Giải pháp nâng cao hiệu quả nhập khẩu lúa mì của công ty bột mì vinafood1 e

INTERNATIONAL EXECUTIVE MASTER OF BUSINESS ADMINISTRATIONTHESIS SOLUTIONS FOR UPGRADING EFFECTIVENESS OF WHEAT IMPORT OF VINAFOOD1 FLOUR MILL COMPANY GIẢI PHÁP NÂNG CAO HIỆU QUẢ NHẬP KHẨ

INTERNATIONAL EXECUTIVE MASTER OF BUSINESS ADMINISTRATION

THESIS SOLUTIONS FOR UPGRADING

EFFECTIVENESS OF WHEAT IMPORT

OF VINAFOOD1 FLOUR MILL COMPANY

GIẢI PHÁP NÂNG CAO HIỆU QUẢ NHẬP KHẨU LÚA MÌ CỦA CÔNG TY BỘT MÌ

VINAFOOD1

In the trend of globalization and Vietnam’s increasingly intensive integrationinto the world economy today, the import is an important activity bringing abouteconomic effectiveness to the enterprise Vinafood 1 Flour Mill Company is anenterprise engaged in the field of import of wheat flour for purpose of flourproduction and local sale Effectiveness of wheat import greatly affects the business

performance of the enterprise Therefore, I choose the subject: “Solutions for

Upgrading Effectiveness of Wheat Import of Vinafood1 Flour Mill Company” for

my master's thesis

During researching and completing the thesis, I have received hearted helpand guidance of instructing teacher, AP Dr Ngo Thi Tuyet Mai I would like toexpress my profound gratitude for her invaluable help

I sincerely thank the program, the teachers for helping me complete thecourse and the thesis

I would like to thank the Management of Vinafood 1 Flour Mill Company,officers and employees of the Company for assisting and creating favorableconditions during the research and implementation of the project

Finally, I would like to express my deep gratitude for my family, friends andcolleagues for motivating and encouraging me throughout the process of learningand research

During the study, although I myself was trying to combine both theory andpractice at the unit to complete this thesis, for many objective and subjectivereasons, the thesis still has certain shortcomings; I look forward to feedback fromteachers, colleagues and friends

Yours sincerely!

TABLE OF CONTENTS

Page Cover subpage

Statement i

Preamble ii

Table of contents iii

List of abbreviations ……….……… vi

List of Tables vii

List of Figures viii

INTRODUCTION 1

Chapter 1: Rationale for the effectiveness of goods import of the business …4

1.1 Definition and classification of effectiveness of goods import …4

1.1.1 Definition …4

1.1.2 Classification of effectiveness …6

1.2 The indicator for assessment of import effectiveness …8

1.2.1 Effectiveness of use of import capital …8

1.2.2 Import profit …9

1.2.3 Rate of Returns from import …9

1.3 Factors affecting the effectiveness of goods import 10

1.3.1 External factors (PEST+ Model) 10

1.3.2 Internal factors 14

1.4 Experience in solutions to improve the effectiveness of wheat flour import of Binh Dong Flour Mill Company and the lessons learned for Vinafood1 Flour Mill Company 16

1.4.1 Experience and solutions to improve the effectiveness of wheat flour import of Binh Dong Flour Mill Company .16

1.4.2 Lessons learned for Vinafood 1 Flour Mill Company 18

1.5 The solutions to improve the effectiveness of the import 19

1.5.1 Promotion of market research and forecast 19

1.5.2 Improvement of the quality of human resources 20

1.5.3 Mobilization and efficient use of capital 20

1.5.4 Research and selection of appropriate import method 21

1.5.5 Completion of logistics 21

1.5.6 Application of measures to reduce the cost of imports 21

Chapter 2: Analysis of Current Situation of Improving Effectiveness of Wheat Import of Vinafood1 Flour Mill Company 23

2.1 Overview of Vinafood1 Flour Mill Company 23

2.1.1 The process of formation and development of the Company 23

2.1.2 The functions, duties and powers of the Company 24

2.1.3 Organizational structure of the Company 27

2.1.4 Results of business activities of the Company 30

2.2 Analysis of factors affecting the improvement of the effectiveness of the import………31

2.2.1 External factors 32

2.2.2 Internal factors……… 36

2.3 An overview of the current status of the wheat import of Company 40

2.3.1 Production and import turnover 41

2.3.2 The import market 43

2.3.3 The structure of imports 44

2.3.4 Import form 46

2.3.5 Distribution system 46

2.4 Analysis and evaluation of the effectiveness of wheat import 48

2.4.1 Analysis of effectiveness of wheat import 48

2.4.2 Assessment of effectiveness of wheat import……… 56

Chapter 3: Directions, solutions and proposals to improve effectiveness of wheat import of Vinafood1 Flour Mill Company……….61

3.1 Direction and targets to improve effectiveness of wheat import of the

Company……….61

3.1.1 Direction of wheat import of the Company……….61

3.1.2 Import targets of the Company………62

3.2 Solutions to improve the effectiveness of wheat import of the Company…62 3.2.1 Promotion of market research and forecast……… 62

3.2.2 Improving management level of human resources……… 63

3.2.3 Mobilization and effective use of capital……….64

3.2.4 Research and selection of appropriate import methods……… 65

3.2.5 Completion of transport delivery……….66

3.2.6 Application of methods to reduce import costs……… 67

3.3 Recommendations for improving import effectiveness of the Company…68 3.3.1 Recommendations for the State……… 68

3.3.2 Recommendations for Vietnam Northern Food Corporation……… 70

CONCLUSION………73

LIST OF REFERENCES……….74

LIST OF ABBREVIATIONS

USDA United States Department of Agriculture

LIST OF TABLES

Table 2.1 - Results of business operations from 2008 to 2012 30Table 2.2 - Qualification structure of Vinafood1 Flour Mill Company 36Table 2.3 - Criteria of capital of the Company from 2008 to 2012 37Table 2.4 - Production and wheat import turnover of the Company for the period

