Improving the competitiveness of black tea producing enterprises in thai nguyen province

ii The Dissertation of TRAN THI HUYEN entitled IMPROVING THE COMPETITIVENESS OF BLACK TEA PRODUCING ENTERPRISES IN THAI NGUYEN PROVINCE submitted in Partial Fulfilment of the Requirem

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A DISSERTATION Presented to the Faculty of the Graduate School Southern Luzon State University, Lucban, Quezon, Philippines

in Collaboration with Thai Nguyen University, Socialist Republic of Vietnam

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The Dissertation of

TRAN THI HUYEN

entitled

IMPROVING THE COMPETITIVENESS OF BLACK TEA PRODUCING

ENTERPRISES IN THAI NGUYEN PROVINCE

submitted in Partial Fulfilment of the Requirements for the Degree

DOCTOR OF BUSINESS ADMINISTRATION

A program offered by Southern Luzon State University,

Republic of the Philippines in collaboration with

Thai Nguyen University, Socialist Republic of Vietnam

has been approved by Oral Examination Committee

JOANNA PAULA A ELLAGA, DBA ALICE T VALERIO, PhD

CECILIA N GASCON, PhD

Chairman

NGUYEN KHANH DOAN, PhD APOLONIA A ESPINOSA, PhD

Accepted in Partial Fulfilment of the Requirements for the Degree

Doctor of Business Administration

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her to complete the course in general and finish the thesis in particular;

Dr Cecilia N Gascon, Dr.Melchor Melo, Dr.Alice T.Valerio, Dr Professor Do Anh Tai, and Dr Tran Dai Nghia, for providing her with a rich

and fertile environment to study and explore new ideas;

Dr Nguyen Khanh Doanh, who provided her valuable guides to

complete the dissertation;

Dr Dang Kim Vui, the Persident of Thai Nguyen University, who

cooperated with with Southern Luzon State University, Republic of the Philippines in offering Doctor of Business Administration through the ITC-TUAF;

Dr Tran Thanh Van, the Dean of the Graduate School of Thai Nguyen

University, for his assistance and encouragement to pursue this study;

Professor Tran Tuan Anh and Professor Nguyen Thanh Hai, who

managed the International Cooperation Program between Vietnam and the Philippines;

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scientists, Provincial People's Committee of Thai Nguyen, Department of Agriculture and Rural Development of Phu Tho Province, Department of Agriculture and Rural Development of Tuyen Quang Province, Thai Nguyen Department of Technology, Department of Planning and Investment of Thai Nguyen, small and medium tea enterprises in the provinces of Thai Nguyen, Phu Tho, Tuyen Quang, who helped her to

