Technological strategies at thai tuan textile ltd

Thai Tuan Textile is a private company, established in December 1993, to produce some kinds of textile product such as embroidery silk, satin, sateen etc.. In recent years, Thai Tuan Tex

1 EXECUTIVE SUMMARY

With the “Doi moi” policy, the Vietnamese socio-economic situation has been changed fundamentally to move from a central planned economy to a market regulated one Many companies have been established to fulfill the higher social requirements day by day Besides the state-owned companies, a lot of private ones have been set up in all of the sectors which Vietnamese government has allowed to In the light industry, textile sector has an important role not only for the satisfaction of basic needs but also the sense of job solution due to its labor-intensified characteristic Therefore, Vietnamese government has provided many conditions to stimulate the establishment of textile companies, especially the private ones that are estimated to have a lot of potential and opportunity to develop Thai Tuan Textile is a private company, established in December 1993, to produce some kinds of textile product such as embroidery silk, satin, sateen etc for female customers Although located in Ho Chi Minh City, its products are distributed throughout Vietnam and exported to other countries for overseas Vietnamese people through the intermediaries

In recent years, Thai Tuan Textile emerges as a successful typical of private Vietnamese company in the textile industry The company has gained some achievements

in introducing diversified and high quality products, developing new markets Its main products are chosen as the first rank of textile products of Top Ten of Vietnamese high quality products Thus, there is a necessary need for studying its market success in terms

of technology strategies, which could help company exploit its competitive advantages to cope with the other bigger competitors and be the successful leader in the textile market

In the textile industry, some researches just concern the needs of technology as the

the state-owned companies Therefore, it is necessary to study the role of technological strategy in the private company, especially in the textile industry where the speed of technology innovation is considered one of the highest sectors This research can give some experiments of implementing technological strategy to apply for the other private textile companies

3 RESEARCH OBJECTIVES

 To analyze business position of Thai Tuan Textile Ltd in the Textile Industry;

 To analyze some major textile market factors affecting to its Business Strategies;

 To analyze Technological Strategies of Thai Tuan Textile Ltd in terms of relationship

to business strategies to exploit and create its competitive advantages in textile markets

by giving continuously new products to satisfy customer requirements;

 To find some experiments of implementing technological strategies to apply for the other textile companies;

 To give Technology Strategy suggestions

4 LITERATE REVIEW

4.1 Definition of Technology

The first step in understanding the Technology Strategy will start with a proper definition of technology The most comprehensive definition, however, has been attributed to Sharif (1987) who considers technology as a combination of four basic components, all of which together accomplish any transformation operation These components are:

 Production tools and facilities, referred to as object-embodied technology or

technoware This includes all physical facilities required for the transformation

operation such as instruments, equipment, machinery, devices, structures, etc

 Production skills and experiences referred to as person-embodied technology or

humanware This embraces all acquired abilities necessary for the transformation

operation such as expertise, proficiencies, dexterity, creativity, diligence, and ingenuity

 Production facts and information referred to as document-embodied technology or

inforware This includes all accumulated facts and figures required for the

transformation activity such as designs, accounts, manuals, specifications, observations, regulations, equations, charts, theories

 Production arrangements and linkages referred to as institution-embodied technology

or orgaware This includes all necessary arrangements for the transformation

operation such as groupings, allocations, systematization, organizations, networks, management, and marketing

4.2 Factors Affecting to the Technological Strategies

4.2.1 Business Strategy

Managing technology is not only an operational issue, but also a major strategic issue Unless business strategy includes the impact of technology, a major portion of the business is being ignored (Gerard H Gaynor, 1991) Technological strategy should be formulated within the larger context of business planning, since technology is the only one component of the business system As long as marketing strategy, technological strategy concretizes the business goals to real actions

Technological strategies must be properly integrated into overall business strategies of

an enterprise and followed the product/technology life cycle (Sharif, 1991)

 Technology leader strategy through generation of state-of-the-art technologies

 Technology follower strategy through the adaptation of advanced technologies

 Technology exploiter strategy through the exploitation of standardized technologies