2008 – 2012 41Table 2.5 - Wheat import market in the period 2008 - 2012 43Table 2.6 - Structure of imported wheat in the period 2008 - 2012 45Table 2.7 - Target for efficiency of use of working capital in the period 2008 –

2012………48Table 2.8 - Profit target and rate of return of wheat import in the period 2008 –

2012……….51Table 3.1 - Import targets of the Company in period 2011 – 2020 62

LIST OF FIGURES

Figure 2.1 – Organizational structure of management apparatus 28

Figure 2.2 - Distribution System 47

Figure 2.3 – The number of turns of working capital in the period 2008 - 2012 49

Figure 2.4 - One - turn duration of working capital in the period 2008 - 2012 50

Figure 2.5 - Working capital efficiency ratio for the period 2008 - 2012 51

Figure 2.6 - Wheat import profit for the period 2008 – 2012 52

Figure 2.7 - Return on sales in the period 2008 - 2012 53

Figure 2.8 - Return on costs in the period 2008 - 2012 54

Figure 2.9 - Rate of return on total capital in the period 2008 - 2012 55

1 The necessity and significance of research

International economic integration is an inevitable trend attracting interest ofall the nations in the world because it has a tremendous impact on the development

of each country In this trend, international trade is a activity playing a key role inpromoting integration of local economy in the world economy Among countries,the exchange of international trade is represented by export and import business

Vietnam has been increasingly intensive involved in the world economy,creating many opportunities and challenges for Vietnamese enterprises, especiallymanufacturing and processing industry in general and wheat flour manufacturingand processing industry in particular For wheat flour manufacturing and processingindustry, the main raw material is wheat Weather conditions in our country createunfavorable conditions for wheat, or at very high care costs, while consumer’sdemand for wheat in the country has increased, leading to the request for fullimport Business performance of enterprises producing and processing wheat flourdepends heavily on effectiveness of wheat imports from abroad

Since 2008, the world economy’s recession has heavily affected the domesticeconomy, led to high inflation, made people tighten their expenditure, increasedUSD exchange sharply, strongly influencing and causing difficult for wheatproduction, particularly the effectiveness of wheat import Vinafood1 is a Companyoperating in the field of wheat flour production and processing is not an exception

In such situation, I myself am working for Vinafood1, under the dedicated

guidance of A.P, Dr Ngo Thi Tuyet Mai, I chose the topic “Solutions for

Upgrading Effectiveness of Wheat Import of Vinafood1 Flour Mill Company” for

my master thesis in order to work out solutions to overcome the difficulties thatCompany is facing

2 The research objective of the thesis

- Clarifying the theoretical and practical issues of efficiency of import

- Evaluating the effectiveness of wheat flour import of Vinafood 1 FlourMill Company in recent years, and pointing out the advantages, limitations andreasons for such limitations.

- Suggesting orientation, solutions and recommendations to improve theeffectiveness of wheat import of Vinafood 1 Flour Mill Company in the future

3 Object and scope of the research

- Object: The research of effectiveness of import of wheat flour of

Vinafood 1 Flour Mill Company

- Scope of the research:

+ Content: Thesis approaches from the part of the Company, researching

effectiveness of import (mainly on the financial aspect) and the content related tothe effectiveness of wheat flour import by Vinafood 1 Flour Mill Company

+ Space: Thesis focuses on research of effectiveness of wheat flour import

by Vinafood 1 Flour Mill Company

+ Time: Thesis focuses on research of the effectiveness of wheat flour import

by Vinafood 1 Flour Mill Company from 2008 to 2013 and suggestion of somemeaningful directions and solutions until the year of 2020

4 Research methodology of the thesis

Research methodology: During the thesis, the author uses the traditionalmethod of research in economics such as statistics, analysis, comparison andsynthesis to resolve the tasks set out in thesis

The authors also uses the results of previous studies and adds new data based

on practical research, in order to increase the scientific and logic nature of thethesis

Method of data collection: Thesis mainly uses method of secondary datacollection Such data is taken from the published report and the statistics of the stateagency, the internal documents and communication of Vinafood 1 Flour MillCompany in recent years

5 Structure of the thesis

Besides the introduction, the tables, the illustration, conclusions andreferences, the thesis is divided into three chapters as follows:

Chapter 1: Rationale for the effectiveness of goods import of the business

Chapter 2: Status of effectiveness of import of wheat flour of Vinafood 1 Flour Mill Company

Chapter 3: Orientation and solutions as well as recommendations to improve the effectiveness of wheat flour import of Vinafood 1 Flour Mill Company

CHAPTER 1: RATIONALE FOR THE EFFECTIVENESS OF GOODS

IMPORT OF THE BUSINESS

1.1 Definition and classification of effectiveness of goods import

1.1.1 Definition

1.1.1.1 Definition of import

According to the Dictionary of Modern Economics of MassachusettsInstitute of Technology: “Imports are goods or services which are consumed in onecountry but bought in other countries”

According to paragraph 2, article 28, chapter 2 of Vietnam Commercial Law

2005, “Import of goods means the bringing of goods into the territory of theSocialist Republic of Vietnam from foreign countries or special zones in theVietnamese territory, which are regarded as exclusive customs zones according tothe provisions of law”

On narrow aspect, according to Article 2 of the Circular No 04/TM - DTdated July 30th 1993 of Ministry of Commerce, “Import business is the wholeprocess of transaction, signing and execution of the sale contracts of relevant goodsand services in partnership with foreign countries"

Therefore, we can understand the import of goods in businesses means thepurchase of goods and services from foreign countries to meet local needs or re -export in order to gain profits; or import means the purchase of goods fromeconomic organizations, foreign companies and consumption of imported goods inthe domestic market or re - export of such goods to gain profits and connect theproduction and consumption

In other words, import means the business at international scale, theexchange of goods among countries based on the principle of parity exchangeconsidering currency as medium It is not individual business, but a system of traderelations in an economy with both internal and external organization

1.1.1.2 Definition of import and export effectiveness

So far, there have been so many different views on business performance

We can divide these opinions into the following basic groups:

The first group is represented by the economist Adam Smith saying that

“Business performance is the achievement of business operations, revenue from thesale of goods “

Group 2 is represented by administrator Manfred Kuhn saying that theeffectiveness is determined by dividing the result measured in value by the businessexpenses

The general curriculum of business administration in businesses, Prof Dr.Ngo Dinh Giao, Publishing house for Science & Technology - 1997, page 408saying that “It expresses a correlated relationship between the obtained results andall expenses incurred to gain such results and reflects the quality of the economicactivity"

The views stated above are consistent in consideration of the relationshipbetween outcomes and expenses; however, we have not fully reflected the nature ofbusiness performance Business performance of enterprises is closely associatedwith economic effectiveness, so both the qualitative and quantitative should becomprehensively considered

Therefore, business performance can be considered as an economic categoryreflecting the use of the production resources, level of organization andmanagement of the business to perform socio - economic objectives at the highestlevel and lowest cost The effectiveness of import is similar to businesseffectiveness The only difference that the business performance reflects the level ofuse of productive resources, the level of organization and management in alloperations of the enterprise, while effectiveness of import reflects the level of use ofresources, the level of organization and management of business in importoperations

From the point of view of a business: The effectiveness of import can beachieved only when maximum outcome is obtained at a minimum cost,demonstrating the ability to use the necessary resources for import operation ofbusiness.

From a social perspective: The effectiveness of import business can beachieved only when the total social benefits from imported goods and services isgreater than the expenses for local production of such goods and services, i.e importactivities contribute to improving the effectiveness of social labor, increase qualityand reduce production costs

1.1.2 Classification of effectiveness

1.1.2.1 Based on the effectiveness method

The determination of effectiveness for two basic purposes:

First, showing and assessing the level of use of various costs in businessactivities

Second, analyzing the economic data of the various options for implementing

Total profit = Total outcome - Total costs

* Relative effectiveness is defined by comparison of the absoluteperformance indicators among different options, or is the discrepancy in theabsolute effectiveness of the options

Outcome

H1 =

-Costs This formula reflects the production of the input criteria

H2 = - - -

OutcomeThis formula reflects the loss of the input criteria

The determination of absolute effectiveness is a basis for determining therelative effectiveness (comparison) However, some indicators of relativeeffectiveness do not depend on the determination of absolute effectiveness Forexample, comparison of the costs of different options to choose the option with thelowest cost is actually a comparison of the cost of options, not a comparison of theirabsolute effectiveness

1.1.2.2 Based on the effectiveness range

Operation of any business is associated with its business environment toaddress the key issues in business such as What? For who? How and how much?,etc; accordingly, based on the scope, the effectiveness can be divided into:

 Individual business performance: a business performance in each specificareas of the enterprise

 Effectiveness of general business: an overview and conclusion about thebusiness effectiveness of the whole production process of the business

1.1.2.3 Based on the time: effective can be divided into:

 Short - term effectiveness of business: the business performance which

is reviewed and evaluated for short periods and in effectiveness as soon as we dobusiness Short - term effectiveness refers to only short periods such as week,month, quarter or year

 Long - term effectiveness of business: the business performance which isreviewed and evaluated for a long time associated with long - term strategies orplans, even long - term business performance associated with lifetime anddevelopment of enterprises

Enterprises need to conduct business activities so that they bring in bothimmediate and long - term benefits; to combine immediate benefits and long - term

benefits harmoniously, not damage long - term interests of the business due toimmediate benefits.

1.1.2.4 Based on object: effectiveness includes:

 Effectiveness gained by implementation of business activities

 Effectiveness gained by a different business operations

1.1.2.5 Based on various aspects of effectiveness

 Financial performance: represents a benefit relationship that businessesreceive while doing business and costs spent for such benefits

 Socio - economic effectiveness: the contribution of socio - economicactivities to the development of production, renovation of economic restructure,improvement of the social labor production, accumulation of foreign currency,improvement of budget revenues, job generation, improvement of people's livingconditions, impact on the ecological environment, etc

1.2 The indicator for assessment of import effectiveness

1.2.1 Effectiveness of use of import capital

1.2.1.1 Working capital turnover ratio import

Working Capital Turnover (Svld) is calculated using the formula:

Net revenue from import

Svld = -

Importworking capital This indicator reflects the revenue gained per a working capital spent forimport business or turnover of working capital in a cycle of import A higherindicator shows a higher effectiveness of working capital for the import businessand vice versa

1.2.1.2 Turnover time of working capital

Turnover time of working capital (Tv) is calculated using the formula:

Duration of analysis period

Tv = -

Working capital turnover ratio

(Duration of analysis period is usually 360 days)

This indicator reflects the number of days required for working capital forthe import business to gain a turnover A shorter turnover time of working capitalshows a higher speed of cycling and higher effectiveness of import and vice versa

1.2.1.3 Working capital efficiency ratio

Factor responsible for working capital (Hvld) is calculated using the formula:

Working capital

Hvld =

-Total import turnoverThis indicator shows a average working capital needed to create a revenueunit from import A lower ratio shows a higher effectiveness of capital use and moresaved capital and vice versa

1.2.2 Import profit

Import profit = Revenue from import - Import costsImport profit is a general target showing the result of import business,reflecting the final result of the import operation

1.2.3 Rate of Returns from import

This indicator reflects profit amount gained from a cost unit spent on importbusiness A higher ratio shows a higher effectiveness of import and vice versa.