complete the dissertation; and

My family, my husband Duong The Cao, and my children, for their

love, support and encouragement throughout my entire life

Tran Thi Huyen – Mary

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DEDICATION

This academic pursuit is dedicated to my family, my husband

Duong The Cao, and my children

Tran Thi Huyen – Mary

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TABLE OF CONTENTS

PAGE

TITLE PAGE ……… i

APPROVAL SHEET ……… ii

CERTIFICATE OF ORIGINALITY ……… iii

ACKNOWLEDGMENT ……… iv

DEDICATION ……… vi

TABLE OF CONTENTS ……… vii

LIST OF TABLES ……… ix

LIST OF FIGURES ……… xii

LIST OF APPENDICES ……… xiii

ABSTRACT ……… xiv

CHAPTER I INTRODUCTION ……… 1

Background of the Study ……… 2

Statement of the Problem ……… 4

Hypothesis of the Study ……… 6

Significance of the Study ……… 6

Scope and Limitations of the Study ……… 7

Definition of Terms ……… 8

II REVIEW OF LITERATURE ……… 10

Conceptual Framework ……….… 30

III METHODOLOGY Locale of the Study ……… 32

viii

Respondents of the Study ……… 34

Research Instrument ……… … …….…… 34

Methods of Analysis ….……… … …….…… 35

IV RESULTS AND DISCUSSIONS ……… 37

V SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ……… 71

Summary ……….……… 71

Conclusions ……… 72

Recommendations ……… 75

REFERENCES ……… 76

APPENDICES ……… 79

CURRICULUM VITAE ……… 92

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LIST OF TABLES

4.1 The Efficiency of Production and Business of Black Tea

Producing Enterprises in Thai Nguyen According to the

4.2 Efficiency of Production and Business of Black Tea

Producing Enterprises in Thai Nguyen According to the

4.3 Margin / Revenue of Black Tea Producing Enterprises in

Thai Nguyen Compared to Black Tea Producing

Enterprises In Phu Tho and Tuyen Quang According to the

4.4 Customers’ Reviews of Black Tea Products’ Quality of Thai

4.5 Customer Reviews on the Form of Black Tea Products’

4.8 Production Costs and Profits of Black Tea Producing

Enterprises in Thai Nguyen According to the Forms of

4.9 Production Costs and Profits of Black Tea Producing

Enterprises in Thai Nguyen According to Capital Scale … 49

4.10 Forms of Advertising That Black Tea Producing

Enterprises Applied in 2012 ……… 53 4.11 Forms of Advertising That Black Tea Producing

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4.12 Productivity of Capital and Assets of the Black Tea

Producing Enterprises in Thai Nguyen ……… 58 4.13 Capital Turnover Ratio of Black Tea Producing Enterprises

in Some Provinces and the Forms of Ownership ………… 59 4.14 Income Affects Consumption of Black Tea Products In

4.15 Qualifications of Enterprise Leaders in the Production of

4.16 Qualifications of Workers in Enterprise Producing Black

Tea in Thai Nguyen Province ……… 67

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LIST OF FIGURES

2.1 Model of Five Competitive Forces ……… 11

2.2 Conceptual Framework Showing Factors Affecting the

Competitiveness of Enterprises Production of Black Tea in

4.2 Packaging of Some Black Tea Products of Ha Thai

4.3 Packaging of Some Black Tea Products of Song Lo

Company in Tuyen Quang Province ……… 45 4.4 Cost and Profitability of Enterprises Producing Black Tea in

Thai Nguyen in the Form of Ownership ……… 49 4.5 Cost and Profitability of the Business of Black Tea in Thai

4.6 System of a Distribution Channel of Some Companies and

4.7 The Proportion of the Cost, Selling Price and Profit of the

Black Tea in Thai Nguyen Via Domestic Consumption in

4.8 Structure of Exports of Black Tea Business in 2012 ……… 57

xiii

Title of Research : IMPROVING THE COMPETITIVENESS OF BLACK

TEA PRODUCING ENTERPRISES IN THAI NGUYEN PROVINCE

Degree Conferred : DOCTOR OF BUSINESS ADMINISTRATION

Name and Address

of Institution

: Southern Luzon State University Lucban, Quezon, Philippines and Thai Nguyen University, Socialist Republic of Vietnam

This study was conducted to identify and analyze the competitiveness among enterprises producing black tea in Thai Nguyen Province This study aimed to identify the factors that affect competitiveness and make the competitive strategy of enterprise production of black tea in Thai Nguyen

province

The study results showed all the factors affecting the competitiveness

of enterprises producing black tea products, where it has achieved above average level and competitiveness of enterprises production of black tea in Thai Nguyen by using year as a deciding factor

Method of system analysis, fieldwork, comparison, using quantitative research methods and forecasting method were utilized in the study This study was conducted for the enterprise production of black tea in Thai Nguyen province, and a number of corporate production of black tea in Phu Tho, Tuyen Quang to compare competitiveness The study was conducted with

100 customers, which were selected based on a random probability The

be enhanced to cope up with the competitiveness of their businesses Also, , enterprises may devise a specific business plan with practical policies to help businesses improve their competitiveness Finally, the proposals and reco mmendations for policy makers in the field of improving the competitiveness

of enterprises black tea in Thai Nguyen province has also been drawn from the results of this research

Chapter I INTRODUCTION

Tea is the perennial plant that has an important role in our social economy Drinking tea has long become a necessity in everyday life, and a habit brought in the culture of Vietnam Tea is also an important export product of agriculture Currently, 39 countries all over the world have grown and processed tea, Vietnam has been ranked fifth in area and eighth in production

For years, tea tree has held an important position in the economic development strategy of Thai Nguyen province Tea tree is the key

socio-to poverty reduction in agriculture and rural development With an area of 20 thousand hectares under the tea business, farmers' average annual harvest was 100 thousand tons, over 300 billion Besides, there are more than 75 businesses, factories, tea processing facilities with a capacity of 10-50 tons of fresh buds/day, dealing with the employment problem for thousands of agricultural workers Tea productions in recent years have contributed significantly to poverty reduction and elevate the poor countryside That is something one can hardly deny