 Product development, the glamour side of technology on which most attention is devoted

 Process development, the shadow side of technology, too often neglected or given short shrift, and including manufacturing technology, material handling, packaging, inventory control

When considering the relationship between technological strategy and business strategy, Noori (1990) highlighted three important points:

 Technological strategy must be developed collectively with manufacturing, marketing, and other functional strategies because technology decisions can have major impact on each of these areas, and vice versa

 Technological strategy must be formed in conjunction with the firm’s business strategy because a right choice of technology provides key competencies

 Technological strategy must support any future revision of the firm’s business strategy and its competitive advantage

The basic role of technological strategy in business planning is to help ask the questions of in what businesses the corporation plans to be and how positioned (Frederick Bestz, 1987) It identifies the potential impact of technological change on any part of the value chain (Porter, 1985)

4.2.2 Organizational Context

Organizational context has the important role to the selection of technological strategy

It allows the firm to substitute internal selection for external selection The effectiveness

of the firm’s internal selection environment affects its capacity to deal with major strategic management challenges (Bulgelman, Mandique and Wheelwright, 1996):

 The ability to exploit opportunities associated with the current strategy (induced process)

 The ability to take advantage of opportunities that emerge spontaneously outside the scope of the current strategy (autonomous process)

 The ability to balance these challenges at different times in the firm’s development Organizational context reflects the firm’s administrative approaches and dominant culture It is impacted by the background and management approaches of the firm’s founders This expresses in the selection of technological strategy: leader or follower and technology innovation: insourcing or outsourcing It also has a close relationship to technology capabilities in terms of deciding technological strategy (Bulgelman, Mandique and Wheelwright, 1996)

In the firm, organizational capabilities must accompany technological ones (Lall, 1987) These can be reflected through some or all of the following:

 Separation of the different technological functions (into different units) in the organizational structure with the growth of the firm

 Giving greater autonomy and financial control to technological functions (like R&D), as these gain prominence, without letting them lose touch with day-to-day commercial needs

 Facilitation of technological information transfers across different departments and from the shop floor, and response to consumers’ feedback

 Development of technology-sensing services (technical library, patent data, data on world technological trends, etc.)

 Formal documentation (in manuals, technical papers, data banks, design libraries and so on) of technical knowledge accumulated

 Link-up with technology suppliers, laboratories, industry associations, universities and drawing on in-house training programs and external programs

4.2.3 Technological Capability

Technological strategy can be conceptualized as an evolutionary organizational learning process, which links between technical competencies and capabilities, technological strategy, and experience Technological strategy is a function of the quantity and quality of technical capabilities that feed into it The experience that results from enacting technological strategy similarly feeds back into technical capabilities and technological strategy, thus continuing the cycle as seen in figure 1:

Figure 1: A capabilities-based organizational learning framework of technological strategy

Technological capability is the ability to use effectively technological knowledge It is the primary attribute of human knowledge and the know-how, which effectively combines human skills and physical capital to meet human needs

Some following elements to define technological capability had been suggested (Bell and Hill, 1978):

Technological

Capabilities

Technological Strategy

Experience

 Effecting necessary adjustments through the production system from the point of introduction of innovation

 Deciding for technical change

 Effecting technical change

 Optimizing operation

The application of technological knowledge has been broken down by Dahlman and Westphal (1982) into the following activities:

 Production engineering that related to the operation of existing plants

 Project execution that pertains to the establishment of new production capacity

 Capital manufactured goods that consist of the embodiment of technological knowledge in physical facilities and equipment

 Research and Development activities to generate new technological knowledge Technological capability can be defined as a combination of three kinds of independent capabilities includes independent technology learning capability (ITLC), independent technology creating capability (ITCC), and independent world technology reconnaissance capability (IWTRC) (Dore, 1984)

On the other hand, Fransman (1984) identified the elements of technological capability

as follow:

 Capability to search for and select appropriate, alternative technology

 Capability to master imported technology and successfully use it for the transformation of inputs and outputs

 Capability to adapt technology to suit local conditions of production

 Capability to make incremental innovations resulted from further improvement in adopted technology

