Training model for owners of small and medium sized enterprises on the air

OPEN UNIVERSITY SOLVAY BUSINESS SCHOOL MMVCFB 6 MASTER IN MANAGEMENT PROGRAM NGUYEN DUC BINH SMALL AND MEDIUM SIZED PROMOTION CENTER HOCHIMINH CITY BRANCH OF VIETNAM CHAMBER OF COMMERC

OPEN UNIVERSITY SOLVAY BUSINESS SCHOOL

MMVCFB 6 MASTER IN MANAGEMENT PROGRAM

NGUYEN DUC BINH

SMALL AND MEDIUM SIZED PROMOTION CENTER HOCHIMINH CITY BRANCH OF VIETNAM CHAMBER OF COMMERCE AND INDUSTRY

TRAINING MODEL FOR OWNERS

OF SMALL AND MEDIUM SIZED ENTERPRISES

ON THE AIR

MASTER IN MANAGEMENT THESIS

ADVISOR: DR TRAN DU LICH

HOCHIMINH CITY, 2007

COMMITMENT

“I commit that this is my own research

All figures and results stated in this thesis are true”

Nguyen Duc Binh

ACKNOWLEDGMENTS

This is a rare opportunity for me to express my profound gratitude to the co-directors program, Prof Michel Allé and Prof Tran Anh Tuan and all professors and coordinators of the Viet Nam - Belgium Master in Management Program, who give me a good opportunity to study this useful program I would like to express my sincerely thanks to Dr Tran Du Lich for his invaluable guidance, constructive comments, explicit direction and encouragement throughout the study period

My thanks are also extended to Mr Le Binh Hung, Deputy Director of Hochiminh City Branch of Vietnam Chamber of Commerce and Indutry; Mr Pham Hoang Tien, Deputy Director of Small and Medium Sized Enterprises Promotion Center; Ms Tran Mai Trinh, Director of Information Department of Hochiminh City Institute for Economic Research and all of my colleagues for their valuable advices and warm supports for my study

Thank all MMVCFB6 members and the Faculty of the Hochiminh City Open University for their help and boundless inspiration

Last, but no least, grateful thanks are conveyed to my family for their support and great inspiration which encouraged me to pursue this study successfully

ABSTRACT

The fast globalization and integration process nowadays brings a lot of opportunities but also many threats Facing with many difficulties, SMEs have to manage themselves to sustain and develop by strengthen their competitiveness via business training On the other hand, realising SMEs’ current situation, the government issued several support policy and training programs for SMEs, but due

to many reasons, there is still a big gap between the SMEs training demand and supply, especially on how to start up and improve a sustainable business

How to fill the gap with current spare and limited result training programs?

In other words, how to fill the gap by creating an opportunity for more SMEs to approach a relevant training program?

A new model for business training with appropriate content and popular training method will be the answer to those questions By analysing SMEs’ training needs and current situation, the Training model for owners of SMEs on the Air is designed with systematic training topics on how to start and improve a business using wider approach to target beneficiary via practical application of advanced technology on mass media On the other hand, the Training Model can mobilize many valuable resources from the government support, donors’ sponsor and SMEs contribution to overcome SMEs difficulties The Training Model with its practical content will not only assist SMEs’ owners to improve their businesses but also enable potential businessmen to start up new businesses At the same time, it will contribute important part in achieving the government strategy on accelerating new business establishment as core base of economic development Finally, as result of new SMEs start-up, the Training Model will help create more qualified jobs, reduce poverty, balance local economic structure and therefore ensure a stable social economic development