Thai Nguyen Province is known as the "capital" of tea production Thai Nguyen Tea is superior to the other varieties because of its ability to grow, , high quality, fragrance, and nutrients

Thai Nguyen tea plants produce high-quality tea leaves Annual income from tea plants accounts for over 60% of the total income from farming

activities The activities of production, processing, consumption create a lot of jobs, contributing to raising incomes and living standards for the people

In recent years, the market has produced tea products with designs and beautiful packaging, and high quality Consumer tastes are shifting sharply to the high-quality products that meet food safety Thus, to survive and grow, black tea products also need to shift and develop according to the trend of the times

Therefore, studies to evaluate the situation, identify the factors that influence it, finding solutions to improve the competitiveness of black tea in small and medium enterprises in Thai Nguyen province is an urgent requirement that have scientific and practical significance As a result, the title “Improving the Competitiveness of Black Tea Producing Enterprises in Thai Nguyen Province” was chosen

Background of the Study

Competition has a great and important role for the development of the economy in general, and each small and medium enterprise in particular Any economy needs to maintain the competition From the point of view of social benefits, competition is one of the forms that the State used to create opportunities for consumers to choose the products with good quality and cheap price From the standpoint of enterprises, competition will bring favorable conditions in order for each enterprise to assert its position in the market Competition forces enterprises to produce and supply the products, goods and services that the market needs to meet the increasingly diverse demands of customers

Currently, in the economy of Thai Nguyen Province, small and medium enterprises account for over 70% of the total number of registered enterprises, generating about 50% of GDP and over 80% jobs for workers However, small and medium enterprises are facing a lot of problems affecting efficiency and competitiveness, such as small capital, weak access to capital, backward equipment and technology, quality of human resources, and weak management Due to some constraints, small and medium enterprises are facing difficulties and challenges in competition both inside and outside the country, especially in the context of international integration and global markets controlled by multinational companies and transnational companies

In the context of the general difficulties of the economy, the small and medium tea enterprises in Thai Nguyen Province is considered to be the most affected The enhancement of competitiveness becomes a vital question of the enterprises Over the years, Tea tree has always been identified as a key economic crop for tea growing districts Producing and exporting tea increasingly play an important role and become one of the key economic sectors of the province, with 80% of the province's tea production for export Earnings from tea exports have contributed to socio-economic development of the province

However, the fact that the province's tea exports have low quality compared to other countries in the region and the world, even in the country is alarming The underlying cause of this problem lies right in the beginning stages of the production process, from the breeding and processing products Most processing enterprises and exporters of tea found it difficult to input source because of fluctuation of prices, and fragmentary production which

face the risk of market loss Although the majority of produced tea of the province is for export , mainly in the form of raw materials, the tea’s brand has not been established, therefore, the income of tea growers and producers are not high Producing and exporting tea has not promoted the potentials and strengths to be confirmed as the key economic sectors of the province The domestic market is fiercely competing with famous tea companies in the world such as Lipton, Dilmah, and Qualitea The market share of tea industry shrunk Numerous companies are on the brink of bankruptcy Therefore, at this time, there should be an overview of the investment in the development process of the tea industry Also, analyze the causes of these problems to put forward the solutions to have the most effective investment in order for the tea industry to overcome the crisis Enhancing the competitiveness for tea products can solve a lot of problems, as well as assessing the competitive situation of tea products, and recognizing the strengths and weaknesses

Statement of the Problem

In the face of requirements of economic development, particularly in the process of international economic integration today, to survive and grow strongly, tea industry must have the appropriate solutions In recent years, the black tea producing enterprises in Thai Nguyen province encounter a lot of difficulties Black tea products of the province faced the following problems: Export markets to countries in the Middle East were disrupted by political instability; The Russian market is affected by imports from other teas.; and Unfavorable weather affects tea production This leads to reduced earnings from tea, thus, some plants were temporarily closed To solve this situation,

black tea producing enterprises in Thai Nguyen province must be developed

to ensure the following requirements: quantity, quality, competitive price, packaging, market share, revenue, and profit The research aimed to improve the competitiveness of the black tea producing enterprises in Thai Nguyen province as observed by businesses and customers Specifically, it sought to answer the following questions:

1 What is the position of the black tea producing enterprises in Thai Nguyen province in the markets today in terms of:

1.1 Market Share 1.2 Quality

1.3 Price 1.4 Revenue 1.5 Profit

2 What are the competitive advantages of black tea products as observed by the enterprises according to:

2.1 Market Share 2.2 Quality

2.3 Price 2.4 Revenue 2.5 Profit

3 What are the competitive advantages of the black tea producing enterprises in Thai Nguyen province as observed by customers in terms of:

3.1 Market Share 3.2 Quality

3.3 Price 3.4 Revenue 3.5 Profit

4 Are there significant differences between the observation of enterprises and customers about the competitive advantage?

