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INTERNATIONAL BUSINESS MANAGEMENT INDIVIDUAL ASSIGNMENT SUBJECT: INTERNATIONAL BUSINESS MANAGEMENT - STUDENT: Dinh Cong Hoa - Class: ieMBA B03 Topic: BRING VIETNAM’S TEXTILE & GARMENT INTO AMERICAN MARKET Overview on textile & garment American market 1.1- Consumer features With the population of more than three hundred million people, the United States is a multiethnic and multiracial nation so that the demand and tastes for consumption of the Americans are diversified and plentiful, especially the demand for textiles & garment First of all, it is seen that the U.S is a nation favoring shopping and consumption On average, the Americans spend 54 clothes each year Because of a large number of strata, the structure and types of goods in the U.S are very plentiful From luxury items to secondary items, all items can be sold in this market In terms of personal items such as clothes, garment, footwear, in general, the Americans like fashionable simplicity and if the items are original, they are more preferred Everyone can wear any types of clothes they like However, in big cities, men usually wear suits, women often dress skirts to go to work; while in rural areas, they dress quite casually: Jeans and coarse cloth pants are very popular However, most of the Americans including the elder, they usually dress in comfortable clothes as their will outside working hours 1.2- Distribution channels In the U.S., there are a lot of types of companies: big, medium and small, these companies have different market channels Big companies usually have their own distribution channels and responsible for from stage of research, manufacture to marketing, distribution and import Medium and small companies are responsible for small stages in value chain Concerning textiles & garment, the U.S imports mainly through wholesalers with big orders from 50-100…sometimes million lots (each lot has 12 products Afterwards, wholesalers will distribute to retailers Supermarkets are the most popular in the system of goods distribution channels of the U.S For example, Jc Penney Corporation – one of the B03_DinhCongHoa-Quantrikinhdoanhquocte_Viet INTERNATIONAL BUSINESS MANAGEMENT biggest retailing and supermarket corporations in the U.S with 1.100 supermarkets and 2,200 retail shops all over the U.S In here, all types of consumer goods are available to satisfy the demand for consumption of the people, the majority of them are clothes and household appliances The system of supermarkets is classified into high-grade supermarkets providing high-quality products, high prices and common supermarkets having all kinds of products with large quantity, high revenues due to attracting various classes Besides, in the U.S., there are specialized companies having systems of shops specialized in selling high-quality garments which are of famous trademarks with high prices or national retailing companies specialized in clothes, footwear, handbags throughout the country Using price factor to attract customers is the strategy of companies who sell discounted-price products In comparison with common supermarkets, the consumers can buy things with much lower prices in these shops And retailing shops with unusual low prices sell products which not have famous trademarks or are directly imported from low-price countries in Asia, South America The fast developing mode of selling in the U.S now is selling by post, by TV, by internet or selling according to catalogue, by trade fairs, exhibitions to get orders Afterwards, the salesmen will deliver to the buyers This mode satisfy people who not want to go buy things or not have time going shopping but the prices are more higher The reasons for choosing to export textiles & garments of Vietnam to the U.S 2.1- Vietnam has an advantage in manufacturing and exporting textiles & garments Vietnam is a developing country with low level, backward technology and usually imported from foreign countries, low level of labor However, the labor force is rich, accounts for 50% of the population With this features, developing textiles & garments industry is suitable for Vietnam Because textiles & garments industry does not require too high technology as well as it needs to use a large number of unskilled labors On the other hand, the price of labors as well as price of other services in Vietnam is much lower than other developing countries so that Vietnam can manufacture and compete in segments of common products B03_DinhCongHoa-Quantrikinhdoanhquocte_Viet INTERNATIONAL BUSINESS MANAGEMENT Moreover, in the structure of Vietnam’s economy, agriculture plays a key role in the economy This creates conditions for development of input materials for textiles & garments industry Presently, Vietnam is developing the cotton growing area in Highlands with the technical support of famous cotton growing countries such as: The U.S., Australia in order to have high quality and productivity With such strength and typical feature, developing textiles & garments industry and focusing on exporting to the segment of common products are the orientation of Vietnam's enterprises Up to now, Vietnam has still promoted to export textiles & garments with intensive investment in order to enhance competing capability of this kind of products in international market 2.2- The U.S