Market Research on plywood & notepaper (Eng)

ervisor : Tran Van Hung, MBA Date : may 2000 Table of content ACKNOWLEDGEMENTS Executive Summary 1 Chapter I: Introduction 4 Establishment and Development History of Cau Duong factory 4 Establishment 4 Organization Framework 5 Characteristic of Base line of Business 6 Asset and Equity 8 The Important of This Theme 10 Chapter ii: literature review 12 Overview 12 Some Concepts Related to the Research 12 1. Term “Market” 12 Definition 12 Functions of market 15 Marketing concept 16 Definition 16 2.2. The Role of Marketing in Practice of a Firm 17 Marketing Research 18 Definition 18 The Duty of Marketing Research 20 Economic Environment 20 Environment of the economy 20 Industry Structure 22 Plywood Production 22 Note-paper Procession 24 Summary 26 Chapter iii: research methodology 27 Chapter iv: results / findings 30 Results 30 Business Activity Analysis 30 Competition Situation 32 Domestic competitors 32 Foreign rivals 33 Position of Cau Duong Factory in the Market 35 Potential Market 37 Note-paper Production 37 Market of Plywood for Construction 38 Political and Legal Factors 40 Demographic factors 41 SWOT Analysis 42 Findings 44 Real State of Marketing Research in Cau Duong Factory 44 Elements Affect on Selling-price of Cau Duong Factory 46 Summary 47 Chapter v: limitations 49 Chapter VI: conclusions and recommendations 50 Conclusions 50 recommendations 51 Improving Awareness of the Factory’s Staff about Marketing 51 Solution to Consolidate and Expand the Market 52 Marketing Research Activity of Cau Duong Factory in short term 53 Establishing a Temporary Marketing Staff 53 Entrusting all Department with Task of doing Market Research 53 in near future Cau Duong Factory should set up a Marketing Staff 56 Solution to Improve Product Quality and Reduce Price 58 Improving Quality 58 Improving Price Policy 59 Appendix 1: questionnaire 61 Appendix 2: charts 67 Appendix 3: bibliography 68 Acknowledgements The writing of this thesis has been made possible because of the guidance, encouragement, good will and practical help of a number of people and organization. I am particularly indebted to my supervisor, Tran Van Hung, MBA, lecturer of the National Economic University, for his valuable guidance, criticism, comments, corrections, and for his kindly encouragement during the development of this study. His suggestions and recommendations were as much appreciated as his endurance, patience and genuine interest in this thesis I would like to express my deep gratitude to all my teachers at Phuong Dong University, who have been helping me for the past four years. I am grateful to managers, officers and staff at Cau Duong Timber Factory, where I carried out practice, for giving me time and great co-operation. I would also like to thank the respondents, officers and staff from various companies that I visited for their time, patience and cheerful acceptance. Most of all, my appreciation and gratitude is due to my parents, my brother and my friends, who encouraged me in many ways to fulfill this study. supervisor’s evaluation recommentator’s evaluation Evaluation of probation office Executive Summary In Vietnam today, the Government is implementing multi - factor economy, including joint - ventures, foreign firms, State-owned enterprises...In which, State-owned enterprises are considered as leading element of the development. Thus, the most important thing for them is economic efficient, competitive ability and position in the market. Cau Duong Timber Factory was built in 1956 with the support of former Socialist Republic of Czechoslovak. It was one of the earliest State-owned enterprises in Vietnam industry; aims to rebuilt the country after a long-lasting war. It has the task of synthetic timber procession with some main products such as note - papers, furnitures and plywood. Since November 1997, It has became a member of Bai Bang Paper Company- Vietnamese Paper Corporation. At present, major market of Cau Duong Factory in North area and Ho Chi Minh City. In such narrowed market, it is necessary for this factory to implement market research in order to expand its market in the future. This report is the result of a market studying by a student from Phuong Dong University with the purpose of gene Cau Duong timber factory up on the customers, the market and competitive real state of affairs. Some main objectives: Providing general market assessment including economic real situation, industry review and the competitive environment. Researching on business environment and an outlook of the actual market in order to analyze decisive factor of the factory’s development. Identifying business opportunities as well as developmental competence, menace in the future. Examining the influence of the outside environment: political, legislation, culture, consuming habit, etc. To achieve the above objectives, the project included both secondary and primary research. The primary data were conducted from questionnaires and directed interview in Hanoi. These were focusing on such issues as present market, competitors, and customers, etc. Secondary data were collected base on various information sources, magazines and other references. The major findings are: In some recent years, business environment of Cau Duong factory has been enlarged resulting from the urbanization speed with a strong demand for wooden products, especially for plywood. Since 1996, as the urbanization rate of Hanoi has been speeded up with the increase of 26%, many construction projects have been being taken place by foreign constructors or domestic construction companies. This demand has been intensified by the significant foreign directed investment capital (FDI), overseas development assistance (ODA) and money transmission from over seas Vietnamese. The main reason for the rise in urbanization velocity came from out-of-date and bad condition of Vietnam’s infrastructure. Open-door policy has been making business opportunities for foreign firms in Vietnam. They have more competitive advantages than local enterprises in technology, equipment, capital...Therefore, their products has more chances to secure large part of the market. For example, 1996, In plywood market only, imported products accounted for 42% because they meet the demand of foreign constructors in big contracts of building; Vietnamese firms seems to be short of initiative in their own market. Asian countries included Malaysia, Indonesia... were the main suppliers in Vietnam plywood market with the total supplying index of 35000 tons in 1999. However, being affected by Asia financial and monetary crisis in July 1997, volume of imported product from these countries was reduced to 20%. In the field of paper production, Vietnam is a large market with the total annual demand of 75 million tons. Meanwhile, the total production capacity of the Cau Duong factory and its parent company (Bai Bang Paper Company) only meets the social demand of 35%. Private sector and other State-owned firms satisfied the rest demand of the Vietnam market. Key recommendations to Cau Duong factory will be: Paying more attention in marketing programs, advertisement. Attach special important to reform machinery, equipment and labor in marketing research. Keeping good relationships with perennial customers and suppliers. Attending trade fairs and exhibitions to seek for new partners Chapter I Introduction In order to better understand about Cau Duong factory, this chapter describes its some sketchy characteristics and a little information about the whole economic surroundings. I - Establishment and development history of Cau Duong factory 1. Establishment Cau Duong Timber Factory is a State - owned firm, which was put in action in July11th, 1959 and cut the inauguration band by Le Thanh Nghi, Industry Minister, belong directly to Industry bureau – Ministry of Industry. It has the primary mission of processing wood, manufacturing wooden product in order to serve inland consuming and manufacturing plywood. Becoming a member of Bai Bang Paper Company, Cau Duong factory has processing notepaper for its parent company since November 1997. Cau Duong factory was invested and directly managed by the State. Cau Duong factory has juridical personality, self-contained in keeping business account and bank account. According to figures in 1999: Capital for running business: VND 12,453,672,000 Total output : VND 14,883,510,671 Labor force : 300 The average age : 38 Monthly income per person: VND 600,000 2. Organization framework. Cau Duong factory was arranged in model of one leader. Director Production-Vice Director Investment-Vice Director Economic-Vice Director Material shed KCS Department Wood-procession Workshop Personnel, Administration Bureau and Wage control Capital construction Health-care, Security, Pre-school Sales department Finance bureau Repository of end-product Paper-prefabrication Plant 3. Characteristic of basic line of business Cau Duong factory’s line of business is abundant with many kinds: woodwork, pencil, plywood, sawn timber, broom-stick, B 40 gun nest, loom’s spare part, racket, boat, etc. However, principal commodities are plywood and notepaper owing to basic earning resource. Plywood + Total output of 1000 m3 annually + Plywood is manufactured in continued, self-contained process. + Material: Rough-timber, Technical proportion: 1000 m3 of plywood need 2500 m3 of rough-timber. Material suppliers: State-owned and legal private afforestation yards in the mountainous of north area. Note-paper + Designed capacity: 3000 tons per year + Material: Paper pulp (Provided by Bai Bang company) + Processed in these closing-stages of work Paper-germ Line-drawing Binding Trimming Packaging End-product Technological process. So far, Cau Duong factory has utilizing production line of former Socialist Republic of Czechoslovak. Backward technology with 70% of 1960s and 1970s-made machinery, is the main reason for high production expenses and limited quality. The consequence of cumbersome and less effective machinery than modern one, high depreciation expenses and obsolescence closely related to high selling price of Cau Duong factory. 4 - Asset and Equity Asset Table 1B - Balance Sheet Criteria Unit of measure 1997 1998 1999 98 / 97 99 / 98 Amount (%) Amount (%) Amount (%) Amount (%) Amount (%) 1.Current assets VND 1000 1615733 15.23 2177265 18.53 2711567 21.77 561532 134.8 534302 124.54 Monetary assets VND 1000 451360 4.25 663972 5.65 680564 5.46 212432 147.06 16592 102.5 Inventory VND 1000 193020 7.48 1022716 8.71 1494852 12 229696 128.9 472136 146.16 Account receivable VND 1000 187325 1.77 228282 1.94 297514 2.39 40957 121.86 69232 130.33 Other current assets VND 1000 184028 1.73 262475 2.23 238637 1.92 78447 142.63 -23838 90.92 2. Fixed assets VND 1000 8992136 84.77 9571268 81.47 9742105 78.23 579132 106.44 170837 101.78 Total VND 1000 10607869 100 11748533 100 12453672 100 1140664 110.75 705139 106 Due to the characteristic of business field, fixed asset takes a large part in total equity, about 80%, liquid asset for doing business is restricted. Hence, capital privation has restrained Cau Duong factory from expanding line of business, improving quality, reducing price and strengthening competition ability. The chart above has presented the upward trend of liquid assets density and the decrease in fixed asset from 1997 to 1999. It means, capital for running business has been strengthening. However, compare to 1998, financial difficulties in 1999 came from large amount of stocks of VND 1494852000 (increase 46.16%) and appropriated capital by its consumers of VND 297514000 (30.33% higher than 1998), meanwhile, cash capital was slightly increased (2.5%). In order to escape from capital scanty, the factory must take back the appropriated capital and establish a sensible policy of inventory. Capital. Table 1 A - Capital statement Criteria Unit of measures 1997 1998 1999 98 / 97 (%) 99 / 98 (%) 1. Capital classification VND 1000 10607869 11748533 12453672 110.8 106 Fixed capital VND 1000 7481546 8032578 8822396 107.37 109.83 Liquid asset VND 1000 3126323 3631276 3631276 118.86 97.73 2. By ownership VND 1000 10607869 11748533 12453672 110.8 106 State capital VND 1000 9308404 10436070 11112395 112.11 106.48 Owners equity VND 1000 1299465 1312463 1341277 101 102.2 Paid-in capital VND 1000 0 0 0 0 0 Equities VND 1000 0 0 0 0 0 Table 1A and 1B reflects real situation of Cau Duong factory’s capital. As can be seen, budget capital and owner’s equity has manifested ability of financial independence. However this situation has led to difficulties in mobilizing all capital resources for developing and expanding business activity, meanwhile, the factory’s difficult solving competence depends on limited bank loans and credit organizations. II. The importance of this theme According to the figures given by Planning and Investment Ministry, Vietnam has allowed 270 foreign investment projects, which are acting in building and construction material domain, with the total registered capital of USD 3,5 billion. So far, these projects have reached USD 1.1 billion of the total working capital. A top construction expert said that foreign investment projects had brought Vietnam many modern facilities, and new management experiences. However, the high level of competition in domestic construction material market must be also dealt-with. If local manufacturers did not have any specific strategy, they would be knocked-out in their own market. In addition, paper production branch is facing unforeseeable losses, resulting from the target of satisfying the interior market demand. In the context of a spike in paper-pulp and having no declining sign, many paper companies have decided to reduce imported paper-pulp from 40% to 10%. In this circumstance, Vietnamese