5 What are the factors affecting the implementation of competitive advantage?

6 What final solutions can be introduced to improve the competitiveness

of the black tea producing enterprises in Thai Nguyen province to meet consumer demand?

Hypotheses of the study

The following hypotheses were tested in the study:

1 There is a significant difference in competition between firms producing black tea in Thai Nguyen than some businesses and Tuyen Quang, Phu Tho province

2 There is a significant difference in the competitiveness of enterprises producing black tea

3 Competitiveness of black tea producing enterprises is significantly affected by the market for business, product categories, price of products, product distribution, and promotion mix

Significance of the Study

This study, in general, will help small and medium enterprises in Thai Nguyen to determine the strengths and weaknesses in order to improve their

competitiveness Moreover, this research will help businesses improve their competitiveness such as market expansion, brand building, and enhancing the competitiveness of products Specifically, the study will be beneficial to the following:

Tea Manufacturers This study will help tea manufacturers to

develop its products, increase the area of production and consumption, which will increase the state budget, creating more jobs for local people and for sustainable development

Workers This study will increase their income to have a stable life and

job

Customers This study will help the customers gain access to the

products conveniently and satisfy their demand

Researcher This study provided the author with documents for

teaching purposes

Members of the Community When enterprises do business

effectively, they will contribute to the state budget and social welfare

Scope and Limitations of the Study

The study was conducted from 2010 to 2012, where the researcher gathered information about the black tea producing enterprises in Thai Nguyen Province, Phu Tho and Tuyen Quang It focused

on a number of issues about the competitiveness of black tea producing enterprises and analyzed the situation of the competitiveness of black tea producing enterprises in Thai Nguyen province

Definition of Terms

The following terms are defined to aid the readers in understanding concepts about the study:

Competition Index is the index used to assess the competitive position of

the business compared with rivals

Competitive Factors are the ones related to the competitiveness of

products and businesses when they compete with rivals

Competitiveness is the ability to gain the market share against competitors

in the market, including the ability to regain one or the entire market share of competitors

Customer is a person or an organization or an enterprise willing to buy

products to satisfy those needs

Decisive Factor is the factor affecting the decision of the competitiveness of

tea products

Geographical Location is the place where the enterprises or customers

stay

Need is the demand for products in the market

Relevant Factors are the ones that affect the performance of tea products

such as input, support activities

Sales Area is the one where the tea products are on display, distributed Small and Medium Enterprises are the ones that have small-scale in

capital and labor, revenue or including 3 above factors

Substitute Products and Services are the ones offered by the enterprises

to satisfy the customer's needs

Workers are those who perform work regularly according to administrator’s

orders They receive salaries and benefits according to the labor contract

Chapter II REVIEW OF LITERATURE

This chapter presents related literature and researches, as well as the conceptual/ theoretical framework which bear significance and similarities in this study Also, this includes the paradigm of the study that could help the readers to fully understand the context of the study

it as striving for quality of products and services of your business that is

better than other businesses

The following are other concepts about competition: (1) Competition is the mutual annexation among opponents to win the market and customers for their business; (2) Competition is the rivalry among goods producers, traders, the businessmen in the market economy, driven by supply-demand relationship, to gain the conditions of production, consumption and most profitable market; (3) Competition is making tactics and strategies in line with business potential, good handling strategies, tactics of opponents, win advantages in trade in goods and services to maximize profits (Dr Nguyen Nguyen Cu); (4) Competition is the competition between individuals and collectives that have the same function to win a victory; (5) the individual or

group with the same function no matter what position (Nguyen Như, 1998); (6) Competition is the competition among the producers of goods, merchants, traders in the market economy driven by supply and demand relationship in order to gain the conditions of production, consumption and most profitable market ( National Assembly, 1995); and (7) Competition is one of the characteristics basic of market economy, the development capacity of market economy