TABLE OF CONTENT

ACKNOWLEDGMENTS - III

ABSTRACT - IV

TABLE OF CONTENT - V

ABBREVIATION - XI

LIST OF TABLES AND FIGURES - XII

CHAPTER I - 1

INTRODUCTION - 1

1.1 BACKGROUND - 1

1.2 OBJECTIVES OF THE STUDY - 2

1.3 SCOPE OF THE STUDY - 3

1.4 STUDY METHODOLOGY - 3

1.5 LITERATURE REVIEW AND APPLICATION: - 4

1.6 RESEARCH FRAMEWORK - 5

1.7 THESIS STRUCTURE - 5

CHAPTER II - 6

RATIONALE OF TRAINING MODEL FOR SMES’ OWNERS ON THE AIR - 6

2.1 OVERVIEW ON SME S IN VIETNAM - 6

2.1.1 SMEs Definition - 6

2.1.2 SMEs’ important roles in the economy. - 9

♣ Create more new jobs - 9

♣ Contribution to GDP - 9

♣ Enable free competition - 9

♣ Attracting domestic investment and exploiting local resources - 9

2.1.3 SMEs’ advantages and disadvantages -10

2.1.3.1 Advantages - 10

Dynamic, flexible and accommodate themselves to market diversity. - 10

Easy start up with small capital. - 10

2.1.3.2 Disadvantages - 11

Limit in financial capability. - 11

Disadvantages in buying input material, equipment and selling products. - 11

Lacking of information and management skills. - 11

Difficult to attract qualified managers and skilful employees. - 11

Unstable business operating. - 11

2.2 THE ANALYSIS OF SMES’ TRAINING NEED -12

2.2.1 The importance of training needs assessment -12

2.2.2 Methodology of survey -13

2.2.3 Some key results of SMEs training need surveys -14

Year of business establishment - 14

Subjects of training courses - 15

Training mode - 16

Training time - 18

Training duration - 19

Motives for taking part in management training courses - 19

Reason for not participated - 21

Training and difficulties/ problems solving - 21

Training service providers - 24

Training fee - 26

2.3 GOVERNMENT SUPPORT ON SMES DEVELOPMENT -27

2.3.1 Degree Number 90/2001/ND-CP: -27

2.3.2 Program No 143: -27

2.3.3 Instruction No 40: -28

2.3.4 Decision No 236: -28

2.4 TRAINING PROGRAM FOR SMES ON BUSINESS START-UP -29

2.4.1 Government support training programs on start-up -29

2.4.2 Other SMEs training programs on business start-up -30

2.4.2.1 Business Edge -30

2.4.2.2 Start and Improve Your Business Training Program (SIYB): -30

Some remarks on ouputs of business start-up training programs. -31

On demand side -33

On supply side -34

CHAPTER III -35

IDENTIFYING TRAINING MODEL FOR SMES’ OWNERS ON THE AIR -35

3.1 OVERALL INTRODUCTION OF THE TRAINING MODEL -35

T ARGET GROUPS OF T RAINING M ODEL FOR SME S ' OWNERS ON THE A IR : -35

3.1.1 Main Components Of Training Model For SMEs' Owners On The Air -36

3.1.1.1 First Component - A Radio Show Broadcasted Live: - 36

3.1.1.2 Second Component – Study Groups: - 37

3.1.1.3 Third Component - Training Material: - 37

3.1.2 Main Activities and Time Frame -38

3.2 TRAINING CONTENT -39

3.2.1 Business Awareness: -40

3.2.2 Business Planning: -40

3.3 ORGANIZATION -41

3.3.1 Preparation: -41

3.3.1.1 Selection Of Leading Organization - 42

3.3.1.2 Selection Of Local Focal Points - 43

3.3.1.2.1 Organizing Focal Point - 43

3.3.1.2.2 Technical Focal Point - 43

3.3.1.3 Selection Of Trainers - 45

3.3.1.3.1 Selection Of Leading Trainers - 45

3.3.1.3.2 Selection Of Local Guest Speakers - 45

3.3.2 Implementation Process -46

3.3.2.1 Key Partners Meeting For Preparation And Coordination: - 46

3.3.2.2 Radio Show Production - 47

3.3.2.2.1 Pre-Tape Recording the First Session: - 47

3.3.2.2.2 Making Interviews and Presentations: - 47

3.3.2.3 Introduction Campaign: - 48

3.3.2.3.1 Brief Introduction Meetings In The Province And Districts - 48

3.3.2.3.2 Propagandizing By Leaflets And Posters: - 48

3.3.2.3.3 Advertising On TV And Radio: - 49

3.3.2.4 Participant Recruitment. - 49

3.3.2.5 Selection of Study Group Leaders. - 50

3.3.2.6 Training for Study Group Leaders - 50

3.3.2.7 Training For Local Radio Station’s Commentators And Technicians: - 51

3.3.3 Trainers’ Tape Recording: -52

3.3.4 Live Radio Show Broadcast: -52

3.3.5 Monitoring And Study Group Visits -54

3.3.6 First Survey: -54

3.3.7 Business Plan Collection And Grading -55

3.3.8 First Assessment Meeting And Closing Ceremony -55

3.3.9 Second Survey - Impact Assessment : -55

3.3.10 Impact Assessment And Review Meeting -56

3.4 BUDGET ESTIMATION -56

3.4.1 Budget Estimation by Implementation Process of Activites: -56

3.4.2 Sources Of Budget. -57

3.4.2.1 First Source – SMEs’ Contribution: - 57

3.4.2.2 Second Source - Supporting Budget: - 58

SUMMARY OF CHAPTER III -59

CHAPTER IV -60

FEASIBILITY STUDY OF THE TRAINING MODEL -60

4.1 SWOT ANALYSIS -60

4.1.1 Strengths: -60

4.1.2 Weaknesses: -60

4.1.3 Opportunities: -61

4.1.4 Threats: -62

4.2 DIAGNOSIS OF RISK AND DIFFICULTY -62

4.2.1 Diagnosis Background: -62

4.2.2 Details Of Diagnosis: -63

4.2.2.1 Training Contents: - 63

4.2.2.2 Organizing System: - 63

4.2.2.3 Technical Aspect: - 64

4.2.2.4 Costs: - 64

4.2.3 Solutions To Manage -64

4.2.3.1 Training Contents: - 64

4.2.3.2 Organizing System: - 65

4.2.3.3 Technical Aspect: - 67

4.2.3.4 Costs to deploy the program - 68

4.2.3.5 Program Output Criteria - 69

Criteria for number of learners - 69

Percentage of businessmen learners - 69

Number of learners completing their own business plans - 70

Number of learner establish a new businesses - 70

CONCLUSION -71

SME S ’ O WNERS A S D IRECT B ENEFICIARY -71

G OVERNMENT A ND L OCAL A UTHORITIES A S T HE I NDIRECT B ENEFICIARY -72

ANNEX 2.1-DECREE NO 90 - I

ANNEX 2.2- DECISION 143 - IX

ANNEX 2.3- DECREE NO 236 - XIV

ANNEX 3.1 – TRAINING CONTENT - XVII ANNEX 3.2 - BUSINESS PLAN FORMAT……… ……… …XXV ANNEX 3.3 - DETAIL BUDGET ESTIMATION ……….……… XXIV

ANNEX 3 4 - QUESTIONNAIRE FOR IMPACT ASSESSMENT -XXXIV

ANNEX 4.1 -PRICE LIST FOR ADVERTISING -XXXIX

REFERENCES - XL

COMMENTS OF ADVISOR

To whom it may concern:

“I, the advisor of Nguyen Duc Binh, the author of the Thesis on Training Model for SMEs' Owners on the Air confirm that the Thesis reaches the requirements of the training program and is allowed to defend in front of the Committee to get MBA degree”