enterprises need to answer following questions: How to cope-with the market displacement in the most effective and fastest way? In a high-level of competition, what will they do to enhance their competition ability? Customers are the vital element of a firm, how to meet their requirements in a profitable and more effective than competitors? In order to survive and develop in such high competitive environment. Enterprises need to find the right way of development; the most effective instrument for their target determination is market research. Besides, in the unstable and ceaseless changed market, market research should be taken place regularly. Market research is always the first step of patrons’ demand defining, plans building, leaders’ decision making… and it becomes the key step of a firm’s development. As mentioned above, Cau Duong factory has been running business in a narrowed, high competitive intensity market, therefore, market research duty becomes an insufficient, more and more pressing activity. Although several market studies were carried-out, Cau Duong factory still need an up-to-date and comprehensive market analyzes of present business medium for its future development. This project aims to provide the firm’s practical background, general market assessment, including economic situation, competitive environment, and reliable information about the customers, predilection... so that they can run business in an effective way. The researcher hopes that this study would provide a little but helpful-information source, which can be used in practical activities of Cau Duong factory. Scope of the project. Owing to time limited, this research only bounded some products: Notepaper and water - resistance plywood for using in construction industry. Chapter ii Literature review This chapter introduces readers a list of related documents and theory that the researcher utilized as reference documents for the project, and also deals with impaction of objective elements to Cau Duong factory’s present position in the market. I. Overview: This research is accomplished base on studying and consulting many documents gathered from various sources. In order to reach objectives of this study, the researcher had to gather information on the past researches in library, some offices and interview officers. Researches and analyses found includes the following: CD - ROM database of Vietnam News Agency Articles in other newspapers and journals such as Vietnam Economic News, Vietnam Economic Times, Vietnam Investment Review, Business and Marketing News. Some reports that are available and concerned with the research. II - Some concepts related to the research: 1. Definition of term “market”. 1.1. Definition. The category of “Market” had appeared long - long ago. In primitive age, it existed in form of batter economy, in which, goods are directly traded or swapped for other goods. This was the most incipient style of market. Later, money appearance simultaneously with market development; the definition of “buyers” and “seller” was taken shape all there factors has created a full definition of “market”. Today, in developed society, market notion is wider and more abstract understood, it is not only a physical location, where buyers and seller interact, but also every where: on the train, at the street, etc. In addition, consumers and sellers can use means of intermediary such as: communications and liaison resource, brokers instead of direct meetings. The market expansion is a foundation to enhance the development of society. There are many definitions about market. Below are some of them: - By Traditional view: Market is place where buying, selling and exchanging activities are carried-out (Enterprise, number 4,1996, p.6). By Marxism: Market is a circulation stage in reproduction process. By Capitalist Political Economics: Market is a process, in which buyers and sellers interact each other in order to determine quantity and price of goods (Enterprise, number 4,1996, p.6) How ever, the more developmental the social is, the more different the market definition be understood. According to the trend today, enterprises’ activities need to be market-oriented, in concrete, satisfy the customers’ demand. Contemporary point of view puts the customer in the central position because in modern life, a firm’s existence greatly depends on the number of customers it has. In marketing sentiment, definition of the market only concentrates on buyers market: “An enterprise sells what the customers need, do not sells what they produce”. P. Kotler and G. Amstrongs (1994) explained the notion of market as follow: “A market is the set of actual and potential buyers of some products”. Also, this definition has placed some questions that firms need to answer: How do the customers choose among these many products? Why do they choose this product rather than that one? There are some kinds of market that marketing-standpoint suggested (JP Lacour - Lexique du Marketing, Editions “Bertrand - Lacoster”, Paris 1993,6) + Actual market: It is a market, including the consumers who only buy product of a unique firm. + Potential market: Is the market that an enterprise has ability to penetrate in the future + Theory market: Is Actual market + Potential market. As concerned above, market plays an important role in a firm’s development. In contrast, the firm’s development greatly depends on the market-share it has. Is there only buying, selling, exchange activities implement in the market? What will the firm do in order to secure its own market - share? What will the firm do in order to have good position in the market? What will the firm do to run business in an effective way? 1.2. Functions of market. Admittance function. Admittance function is reflected in consuming procedure, products’ consumable ability depends on the consumer’s approval. Reproduction process is accomplished when market’s admittance synonimize to consumers’ acceptance. Nevertheless, The market not only passively recognize but also inspect and analyse the result of reproduction process as well as buying and selling procedure through law of economy. Implemented function. By means of implemented function, commodities form exchange value themselves. Exchange function’s reflection in total demand and supply, goods exchanging has become an important foundation for setting up the structure of product. Function of regulation and excitement. Through the instrumentality of goods and services exchanging, market regulates and excites the development of business activity. Thus, market is not only the target, but also the motivation to effectuate objects and objective groundwork in order to develop the role of this function. Expression: + Creating motivation to firms. By studying market demand, producers take the initiative of moving to different field of business with the purpose of getting higher profit. In contrast, manufactures in disadvantageous position have chances to rise up and escape from bankrupt menace. + Conducting consumers in careful considering before deciding to buy any product. Information function. Information function only exist in the market, it concludes information about demand, supply, structure of demand – supply, relation ship between demand – supply and each kind of goods, price and its influent, etc. Becoming a decisive role in economic management, information need to be exactly collected, especially information of market, as a consequence of the most important step is decision-making. 