is a big market for textiles & garments With the population of more than three hundred million people, average income per capita is about 43.600 USD, growth rate in 2011 approximately 4%, the U.S is considered to be giant consumer market Import turnover of textiles & garments is about 150 billion USD per year, the U.S is a biggest market of importing textiles & garments equaling to EU plus Japan The living standard of the Americans is diversified so that consumption for textiles & garments has different kinds from high-quality goods with famous trademarks to common goods Consumption of textiles & garments of the Americans also leads in the world and more than 1,5 times EU – the second consumer market of textiles & garments in the world Therefore, the American market opens an opportunity for all of countries exporting textiles & garments On the other hand, the industry of textiles & garments of the U.S focuses on manufacturing high-grade items with modern technology, high level of labors meeting demand of consumers having high incomes so that the big segment of common textiles & garments is neglected The gap in this segment is filled by processed goods manufacturing from developing countries It is because of strong attraction of big consumption of textiles & garments, the U.S is the rich market for textiles & garments for other countries B03_DinhCongHoa-Quantrikinhdoanhquocte_Viet INTERNATIONAL BUSINESS MANAGEMENT 2.3- Vietnam’s benefits of promotion of exporting textiles & garments into the American market Textiles & garments are key items and lead in terms of proportion contributing to the national economy Therefore, promotion of exporting textiles & garments is an important strategy in light industry of Vietnam On the other hand, the American market is an attractive market for this item So what are benefits of promotion of exporting textiles & garments of Vietnam into American market? Firstly: An increase in quantity and value of textiles & garments into American market helps Vietnam gain profits in business and increase in market share in American market In 2010, Vietnam ranked at the second among countries exporting textiles & garments into the U.S., just after China Secondly: Exporting creates capital for importing Therefore, promotion of exporting will create conditions for importing more types of products in order for Vietnam to modernize the economy, import items which are not available or more expensive in the country and consumers have more opportunities to choose products Thirdly: Promotion of exporting textiles & garments will be accompanied by development of relevant industries such as: Cotton growing, clothing manufacture, dying v.v… Fourthly: Promotion of exporting textiles & garments not only takes full advantage of abundant, cheap human resources as well as cheap material source in Vietnam but also creates more job opportunities for laborers Fifthly: Promotion of exporting textiles & garments helps enterprises increase ability to invest in technological innovation, acquire new accomplishments of science – technology Sixthly: It also helps Vietnam’s enterprises learn experiences in international business in markets having fierce competition Seventhly: It helps strengthen relationship between two countries not only in the field of business but also in other fields as well as expand relationship with other countries in the world With above-mentioned benefits, promotion of exporting textiles & garments of Vietnam into American market is the top strategy of textiles & garments industry of Vietnam in the coming period B03_DinhCongHoa-Quantrikinhdoanhquocte_Viet INTERNATIONAL BUSINESS MANAGEMENT Competing plan 3.1- Take full advantage of overseas Vietnamese living in the U.S to promote exporting For Vietnam, we have a lot of overseas Vietnamese living in the U.S., especially at California Therefore, we can implement this strategy In order to this, first of all, we need to research and promote exporting textiles & garments of Vietnam into American market especially in California without intermediaries Thanks to that, textiles & garments of Vietnam will reduce intermediate costs, reduce manufacturing costs and enhance competiveness To continue, we need to have marketing activities promoting selling in order for customers recognize Vietnam’s textiles & garments And then, from California market, Vietnam’s textiles & garments can develop extensively in American market 3.2- Enhancing competitiveness about prices in order to dominate the market Presently, Vietnam’s textiles & garments exporting into American market mainly aim to segments which are middle class and low income people Although Vietnam has abundant and cheap labor resource, labor productivity in the industry of Vietnam is not high Therefore, it does not create momentum in enhancing ability in competing about prices In the coming period, Vietnam need to learn experiences from China: Manufacturing exporting items serving for upper class will gain more profits We also need to innovate technology, enhance skills for workers in order to be able to increase productivity, then reduce manufacturing costs 3.3- Improve models, diversify types of products Vietnam’s textiles & garments not have diversity as well as uniqueness about designs, appearance Therefore, Vietnam should promote exporting textiles & garments