Hochiminh City, 1 st March 2007

DR TRAN DU LICH

COMMENTS OF CRITICAL PROFESSOR 1

COMMENTS OF CRITICAL PROFESSOR 2

ABBREVIATION

LIST OF TABLES AND FIGURES

Table 2.1 - Year of business establishment 15

Table 2.2- Training topics attended by enterprises 15

Table 2.3- Training courses anticipated to attend by enterprises 16

Table 2.4-General of demands on training method, time and fee 17

Table 2.5- Time for training courses on management 18

Table 2.6– Duration of a training workshop 19

Table 2.7- Motives actuating enterprise owners to training courses 20

Table 2.8 - Reasons of not taking part in training courses Error! Bookmark not defined Table 2.9 -Which difficulties should be solved first 22

Table 2.10 - Existence time of difficulties 23

Table 2.11- Training Organizers 26

Figure 2.1 Percentage of SMEs by employ 1 8

Figure 2.2 Percentage of SMEs by capita 1 8

Figure 2.3- Training service market shar 1 24

CHAPTER I INTRODUCTION

1.1 BACKGROUND

1 During development process of many countries, SMEs have important position and play a significant role in the economy SMEs are considered as suitable business formulation, has advantages on dynamic and flexibility, fast response to market changing and good tool to solve unemployment Even though, during its development, SMEs has also many disadvantages on capital, technology, attracting skilful human resource, etc Therefore, the governments pay very much attention and issue a lot of supporting policies and programs to promote SMEs

In Vietnam, with strong efforts from government, especially when National Assembly approved Enterprises’ Law, Investment Incentive Law, Commercial Law, etc., business environment was significant improved with more foreign and domestic investment, growing GDP and much better habitants’ lives According to Department of Planning and Investment, Vietnamese SMEs occupy more than 99%

in 270,000 businesses operating by Business Law The right direction of the government in developing SMEs will mobilize all local potentials and resources to overcome Vietnam current difficulties such as shortage of capital, backward in technology and poor of management skills However, Vietnamese SMEs are still week due to their own uncompetitive capability and exterior difficulties On the other hand, it is also due to limit results in executing government policy, especially

in SMEs training programs

2 In recent years, first prioritised target of Vietnamese government and communist party has been supporting potential businessmen to start up new businesses and assisting SMEs sustainability growth At Decision number 236/QD-TTg dated October 23rd 2006, the government targets to create new 320,000 SMEs, increasing total enterprises to 500,000 in 2010 and issues supporting mechanism with a lot of assisting programs for private sector and SMEs development,

especially on business training on human resource and competitiveness improvement

However, training programs are mostly organized in classrooms, with limited approach, with several topics which more relevant to big companies SMEs are still

in need of a systematic and broad scaled training program for start-up or improving their businesses

3 With its broader approach to audiences and training content relevant to start-up and improve small-scaled business, Training Model for SMEs’ owners on the Air would satisfy above-mentioned requirements The Training Model will simultaneously deliver training and consultancy to 500 and even more participants

in each province It will help SMEs to save time and expenses while studying in a group right at their own place but it keeps modern training methodology with participant-oriented method based on systematic training content and material on business start up It has many advantages in comparison with remote training on TV

or internet (in terms of initial investment on equipment and broadcast expenses) and traditional training in classroom (in terms of broad scale and moving time)

1.2 OBJECTIVES OF THE STUDY

1 Identify the necessity and important of training broadly on business knowledge and skills, especially on how to start up a business on the air for SMEs’ owners and potential businessmen

2 Building a Training model for owners of SMEs on the air is a method to encourage and support businessmen to start up or improve their business sustainability, reduce number of bankruptcy SMEs, improve business competitiveness in WTO and global integration, create more qualified job, contribute to economic development

3 Feasibility study on Training model for owners of SMEs on the air to find out best implementing solution to different provinces, supporting SMEs to improve business start up skills as well as to meet government’s objectives in SMEs development

1.3 SCOPE OF THE STUDY

1 The study mainly focuses on SMEs’ current situation and government supporting policy and training programs, especially on how to start-up and improve

a new business for SMEs, not for large scaled company

2 The design of Training Model for SMEs’ Owners on the Air based on selection and complement from training content of Start and Improve Your Business (SIYB) and remote business training programs on TV and Radio in some provinces such as HCMC, Binh Duong, Dong Nai and Can Tho

3 The analysis on the Training Model for SMEs’ owners on the Air bases on the concept of mobilizing multiparty cooperation and contribution from central and local government, donors and SMEs

1.4 STUDY METHODOLOGY

• Data compilation and analysis: Data compilation from various

resources such as newspapers, documents, books, magazines, internet, seminar and workshops on SMEs and SMEs training programs, etc

• Study on SMEs training needs: Analyse data on surveys and report on

SMEs training needs in 2003 and 2006 conducted by VCCI, GTZ, DANIDA, and Inwent The surveys are conducted by direct interview, sending questionnaires via mail, fax and email to SMEs’ owners and participants of VCCI workshops and local partner organizations

• Impact assessment: Sum up collected information and data to have

statistics and figures to illustrate for the study

• Direct contact: information exchange and discussion with SMEs owners

and person in charge of training, trainers, participants in SMEs training workshops and seminars Experience sharing with GTZ, ILO, Inwent, JICA, JETRO international experts on SMEs development, representatives of local government authorities related to SMEs, radio and TV station and VCCIHCM colleagues

1.5 LITERATURE REVIEW AND APPLICATION:

The study on Training Model for SMEs’ Owners on the Air is designed in conjunction with some knowledge and skills which are drawn out from MMVCFB Training Program and applicable mainly in the Model’s training content but also in the organization Some of those are as follows:

