INDUSTRY CHARACTERISTICS AND SOCIO-ECONOMIC STATUS OF FISHERIES INDUSTRY

Recently, Vietnamese government targets to raise the total output and export value of fisheries industry to 2 mill tones and USD 2.5 bill, respectively, in year 2010 .

A DEVELOPMENT STRATEGY FOR THE FISHERIES INDUSTRY

IN VIETNAM

by

Lai Huy Hung

A research submitted in partial fulfillment of the requirement for the degree of Master of Business Administration

Examination Committee Dr Fredric William Swierczek (Chairman)

Ho Chi Minh City, Vietnam

Scholarship Donor Government of Switzerland/SDC (SAV)

Asian Institute of TechnologySchool of ManagementBangkok, ThailandApril 2000

I would like to express my sincere thankfulness and indebtedness to my research advisor Dr.Fredric William Swierczek for his guidance, advice and encouragement through out theresearch work

My sincere thanks are also due to Dr Do Ba Khang and Dr Hans Stoessel for examining theresearch work and giving valuable comments as the members of examination committee

I would like to express thanks and appreciation to Prof Hoang Xuan Thong – Director ofInstitute of Fisheries Economics and Planning, Dr Tran Huu Chinh – General director ofFIDICO, Miss Nguyen Thi Nga – Planning vice director of Science, Technology andEnvironment Department, Dr Nguyen Thanh Hung – vice dean of fisheries faculty of HCMCUniversity of Agriculture and Forest, for providing information and interview Without theirhelping, this research would not have been possible

I would like to express my sincere gratitude to all of my teachers and others at AIT and SwissVietnam AIT Management Development Program for their teaching and supporting during mycourse

I would like to express my deeply appreciation to The Government of Switzerland who gave

me a great chance to participate in MBA study by providing financial support

Special word of appreciation goes to my parents and family for their support, endurance andencouragement throughout my study

Last but not least, special thanks to my close friend and classmates for their friendship thatmade my study more memorable with enjoyable and excitement

Abstract

Due to the resources lacking and to survive in the competitive world of Vietnamese fisheriesindustry, it is necessitated to analyze the fisheries industry distinctly and explore factors Themain objective of this research is to formulate a development strategy for Vietnamesefisheries industry A number of strategic formulation techniques are employed to analyze theinternal strengths and weaknesses, external opportunities and threats as well as the internallinkages of the industry

In general, Vietnamese fisheries industry has potential competitive advantages fordevelopment To exploit these potential advantages, it necessary to rationally manage andcontrol the balance development between sub-sectors as well exploiting the strengths ofthese sectors

It is suggested arrays of policies and regulations for strengthen competition of fisheriesindustry, which are mainly focused on industry internal linkages and the rational exploitation

of natural resources

TITLE PAGE I

2.3.1 Structural determinants of industry development 10

b) Rivalry among established companies 12

2.3.2 National determinants of industry development 14

d) Firm strategy, structure and rivalry 16

3 INDUSTRY CHARACTERISTICS AND SOCIO-ECONOMIC STATUS OF FISHERIES

3.2.6 Mountainous and Middle high lands 21

b) Fish exploitation in low land areas 33

4.3.2 Raw material processing 414.3.3 Processing and Manufacturing facilities in fisheries industry 42

LIST OF FIGURES

Figure 1 1: Framework of the research 3

Figure 2 1: strategy formulation process 7

Figure 2 2: variables of industry environment 8

Figure 2 3: Factors Influencing the Competitive Business Environment 9

Figure 2 4: The Porter five forces model 11

Figure 2 5: Determinants of national competitiveness 15

Figure 4 1: Total engine capacity and productivity 29

Figure 4.2: Total yield and productivity in fisheries industry 32

Figure 4.3: Proportion of raw material consumption 48

LIST OF TABLES

Table 2.1: SWOT (strength, weakness, opportunity and threat) matrix 17

Table 3.1: Source of borrowing money in some main representative provinces in 1996 24

Table 4 1: Estimated production by depth zone, in 1994 27

Table 4.2: Categories of Motorized Fishing Boat (%) 28

Table 4.3: The main categories of fishing gear in Vietnam 30

Table 4.4: Total out put and annual growth rate of landing 31

Table 4.5: Product structure in country 33

Table 4.6: Regional distribution of surface water 35

Table 4.7: Productivity in different method of brackish shrimp culture 37

Table 4.8: Situation of shrimp post-larvaehatchery, 1998 38

Table 4.9: Percentage of processed product in total fisheries output 41

Table 4.10: Growth rate in processing and manufacturing facilities 42

Table 4.11: Average material per manufactory in ten major provinces 44

Table 4.12: Proportion of raw material consumption 48

Table 4.13: The growth rate of total fisheries exported value 49

Table 4.14: Proportion in fishery exported product 50

Table 4.15: Proportion in domestic consumption of fishery product 50

Though having great potential, Vietnam's fisheries sector remains underdeveloped Atpresent, Vietnam has only 142 fishing ports, 22 others are in construction Degrading majorinfrastructures such as water supply, electricity and transport systems can not servedevelopment of the sector In recent years, foreign investors have cancelled 44 out of 48 FDIfishery projects Merely 4% of capital for aquaculture are from foreign investment1

