Export of footwear and leather products from ho chi minh to lagos nigeria

The findings give rise to the improvement of export of footwear and leather products not only from Ho Chi Minh city to Lagos but probably also from other cities which have the same circu

CERTIFICATE OF ORIGINALITY

I hereby certify my authorship of the thesis submitted today entitled:

EXPORT OF FOOTWEAR AND LEATHER PRODUCTS FROM HO CHI MINH CITY TO LAGOS – NIGERIA

In terms of the statement of

Requirements for Project in Master’s Programs

Issued by the Higher Degree Committee

Ho Chi Minh City, 2012

ANDREW AZUKA MARAH

RETENTION AND USE OF THE PROJECT

I hereby state that I, Andrew Azuka Marah, being the candidate of the degree of Master in MARKETING, accept the requirements of the University relating to the retention and use of Master Project deposited in the Library

In terms of these conditions, I agree that the original work of my Project deposited in the Library should be accessible for the purposes of study and research, in accordance with the normal conditions established by the Library for care, loan and reproduction of Thesis

ACKNOWLEDGEMENTS

I wish to express my sincere and deepest gratitude to my supervisor Professor Marianne Claes at the Universite Libre De Bruxelles in Belgium who believed in me right from our first meeting and volunteered to supervise my project As a model of mentors, without her moral support, directions and encouragement, this work would hardly be completed

I would like to give my special thanks to Professor Jean-Pierre Baeyens the Dean for Solvay Brussels School, Dr Tran Anh Tuan and Professor Daniel Van Houte for their helpful encouragement throughout my studies at Solvay School in Vietnam My sincere thanks to Nguyen Thi Mong Thuy and Serge Bywalski coordinators in the post graduate school for their kindness and friendliness I owe a lot of thanks to all my lecturers for their helpful instructions during the master course To my classmates, a big thanks for their friendly and brilliant feedbacks

Finally, my warmest appreciation and thanks to my family particularly my wife Dr Tran Kim Hang for her understanding, support and encouragement to make this study a success

ABSTRACT

This thesis examines Export of footwear and leather products from Ho Chi Minh City to Lagos – Nigeria 14 Nigerian companies’ representatives in Ho Chi Minh City were interviewed to fill the questionnaire designed with 14 questions, which were divided into 05 parts We try to create a passage of information to Vietnamese footwear industry about the size of Nigeria’s market

as far as Africa market potentiality is concern On the other hand, we want to support and encourage Nigerian business communities in general and most especially the representatives in Ho Chi Minh City We would like to enlighten them more about the size of Vietnam’s footwear industry, capabilities and value

in the world export market

The data obtained are then subjected to descriptive and qualitative analysis The findings indicate parity between theory and practice Many Nigerian firms are able to order directly from Vietnamese companies because of their business representatives and registration in Ho Chi Minh City though they must pay by cash and use different types of methods to source for shoe manufacturers Sports and ladies shoes are given most attention in Lagos market Nigerian companies’ representatives have the advantages in preparing export documentations and availability of carriers and forwarders while they have

disadvantages in delivery and non-adherent to contract agreement There is no market rejection or strong request for special modification for Vietnam’s footwear and leather products regarding quality and style Vietnamese companies should consider the small sizes of Nigerian’s order as they are still in the early stage

The findings give rise to the improvement of export of footwear and leather products not only from Ho Chi Minh city to Lagos but probably also from other cities (which have the same circumstances) in Vietnam to different cities in Nigeria The implications relate to Vietnamese companies, Nigerian businessmen, Vietnamese and Nigerian governments

