Assessment of the concentration of textile & garment manufacturing industry in vietnam

Topic: ASSESSMENT OF THE CONCENTRATION OF TEXTILE & GARMENT MANUFACTURING INDUSTRY IN VIETNAM Class : KTEE418 GD2 - HK2 - 2122.. FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECON

Topic:

ASSESSMENT OF THE CONCENTRATION

OF TEXTILE & GARMENT MANUFACTURING INDUSTRY

IN VIETNAM

Class : KTEE418 (GD2 - HK2 - 2122) 1

Group :38

Student Name-ID : Dinh Khac An 1914450002

Nguyen Quynh Huong 191445001€

Lecturer : Assoc Prof Tu Thuy Anh

PhD Chu Thi Mai Phuong

FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS

MID-TERM REPORT INDUSTRIAL ORGANIZATION

Topic:

ASSESSMENT OF THE CONCENTRATION

OF TEXTILE & GARMENT MANUFACTURING INDUSTRY

IN VIETNAM

Class : KTEE418 (GD2 - HK2 - 2122) 1

Group : 38

Student Name—ID : Dinh Khac An 1914450002

Nguyen Quynh Huong 191445001€ Lecturer : Assoc Prof Tu Thuy Anh

PhD Chu Thi Mai Phuong

Ha Noi, May 2022

TABLE OF CONTENTS INTRODUCTION

CHAPTER | - THEORETICAL FRAMEWORK

1.1 Theory of market concentration and regression function - 2 1.1.1 Market share

1.1.2 Concentration measures 3

1.2 Cobb - douglas manufacturing function and application to measure business

|9-11/9)4/41-181©e-89) 6-ie-]|-EĂiaỒỒỒỒỒỒẦẦẦẦỒ.ỮẦ 4 1.3 Overview of the textile and garment industry in Vietnam

1.3.1 Making clothes (14100)

1.3.2 Manufacturing of knitted and crocheted garments (14300)

CHAPTER II QUANTITATIVE ESTIMATIONS

2.1 Process the data

2.2 Evaluation of the industry concentration ratio

2.2.1 Concentration measures of making clothes (apart from clothes made by EH1:HL.ÌM-R¡P| >1) 19641) Ư%%ắaắẳẮẮĂĂẶẮẶ can áắắắắắìì 7 2.2.2 Concentration measures of manufacturing of knitted and crochetedgarments 8 2.2.3 Meaning and correlation between CR4 and HHI - -<s<<<552 9 2.3 Regression model of business efficiency by scale ẶẶẶ TS S2 10 2.3.1 Research methods HH 1n TH TT TT TT TT n TT 1 1 2 1111k tk kh kkh 10 2.3.2 RESEAPCH FESUItS ng EEE “:-1 1B Sn 11 2.3.3 Regression analySIS - TQ Q0 0000 H Tnhh net 12 2.4 Testing modiel c3 111201222221 1nn HH ng gọn nh cu 12 2.4.1 Omitted variable tesf - 00H HH H HH TH HH HT HH Tnhh TK khe 12

VÀ 2n (9099 ca 12

VÀ SON 0000 s9 e AAAđ3ẦẦẦ 13 2.5 Statistical inference 13

CHAPTER III: CONCLUSION AND RECOMMENDATION 15

3.1 Review of the InduSfry .- TQ TQ TQ HH HH HH TH ng nh nen cu 15 3.2 Conclusion

3.3 Recommendatfion - - - - - - - Q02 10102111101 1n HT n ky TT TT KH TT TT TT TT ky Hàn vn

REFFERENCES

INTRODUCTION The fashion garment industry is one of the key industries in our national economy In the context of our country, there are many favorable things for the fashion garment industry

to develop But besides that, it requires the industry to also make efforts to develop further Promoting all competitive advantages of the industry is an effective competitive measure

to defeat other competitors to dominate the market Businesses have to identify for themselves the strengths , the advantages are much better than the competitors From there, melons come up with appropriate business strategies to achieve high economic efficiency