♣ The Roles of State in the economy in many supporting fields, including local social - economic development through enterprises support, business environment improvement, poverty reduction and job creation

♣ Organization management is applicable in two ways Firstly, some types of organizing structure are introduced to build a sample of company Organization Structure in Business Planning part of the training content Secondly, knowledge of organization management is also applied in organizing method of the Training Model by mobilizing all local resources from local government, authorities, mass organizations, and business specialize associations, mass media and enterprise community in the implementing province

♣ Business Planning and Corporate Finance with business planning and assessment skills are used in SWOT analysis of the Business Ideas and main financial ratios such as ROA and ROE, in conjunction with knowledge from Accounting & Control in session Plan for Profit topic of the training content The SWOT analysis is also applied to Feasibility Study to find out the advantages and disadvantages of the Training Model to have solutions overcoming the difficulties

♣ Marketing Management is partly introduced in Market Assessment topic of Business Planning module and applied to design an implementing system through marketing channel of local government agencies and through mass organizations and business-specialised association in the implementing province

♣ Human resource management with Maslow Hierarchy of Human Motivation is applicable to Managing People in Business Planning of the training content

♣ Labour Laws and Business Laws is introduced in Business Planning content with labour contract and legal business forms with advantages and disadvantages

1.6 RESEARCH FRAMEWORK

1.7 THESIS STRUCTURE

Chapter I: Introduction

Chapter II: Rationale of Training Model for SMEs’ Owners on the Air

Chapter III: Identifying Training Model for SMEs' Owners on the Air

Chapter IV: Feasibility study of Training Model for Owners of SMEs on the Air Conclusion

Rationale of Training Model

• SMEs’ important roles

• SMEs’ difficulties

• SMEs’ training needs

Rationale of Training Model

• Government Objectives in SME development

• Limit of current government support and training program for SMEs

Identifying Training Model

CHAPTER II RATIONALE OF TRAINING MODEL FOR SMEs’ OWNERS

In Europe, including Belgium, “the category of micro, small and sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million Euro (1.050 billions dong), and/or an annual balance sheet total not exceeding 43 million Euro.’

medium-(Extract of Article 2 of the Annex of Recommendation 2003/361/EC) 1

In Japan, SMEs definition is stated in Basic Law for SMEs2 as follows:

• For manufacturer: less than 300 employees or 100 million Yen in average capital (equal to 14.5 billions dong)

• For wholesaler: less than 100 employees or 30 million Yen in average capital (equal to 270,000 USD)

• For retailer and service: less than 50 or 10 million Yen in average capital (equal to 90,000 USD)

In America, for the most part, size standards businesses are the average annual receipts or the average employment of a firm Small businesses are defined with average employment less than 500 (but especially for some heavy industry

1

Resource: SMEsNET National Assessment Report, FEVIA, November 4th 2005

2 Resource: New Basic Law for Japanese SMEs, 1999

businesses such Line-Haul Railroads, Pipeline Transportation of Refined Petroleum Products Petroleum Refineries, and average employment is less than 1,500) The annual receipts of American small businesses are various from $ 750,000 (Dairy Cattle and Milk Production, Hog and Pig Farming, etc) to $165 million in assets (Commercial Banking, Savings Institutions, Credit Unions, other Depository Credit Intermediation, Credit Card Issuing and International Trade Financing, etc), but mostly at 6.5 million USD (equal to 104.305 billion dong)3

In Vietnam, at Degree No 90/2001/N§-CP date 23rd November 2001, SMEs are defined with 2 characteristics: Register Capital is less than 10 billions Vietnamese dong and Annual Average Employment is less than 300 employees”4

Characteristic of employment are almost similar with many other countries such as Germany and Japan, but characteristic of capital is much lower, especially

in comparison to Thailand SMEs with 5.4 million USD in capital (equal to 86.67 billions dong)

Until 31st December 2005, according to official figure of National Statistic Bureau, there are operating 113,352 enterprises (increased 23.54% in comparison to Dec 31st, 2004) and 3,053,011 household businesses with 5,583,617 employees

In 5 years from 2001-2005, average number of enterprises increases 27,95% per year (more new 14,213 enterprises each year), contribute 53,0% to GDP, 55,0%

to investment

Non-state enterprises, increased very fast from 35,004 enterprises in 2000 to 105,596 enterprises in 2005, in which 96,81% are SMEs with average number of employees is 30 and capital is 3 billions in 2000 and average number of employees

is 32 and capital is 7 billions

In which mainly small and micro small enterprises (MSEs) with less than 10

employees: 51.3% (see Figure 2.1) and less than 1 billion dong capital: 41.8% (see

5 Source: Presentation on “Developing SMEs in Vietnam –Achievement and Threats”, Mr Bui Liem, Deputy Director of SMEPC Supporting Bureau, MPI at Seminar on Vietnam-Japan Conference on SME Policy in Vietnam under the Impact of Globalization , 31 August-1 September 2006

2.1.2 SMEs’ important roles in the economy

♣ Create more new jobs

In many countries, SMEs occupied more than 95% in total enterprises and supply employment for 2/3 of social labour force In 1997, in Germany, while large-scale enterprises cut off 312,000 employees, SMEs still create more new 723,000 jobs From 1985 to 1987, British SMEs created more 29,000 jobs, while big corporations created only 20,000 jobs In Vietnam, even there is limit percentage in GDP, but SMEs are using 3 millions employees, equal to 49% in total employment

in non-agriculture field in rural areas and 26% in total of Vietnamese employment

♣ Contribution to GDP

With high percentage in total number of enterprises, SMEs contribute more than 50% GDP in American, 55% in Japan and 53% in Germany in 1994 In Vietnam, SMEs contribute a very important part of more than 40% GDP and 29% export turn over, along with large scale, foreign and joint venture companies as mentioned above

