Tài liệu Machinery import activities at vnphat co., ltd situation and suggestions

ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ ACKNOWLEDGEMENTS First and foremost, I sincerely thank teachers of the Faculty of Business English at Foreign Trade University, especially Mrs Nguyen Binh Lan for her enthusiastic guidance throughout the writing of this field stydy report. I would also like to express my gratitude to Vinh Nguyen Phat company’s staff who have helped me to complete this report. I am deeply indebted to Mr Nguyen Van Chung and Mr Nguyen Van Hoan whose materials, support, stimulating suggestions and encouragement helped me in all stages of writing this report. My classmates supported me a great deal and I want to thank them for all their support, cooperation and valuable suggestions. Finally, I cannot fully express my gratitude to all the people whose direct and inderect support helped me complete my report in time. ____________________________________________________________________________________________ Luu Thi Le Quyen 1 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ INTRODUCTION Nowadays, globalization is a general trend. Not a single nation can be prosperous with closure policies since international trade plays the key role in promoting domestic economic integration into the world economy. Moreover, international trade can also help a country develop it comparative advantages, taking advantage of potential capital, technology, science and advanced management skills from outside, as well as maintain and develop national culture, acquiring the quintessence of human culture. Imports help domestic consumers to have a diversity of products at lower prices. Also for the entire economy, imports increase the efficiency of production and enable it to concentrate on producing those goods which it has competitive advantages, increasing labor productivity through imported equipment, technical science, and modern production methods. With the trend to strengthen international cooperation, the Vietnamese government has allowed various business types, including stateowned enterprises, joint- ventures, business cooperation and private sector to participate in import and export business. Therefore, improving the efficiency of import-export business in general and import business inparticular is extremely important . ____________________________________________________________________________________________ Luu Thi Le Quyen 2 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ Like other commercial enterprises, Vinh Nguyen Phat Trading and Service Company is also very interested in improving its import business performance. During her internship at the company, the writer has tried to study how the company does business and decided to choose the topic "Machinery import activities at VNPhat Co., Ltd: Situation and suggestions" for her field stydy report. This report was finished with the aim to study the status and ability to perform business activities on international trade of a medium company, to understand the process of importation and how to use available resources to achieve the highest efficiency. The report includes the following sections: Introduction Chapter I: An overview of VNPHAT Co., Ltd Chapter II: Machinery import activities at VNPHAT Co., Ltd Chapter III: Sugesstions to improve machinery import activities at VNPHAT Co., Ltd Conclusion References Because of the short practice time and limited knowledge, this report should have some inevitable errors. The writer would like to receive comments from readers in order to improve her report. ____________________________________________________________________________________________ Luu Thi Le Quyen 3 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ CHAPTER I: AN OVERVIEW OF VNPHATCO., LTD: 1.1. Establishment and development: VNPhat Co., Ltd was set up from a store specializing in trading mechanical equipment in Hanoi. After a period of operation, realizing the potential market for mechanical goods in Vietnam, and the limitations of a familly business, the store owner decided to set up a limited liability company called VNPhat Co.,Ltd. VNPhat Co., Ltd was officialy established in March 2001 ____________________________________________________________________________________________ Luu Thi Le Quyen 4 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ with the initial capital of 5,000,000 VND. Its headquarters were then at No. 37/4, Phuongmai Road, Hoangmai, Hanoi. A representative office was opened at No. 21, 152 A Caolo Road, 4 Ward, 8 District, Hochiminh City in 2005. In september 2005, VNPhat Co., Ltd was relocated to 30/192 Giapbat, Hoangmai, Hanoi. During its operation, the company has tried to expand the market in Hanoi and Hochiminh city while increasing the ability to grasp and manager new markets by opening branches in various provinces. The company estiblished a representative office in Hai Phong in 2004. Representative office in Danang - the largest industrial city Center of Vietnam in 2007. March 2008, it opened a branch in Thainguyen – an industrial city of Vietnam. Thus, so far the distribution network of the company has expanded across the country. Initially the company’s major sources of import were from Russia and Eastern Europe. However it has now transferred to sourcing goods from Taiwan and China because of their good quality and competitive prices. With the expanding market, the company has diversified its lines of business. Its initial major business items included hydraulic presses, broaching machines, compressors, welding machines and lathe. Currently, the company's products range from ____________________________________________________________________________________________ Luu Thi Le Quyen 5 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ handheld machines for small operation such as welding machines, drilling machines, to the machines for production and business processes of large factories such as drilling machines and twostone grinding machines. Experiencing the rises and falls of the country's economy, especially the serious economic crisis wordwide in 2007-2008, like other companies, VNPhat co.,Ltd, faces with more and more difficulties but its brand has won market acceptance, customer trust and reputation. Futhermore, along with the efforts of the entire management and employees in the company, Vinh Nguyen Phat has overcome the difficulties, maintaining growth and exceeding the targets set. The company's motto is: "prestige accompaning brand”. Vinh Nguyen Phat brand is developing and will surely grow with the growth of the national economy. 1.2. Organizational structure Vinh Nguyen Phat’s organizational structure is reflected in the following figure (figure 1.1). Figure 1.1: Organizational structure Board of Directors ____________________________________________________________________________________________ Luu Thi Le Quyen 6 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ Sales department Marketing department Accounts department Technical department Import department 1.2.1. Board of Directors The directors are responsible for general planning and strategic direction for the entire company; they are also responsible for all activities of the company, ensuring profitability, growth and development of the entire company, achieving the objectives of the company on sales growth, profit, personnel development and others. 1.2.2. Sales department The salesforce is responsible for sales, services provision through direct transactions with customers in the areas assigned. On the basis of the overall business plan given by the directors each year, the sales department will work out plans and specific methods of implementation, distribution, and revenue goals that each salesperson must complete. The sales department must carry out all necessary market activities to win customers (mainly dealers, shops, mechanical plants), to sign contracts, and to take care of customers, commodity distribution and other related activities. ____________________________________________________________________________________________ Luu Thi Le Quyen 7 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ The results of the sales department operation are reported monthly to the directors, which will be the basis for business planning and import plan for the folowing years. 1.2.3. Marketing department This deparment’s function is to determine the market demand for each type of products in quantity, quality, distribution methods etc. The marketing department's quarterly report on market will be the basis for the directors to make plans for importing goods or business plan, and orientation for the marketing department on market approach accordingly. The department also implements programs to build and promote the company’s brand such as promotion, advertising and customer conferences. For some goods that the company is a sole distributor in Vietnam for a short time (about 3-5 years), the construction of brand names plays an important role in the busines activities of the company. 1.2.4. Accounts department The duties of this department are to advise the directors on corporate finance, making sure it is in line with the State policies on business, financing, investment, and management so as to effectively use all sources for business development. 1.2.5 Technical department ____________________________________________________________________________________________ Luu Thi Le Quyen 8 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ The technical deparment is in change of installing machinery and intructing customers on how to operate them, repairing the machines when customers request. It also organizes professional training, and coordinates with the sales department to train workers for the implementation of projects. 1.2.6. Import department The import department plays an important role in the search for input goods for the company. It conducts organized import activities as planned under the direct leadership of the directors, such as finding partners, making contractual arrangements, implementing contracts etc. 1.3. Main business fields and achivements Vinh Nguyen Phat Trading and Service Limited Company is a professional importer of metal processing equipment with over 10year experience in Vietnam’s market. With a team of mechanical engineers of high levels and many years of experience working in large factories, who are constantly updated with technical information and technology through the cooperation with foreign experts, VNPhat Co.,Ltd provides customers with program packages including: technical advice, equipment selection, technology suitable for technical requirements and capabilities, technology transfer package, installation instructions, workers training, maintenance and technical support. ____________________________________________________________________________________________ Luu Thi Le Quyen 9 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ Items of equipment provided by VNPhat Co., Ltd include: lathe, universal lathe screw, CNC lathes, drilling machines, milling machine, two-stone grinding and surface grinding machines, grinding holes, grinding machine tools, hydraulic shearing machine, brake machine hydraulic, hydraulic presses, sawmill, welder, air compressor, etc. During its development, VNPhat Co., Ltd has established solid relationships with many domestic and foreign partners. The company’s domestic customers are mainly