into American market by designing clothing models, new designs, appearance Apart from that, we also need to diversify items of textiles & garments exported into this potential market 3.4- Have preferential policies attracting foreign capital in order to manufacture textiles & garments exported to the U.S Presently, Vietnam still has to import a lot of materials from foreign countries in order to manufacture textiles & garments, in other words, mainly, we still process for foreign countries Therefore, in the coming period, the State also should encourage to invest in industrial zones, export processing zones manufacturing materials for textiles & garments B03_DinhCongHoa-Quantrikinhdoanhquocte_Viet INTERNATIONAL BUSINESS MANAGEMENT industry If we can that, it is for sure that profits in exporting textiles & garments will increase a lot Evaluating the potentiality of exporting 4.1- Strengths + the industry of textiles & garments of Vietnam has abundant and cheap labor force + Items of textiles & garments of Vietnam has innovated in terms of designs and preferred by domestic and overseas customers + Vietnam follows in economic integration so that she has conditions for acquiring new innovative technology as well as acquiring experiences from other countries + The majority of businesses of textiles & garments usually have medium and small scale so that they have certain advantage in adopting with changes of markets: - Have ability to take full advantage of labor force throughout the country, from urban areas to rural areas - Do not need to have big capital, have conditions for saving costs, increasing profits in manufacturing and doing business - Easy to change facilities, innovate technological procedure, designs in order to expand market - Have conditions to support for enterprises with large scale 4.2- Weaknesses + the first and most important factor causing that Vietnam’s textiles &garments still cannot enter directly into American market is there are too many brand names and trademarks Although products of Vietnam’s textiles & garments has exported with large quantity but about 70% is processing products having brand names of the order parties, the rest of 30% is brand manes of manufacturers or licensed foreign trademarks +consumer market of textiles & garments in the U.S trends to compete more fiercely so that Vietnam’s textiles in American market have to compete fiercely with products from “powerful countries” such as: China, HongKong, Taiwan, India… while Vietnam is the country who go behind, the productivity is still low, product quality is not high, lack of capital, management technology, segments and experiences… these are big threats to Vietnam to maintain and promote exporting textiles & garments into American market B03_DinhCongHoa-Quantrikinhdoanhquocte_Viet INTERNATIONAL BUSINESS MANAGEMENT + in terms of textiles & garments, American market requires strictly about quality according to ISO 9000 standards, regulations on brand names, origins of products While Vietnam’s textiles & garments industry mainly are export processing Besides, because there are not many partners, Vietnam’s goods have to enter into this market by the third party + Presently, the situation of material bases, technology, management of the whole industry in general and of a lot of companies in particular is still weak, asynchronous, especially businesses manufacturing knitwear and materials serving for garment industry Which leads to low business effectiveness, low quality of garments, lack of competitiveness in American market Professional qualifications, and ability of foreign languages, the understanding laws of staff are still limited + Lack of information of customers is the big problem for a lot of businesses manufacturing consumer goods not only textiles & garments industry However with textiles & garments, the industry with great potentiality and ranked at one of the key exports so that the lack of information is interpreted as self-left in a small jacket named “Process” Basis for making decisions - Analyzing SWOT model in order to know strengths, weaknesses, opportunities, threats to businesses of textiles & garments of Vietnam in American market - Analyzing competitive five-forces model in order to know features of American market of textiles & garments References: International business management book –PGSM composed by Dr.Larry Williams 2- References: http://www.moit.gov.vn , http://www.vietnamtextile.org.vn: Providing information about manufacturing situation, international and Vietnam's status quo of exporting textiles & garments; providing information about enterprises exporting textiles & garments, situation of American market of textiles & garments B03_DinhCongHoa-Quantrikinhdoanhquocte_Viet ... promote exporting For Vietnam, we have a lot of overseas Vietnamese living in the U.S., especially at California Therefore, we can implement this strategy In order to this, first of all, we need... intermediate costs, reduce manufacturing costs and enhance competiveness To continue, we need to have marketing activities promoting selling in order for customers recognize Vietnam’s textiles... Improve models, diversify types of products Vietnam’s textiles & garments not have diversity as well as uniqueness about designs, appearance Therefore, Vietnam should promote exporting textiles