Michael Porter's Model of Five Competitive Forces

In the market economy, any business that operates in the market must

be under a certain competitive pressure that depends on five basic competitive forces, represented by the following model:

Figure 2.1 Model of Five Competitive Forces

According to Adam Smith (1776), the classical perspective on competition was that certain agreements and business practice could be an unreasonable restraint on the individual liberty of tradespeople to carry on their livelihoods Restraints were judged as permissible or not by courts as new cases apperred and in the light of changing business circumstances Hence, the courts found specific categories of agreement, specific clauses, to fall foul of their doctrine on economic fairness, and they did not contrive an overarching conception of market power Earlier theorists like Adam Smith rejected any monopoly power

Further, a monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures The monopolists, by keeping the market constantly under-stocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist of wages or profit, greatly above their natural rate (Smith,1776)

By the latter half of the nineteenth century, it had become clear that large firms had become a fact of the market economy, John Stuart Mill (1859) laid down in his treatise On Liberty Accordingto his theory, trade is a social act Whoever undertakes to sell any description of goods to the public, does what affects the interrest of other persons, and of society in general, and thus his conduct, in principle, comes within the jurisdiction of society both the cheapness and the good quality of commodities are most effectually provided for by leaving the producers and sellers perfectly free, under the sole check of

equal freedom to the buyers for supplying themselves elsewhere This is the so-called doctrine of free trade, which rests on grounds different from, though equally soilid with, the principle of individual liberty asserted in this Essay Restrictions on trade, or on production for purposes of trade, are indeed restaints, and all restraint, qua restraint, is an evil (Mill, 1859)

After Mill, there was a shift in economic theory, which emphasized a more precise and theoretical model of competition A simple neo-classical model of free markets holds that production and distribution of goods and services in competitive free markets maximizes social welfare This model assumes that new firms can freely enter markets and compete with existing firms, or to use legal language, there are no barriers to entry By this term, economists mean something very specific, that competitive free markets deliver allocative, productive and dynamic efficiency Allocative efficiency is aloso known as Pareto efficiency after the Italian economist Vilfredo Pareto (1848) and means that resources in an economy over the long the run will go precisely to those who are willing and able to pay for them Because rational producers will keep producing and selling, and buyers will keep buying up to the last marginal unit of possible output or alternatively rational producers will

be reduce their output to the margin at which buyers will by the same amount

as produced- there is no waste, the greatest number wants of the greatest number of people become satisfied and utitily is perfected because resources can no longer be reallcated to make anyone better off without making someone else worse off society has achieved allocative efficiency (Galbraith, 1967)

Concepts of Competitiveness

Since 1980, the term "competitiveness" was widely used by researchers and businessmen Some researchers suggested that, those terms are used the same at different levels of competition interchangeably Some other researchers argued that, those terms are not identical but different and each researcher offered a different perspective on them Therefore, to give a correct and unique definition, reflecting on each term is difficult to implement, with the agreement of the researchers absolutely During the study, the authors found some of the following concepts:

Competitiveness is one of the concepts that have not had the agreement When talking about the competitiveness, we have to mention the subject of competition, so there is no concept of competitiveness in general, that the concept of competitiveness is applied to both levels: Macro level (competitiveness of a country or region) and micro level (competitiveness of enterprises and the competitiveness of the product)

At the micro level, “The enterprises with competitiveness are those which achieve the progress higher than the average of quality of goods and

services, or have the ability to cut down relative costs to allow them to

increase profits and market share” (Dunford and Louri, 1998)

Michael Porter (1990) also acknowledged, there can not be an absolute concept of competitiveness In his opinion, “To compete successfully, the enterprises must have competitive advantages in the form of either low production costs or product differentiation”

National Competitiveness

According to World Economic Forum, competitiveness of a country is the ability to achieve and maintain high growth rates on the basis of policies, institutions and other economic characteristics

For the U.S Board of Industrial Competitiveness , “Competition for a country is the level at which under the market conditions of freedom and fairness, can produce the goods and services to meet the demands of the international market, simultaneously maintain and raise the real incomes of its people"

Global Competitiveness Report gave the definition of national

competition: “The ability of that country achieves rapid and sustainable results

of living standards That is to achieve the high rate of economic growth calculated d by the change of gross domestic product per capita over time”