2. Marketing concept. 2.1-Definition: We all know that a developed social closely related to market expansion level. In the development history of human -being, it holds the key position. Today, the origin of an enterprise’s business activity aims to dump goods and control the market movement. All victorious companies have the ability of completely satisfying and pleasing their target consumers. Meeting this requirement, marketing research is not only a specific function but also the whole firm’s philosophy. Therefore, marketing staff needs to clearly define the customer’s groups and to clearly determine how to profitably serve them and to make it more effective than competitors. This is an essential definition: Marketing is a management process of social property, in which individuals and communities gain what they expect by creating, canvassing and exchanging valuable things to others (P. Kotler, Marketing management). This notion was found based on some other concepts as needs, demands and relationships, market, marketing and marketing staff. Below are some other definitions about marketing that should be considered in the research process: + Marketing is a process, through which an organization has a creative, effective and profitable relation-ship with their market. + Marketing is a kind of creativeness arts and profitable satisfaction the customer. +Marketing aims to put forward right products and services to right persons, right addresses, right time, right price and exact information together with purchasing encouragement. +Marketing is a form of human activity, aim to meet their need and desire by means of exchanging. 2.2. The role of marketing in practice of a firm. “Marketing is so important that it should not be understood as a scheduled function. It shows the whole of business work from the angle of the ultimate result by customer’s field. Success in business are not determined by the producer but the customer”. (P. Drucker - Translated version) “Marketing have connection with many activities that the company use to fit the bill of creative and profitable business environment.” (R. Carey - Translated version). “The work of marketing with a view to adapt the variant social demands and profitable chances” (Nameless - Translated version). In short, In stead of bringing about business with the fixed and already known competitors, all the firms are acting in competitive environment against quick alternation with advanced-technology contenders, new law, new trade management policies and the decrease of consumers’ loyalty. With the purpose of fast adaptation to market changes, it is necessary for the existence of market research stuff in each firm. 3. Marketing research: 3.1. Definition: In modern life, information has becoming a kind of goods, it can be sold in the market like other merchandises, many informative services have appeared in order to provide necessary information for all the people in all fields. Especially in business activity, it plays a decisive role of running a business. An effective action greatly relies on exact source of information. In the world today, companies are trying their effort to get latest information that help one another for decision making process. Hence, there have been explosions of information war among leading firms. In spite of standing at the first phase of market economy, a new tendency has just been sprouted in Vietnam, infant information competitions. This matter is manifested in form of market research activity. Although market research is a new activity, it intimate connected with information finding. The fundamentals of marketing research is information gathering from many sources such as: customers, competitors, market, etc. Its existence has become an important part in decision making process because, right and exact information will help the firm rationally allocate the sources, running business in the most efficient way. * Marketing research is a significant link of marketing information system, which consists of people, equipment and procedures to gather, sort, analyze, evaluate and report the result by the firm, with the purpose of providing base-line information to managers. Existence of marketing research aims to make good marketing-intelligence’s shortcomings. This means, managers cannot wait for information to arrive in bits and pieces from the marketing intelligence system (everyday information about developments in the marketing environment that help managers prepare and adjust marketing plans), they often require formal study of specific situation. Marketing research will help them. * Marketing research is defined as the function that links the consumer, customers and public to the marketer through information - Information use to identify and define marketing opportunities and problems, to generate, refine, and evaluate marketing action, to monitor marketing process. (P.Kotler and his Co-Author, G. Amstrong, 1994). * Marketing research systematically studies necessary data set by marketing situation. The firm must gather, analyze, and report the result (Marketing Essentials, p21). * Marketing research engages in wide variety of activities, ranging from analyses of market potential and market shares to study of customer satisfaction and purchase intentions. “The aim of marketing is to make selling superfluous. The aim is to know and understand the customer so well that product or service fits and sell itself”, said Peter Drucker (Principles of marketing, p6). 3.2. The duty of marketing research: + Finding, collecting, disposing information about actual customers, markets and position of the firm. Providing exact information for the leader’s decision. + Making plans for future development direction. + Finding, analyzing the firm’s opportunities, and threats in the future, rely on information of present market. + Having a thorough groups of new demands, building advertisement measures, speeding up selling-goods and after-selling services. + Marketing researcher must clearly define groups of customers and which requirement the firm can serve in a profitable and more effective than competitors. II. Economic environment. 