2000 to 2005 I he Comparn w as ever-developing in the trend o f international economic integration, company's re-organization and extending the business' activities.
• From 2005 to now The Company has been focusing on re-organizing as a holding companv and privatizing its company members.
Business resu lts
The performance o f I lanosimex has shown some growth in doing its businesses There is increasing in company economic index from 2004 to
In 2008, the company experienced a decline in revenue and profit compared to 2007, largely due to the global crisis The company is burdened with high debt, and its accounts payable are approximately three times higher than its accounts receivable, as detailed in Table 2.1.
Table 2.1: rhe main financial indexes in period from 2004 to 2008 (B illion
2.1.3.Organizational StructureError! Bookmark not defined.
Hanosimex’ s organizational structure is organized along with straight- line controlling with low level o f the management team General Director is responsible for the w hole development o f the company.
The organizational structure of the group is function-based, with a General Director overseeing three Vice Directors responsible for key functions The head office comprises three departments: Production, Accounts & Finance, and Administration The Production Department manages six production units, including Yarn Factory I, Yarn Factory II, and Knit Factory located in Hanoi, as well as Ha Dong Textile Factory, Dong My Sew-Embroider Factory in Ha Tay province, and Vinh Yarn Factory in Nghe An province All production units are horizontally integrated, each led by a production manager who reports directly to the General Manager of Production at the head office Department heads are tasked with coordinating efforts and leading their respective departments.
Administration and Human Resource Department : The department is responsible for recruitment, for participating in the development o f salary system, reward policy for staff, promotion for employee and etc.
Accounting tV Finance Department' I he department is responsible for accounting and financial matters Now the company has data base finance accounting.
The Production department encompasses four key subsectors, including Operation Management, Quality Control, and Commercial Operation Management oversees production planning, monitoring, and inventory control across all factories Meanwhile, the Commercial department handles various commercial activities such as import and export operations, insurance, subcontracting, customs, quota allocation, and negotiations with buyers.
N ice Didector 1 Vice Director 2 Vice Director 3
Operation Management Department Aceounttine &Finance Department
Export & Import Department Ọualit\ Control Department
Dona Mv Sew-Embroider Factors
■igure 2.1: The Organizational Chart o f 1 lanosimex
2.2.Formulation and Choice of Competitive Strategy for HANOSIMEX
V is io n /M is s io n
Vision: Compam has not got the v ision yet.
M issions: They can he summarized in some main points:
- Becoming the leader in yarn supplying market.
- Reconstructing the exporting capability o f knitwear market.
- Continuing the reorganization process to become more effectiveness, more fle xib ility in production.
In the coming year, Hanosiinex's top priority is to ensure stable growth while enhancing its marketing and product strategies The company aims to strengthen its brand and establish a healthy, safe, and effective business environment to improve production and operations This approach will create momentum for future growth, gradually transforming Hanosiinex into a multi-sector trade company that meets international trade standards.
E xternal A n a l y s i s
Since 2001 Vietnamese authorities have reaffirmed their commitment to economic liberalization and international integration The reform has changed the face o f the economy It allows an open door policy that
Vietnam encourages foreign investment across all economic sectors, adopting a free market mechanism with state regulation aimed at socialist orientation The country is implementing structural reforms to modernize its economy and enhance the competitiveness of export-driven industries Membership in the ASEAN Free Trade Area (AFTA) and the US-Vietnam Bilateral Trade Agreement, effective December 2001, has accelerated changes in Vietnam's trade and economic framework Joining the WTO in January 2007, after a decade of negotiations, has anchored Vietnam in the global market and bolstered domestic economic reforms This accession also allows Vietnam to benefit from the phase-out of the Agreement on Textiles and Clothing, which removed quotas on textiles and clothing for WTO partners starting January 1, 2005.
After a decade of renovation, Vietnam has successfully emerged from its socioeconomic crisis, experiencing consistent economic growth with an annual rate of 7% to 8.5% The country's GDP rose significantly from USD 31.1 billion in 2000 to USD 70.06 billion in 2007 However, the global financial crisis in 2008 led to a decline in the GDP growth rate from 8.48% to 6.23%, posing challenges for job creation and poverty reduction in Vietnam.
Figure 2.2: GDP during the period o f 2000-2008
GDP growth rate: for the past few years Vietnam has achieved high economic growth rate o f 7% on average.
Y e a r Figure 2.3: GDP growth rate in the period o f 2000-2008
The growth rate of the economy directly influences the opportunities and threats faced by companies In the coming year, GDP is projected to reach an average of 7-8% GDP comprises individual and household consumption, gross investments, government spending, and net exports As GDP rises, its components will also increase, leading to a higher demand for textiles driven by increased consumption.
Figure 2.4: GDP growth rate in the period o f 2010-2015
In 2008, Vietnam's average income per capita was $1,024, and it is projected to rise to $2,113 by 2015 This increase in income is expected to enhance the living standards of consumers, leading to higher spending on clothing.