TABLE OF CONTENTS

Certificate of Originality - i

Retention and use of the project - ii

Acknowledgements - iii

Abstract - iv

Table of contents - v

List of tables - vi

Chapter 01: INTRODUCTION

1.1 Background of the study

1.2 Reasons to choose this topic

1.3 Research limitations

1.3.1 Object

1.3.2 Project limitation

1.4 Research methodology

1.4.1 Case study

1.4.2 Data collection method

Chapter 02: FOOTWEAR AND LEATHER PRODUCTS INDUSTRY

IN VIETNAM

2.1 Vietnam footwear and leather products overview

2.2 Vietnam footwear and leather products market problems

Chapter 03: INTERNATIONAL TRADE

3.1 How to select a country

3.2 Vietnam and Nigeria bilateral agreement

4.1.2 Nigeria’s business behavior

4.2 Nigeria’s economic structure

4.2.1 The economy of Nigeria

4.2.2 Incentives for investors in Nigeria

Chapter 05: ANALYSIS AND EVALUATION OF THE SITUATION

OF EXPORT OF FOOTWEAR AND LEATHER PRODUCTS

INTO LAGOS NIGERIA

LIST OF FIGURES

Figure 2.1: VN Footwear and Leather Industry and location……… Figure 2.2: VN export of footwear by 11main export markets… Figure 3.1: Strategy to enter foreign market ………

LIST OF ABBREVIATION

BTA: Bilateral Trade Agreement

BCG: Boston Consulting Group

BCE: Before the Common Era

EU: European Union

GDP: Gross Domestic Product

GNP: Gross National Product

GNI: Gross National Income

GSO: General Statistical Office

GSP: General System of Preferences

HCMC: Ho Chi Minh city

IMF: International Monetary Fund

LEFASO: Vietnam Leather and Footwear Association

NAM: Non-Aligned Movement

PPP: Purchasing power parity

PTO/GSM: Telecommunication operators/subscribers

R&D: Research & Development

SLA: Footwear and Leather Association of Ho Chi Minh City

US: The United State of America

US$: US dollar

UTC: Coordinated Universal Time

VCCI: Vietnam Chamber of Commerce and Industry

Chapter 1: INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Nowadays, companies are no-longer planning only for the local market, but are constantly meeting with challenges to open doors for international trade Thanks to benefits accruing to international trade and advanced technologies, trading across borders has become a notable feature of both big and medium size establishments in the twenty first century In addition, internationalization can be seen as becoming easier and faster than ever due to economic integration of countries and nations: trade unions, unions, associations and other forms of collaborations between nations, improved transportation systems and technology As establishment differs in many ways, so do their objectives and goals They may decide to go international for many reasons Some may go international in order to protect themselves from future home market decline, expansion of production and sales or when there is saturation in the local market or as a way to reduce cost and high cost of labor even to acquire international experience

To any industry or enterprise be they in production or export of goods and services, the need to expand, find and exploit new market, is always a crucial task Even when business is doing well, new market is considered as a life wire of business because market limits production

1.2 REASONS TO CHOOSE THIS TOPIC

I am a Nigerian studying Master in Business and Marketing Management at Solvay Brussels School – Ho Chi Minh City Open University This is one of the most

impressive progressive eras in Vietnam’s history At the time when most industrialized nations dwelled in fears of turbulence economic crisis, Vietnam is rising like an eagle with its economy into industrialization Suffice it to say that Vietnam has many trading partners in the world for example, in the United States, the European Union, Japan to mention, but they appeared to have no major market in Africa especially in Nigeria In the past, geographic location or distance was a major concern

to marketers Nowadays, the reverse is the case With modern technologies, improved transportation, communication, internet and worldwide web, the world is just considered like a global village Business is no longer limited by distance In considering the huge effort the government of Vietnam and Nigeria are making to enhance friendship and facilitate trade between the two countries According to the

word of the president of Vietnam Chamber of Commerce and Industry (VCCI) in a

forum organized in Hanoi, he said, economic and commercial cooperation between Vietnam and Nigeria remains limited because the business communities of the two countries lacked information about each other (www.vietnamembassy).This is crystal clear from the evidence of total transactions that transpired between the two countries

We are also aware of many problems encountered by marketing managers of Vietnam’s footwear and leather products in foreign markets for example; high tax, dumping accusation, etc (www.ven.vn) We advice that they look around for new market either as a back up or as an expansion to enable them confidently pursue their strategic export target of US$13 to US$14billion dollars turn over in 2020 The world cannot deny the fact that Vietnam has done notably well in the areas of agriculture and production of goods for export to many parts of the world However, we know that this is a new topic, and that it has not been researched on in the past In this writing,

we try to create awareness or a passage of information to Vietnamese footwear industry about the size of Nigeria’s market as far as Africa market potentiality is concern On the other hand, we want to support and encourage Nigerian business communities in general and most especially the representatives in Ho Chi Minh City