With this definition, a nation's competitiveness is determined on the basis of stable and better living standards, higher earnings of people

Some other economists suggested the concept of competitiveness of

countries based on labor productivity Porter (1990) said that: “The most

meaningful concept of national competitiveness is labor productivity” Porter's

theory aimed to enhance the role of enterprises in national competition A country with highly competitive enterprises have competitive strength which leads to higher labor productivity In his opinion, the basic elements such as: infrastructure, skilled workers, competitive pressure, law, and technology These factors have a major role to create the competitive environment

competitive environment which increases the labor productivity of the enterprises

Fagerberg defines competitiveness of a country as “the ability of a country

to realize the purpose of centralized economic policy, especially for the growth of income and employment without meeting the difficulties in balance of payments” (Nguyen Vinh Thanh, 2005)

Competitiveness of Enterprises

In 1998, UK’s Ministry of Trade and Industry defined it as the ability to

produce the right product, and determine the right price at the right time (Nguyen Huu Thang, 2008)

Aldington Report’s opinion (1985) stated that “The enterprise is competitive when it can produce products and services with unsurpassed quality and lower prices than competitors in the domestic and international Competitiveness means to achieve long-term interests of the enterprises and the ability to guarantee income for workers and enterprise’s owners

In view of M.Porter, in the market economy, any industries and enterprises are under competitive pressure during operation The competitiveness of enterprises depends on 5 factors: bargaining power of suppliers; threat of new entrants; threat of substitute products and services; the bargaining power of buyers; and industry competitors

There are a lot of concepts of competitiveness of enterprises, which are as follows:

Competitiveness of enterprises is the ability to maintain and expand market share, the profitability of the enterprises According to this concept,

competitiveness is the ability to consume goods and services compared to the competitors and the profitability of the enterprises These concepts can be found in the work of Mehra (1998), Ramasamy (1995), Bruckley (1991), Schealbach (1989) or in the country as a research result of CIEM (2003), National Committee for International Economic Cooperation (2003) This concept did not cover the methods and the elements to maintain and improve competitiveness.

Competitiveness of enterprises is the ability to resist the attack from other enterprises For example, Policy Council of the American defined

competitiveness as the economic capacity of goods and services of the production background National Committee for International Cooperation has cited the concept of competitiveness in Glossary of Trade Policy (1997) Accordingly, competitiveness is the ability of an enterprise that is not trounced

on the economic capacity by other enterprise This concept is qualititive It is difficult to quantify

Competitiveness is synonymous with productivity According to the

Organization for Economic Cooperation and Development (OECD), competitiveness of enterprises is productivity and relatively high income based on the use of production elements effectively; and makes the enterprises develop sustainably in terms of international competitiveness (Bach Thu Cuong, 2002) The concept is not associated with the implementation of the objectives and tasks of the enterprises

Competitiveness means to maintain and improve competitive advantage For example, Vu Trong Lam (Vu Trong Lam, 2006) said that: "The

competitiveness of enterprises is the ability to create, maintain, use and and newly create the competitive advantage of enterprises” The author Tran Suu

(2005) also has a similar opinion: competitiveness of enterprises is the ability

to create competitive advantage; productivity and quality higher than competitors; control the large markets; and bring high income and develop sustainably

In addition, when showing the concept of competitiveness of enterprises, there are issues which involve the following: Firstly, concept of competitiveness should be appropriate to the conditions and context, and the level of development of each period Secondly, competitiveness should be the ability to compete among enterprises not only the ability to attract, use the factors of production and consume goods but also the ability to expand the living space of the products and create new products Thirdly, competitiveness of enterprises needs to demonstrate appropriate methods of competition, including the traditional and modern methods, not only based on comparative advantage but also based on competitive advantage and regulations

From the analysis above, competitiveness of enterprises can be defined as follows: Competitiveness of enterprises is the ability to maintain and improve competitive advantage in consuming products, expanding sales network; attract and use effectively the production factors in order to achieve high and sustainable economic benefits

Theories of Comparative Advantage

Caves and Jones (1977) describe the Ricardian model as the oldest and simplest trade model in which the details of production are fully incorporated According to the classical Ricardian theory of comparative advantage, relative labor productivities determine trade patterns The

Ricardian model plays an important pedagogical role in international economics (Golub and Hsiehh, 2000)