 Return on investment (Pi)

Import Profit

Pi = -

Total capitalThis indicator reflects profit amount gained from a capital for importbusiness A higher ratio shows a higher profitability of capital, higher effectiveness

of import and vice versa

1.3 Factors affecting the effectiveness of goods import

In fact, there are many factors affecting the import operation of the business,which affect the effectiveness of import Effectiveness of import business ismeasured by comparing the results from the import business with all costs incurred

to achieve that result Therefore, all factors affecting the consumption of imports,import costs or selling expenses will directly affect the effectiveness of import.Based on the objectiveness of factors, they can be divided into two main groupsincluding external factors and internal factors

1.3.1 External factors (PEST+ Model)

1.3.1.1 Political and legal factor

Political factor has a great impact on the import operation It ensures politicalstability, maintain a peaceful environment and friendship with other countries in theregion and the world, creating favorable conditions for the import operation Theexpansion of political and diplomacy relations will create favorable conditions andset a legal foundation for businesses to develop new partners; accordingly, suchbusinesses can find sources of goods at the best price as a basis for reduction ofimport cost and improve effectiveness of import

Government’s policies have a significant impact on the effectiveness ofimport operation The incentive credit and financial policies will help importersgrasp business opportunities, reduce import costs and gain profits The policies

protecting the domestic production and encourage to replace imports reduced theeffectiveness of importers who want to gain profits from the local sale of imports,but bring in socio - economic effectiveness, generate jobs for labors and evenencourage domestic manufacturing industries to promote their capabilities.

In the context of globalization and international integration, WTO membercountries are committed to minimize tariff and non - tariff barrier At the same time,that the countries strengthening to sign bilateral trade agreements and free trade hasalso forced such countries to adjust the international trade policy towards tariff andduty reductions, creating favorable conditions for export and import activities

The characteristic of the import business is that participants are often indifferent countries, so businesses are required to follow not only laws of theircountries but also international law If legal documents are clear, fair and consistent,they will create a healthy legal environment, create favorable conditions forenterprises to conduct business without encountering legal obstacles or risks Incontrast, the unclear law will make it difficult for businesses to do business, thenleading to abuse of weakness of laws to do illegal business such as contraband,counterfeit, etc affecting revenue, reputation and competitiveness of enterprisesgreatly, reducing the effectiveness of the import business

For agricultural products in general and wheat in particular, imports can bearinsects, harmful plants which can survive easily in our country, so National AgroForestry Fisheries Quality Assurance Department has issued a list of 34 countriesallowed to import goods into Vietnam, and others are not allowed or required togain license of fumigation and quarantine before clearance, making businessesdifficult to find sources of cheap raw materials In some cases, goods shipped toport are required to re - export, leading to huge damage for businesses and reducingthe effectiveness of the import business [3]

1.3.1.2 Economic factors

Enterprises should pay attention to the short - term, long - term economicfactors and Government’s intervention in the economy

The status of the economy: any economy has cycles, and in each specificphase of the economic cycle, companies will make the appropriate decisions forthemselves.

Factors affecting the economy: interest rates, inflation

The economic policy of the Government: the basic wage law, the economicdevelopment strategy of the Government, the incentives for the industry: tax cut,subsidies, etc

The economic outlook in the future: growth rate, GDP, GDP rate oninvestment, etc

Vietnam is a developing country, with an annual growth rate of 5 - 7 % and apopulation of nearly 90 million people with increasingly improved living conditionand increasing demand for the use of various types of food, so the demand for flourand flour preparations is increasing

Within 20 years (1991 - 2011), Vietnam's GDP growth rate was at 7.34

%/year, the highest rate in Southeast Asia in particular and in Asia and the world ingeneral In 2012, GDP grew by 5.03 % compared to 2011 Despite a lower growththan the year 2011, in the context of world economic difficulty, this growth rate isappropriate Per capita income in 1990 was just over $ 100, and in 2012, itincreased by over 15 times up to $1.540 [13] Inflation rate was about 11.75 % in

2010 and 18.58 % in 2011, which are high rates It has directly affected theoperations and business performance of enterprises In 2011, the Resolution 11/NQ

- CP dated Feb 24th 2011 offered solutions focusing on curbing inflation, stabilizingthe macro economy and ensuring social security, which has a tremendous impact oneconomic situation in Vietnam in general and the business situation of enterprises inparticular The tight spending of the state budget is caused by the effects ofinflation In 2012, USD exchange rate increased by nearly 30% compared to 2008,rising gasoline prices led to increase in other costs such as transportation, labor,storage and open storage All these factors have reduced the revenue and increasedimports the import costs, thereby reducing the effectiveness of the import business

1.3.1.3 Scientific and technological factors

The technology revolution, especially information technology in recentdecades has truly changed the world, changed consumer’s behavior and businessoperations The revolution includes the introduction of computer, Internet, socialnetworks, mobile phones, etc

Production technology is also changing Businesses can take advantage ofopportunities to increase competitive advantage in the import business, and saveimport cost (market research costs, transportation costs, etc) to serve customersbetter, provide goods at lower cost, etc

1.3.1.4 Socio - cultural factors

The world has many different cultures and each country has differentcustoms A country will import goods to supplement or substitute the consumption

or import to continue to produce the goods to meet the needs and tastes at a certainphase of the population The research of culture and tastes will have a decisiveimpact on the outcome of the sale of importer and import performance

Socio - cultural factors are sensitive and changing frequently Lifestyle of thepopulation itself is rapidly changing, introducing new lifestyles, leading to changes

in customer’s behavior Intellectual level of the people is higher, leading to higherneed of quality and categories This is a challenge for importers

1.3.1.5 Factor of natural conditions

Wheat grows and develops in temperate climate, needs a high humidity fordevelopment stage and low humidity for the stage of grain formation If so, thequality of wheat will be ensured Such quality will be lower in rainy and wetcondition during grain formation and harvest The time for planting and harvestingwheat is longer than wheat, from 130 days to 180 days depending on soil andclimate condition in each country, such as from 160 to 180 days for Russia,Ukraine, Canada, and from 120 to 140 days for Australia, U.S., India and China[15]

Soil, cultivation practices, planting and care techniques affect the wheatproduction, and climatic factors such as rainfall or drought will affect the quality ofwheat such as gluten, protein, etc Currently, due to the greenhouse effect, theclimate is increasingly harsh and floods, droughts and disease are affecting wheatyield and quality Therefore, only after harvesting and during storage, farmers andcereal storage agencies in each country analyze, classify and evaluate each type ofwheat of each certain region to sort out the wheat lines as food for human such asAPH, APW, HPS, etc or food for livestock such as feed wheat This is the basis forassessment and classification of price of each product and export in accordance withthe world market.