1. Environment of the economic. After the lifting of Trade embargo imposed on Vietnam by the US government in February 1994. Vietnam has strengthened its economic collaboration and developed relationship to many countries in the world. Since then, Vietnam has been becoming a member country in different International economic organizations such as ASEAN (1995), AFTA (1995), and APEC (1998). Also, it is on the way to join WTO (World Trade Organization) base on signing a Commercial Treaty with the US. As a consequence, Vietnam’s GDP growth in 1996 was at the peak of USD 19,9 million (9,54%) the average GDP per person has reached to USD 269 a year (World development Report 1997) and in the period from 1986 to 1996, the annual average of economic growth was in the space of 8,2% (ADB, 1997). However, being heavily affected by Asia Financial and monetary crisis in 1997, many Asia neighbour countries’ economic growth has felt down to negative. Thanks to the first stage of the economic market expansion, Vietnam’s GDP growth was decreased by 2,35% to 5.8% in 1998 and 4,8% in 1999 (3,35% fewer than it was in 1997) (ADB, 1999). In the year 2000, it is predicted that GDP growth will raise at least from 5,5% to 6% (Vietnam Economic Times, January 1996) Table 2 - general norms Norms Unit 1999 First quarter of 2000 GDP growth rate Industry production value growth Import turn-over Import turn-over speed Price of consumer’s goods % % million USD % % 4,80 10,40 11,54 23,30 0,10 5,56 13,40 2,94 33,80 0,80 (Source: Planning and investment Ministry) Though this decrease of economic growth, a number of capital had not been prevented from flowing into Vietnam. Foreign investment, which stood at zero just about more than ten years ago, has climbed to USD 28 billion in 1999. It comes from various sources: Foreign Direct Investment (FDI), Overseas Development ._.Assistance (ODA), commercial loans and money transmission from overseas Vietnamese. Together with capital circulation, abundant of foreign investors, enterprises and economic organizations... also came to Vietnam in forms of joint - ventures, representative offices and created an effervescent market in Vietnam. Table 3. Economic - social Essential target in the year 2000 Criteria Expectation GDP growth Industry production value Service Total of export turn-over Inflation National budget spending Jobs for Labor Force 7. Reduce poverty ration 5,5% -6% 10,5%- 11% 5% - 5,5% 11%-12% 6% Lower than 5% GDP 1,2 - 1,3 million Reduce to 11% (Source: Planning and Investment Ministry) Attending to international and area economy, Vietnam could attract more capital investments in order to enlarge the economy. In the other hand, it has brought many difficulties that domestic manufacturers must face: satisfaction the customer’s higher and higher requirement, high competitive intention of the economic environment with foreign made goods, especially the contraband commodity. For example, in 1999, the quantity of imported paper reached 193000 tons (increasing 19%, compare to 1998), in which, nearly 15000 tons were suspected for commercial cheating. 2. Industry structure. 2.1. Plywood production. Since it was found in 1960, Cau Duong Timber Factory has been the major provider of wooden product in the North area of Vietnam with the market-share of 40%. Water resistance plywood for construction is the main product of Cau Duong factory, the annual total output of 1000 m3. Presently, plywood is producing by self-contained process of production. The factory is purchasing rough-timber from its material suppliers and is carrying on production line. Due to the nature of production line, product’s need is exactly made in every working-step. Material providers: Mostly located on the mountainous areas, in some State-owned and legal private forest-stations. However, limited number of providers has led to the insufficiency of material input for the factory to use-up its capacity. As from the open door has been establishing in Vietnam in 1986, the fast changes in the form and content of Vietnam’s economy also brought the development of the factory. In addition, the sharp rise of urbanization rate in Ha Noi has created a strong demand for construction plywood and a number of Cau Duong factory’s competitors. Foreign antagonists came to Vietnam’s market altogether with foreign investment circulation owing to open-door structure; in the neighboring areas, processing activity of households also spread quickly. However, the big construction contracts in urbanization process mainly focus on joint - ventures between Vietnam and foreign partners or 100% foreign invest projects. Materials’ providers are usually chosen by putting forth for them to make tender for its supplying. Normally, Vietnamese providers fall those contracts into foreign suppliers’ hands, resulting from scanty of financial, limitation of supplying product quantity...All these above reasons has shown the actual situation that Vietnamese enterprises in general and Cau Duong factory in particular has not taken full advantage of their own market to gain in big projects. At present, Cau Duong factory has little chances to take part in big contracts of foreign construction projects. Its major consumers are local construction companies: Construction Company number 4 - Ho Chi Minh City, Cooperation LICOGI 18 LICOGI 18, VINACONEX, Ha Noi Construction Cooperation... with the purchasing power of 65% the total selling-product yearly. Besides, the slow down of construction rate in Ha Noi can probably accounted for declining economic tendency owing to Asia Financial and monetary crisis. Table4: Purchasing Proportion of Major Consumers in 1999 Consumer name Purchasing volume Percentage LELEX joint - venture - Ho Chi Minh City 2. Construction company number 4 -HCM City 3. LICOGI 18 Cooperation 4. VINACONEX 5. Ha Noi Construction Cooperation 102 m3 57 m3 132 m3 95 m3 156 m3 12,22% 6,83% 15,81% 11,38% 18,68% Total 542 m3 64,9% Total consuming capacity 835 m3 100% (Source: Cau Duong Timber Factory) 2.2. Notepaper procession. Cau Duong factory has processing this product since 1998 when it became a member of Bai Bang Paper Company. The factory has not enough financial potential to equip a self-contained line for manufacturing but the expansion on this product has brought a basic earning for the factory with designed capacity about 3000 tons annually. Materials (paper pulp) are provided by its parent company, completely satisfy the factory’s need in procession, it does not take more concern about finding material suppliers. In spite of paper procession, the factory still independent on consuming goods, however, producing and trading plans are made by its parent company. At the present time, the factory is making a deal with selling-agencies net, directly trading with end-users by its own distribution network has not been organizing yet. All these above reasons led to an indirectly affectation on splitting up the net profit into parts of Cau Duong factory. Lighter competitive situation of paper production compare to plywood