Enhancing the effectiveness of import and distribution channel of vindrink ,JSC

Preamble Import and export has been holding the leading position in foreign trade activities Nowadays, not only in developed countries where this activity has been going wild, but also in developing countries, this trend has been growing strongly Incorporating with this trend, many import and export companies in Vietnam have been born which making a new development of foreign trade in Vietnam Aware of this, after a period of studying professional subjects and as the request of the school about the internship, I applied for 4-week internship at VINDRINK.,JSC According to the knowledge that I have gained through classes as well as the useful information which was accumulated during the internship, I decided to choose project: “Enhancing the Effectiveness of Import and Distribution Channel of Vindrink.,JSC” in order to understanding and practically learn about the import activity There are three main parts of the thesis: Chapter 1: The theoretical basis of Import Activity at VID Chapter 2: Evaluate Import Department at VID Chapter 3: Orientation and Solutions to enhance import business efficiency at VID In order to accomplish this minor thesis, first of all, I would like to thank the Board of Directors and Sales Department of VINDRINK., JSC for creating favorable conditions for me to practice at the company in the past few months I would like to sincerely thank MSc Pham My Hang Phuong – Who has wholeheartedly guided, contributed advices, answered questions for me in the process of writing this graduate thesis Despite trying to improve the thesis, but due to the short time of internship and the limited understanding, this graduate thesis cannot avoid errors Contributions from teachers would help me to make this thesis more complete Student Bui Nhat Ha Chapter The Theoretical Basis Definitions, characteristics and roles of importation 1.1 Definitions Importing play a pivotal role of foreign trade, it is one of the two basic activities that constitute foreign trade According to article no.28 in Vietnam Commercial Law 2005 “Import of goods means the bringing of goods into the territory of the Socialist Republic of Vietnam from foreign countries or special zones in the Vietnamese territory, which are regarded as exclusive customs zones according to the provisions of law” According to Clause 1, Article 28 of the Commercial Law 2005, the definition is as follows: "Importing goods means that goods are brought into the territory of Vietnam from foreign countries or from special areas located in the territory of Vietnam to be considered regions Private customs in accordance with the law" The Market Business News also defines the term “Import” is understood as “Imports are goods or services of foreign origin that importers bring into a country” Imports are important for the economy because they allow a country to supply nonexistent, scarce, high cost or low quality of certain products or services, to its market with products from other countries Import also aims to strengthen the economic facilities, modern advanced technology enhance technology transfer, save production costs, labor time, and contribute to the production development of society is a highly effective way On the other hand, import creates a driving force for domestic manufacturers to optimize production system, create apparatus to compete with foreign manufacturers So in this thesis, I used the definition as article no 28 in Vietnam Commercial Law 2015 to define what is importation 1.2 Characteristics of Importation Import is an international trading activity, it is a complex and organized system of trade relations from inside to outside Therefore, import activities bring out high economic efficiency However, it can also cause unpredictable consequences from the external economic system that a participating country cannot control by itself Import activities are organized, perform many tasks and many different stages Starting from foreign market surveys, selection of imported goods, transactions, conducting negotiations and signing contracts, organizing contract implementation until receiving goods and paying Steps and tasks must be thoroughly researched and analyzed to capture the advantages and achieve the results that company wants Import includes activities of trading transactions between people or corporates from different nationalities With the characteristics of large, difficult to control market, the payment currency must be foreign currency for a country or both, and different countries participating in import activities must follow the customs of the locality and international practices Import activities take place on a very wide range both in space and time It can be carried out on the territory of a country or in many other countries around the world Besides, it can take place in a short or even yearly period depending on the contract signed between the parties Import activities take place in all areas Imported goods can be consumer goods or production materials, machinery or high-tech technologies to benefit importing countries Import brings benefits not only to the enterprises themselves but also to the economy and people's lives A developed import sector contributes in reducing the unemployment rate as well as improving the economic state of importing country 1.3 The roles of Importation Importing is an important activity in international trade It directly affects the production state and human life (through consumption of imported goods) Through import, it enhances the technical facilities, advanced and modern technology for the production process and people will also be