mechanical plants who need to purchase machinery and equipment for their production. The purchasing power of the mechanical plants in Viet Nam is huge. Heavy industry is growing, so the market for all kinds of electrical machinery and metal processing is potential. Some of its domestic customers are Duyen Ha cement plant, Bai Bang Paper Factory, Bach Dang shipyard, Lilama7, Engineering Factory 19-5, Mechanical and Chemical Company 13. The company's foreign partners are mostly manufacturing plants who have done business with the company for a long time, such as ARSENAL Group (EU); Rostselmash, Kamas, Irkut, Mikron (Russia); Annn Yang, China Jiangsu, Nanton Donghai, Shanghai (China); etc. ____________________________________________________________________________________________ Luu Thi Le Quyen 10 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ CHAPTER II: MACHINERY IMPORT ACTIVITIES AT VNPHAT CO., LTD 2.1. Factors affecting import activities In fact, there are many factors affecting the import activities of enterprises and thereby affecting their business performance. They can be divided into two main groups: factors outside the company (objective factors), and factors within the company (subjective factors). 2.1.1: Objective factors Objective factors are elements related to business environment and laws. For enterprises importing goods, these factors include: - Business environment and laws of the exporting countries and international legislation: the biggest difference between doing business locally and internationally is the impact of foreign laws, and international conventions. Import contracts and import activities must abide by the laws of the exporting country, the law of a third country (if specified in the import contracts), international business practices and international conventions, treaties that the parties participate in. The laws and regulations of the exporting country can make the process of import business ____________________________________________________________________________________________ Luu Thi Le Quyen 11 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ simpler or more complex, which affects the import operating costs and thus import activites efficiency. Therefore, before conducting import, enterprises must clearly understand international laws and the laws of the exporting countries. - Fluctuations in the domestic market and international market: like other types of businesses, import businesses are influenced by input commodity markets and output commodity markets. However, for businesses specializing in imports, the input markets are international markets influenced by the changes happening on the world market When commodity prices on the world markets increase, the prices of imports also increase, so do the costs of imported goods. This may reduce the competitiveness of imported goods on the domestic market, reducing consumption and thereby reducing business efficienery. - Fluctuations of exchange rates The exchange rate is an important factor affecting import prices or the cost of imported products, thus affecting the efficiency of the import business. When the exchange rate increases, the cost of one unit of imported goods increases accordingly and therefore reducing the competitiveness of the goods, their consumption and business efficiency. Conversely, when the exchange rate falls, the price of one unit of imported ____________________________________________________________________________________________ Luu Thi Le Quyen 12 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ goods also declines, and thereby increasing the competitiveness of the products, their consumption and business effectiveness. - Competitors For a business, competitors include current competitors and potential competitors. Enterprises must study the current competitors and potential competitors to find out their strengths and weaknesses so as to look for suitable orientations, especially suitable marketing programs. This will make businesses and their goods not be confused with other businesses’, and increase their competitiveness in the market. - Other factors Other factors in domestic and international markets include demographic factors, culture, traditions, and natural conditions. These factors will affect production practices and consumption habits of each country. Law and business environment are objective factors that individual business cannot change. They must comply with them and take steps to adjust their operations, organizational structure in accordance with the rules in the markets they operate in. 2.1.2: Subjective factors In contrast to objective factors, subjective factors are those that the business can change, and adjust the level of their impact on their business activities. They are: ____________________________________________________________________________________________ Luu Thi Le Quyen 13 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ - The size of the business: this is shown in the company’s potential financial resources and annual revenue. Businesses specializing in imports must have strong financial resources. - Human resources: these are reflected in the number of employees, their qualifications and working ability and management level. Human resources are the determining factor in every business. The qualifications and capabilities of human resources must be consistent with the type of business. - Target customers: The target customers and the types of goods a company offers can have effect on the level of price elasticily of demand. For example, when there is inflation or price increases, the demand for commodities aiming at high incomes group will decrease less than that for low and middle income groups. On the other hand, different target clients will have different requirements for the same product category, and therefore, the marketing strategy, and product introduction for each type of customer is different. 