Economists call for distribution strategy (18/04)

06/08/2010 - 34 Lượt xem

Local economists have called for a distribution network development strategy, saying that only by having a thorough grasp of distribution networks, can Vietnamese enterprises survive the anticipated fierce competition.

Cheap labour no more a competitive edge

According to Tran Du Lich, Head of the HCM City Economic Institute, Vietnamese enterprises are held back by four main shortcomings: undiversified product designs, low quality of finished articles, high input costs, and poor distribution channels. If these problems continue unabated, enterprises will be savaged by the dogs of competition once foreign companies when Vietnam fully opens its market.

Mr Lich focused on shortcomings in distribution. He said that Vietnamese enterprises have been relying on foreign distribution networks. This approach leads to exploitation, as the company that holds the distribution network can assume control over production activities.

Mai Hong Quy, Deputy Principal of the HCM City University of Law shared the same view, citing an example showing how shortcomings arose from the distribution phase. Vietnam was the first distributor of products within the SNG (Commonwealth of Independent States), but China later replaced Vietnam as the largest distributor within the market.

In the past, the former Soviet Union imported tea from two suppliers, Vietnam and India. However, inexplicably, Vietnamese tea was found being exported to India before being re-exported to the Soviet Union as an Indian product.

Ms Quy said that cheap labour was once considered to be Vietnam’s greatest competitive edge. However, this factor is being viewed less frequently as an advantage, and recent worker strikes have shown it is time to improve the labour relations and remuneration rates.

“In future, enterprises planning to compete with others by outsourcing expenses will not survive competition,” Mr Lich said.

Another weak point among Vietnamese enterprises was the inability to cooperate when attempting to fill large orders. Having gotten used to small scale production, Vietnamese enterprises are capable of filling small order, but are loathe to join forces with other enterprises for increased productivity that would capture larger market share.

“Chinese competitors have proven to be far better in this field,” Ms Quy said. “They have also found more success in US markets as they have superior distribution channels.”

Government support called for

Vietnam’s footwear industry has been sliding downhill since the anti-dumping taxes were slapped on shoes exported to the EU.

The effect on the industry is a clear demonstration of how heavily local producers were relying on one market (shoe shipments to the EU accounted for 60-70% of the industry’s total export volume). Through lack of understanding of the need for diverse distribution, the collapse of one market has been enough to mortally wound an entire industry.

Diep Thanh Kiet, Deputy Chairman of the HCM City Knitting, Embroidery and Textile Association, said that the Government and relevant associations have never warned companies about the risks associated with such activities. If they had, enterprises could have restructured production and distribution networks to adapt to the situation. However, footwear producers failed to learn a single lesson from the plight of tra, basa fish and shrimp exporters who had previously foundered on the rocks of anti-dumping proceedings.

If Vietnam does not begin devising suitable strategies for distribution network development, anti-dumping lawsuits are likely to drag down apparel and wooden furniture producers as well.

While enterprises cry out for government support to develop their distribution networks, what they need is not another mechanism for local production protection, but rather support and information provision. The development of solid infrastructure will enable them to minimise expenses.

Source: VietnamNet