Lacking money and knowledge, farmers have failed to develop effective aquaculture 96.3%

of fish raising areas are of extensive cultivation which can generate low yields Tens ofthousands of aquaculture farms have suffered from losses and bankruptcy when their fish die

or are not good enough to be exported due to lacking breeding technologies

Vietnam now has 196 aqua-product processing factories 70% of them have been working forover ten years without upgrades Due to insufficient investment, most enterprises andfamilies don’t have renovated equipment to increase their output To date, the country hasonly 27 enterprises qualified to export products to the European market Around 81% ofaqua-product exports are sold at low prices At a recent meeting of international donors forthe fisheries sector, Fishery Minister Ta Quang Ngoc said that Vietnam would need aroundVND 3,112 bill in the coming time to develop the sector2

1.2 Problem statement

Recently, Vietnamese government targets to raise the total output and export value offisheries industry to 2 mill tones and USD 2.5 bill, respectively, in year 20103 Due to theresources lacking and to survive in the competitive world it is necessitated to analyze thefisheries industry distinctly and explore factors, which directly or indirectly influence theimprovement of this sector, to formulate the long-term development strategy for this industry

in Vietnam

1 Ministry of Trade

2 Vietnam economic review: 1999

3 Economic Development Magazine: 2000, pp 41

1.3 Objectives

1 To describe current performance of Vietnamese fisheries industry

2 To identify the structure and characteristics of internal linkages in the fisheries industry

3 To analyze and determine strengths and weaknesses of the fisheries industry

4 To identify the barriers for development of Vietnamese fisheries industry

5 To formulate a development strategy for future development and improvement of thefisheries industry in Vietnam

1.4 Approach to the study

1 Mission: the mission of this research is to develop the fisheries industry in Vietnam.

2 Goal setting: to formulate a development strategy

3 Gathering information: primary data were gathered by unstructured interview with

fishing company, middle man, technical and academic institutes, related governmentagencies and departments Secondary data were gleaned by reviewing relevant texts,government reports and publications

4 Data analysis: before going to formulate the strategic plan, it is important to

understand the fishery business environment and this was done with the help ofPorter’s concept and SWOT analysis

5 Formulation of strategic plan: after data analysis and data interpretation, a

suggested strategic plan is formulated

1.5 Expected contribution

It is hoped that the research will be beneficial for the policy-makers as well as for fisherybusiness entities It may also serve as a stimulus to boost the fisheries in the global market

1.6 Scope of the study

This study is confined at national level for overall development of the fisheries industry inVietnam The research geographically describes the fisheries industry and focus on industriallinkage analysis, which can support the industry strategic formulation

1.7 Organization of the research

The research consist of six chapters, which is further described as follow:

Chapter 1: Introduction chapter

Chapter 2: This chapter is a review of literature particularly on the concept of strategic

planning and the environment of fisheries industry

Chapter 3: chapter 3 describes the performance and distribution of Vietnamese

fisheries industry, and aims at understanding the development of factors which directlyand indirectly supplements the performance of the fisheries industry in Vietnam

Chapter 4: Industry analysis bases on the existing data with help of Porter’s concept,

SWOT matrix and cluster concept

Chapter 5: This chapter is formulating a strategic plan and recommendation, which

aims at developing and improving the fisheries industry in Vietnam

Chapter 6: Conclusion chapter

Figure 1 1: Framework of the research

Development strategy

Findings and recommendations

Chapter 2

Literature Review

This chapter dues with the theory foundation, which concern on the strategic development It

is started with definition of strategic management and narrow down to the scope of study thatfocuses on strategic formulation stage A number of industry analysis techniques will beexamined to support the strategic formulation activities

1.8 Strategic management process

1.8.1 Definition of strategy

Starting from its military root, strategy, ever considered as “the science of planning anddirecting military operations”, is not a new term However, applications of this concept intobusiness area is a breakthrough idea took place in the later half of this century In thedecades of 1960s and 1970s, most management definitions of strategy by many authorswere emphasized on the planning them as an important component Alfred Chandler hasdefined strategy as “ the determination of the basic long term goals and objectives of aenterprise, and the adoption of course of action and the allocation of resources necessary forcarrying out these goals” The main idea in Chandler’s definition is that strategy involves arational planning process The organization is depicted as choosing its goals, identifyingcourses of action (or strategy) that best enable it to achieve its goals, and allocatingresources accordingly Similarly, Quinn defined strategy as “ the pattern or plan thatintegrates an organization’s major goals, policies and action sequences into a cohesivewhole” Finally, Glueck defined strategy as “a unified, comprehensive and integrated plandesigned to ensure that the basic objectives of enterprises are achieved” (Hill/Jones,1989)However, definitions of strategy based on planning have been criticized Hill and Jonesindicated a new approach based on Henry Mintzberg’s definition of strategy as “a pattern in astream of decisions or action” (Hill and Jones, 1989), the pattern being a product of whateverintended (planned) strategies are actually realized and of any emergent (unplanned)strategies Mintzberg’s concept of strategy suggests that strategy involves more than justplanning a course of action

In the decades of 1980s and 1990s, “ strategy” becomes more and more essential inbusiness domain Thereby, the concept of strategy has received a great attention by variousauthors

Hax and Majluf (1991)pointed out that strategy can be seen as a multidimensional conceptthat involves all the critical activities of the firm, providing it with a sense unity, direction andpurpose as well as facilitating the necessary change caused by its environment(Glueck/Janch, 1986)

Johnson and Schole (1993) have stated the nature of corporate strategy by thecharacteristics usually associated with the word ”strategy” or “strategy decision”

In summary, according to them, strategy is a unified, comprehensive and integrated plan thatrelates the strategic advantages of the firm to the challenges of the environment and that isdesigned to ensure that the basic objectives of the enterprises are achieved through properexecution by the organization (Glueck/Janch,1986)