To develop further, the fashion apparel industry must take advantage and promote its available advantages to create an effective competitive tool to meet the needs of the industry

We would like to write a report under the supervision of Assoc Prof Dr Tu Thuy Anh and Dr Chu Thi Mai Phuong to better research the Vietnam's textile and garment industry in the economy and in our everyday lives In this paper, we examined the topic

"Assessment of the concentration of textile & garment manufacturing industry in vietnam” using both the research technique and the quantity method In the course of the essay, the author used stata software data analysis and processing tools and referenced from many sources, Questionnaire business surveys, industry organization lectures and some other related documents

Our report is divided into 3 main chapters:

Chapter |: Theoretical framework

Chapter II: Quantitative estimation

Chapter II: Conclusion and recommendations

Due to many limitations in the process of finding and analyzing information, the essay still exists inevitable shortcomings However, with the results collected, our team hopes to reflect accurate and representative information on behalf of the chosen industry, and at the same time, we look forward to receiving comments and comments from lecturers to be able to improve this report

CHAPTER | - THEORETICAL FRAMEWORK

1.1 Theory of market concentration and regression function

1.1.1 Market share

Asingle company's market share (absolute market share) is the percentage of total salesfor an industry, product category, or specific product Market share may be broken downinto industries, product categories, and even individual products It's computed

by multiplying the firm's revenues by the industry's sales during a given time period

In other words, it's the quantity of revenue a firm generates when contrasted to the rest

of its industry Market share can be measured in terms of value or volume, and is computedusing the formula:

Market share (%) = _ Sales of the firm _ firm

Total sales of the industry

Number of units sold by the firm Total units sold in the industry

Market share (%) =

In contrast to absolute market share, relative market share compares a company

to its single, most powerful competition This is a method of determining a firm's strength incomparison to another company that is chasing it or is pursuing it It's also

a method ofidentifying prospective risks and opportunities For example, a market share leader would look at relative market share statistics with its top rival to determine

if the competition is cutting into their market share or stealing their consumers The market share of a firm (its absolute market share) is divided by the market share of its strongestrival in the industry to arrive at relative market share

Market share of acompany

Relative market share = - -

Market share of its strongest competitor The market share leader in a certain industry will always have a relative market share larger than one Consumers’ preference for a product over other similar ones is measured by market share A high market share indicates that a corporation has mastered marketing Market leaders entice investors and instill trust in potential

One way for a corporation to gain market share is via innovation Happy customers telltheir friends and family about their pleasant experience, resulting in new customers Gaining market share through word of mouth boosts a company's income without increasing marketing costs Purchasing a rival is one of the most reliable ways to expandmarket share

1.1.2 Concentration measures

Market concentration is defined in economics as the extent to which a small number of enterprises account for all of the market's total production If the concentration is low, itsimply indicates that the top N firms do nothave a significant impact on market production, and the sector is deemed highly competitive A high level of concentration, however, can indicate an industry is oligopolistic or monopolistic There are numerouspopular methods for calculating an industry's market concentration, including Herfindahl Hirschman Index (HHI) and Concentration Ratios (CRm)

a Herfindahl-Hirschman Index (HHI)

The Herfindahl-Hirschman Index is the most often used method for calculating marketconcentration (HHI) This index is produced by squaring each individual firm's marketshare in a market and then adding the results

The Herfindahl-Hirschman Index formula is as follows:

N HHI = > si?

i=1

where

N is the number of businesses in the industry

Si is the market share (percentage) of company i

The HHI value ranges from zero to one (perfect competition at its lowest level) and monopoly at its highest level When percentages of market share are expressed

as whole numbers, the value of HHI is frequently multiplied by 10,000, resulting in

a range of zero to 10,000 The Vietnam Competition claims that; Authority:

- AHHI of less than 0.1 (or 1000) shows that the industry is very competitive

- A HHI of less than 0.18 (or 1,800) implies that the industry is somewhat concentrated

- A HHI of 0.18 (or 1,800) or above shows that the industry is highly concentrated

