Discuss about the Garments and Textile Products in Vietnam.
Business ventures are a small business where it is developed with the intension of being benefited economically. One or more individuals or groups with the expectation of the business bringing them a financial gain will invest in those ventures. Majority of business ventures are generated based on pressure from the market or a scarcity of contribution to the market. Requirements of consumers are recognized for a commodity or a service and the businessperson and investors will progress to grow the idea, market it, and sell the commodity or service advanced (Schaper et al., 2014).
With profit-making improvement and emerging prosperity, Vietnam is among the basic appearing economies in the middling and extended term. The country’s professional environment offers countless opportunities for speculation, in spite of the challenges such as a troublesome Communist state apparatus and deficient infrastructure. Vietnam is among the best province to register a business. Presently it is ranked by World Bank in the 90th position for simplicity in doing business and is considered among the fast-growing provinces in the South East Asia (Athukorala & Tien, 2012).
It has become simpler for immigrants to enroll an organization in most business since 2015. One is only required to have a shareholder, besides a corporate existence or a person with any citizenship and residency, to assimilate a company. Vietnam has an enormous population with 90 million people and potent natural resources (Zolin & Schlosser, 2013).
Dr. Alex Osterwalder, joint-author of Business Model Generation, suggested the Business Model Canvas as a blend for companies those are pursuing to introduce their business models so that it best fit in the industry. Osterwalder’s objective with the Business Model Canvas is to assist companies acquire the best devices to introduce their business models and utility hypothesis. This program not only helps for tactical planning and model structuring; it also assists aid innovation, fusion and accessions, and decisions on speculations. In this report the business venture that has been choose to establish in Vietnam is of Garments and Textile Products and the opportunities, business model are elaborated below (Veit, 2014).
Garment and Textile manufacture is another commercial business in Vietnam since Garments and Textiles are among those products that are exported by Vietnam. One can also particularize in creating ready-to-wear attires or start one’s own line of clothing. It may become too expensive to start one’s own production of textile and Garment Company, and then one can turn as a cloth merchant or get started with an online garment supplier. All these businesses are equally profitable (Thoburn, 2013).A huge number of foreign shareowners have displayed great appeal investing in the textile industry of Vietnam, primarily soon after the country signed a number of Free Trade Agreements, involving the EU-Vietnam FTA (EVFTA) (Duong, 2016). Under this EVFTA, all importation tariffs on the products of Vietnam’s garment and textile that will be abolished within the coming 7 years. With the broad and deep incorporation, Vietnamese textile and garment has converted from a domestic-aligned sector into one of the prime forces in the country’s transport turnover. In particular, Vietnam earned a billion of $27in 2015 by transporting textile and garment and the digit is anticipated to reach a billion of $29 by the end of 2016.
As stated by Vietnam Textile and Apparel Association (VITAS), the textile and garment industry is among the giant economic divisions in the country. It has 4,000 businesses with an income of 20 billion dollars per year, counting for 15% of GDP, building Vietnam the fifth widest textile, and clothing exporters worldwide. Textile and garment products of Vietnam have been transported to 180 countries and territories universally, in which the biggest markets are the United States, Europe and Japan (Tran, 2012).
Vietnam is at a crisis point where it can also relocate to the succeeding positions of industrialization or likelihood of losing competition. In a distant past Vietnam has acknowledged foreign capital in the industry of Textile and Garments. Organizations that imbue to outside-based companies permit up to 60 per cent of the earnings from export, few connections are there joining national and international firms. For example, Japanese firms have accepting to Vietnamese organizations for their commands for the garments, but they have not initiated reverse linkages by spending in yarn and fabric provisions. When labour prices in Vietnam ultimately increase, overseas investors will shift to countries with bottom labour value like Bangladesh and Sri Lanka (Kenta, 2012).