The concept of strategy has become one of everyday words of managers during the past 20years and the practice of strategic planning is now widespread among large and mediumsized companies This interest in strategy was caused by growing realization that thecompany’ s environment has become progressively changeable and discontinuous from thepast and that as a result, objectives alone are insufficient as decisions rules for guiding thecompany’s strategic reorientation as it adapts to changing challenges, threats andopportunities

1.8.2 Process of strategic management

Strategic management is a stream of decisions and actions that leads to the development of

an effective strategy or strategies to help achieve corporate objectives The strategicmanagement process is the way in which strategists determine objectives and make strategicdecisions However, strategic management is not simply the management of the process ofstrategic decision making According to Chakrvarthy (1986), strategic management is theprocess through which managers ensure the long-term adaptation of their firm to itsenvironment It should be also emphasized that strategic management process is continuous– it never really stops within the organization Certo and Peter (1990) defined strategicmanagement as “a continuous, integrative process aimed at keeping an organization as awhole appropriately matched to its environment”

The process of strategic management involves three basic stages: (1) strategy formulation,(2) strategy implementation, and (3) evaluation and control Based on context of this study,however, the focus will be on the strategy formulation process

Strategy formulation is often referred to as strategic planning or long range planning.

Regardless of the long term used, the process is primarily analytical, not action oriented Asshown in the Strategic Management Model, the formulation process is concerned withdeveloping a corporation’s mission, objectives, strategy and policies In order to do this,corporate strategy makers must scan both the external and internal environments for neededinformation on strategic factors

Wheelen and Hunger (1998) detailed the first six steps commonly found in strategyformulation are a series of interrelated activities:

1 Evaluation of:

 The corporation’s current performance results in terms of return on investment,profitability and so on

 The corporation’s current mission, objectives, strategies and policies

2 Examination and evaluation of the corporation’s strategic managers- board of directorsand top management

3 Scanning of external environment to locate strategic opportunities and threats

4 Scanning of internal corporate environment to determine strategic strengths andweaknesses

5 Analysis of the strategic factors from step 3 and 4 to

 Pinpoint problem areas, and

 Review and revise the corporate mission and objectives as necessary

6 Generation, evaluation and selection of the best alternative strategy appropriate to theanalysis conducted in step 5

However, the above strategy formulation process can be divided into 2 stages, as illustrated

in the figure 2.2

 The first stage is the situation analysis Beginning with an evaluation of currentperformance and ending with the review and possible revision of mission and objectives,this stage includes step 1 through step 5

 The second stage is the process of generation, evaluation and selection of the bestalternative strategy This stage is step 6

In order to construct an appropriate competitive strategy, a ”picture” of the competitiveenvironment is always a useful basic In other words, there is clearly a need for competitiveenvironment analysis, an industry structure analysis

Figure 2 1: strategy formulation process

Evaluate strategic managers

Analyze competitive environment Entry

BuyersSuppliersSubstitutesCompetitors

Analyze strategic factors in light of current situation

Develop:MissionObjectives

Scan external Environment

OpportunitiesThreats

Scan internal Environment

StrengthsWeaknesses

GENERATION, EVALUATION, AND SELECTION OF THE BEST STRATEGY

1.9 Concept of industry environment

Organization can be considered as ecological entities and viewed as though they areorganisms that form mutual relationship with their environment An organization’s ability tocope with a changing environment is probably the most important determinants of its success

or failure in a free market system The environment where a firm exists can be classified intotwo types: internal environment and external environment

According to Wheelen (1987), internal environment consists of variables that can influencethe firm’s success through the strategic factors of the firm itself The variables are strengthsand weakness of the firm and it can be anticipated through the firm’s structure, culture andresources (figure 2.3)

Figure 2 2: variables of industry environment

Creditors

Special Interest Group Government

Stakeholder

TASK ENVIRONMENT (External)

Structure Culture Resources

CORE ENVIRONMENT

(Internal)

SOCIAL ENVIRONMENT (External)

Political Factors Political Factors

groups that directly affect the firm’s major operation such as stockholders, government,customers and suppliers The social environment includes more general forces, which do notdirectly affect the short-run activities of the organization but often influence its long-rundecision such as economic, socio-culture, technological and political-legal forces Each ofthese environments may have a distinct influence on decision making and organizationalaction (Hanbrick, 1981; Brown and Utterback, 1985; cited from Elenkov, 1997)

Since there are many factors that need to be analyzed, the executive must be selective andconcentrate on those factors, which are critical for the enterprise Furthermore, it is notenough for the strategist to assess only the present environment Planning for the future isvery much concerned with the more distant future

In considering the factors affect on a firm’s business environment, Boulton (1984) mentionedthe variety of social, political, economic, and technological forces (figure 2.4)

Figure 2 3: Factors Influencing the Competitive Business Environment

Sources: Boulton (1984)

Boulton had noted some of the social factors that affect business relate to the expectations,norms, and attitudes of the communities in which business were operated Political and legalfactors that develop out of social concerns include ecological legislation, health and safetyregulations, and the resulting concerns over too many regulatory and administrative controls

Social Norms

Social Attitudes

Ecological Concern

Employ- graphic

Demo-Inflation Rate

National Economy

Health &

Safety

Regulatory Controls

Admin.

Control

THE COMPETITIVE BUSINESS ENVIRONMENTSocial Forces

Economic issues include a growing concern over national economic policies, inflation rates,demographic changes, and employment levels and saving rates Technological forces alsoplaying an increasing role in competition as a result of materials shortages, need forproductivity improvements, plant modernization, and increased investment in research anddevelopment The growing impact of these issues on business makes it difficult to considerthem independently, or even to set priorities as to their important.