Therefore, the natural condition factor is an important factor directlyaffecting the quality and yield of wheat This factor is basis for countries to decide

to increase or decrease the price of wheat The wheat importers will choose the righttime to buy wheat at low price to save the import cost and improve the effectiveness

limited when performing multiple contracts at the same time Enterprise shoulddetermine their own capital structure, mobilize and use such capital appropriately toincrease the effectiveness of capital use and create capital accumulation for theenterprise.

1.3.2.3 Technical facilities

Facilities for import business activities include warehouse systems,transportation means, equipment, handling technology, warehouse for storage ofgoods, etc If equipped with adequate facilities, businesses will reduce rental costs,and take initiative in business Conversely, the businesses which cannot affordfacilities will suffer from a higher input cost, likely lose business opportunities andinfluence business performance of enterprises Therefore, enterprise must improveand upgrade facilities to reduce costs, create favorable conditions for productionand business activities

1.3.2.4 The management level of business

If businesses can build an appropriate organizational and managementstructure, maintain a low indirect labor cost while maintain a smooth businessoperation, they will be able to reduce management costs in the production costs.Managers with the proper import policy will bring in a higher profit for enterprises.Conversely, improper decisions can cause uncompensated losses Therefore,managers need to have a good knowledge of administration, flexibility to capturethe needs and trends of the market, raise and use the available resources well toaccomplish goals and strategies of businesses In addition, they also need to knowhow to use the management methods and tools to stimulate the creativity ofemployees, so that they can contribute more to the business operations of theenterprises

1.3.2.5 Information collection, exchange and processing system

Information is the basis for the managers to make decisions on importbusiness Enterprises that collect and process information accurately and timely will

be able to make the right decisions, so that businesses can be work out a effective

import plan or option It is important that businesses must organize a system forcollecting and processing information in a scientific and accurate manner, updatethe market, price, competitor, etc in order to increase sales, reduce costs, improvebusiness effectiveness of enterprises.

1.4 Experience in solutions to improve the effectiveness of wheat flour import of Binh Dong Flour Mill Company and the lessons learned for Vinafood

1 Flour Mill Company

1.4.1 Experience and solutions to improve the effectiveness of wheat flour import of Binh Dong Flour Mill Company

Binh Dong Flour Mill Company (Trade name: Binh Dong Flour MillCompany - Address: No 277A Binh Dong Port - Ward 14 - District 8 - Ho ChiMinh City) was established and has operated since early 1970 and owned byinvestors After the complete liberation of the South, in April 1975, the factory wastaken over and put into operation according to the management regime on the basis

of consolidation of two old factories named SAKYBOMY and VIFLOMICO Twofactories have five production lines supplied by two famous manufacturers of wheatmilling equipment in the world, MIAG and BUHLER by modern technology Thetotal capacity of the two lines is 890 tons/day In 1977, Ministry of Food hasdecided to officially establish the Binh Dong Wheat Flour Milling Union In 2004,Binh Dong Flour Mill Company, a independent accounting member, became asubordinate accounting unit under Vietnam Southern Food Corporation

Binh Dong Flour Mill Company has achieved certain successes in import andeffectiveness of wheat import is as follows:

The product: The Company manufactures products at various levels to meetthe needs of the market from high - end powder like red doves, swans used for largeplants like Acecook, Massan, Kinh Do, etc to low - end products such as cabbage,sailing boat, hanging bridges, etc used for animal food plants

Import yield and turnover: In 2010, Binh Dong Flour Mill Companyimported about 110,000 tons of wheat, equivalent to 30.47 million USD In 2011,

such number increased to 120,000 tons wheat, equivalent to 43.08 million USD In

2012, it dropped to 115,000 tons of wheat, equivalent to 37.4 million USD due tosluggish consumption of wheat flour, leading to reduced quantity of imported wheat[5]

Wheat import market of the Company is mainly Australian market, inaddition, U.S., Canada, etc

Main import is APW wheat because it produces fours with protein, glutenand colors accepted in the market

The product is distributed mainly through wheat flour distributors across southern provinces 40% of the powder is sold at the plant, 60% is for retail sale in the market.

Profit and rate of return: In 2010, Binh Dong Flour Mill Company achieved12,240 million dong of profit and 1.46% of return on sale Such number was 14.582million and 1.51% in 2011 and 14.974 million and 1.54% in 2012 In the context ofdomestic economic downturn, Binh Dong Flour Mill Company has maintained ahigh profit and return on sale and a continuous increase every year except for alower increase in 2012, which shows that this is a successful in import operationand import performance of the Company [5]

The solutions to improve the effectiveness of wheat flour import of BinhDong Flour Mill Company have been applied and brought about a higheffectiveness:

Training management staffs and consultants, especially the head of theCompany must understand the world wheat market, conduct a thorough analysis ofconsumer’s demand in the country to offer specific import plans for each shipment.Depending on demand, the Company determines the product lines for production topurchase the proper wheat bathes

Regularly update the information about weather, wheat export policies ofexporting countries, global society, etc to identify what factors affect the price ofwheat import

Developing partnership strategies in exporting countries such as Australia,U.S., Canada, etc and build mutual trust for a closer relation and mutual interests.