♣ Enable free competition

Different from big companies which need big market and protect from government leading to monopoly, with its big number, SMEs easily accept free competition with its high self control and independent, ready to exploit opportunities to grow, risk taking without government subsidy, play very important role in breaking business monopoly situation

♣ Attracting domestic investment and exploiting local resources

Due to relationship of kindred and close friends, SMEs can easily borrowing idle money to invest in business On the other hand, SMEs can develop local advantages by establishing or participating in local handicraft villages or cooperatives using specific potentials on natural resources, labour and material, etc

Apart from those, SMEs also contribute in some other aspects such as:

Establishment of balanced economic development and transfer of regional

economic structure, to accelerate local potentials in rural and far remote areas to

promote local production and services, contribute to the transfer of regional economic structure That also contributes significantly to industrialization and modernization in agriculture and rural areas

Creating a lot of products and services, diversifying market by matching

various customers’ need that leads to innovation and quality improvement; increase the competitiveness of domestic products and services

Supporting for large-scale companies, in market approach, balancing

demand and supply in community, subcontracting and processing input materials and semi-products On the other hand, SMEs are basis for the establishment of big business corporations in development process of a market economy

2.1.3 SMEs’ advantages and disadvantages

2.1.3.1 Advantages

Dynamic, flexible and accommodate themselves to market diversity

With small and medium size, simple management structure, SMEs easily approach and satisfy some certain requirements On the other hand, SMEs usually have direct contact with customers and market, therefore quick response to market’s changes With few equipment and simple technology infrastructure, SMEs can smoothly expand or reduce their production scale causing no bad affect for society

Easy start up with small capital

It needs low initial capital, small office or premises and little equipment to establish new SMEs Therefore, taking full advantages of family heritages and experience, most of SMEs’ owners continue to run business effectively after the establishment The profit may grow slowly but more and more stable thanks to their simple management structure, easy to control, more flexible to the market leading to

lower market risk when there are some changes in the economy

2.1.3.2 Disadvantages

Limit in financial capability

SMEs based mostly on their owners’ equity, low access capability to loans due to small scale of production, small amount of loan, therefore their loans always are low in priority consideration of credit institution On the other hand, SMEs cannot persuade banks because lacking of collateral and a feasibility business plan for their loans The same thing happens in other countries, including America and Japan, banks hesitate to SMEs high-risk loans

Disadvantages in buying input material, equipment and selling products

SMEs rarely have discount when buying material with big amount due to their limit financial capability In case of importing equipment from aboard, SMEs usually lack of foreign currency to buy directly from foreign manufacturer, but through Vietnamese middleman with higher price In contrary, SMEs cannot have good prices when selling products because buyers consider them as small and not important retailers and manufacturers

Lacking of information and management skills

Nowadays, information is very important input of business process, but SMEs still face many difficulties to access market information, new production technology and advance management skills or late update important information resources on new market and customers

Difficult to attract qualified managers and skilful employees

Due to small sales and profit, SMEs cannot pay high salary and difficult invest in better working condition like large-scale companies, therefore they always difficult to recruit good labour resources for their product manufacturing and business management

Unstable business operating

Even dynamic and flexible in running business, SMEs easily go bankruptcy because they don’t have a long-run strategy, no contingency fund and financial

assistants to recover from market risks However, fortunately, rate of SMEs bankruptcy is still lower than rate of new business start-up, therefore in general, number of SMEs operating in the market is still growing, causing no chaotic or unbalanced economic situation

2.2 THE ANALYSIS OF SMES’ TRAINING NEED

2.2.1 The importance of training needs assessment

Training is one of important business assistance services for the development

of enterprises, especially for the enterprises of small and medium size In Vietnam, small and medium enterprises (SMEs) make up a major part of private enterprises This sector was formed in the early 1990s but it has had significant changes in recent years, especially since the Enterprise Law was put in force (January 2000) Within only 3 years (1999-2002) the number of enterprises registered according to the Enterprise Law was almost double, reached 80,000 enterprises This figure does not include 2.2 million individual business households of semi-informal legal status, and to some extents they have considerable demand on accessing business development services, including training services

The training demand of Vietnamese enterprises increases not only because of the appearance of more and more new enterprises but also because of the awareness

of the enterprises in the trend of integration On one hand, newly emerged enterprises with young businessmen are aware of opportunities and are always ready to improve their knowledge to expand to the widely opened world market On the other hand, the challenges of globalization require enterprises to develop continually, gain new administration knowledge to penetrate existing markets and look for new ones The main constraints usually mentioned by Vietnamese enterprises are limited management skill and low qualification While the concept

“knowledge economy” is more and more perceived by enterprises in the world, the value of “training” is also enhanced in the awareness of Vietnamese enterprises In the past, capital was considered the biggest constraint, nowadays it is the “market

accessing ability”6 It is clear that in order to achieve the market accessing ability, enterprises should obtain many skills, and these skills are mostly gained through training

In the first years of the 21st century, the trend of commercializing services provision, especially training services for SMEs have been affirmed by many donors This means that the training assistance for SMEs should be first based on the needs of the enterprises themselves The Government’s 90/ND-CP decree about the SMEs development assistance policy affirmed the Government’s policy in assistance SMEs regarding training issue It was followed by the Resolution 5 of the Central Committee of Vietnam Communist Party (Term IX) about the continual changes of mechanism and policy to promote the development of the private sector, affirming the Party’s policy in training assistance for the private sector In the 2002 action program the Government entrusted Vietnam Chamber of Commerce and Industry (VCCI) to study and establish a training assistance fund for firms of private sector The training needs research and assessment, proposed by VCCI, received positive support from Mekong project development facility – MPDF and Danish International Development Assistance – DANIDA