able to consume products that cannot be produced in their country or production cannot meet domestic demands Import has the following major roles: 1.3.1 For the World economy Beforehand, through import activities, countries around the world have opportunities to understand the customs, culture and political of other countries which they co-operate with Thereby contributing to speeding up the process of economic integration among countries, fully exploiting their comparative advantages and using human and natural resources more appropriately Import activities will stimulate production and consumption in each developed country It makes the volume of goods and demand in the world economy increase, thereby also improving people's living standards Import will help developed countries or developing countries have the opportunity to learn a lot of experience in managing and acquiring scientific and technical achievements as well as serving the industrialization and modernization process Import promotes economic integration between countries and regions It makes the international division of labor take place all over the world, creating a reputation for each member state to be enhanced At the same time, activities such as insurance, tourism, services and trade also developed rapidly 1.3.2 For the State economy Vietnam is a developing country so that importing goods is indispensable for the process of developing the economy and accelerating the industrialization and modernization of the country Thus, import activities have a huge role for the Vietnamese economy Importing construction equipment helps process of material and technical construction to shorten time and effort It facilitates the development of the economy with modern equipment lines By importing modern equipment, it helps domestic workers have opportunities to improve their skills and knowledge, managers have conditions to improve knowledge of qualifications and management Importing goods makes it possible to diversify sorts and types of goods, consumers will be able to choose goods that are more suitable for their income This also makes a contribution in improving people's lives At the same time, import activities also timely replenish domestic goods due to inadequate domestic production Thanks to importation, the domestic manufacturing industry will be able to eliminate weak production units with no competitiveness Besides, businesses have to face the need to innovate both technology and management in order to maintain profits and improve the competitiveness of their goods, facilitate the dominance of the domestic market and gradually proceed to exportation Eventually, importation will create opportunities for our country to expand diplomatic relations with other countries Then enlist their support for our economic development 1.3.3 For the Enterprises Through import activities, enterprises must innovate and improve quality technology and product services in order to increase the competitiveness of domestic products Thereby, production efficiency is enhanced, workers find jobs, and workers' life is improved Import activities are complex international activities because of the exchange of many different economies of culture, politics, customs, and languages Therefore, enterprises are forced to perfecting and innovating business management, officials and individuals always have to gain experience and improve professional skills It enhances the professional capacity of members of the enterprise Importation plays an important role in increasing the position and reputation of the company both in domestic market and international market The profit from business allows the company to build technical facilities, expand business fields in both depth and width, contributing to solving jobs for workers and improving life of officials and employees, solving problems of society, improving and developing business relationships Import brings conditions for businesses in connecting between domestic and foreign entities in a self-conscious way, stemming from the interests of both sides, creating the strength of the subject in the enterprise in a practical way Therefore, imports mean very important for a nation's development, it exists as a necessity Types of importation Import business activities can only be conducted in import-export enterprises directly, but in fact, due to the impact of business conditions, Vietnam creates various import and export forms In this section, we only consider a few common and popular forms of import that are being applied at enterprises in Vietnam 2.1 Direct Imports Definitions: According to the Commercial Law 2005, direct import is defined “For this form, the buyer and the seller of the goods directly deal with each other, the buying and selling process is not tied to each other Buyers can buy without selling and vice versa Direct import is conducted quite simply In particular, the importer wants to sign an import business contract, must study the market, find suitable partners, sign and perform contracts, self-invest, bear all risks and costs in deal…” Characteristics: In direct import, businesses must take all the tasks This is an activity that must be carefully considered accurate from the initial step of researching information to signing the contract The reason for this due to businesses have to invest their own capital to bear all transaction costs, market research, delivery, warehousing, cost to consume goods, taxes payable when businesses Self-trading, enterprises are allowed to import imports and when consuming goods, enterprises are subject to sales tax and item tax As usual, the business only needs to make a contract with the foreign