The reason why PESTEL is done because it recognizes the external political, economical, social, technological, legal and environmental elements, which can affect the business. Thus, the risky factors that are identified from this analysis can be utilized to take up new decisions for the benefits of the business (Tuan, 2012). As far as the political elements are, concerned Vietnam is a state that is ruled with one-party that is the Communist party of Vietnam (CPV). All the decisions regarding strategies and the problems related to policies are look after this party. However, the policy involves encouraging stability, maintaining the political ranking quo, development of domestic economies and international combinations. Vietnam is very much politically stable country in South East Asia. Internal conflicts are infrequent which an advantage for the garment and textile industry is (De Mel, & Jayaratne, 2012).
Economical growth in Vietnam in the present few years have averaged up to 6.2%. Vietnam is currently having the rapid growing middle class in the South East Asia. As the foreign invested constructing, sectors are indicating the growth of the industries. Added advantages are that Vietnam has been a country attracting the FDI destination especially Japan, South Korea, Taiwan, Singapore. The state’s existence in the economy rests huge in Vietnam. However, Vietnam is ranking in 82th position in the World Bank’s report of doing business in 2017. The social factors in Vietnam is that it is having the support of the young population who have attained the working age and having fresh entrants in the market of labors every year but still the overall production which leaves very little and is only three fifths of the ASEAN centre or is around one tenth altitude in Singapore. However, the people in Vietnam are very positive for the future that to because of the stability of the political, peace and economical growth (Déri, 2013).
Technology is developing with the time and so it has its impact in Vietnam as well. Internet is easily attainable with much cheaper price. Another noticeable thing presently is the power shortage that is increasing due to the growing demands in Vietnam. Lastly, there is an extensive availability of the software products all over the country, which is definitely an advantage for the garments and textile industry (Kenta, 2012). The environmental factors also play a vital part because Vietnam has an extensive coastal border and is contemplated to be the most endangered countries due to the risk of the natural disasters, changes in the climate and the rise in the sea level that can seriously affect the business. Thus, environmental factors always remain at the priority list that all the business ventures study carefully before starting any business because it can highly damage the business.
Lastly, the legal factors also play an important role as Vietnam has accessible law enterprise, investment law and other universal and regional agreements where all sort of enterprises have to work with the same rule. Vietnam has faulty quality of human resources and issues related to corruption thus its get difficult for the enterprises to implement the laws (Thoburn, 2013).
The Porter’s five forces model is an excellent instrument for analyzing the rivalry inside the market and the business strategies developed by the industry. It however pulls the company’s economics to extract the five forces, which dictate the rivalry strength and hence the appealing part of the industry comes in front (E. Dobbs, 2014). The five forces in Porter analysis comprises of the following-
Demands as well as competition both are high in Vietnam’s garment and textile industry. Competition is equally spread in large customers to market involving inputs and labors. With the growing reforms in Vietnam, the most profit is gained by the garment and textile industry. This industry actually specializes in the cheapest value added part in the mid of the global chain of supply. It is at the cross road where either it has to take its business on to the next level or have to probably lose his competitiveness. Labor is among the essential features of the manufacturing activity, mainly woman are found as labors who are having few years of experience in this business (Elliott, 2016).
The problem that the garment and textile industry is facing as it depends steadily on the inputs imported from various other countries like china (Xiaoyang, 2014). However, this is making the power of the suppliers to become on e of the essential controlling forces for the profit making of the industry. Enormous number of suppliers, average differences and low costs of changing the suppliers leads to little bargaining power of the suppliers. The main suppliers of Vietnam are china, South Korea and Taiwan.
As far as the bargaining powers of the buyers are concern it is not that of a huge demand and little production capacity prevails in the enterprises. This industry makes maximum of the business in the peak season that is Q2 and Q3 of every year. As the trend of labor costs of the Chinese are increasing with the suppositions for trade agreements, Vietnam’s clothing industry will develop its role in the universal chain (Tran, 2012).
