Developing small and medium enterprises in traditional handicraft villages in Bac Ninh province

DEVELOPING SMALL AND MEDIUM ENTERPRISES IN TRADITIONAL HANDICRAFT VILLAGES IN BAC NINH PROVINCE A Doctor Thesis Presented to The Faculty of Graduate School Southern Luzon State University, Lucban, Quezon, Philippines in Collaboration with Thai Nguyen University, Socialist Republic of Vietnam In Partial Fulfillment of the Requirement for the Degree Doctor of Business Administration Vuong Quoc Tuan (Strongman) December 2014 TABLE OF CONTENTS CHAPTER 1: INTRODUCTION 1 1.1. Background of the study 1 1.2. Objectives of the study 4 1.3. Hypotheses 5 1.4. Scope and Delimitation 5 1.5. Significances of the study 6 1.6. Definition of terms 7 CHAPTER 2: REVIEW OF RELATED LITERATURES AND STUDIES 9 2.1. Related Literatures 9 2.1.1. Concepts 9 2.1.2. An Overview of Small and Medium Enterprises 13 2.1.3. Small and Medium Enterprise Development and Business Development in Traditional handicraft villages in Bac Ninh Province 31 2.1.4. Factors Affecting the Development of Small and Medium Enterprises 46 2.2. Related Empirical Studies 50 2.3. Conceptual Framework 56 CHAPTER 3: RESEARCH METHODOLOGY 57 3.1. Research Design 57 3.2. Population, Sample Size and Sampling Technique 57 3.3. Description of Respondents 58 3.4. Research Instrument 58 3.5. Data Gathering Procedures 59 3.6. Statistical Treatment of Data 59 CHAPTER 4: FINDINGS AND SOLUTIONS ABOUT CURRENT SITUATION ON DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES IN TRADITIONAL HANDICRAFT VILLAGES OF BAC NINH PROVINCE 61 4.1. Overview of traditional handicraft villages and small and medium enterprises in traditional handicraft villages in Bac Ninh province 61 4.1.1. Traditional handicraft villages 61 4.1.2. Small and medium enterprises in traditional handicraft villages in Bac Ninh province 63 4.1.3. Employment and income in small and medium-sized businesses in handicraft villages, traditional handicraft villages in Bac Ninh province 65 4.2. Features of the elements in external environment affect the development of small and medium enterprises in handicraft villages, traditional handicraft villages in Bac Ninh province 66 4.2.1. Group of policy factors 66 4.2.2. Group of administrative procedure factors 71 4.2.3. Group of geography, infrastructure factors 80 4.2.4. Group of financial and economic factors 85 4.2.5. Group of labor factors 88 4.3. Assessing the internal problems of small and medium enterprises in handicraft villages, traditional handicraft villages in Bac Ninh province today 94 4.3.1. Group of business owner factors 94 4.3.2. Group of labor factors 99 4.3.3. Group of organizational structure factors 102 4.3.4. Group of raw material factors 106 4.3.5. Group of technological level factors 110 4.3.6. Group of financial capacity factors 115 4.3.7. Group of product and market factors 119 4.3.8. Group of production and business result factors 126 4.4. Analysis of factors affecting the development of small and medium enterprises in traditional handicraft villages in Bac Ninh province 130 4.4.1. Factors affecting the growth in the number of small and medium-sized enterprises 131 4.4.2. Factors affecting the gross revenus of small and medium-sized enterprises in traditional handicraft villages of Bac Ninh province 133 4.5. Assessing the strengths, weaknesses, opportunities and challenges for the development of small and medium enterprises in traditional handicraft villages in Bac Ninh province 134 4.6. Limitations and challenges of the SME sector 136 4.7. Orientation and solutions for SMEs development in traditional handicraft villages of Bac Ninh province in the near future 138 4.7.1. Orientation 139 4.7.2. Development Goals 139 4.7.3. Solutions for the development of SMEs in traditional handicraft villages in Bac Ninh province 140 CHAPTER 5 148 CONCLUSION AND RECOMMENDATION 150 5.1. Summary 150 5.2. Conclusions 151 5.3. Recommendations 153 BIBLIOGRAPHY 155 APPENDICES 161 1 CHAPTER I INTRODUCTION Due to the important role of small and medium-sized enterprises, many countries have focused on encouraging this type of enterprise development. Institutional support nature to encourage include: Support to create a favorable business environment (development and promulgation of the law on small and medium enterprises, to facilitate licensing, supply information , etc.), the business support capacity building (training resources management, technology support , etc.), and the support of credit (bank established professional for small and medium enterprise loans, credit guarantees for enterprises, the establishment of venture capital companies , etc.), and other support (such as business premises). According to the Vietnam Association of Small and Medium Enterprises (VINASME), up to 96% of registered enterprises in Vietnam are SMEs. This unit generated 40% of gross domestic product, generating more than 1 million new jobs each year, mainly beneficial especially for untrained labor. For many years, the volume of SMEs is still the engine that runs the economy of Vietnam. But have to admit the fact, this volume is also thrive in areas with modest margin, low technology so there is no advantage in size (financial resources, area of operation, market share, etc.) that often focus on issues such as selection of business objectives consistent with the ability, stability and consolidation of market share or develop gradually and selectively market stage, the sudden most favorable break. SMEs still have the motor and the link to business cooperation that lack of clarity of the role of state policy. 