We want to enlighten them more about the size of Vietnam’s footwear industry,

capabilities and value in the world export market In addition, we try to view the bilateral agreement between Vietnam and Nigeria government and other subsequent moves to promote friendship, trade and investment

We hope that this writing will encourage business-people in both countries, especially representatives of Nigerian’s companies in Vietnam Most importantly, we would like Vietnamese producers in general to compliment government current efforts and initiate entries to Nigeria market, especially, the footwear and leather industry Looking at history, and all the problems Vietnam’s footwear and leather products went through to become one of the leaders in the world export market, we therefore humbly

choose this topic: Export of footwear and leather products from Ho Chi Minh City to

Lagos Nigeria

Now that efforts are being geared towards supporting business people by Nigeria and Vietnam’s government to increase business cooperation, it is expedient to enlighten a large and fast developing industry like the Vietnam’s Footwear and leather industry the opportunity of designing an entry to a new market particularly, to export footwear and leather products from Ho Chi Minh city to Lagos city in Nigeria The main reason for choosing these two large commercial cities is to make it easy for a good start Both cities are prominent in their country for industries and commercial activities with big sea ports, international air ports and modern communication network Presently, in line with both government objectives to expand their relationship in trade and investment, company’s representative offices now exists in these two commercial cities

1.3 RESEARCH LIMITATIONS

Based on Vietnam and Nigeria bilateral agreement, we are interested in creating awareness for the export of footwear and leather products from Ho Chi Minh City to Lagos Nigeria and suggesting different methods of export We have tried to show different entry strategies and left it open as a choice because there are many companies

in the industry Every company is special and unique in their vision, mission, objectives and goals Their main reason and how they propose to enter foreign market also differs according to their needs This is true, as no two companies are the same and the reason for export varies according to the need of each company We hope that further studies in this subject will be able to use our project especially, when researching for a particular firm in the industry

1.3.1 Object

Export of Vietnamese footwear and leather products from Ho Chi Minh City

to Lagos city in Nigeria

1.3.2 Project limitation

All information used to build the basis for our project was obtained from the Nigerian embassy in Hanoi, Vietnamese embassy’s site in Nigeria, Nigerian companies’ representatives in Ho Chi Minh city, Vietnam Leather and Footwear Association (LEFASO) publications, lecture books and the internet

Due to local language difficulty, we were not able to meet with any particular Vietnamese company for interaction or interview rather, we concentrated on secondary data and other publications Our questionnaire was designed only for Nigerian company representatives in Ho Chi Minh City Our aim is to have direct information

about their experience, difficulties and suggestions on how to improve export of footwear and leather products from Ho Chi Minh City to Lagos City

1.4 RESEARCH METHODOLOGY

3

There are two major business research methods – Quantitative and Qualitative Quantitative research differs from qualitative research in several ways According to Bryman and Bell (2007), in wide – ranging terms, quantitative method is more about collection of numerical data Conversely, qualitative researchers are interested in answering the questions “why” observing situations and understanding the reasons and are not keen to merely accepting the results based on numerical interpretations (Ghauri, G and Kristianslund, 1995) Choice of the best method depends on the field

of study and type of the research being carried out In country specific market research, the first step to tackle an issue is to use qualitative data: this consists mainly in focus groups where people from the studied target group are gathered under the leading of a research specialist (Marianne Claes, 2011) For the purpose of this research on export

of footwear and leather products from Ho Chi Minh city to Lagos Nigeria, qualitative approach is applicable By using In-Depth method, we were able to gather data and information not only from Vietnam’s footwear and leather industry, but, true life business experience and suggestions from Nigerian’s company representatives, who are presently exporting/importing footwear products from Ho Chi Minh city to Lagos city