The capacity to turn substitute product line is big like for instance from jeans to khaki products then from t-shirt to shirts, then from one brand to another, in this way it goes on. The outcome of this is cheaper costs of the altered products, the variety of price and the quality of the products and the improvements in the fashion tendency with the growing time (Kew & Stredwick, 2017).
In the garments and textile, industry in Vietnam the threat to new entries is not that high due to the policies that the government makes to stimulate the evolutions of this industry and average requirements of the technology, wealth and so on. However, with addition to these the entrance to inputs and channels of distribution are also comparatively easier. Therefore, in Vietnam currently there are around 6,000 businesses working in the garments and textile all over the country. To be in the competition the enterprise has to retain the employees who are skilled and experience (Montague, 2013).
The basic resource everyone needs to start a new business venture is financial resources, Human resources, educational resources, Physical resources and emotional resources (Ciabuschi, Perna, & Snehota, 2012). The most important resource without which we cannot start a business is monetary investment. The funding can be gathered from a variety of sources be it the founders personal savings or from loans or credits. Human resource depends mainly on the strength and talent of the employees. However, the team depends on this experienced hiring of the workers with a certificate of being skilled at their domain (Nielsen & Montemari, 2012). Before going for a business venture, it is important to gain knowledge about the business that will get started. So a deep knowledge about the market and the competitor must be known so that there is a right direction for the firm. Physical resources on the other hand are the satisfactory work environment and the basic requirements in the workplace. Lastly, to start with a business venture an inspirational and motivated team is needed which can be of friends, family, mentor or the executive group (Storemark & Hoffmann, 2012).
Then the resources that are more important are the machines. There must be a estimated requirements of the production based on which the machines are decided. For a start up there must be a rough estimation for their production of garments in the initial days, which they can modify later if the customer demands and their budget enlarges. Now when the production figure its type is decided then the calculated for the sewing machines and other miscellaneous requirements can be calculated (Bharadwaj et al., 2013). The type of machines are very important like if it’s a garment factory for the Shirts then the machines used are different where the machines can be sewing as well as non-sewing machines that the factories uses. Therefore, based on the machine brand and their county sourcing their cost will depend. Along with this, the capital investments will also get to be calculated on the machines. Along with the sewing machines, there will also be other resources like pressing tables, cutting room machines, and boiler for pressing tables, diesel generator for power back up, finishing room equipment and furniture (Bierman & Smidt, 2012).
The next important resource needed is the raw material and after the machines requirements are met, the list for raw materials had to be made in order to make the garments with average utilization (Nguyen, Beeton & Halog, 2014). A major component of the garment manufacturing cost is the material cost. The raw materials that are needed are estimated from the suppliers and the basic materials are fabrics, labels, thread, hangtags and trims. Therefore, to have the correct price knowledge of each of this material is necessary. This list of raw material will further help in making the budget on material sourcing. Resources also include the office space for setting up the machines and the departments. Based on this resource further planning is done for renting a space or factory building. Moreover, the most important resources are the labor. The primary resource for any business venture is its workforce. This workforce includes the number of employees, supervisors and labors who will help to run the business evenly. Estimating the salaries for every worker after the recruitment will help in the budget for running cost (Doan, 2012).
A business model is the process by which any organization initiate revenue and earns a profit from the organization’s operations. Investigators use the metric gross profit in a way to differentiate the effectiveness and coherence of the organization’s business model (Bocken et al., 2014). The two main forces of any organizations business model are pricing and cost. An organization can however, increase prices and can find directory for decreased costs. Both these efforts actually increase the total profit. Gross profit is frequently contemplated the initial start of profitability as it only reviews costs but not the expenses. It exactly centers on the process by which an organization does its business, not the effectiveness of the management. Some space is usually left for an ineffectual management team when the investors actually focus on the business model. Investors thus believe that the best business model can make them flourish (Casadesus?Masanell & Zhu, 2013).