party, and the domestic purchase contract will be made after the goods arrive 2.2 Entrusted Imports Definitions: According to the Decision no 1172/TM/XNK dated September 22, 1994 which released by the Minister of the Ministry of Trade, entrusted import is defined “Entrusted import and export is commercial service activities in the form of leasing and importing for export or import services This activity is carried out on the basis of an export or import entrustment contract between enterprises, in accordance with the provisions of the Ordinance on Economic Contracts” In other words, entrusted import is activity formed between a domestic enterprise with its own foreign currency capital and a demand for import of a commodity but they not have the right to participate in direct import-export relations, thus they entrust one enterprises with the function of directly conducting foreign trade transactions shall import according to their requirements On the other hand, authorized importers are importers that act as intermediaries to import goods The entrusted party must negotiate with foreign countries to import goods at the request of the entrusting party Normally, a entrusted party is entitled to a remuneration of 0.5% to 1.5% of the total contract value, also known as a entrust fee and they must pay income tax on this source also, when conducting import Entrusted enterprises only calculate import and export turnover, not include turnover and pay value added tax Characteristics: In this import operation, the entrusted enterprise does not have to invest capital, nor apply for quotas, nor study the imported goods market, but only to act as a representative to find and deal with foreign partners, sign contracts and import procedures as well as changing the trustees' claims, claiming compensation with foreign parties when there are damages When choosing the type of entrusted import, enterprises must set up kinds of contract: - A foreign contract (purchase with foreign countries) - An internal contract (entrusted importation with the trustee) 2.3 Joint Venture Imports Definitions: According to the Commercial Law 2005, joint venture import is defined: This kind of importation is based on the basis of voluntary economic linkages between enterprises (of which at least one direct import-export enterprise) with an aims to coordinate skills to jointly trade and set up advocate measures related to import activities, promote this activity to develop in the most beneficial way for both parties to share profits, losses and damages Characteristics: Compared with self-trading imports, enterprises are less exposed to risks because each joint venture enterprise only has to contribute a certain amount of capital, the rights and responsibilities of each party also increase with the capital contribution The division of cost and turnover tax according to the ratio of capital contribution, interest and loss depends on the two parties' agreement to divide based on contributed capital plus the responsibility that each party must handle In joint venture import, enterprises that import goods will be counted for export turnover but when they bring goods to consumption, they only calculate the turnover on the number of goods calculated according to their capital contribution ratio and only pay sales tax on those goods Direct import and export enterprises must implement contracts: - A purchase contract with foreign countries - A joint venture contract with another business 2.4 Processing Imports Definitions: Processing activities are stipulated in Chapter of the Consolidated Document 09 / VBHN-BCT in 2017 “Processing import is a form of import whereby the importing party (the processor) processes the import of 10 Chapter Orientation and Solutions to Enhance Import Business Efficiency at VID Development orientation of the company in the future 1.1 Orientation of the company The strategy of foreign economic development to 2020 of Vietnam is to continue expanding foreign trade activities towards diversification and multilateralism, actively integrating into regional and world economies However, this is also a challenge that requires management agencies as well as businesses to develop export and import markets and measures to improve foreign trade policies to promote export and import activities in the court of action in industrialization and modernization of the country In that current context, the strategy for import activities of the company in upcoming time is: In order to survive and develop in the following years, VID company needs to continue improving its foreign trade competence At the same time, company strengthen relationships with international partners and suppliers in a professional manner such as: invite partners to visit company in Vietnam, have a fast payment policy, regularly contact to capture information of supply sources and finding more stable new suppliers Besides, company orient to expand more forms of import For existing customers, VID offers a suitable price strategy and a good discount as well as promote the sales department to find more new potential customers In terms of imports, company plans to diversify importing products from other countries such as Europe in addition to the countries which VID currently work in Thailand and Austria 55 In the upcoming years, it is necessary to improve the staff capacity in the company As company is doing business in the field of import, so it is necessary to have qualified foreign language staff to negotiate foreign trade contracts On account of that, company requires employees to have a level of English equivalent to the minimum TOEIC score of 500 points At the same time, regularly send