Ricardos theory of comparative advantage is based on the labor theory

of value (Salvatore, 2002) The Ricardian model assumes that: labor is the only factor of production that is remunerated; all labor is homogeneous and all occupations pay the same wage; in any occupation the number of man-hours required per unit of output is constant and independent of the output level, that is, real cost per unit is constant and; labor is mobile among industries but immobile between coutries (Caves and Jones 1977) These unrealistic assumptions led to the incorporation of opportunity cost into the explanation of the theory of comparative advantage If the Ricardian theory of comparative advantage is redefined in terms of opportunity cost, then a country will have a comparative advantage in the production of goods and services if such goods and services can be produced at a lower opportunity cost This implies that a contry will have a comparative cost advantage in the production of those goods and services that can be produced at a lower opportunity cost than in other countries (Salvatore, 2002)

The Ricardian model can be easily understood in the context of a country, two-commodity model Adapting Caves and Jones (1977), imagine a simplified closed economy in which only two commodities, X and Y, can be produced Let aLX and aLY each represent the constant real labor cost per unit

two-of output in the production two-of X and Y, respectively If output levels are given

by Zx and Zy, the total leved of labor allocated to X and Y would be aLX Zxand

aLY Zy, respectively Assume labor í as fully employed

aLX Zx + aLY Zy = L (1)

The asumption of fixed labor requirements per unit of output implies that equation describes a straight line transformation schedule (Caves and Jones, 1977) This implies that in the Ricardian model, relative prices are fixed and determined by the real labor costs per unit of output aLX and aLY

To see this, we ask how much extra Y could be produced if X output is reduced by one unit This reduction would release aLX units of labor Since aLY units of labor are required to produce one unit of Y, aLX/aLY extra Y units could be produced Since aLX/aLY represents the relative price of X, and this ration is constant, relative prices are constant In this case, the straight line transformation curve woul also imply that the relative supply function (Zx/ZY)

is horizontal This implies that demand has no role in determinng pre-trade relative prices

Now suppose that this country engages in trade with another country that also produces only X and Y In the Ricardian model, patterns of trade are completely determined by technological differences between coutries, or put in another way, trade flows are determined by the countries pre-trade relative pricer

System of Criteria for Assessing the Competitiveness of Enterprises

To assess the status of the competitiveness of black tea producing enterprises in the market, the following criteria are used:

Market Share of the Product: The market share is calculated as a

percentage of sales of the enterprise compared to the total revenue of all the enterprises of the same type of business in a market and in a certain time Each type of goods accounts for certain market segments; the market segments are number of customers that consume enterprises’ products The

market share reflects accurately the power of enterprises and the competitiveness

of enterprises in the market

Product Quality: Quality products are reviewed in terms of quality

compared to other products as: designs, colors, standards of environmental quality to increase the attractiveness of the product to the customer and the factors that confirm the competitiveness of products Product quality must show the basic technical characteristics of the product in the design as: strength, dexterity, precision, consumption of fuel, raw materials, length, and width Goods’ quality is a deciding factor to the competitiveness of enterprises

Packaging and Labelling of Products: This criterion creates

competitiveness for tea products because it brought the peculiarities of this product compared to other products In modern life, the packaging requirements of customers tend to increase, because the packaging shows the aesthetic value, the value of beauty,and personality The label creates the important differences in order for customers to distinguish the goods of this enterprise from those of the enterprise, thereby simplify the purchasing decisions

Price of Products: The various price of the product increases customer

choice, and the price differentials make customers give different decisions when purchasing Normally, customers will choose the same products, the same quality but be cheaper This is one of the important elements in improving the competitiveness of enterprises

Product Category: A group of products that are closely related to each

other, because they have the same functions, or within a price range, or sell them to the same group of customers

Distribution System: The transfer of goods from the place of production

to the consumers to achieve the highest results The enterprises always try to have distribution systems that create the most favorable conditions for consumers when buying products

Productivity: As index becomes higher, competitiveness becomes

higher and vice versa

Output: As index becomes higher, the stronger competitiveness is

Efficiency of Production and Business: Reflects the results of the

business compared with the costs As the index becomes higher, the stronger competitiveness is and vice versa

The ability to link and cooperate of the enterprise: As the index

becomes higher, the stronger competitiveness is and vice versa

Basic Contents when Researching the Competitiveness of Enterprises

Competitiveness of Products

This reflects the business performance of enterprises Because the most fundamental tasks of the enterprise is the production and trading, the products of enterprises without competitive capacity will also affect the competitiveness of enterprises

Market Share of the Enterprise

This represents the competitive position of the enterprises in the market, the larger the market share of enterprises is, the higher

competitiveness of enterprises is So, in order to compete, the enterprises must occupy the market.