The key advantages of HHI over other metrics are the ease with which it may

be calculated and the short quantity of data required for the calculation However, one of the index's main drawbacks is that it is such a simplistic measure that it fails

to accountfor the intricacies of diverse markets in a way that allows for a really realistic assessmentof competitive or monopolistic market conditions

b Concentration ratios

Concentration ratio is another way to figure out how concentrated a market is (also called m-firm concentration ratio) In economics, the concentration ratio is a ratio that may be used to assess the market share of the top m businesses in a certain industry according to the formula:

i=1

The concentration ratio is a number that runs from zero to one that shows the degree ofrivalry in a certain sector Aconcentration ratio of 0% - 50% may imply that the industryis perfectly competitive and concentration An oligopoly arises when the top four businesses in a market account for more than 60% of total market shares, according toa rule of thumb

1.2 Cobb - douglas manufacturing function and application to measure

business performance by scale

To assess the impact of these factors on production outcomes, economists often use the Cobb-Douglas model because of its simplicity but still allows for a close observation of the actual production situation, the parameters of the model

The Cobb-Douglas production function has: Q =A K “L P(*)

In which:

Q: production product output

K: input is capital

L : input is labor A: constant

a: Elasticity coefficient of output by capital

B: Elasticity

The total elasticity coefficient œ and B of significant economic significance

e If the total elastic coefficient (a + B) = 1, then the production function indicates that the state of profitability does not change by scale, which means that the percentage increases the inputs by % increases the output

e Ifthe total elastic coefficient (a + B) > 1, then the production function indicates

a gradual increase in profitability by scale, which means that the percentage increase in input factors is less than % increases in output output

e If the total elastic coefficient (a + B) < 1, then the production function indicates

a gradual decrease in profitability by scale, which means that the percentage increase in input factors is greater than % increases in output

In order to apply this method, the model is introduced to a linear form by logarithmizing the two sides of the formula (*), we have:

log(Q) = log(A) + ơ log(K) + log B (L)

To use the Cobb-Douglas function to measure business performance according to the size of businesses in the service sector, the author uses the total revenue from net production and business activities to replace the output, the two labor factors (L) and capital (K) remain the same Just like in the original model

1.3 Overview of the textile and garment industry in Vietnam

In this essay, the team will conduct research and analyze the concentration, scale and business efficiency of enterprises in the field of apparel (except fur clothing) in the group of processing and manufacturing industries Selected group business that is a level

5 industry, the full industry code is 14100 and 14300 in the economic system of Vietnam, implemented by the General Statistics Office in 2007

However, the main disadvantage of Vietnam's key export industries, including the apparel industry, is their dependence on imported raw materials This leads to the situation that Vietnamese enterprises only perform a short step in the production process

of products with low added value This situation is gradually improving with the promotion of domestic production to replace imports, but Vietnam still imports a large volume of fabrics, auxiliary materials and technology to support the garment industry

in 2017

1.3.1 Making clothes (14100)

This group includes:

- Manufacture of children’s clothing, swimwear, ski clothing;

- Manufacture of soft or hard hats

- Producing other costume accessories: socks, belts, ties, hair nets, scarves;

- Producing festival goods

- Manufacture of underwear or nightwear made of woolen, crocheted fabrics, for men, women or children such as: Shirts, pullovers, shorts, tights, pajamas, skirts sleepwear, blu shirt, bra, corset ,

- In the manufacture of clothing, the raw materials used may be of any kind which may be coated, covered or rubberized;

- Manufacture of apparel of leather or composition leather including leather accessories for industrial uses such as leather aprons;

- Producing workwear protective clothing;

- Producing outerwear from woolen fabrics, crocheted or non-crocheted fabrics for women, men and children such as outerwear, jackets, suits, pants, skirts 1.3.2 Manufacturing of knitted and crocheted garments (14300)

This group includes:

- Producing knitwear such as cardigans, socks, and shorts

- Manufacture of crocheted apparel and other ready-to-wear products, crocheting directly into products such as pullovers, sweaters, vests