1.1. Background of the study Small Business Development Plan and medium period 2011 - 2015 has been approved by the Prime Minister, in which the goal of bringing the number of newly established small and medium-sized enterprises in 2011-2015 is expected to 350,000 enterprises. Target set by the time on 31.12.2015, there were 600,000 active enterprises. (http://baodientu.chinhphu.vn/Home/Ke-hoach-phat-trien-doanh-nghiep-nho-va vua/20129/148542.vgp). Small and medium-sized enterprises play an important role in socio-economic development and active support for the development of big business, but they have certain restrictions on capital, production technology, production ground So, requiring solutions, long-term policies to support enterprises to overcome difficulties and improve competitiveness towards the goal of sustainable development. 2 According to a survey of the Department of Business Development (Ministry of Planning and Investment), officially recognized in 2001, by the end of June / 2012, the country has 658,645 SMEs registered establishment, of which 468,023 enterprises activity (about 71.1%). The number of SMEs in terms of the labor force each year by an average of 22.11% / year (if in 2000 more than 38,000 companies, 2010 was over 283,000). In 2010, Bac Ninh Province have been granted business registration certificates for 797 enterprises, including: 748 enterprises granted business registration certificates of the Company Law, 100% new business was established in 2010 small and medium-sized enterprises; 49 FDI investment certificates associated with the establishment of enterprises, branches, representative offices under the Investment Law; as the end of 2010, Bac Ninh province has a total of 4.293 enterprises, in including 5 state enterprises and private business 4013, 275 FDI enterprises. In general, businesses in the province to develop good business in accordance with law, to be effective, has potential exploit local strengths such as capital, labor, skill, level workers, especially is in the local traditional handicraft villages. Private sector was contributing to production development, create jobs, increase budget revenues, improve people's lives; contribute to poverty reduction, economic restructuring towards industrialization of modernization and contribute significantly to the socio-economic development of the province. Enterprises have increasingly conscious mouse than in the observance of safety, occupational health and insurance. Results of implementation plan for SME development in the province of Bac Ninh 2006-2010. Bac Ninh Province to encourage and create favorable conditions and support people to establish enterprises; province has planned and established industrial parks, small and medium-sized industrial clusters, industrial villages, to help people set up businesses have leased premises conditions for investment in the business. The province has implemented mechanisms, effective new policies to improve the business environment. PCI index increasingly improved rankings year after more than year ago: rated 22 (2006), No. 16 (2008); 2009, provincial competitiveness index of the North increased security 6 Level No. 10 compared to nationally and internationally as one of three leading provinces PCI index of the northern provinces; 2010, the provincial competitiveness index of Bac Ninh increased to 4 Level stand 6 compared with nationally and internationally as one of the top leading PCI of the northern provinces. On the business side: The majority of SMEs have small capital, so the investment in modern technology and equipment (mostly imported from abroad) is very difficult, 3 while to the competitive foreign companies to continuously improve equipment, reduce input costs. State policies to support credit loans but access to capital is impeded by the small value mortgage, can not afford credit guarantee; SMEs often lack and difficulties with most kinds of business are not given priority in terms of production, often using their own homes, and hiring of private land lease prices high, there is still discrimination. Low level of technology and quality of labor is limited, derived from small-scale features which should virtually restricted business investment in modern technology and equipment. Management level and low-skilled, the number of SMEs through training percentage is very low and virtually untrained professional; while workers mostly manual labor, only trained short-term job or the labor shift from agriculture to up the skill is still limited. Therefore, the application of modern advanced technology is also difficult. SMEs lack information and remain flat side of the relationship (the state, the market, banking, science centers and training centers, etc.). Internet access and applications in business for SMEs constrained by insufficient qualifications as well as the cost is quite high compared to the size of the small business. SME Development Goals 2011-2015: accelerate business growth and enhance the competitiveness of SMEs, business investment environment and convenient, equitable, transparent to the SME contribution increasing economic development and improve national competitiveness. Target SME Development 2011-2015: number of newly established enterprises increased by 25% / year; each year