1.4.1 Case study

We choose case study approach because of the nature of the research problems Yin (1989:22) explained case study as “an empirical inquiry that investigates a contemporary phenomenon within its real life context using sources of evidence” Noor (2008) also identified that in research where one needs to understand a specific

issue or situation, case study can become particularly useful as it allows detecting cases rich in information Export from Ho Chi Minh city to Lagos city, concern with the questions ‘why and how’ Why Nigeria market? How to export directly by Vietnamese companies? We try to work with real life Nigerian company representatives who are already exporting/importing footwear and leather products from Ho Chi Minh city to Lagos city

1.4.2 Data collection method

Sources are generally categorized as being primary or secondary According to Boslaugh (2007), primary data is collected with specific aim, by the researcher, for further analysis Thus, if the data was collected by someone else for some other purpose, it is a secondary data In this project, we used primary and secondary data and the results were further used to make inferences on the project In addition, integration

of ideas into the finished work to synchronize with real company’s representatives’ suggestion

Interview is one of the qualitative methods of collecting primary data and can be executed using different approaches According to Patton (1990), the qualitative methods are possible to have structured – exactly same question for all interviewees, prepared in advance with no room for deviation Informal – open, conversational interview with no particular structure or semi – structured – open-ended questions prepared in advance, the interviewer “goes with the flow” Gummesson (1988) discussed in his book “Qualitative methods” that the interviews referred to two methods of how to document it as: (1) Recording interview as to retain its original form and to ensure that interviewees’ answers are kept in their terms For example, an interviewer may decide to use tape recorder, video camera, notepad, etc (2) Another way of documenting is to write down critical information like dates, amounts, times and some notes for further analyses In this project, we used semi-structured interview method As in-depth researches, we associate with persons involved in the primary

business of export of footwear from Ho Chi Minh city to Lagos Nigeria We began the interview with broad questions to get a feel of their experience in Vietnam and market

of footwear in Nigeria and then, resorted to open-ended questions prepared in advance Our choice of documenting the interview was to record for certainty consequences This will offer the advantage of being able to review it again

Our interviews to 14 Nigerian companies’ representatives in Ho Chi Minh city were based on the questionnaire designed with 14 questions, which were divided into

05 parts: (1) company identification (questions 1 - 2), (2) ways of doing business transaction (questions 3 - 7), (3) difficulties in doing business in Vietnam (questions 8 -11), (4) Ideas about Lagos market (questions 12 - 13), (5) suggestions to improve export of footwear and leather products from Ho Chi Minh City to Lagos City in Nigeria (question 14)

CHAPTER 02: FOOTWEAR AND LEATHER PRODUCTS INDUSTRY IN VIETNAM

2.1 VIETNAM’S FOOTWEAR AND LEATHER PRODUCTS OVERVIEW

The footwear and leather industry in Vietnam has been developing very fast over the last decade Prior to the opening of the Vietnamese economy in the ‘90s, the footwear industry capitalized mainly in sewing the upper parts of products for export

to the Soviet Union At that time the quality and differentiation of products were not particularly high The Vietnam’s footwear and leather industry later suffered a severe crisis due to the disappearance of its established importers As part of the “Doi Moi’ reform policy the Vietnamese Government encouraged the formulation of joint venture with foreign partners This initiative resulted in the relocation of many factories from countries like Hong Kong and Taiwan to Vietnam Therefore the sector started to recover and found new markets and the Vietnam’s footwear and leather industry registered a sharp growth bringing the export value to unprecedented heights (EUECC, 2004)

Ha Noi city Hai Phong city Other Nothern provinces

Table 2.1 Export of Vietnam footwear industry (2002-2008)

Type of shoes Units in

millions

2002 2003 2004 2005 2006 2007 2008

Total footwear 333.2 393.0 420.2 472.7 579.3 614.7 620.7 Sport shoes 180.0 220.3 243.9 273.9 381.6 391.6 377.3

Ladies shoes 66.7 78.7 89.0 90.0 87.1 110.5 121.6

Hand bags 33.7 35.0 41.0 51.7 70.0 80.0 88.0 ( LEFASO, 2008)

The main product of export in the industry is sport shoes, a total of 377.32 million worth about USD 3,282.68 million were exported in 2008 This account for 68.86% an increase of 21.49% compared with 2007 Ladies shoes followed with a total

of about 121.58 million pairs worth USD 857.27 million showing an increase of 6.82% over 2007, then canvas shoes 49.65 million pairs worth USD 308.13 million, and the last, various kinds of sandals and others a total of 72.17 million worth USD319.14 million (www.unctad.org)