6

Source: VCCI’s Survey of SMEs in 2001

The research group combined the analyzing method UAI (Understanding, Attitude, and Image) in order to put forward suitable suggestions for the marketing strategy built up for the training programs This is a popular method to study the service and business development market However, it needs to note that the training service in this study has a broad definition, so the UAI analyzing method has little value in improving service for each training topic or some specific training methods

Some figures of the survey are updated with latest survey results of 52 exporting SMEs conducted by SMEPC of VCCI with support from Inwent in December 2006 in project "Improving export capacity for Vietnamese SMEs" The TNA is to identify the training needs of SMEs in five main sectors (wood/furniture, fisheries, garment and textile, footwear, and IT) The training needs focus on strengthening capacity of Vietnamese SMEs to overcome barriers to export to EU markets and should be sector-specific and tailor-made (with a focus on standards, quality, environment )

2.2.3 Some key results of SMEs training need surveys

Year of business establishment

Each development period of an enterprise corresponds to a certain training needs Most the surveyed enterprises have been founded in recent years Years with the most newly established enterprises are 1999 and 2000 (23.3% and 23.4%

relatively) (See Table 2.1) The main reason is that the business environment has

much been improved after ratifying several laws, especially when the Enterprise Law was put in force in 2000

Table 2.1 - Year of business establishment

1990-1991 1992-1993 1994-1995 1996-1997 1998-1999 2000-2001

2002

Total

6.3 5.0 11.2 15.3 12.8 23.3 23.4 2.7

100.00

To define the year of foundation of enterprises is also a very important factor

in building up suitable training programs Under the condition of newly emerged

market as in Vietnam, enterprises in private sector are still toddlers in doing

business; demand on training in starting up business would be very high Such

training courses would help enterprises to avoid risks right from starting operation

Besides, it would be noticed that these new enterprises are facing the challenges of

Vietnam integration into AFTA and WTO when the favourable tariff of which has

been applied since January 2003 and January 2007

Subjects of training courses

In the simplest way of understanding, enterprise management is first related

to managing finance and money, so “Managing finance/ accounting/ tax” is the

topic most wanted and attended by enterprises (17.1%) This result is totally

corresponds to the result of the survey on business organisation structure mentioned

above that says among different professional sections in enterprises, the accounting/

finance section is the most popular (see Table 2.2)

Table 2.2- Training topics attended by enterprises

Name of courses Times of

attendance

Ratio %

Finance/ accounting/ tax management 76 17,1

Business/ enterprises administration 50 11,2

Managers and directors training 26 5,9

Import-Export, foreign trade, customs skills 23 5,2

Starting your business 19 4,3

The subjects such as human resource and general business management

subjects also receive high interest of enterprises, but topics such as business

planning skills are out of the interest of enterprises Many researchers and

promoters of small enterprises have expressed their concern about these topics7, but

in fact the covering scale of training courses on this topic is still narrow It partly

proves that Vietnamese small and medium enterprises still lack long-term business

strategies Besides, it is possible that training courses on business planning have not

been widely introduced to enterprises (see Table 2.3)

Table 2.3- Training courses anticipated to attend by enterprises

Group study is the mode most appealed by enterprises (51.7% of interviewed

enterprises) (See table 2.4) However, participants could follow group study of

different forms, mainly in classrooms The training mode is also mentioned but this

method seems unsuitable to management training, especially when entrepreneurs

7 UNIDO Working Paper No 5“-Assistance to Industrial SME in Viet Nam”, Sai Gon Time, December 2002

want to study at an outside venue to seek opportunities for exchanging relations Other training modes, which help entrepreneurs to self learn, for example the online

or web-based learning mode or learning via television or radio broadcast attracted more attention (in comparison with SME’s TNA in 2001), but still not yet familiar

to SMEs The problem would because of promotion of the above said training technologies If products are well introduced and many enterprises get to know new training technologies the assessment of enterprises will be better The survey result shows that 31.8% enterprises considered the SIYB books as useful and suitable to enterprises About 60% of people interviewed said that the price of 25,000 VND for

the book is acceptable

Table 2.4-General of demands on training method, time and fee

Mix of group and self

study

over 1 month 59 11%

Mix of group and self study

Classroom training 372 72.2% Office hours - all day 77 14% On-the-job training

Self study workbooks 123 73.2%

Hot line service 15 9%

< 200.000 58 11% University professors 116 22% 200-300.000 282 53% Industry expert 390 73%

>300-500.000 60 11% Vietnamse lecturers 410 77%

>500.000 30 6% Vietnamse language 472 88%

they are organised in the evening This demand would be explained by enterprise owners’ desire to equip themselves with continuous systematic knowledge At present only several universities and training centers have organised courses in the

evening Training promoters should pay attention to the needs (See Table 2.5)

Table 2.5- Time for training courses on management

Full day, working hours

Half day, working hour

In the evenings

On Saturday and Sunday

Other time

Training duration

Duration of each session is an important factor for each training course It

should not be too short or too long but enough for lecturers to give trainees the most

adequate knowledge on a small topic 30.2% of interviewed owners said that the

best time for each session is 3 hours and 27.8% said that 2 hours long would be best

Few owners wanted over 4 hours –long class session We would better apply 3

hours/ session norm to the courses during work hours and 2 hours/ session norm to

the courses organised in the evening (Pls see Table 2.6)

Table 2.6– Duration of a training workshop

Understanding why enterprise owners take part in management training

courses is very important in defining the real demand of enterprises and designing

appropriate promotion activities In Vietnam the main reason making enterprises

take part in management training courses derives from enterprise internal needs

such as lack of necessary skills, or from external needs such as conforming to the