about 500 new established enterprises and 20,000 employees supported technical training, and technical management in SMEs; meet the basic business of the production business. The story of a representative enterprise producing bamboo handicrafts in Y Yen District, Nam Dinh said: Although the village is famous for its line of bamboo lacquer products, but the products must through intermediate systems, inaccessible to direct customers. There is time for the people of this village to busy racing competition, including not healthy, so it's time for poor quality products. When the product is on the market, customers see poor quality so next time do not buy anymore. Notably, there are many large business companies do not get the goods of this village that takes the product of another village, while other villages choose to buy products that actually get the product from this village for sale rather than production. This 4 situation led SMEs in this village that the deadlock, even feel the "injustice" in the marketplace. However, according to Pham Chi Lan, this is something quite common in villages in Vietnam. Being aware of mentioned issues and with the support from small and medium enterprises in traditional handicraft villages in Bac Ninh province and consultant from supervisor, with the purpose of enhancing quality and quantity of not only products of SMEs but also SMEs themselves, the researcher studied this thesis entitled “Developing small and medium enterprises in traditional handicraft villages in Bac Ninh province”. 1.2. Objectives of the study The general objective of the study is to know about the current situation of small and medium enterprises development and then to propose feasible solutions for the development of traditional handicraft villages in Bac Ninh province. The specific objectives of the study are as follows: 1. To determine the profile of small and medium enterprises in traditional handicraft villages in Bac Ninh province in terms of: - Capitalization/investment; - Type of products; - Number of employees; - Scope of operation. 2. To analyze elements in external environment and internal environment that affects the development of small and medium enterprises in traditional handicraft villages in Bac Ninh province in terms of: * External environment: - Policy; - Economics and Finance; - Administrative procedure; - Geography, infrastructure; - Labor. * Internal environment: - Human resource (Business owner; Labor); - Organizational structure; - Production (Raw material; Product and market). - Technological level; - Financial capacity; - Production and business result. 5 3. To assess the strengths, weaknesses, opportunities and challenges for the development of small and medium enterprises in traditional handicraft villages in Bac Ninh province based on SWOT analysis. 4. To determine the significant difference between problems identified by both groups of small and medium enterprises inside and outside traditional handicraft villages in Bac Ninh province. 5. To propose feasible solutions for 5-year development plan of small and medium enterprises in traditional handicraft villages in Bac Ninh province. 1.3. Hypotheses There is no significant difference among the perception of the respondents about conditions for the development of small and medium enterprises in traditional handicraft villages in Bac Ninh province in terms of: * External environment: - Policy; - Administrative procedure; - Geography, infrastructure; - Economics and Finance; - Labor. * Internal environment: - Business owner; - Labor; - Organizational structure; - Raw material; - Technological level; - Financial capacity; - Product and market; - Production and business result. 1.4. Scope and Delimitation The main goal of this study is to find out solutions for the development of small and medium enterprises in traditional handicraft villages in Bac Ninh province The researcher completes this study with belief that its result will help SMEs in traditional handicraft villages can develop stronger. 6 Due to the author’s limitation of time, the research only studied some contents related to factors of external environment (Policy; Administrative procedure; Geography, infrastructure; Economics and Finance; Labor) and factors of internal environment (Business owner; Labor; Organizational structure; Raw material; Technological level; Financial capacity; Product and market; Production and business result) that affect the development of SMEs in traditional handicraft villages in Bac Ninh province. Describing methodology and with survey questionnaires as a main tool to collect the data and information will be utilized in this study. 