employees go to the business classes which appropriate with the job title 1.2 Future Target In the upcoming time, company will invest heavily in market research, maintain available customers and cooperate with new clients so that the spending in the following years will be higher than in previous years In order to implement this, it requires not only the efforts of the board of directors but also the whole company In addition, in order to ensure the signed contracts as well as to ensure the credibility, company would like to set the target of import orientation plan in the period of 2019-2021 as below: Target Total Revenue Gross Profit Table 3.1 Target figure in the period of 2020 – 2022 of VINDRINK Source: Sales department – VID 56 Advantages, Limitations and Threats 2.1 Advantages 2.1.1 Staff with specialist knowledge Since its establishment, company has determined its own direction It is mainly on import business specializing in packaged food products so that company’s staff has specialized knowledge about import, export and packaged food In terms of the experience, it depends on each position, but most are checked by the company based on the position No Academic Level Post Graduate Post Colleges Table 3.2 Labor Structure of VID Source: Administration department – VID 2.1.2 Company is currently the sole agent and appointed agent of major firms Although company has only been established for years but with a team of experienced staffs, company has successfully signed many big contracts and become the appointed agent of the famous multi-national corporations Until now, VID is working with EVERMORE and RED BULL and will soon expand to Europe 2.1.3 Maintain good and stable relationships with potential clients In recent years, VID has been constantly looking for new clients but at the same time, VID still maintains good relationships with big clients and shows goodwill in long-term business with small clients: - VinMart retail group (Hanoi) 57 - Circle K retail group (Hanoi) - And more than 300 distribution channels 2.1.4 Always maintain prestige with clients and business partners Since its establishment and the business in the importation field so far, VID has never had disputes, complaints and always ensure the implementation of foreign trade contracts takes place smoothly 2.2 Limitations and Threats 2.2.1 Competition from cheap products In the imported goods market, there are a lot of products of the same type but they have different prices Imported products of VID are also facing difficulties due to the pressure of cheap products Company's Red Bull product, although this product retain a better taste and convenience than many other products in the same category, it still faces domestic products with cheaper prices such as Number or even Red Bull Vietnam 2.2.2 Uneven Employees Quality As the company is newly established, the number of employees has not met all the tasks, many employees have to take on many jobs at the same time, both implement documents, transporting and running papers outside so that the work efficiency is not high which affect the quality of company In additions, the qualifications of the employees are not equal, the ability to absorb the experience as well as the problem solving in each situation of some employees is limited Besides, main of the business partners of VID is foreign partners, however except the director board, the number of employees who know English well are very limited 2.2.3 Difficulties in Custom Clearance 58 Customs documents and procedures, taxes relate to import, export and transportation are still a problem for some businesses and VID is also one of them For companies, the biggest difficulty of customs clearance is time This can lead to many consequences for company such as: - Cargo might get damages, especially with short expiry date goods such as seafood, food ingredients, milk, medicines, cosmetics Containers kept at ports can lead to damaged goods, this cargo cannot be delivered to customers and cause losses for the company itself However, because VID is an importer of packaged foods with a long expiry date, the damage to goods will be unlikely - Besides, it costs time, labor and money for company Difficult customs clearance makes company have to leave the goods at the port This lead to the storage fees that company might have to pay in extra Storage fees are negotiated between company and the carrier Usually, the carrier allows company to store cargos for 5-7 days for dry containers If company exceed this time the carrier will charge DEM – Demurrage fees which depend on the carrier's regulations, the DEM fee will fall between 20-40 USD / cont 20 '/ per day - The delay in customs clearance lead to delay in delivery to customers Usually, if the clearance time is not too long, the customers will sympathize with the company However, if the clearance time is too long (about week) then customers will have the authority to cancel the contract and stop working with company This directly affects to the profitability and especially the company's reputation While working with customs, VID usually falls into cases where customs department requires more documents, reports invalid papers or lack of Authorized letter from foreign partner which takes forwarder and VID a lot of 59 time to contact foreign partner and send documents, this leads to delay in delivery goods to customers This will directly affect the reputation and prestigious of the company if VID does not have reasonable solutions 2.2.4 Unreasonable Extra Costs During the internship at VINDRINK, I have noticed that the forwarder is responsible for working directly with the carrier as well as foreign partners in the terms of