1.10 Industry analysis

In the preface to his classic work, Competitive Strategy, Michael Porter argued that the field

of business strategy lacked an analytical base and contained few generalizable or robustinsights He also noted that economists, whose work on industry and competition mightserve as the basic for the development of such insights Porter’s book provide an importantillustration of how economic reasoning can inform and develop useful insight for practicingmanagers, particularly with regard to strategies for dealing with a firm’s external environment.Since the publication of Porter’s work researchers in economics and strategic managementhave made significant strides in developing an understanding of both the external marketenvironment of firms and their internal organization

1.10.1 Structural determinants of industry development

Although the roofs of the economics of industry and market competition field can be traced tothe 1930s or earlier, they had little impact on business strategy until Micheal Porter publish a

series of articles in the 1970s that cumulated in his pathbreaking competitive Strategy In this

book, Porter presents a convenient framework for exploring the economic factors that affectthe profits of an industry Porter’s main innovation is the classification of these factors intofive major forces A five-force analysis systematically and comprehensively applies economictools to analyze an industry in depth This model can use widely in any industry to facilitatethe formulating strategies to gain competitive advantage

The five forces model originated from work by Porter (1997), as shown in the figure 2.5 Thismodel focuses on five forces that shape competition within an industry: (1) the threat of newentry by potential competitors; (2) the degree of rivalry among established companies within

an industry; (3) the bargaining power of buyer; (4) the bargaining power of suppliers and (5)the threat of substitute products This model can be used for positioning an organization inrelation to market forces particularly through exploiting industry changes (Porter, 1979; citedfrom Betts and Ofori, 1994)

Figure 2 4: The Porter five forces model

Source: Porter 1979 (cite from Hill and Jones, 1998)

Porter suggested that the strength of these forces is the threat in the ability of the companies

to raise prices and earn profits In contrast, the weakness of these forces can be viewed as

an opportunity for the companies to earn greater profits The strength of the five forces maychange through time as industry change The task of managers is to understand how change

of these forces generates new opportunities and threats an formulate appropriate strategies1.10.1.1 Threat of new entry

Potential competitors are the companies that are not currently operate in the industry buthave capability to entry into the competition in the industry Threats of new entrants caneffect the profitability of established companies

The degree of potential competitors to entry the industry is depends on the barriers to entry.These barriers are band loyalty, absolute cost advantage, economic of scale and governmentregulation High barriers to entry make potential competitor difficulty entry the industry since

it makes costly for them to establish new companies and survive in high competition

 Brand loyalty is the preference of buyers in the products of the established companies.The established companies can create band loyalty through continuous products quality,good after-sale services, product innovation and price advantage

Rivalry among established company

Threat of entry

by potential competitors

Bargaining

power of

buyers

Bargaining power of suppliers

Threat of substitute products

 Absolute cost advantage is the established companies in the cost of production due topast experience, patents, skill in management of materials and equipment and access toloan the money

 Economic of scale is the cost advantage that relevant with large company size The largecompanies have capability to dominate the price of products in the industry due to costreductions gained through mass producing a standard out put, the advantage gained byspreading fixed costs over a large production volume, and larger volume of purchase rawmaterials

 Government regulation is the policies that establish to protect some establishedcompanies and buyers such as patents, law of consumer’s protection and law ofenvironment’s protection

1.10.1.2 Rivalry among established companies

Established companies are the companies that currently compete in the industry Highcompetition lead to threat in profitability of established companies Meanwhile, lowcompetition is the opportunity for the companies to raise prices and greater profits Theextent of rivalry among established companies within industry is largely a function of threefactors: the industry’s competitive structure, demand conditions and the height of exit barriers

in the industry

 Competitive structure refers to the number and size distribution of companies in anindustry Structures vary from fragmented to consolidated and have different influence forrivalry The fragmented industry consists of many small and medium -size enterprises butnon of them dominate the industry This type of industry is identified as low barriers ofentry and hard to differentiate the products Many companies in the industry may lead theprice war because typical products and services may conduct buyers to interest in lowprice; consequently many companies have to cut prices to maintain their market share.This is the threat for profitability among rivalry The consolidated industry is dominated by

a small number of large companies that are independent The competitive activities ofone company effect the operation of others The event that pushing profits down is, if onecompany reduces prices of products, others can not stabilize their prices to earn greaterprofits The advantage of this industry is, if there is agreement among rivalry to raiseprices and earn more profits This is disadvantage for buyers

 Demand conditions are another factor of intensity of rivalry Growing demand tends toreduce rivalry since all companies can sell more and earn greater profits Conversely,declining demand causes decrease in buying power and more rivalry as companies’ fight

to maintain revenues and market share

 Exit barriers are the factors that keep companies in the industry even when return are low.Causes of these barriers depend on economy, strategy and emotion of companies Ineconomic factor, companies may invest in plant and equipment that have no alternativeuses and can not be sold off; it is not worthwhile for them to leave the industry Instrategic factor, companies only need to survive under crisis condition in order to wait fornext booming of the industry that earn them continuously

1.10.1.3 The bargaining power of buyer

Buyers affect the competition when they are in the position to force down prices, demandbetter service and bargain higher quality Buyers can influence the competition by theirpower to bargain with the companies The circumstances that buyers are most powerfulinclude:

 Low demand from buyers that allow them to dominate supplier

 Buyers purchase large quantity, they can bargain for price reduction

 High supply from companies so buyers have several choices to purchase

 When suppliers depend on the buyers for large percentage of their total orders

 Buyers have capability to produce the products themselves

1.10.1.4 The bargaining power of suppliers

Suppliers affect the competition when they are able to force up prices, reduce the quality andservice of the input they supply As with buyers, suppliers can influence the competition bytheir power to bargain with companies The circumstances that suppliers are most powerfulinclude:

 When there is small group of them sell the product to many companies

 When there are no competitive products

 When their products are differentiated that it is costly for a company to switch from onesupplier to another

 When the company’s industry is not an important customer of them They can have littleincentive to reduce prices or improve quality

1.10.1.5 The threat of substitute products

Substitute products are the products that can serve the similar service or quality Threat ofthem can conduct companies to limit prices and earn greater profits If substitutes are weak,such as high prices or quality is not meet consumers’ requirement, it is opportunity forcompanies to raise prices and earn more additional profits

Among the five forces, Besanko et al.(1996) mentioned internal rivalry as the central factor

because it may be affected by each of the other forces He also pointed out severallimitations of this framework

 First, it is not especially concern with the magnitude or growth of demand The framework assumes that demand is sufficiently large for firms to be profitable under the most favorable competitive conditions

 The second, framework does not explicitly account for the role of the government, except when the government is the supplier or buyer The government as regulator can profoundly affect industry profitability, and could be considered a sixth force

 The third, the five-forces analysis is qualitative For example, an analysis of industry structure may suggest that the threat of entry is high, but the framework provides little guidance about how to estimate the probability of entry Because this is qualitative, the framework is especially useful for assessing trends – that is, for determining whether industry profitability is likely to increase or decrease.

1.10.2 National determinants of industry development

Many discussions, debates, and writing are made to explain the national competitiveness.More recently, the review has gained favor that competitiveness is driven by governmentpolicy The best and suitable concept of conflicting at the national level is productivity (Porter,1990) Productivity is the prime determinant of a nation’s long run standard of living Nonation can be competitive in all aspects The idea is to assemble the nation’s limited pool ofhuman and other resources into the best productive way He argues that competitionadvantage originates in the local environment in which the firm is based This conclusion isbased on the detailed case studies of numerous industries that appeared in his book TheCompetitive Advantage of Nations

Like nelson and Winter, Porter views competition as part of an evolution process Firmsinitially gain competitive advantages by altering the basic of competition They do so not just

by recognizing the existence of new markets or technologies but by moving aggressively toexploit these opportunities They sustain their advantages by investing to improve existingsources of advantage and to create new ones A firm’s home nation plays a critical role inshaping manager’s perception about the opportunities that can be exploited; in supporting theaccumulation of valuable resources and capabilities; and in creating pressures on the firm toinnovate, invest and improve over time

According to Porter, 1991, there are four basic attributes or determinants at national level thataffect the industry development They are: factor of conditions, demand conditions, relatedand supporting industries and firm strategy, structure and rivalry (figure 2.6)

Figure 2 5: Determinants of national competitiveness

Sources: Porter(1991)

1.10.2.1 Factor conditions

The principle from Smith and Ricado (Classical economics) stated that a nation’s factors ofproduction, labor, land, natural resources, capital, infrastructure will determine the flow oftrade by exporting those goods that make most use of the factors which it is relatively wellendowed But in the sophisticated industries that form the backbone of any advancedeconomy, a nation doesn’t inherit but instead creates the most important factors of production1.10.2.2 Demand conditions

Nations gain competitive advantages in industries where the home demand gives theircompanies a clearer or earlier picture of emerging buyer needs and achieve more than theirforeign rivals Also the larger the market segments in a nation, which receives the mostattention from the nation’s companies, helps to build competitive advantage

FIRM TRATEGY STRUCTURE AND

RIVALRY

RELATED AND SUPOPORTIN

G INDUSTRIES

1.10.2.3 Related and supporting industries

An industry segment can gain benefit through association indirectly with an advantageousindustry segment that is upstream or downstream and contributory to the environment Thepresence of internationally successful related industry in a nation provides opportunities forinformation flow and technical interchange, which can speed the rate of innovation andupgrading

1.10.2.4 Firm strategy, structure and rivalry

These characteristics include strategies, structures, goals, managerial practices, individualattitudes, and intensity of rivalry within the business sector Also the competition betweendomestic firms is more emotive and personal, and they reveal compete from a commonnational platform, so they rivalry tends to be more intense than with foreign competitors.Hence, domestic rivalry is particularly effective in promoting the upgrading of competitiveadvantage

There are another two variables that also influence the national system Those are chanceand government Chance events occur in the condition outside the power of firms, as wars,external political developments and pure inventions These are also important since theycreate discontinuities that shift competitive position in an industry Government can influenceand be influenced by each of the four determinants, either positively or negatively.Government has a direct dominion on national industries through its policies and regulations

1.10.3 SWOT analysis

SWOT is an acronym for a firm’s key internal strengths and weaknesses and externalOpportunity and Threats It is one of the most popular techniques for conducting situationalanalysis attempting to find a strategic fit between external opportunities and internal strengthswhile taking care of external threats and internal weaknesses It is helpful in identifying firm’sdistinctive competence in terms of particular skills and resources possessed by the firm andbetter way of utilizing them The technique provides simple and systematic way of identifyingthe relationship between the factors on which strategic are based

Weihrich (1982) proposed seven steps procedure for the analysis They are as follows:

 Prepare an enterprise profile: the kind of business, geographic domain, competitivesituation, top management orientation

 identify and evaluate the following factors: economic, social, political, demographic,products and technology and market and competition

 prepare a forecast, make predictions and assessment of the future

 prepare a strength-weakness audit in: management and organization; operations; finance;marketing and others

 develop alternatives and

 make strategic choice

He classified the overall factors governing the firm’s strategy into two major groups namelythe external environment and the internal environment External environment has beenfurther categorized as economic, social, political and demographic factors, products andservices, technology, market and competition that give rise to the opportunity and threat tothe firm Similarly, internal environment which is responsible for the strength and weakness

of the firm, was classified as management and organization, operations, finance, marketingand others

In the 2x2 matrix shown in the table 2.1, four conceptually distinct alternative strategies can

be observed They are weakness-threat (WT) strategy, weakness-opportunity (WO) strategy,strength- threat (ST) strategy and strength –opportunity (SO) strategy

Table 2 1: SWOT (strength, weakness, opportunity and threat) matrix

Strengths (S)

List of 5-10 internal strengths here

Weaknesses (W)

List of 5-10 internal weaknesses here

socio-workforces, income structure capital structure economic structure training and education

incentive program health care system

1.11 Organization and management

1.11.1 Ministry of fisheries (MoF)

 Relying on the established General of Department of Fisheries in 1960, later in 1976 theMinistry of Marine Products that was set up, was changed to Ministry of fisheries in 1978

It covered fields of: capture fisheries, aquaculture, preservation and development offisheries resources and fishing vessel registration, fisheries processing and import-export,international economic and technical cooperation and investment, inspection ofproduction an hygiene standards, quality control, training fisheries scientists, technicians,managers, workers, captains and operators, scientific and applied research on fisheriesproduction

 The administrative system of the MOF consists of 9 departments as follows: Planning andinvestment department, Finance and accounting department, Science and technologydepartment, International co-operation department, Fisheries management department,Personnel and labor department, Department of resources preservation, Inspectors’section, Administration office of the Ministry

1.11.2 State organization

There are two organization levels: province and district At province level, People’sCommittees (PC) of provinces are the administrative authorities to implement the fisheriesMinistry’s policies and regulations PCs can make resolutions, decisions, standard andquotas on fisheries within the provinces, but not in conflict with the regulations of the Ministry.However, at district level, Provinces are not permitted to set up official fisheries offices.Fisheries units are often combined with others to form district agriculture department ordistrict forestry-fisheries department And provincial and local departments have to self-finance their activities through local budgets or research contract

1.11.3 Universities

Universities and research centers implement an important role in supporting to theaquaculture development There are four universities over the country: University ofAquaculture No.1 , University of Fisheries, Nha Trang, University of Agriculture and Forestry,and University of Can Tho Besides teaching activities, a number of Aquaculture Research

Centers that were set up by universities undertook the research projects on coastalaquaculture and coastal resource management.

1.11.5 Other institutions and agencies

Some other institutes and agencies are involved in research related to aquaculture are:Center for Natural Resources and Environment Study (CRES) under the National University

of Vietnam (NU), the Sub- institute for Forestry Sciences in South Vietnam, Nha TrangInstitute of Oceanography, Hai Phong Sub-Institute of Oceanography, the Sub-Institute ofEcology of biological Resources of Ho Chi Minh City

1.11.6 Extension services

 Present extension activities are run by different agencies using different system andapproach The department of fisheries resources management (DFRM) of the MOF isresponsible for the overall development and monitoring of the extension activitiesthroughout the country

 In 1994, 24 out of 27 coastal and 23 out of 26 inland provinces in the country establishedtheir fisheries extension centers The extension centers operate under the provincialfisheries departments Virtually no institutional extension is undertaken at the district ofcommune level Some research institutes and NGOS also undertake farm level extensionbut not a level sufficient to have a major impact on development There is a lack ofcoordination in extension

 During the late 1994 and early 1995, about 750 training courses (2-3 days each) havebeen organized national wide, 410 extension officers and about 42.000 aquaculturists/fisherman had received training Over the same period 114 demonstration farms hadbeen set up

 The total budget allocated by the central government in support of the FECs andextension activities amounted to approximately VND 4.5 billion covering the period fromaugust 1994 to all of 1995 In the first 6 months of 1996 about 0.95 bill has beendisbursed

 The main extension approaches are the use of short training courses demonstrationfarms, site visits and study tours for advanced farmers and commune leaders, and radiobroadcasting, technical booklets and video films

 At present, FECs are facing problems of inadequate budget, lack of trainers and trainingand extension facilities and equipment

1.12 Regional distribution of fisheries

Fishery industry is classified into seven biological economic regions and their productions as

in the appendix 3.1

1.12.1 Red river delta

This area is limited by 23,260 square kilometers (7.3% square of over all) However, thepopulation is density at 722 people/ km2 in 1995, increasingly in 748 people/km2 in 1998.According to the statistic, its production contribution to the fishery industry is lowest though in

1998 its growth rate increased 141% in comparing to 1995 The output in 1995 was 97,590tons accounting for 6.94% overall (landing 42,200 tons and growing 55,390 tons), equals to5,9 kg production per capital per year, while the average was 14,7 kg/person/year In 1998,with 137,916 tons production, its contribution was still 8,23% to the industry The export in

1995 was only USD17.45 mil, about 3.5% compare with the local exportation Ifencompassing state owned enterprises’ export in the area, the export value was USD 26 milexcluding illegal and unofficial exporting However, increasing to USD 41.050 mil in 1998,nearly twice and half of one in 1995 is the milestone for regional rapid growth