State regulations This shows that enterprise owners realise the problem of their

enterprises and consider training courses necessary

The main motive for enterprise owners for taking part in training courses is

the desire to improve their management ability and the ability of managers in their

enterprises (51.6%) The growth and operation expansion make enterprise owners

realise the necessity of enhancing their management ability in order to control more

sophisticated matters related to their enterprises, especially in enterprises where

competition makes them renovate technology to receive new technology The

awareness of conforming to laws and State regulations also plays an important role

in actuating enterprise owners to take part in training courses in order to understand

new regulations of law so that they can in time adjust the operations of their

enterprises in a suitable way Training courses are also the place where enterprise

owners hope to seek and establish new relations, new business opportunities for

their enterprises (See Table 2.7)

Improving management knowledge is a continuous process, particularly

under present conditions where enterprises always have to renovate management

methods to stand in a high competitive environment Because of the same reason

the main motive actuating enterprises to continue to take part in courses on business

management is improving management capability (48.7%) Beside the motive to

make themselves keep up with new technology (15.2%), the motive for retraining is

also interested by enterprise owners (11.2%) The two new motives - “for the goal

of development of enterprise” (2.5%) and “improving work effectiveness” (2.3%) –

though make up low percentage, show the fact that enterprise owners have started to

consider training as one of the driving forces actuating development and improving

work effectiveness of their enterprises Thus, besides providing basic management

and administration knowledge, training courses should focus more on improving

knowledge

Table 2.7- Motives actuating enterprise owners to training courses

Motives for attending training courses Quantity %

Lack of skills/ performance problem, want to improve

management skills

Keep up with new system/ new technology 151 15.2

Re-training in order to maintain organisational currency 112 11.2

Search for and establish new relations 98 9.8

For the development of enterprises 25 2.5

Want to receive a certification 11 1.1

Reason for not participated 8

The most reason for not participated was companies did not know about

those courses (42.3%), reflecting problems on marketing for domestic training

courses The second rank was there was no any training available that met

enterprise’s needs, it reflected the low quality of the past domestic training courses

as well as training topics selected incorrectly Notably there was 23.1%

interviewees did not give an answer meaning the same with they did not care (1.9%),

this may reflect that a big group of enterprise has not yet awaked about the

important of training to their business, or in other words, the training courses didn’t

approach to relevant participants (See Annex Table 2.8)

Table 2.8 - Reasons for not participated in the past training courses

No any trainings available that met our

needs

Total 100.0 Training and difficulties/ problems solving

According to the goal set up at the beginning, the training needs survey

aimed at finding difficulties which enterprises usually face in doing business,

defining needs (including training needs) that enterprises themselves put forwards

in order to solve these difficulties It is necessary to note that not all enterprises

know which difficulties they are facing and defining method to solve problems in

enterprises is still more difficult

Results of the survey shows that only 20.8% surveyed enterprises had no

difficulties This is a modest figure but it partly shows that in Vietnam a group of

8 Source: SMEs TNA survey 2006, VCCI/ Inwent

self-confident and optimistic in doing business entrepreneurs has emerged Very often an enterprise would face one or more difficulties The difficulties most mentioned by enterprises are “lack of people/resources to do the work” and

“workers lack knowledge and skills” The next difficulty that is also often mentioned is “lack of documentation within the company (policies and procedures)” (13.4% of opinions) “Poor attitude among employees” also is a certain restraint (10.9% of opinions), mainly because of the enterprise confusion in human resource management The difficulty “inadequate technology (equipment, machines) to do the work” also puts enterprises in disadvantageous position in the world of rapid development of technology renovation Perhaps, in the past, at first sight, lack of capital and market seemed the difficulties faced by most private enterprises, but after a thorough examination of enterprises’ internal capability, the real difficulty faced by most private enterprises was found It is the labour resources problem caused by the misbalance in the education system in Vietnam It is a sign showing a potential market for training services in future The sign was reaffirmed when enterprises considered improving knowledge and skills on how to start up a business systematically and making a long-term business plan as prior problems to

be solved first (see Table 2.9)

Table 2.9 -Which difficulties should be solved first

Kind of difficulties

(By order of priority)

Number of opinions (%)

Lack of knowledge and skills on start up and making business plan 37.2 Lack of people/ resources to do the work 19.1

Lack of documentation within the company (policies and procedures) 6.5

Inadequate technology (equipment, machines) to do the work 5.4

Inefficient/ ineffective work process 3.3

Total 100.0

The survey’s result also shows that the difficulties mentioned by enterprises have long been existing More than half of enterprises have faced the difficulties for

over a year, some others even met them right at the start-up time It proves that

enterprises have poor preparation when starting business (See Table 2.10) In fact,

starting business comprises not only completing legal procedures but also problems

related to the management ability of enterprises After the Enterprise Law was put

in force and several enterprises “disappeared”, the reason could have been that these

enterprises could not stand because of lack of business skills and other necessary

conditions The result of Impact Assessment of SIYB Vietnam Program

VIE/98/MO2/SID in 2001 shows that among the people who took part in program

SIYB and have not run their own business, only 14% started business right after

training and 34% intend to start business within 12 months

Table 2.10 - Existence time of difficulties

Existence time of difficulties %

Since starting business/ foundation 21.4

Most enterprises admitted that the above said difficulties affected the owners

most, that means they directly affected the enterprise benefit Other managers were

also affected and they had troubles when solving these difficulties Apart from that,

customers also were the ones who are affected by the above difficulties The

enterprises themselves are aware of the needs of careful service, but they had

inadequate ability and skills to do this Imperceptibly, the so-called “objective”

difficulties directly affected the enterprise image and prestige Employees in

enterprises were not beyond the affecting scope of these difficulties, first of all the

productivity was low and their salary was not improved so they were not

encouraged to devote themselves to the enterprises In other words, the above said

difficulties much affected the effectiveness of enterprises, reduced turnover and made obvious losses