 Capability to institutionalize search for breakthroughs and innovation through local R&D facilities

 Capability to carry out basic research for furthers upgrading the technology

The technological capability development efforts in India proved that technological capability is shown by the ability for purchasing technology, the ability for plant operation, the ability for duplication and expansion and the ability for innovation (Ashok Desai, 1984)

Four types of technological capability were proposed by The Thailand Development Research Institute (TDRI, 1989) based on the revision of World Bank study They include

 Acquisitive capability relates to the capability to search for, assess, negotiate, procure, and transfer technology and installation/ start-up

 Operative capability integrates the abilities for operation and control, maintenance, training and management

 Adaptive capability includes knowledge acquisition, technology digestion, minor product and/or process modification

 Innovative capability embodies research and development capabilities, and radical product and/or process modification

4.2.4 Government Policies

There is a wide range of government policies that affect the efforts of firms in any industry to accumulate technological capabilities As a result, they also influence the technological strategy of the firm These policies include trade policies (policies towards import of technologies), investment incentives, fiscal and monetary policies, tariff regulations, etc

Government legislation can create a demand driven pressures of competition or even foreclose entry into industrial sectors with controls by licensing arrangements, raw materials and capital access Government goes by to create direct social benefits but the secondary consequences are a creation of entry barriers (Porter, 1985) Therefore, it can make the transformation of industrial structure, which affects directly to the technological strategies of firms in this industry

Government can facilitate technological capability development of industrial firms through providing:

 Testing services to qualify products to meet local and international standards

 Information centers to provide information related to technology alternatives

 Institutions for education, training and R&D

Besides, government policies for the certain industry can affect to the other related industries due to the mutual relationship among industries in terms of providing input and consuming output

4.2.5 Technology Forecasting

Using technology as a competitive factor must begin with anticipating technological change Technology forecasting uses techniques for the business organization to systematically anticipate relevant technological changes

Technological changes influence the Technological Capabilities as well as Technological Components The general impact of technological changes is to make some

of the Technological Components obsolete and alter the relative importance of the Technological Capabilities These changes make the influences to the Product Market The dynamics of the Product Market due to technological changes are described by two phenomena (Corbett and Wassenhove, 1993):

 Qualifying Criteria becomes tougher: the minimum performance levels, which must

be met in order to prevent the loss of market share become higher One must constantly improve in absolute terms simply to prevent being wiped out of market

 Order Winning Criteria become Qualifying Criteria: what one time is considered by customers to be a valuable extra feature can, as they become used to it and technological changes, become a standard minimum requirement

Forecasts are important inputs to the process of strategy formulation and planning They have been used to gain a better understanding of the threats and opportunities likely

to be faced by established products and markets and, consequently, of the nature and magnitude of the changes needed (Bulgelman, Mandique and Wheelwright, 1996)

The usefulness of technology forecasting techniques is not only in the prediction, but also in their value to business planning for systematically searching out potential and relevant technical change The next step after technology forecasting is formulating technological strategy which is set up what will be done to use technology as the effective and efficient to get the competitive advantage (Frederick Bestz, 1993)

4.2.6 Technology Content Addition

In rapidly changing environments, it is essential to sense the need to reconfigure the asset structure and accomplish the necessary internal and external transformation This reconfiguration and transformation has to be done such that the Value Addition and the process of Technology Content Addition are aligned to each other The technology Atlas Team (1987) defined the Technology Content Addition of a transformation activity in

terms of the four technology components, which are used in the transformation facility The four technology components are considered to be equivalent to the factors of production used in the calculation of a production function

 Textile Industry’s Reports to get information on the industry’s structure

 Thai Tuan Textile Ltd Annual report, and documents and Phuoc Long Documents

 Some magazines: such as Saigon Times Magazine, Saigon Marketing Magazine, Science and Technology Magazine, Magazine of Ministry of Light Industry and others

 From the Internet

4.3.2 Primary Data

 In-depth interview and discussion with top manager of Thai Tuan Textile Co Ltd.: Mr Thai Tuan Dung, Vice General Director of Permanent to obtain information related to company strategies