In the Red River delta, Hai Phong and Quang Ninh are considered as central areas andHanoi is the major domestic market with 3.5 mil of resident excluding foreigners and touristsand a trading place

1.12.2 Northern Mountain

This region includes six provinces from Thanh Hoa to Thua Thien Hue .Annually, itsproduction is lower than the average In 1995, it reached only 110,150 tons occupied 7.8% ofthe industry (in which 86,750 landing tons and growing 23,400 tons) and 9.5 kg/capital.Though the growth was 116% in 1998 over in 1995 (increasing from 110,150 to 128,370tons), its contribution was decreased to 7.66%

In paralleling with the production situation in the 1995-1998 period, exporting growth ratereduced from 5,98% to 4,44% though its value increased from 29.8 mil to USD 33.6 mil.Therefore, its growing is lower in comparing with the Red River delta Thanh Hoa, Nghe Anand Thua Thien Hue are central places of the region

1.12.3 South central coast

With 8 provinces from Quang Nam- Da Nang to Binh Thuan, the productivity of this area ishighly increased It produced 298,198 tons accounting for 21.2% over industry in 1995 Withthe growth rate 117%, in 1998, the productivity increased to 349.323 tons Exporting in 1995was USD 85,747 mil excluding the state own enterprises But in 1998, this figure was grownrapidly to USD 127 mil, equally to 150% in compare to 1995 Centers of the region are DaNang, Khanh Hoa and Binh Thuan

1.12.4 Southeast area

This region has 6 provinces including Ho Chi Minh City It is low production as 130,160 tons

in 1995 (9.2% of the industry) and mainly in landing The average was 8.7 kg/people/year In

1998, though it grown 120%, its contribution to the industry was still 9.32% However, it was

the second exporter in 1995 and the third in 1998 with its value USD 104,000mil and 88,550mil Ba Ria Vung Tau and Ho Chi Minh City are two centers

Ho Chi Minh is the center of processing, consuming and exporting fishery It is the big marketattracting sources of 300,000 tons annually from Southwest (150,000 tons), Southeast(60,000 tons), Middle South (50,000 tons) and internal production It is the processing andexporting center In 1995, there are 46 factories with 240 tons capacity/day In which 30factories are under the city management, 10 under the fishery ministry and the rest belonging

to other industry It exported USD 58.8 mil and in 1998 it reached USD 63.55 mil It alsoproduced fish sauce (18 mil litters) and fish powder (700 tons) Though factories are locatedfar from the raw material sources, they are high productiveness Large lakes as Dau Tieng,Tri An and other small ones are growing places in the region

1.12.5 Mekong River Delta

It is including 12 provinces with 39,554 km2 square and 434 people/km2 This is the growingcenter of country Its contribution to the whole industry is always more than 50% in growing

as well as exporting In 1995 with 738,361 tons output (52.47%), it exported USD 261,469 mil(52.45%) By 178% growth rate in 1998, it produced 872,615 tons and exported USD 466.1million Kien Giang, Ca Mau, Can Tho and Soc Trang are central points

In summary, Mekong River Delta has sufficiency conditions for developing in fishery includinggrowing, landing and processing in large scale Its output is not only providing to meet theinternal demand, also the source of raw material for processing and exporting

1.12.6 Mountainous and Middle high lands

It is 79.367 km2 square including 13 provinces In 1995, its population was 10,812 mil people(13.5%) and 136 people/km2 It only produced 21,928 tons (1.56%) and the average was1.83 kg/people In 1998, its output reduced to 21,401 tons This area has large water area(69% of the country) that is considered as strong aspect However, it is existing difficulties assource of investment, production model and management

1.12.7 Central highlands

Including 4 provinces, it accounts for 55,569 km2 In 1995, there was 2.9 mil of populationwith 52persons/ km2 The output of region was limited by 5600 tons accounting for 4% of theindustry and the average of 1.9 kg per capita In 1998, this figure decreased to 4624 tons(.28%) This area is prospective as north mountain/midland area with 11.6% water area

1.13 Demography

1.13.1 Population and population growth

Though the population in 1998 was 76.4 mil, it would be 78 mil and 100mil by the year 2000and in 2010 with the growth rate is 1.7% annually, however, this rate is different between

rural and urban areas; poor and misery people This increasing results to high demand fornecessities as foods and other social needs that required for the survival reason Fisheryindustry is responsible for contribution to the supplying for social demand in the future.

Vietnam has 29 provinces and cities, whose population was about 40 mil in 1995, accountedfor 51% of country, of which, 38% people live in 116 seaside districts and islands Amongthem, 7.1% people earn for living by landing

1.13.2 Age structure

In Vietnam and fishing areas in particular, the age structure is young The working age rate ofpopulation is 52% In the fishery industry, the working age ranges from 16 to 65 Relying onthe survey result in seaside districts, the rate over age of 70 accounted for 5%, over 65 was11-13%, from 1 to 14: 30 to 40% and the rest was 53 to 59 % age working

1.13.3 Sex structure

Ratio of male/female is stable at 48/52 all over the country In the seashore areas, this ratio ischanging vice versa 52/48 male-female Work characteristics and nutrition are the reason ofbirth rate of son is higher in these regions

1.13.4 Household structure

According to the statistics in 1994, the average head count was 4.77 and in the fisheries, itwas 5.5 However, the sample survey showed that the head count in seaside area washighest at 6.5 to 7 but has been declining from 1994 up to now (appendix 3.2)

1.13.5 Agriculture and living land distribution

The rate of growing and living land is in fluctuation in different areas (appendix 3.4)