1.5. Significances of the study This study will be beneficial to the following: For managers of research units: The study shows out the limitations as well as find out conditions needed for the development of small and medium enterprises in traditional handicraft villages in Bac Ninh province, so it helps managers of research units to identify solutions and build strategies to remove the difficulties and support SMEs in the province in some different ways and improve investment environment to attract resources from outside of province such as investment capital, science technology, scientific management, also exploit and promote the province's comparative advantage in productions and business, trade and services, infrastructure and available labor resources of the province to enhance the development for SMEs in traditional handicraft villages. For research unit: By realizing appropriate conditions for the development and from which by offered proper solutions, the study helps research units receive better policies to perform well their businesses and develop more strongly. For the researcher: This study helps to complete the PhD thesis, besides it also enhances studying ability, accumulate knowledge for the author. For future researchers: This study will serve as a reference for future studies and researchers on research methods, analysis and evaluation of conditions for the development of small and medium enterprises in traditional handicraft villages, from which researchers’ future studies will determine the issues for related further studies. [...]... employees, and the inability to obtain short-term and long-term capital are their most serious problems (Benzing et al, 2005) 2.1.3 Small and Medium Enterprise Development and Business Development in Traditional handicraft villages in Bac Ninh Province 2.1.3.1 Overview of Small and Medium Enterprises in Traditional handicraft villages in Bac Ninh Province Bac Ninh is a province in the northern plains in the... 53 villages including industrial production and small industry is distributed throughout the province and most active in major economic sectors Table 2.10: The medium and small villages in Bac Ninh province in 2008 (Source: Bac Ninh Department of Trade in 2008) 31 Businesses in the well-developed village 32% (20 villages) are the producers of products suitable to the market, there is increased investment... accelerating the growth of economic Assembly, in accordance with guidelines developed by the Party and economic authorities of Bac Ninh To December, 2008, Bac Ninh province has built eight zones and industrial parks, 26 small and medium industrial clusters, industrial clusters of craft villages, of which 18 industrial zones have been put into business action Until now the province of Bac Ninh has 62 villages, ... giving rise to conflicting objectives (trade-offs) and conflicts 9 Consequently, measuring development, i.e determining whether and to what extent a system is developing, is an intrinsically multidimensional exercise 2.1.1.2 Small and Medium Enterprises Small and medium enterprises are the enterprises with small scale in terms of capital, labor or revenue Small and medium enterprises can be divided into... gathered in “phường/hội”, the new form of handicraft village, to help others to improve The Vietnamese government has recognized about 1.500 handicraft villages, of which about 300 are traditional handicraft villages These villages maintain the country's handicraft heritage Bac Ninh is a beautiful and famous province in the northern midlands Just 30km from Hanoi city, north close to Bac Giang province, ... enterprises Administrative procedure: A fixed, step-by-step sequence of activities or course of action (with definite start and end points) that must be followed in the same order to correctly perform a task Infrastructure: Refers to basic physical and organizational structures needed for the operation of enterprises (in this study, they are SMEs in traditional handicraft villages in Bac Ninh province) ,... goods and services, and in the organization of human activities Financial capacity: Refers to ability of enterprises in terms of money, capital and equity Product: Is anything that can be offered to a market that might satisfy a want or need In the study, products are types of subjects made by traditional handicraft villages in Bac Ninh province Market: A medium that allows buyers and sellers of a specific... tangible as well as intangible heritages Bac Ninh have now many famous traditional handicraft villages such as Dong Ky Wood, Dong Ho folk painting village, Dai Bai Cooper casting and Phu Lang Pottery… that create favourable conditions not only for economic development but also for tourism development Northern Bac Ninh Province, homeland of Quan Ho art, has 62 traditional trade villages The most colorful... poor internal resources, and social discrimination against them may also deter SMEs from seeking the opportunity to establish strategic alliances, business cooperation with other firms and financial supporting institutions and to achieve better performance This finding is consistent with the findings from Nguyen, Le, and Freeman (2006) and Ha and Swierczek (2003) f Presence of business clusters and. .. from Bac Ninh old born and appeared with preserving the unique variety of occupations associated with the names of villages, called communes, associated native tradition, survival and development for hundreds of years Entered a period of renewal and modernization investment in development zones and industrial clusters of craft villages, rehabilitation and development of craft villages in Bac Ninh is . Northern Bac Ninh Province, homeland of Quan Ho art, has 62 traditional trade villages. The most colorful village is Dong Ho The village of Dong Ho (Đông Hồ) in the province of Bắc Ninh is known. handicraft villages in Bac Ninh province 63 4.1.3. Employment and income in small and medium-sized businesses in handicraft villages, traditional handicraft villages in Bac Ninh province 65 4.2 Bac Ninh province 133 4.5. Assessing the strengths, weaknesses, opportunities and challenges for the development of small and medium enterprises in traditional handicraft villages in Bac Ninh