manufacture, is probably a consequence of social’s strong demand that has not satisfied. However, in the first quarter of the year 2000, Vietnamese producers are facing up to unforeseeable losses owing to the sharp rise of paper-pulp price that indeed is still on the upward trend (the average increasing of 29%). Bai Bang Paper Company’s annual designed capacity is about of 55000 tons. It is estimated that Bai Bang would produce 65000 tons in 2000. In order to steady the output, it must import 10000 paper-pulp tons, take 15% of demand in this year, result to at least VND 23 billion decline of profit (Business and Marketing News - March, 2000). In this circumstance, paper branches are petitions for lessening the 10% Value-added Tax to 5% or correcting its selling price. Summary In order to exist and develop in competitive law of market economy, the important thing to every firm is to get exact information, determine the target consumers, finding potential market. Marketing research appearance aims to do these things for them. In addition, this activity provides serviceable information in helping the managers’ decision making process, strengthening the adaptation ability to the changes and consolidating the competitive power. The thing is that, the objective world is always in motion and ceaselessly change, so does the market. As an indispensable result, market research becomes an uninterrupted and regular activity in such unstable market. Marketing research is not only the most important factors, but also a starting point in building a firm’s strategies, in which they establish and implement business plans or perfect their market policy in order to gain the best result in business activities. For these above reasons, all the firms need to build up their own market policy, so that they can gather valuable and exact information for their activities. An enterprise’s effective activity can greatly depends on the consequence brought by market research. People consider it as the first step to run a business, to orient the way of developing, and to enlarge activities of a firm. With the purpose of providing connected information to the company, market research consists of determination the position of a firm in the market, a product or merchandise groups’ selling ability in an elsewhere market. Base on this foundation, the firm enhances its supply capacity to satisfy social requirement. In the economic market, the major substance of market research drives at studying and finding the development penetrable aptitude of the firm in the future. Chapter IIi Research methodology In this chapter, readers will clearly understand how the researcher did to meet the established goals. With the purpose of achieving the objectives this investigation, the study is implemented rely on both primary and secondary research. The first phase involved the review of desk-research of publications and analysis of the available publication and information by means of different sources: * Economic / Industrial reports on the sectors / sub - sectors to be studied * Previous market studies. * Some print matters: Vietnam Economic Times (VET), Vietnam Investment Review (VIR), Business and Marketing News. The second phase was the primary research that included questionnaires and face-to-face interviews to get feedback from the customer. However, the sample size was not enough to achieve the research objectives or to give a complete exact assessment. In arriving at an appropriate method of primary data collection, the researcher consulted these documents: * Principles of marketing * Marketing research on life insurance market in Hanoi (Tran Doan Kim, Boise State University, 1999) According to these documents, the researcher found that the most effective way is to conduct a survey using structure questionnaire, which aim to get the exact objectives of the study. Place of the survey: Eight urban districts of Ha Noi Sample size: Resulting from the time limited, the sample of this research is restricted by 30 respondents and 10 directly interviewers. Sample profiles: + Nationality: Vietnamese. + Sex: Approximately 50% male and 50% female + Occupation: Personnel in construction companies or having knowledge of construction. Sampling method: * With water resistance Plywood: Since plywood production closely related to construction activities, chosen respondents must be involving in building. The respondents’ number of each kind in this research area included: + 30 respondents were given questionnaires and time for answering last for 5 days. + 10 interviewees were chosen randomly. * With Note-paper processing: The market research on note-paper is fulfilled with the purpose of providing some base-line information about the present matter of taste of consumers and defines the future tendency. + 30 respondents were given questionnaires, including pupils in high schools, primary schools, students at universities and some pupils’ parents. Questionnaire design : After 3 days of studying models in textbooks and previous researches with the supervisor’s comments, questionnaires were sent to the respondents. Questions were divided into 2 parts: + General questions which asked the respondents to provide some personal information such as age, sex, occupation. + Specific questions which investigate customers’ feedback about the product. Most of the questions were made in a simple way so that respondents could easy to answer. The survey took about 10 days to complete. Chapter IV Results/findings I. Results. 1. Business activity analysis. Table 5: income statement Criteria Unit 1997 1998 1999 Density 98/97(%) 99/98(%) 1. Revenue VND 8076235783 8540633712 10415743802 +5.7 +22 2. Main products + Plywood m3 769 801 810 +4.2 +1.12 + Note-paper Tons 0 1250 1461 0 +16.8 3. Total cost of selling VND 265023651 367677486 416850793 +38.7 +13.4 4.Total management cost VND 397535172 427030642 542700619 +7.4 +27 5. Hand in State’s budget VND 727042653 762436012 805571496 +4.9 +5.7 6. Total capital A thousand VND 10607869 11748533 12453672 +10.8 +6 +Fixed capital 7481546 8032578 8822396 + 7.37 + 9.83 +Liquid capital 3126323 3715955 3631276 + 18.86 - 2.27 7. Labor force Person 293 298 300 +1.7 +0.7 8. Income per person VND 540000 584000 600000 +8.2 +11.3 9. Profit VND 18147568 17598482 35726563 -3 +103 (Source: Cau Duong Factory) As can be seen from the chart above, in 1998, Cau Duong factory has achieved growth ration in turn over with the increase of 5,7% compare to the previous year. For the pass 3 years, index of goods quantity and turn-over were on the upward trend; in concrete, owing to the procession of note-paper, a sharp rise in total revenue of 1999 (22% bigger than 1998) was made. Also, the amount of money that handed in State’s budget is on the rise with increasing rate of 4,9% in1998 and 5,7% in 1999. All these figures have shown that the satisfactory result on revenue not only