By the custom of resident in three areas of the country, the average of fisheries land in theSouth region is higher than in the North and Central regions Therefore, it is good conditionfor household’s development

1.14 Workforces

1.14.1 Characteristics

In 1986, Vietnam work force involved 30.3 mil of people and this number increased to 40.3mil in 1995 with the growth rate of 3.22% In 1986, with average 3% up in labor demand,there were 27.4 mil of workers and the figure grown to 34.7 mil in 1996 There are 40.3 mil ofpeople in the working age, of which 34.7 mil having job (86%), 1.5 mil in studying (3.7%), 2.1mil of housewives (3.7), and about 2 mil of jobless (5%)

1.14.2 Labor in fishery industry

According to the fishery statistics, there were 1,039,000 people working in the field of landing,growing and processing in 1995, in which 420,000 people are in landing, 560,000 job are ingrowing sector, and 59,000 are processing staffs

In fact, the labor in fishery industry is increasing and total full time jobs would be 1.6 mil in theperiod of 1999 to 2010 excluding about 500 to 700 thousand of part time jobs Therefore, thenumber of labor in the entire industry is about 6 mil people

1.14.3 Female labor

Among 40.3 mil of work force, female worker is counted more than half However, this rate isdifferent in different industries In the rural and seashore areas, female labor is a majorsource in agriculture and fishery growing (50 to 55%), particularly, in fishery industry, this rate

is 80% In the recent years, due to reducing benefits from sea sources, women have to work

in other fields

1.15 Income structure

The households’ income is variable and diversified depending on the production conditionsand accumulative rate of each household Income is relied on different sources (appendix4.3)

The rate of poor household decreased and middle and rich households increased by number

of income sources Besides, households that encompass fishing and other occupations, havehigher income than the purity fishing ones As in the appendix 3.5, the South households’income is 40% higher than in the North The poor and rich classification is a characteristic ofthe South

Rich households are off seashore fishers or processors or services providers or ship owner,middleman However, small landing scale, hired working, many children, no sub-income and

no self- investment are poor households’ characteristics Moreover, they are usually risky inproduction because of nature conditions, diseases and pollution

There are many small landing scale households that their revenues are not off set productioncosts and vice versa In the seaside rural areas, households’ major income source is fromlanding, growing and agriculture There is limited chance in other fields as officer, staff indifferent industries Thus it exists a trend of sub- occupation

1.16 Capital structure

Table 3.1: Source of borrowing money in some main representative provinces in 1996

No Indicators Unit Northern

Region

Central Region

Southern Region

1 No of households borrowing

Percentage

Household

%

5947.2

4855.2

4655.7From Bankers

Percentage

Household

%

4939.2

1618.4

3138.8From private lenders

Percentage

Household

%

3326.4

4046

2025

Source: Ministry of Agriculture and Rural Development

In the table 3.1, though in the North there was only 47.2% households are credited because

of the montage, short maturity day, red tap and high rate loans from private sectors, most ofthem expected that they would receive the credit supporting from banks in order to develop

At present, capital from government is limited that only concentrated on the importantinfrastructure projects as seaport, parking, transportation and other priority local projectsThe foreign investment is focusing on the central projects as upgrading processing factories,building up the seaports and demo new production model In some areas, particularly in theSouth (Ben tre, Ba Ria-Vung Tau), there are foreign supports from abroad relationships.The rest sources supply mainly for fishery operations Of which, ownership capital is over50% of total, the banking credits satisfies 30% of requirement and private loans plays animportant role in fishery activities

Though there are the existing limitations in the private financial system as high rate: 5-10%/month, unfair trading In fact, this system is known as one source for surviving situations asfollowing reasons:

 Loans are credited as bank notes or goods (i.e Nets, tools, ships or foods) depending onthe clients’ demanding without any documentaries

 As usual, the lender is the buyer

 And they keep tracks all production activities and supply the need in time

 They are flexible and dynamic in interest rate and pricing negotiation

Household satisfies with this system since it is the best way for earning living and selling itsfished products The Government should have management plan to this system due toprotect producer and control the system effectively

1.17 Economic structure

1.17.1 State Owned sector

Generally, the state owned enterprises’ operations are not efficient Before 1990, processing enterprises were profitable From 1991 up to now, its effectiveness was declining.Though it counts for 94.2% exporting value, the profitable units are limited (25% of total stateenterprises), 35% enterprises are unprofitable and the rest reach at breakeven point Inprocessing field, number of state enterprises are reducing, existing ones produce fish sauceeffectively

fishery-1.17.2 Collective sector

They did change their operating in new model organization in the period from 1987 to 1990

In the end of 1996, there are only about 80 small-scale collectives in 29 cities and provinces

It is the trend of independent owner and production relying on collaboration

1.17.3 Private sector

Private boat owner hired fisher basing on the benefit negotiation The number of privateowners has been increasing And each owns about 10 fishing boats worth billions of VND Ingrowing field, they lease land and water areas for building large production scale from 20Ha

to hundreds of hectares There are private enterprises in processing They invest billions ofVND in setting processing factories Their revenues are fluctuating from 10 to 30 mil USD in

1997 In trading and services, they apply a dynamic mechanism that capitalizes on fishersthen monopoly in buying and selling fishery landed Their working capital is over billions ofVND and some of them build the processing factories and stores

1.18 T RAINING AND EDUCATION

Most of the fishers are not educated, 18% of them are not literate, 64% at primary schoollevel, 17% at secondary and 1% high school and university level The situation is caused bythe financial constrains, fisher’s perception, and lack of education and training infrastructure