5.1. A discussion to eliminate some potential central problems 5.1.1. Expanding local business by import goods
Investigating the potential problem “Expanding local business by import goods”, Mr. Chuong said that Vietnam factory would operate to produce threads locally in June 2019 as plan. Therefore, during 2018, the company had to find more customers to start working with them so that in 2019, they have more customers with higher volume quantity orders to fulfill the capacity of new factory. Otherwise, there are not enough orders to run the production. Expanding new local business by import goods, off course, leads to some loss to the company but it is short-term solution happened in one year and a half. When the factory can produce threads in June 2019, this problem no longer exists.
5.1.2. Recruitment process is not good
Amann Vietnam has operated as a trading company with less than 20 employees until end of the year 2018. Before June 2018, there is only 5 employees:
one General Manager, one Customers Service Manager, one Customer Service Officer,
Negative profit
Increase in cost of goods
sold Apply price
centralized decision-
making structure
Decrease in profit margin Decrease in
average selling price Local sales
people do not decide price offer Inefficient
sales plan Lack of
market orientation
Unreasonable selling price
compared with local
cost Trade-offs
(high-end products vs
low-end products)
Diagram 4: The updated cause and effect map
Shorten lead- time by air
shipment
Increase in air shipment
Increase in transportation
cost No local
production Lack of
middle thread sizes
Focus on high-end segmentation
one Secretary, one Logistics Officer, 3 sales members left the company. In June 2018, the company recruited one Sales Director to build up the sales team from September 2018 to April 2019 to 9 members in Sales Department: 1 Sales Directors, 3 GKA Managers, 3 Deputy Sales Managers, 1 TAS Managers, 1 Sales Support Officer. A new Managing Director named Shafiq Zaman from Bangladesh came to Vietnam in July 2018 to lead the factory construction project. There are many changes when new Managing Director comes to Vietnam. Amann established the branch of Amann Vietnam Co., Ltd in Tam Ky, Quang Nam and began to recruit more people. In early of 2019, there are 5 departments as Diagram 1 (page 4).
According to Mr. Shafiq Zaman, it is not easy to find out qualified people in the central and sales people who have high qualifications and long experiences in thread manufacturing. Therefore, the company accepts to recruit young and dynamic people then they will be trained and coached to be able to make the job done. This problem not only happens in Vietnam but also happens in other countries like China and Bangladesh.
Interviewing Ms Hang – Sales Support who controls selling expenses for sales team, there is one case that a salesman in the North used car urgently without visiting plan in advance, which increased 2 million VND only.
The high cost spending for recruitment in the central is higher than selling expenses including:
• Sales team: training cost for three people of sales team in China
• Production department: training cost for one Dyeing House Manager in Bangladesh and house re-arrangement package from Hochiminh to Quang Nam for him
• HR department: Travelling between Danang and Hochiminh and accommodation for HR Manager for handover from General Manager in Hochiminh sales office.
However, any company in the first stage of setting up business has to pay for these costs.
5.1.3. Ineffective system management
At this time, AVN uses HOSTrade system to manage all customers. The limitation of the system is that customer service department just uses it for key in customers’ purchasing orders, running sales report and credit report. However, the system does not have multiple functions for all sales team, customer team and financial team. They have to work manually a lot to have the necessary reports as expectation. It leads to the low productivity of employees, so overtime in peak season cannot be prevented. However, as analysis, the overtime cost is not high so this problem immaterially impacts the profit. Furthermore, a new SAP system will go line in June 2019, which is expected to deliver better work efficiency to all departments because it provides end-to-end solutions by sharing common information among all functions of a business such as financial, production, logistics, distribution etc.
5.2. A discussion to focus on a central problem
After considering all the potential problems, “inefficient sales plan” has been selected as the central problem. The reasons for this selection are explained as following:
• Segmentation and product types: Amann is positioning at high-end segmentation for famous brands such as Prada, Barbour, Hugo Boss, Engelbert Strauss, Ecco or special programs of the leading retailers for sportswear like Adidas (down jacket), Nike (yoga) and Puma (running). Therefore, Amann provides customers with high quality thread with brand name Serafil, SabaSOFT, SabaFLEX and Strongfix. These products have excellent features in terms of strength, softness, elongation and melting ability better than similar products of other competitors. Therefore, the price of these product types is set higher than others. They are also proud of TechX threads which are applied for protective wear such as uniform for firefighters, workers working in high temperature working conditions, scientists, etc. However, in Vietnam, there are a few manufacturers producing such garment types. Almost garment types are jackets (22%), T-shirts (21%), pants (17%), shorts (6%) and others (34%)
Figure 8: Key garment types of Vietnam Textyle & Garment export 2017
Thus, when Amann wants to expand more business in Vietnam market which mainly middle-end segmentation, they have to move to lower segmentation with popular thread types such as Universal (Spun Polyester A), SabaTEX (Texturized Filament Polyester), SabaC (Corespun Polyester) and Crown (Spun Polyester C) at very competitive price because the demand in Vietnam market is 50% for Spun Polyester A, 17% for Texturized Filament Polyester, 14% for Core Spun Polyester, 12% for Spun Polyester C and 7% for others. However, how to move to lower segmentation but not impact on its brand positioning? This is an important issue that needs careful thinking from the top management.
• Selling price: The interview with Global Key Account Manager provided the information on sales proposition of the company, in which 61% from Global Key Accounts, 23% from Cross Borders (accounts not listed in GKA list) and 16% from Local. The figure shows that almost the business at AVN is from global nomination, that’s why it is controlled by Global Key Account Management team and Cross Border team in Head Quarter. In order to achieve the brands’ nomination, they calculate price offer to all the regions where brands’ production sites are located. However, they do not deeply understand
offer price lower than local market price and even lower than minimum price that negatively influences AVN profit. AVN is responsible for its profit from its operation but it cannot decide the selling prices to customers.
Table 9: GKA forecast of AVN from 2020 to 2024
• Distribution: According to Vitas, there are 6000 enterprises operating in textile and garment industry, in which, 62% located in the South, 8% located in the Central and 30% located in the North. Amann’s factory is located in the Central where the number of garment manufacturers is small. Therefore, delivery to the South and the North is less competitive than competitors who have their own factory in two mentioned regions such as Coats (factory both in HCM and Hung Yen), A&E (Nhon Trach, Dong Nai) and Gunzetal (Binh Duong).
• Marketing: For B2B industry, renting booth in the exhibition is a good way to advertise your company name to customers. However, it is just useful for the first time you join the new market. Exhibition is not a good way for B2B industry to have more orders. Approaching as traditional way from the relationship with high position people normally brings better results. Analyzing the market information to set a proper plan of approaching new customers is more effective.