contributes to State’s budget, but also puts up the incomes of labor force with a noticeable ratio (8,2% (1998) higher than 1997 and 11,3% (1999) bigger than1998). In contrast, the high total costs of the factory still remain problem. Especially, total costs of selling in 1998 of 38,7% are higher than they were in 1997 because of the more quantity of selling-goods, and the total management expense in 1999 exceeds its ratio in 1998 about 27%. If the growth rate of costs and growth rate of total revenues is put in comparison, the first seems much higher than the latter. The above problems have reflected on poor profit, it can be easily realized by seeing the figures from the table. For example, total revenue in 1998 was 5,7% was bigger than in 1997. However, the profit had got felt by 3%. In fact, high expenditures and business capital altogether have impacted the number of profit lost in 1998, which also affect on low competitive ability of Cau Duong factory. Doing business in such high cost, in order to strengthen effective activity, this factory is trying to find the way to step by step in minimizing the cost. A promising sign has appeared in turn-over report of 1999 with total revenue and total profit of 22% and 103% bigger than 1998. However, its financial scantiness limited the liquid asset mobilization for machinery and equipment improving, quality enhancing and product diversification. 2. Competition situation 2.1. Domestic competitors. Domestic rivals are the main opponents of Cau Duong factory, consisting of private economic sectors and some State-owned companies such as Tan Mai factory, Dong Nai timber factory, Dong Ha hardboard factory, etc. State-owned opponents: All of them located on the Central and South area of Vietnam, hence, their market is mainly in these provinces, included Hue and some provinces in the South of the Central region. They were built at the same time with the same size and capacity as Cau Duong factory in producing plywood. Their annual out-put capacity can produce 1100m3 of plywood and 10000 tons note- paper for each. However, in the domain of paper production, according to Vietnamese Paper Cooperation’s plan, they will be continued reformed and enlarged manufacture dimension in this year. Hence, they have more chances to strengthen their competitive ability against Cau Duong factory. At this time, their market-share of plywood production is about 33%, and note- paper of 28%. Particular trait of State-own antagonists. + Providing product with lower price than Cau Duong factory (From 5% to 10%). + Product’s quality is not as good as products of Cau Duong factory. + In field of paper production, they are direct branch companies of Vietnam Paper Cooperation. Thus, they have more chances to well-equip and to enlarge their efficiency for producing this product. * Private economic sectors: they have small size and faculty of production; specialize in processing Note-paper, normal plywood, which does not need precision and high technique requirement. However, they are huge-numbered factor in the economy with the market-share of 22% for note-paper and of 4% for water resistance plywood. Moreover, they have ability to meet narrowed and sub - market’s demand, together with satisfy the requirement of customers with scantily fund and do not require much about product’s quality. Private providers can use up their strong points in competition as follow: + Satisfying all kinds of customers and their requirement, due to providing low-price product (25% to 30% lower than Cau Duong’s price). +Quickly getting information, can probably a consequence of ample-net. +Tax-avoidance ability contributes to low cost price. +Buying material at low price, having enough input material for producing. They make purchase from various sources, mainly from illegal and adrift sources. Especially, in furnishing construction plywood, private sector can only supply goods to small and private construction projects…as a result of producing poor qualification products, tax avoidance and a situation of consuming goods without bills. All these reasons caused difficulties in consuming goods because, in big construction projects, constructors, who bought material without bill are not easy to have their projects checked and taken over. In general, product’s price of Cau Duong factory is usually from 20% to 25% higher than that in other domestic manufacturers, and its consuming activity now greatly depend on reputation of product’s quality. 2.2. Foreigner rivals. Major foreigner providers come from some Asia neighboring countries as Indonesia, Malaysia... (in producing plywood) and China (in providing note-paper). These products have their own competitive capability in quality and reasonable price (Only 5%higher than Cau Duong factory’s price of sales), owing to modern machinery, equipment, standard of management. In some cases, sensible price of imported product was given rely on the law breaking by importing illegal product or birbing officials for tax preferential. That made the local commodities less competition in price and quality. In addition, Vietnamese consumers often prefer foreign product to domestic one. Branch names are always considered in purchasing. Price and quality remain the most important competitive factors. Like the trend today, inland producers in general and authorities of Cau Duong, in particular, should make plan for market approaching, getting knowledge about consumers’ demand, in order to minimize the cost, to reform quality of product, to improve machinery. These works aim to use-up the resources, strengthen competitive ability of the firm against goods made by foreigners. Imported product become more attractive to local consumers than other interior one for some reasons: + Modern and well-equip facilities, equipment, etc. + Advanced technology, easy to form belief from consumers in quality. + Strong potential of finance have ability to adapt to the market changes + Deeply research on the market tendency, quickly catch up with consuming habit, satisfy customers in a fastest way In big contracts attended by foreign partners, domestic product is rarely used by reason of their idea of domestic product. Comparing to imported product, local products are a bit inferiors in quality, solidity and reputation. In addition, conception of Vietnamese people about foreign value that they make goods above also takes part in difficulties of domestic manufacturers. 