Training service providers

Among 635 training courses for SMEs, there are only 412 courses remembered by answerers talking about providers, making up 65% The main short-term training service provider is VCCI, making up 36.5% of market share Other training service providers make up 26.5% market share Other organisations here include colleges, non-government organisations etc Meanwhile, training service providers directly belonging to the State such as universities, offices etc make up considerable “market share” (24.7%) “Market share” here is put within quotation

marks because these training courses do not have true nature of service (Figure 2.3)

Many courses are organised free of charge Among providers belonging to state sector National Economic University is the most active Courses organised by the University in two main places Hanoi and HCMC make up 9.7% of all training courses Training service providers of foreign organisations have not played a considerable role In fact, many national training service providers have received technical assistance from foreign organisations, and many foreign organisations have associated with national organisations to provide training service, but number

of organisations providing training service for 100% foreign capital invested enterprises is still very small and they focus mainly on big enterprises, foreign capital invested joint ventures to compensate expenses Branch of AIT (Thailand) in Vietnam is an example

Figure 2.3- Training service market shares 1

The trademark of training courses of SIYB and MPDF is also mentioned by enterprises as a foreign training service provider It is possible to say that with the function to assist Vietnamese enterprises Vietnam Chamber of Commerce and Industry (VCCI) has enhanced quality and professionalised its training activities and has become a main short-term training service provider for enterprises In general, majority of training courses are assessed by enterprises as useful and suitable, particularly training courses provided by MPDF and SIYB Unfortunately quantity of these courses is very small compared to other courses organised by VCCI (about 1/9) Meanwhile, with self-reliant efforts, about 80% of VCCI’s training courses (both technical and management) are assessed as useful, suitable and with high quality It is quite interesting that few training courses organised by universities are assessed by enterprises as useful and suitable

The market for business development services, including training service, has just been formed in recent years Thus, market share of training service providers of private sector has a modest position, making up about 7.04% The main reason is that these organisations do not have enough prestige to attract enterprises Because private training service organisations have just been founded so their teach capability, teaching staff as well as professional knowledge are limited Moreover, these organisations, as other private organisations in general, are discriminated with the State ones Though this attitude has been improved recently, training service providers of private sector have not ventured investment in this field In such a situation, Associations of enterprises should play an important role in providing training service for enterprises In fact, together with VCCI, organisations of associations of enterprises such as Cooperative Alliance and Young Business Association make up a considerable market share

The surveyed data clearly shown that the Vietnam Chamber of Commerce and Industry was the most active in providing training service, beside that Foreign Trade University, Trade Promotion Department of MOT and provinces also played

important role in providing training for SMEs in export and market enlargement

related topics (See table 2.11) 9

Table 2.11- Training Organizers

Total 100.0

Training fee 10

It would be based on fluctuation of cost to define suitable fee accepted by

majority of enterprises The survey results show that for a short – term training

courses on business management lasting about 3 days (morning and afternoon) with

suitable topics the fee of 200,000 VND to 500,000 VND have high fluctuation of

demand The highest fees were for long courses (over 10 days) with international

trainers is 22 millions VND, it means that enterprises were ready pay high for a

quality and met their demand course (See Table 2.12)

Table 2.12 - Training fee

2.3 GOVERNMENT SUPPORT ON SMES DEVELOPMENT

From renovation in 1985-1986, Communist party meeting VI issued many new policies on economic development, created good conditions to enterprises development, including SMEs, to exploit labour forces and other resources on labour force, domestic investment, natural resources, brainpower, experiences and skills in the whole country for economic development Realizing significant roles and the important, the government pay more attention on SMEs development and building solution system to help SMEs overcome their difficulties So far, the government has issued around 40 SMEs supporting policies and programs, in which the most important policies are:

2.3.1 Degree Number 90/2001/ND-CP:

Degree No 90/2001/ND-CP dated 23rd November 2001 shows government intention on SMEs support by giving official definition on SMEs in Vietnam with a supporting system of six groups of activities on various fields as follows:

• Designing some training material sets on basic business

• Organizing18 training workshops for 540 trainers (30 trainers per workshop)

• Organize 3,589 training workshops for 107,670 SMEs, potential businessmen who intend to establish new businesses

2.3.3 Instruction No 40:

Resolution of Communist Party’s Committee No 5 and Instruction No 40/2005/CT-TTg dated 16 December 2005 on continuing renovation of private sector development policy, show government direction on supporting private sector, especially SMEs

2.3.4 Decision No 236:

On 23 October 2006, Decision No 236/2006/QD-TTg approved SMEs development master plan is latest effort of the government to mobilize co-operation among government agencies and mass organizations for SMEs development on various programs with overall objectives is “speed up SMEs development, create fair competitive environment, improve national competitive capability in order to encourage SMEs to contribute more to economic development” Specific objectives

of the Decision are as follows:

♣ Number of new SMEs is around 320.000 (growth 22% annually);

♣ SMEs’ growth rate in difficult provinces is 15%;

♣ Direct export rate is 3-6% in total SMEs;

♣ Create 2.7 millions new job from 2006 - 2010;

♣ Supply technical training for 165,000 labours working in SMEs11

To fulfil these objectives, the government issued a system of nine tasks and five groups of solution, from building incentive legal framework, establishment of credit guarantee funds, to enable a social awareness environment In which, the significant part is the group of solutions on human resource and capability improvement for SMEs

11 Pls see Annex 1.3 on the Prime Minister’s Decisio n of No 236/2006/Q§-TTg dated 23 rd October 2006