 In-depth interview and discussion with experts of Thai Tuan Textile Co Ltd.: Mr Vo Van Quyen, Director of Administration Department, Mr Vo Van Sang, Vice General Director of Technology-Production and Mrs Vo Thi Quy, consultant to know clearly production process and relevant technical and financial problems

5 JUSTIFICATION

This study will focus on the way of implementing of Technological Strategy of Thai Tuan Textile Ltd to gain the competitive advantage and be the leader of Vietnamese textile market in terms of textile products for female customers

Because the technological strategy is rather a wide concept for not only Thai Tuan Textile Co Ltd but Vietnamese companies generally, the managers just said what they did relating to the strategy and production rather than giving systematic steps they had taken to achieve and implement technology Some information was not available due to the business confidentiality

By the year 1995, the demand of fabric was high day by day and the domestic market was overwhelmed with the foreign fabrics Realizing that this was the opportunity and there was enough capability, company carried out construction of departments, importation of equipment, materials and recruiting staff to produce the fabrics which have high quality as the import ones In May 1996, the weaving factory was established and produced officially in October 1996 In this period, the main company product was the rough fabric, which was dyed by the other companies and consumed mainly in the HCM City and Mekong Delta

In January 1997, company went on doing the construction of dyeing factory to complete their products, step by step in their production process and cut off transportation cost In November 1997, the dyeing factory began to start its business activities

COMPANY’S MISSION AND GOALS

EXTERNAL ANALYSIS

INTERNAL

ANALYSIS

BUSINESS STRATEGY

TECHNOLOGICAL STRATEGY FORMULATION PROCESS

TECHNOLOGICAL STRATEGY IMPLEMENTATION PROCESS

EVALUATION

From 1997 to the present time, company has done its business following market mechanism, using its own capital and amortizing money to modernize their production process To satisfy the demand of diversification of market, company decided to invest the second weaving factory in March 1999 So far, company makes products and distributes its products simultaneously through its whole national network distribution and two showrooms in HCM City This contributes to the increase of consuming fabrics in the last two years

Table 1: The consuming fabric and growth rate of Thai Tuan Textile Co Ltd

Consuming fabric (million meter) 4.2 6.1 7.5

Growth rate (%) compared with

the previous year

Source: Thai Tuan’s Documents

In 2011, the turnover increased rapidly because the first company products such as kinds of embroidery silk, satin etc hit the market and prompted the replacement of Vietnamese high quality fabrics for the foreign ones Thai Tuan textile products begin to

be well known and appeared in the fashion shows

6.1.2 Organizational Structure

The company management system is organized by the form of mixing mechanistic and organic models It assures the unique manager system to manage directly with the efficient support of functional departments The organizational structure of company consists:

 Board of Management: this includes 4 founders to define the company strategic issues and to solve the big problems

 General Director

 Vice General Directors: Permanent, Sales and Technology- Production

 Directors of functional departments and mills: Finance-Accounting, Administrative, Sales, Marketing, Production and R&D, Spinning and Weaving, Dyeing and Finishing Duties of Vice General Directors, Directors of functional departments and each department are described as below:

 Vice General Directors and Directors of functional departments:

- Forming the regulations to manage the company

- Appointing the qualified people to handle the important positions

- Concentrating the company resources to orient the target strategies to achieve the company objectives

 Production and R&D Department:

- Planning the production strategies and tactics through balancing between resources and market demands

- Researching and designing new models to satisfy timely market demands

- Planning and managing production plans as well as giving solutions to use effectively and efficiently machines and equipment

- Regulating production through providing materials and receiving products distributed

- Solving all of the staff claims and accusations in the working time

- Researching, planning, orienting and organizing the problems related to the labor cost regulations, wage payment forms and income distributions

- Representing company to establish relationship with public agencies, social organizations

- Managing documents and circulating information to assure the company activities

 Finance- Accounting Department:

- Recording and reflecting the economic activities completely, and timely

- Defining business results, forecasting capital demands and balancing the budget to assure the normal stage between the production activities and financial capability