Today, the Vietnam’s footwear and leather industry is the third largest foreign currency earner of the country after crude oil and textile, representing constantly more than 10% of the total exports Vietnam’s footwear and leather industry ranks fourth; after China, Hong Kong and Italy in the world export At the end of 2008, more than

900 completed production lines have been equipped for making different type of shoes with a total capacity of 780 million pairs per year More than 550 enterprises engaged

in tanning, footwear, leather products and shoe materials In production, with over 650,000 employees excluding works in small shops, household businesses and traditional villages In spite of this huge progress, the footwear industry is still having

challenges in foreign markets (LEFASO, 2008)

2.2.VIETNAM’S FOOTWEAR AND LEATHER PRODUCTS MARKETING PROBLEMS

Table 2.2 Vietnamese footwear and leather products by sectors

Enterprises by sector

Footwear/

Hand bag enterprises

Tanneries Total

been accused of dumping in the European union (EU) market thereby, levied with high tax There is fierce competition between domestic producers, lack of modern machines and technology; persistent fears of import reduction from prominent customers and raw material dependency, 80% of finished products depend on importation or foreign partner’s supply (www.ice.it)

Table 2.3 Vietnam’s export of footwear 2000 – 6 / 2010

(LEFASO, 2008)

Vietnam’s leather and footwear industry has had a difficult year in 2009 as it failed to achieve its export target and more so in 2010 as the EU threatened to end the General System of Preferences (GSP) status for imports of footwear from Vietnam coupled with other challenges like import reduction from prominent customers, like the

EU and the United State (US), due to public debt crisis in their countries

The main importers of Vietnam’s leather and footwear products are Japan, the

US and the EU Today, the Vietnam’s footwear and leather industry is the third largest foreign currency earner of the country after crude oil and textile, representing constantly more than 10% of the total exports (LEFASO, 2008) Vietnam’s footwear and leather industry ranks fourth in the world export value after China, Hong Kong and Italy This is one of the fastest growing industries in the face of different obstacles, like high interest rates, inflation and rising cost of raw materials The strategic goal of the industry is to reach an export turnover of US$13-14 billion by 2020, and provide up to

80 percent of material inputs and conquer over 60 percent of the local market (www.english.vov.vn) Going back to view the position of this industry between year

2000 and 2010, we are not doubting on their estimation for 2020 For example, in year

2000, according to Dr Tran Thi Nhan, Vietnam Leather and Shoe Research Institute (www.unctad.org), the industry total export earnings rose from USD 1.468 billion (2000) USD 1.560 billion (2001) USD 1.846 billion (2002) and over USD 4.0 billion

was achieved in 2010 However, with their past experience in marketing to advance countries, they should need a back up for many reasons until economic crisis are settled in the western economy Following the views of their government, their presence in Africa especially Nigeria’s market is necessary to boost their goals Recently in a seminar organized in Ho Chi Minh city by the Leather and Footwear Association and Dun & Bradstreet, an international level business information provider, Truong Thi Thuy Lien, director of footwear manufacturing firm Lien Phat Co Ltd, aimed at searching ways for the industry to rise above its present challenges and to make the most of the opportunities at hand She reported that Vietnam’s footwear industry had made tremendous progresses but still is being confronted with several problems, like fall in export orders and dearth of manpower EU and the US being the two leading importers, unfortunately, the mindset of people in the EU and the US has been greatly influenced by the public debt crisis in their countries, which has led to a fall in export orders She went further to emphasize that the export to the EU and the

US markets are likely to witness a 15 to 20 percent drop during the first quarter of

2012 as compared to exports clocked during the corresponding period of the last year Presently, the footwear firms are only trying to sustain their operations and keep hold

of their workforce, and are not thinking of making profits Vietnam has to try to identify other export markets (www.business - in - asia.com)

In another report, Ms Nguyen Thi Tong, Secretary General of the Vietnam Leather and Footwear Association (LEFASO), also said that Vietnam’s leather and footwear industry had a difficult year in 2009 as it failed to achieve its export target and more so in 2010 as the EU will end the General System of Preferences (GSP) status for imports of footwear from Vietnam, so Vietnam has to try to identify other export markets (www.worldbank.org.)