Business Performance

Business performance is reflected by the following indicators:

Ratio of Corporate Profits: as a general indicator is calculated as the

absolute or relative value

Unit cost: reflects the competitive advantage of the enterprise If the

cost of products is low, it will improve the competitiveness of enterprises

Productivity of Production Factors

Labor productivity: reflects the level of production and business, the capacity to use the factors of production, technology Labor productivity is measured as the ratio between net sales and the average number of employees during the period The higher this indicator is, the larger the competitiveness of enterprises is

Performance on the use of capital: is the ratio between the net sales and operating capital

Yields on the use of all assets: is the ratio of net revenues per total assets or total investment capital of enterprises

Ability to link and cooperate of Enterprises

In this context, competition is not mutual destruction; the competition can help enterprise develop more The ability to link and co-operate is seen

as a precondition for effective business activities This criterion is qualitative This criterion expressed by the quantity and quality of relationships with customers and business partners

Ability to attract the Resources

The resources’ attraction is an indicator to show the competitiveness of enterprises The attraction of the input with high quality such as: skilled labor, capital and materials can produce high quality products with competitiveness

Factors affecting the Competitiveness of Enterprises

Economy

The economy has a great impact to the enterprises If the economy is stable, it will be a prerequisite for economic growth, increasing income for the people as well as the ability to pay for the customer's needs If the enterprises want to survive and assert their position in the market; they must keep up with the growth of the economy

Interest Rate on Loans

This is one of the factors affecting the competitiveness of enterprises If the enterprises have initiative in providing the capital, they will be active in the business and vice versa

Science and Technology

The competitiveness of enterprises is dominated by science and technology If the science and technology of the enterprise are modern, the enterprise will create products with high scientific content and have the ability to compete with other products

Supplier

Supplier can threaten producers through the importance of the product supplied, due to high differentiation of suppliers and producers brought by changes in the cost of products that manufacturers have to accept and carry out

In the international trade, suppliers have a role as exporters of raw materials When enterprises can not exploit local raw materials, the international suppliers have increasingly important position Although there may be competition among suppliers and the enterprise, they can select the best suppliers, although bargaining power of suppliers is limited In order to ensure the competitiveness of products, the enterprises have to turn the power of suppliers’ negotiations to their power

Threat of Substitute Products or Services

When the price of current products, services increases, customers tend

to use substitute products and services These factors threaten the loss of market of businesses The competitors put on the market substitute products that highly differentiate from products of enterprise or create preferential conditions of service or financial conditions

If the substitute products are more similar to the products of enterprise, the larger the threat to the enterprise will be This will limit price, sales volume and affect the profitability of the enterprise If there are a few substitute products similar to the products of enterprise, the enterprise will now have the opportunity to raise prices and increase profits

Threat of New Entrants

The emergence of new enterprises to participate in market creates more risks to reduce revenue, and dominate the market of other businesses

To limit this threat, managers often create barriers such as: expanding production volume of business to reduce costs; and resorting to product

differentiation to innovate technology and distribution system and development of additional services

In addition, choosing the appropriate location in order to exploit government's support and choosing the market for the products is important

Level of Organization and Human Resources

Management capacity of leaders is one of the factors which is likely to affect the competitiveness of enterprises Organizational capacity is expressed in management level by preparing the plan and building strategies This has great significance in improving the efficiency of business operations

Level of workers is the most important factor for any business activities of enterprises This factor covers all activities and be crucial to the success or failure of the enterprises It is the element that constitutes labor costs; it determines the cost of labor in production and business activities

Financial Capacity of Enterprise

Capital is the decisive factor to the production capacity of the enterprise The enterprises have a strong financial capacity; they will have long-term business strategy, equipped with modern technological lines, and invest in market research to ensure the creation of high quality products at a low cost Thus, it helps enterprises have high competitiveness

Marketing Capacity of Enterprise

This is a very important group of factors that strongly influences the competitiveness of enterprises, because marketing capability directly create impacts on production and consumption; meets customer needs, contributes

to higher profits for enterprises, increases the market share; and improves