- Controlling the legal status of vouchers occurring in the management processes

- Forming and selecting the appropriate mobilizing and lending forms when needed

 Sales and Marketing Departments:

- Distributing company products to customer

- Catching the market information: products, prices, competitors; finding new customers, new markets and discovering new demands

- Collecting new styles and designs in the market

6.2 Potential Development

Quality is the first priority of the company to set up the company brand position to the consumer through the supply with the first Vietnamese high quality fabrics such as silk, embroidered silk, satin The next year is the goal of “fashion and quality” to affirm the company ability in terms of providing to the customer with not only high product quality but fashion ones

With the investments and the customer- oriented approach, company has asserted strongly the company position in the consumer choice for the high quality fashion fabrics

of Vietnamese dress and other fashion ones Company imported the equipment to print the brand name on their products in order to assure quality of company products and receive the support of market as well as increasing the consumer trust for the Vietnamese products In addition, this helps to replace the import fabrics and save the foreign money for country In the trade fairs and exhibitions of new products, company products always make the consumer concentration and lead forward the turnover compared with other company products Company has got the gold medal of quality product and diploma of merit of People’s Committee of HCM City for the company, which has the efficient production and business activities

Nowadays, company is considered to be one of the most successful private companies

in HCM City and its kinds of embroidery silk have just received the first position of textile products in the consumer selection of Vietnamese high product quality

6.3 External Analysis

6.3.1 Threats

 Due to implementing CEPT (Common Effective Preference Tariff) Scheme in 2006 because of the joint of AFTA, the competition between domestic textile products and imported ones from China, Thailand and Indonesia has increased considerably

 The appearance and development of private companies as well as state-owned ones producing the same Thai Tuan’s fabric products with some certain advantages have made the increase of rivalry

 The competitive pressure comes from the imported and smuggled Chinese and South Korea fabric products

 The fluctuation of materials price will affect greatly to product price due to the major dependence of imported materials

 The changes of customer’s taste

6.3.2 Opportunities

 Textile domestic production does not meet the actual demand of market

 Government policies support the development of textile-garment industry in terms of information, capital, tax and training courses, especially in technology renovation

 International markets of textile products are being increasingly enlarged

 There is a tendency of transferring textile technology from developed and NIC countries to the countries, which have the low labor cost Therefore, it is not difficult to obtain and apply new technology

 The tendency of using Vietnamese high quality products and the recovery of wearing Vietnamese traditional dress

When deciding to shift from the major trading activities from manufacturing, company faced the problems related to the market segmentation, product characteristics and technology for production process

The situation in for Thai Tuan Textile Co Ltd can be expressed in the table below

 High demand of embroidery silk and

satin by female customers

 The development of middle classes in

cities and even in rural areas

 So far, there was no Vietnamese

textile company producing

embroidery silk

 The invasion of foreign fabric products with the certain advantages

of color and pattern

 The increase pressure of competition

in textile market

 The higher customer requirements for fabric products

6.4 Internal Analysis

6.4.1 Main Financial Figures and Market Share

6.4.1.1 Main Financial Figures

Table 2: Main Financial Figures of Thai Tuan Textile Co Ltd

Average Wages VND/People/Month 3,700,000 3,900,000 4,100,000

Source: Thai Tuan’s Documents

It is noticed that the owned capital has a small proportion (14.6%) in the total investment capital This is the bankruptcy threat for company if it does business inefficiently However, thanks to their effective activities and high growth rate, company has expended their company size as well as increased average wages though company has paid the significant increase tax

Capital Structure also shows the greatly concentrate investment of company for the machinery (50.4%) to achieve the production capability which satisfies the descriptive objectives related to product quality

6.4.1.2 Market Share

The Market Share of each kind of fabric product of Thai Tuan Textile Co Ltd is expressed in the table 3 below

Table 3: Market Share of each kind of Thai Tuan’s products

Kind of fabric product Market Share (%) % of consumed output

Source: Thai Tuan’s Documents

Overall market share of Thai Tuan Textile Co Ltd