CHAPTER 03: INTERNATIONAL TRADE

3.2.2

In the opening, we discussed about the benefits and new development in international business especially in the twenty first century It is interesting to note the effects of advanced technology in assisting modern businesses coupled with more economic integration of countries, nations and other forms of collaborations between nations, etc Then, one might ask “Why not all go international?” or “At what stage should a company go international?” This may lead to another question “What is international trade?” In a simple term, international trade is a trade carried on across national borders For us to understand why firms do take their business across their national borders, it will be nice to familiarize with the theory of comparative advantage The theory is based on nation’s abundant factors of production: Land, Labor and Capital (David Ricardo, 1817) Comparative advantage simply demonstrates that there are two countries, country A and country B Country A has relative abundant of labor, and country ‘B’ relative abundant of capital The theory states that each country should export those products or services which use its

abundant factors of production intensively In this example, country A should export

products or services that use labor intensively then, country B should export products

or services that use capital intensively This situation also is common to firms Some firms may develop expertise and specific advantages based initially on abundant resources at home, but as time moves on, resources needs changed, the stage of the product life cycle matures, and home markets become saturated, these firms find it advantageous to trade across their national borders However, this is a very simplistic explanation because there are many more other factors of production with varying qualities, and many other influences on trade such as government regulations

3.1 HOW TO SELECT A COUNTRY

Before a company finally decides to do business in a foreign country, there are many steps to consider in other to avoid loss of time or even part of investment due to unexpected rules or wrongly assessed markets Whether the move to enter foreign market was a result of a potential customer contacting to import their product or the company need to expand their production and sales abroad thereby, looking for interesting international market According to Marianne Claes (2011), it is important for the marketing manager to consider the three steps:

(1) If the home country has trade agreement with the country in consideration

(2) Analyze the macro economical aspect of the country, its economy, population, culture etc

(3) Scrutinize the micro economical aspects specific to the market they want to enter, the size, distribution and competition, etc

3.2 VIETNAM AND NIGERIA BILATERAL AGREEMENT

At the United Nations headquarters in September 2000 and the 13th Aligned Movement (NAM) Summit in Malaysia in February 2003, Vietnamese president Tran Duc Luong met with Nigerian president Olusegun Obasanjo, the then African Union president, in order to discuss measures to boost the bilateral ties On these occasions, the Vietnamese president invited his Nigerian counterpart to visit Vietnam from April 17-19th, 2005 The two countries signed a Trade agreement in June 2001 The bilateral trade relations: the trade turnover was US $20.7 million; US

Non-$70.9 million; US $47.8 million and over US $52 million in 2003, 2004, 2005 and

2006 respectively Vietnam’s Ministry of Trade decided to open its Trade office in Nigeria on August 5th, 2005 From November 23-25, 2005, Mr Alhaji Achituwo Abubakar Tanko, Nigerian's Foreign Secretary, paid official visit to Vietnam and

signed an agreement on economic, commercial, cultural, scientific and technological co-operation with Vietnam In December 2006, Deputy Minister of Trade Do Nhu Dinh visited Nigeria in the framework of a trade promotion program From December 10-12, 2006, Deputy Foreign Minister Vu Dzung visited Nigeria to boost the bilateral relations, especially in the fields of oil and gas, agriculture and aqua-culture (www.vietnamembassy-nigeria.org) At the present time, the government of Vietnam has the Vietnamese embassy in Abuja and the Nigerian government establishes the Nigerian embassy in Hanoi

by establishing foreign direct investment in the form of a branch or even a manufacturing facility which is not covered in this report However, a distinction has

to be drawn between a passive and aggressive exporting A passive exporter awaits order or comes across them by chance whereas, an aggressive exporter develops marketing strategies which provide a broad and clear picture of what the firm intends

to do in the foreign market Pavord and Bogart (1991) distinguished between firms whose marketing efforts were characterized by no activity, minor activity and