Business model always have its importance that is needed to set up any new business venture. To open a Garment and textile product in Vietnam, there is also a need to plan the business first. However, the potential of any given business model to scale is determined by the maturity of its business model itself which means the capacity to supply the socially advantageous goods, services or the livelihoods and also retrieve its cost at their scales. However, certain models can be scaled faster than many others that need ample time like years or even decades to get appropriate way before even getting appropriate for scaling up (Bock et al., 2012). The diagram above is showing the different segment a business model canvas (BMC) comprises of that was developed by Alexander osterwalder and Yves pigneur. This BMC is the different variable a valuable organization has. Tool for strategies helps a new organization and examines the current situation in the business and this is done by BMC (Strategyzer, 2017). This canvas is important because it explains the ways this new business venture or idea operates in terms with the nine interconnected elements that is discussed later under this topic. These necessary features built up the business model. Business model supplies a coherent process for initiating the offering of the market fit (Trimi & Berbegal-Mirabent, 2012). It however comprises of the nine categories that they introduced as the building blocks of any organization. These building blocks are as follows:-
However, to plan a business model for a garment and textile business venture based on these above can help in having a clear glance of the aspects of the business (Vargas, Calva & Camacho, 2015).
Agencies or individuals setting up a business usually are external sources who donate to few parts of the business canvas. Thus, it can be investigated what resources and the services the organization benefits from the partners and it is linked to how they attach value. It is mandatory to build associations with the partners. For example, when striving against the rivalries and incorporating knowledge and specialty key partners pays an important role. Necessary data will be needed by knowing in present, which the partners may compose to a precious relationship.
The key partners that are needed for this very business venture of garments and textile in Vietnam are as follows:-
Key activities are those affairs that instantly or accidentally donate to delivering the value proposition to the customers. Therefore, they may include the features of the value proposition and the way they authorize distribution of channels, relationships with their customers and the streams of revenues. Along with a good knowledge for the internal activities of the organization, the benefit will be that a greater understanding of the value hypothesis of the organization is acquired. The key activities are not limited to production only but also problem-solving outlook, networking, and standard of the commodity. If the additional values for the customers are known to the organization then a more advanced relationship can be build up with the customers, which in turn will help in attracting new customers and keep up the competition (Carayannis, Sindakis & Walter, 2015).
For this particular business venture in Vietnam, the key activities involved are as follows:-
Key activities are those resources that bestow upon value proposition, channels, the relationships and revenue. These resources can be both tangible or can be intangible and so they may involve intellectual properties, brands, hardware and software, finance, the facilities and people. Key resources however is the building block, which describes the most necessary benefits, needed to run the work model of the business. Every business model needs them and it is only via them that the organization initiates value propositions and revenues (Massa & Tucci, 2013).
Resources are those measures the organization needs to execute. They can be classified as under:-
Value propositions are the centre for the Business model Canvas that defines the actual as well as the recognized value that the organization delivers to their customers and the challenges they are solving by meeting the needs of the customers. However this can involve the features like design, the brand, the price and how easy is to use the products. Value proposition in the BMC has two sides, one is of the customer segment that the organization plans to produce value for and the value proposition that helps the organization allures customers. The BMC draws collateral between products, services that are offered, and customer’s necessities (Osterwalder et al., 2014).
This is all about the fundamental of the organizations right for existence, which meets the customer’s necessities. However, the value proposition of the garment and textile business venture in Vietnam will be the followings:-
This point covers the type of relation that each section like the online peer from peer, the contributors, users and beneficiary requires. For instance from the personal attention to any customer, self-services, sense of the community and those in the co-creation are all involved here. The relation of frequency one off, the regular or infrequent are also defined in this segment. It is crucial to commerce with the customers. The wider the customer support too essential, which is to divide those customers into various, targeted categories. Every one of the customers has some particular needs. By predicting those needs of the customers, the organization devotes in various customers. A capable service will guard good and balanced relationship with the customers, which will get confirmation later on (Muhtaroglu et al., 2013).