Training technical team well and reliably to evaluate and classify the keycriteria in each batch, review the results of standard contract performance becausethe quality greatly affects the cost of production of wheat The main criteria are:Protein, Gluten, Humidity, Impurities, Discreteness, Heavy Metal Content, etc

1.4.2 Lessons learned for Vinafood 1 Flour Mill Company

From the solutions to improve the effectiveness of wheat import applied byBinh Dong Flour Mill Company effectively, Vinafood 1 Flour Mill Company hasdrawn the following lessons:

The success lessons:

Developing and training management staffs with experience and dedication

Maintaining a good relations and reputation with Banks to mobilize capital toprovide each loan of millions USD immediately

Not good cooperation with international carriers, agents and port, so somebatches cannot be cleared, increasing the costs of loading, unloading, storing andwarehousing

1.5 The solutions to improve the effectiveness of the import

Vietnamese businesses when participating in import activity, particularly theimport of agricultural products, do not usually delve into the product, work outspecific direction and strategies, and so fail to give effective solutions to improvethe effectiveness of import To succeed, the companies need solutions to adapt tothe business environment at each stage, which is particularly necessary andimportant for business activities of importers Here are the basic solutions:

1.5.1 Promotion of market research and forecast

Enterprises when being engaged in the business operation in an environment

of economic integration have always faced with a fierce competition from manysides To survive and grow, the businesses must quickly seize opportunities and findways to overcome the challenges To achieve this, one of the decisive factors is theability of the businesses to study and predict the volatility of the market For theimporters, this research should be carried out at two places: the domestic marketand foreign market

Domestic market research aims at determining the need for importedproducts because this market will consume these items Domestic market researchalso aims at finding out information about impact of Government’s policy changes

on the import business activities of the Company such as import tax, interest rate,exchange rate, etc to calculate the domestic cost for the import operation

Research of foreign markets aims at expanding the supply of importedgoods, finding reputable vendors with good quality, low price and volume stability

Market research and forecasts aims at helping businesses get a accurate,timely system information, ensuring the ability to respond to changes in businessprocesses Accordingly, those business leaders can make decisions quickly,reasonably, reducing incurred costs, and facilitating the import activity and bringing

in high profits for enterprises

1.5.2 Improvement of the quality of human resources

Human resources is a fundamental and decisive factor to all businessoperations of the enterprises With characteristic of non direct production ofproducts of import activity, so the role of human resources is so critical To promotethe capacity of human resources, to meet the business requirements in a increasinglycompetitive environment and achieved a high effectiveness, the enterprises mustconstantly raise the level of human resources management If qualified manpower isemployed reasonably, this will help businesses reduce sale and management costs

as well as avoid the loss in the business process

1.5.3 Mobilization and efficient use of capital

In the import business, capital is an indispensable element for the circulation

of goods To get capital, businesses must raise capital from various sources such as:

- Stockholder's equity of businesses

- Credit capital of banks and trade credit

- Stock issuance capital

To use capital reasonably and effectively

To manage capital in an efficient manner, to prevent appropriation andmisuse

In addition, businesses must constantly analyze and evaluate theeffectiveness of capital use to quickly remedy these limitations and promote theadvantages of enterprises in management, mobilization and use of funding

1.5.4 Research and selection of appropriate import method

Financial ability of businesses is limited, whereas the market is constantlyfluctuating Therefore, the enterprises should research the market’s needs to choose

a flexible import structure, an appropriate import structure to save costs andimprove the effectiveness of import

1.5.5 Completion of logistics

Logistics is an indispensable activity in import business The logistic freightalways accounts for a significant proportion of the total costs of import business.Therefore, to improve import performance, enterprises should:

Determine the exact volume of goods and reasonable period for each item.Combine the transnational transport in a reasonable way to reduce the cost offreight by combining multiple forms of transportation, such as waterways, roads,etc

Understand the schedule of transportation, arrange deliverer, deliver goodstimely, and avoid incurring charges of storage, open storage and loss exceeding thepermitted level

1.5.6 Application of measures to reduce the cost of imports

For importers, to improve the effectiveness of import, in addition toincreasing revenue from import, they are required to cut import costs of goods Theimport costs make up commodity prices, play a decisive role to selling price,revenues, profits, then affect the effectiveness of import business; thereby reduction

of the cost of imports is an essential factor to increase the effectiveness of import inthe enterprises

Conclusion to Chapter 1

Chapter 1 clarifies definition, classification and evaluation criteria foreffectiveness of import business, as well as considers the factors affecting theeffectiveness of the import business; provide the basis for the analysis of status ofwheat four import of Vinafood 1 Flour Mill Company in Chapter 2 Chapter 1 alsomentions the experience in solutions to improve the effectiveness of import of Binh

Dong Flour Mill Company, thereby offer some solutions to improve theeffectiveness of wheat import business setting foundation for working out solutions

to improve the effectiveness of wheat import of Vinafood 1 Flour Mill Company inChapter 3

CHAPTER 2: ANALYSIS OF CURRENT SITUATION OF IMPROVING EFFECTIVENESS OF WHEAT IMPORT OF VINAFOOD 1 FLOUR MILL

COMPANY

2.1 Overview of Vinafood1 Flour Mill Company

2.1.1 The process of formation and development of the Company

Vinafood1 Flour Mill Company (under VietNam Northern FoodCorporation) was established in 2008 on the basis of reorganization of Hung QuangFlour Trading and Manufacturing Company (founded in 2003) and Bao Phuoc FlourFactory acquired by the Corporation from Bao Phuoc Import - Export TradingCompany Limited In recent years, overcoming all difficulties and challenges due tothe economic recession, Vinafood1 Flour Mill Company has continuouslydeveloped, confirmed the brand and reputation of the business in the market TheCompany's products have been trusted by consumers, the market share is constantlyexpanding

Today, with a head office in Hanoi, the Company has 02 plants: Hung QuangFlour Factory located in Vinh city, Nghe An province and Bao Phuoc Flour Factorylocated in Hai Phong city with a total of 172 officers and employees In recentyears, in order to improve the efficiency of production and business, the Companyhas developed the technical and economic norms such as the sale of products, thecommission fees for agents, distributors; the rated consumption of electricity, water,supplies and equipment for production, policy development, product standardaccording to European standards, registration of product quality and design withNghe An Department of Health and Product Brand Administration Specifically, in

2008, the Company developed and managed the product quality under HACCP(2001 - 2000), quality standard ISO - 22000: 2005 accredited in 2009, confirmingthe brand and corporate reputation The Company's product quality is always stable,

at reasonable price and gain the trust of the majority of customers and consumers Incurrent difficult context, when the purchasing power of the population declines

sharply due to the impact of inflation, the Company's products are still favored byconsumers.