Figure 2.5: Income per capital in the period o f 2010-2015
Source: M inistry o f Planning and investment
With the growth o f per capital income, customers' livin g standard w ill be higher and they w ill spend more on recreational activities, including clothes.
According to a survey o f newspaper Saigon Tiep thi in 2008, 9.5% o f households' income and 13.6% o f single people are for necessaries, traveling, housing assistance (including for clothes).
□ Entertainment, sport, beauty treatment, public relations
□ Electricity, water, tel, house rental
Figure 2.6: Consumption structure o f household and individuals in Hanoi
Source: Nguyen Tien Dung Research Center o f Consumer and Enterprise - Saigon Ticp thi newspaper
Inflation can be a perplexing issue, particularly in Vietnam, where the Consumer Price Index (CPI) is typically measured by comparing the price index from December of the current year to that of the previous year After experiencing single-digit inflation in the late 1990s, Vietnam saw a significant rise in inflation starting in 2004, with an average rate of 7.7% that year, peaking at 8.3% in 2005 before slightly decreasing to 6.6% in 2006 However, inflation surged again in 2007 to 12.63% and reached 19.89% in 2008 It is anticipated that inflation will return to single-digit levels by 2010, as high inflation negatively impacts consumers' purchasing power.
Figure 2.7: Inflation in period from 2004 to 2008
In conclusion, growing GDP and per capital income are opportunities for textile companies, increasing inflation rate/CPI is threats to textile companies Social Factor
Vietnam, with a population of 86.5 million, ranks 13th globally, presenting a significant market potential However, 73% of its population resides in rural areas, where income levels are lower than those in urban regions This income disparity results in distinct differences in buying patterns, product requirements, and consumption styles Urban consumers tend to be more sophisticated, prioritizing design, color, quality, and brand names, while rural consumers focus more on price and durability.
Vietnamese people used to prefer imported goods due to their high quality Although imported goods are more expensive, people are w illin g to
Vietnamese consumers have traditionally favored imported goods for their perceived high quality, often willing to pay a premium for them However, in recent years, domestic products have gained popularity among locals due to their reliable quality and significantly lower prices As a result, more consumers are opting for domestic goods, which now offer comparable quality to imported items.
So social factor not only the opportunities but also the threats for textile industry.
In 2006 Congress approved 60 laws and ordinances, the government passed 300 decrees w ith the goal o f completing legal system, then creating a business environment more smoothly, equality, clearness, for all business components.
Decision No 36/2008/QD-TTg dated March, 10th 2008 by Prime
The Vietnamese government has approved a development strategy for the textile and apparel industry, aiming for modernization and increased product value by 2015, with a vision extending to 2020 This strategy focuses on three key programs: cotton planting, high-quality fabric weaving, and human resources training, which are essential for the sustainable growth and long-term stability of the industry.
The Vietnamese textile and apparel industry has experienced significant growth in export performance over the years, with export turnover reaching nearly $7.8 billion in 2007 This sector continues to play a crucial role in the country's economy, showcasing its potential for further development and international trade.
In 2008, the textile and garment industry emerged as a crucial sector in Vietnam's economy, achieving the second highest export turnover of approximately USD 9.1 billion This industry consistently ranks among the top three export goods, alongside crude oil and footwear products.
The Vietnamese textile and apparel industry is poised for significant growth, with a focus on enhancing both quality and production volumes through its renowned products The domestication rate is expected to rise from the current 32% to 50% by 2010 and 60% by 2015 Additionally, export turnover is projected to reach $12 billion by 2010 and $18 billion by 2015.
A stable political environment presents a significant opportunity for companies to grow steadily However, slow administrative processes and a lack of unified regulations pose challenges for textile companies.
Investing in technology is essential for enhancing productivity and the design of fashion items The rapid evolution of technology is revitalizing the garment sector, and textile companies must stay updated to avoid losing valuable opportunities.
The internet is rapidly developing, with 95% of companies and organizations in Hanoi utilizing it [Source: Vietnam National Internet Center, June 2008] By 2010, a plan was set to ensure that all research institutes, universities, schools, and government bodies in Vietnam would be connected to the internet, as outlined in decision number 32/2006/QD-TTg dated February 7, 2006 This initiative provides a convenient platform for women, who are often the primary purchasers of clothing for their families, allowing them to easily check styles and prices of the clothes they need.
So, technology is an opportunities I'aetor i f companies can follow, catch it and use it for companies' goal.
2.2.2.2 Industry Analysis (Five forces model)
In this section I w ill focus in Yam product.
Managers and officers highlight that quality and price are the two primary competitive factors in Vietnam's textile and fabric industry Historically, this sector was prioritized and largely dominated by state-owned enterprises, which received significant subsidies The industry's strategy focused on establishing large-scale plants that relied heavily on labor, leading to challenges in updating outdated technologies Poor maintenance policies and insufficient capital for technological upgrades further exacerbated these issues, resulting in domestic firms facing low quality and high prices.