The following elements help the garment and textile business venture in Vietnam for exploring the opportunities the country has like:-
Channels are actually how the business explores the plans to reach out the targeted customers. It however involves the online services, retailers, wholesalers, direct marketing any many more. The organization can even have various channels and different other channels for acquisition and their maintenance. Therefore, definitely there are various channels for various types of customers all are included here. An organization dispenses with the channels of communications, distribution and sales. It is not regarding contacting customer but the manner in which a company interface with the customers. The purchase position and the conveyance of the product or services dispensed are determining components in this. There are five different channels to customers, which are recognition of the product, buy, delivery, assessment & gratification and after sales. In addition with assemble beneficial utility of the channels and to outstretch as many customers feasible and so, it is recommended to merge shops and web shops channels.
The customers are always among the greatest assets an organization will need to attract and so this feature defines the main clusters of consumers that are connected with the benefits from the value that the organization created. As companies frequently dispense services to a group of more than one customer, it is practical to split them among customer segments. By recognizing the particular needs and essentials of each group and those values, they connect to this and the products and services are better speeded near these necessities and demands. This will guide to considerable satisfaction of the customers, which in turn will bestow to a capable value proposition (Abraham, 2013).
However, customers can be divided into the following two segments:-
Cost structure is another important feature that places emphasis on the important cost structure in the organization that can be both direct as well as indirect. This feature is analogous to the key resources and the key activities the organization has framed. By obtaining a perception into cost structure, an organization will get to know what the minimal income would produce a benefit. Direct costs are those costs that can be effortlessly detected to a specific object that is also known as a cost object such as a product, the raw materials utilized to produce a product or the labor related with the work to manufacture the product. Indirect costs are the one that affects not just on product but the overall Organization. These costs include advertising, depreciation, general supplies for the organization, accounting services and so on (Amit & Zott, 2012).
This section covers the procedures of how the organization outlines the plans to make money. It explains how much they are ready to pay for the level of values that are deliverd and the ways of payments. Revenue streams are the cost drivers. It delivers a clear perception of the organizations revenue model. The ways in which the garments and textile business venture can generate cash flow is through understanding the expenses of the organization, rolling product and services, creating a back-end product or services, uplift repeated business and by pre-selling the products or services.
Revenue streams also look after what number of customers an organization will require on a yearly support to initiate gain along with how much revenue does it require to maintain a balance between neither profit nor loss (DaSilva & Trkman, 2014).
Thus, the business model canvas is developed in a sequential way that describes that how the business started and slowly it constructed the components that are essential for it to make profit and develop with time.
Conclusion
To conclude this report, it can be said that business ventures are small setups that depends on the demands of customers need in the market. It is started with the intention to make profit out of it. Maximum of the business ventures are developed based on the pressure from the market or a shortage of contribution in the market.Vietnam is among the best province to register with a business in spite of the challenges there are many opportunities that are there for Garments and textile products to flourish there. Vietnam has a huge population with 90 million people residing and ample variety of natural resources. Thus from 2015 it has become easier for the immigrants to start a business there.
The opportunities that Vietnam gives for business venture such as Garment and textile products are that primarily is it exports garments in a large scale to United states, China, South Korea, Japan and so the market is widely dispersed. A large number of overseas shareowners have exhibited huge interest in investing in the textile industry of Vietnam, soon after the country signed a number of Free Trade Agreements. Recently, Vietnam has accepted foreign capital in the business of Textile and Garments. According to the Vietnam Textile and Apparel Association (VITAS), the textile and garment business in Vietnam is among the massive economic divisions of the country.
However, Dr. Alex Osterwalder, joint-author of Business Model Generation, suggested the Business Model Canvas (BMC) as a mix for the organizations those are seeking to introduce the business models so that it perfectly fit in the industry. This BMC comprises of nine building blocks such as Key partners, Key activities, Key resources, Value propositions, Customer relationships, Channels, Customer segments, Cost structure and Revenue streams. BMC is the divergent variable a valuable organization has. The nine tools for the policymaking actually help a new organization for future developments and examines into the current situation in the business.
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