As a production unit with materials to be imported from foreign countries(wheat), in the context of great and unexpected and unpredictable volatility ofexchange rate, the Company’s leaders are often closely monitoring developments ofwheat market, choosing the right time to import raw materials, thereby contributing

to economic efficiency, cost savings for businesses Thus, since 2008, the Companyhas always exceeded the targets set out, the production has grown constantly.Particularly in 2012, the Company’s revenue reached 798.503 million dong, profitreached 8,451 million; payment to state budget was 66.676 million dong; theaverage income of employees was 5.8 million VND/person/month

The main fields of activity of the Company include

- Production, processing and sale of wheat and wheat products,

- Production and processing of food,

- Services of warehousing and offices for sale,

- Wholesale, retail sale and dealers: agricultural products, animal feed, fertilizer dealers.

2.1.2 The functions, duties and powers of the Company

2.1.2.1 Function

Vinafood1 Flour Mill Company specializes in the production and thebusiness of wheat, wheat flour; purchase, storage, processing, wholesale, retail sale,storage and circulation of agricultural food and products; Export of food,agricultural products, animal feed, agricultural materials, etc

2.1.2.2 Duties

Based on the function, the Company has following specific tasks:

Abiding by all policies, guidelines, policies and laws of the State andGovernment, the current provisions of the Corporation in the normal course ofbusiness

Getting and using effectively, preserving and growing the capital authorized

by the Corporation for production and business purposes

Purchasing, importing raw materials (wheat), materials, equipment andspare parts, preserving, storing, milling and consuming products, by - products fromthe production

Applying scientific and technological progress in manufacturing,diversifying flour products, trading food, other agricultural products in accordancewith policies and State law and duties assigned by the Corporation

Complying with Financial Regulations of the Corporation Performingperiodic reports, quarterly and annual settlement, in the direction of theCorporation

Ensuring the implementation of all regimes and policies of the State foremployees, often caring the spiritual and material life of workers

Fully complying with obligations to the state (payment to state budget) asprescribed by law

Protecting property, maintaining security and order in the Company,implementing defense obligations, ensuring safety, industrial hygiene,environmental sanitation in the Company

Promoting the movement, organization, appointment, Commend andreward, timely introducing typical examples

Working closely with the Party organizations, Trade Unions, YouthOrganizations in building transparent and strong unions

2.1.2.3 Powers of Company

a Finance and business accounting:

Being authorized by the Corporation to use capital, land, property and otherresources to directly manage and use in production and business activities

Mobilizing funds and other resources to the extent of specific authorization

of the Company (if any) to implement investment, development and use plans inproduction and business activities of the Company

Implementing the purchase of assets, investment in capital construction inaccordance with the Financial Regulations of the Company and the Company'shierarchy.

Being authorized by the Corporation to use funds to timely meet thebusiness needs in the principle of capital preservation and effectiveness

b Business activity:

Operating the business lines assigned by the Corporation; being allowed toextend and develop the business operations in line with the Company's ability andneeds of the market

Being authorized by the Corporation to negotiate, sign contracts andperform the sales contract with customers in the country and foreign countries aswell as sign other economic contracts in accordance with the assigned objectivesand tasks and legal regulations

Being authorized to make proactive decisions on the purchase price ofmaterials and the selling price of the products produced by the Company, but theselling price must be not less than production cost

Being authorized to make investment in technology, equipment inaccordance with the business purpose of the Company, implement plans of majorrepair, renovation and maintenance of machinery and equipment to ensure thebusiness operations of the Corporation

Being allowed to make decision on the forms and measures to supportmarket (promotion, advertising, sales commissions and bonuses for buyers, etc) inaccordance with the provisions of law, to promote the market expansion andimprove competitiveness

c Investment and development:

Being authorized by the Corporation to organize and implement thedevelopment and investment projects, under the plan of the Corporation; To receivefunds and other resources necessary for the implementation of the project

d Organization of personnel structure:

Being authorized by the Corporation to organize the management structureand do business in accordance with the assigned tasks and targets as assigned by theCorporation.

Being authorized by the Corporation to build the labor norms, norm of theconsumption of materials in accordance with the conditions of machinery,equipment and technical infrastructure of the Company, the norm of costs formanagement and other costs, etc on the basis of ensuring effectiveness of businessactivities and in accordance with the provisions of the State to submit them to theCorporation for approval

Being authorized by the Corporation to build and ask the Corporation toapprove the price unit of wage; to select the form of payment of salary, bonus, mealallowance, collective welfare and direct rights to employees in accordance with theregulations of the State

Based on the personnel management decentralization of the Corporation, theCompany can resolve the social insurance and other regimes for employees inaccordance with Labor Law and regulations of the State

Being authorized by the Corporation to recruit, sign the labor contract,terminate labor contracts, arrange, transfer, train personnel and implement otherrights under the provisions of the Labor Law, the other provisions of the law and themanagement decentralization of the Corporation

2.1.3 Organizational structure of the Company

Vinafood1 Flour Mill Company is a state - owned enterprise with economicaccounting under Office of VietNam Northern Food Corporation, registered and hasits own seal and a deposit account at the bank for transactions

Company Name: Vinafood1 Flour Mill Company,

English Name : Vinafood1 Flour Mill Company; Abbreviation:VNF1FLOUR

Headquarter : Vinh Tan Ward - Vinh City - Nghe An

Tel : 0383.582277 Fax: 0383.582264

Company’s management apparatus reflected in the following diagram:

Figure 2.1 – Organizational structure of management apparatus

Note:

Direction relation

Functions and duties of the departments

Board of Directors of the Company is the legal representative of the highestexecutive authority in the Company He can decide all matters relating to themanagement and business operations of the Company, is responsible to theCorporation and State for the operation of the Company

Deputy Director is an assistant to the Chief Executive as assigned,authorized, subject to the conditions of production and business operations fromtime to time The Director can assign and authorize each Director in writing for anumber of specific areas

Administration and Personnel Dept: This Department shall advise and assistthe Director of the Company for organizational structure of management apparatus,staffing, management of salary and personnel, supervision of emulation, discipline;

AccountingDept

SaleDept

TechDept

QualityAssuranceDept

inspection, research and development of rules, regulations, implementation ofpolicy and regime for employees, management of administrative and clerical task aswell as protection of the office.

