CHAPTER 3. DISTRIBUTION SYSTEM OF KEY IMPORTED
3.4. General assessment of the state of penetration into Japan’s goods
3.4.1. Achievement
Vietnam-Japan relationship have been entered a new stage and has been developed with better quality and depth. In economic areas alone, with Japanese enterprises, Vietnam serves as an attractive point of investment and running a business in South East Asia. In particularly, the event, in which Vietnam became an official member of WTO since 11/1/2007, is a huge encouragement for Japanese enterprises to research and find more information about Vietnam.
Together with the rapid development in business partnership of the countries, Japan is becoming Vietnam’s major business partner. Currently, Japan is the third largest trade partner of Vietnam. The year 2010 marked the significant recovery of the two countries bilateral trade, turnover reached more than USD 16 billions, up by nearly 22%
in comparison with 2009. In 2011, two-way trade turnover remained at a relatively good level. At the same time, market share of Vietnam’s products will increase as well, taking about 1% in Japan’s imported goods market. Noteworthy information is that Vietnam’s export turnover to Japan not only increases in terms of scale and quantity, but also in terms of product variety and composition. Apart from key export products such as fisheries, textile and garments, wood and wood products, handicraft…, some products such as high- class clothes, processed food, fresh vegetables and fruit… are slowly taking their first step to penetrate Japan’s hard market. This shows that Vietnamese enterprises are taking favorable first steps on their way to Japan’s market in general and to their distribution system in particular.
Main export products of this industry are T-shirts, knitted products such as towels, underwear, sport clothes,… Additionally, more countries signed business
contract to export complicated and higher value products such as jacket, kimono…
With ceaseless efforts to improve product quality, design, outlook from many enterprises, Vietnam’s textile and garment products are becoming more prestigious and gaining positive feedback from Japanese importers and consumers.
Among goods imported to Japan, wood and wood products are listed as a key area, which needs to be pushed further in next stage. At present, wood products from Vietnam take up about 8.3% of Japan’s imported wood and will increase rapidly in the future because Japan’s wood demand is continuously increasing, especially medium quality wood (mostly produced in Asia, including Vietnam).
More and more wood products from Vietnam are in display on shelves of supermarkets and high stores in Japan such as AEON, Homac, Nitori,…, which shows that Vietnam’s wood products are on their way to find a position in Japan’s market. Many businesses not only sign export contracts with Japan’s big commercial companies, but also sign direct contracts with Japan’s big retail corporations and stores specialized in wood product business. The Japanese also have positive feedback for Vietnam’s wood products, especially for handcrafted products such as rattan for their small, size, beautiful structure and convenience and suitability for Japanese daily lives.
To obtain such achievements, the first thing that needs mentioning is effort from the two countries’ governments to sign and carry out Investment Acts, Vietnam- Japan Joint Initiative Program, and to potentially sign Vietnam- Japan Economic Forum next year. These programs lessen the amount of worries of two countries’ companies and help them focus on their business, especially to promote investment from Japan to Vietnam. Additionally, commercial promotion activities are pushed further. More market fair, commercial display, business forums, together with company visit are usually organized for enterprises to find investment opportunities. Therefore, companies have opportunities to promote and introduce their products to Japan’s businesses and consumers, also to find business partners.
Apart from efforts from governments and related organizations, we need to mention efforts from individual companies in improving technology, enhancing management
and labor skills, in improving their design and in promoting marketing, advertising activities, in researching the market and finding partners. These efforts from companies and from governments have brought about many success for not only Vietnam’s enterprises, but also Vietnam’s position in the international market.
3.4.2. Existing limitations and their reasons:
Beside notable achievements, Vietnam’s companies, in textile and garment, wood and wood product face many existing limitations of in their activities regarding exporting products and penetrating into Japan’s market. The summary of these limitations are as follows:
Production scale is still small. Proportion of Vietnam’s export product in Japan’s market is still low.
The growth rate is unstable and vulnerable to external shocks such as price fluctuation in international market or changes in Japan’s market.
Product composition is still not very appropriate. There is a lack of product variety. Most products are handcrafted with low value and too dependent on Japanese partners. This creates many difficulties in establishing brands because handcrafted products often carry foreign labels.
Distribution methods are obsolete. Most export products are passed through many intermediaries. Exporters do not access the market directly and are not able to catch changes in customers’ demand to produce goods, which look attractive. This is a huge limitation because Japanese consumers pay a great amount of attention to product appearance.
Business promotion activities are segregated, and not highly effective.
Activities of the representative network, especially about commerce in foreign countries, are still very weak. There is a lack of care and attention to market research and promotion.
These limitations are due to these following fundamental reasons:
Governmental offices and organizations are not successful in spreading information on a large scale, guiding enterprises and preparing favorable conditions to receive opportunities in export market, which are the fruit of business
partnership and agreements. At the same time, enterprises are too dependent on assistance from the government.
There is a lack of suitable infrastructure supporting export activities such as forts, airports, customs storage,…. Basic services such as utility, internet,..are highly monopolistic. This decreases competitiveness of Vietnam’s enterprises and export product. More specifically, it directly affects market prices, delivery time,…
The level of investment in export sectors is still low. The majority of enterprises are at a small scale. They lack skills, knowledge, have little or even no experience in international commercial business, do not have sufficient business strategies for a long term, and a largely passive.
There is still no solution to problems regarding input materials, especially in textile and garment industry and wood industry. A large number of companies in these sectors have to import input material from other countries, causing their product price higher and causing their business less stable.
Enterprises are not active in grasping opportunities to penetrate and exploit Japan’s market.
There are more and more complex trade barriers such as social, environmental and safety standards, product hygiene…. This cause much difficulty and loss to exporting companies.