2.2. Current situation of machinery import activities at VNPhat Co., Ltd 2.2.1: Main imports Currently Vinh Nguyen Phat Trading and Service Limited Company specializes in the field of electrical machinery, which has great potential in Vietnam's market because we are in the ____________________________________________________________________________________________ Luu Thi Le Quyen 14 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ process of industrialization and modernization. Industrial economy is a target we are aiming at. Machinery import business has generated income for the company. Table 2.1 gives information about import value of its main imported products. Table 2.1: Import value by products Product Percentage of total imports value (%) Hydraulic presses 2.0 Broaching machines 3.5 Compressors 2.6 Welding machines CNC and 3.7 lathe (Source: Import Department) 2.2.2: Main customers Our country is in the process of industrialization modernization so industry is developing fast. Industrrial enterprises are Vinh Nguyen Phat’s customers. With a country-wide network of distribution agents, Vinh Nguyen Phat aims to meet the demand for mechanical machines ____________________________________________________________________________________________ Luu Thi Le Quyen 15 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ across the country. The main targeted customers are heavy industry companies, and factories operating in the field of metal processing. 2.2.3: Main suppliers The company's foreign partners are mostly manufacturing plants with which, the company has been doing business for a long time, such as ARSENAL Group (EU); Rostselmash, Kamas, Irkut, Mikron (Russia); Annn Yang, China Jiangsu, Nanton Donghai, Shanghai (China); etc. Figure 2.1 and table 2.2 show the company’s import value by markets in 2007. Table 2.2: Import value by markets (2007) Market EU Russia Kamas China Tawain Import value (US) 180,223 220,225 270,523 130,000 200,000 Percentage (%) 1.8 2.2 2.7 1.3 2 (Source: Import Department) Figure 2.1: Import value by markets (2007) ____________________________________________________________________________________________ Luu Thi Le Quyen 16 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ Unit: thousand US $ 2007 (Source: Import Department) 2.2.4.1. Implementation of import plans Since its foundation, Vinh Nguyen Phat company has always met or exceeded its import plans (see table 2.3 and figure 2.2 below) Table 2.3: Implementation of import plans: (2007-2009) Year 2007 2008 2009 Plan (BillionVND) Implementation Plan (Billion VND) Implementation (%) 2,300 2,354 102 2,800 2,846 105 3,500 3,845 110 (Source: Import Department) Figure 2.3: Implementation of import plan (2007 – 2009) ____________________________________________________________________________________________ Luu Thi Le Quyen 17 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ (Source: Import Department) In recent years, the company has imported more than the projected figure. In the early months of 2007, the company’s turnover from imports was quite high, exceeding plan by 10%, but in late 2007 due to economic crisis, its import turnover was down, but still 2% higher than the proposed plan. In 2008, although it was still affected by the crisis, with the efforts of all staff, its import turnover exceeded import plan and in 2009, the company achieved an increase of 10% in import value. Generally, in all the three years from 2007 to 2009, import turnover always excessded plan. 2.2.4.2. Import turnover Import business is the main operation of VNPhat Co., Ltd. The import turnover of the company is increasing over years. This ____________________________________________________________________________________________ Luu Thi Le Quyen 18 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ is the result of expanding business sectors and business relations with foreign partners. The import turnover of the company between 2007 to 2009 is shown in table 2.4 and figure 2.3 Table 2.4: Import turnover (2007-2009) Increase, decrease against Year Import turnover previous year (Billion VND) Value 2,354 2,846 3,845 (Billion VND) _ 492 999 2007 2008 2009 Percentarge ( % ) (Source: _ 12 14 Import Department) Figure 2.3: Import turnover (2007-2009) ____________________________________________________________________________________________ Luu Thi Le Quyen 19 7c ENGLISH BUSSINES DEPARTMENT - FOREIGN TRADE UNIVERSITY ____________________________________________________________________________________________________________________________________________________________________________ Import turnover (Million VND) (Source: Import Department) Import turnover of VNPhat Co., Ltd. has always tended to increase in recent years: the total import turnover reached 2,354 million VND in 2007, 2,846 million VND in 2008, up by 492 million VND (12% up compared with 2007), 3,845 billion in 2009, up by 999 million (equivalent to 14% increase compared with 2008). In general, growth in imports was relatively stable, achieving an average growth of about 12% per year. In 2009 alone, the increase of import turnover was higher than other years due to the expansion of business sectors and an increase in the number of new foreign partners. 2.2.5: Strengths and weaknesses 2.2.5.1. Strengths For nearly 10 years since it was established (in March - 2001), the board of directors and all staff and employees of Vinh Nguyen ____________________________________________________________________________________________ Luu Thi Le Quyen 20 7c