Foreign Economic Relations Division shall advise the Director of theCompany on signing material sale contracts, inspect the legality of foreigneconomic relations contracts, and be directly responsible to monitoring theimplementation the signed wheat sales contract until the liquidation of suchcontracts

Accounting Department: under the direct direction of Director of theCompany, shall provide the Director of Financial Management with advice;organize and direct the work of accounting and statistics for production andbusiness activities of the Company under the applicable accounting standards;Perform functions of a supervisor in the Company

Sales Department: It shall advise the Director of the Company mattersrelated to the organization and administration of sales activities, such as sale ofproducts, by - products and other items as planned; Develop annual plans, mediumand long - term strategies of business development of the Company, under theguidance of the leader or Corporation

Technology Dept: It shall advise and assist the Director or Deputy Director

in the technological process of flour production, research, quality management forinputs and inventory, offer the suitable mixture formula, develop plans fordistribution and use of appropriate materials, in conjunction with the relevantdivisions to make plans for production and supervision of product quality

Quality Assurance Dept: It shall manage the quality of raw materials,control the sanitary, production environment, advise the Technology Department toregister the product quality targets; regularly contact and inform the Managementabout the quality of products, exchange and handle the issues related to productquality

2.1.4 Results of business activities of the Company

Results of business activities of the Company are represented by thefollowing indicators:

Table 2.1 - Results of business operations from 2008 to 2012

Unit: million dong

Payment to state budget 4.454 45.641 59.836 68.287 66.676

Source: Vinafood1 Flour Mill Company, financial statements in 2008, 2009,

2010, 2011, 2012

Table 2.1 shows the Company's revenue is increasing every year TheCompany's revenue doubled in 2009 compared to 2008, reaching 457.123 millionVND (241.038 million VND, up 111.55% compared to 2008) The main reason is inlate 2008, the Corporation purchased and handed over the Bao Phuoc Flour Factory(capacity of 140.000 tons/day, equal to the capacity of Hung Quang Flour Trading)

to the Company Moreover, China's cheap wheat in 2008 was no longer sold in2009

In 2010, sales reached 617.829 million VND (up 160.706 million VNDcompared with 2009, equivalent to 35.16%) The main reason is that in this year,imports of wheat was still equivalent to that in 2009, but the Company was allowed

to increase the supply of wheat for export up to 20.000 tons and the Companyactively expanded to other items such as wheat bran and dry soybean for animalfeed factory

In 2011, sales reached 701.987 million VND (up 84.158 million VND,equivalent to 13.62% compared with 2010) The main cause is a sharp increase inwheat price in the first quarter of 2011, an increase by about 30% leading toincrease in price of four in the quarter, and increase in revenue from sale of finishedproducts by 26.5% compared with 2010

In 2012, sales reached 798.503 million (up 96.516 million, equivalent to13.75% compared to 2011) The main cause is that the Company was activelyseeking sources of animal feed, supplying wheat for the Corporation to increaserevenues, while revenue from sale of finished products fell by 6% due to a sharpdecrease in wheat price in late 2011 leading to a sharp decrease in price of finishedproducts in 2012.

The period from 2008 to 2012 is a period of global economic recession,Vietnam has been hit seriously, but the Company remained the annual sales growthrate, although the growth rate has slowed down That shows the Company’s efforts

Other indicators such as profitability, payment to state budget, per capitaincome between 2008 and 2012 of the Company's have also increased annually,showing that the Company offered proper policies and strategies The Companytook initiatives to seek other items to increase revenue and improve businessefficiency

2.2 Analysis of factors affecting the improvement of the effectiveness of the import

In the production process of the Company, the most important factor tobusiness results is input material Materials here are wheat imported from manycountries Since Vietnam cannot grow wheat, 100% of the materials must beimported from other countries For structure of production costs, the price of rawmaterials accounts for 90% of the production cost; so the selection of material andprice will directly affect the production costs, thereby affect the effectiveness ofwheat import of the Company Wheat import effectiveness is influenced by manyfactors both outside and inside the Company

2.2.1 External factors

2.2.1.1 Political and legal factors

Since our country opened the economy, the purchase of raw materials hasbeen diversified and facilitated thanks to bilateral relations with many countries.

With the geographical, political and social condition and bilateral relationsthrough Government - level cooperation decree of Vietnam, based on economic,cultural policy and commercial exchanges between the two sides, in recent years,the number of imported wheat has grown, 701.4 thousand tons in 2008 andincreased up to about 2.3 million tons in 2012 [12]

Political and legal factors are important factors to the effectiveness of importbecause a good bilateral trade relation between the two countries will helpcommodity avoid double taxation That our country is actively participating inTrans - Pacific Strategic Economic Partnership Agreement (TPP) is a positivesupport for businesses doing business of wheat export including Vinafood1 FlourMill Company If the agreement is approved and the benefit of zero from importduty, it will create favorable conditions for businesses, or each country will developthe technical barriers to facilitate or make it difficult for other countries to exportgoods For example, if wheat, recycled agricultural products with the whole grain is

re - exported by importers due to quarantine, businesses will bear greater costs.Specifically, in December 2012, the Company imported a batch of 500 tons ofwheat from Pakistan, when the goods came to Hai Phong Port, because Pakistan is acountry listed in the countries not allowed to import agricultural products inVietnam, so the Company must re - export such batch, causing a damage of nearly 1billion VND [4]

Since wheat is a agricultural product, along with wheat, is “Food from themost important cereal in the world”, uncertain natural conditions cause loss.Therefore, to ensure food security, many countries have launched a ban on wheatexports, leading to decrease in the supply of wheat in the world market.Specifically, in late 2010, Russia launched a ban on wheat export because a largearea of wheat cultivation in Russia was in danger of total loss due to fires anddroughts, affecting the supply of wheat exporter in the world, leading to increase of