delivery imported goods This is useful for VID in labor-saving and time-saving, company does not have to go directly to the port and deal with customs However, this also has a disadvantage for VID when it fails to catch all the fees of the carrier, even if there are invoices, and of course, the commission for KMG Logistics Company This directly affects the benefits and revenue of the company while every month company has to import 3-5 containers from the seaport, each container costs a lot for services Table 3.3 List of fees paid to KMG Logistics Company in October, 2018 Source: Financial and accounting department – VID 60 Table 3.4 List of fees paid to KMG Logistics Company in December, 2018 Source: Financial and accounting department – VID As we can see, the fee were listed in purple columns are fees that the forwarder pay on the behalf of VID, collect invoices then make the payment with VID when the forwarder shows invoices to the Financial and accounting department of VID However, the yellow columns are service fees that VID has to pay for using KMG Logistics Company service After the arrival of each container, KMG company will send a form of invoice as below to VID: 61 62 63 These types of fee is the cost that VID cannot control, it costs VID about 67 million dong every CIF container and 18-22 million dong every FOB container For instance, in October 2018, VID received FOB containers and CIF container, the service fee that VID has to pay for KMG company up to nearly 69 million dong This directly affects to the revenue that VID receive every month 2.2.5 Inefficient Indebtedness Management Effective debt management is a necessary requirement for the success or failure of the company Many firms after a period of operation starting to get into trouble for this issue which lead to capital tie-up and time-wasting and resourcewasting Although company almost does not allow having loans, but for such big clients such as VinMart, Circle K The fact that company allows clients to have debt is completely understandable However, the amount of loans might affect to the efficiency of company operation Solutions to Improve Import business efficiency In the situation of a highly competitive market, VINDRINK must constantly improve its professional skills, improve its processes and procedures to create a good competitive environment Thanks to that, the company can keep good relationships with customers and find more potential customers 3.1 Solutions to outperform in cheap product market Competing with products In cheap product market has always been an issue for mid-range items, especially with imported goods and domestic goods In order to deal with this issue, what VID needs to is promote marketing and expanding the number of customers on distribution channels MT (Modern 64 Trade) and GT (General Trade) The number of MT and GT currently approximately 30 and 300, respectively VID needs to bring this number around 450 stores if they want to remain their position in the market these days Besides, because of their newly established, VID has not had an official Marketing department, this department currently lies in Sales department Marketing plays a vital role in every success of every company, so that sometimes having a good leader team is not enough when a corporation lack of Marketing care VID needs to have an official Marketing department and promote products’ image and emphasize on the high quality of products in accordance with the price: “high quality products at affordable prices” 3.2 Solutions to Manage employees VID has experienced employees, however it is not evenly distributed At the same time, as the newly established of VID so employees would have to handle with many tasks at the same time This can cause discomfort for employees and create invisible pressure on management VID needs to improve the professional level for employees in the company, especially the level of foreign language (English) by organizing training courses or encourage staffs attend short training courses outside Developing recruitment mechanism or recruiting new employees with good qualifications can amend a lot for company effectiveness In order to that, VID can connect with universities in the city to recruit excellent employees for the company, and professional training for them right from the start of the recruitment All the departments need to maintain the attitude of communication, attentive and enthusiastic behavior with customers to make a good impression on customers It is necessary to have adequate remuneration for employees in the 65 company to be able to operate most actively and effectively Besides, creating a dynamic, united and comfortable working atmosphere in the company can bring high efficiency in work The company can organize picnics for all employees on some occasions such as March 8, October 20, March 26 Finally, the company needs to make rules with strict regulations, combined with a clear and reasonable policy in order to encourage employees to work, creating opportunities for individuals who are progressive and bright at work 3.3 Solution to Improve Customs Difficulties In the process of KMG Logistics Company working with port customs, the situation of customs arresting the lack of documents and not allow for customs clearance are also problems for the company if they are not timely prepared documents This might cause damages to the company both in time and financially For instance, customs department requires that the documents must have an Authorized Letter from the foreign agent, as well as the signature of the authorizer to be valid and in accordance with the signature of the customs department This sometimes takes a lot of time for both VID and the forwarder when the customs signature documents have not been updated, so that the signature samples are not synchronized, forcing the company to communicate with the foreign agent in order to handle the issues Thus, the company needs to learn from experience and prepare all the documents, thinking of all possible directions for prevention and timely preparation Under any circumstances, it is necessary to take immediate measures, such as an explanation with the customs or provide the forwarder documents beforehand in case it is asked by the customs 66 In order to overcome errors in the customs process, employees in the company need to check carefully the documents between parties If there is an uneven in the data between documents, it is necessary to find out the cause of the deviation and request the amendment of the documents to match 3.4 Solution to Amend Extra Costs There should be a quick rearrangements to avoid the impaction on company's profitability in the long run VID needs to know clearly all the costs as well as the contents of the expenses So that I strongly suggest instead of using the forwarder, company can actively work with foreign agents and carrier in terms of payment such as local charge, receive goods and clear customs After that, company can let the forwarder handle the rest of the work in delivery goods from the port to VID warehouse This might increase the amount of work which should be belonged to the forwarder for the employees However, overall, the company now can be able to avoid losses and the profits are guaranteed This solution will ensure the business purposes for company 3.5 Solution to Improve Indebtedness Management In order to avoid liabilities beyond the control of the business, company needs to draft a clear payment regulation to limit problems that may arise They need to bind by a number of requirements to prevent the debt from arising out of control, as well as require clients to sign an agreement, stipulate that the payment must be made on time and specify the penalty level has to be paid by clients if they make the payment late Looking in little more details, VID needs to assess and classify clients according to each group in order to manage They can develop reasonable and 67 clear sales policies from the beginning for each level of distribution, for each line of client Preparing full personnel for each stage: specialized personnel, speeding up the collection of debt receivable from customers quickly and on time For those employees directly involved in the process of customer communication for the purpose of recovering and paying debts, it is necessary to master some skills such as careful archiving of documents dealing with customers in any form, always keep calm and keep professional behavior; Keep abreast of monitoring closely all moves of paying debt of customers Creating personnel review and monitor weekly and monthly debt reports as well as setting targets and KPI indicators are good methods to assess the liabilities and the management of receivables In addition to manpower to control debt, it is advisable for businesses to purchase an accounting software to manage and help save time with high accuracy, it helps debt management to be solved easily and effective It not only helps businesses manage client debts effectively, but also has the ability to analyze and evaluate the quality of each customer, each provider helps the management in optimizing business strategies such as software: MISA accounting 2017; AMIS software 68 Conclusion Import and export is one of the leading industries in Vietnam Import and export activities are closely linked to freight forwarding and they play an vital role in the development of the state economy VINDRINK.,JSC company started its business in this field from 2017 Although it had established only for years, however, company has been in stable business operation until now and achieved many success at work Company has established close relationships and signed big contracts with customers who are the prestigious companies and corporations in the world market today such as Red Bull Company, EverMore Corporation In such a competitive world, in order to survive and constantly grow, company needs to develop and implement development policies in accordance with long-term goals and strategies This will be a difficult task for VINDRINK so that all members of the company need to work harder as well as every individual in this company must always be aware of their roles and responsibilities at work The internship in VID helped me verify the knowledge I had learned at school, relate the theory into practice Although it is only a short period of time, thanks to the dedicated guidance of my instructor as well as the employees in the company, I have accumulated many things, contributed to perfecting my professional knowledge Once again, I sincerely thank the Academy of Policy and Development, my Instructor - MSc Pham My Hang Phuong, the Board of Directors and all of the employees in VID company helped me complete my graduate thesis 69 ... Contracts The contract is an agreement between the parties, the seller (exporter) who has the duty to deliver the goods and transfer the ownership of the goods to the purchaser (importer), and the. .. vital role in the effectiveness of the organization and the success of the firms 4.1.3 Capital and Technology factor Capital and technology directly affects to the business activities of the company... Chapter of the Consolidated Document 09 / VBHN-BCT in 2017 “Processing import is a form of import whereby the importing party (the processor) processes the import of 10 raw materials from the exporter