2.3. Position of Cau Duong factory in the market. In order to assess activities of a company, people always put it in a concrete circumstance by defining its position in the market. Position of a firm always gives the most truthfully expression to its effective activity or success. With the superiority of large square of forest, wood-processing industry in Vietnam has fast expanded and been considered as a complex trade. Nevertheless, in recent years, this branch has been affected by some elements as: The government policy of resource prevention, result from large side of deforestation, short of material for producing because of forest resources exhaustion, etc. Besides, high competition has put pressure on activities of this branch. Holding market share of 26% (plywood) and 5% (Note-paper) there has been a great ability for the factory to make full use of present market. But running business in such a high competitive environment, the factory must find the way to develop internal force it self. They indicated the fundamental question to Cau Duong factory now as a deficient in absolute exploitation of its existing efficiency. In spite of high capability in producing plywood and note- paper, its annual output stand at 30% of designed capacity, about 800 m3 of plywood and 1500 tons of notepaper. This real state has made a drawback that is high lever of producing cost, which is resulted from high depreciation expense. In fact, due to its lower product quality, the selling-price of Cau Duong factory’s goods normally 15% cheaper compare to compare to imported one. However, its price is above other domestic products, especially from the private (about 20% to 25% dearer) Therefore, the factory is presently in competition with the two forces, price competition with local products and quality rivalry to foreign made goods. The main reasons for lacking-of competitive ability in Cau Duong factory: Backward machinery, cumbrous equipment (70% of facilities has been using since 1960s). Hence, its product is not better than imported goods, and ineffective action, waste in using time and material, defect of technique, etc. Standard of labor force’s knowledge in new technology assessment. Financial scantily causes restriction in technology renewable ability, production modernization, and quality enhancement. The more developmental the market is, the higher level it requires to enterprises. Thus, the main issue of Cau Duong factory at present time is trying its effort, aim to rationalize manufacturing process for meeting social and market demand, minimum the expense and gain the maximum profit. However, only by gathering exact information about the actual and potential market, this target can be implemented in order to reinforce its existing position and enlarge the market in the future. For this, it is indispensable to form a market research staff that helps Cau Duong factory to perfectly finish its target. In discussing about the competitive environment of Cau Duong factory, the researcher would like to show that its business surrounding is rather complex with plenty of competitors. Each kind has its own features but determinants are created by the firms it self. At present, Cau Duong’s less effective activity would seem to stem for insufficiency of a section which takes the lead in target selection and defining line of action. For example, The customer’s requirement satisfaction is implemented base on information about the market trend, purchasing habit, the firm can be successful if they answer all the determination questions for their existence. Marketing research presence in this firm is indispensable, its existence make the factory easier to have the sense of initiative in dealing with social trend, competitor’s strategies, market characteristic. Economic market application in Vietnam since 1989 has changed many things. Vietnamese enterprises no longer depend on the State’s protectorate. They need the way to affirm themselves. In high lever competition market, like other firms, Cau Duong factory’s actual difficulties will be surmounted base on real-strengthen promotion, shortcoming restriction, competitors researching, decision making... by market research activity. 3. Potential market. 3.1. Notepaper production. Presently, Cau Duong factory is processing note-paper for its parent company with the major market in the north provinces as Ha noi, Thai nguyen, etc. and some in the South: Da nang, Quy nhon... Annual total supply from 5% to 7% of market demand (about 75 million products), in which, approximately 57 million products appear in every new school year. According to these collected figures, total supply of Bai Bang Paper Company takes 30%. Product quantity of Cau Duong factory is restricted by machinery capacity, affected on paper processing; demand of its present market has not been satisfied yet. In some years coming, they intent to develop actual ability as well as enlarging its machinery capacity with the anticipatory production ability of 1700 products (increase 16,4% to 1999), that aim to make full use of present market. Besides, They are also planning to deeply infiltrate in Middle and South area market, lean on setting up small selling agencies net at the first step, which creates a basis for another construction plan. In ten years coming, a paper factory of modern technology will be built with the designed capacity of annual 30million product. In the field of high-class tissue paper production, including tissue paper, table-cover paper, toilet-paper...local manufacturers still open to foreign suppliers as Thailand, Indonesia, Japan, etc. due to their technique and production capital insufficiency. In this circumstance, Cau Duong factory will assemble a production process for these above products, which is used in hotel and airline. It is plan to begin to work in the third quarter of the year 2000 and put in operation in 2002. They estimated the initial investment about VND 100 billion with the capacity of 100,000 tons of product per years. 3.2. Market of plywood for construction. This product is very closely related to urbanization rate in Vietnam, the market for this product is very fragmented with many kinds of customer. However, its major consumers are construction companies and constructors such as Joint - venture LELEX- Ho Chi Minh City, Ha Noi Construction Cooperation, Corporation LICOGI 18... with the purchasing volume of 65% the total sales, the private and infrequent customers hold the rest 25%. In North area market, although Cau Duong factory only meet the social demand of 22% (result from abundant of competitors), chance to make full use of this present market is feasible in order to reinforce actual position and better satisfy its consumer’s need. As plan of this year, this factory is going to produce 1200 m3 of plywood in the next few years. Annual output rises of 20%-25%. In the market of Ho Chi Minh City, the consumer now tend to use local made goods, owing to the same quality and less expensive than imported (about 15%). Therefore, domestic wood is strengthening its price competitive superiority against imported one. Up to now, from 25% to 30% of product has been sold in Ho Chi Minh City, its become a potential large market to the factory. With annual demand stand at 60% of the whole country, Ho Chi Minh City is the most crowded and the fastest Leading City of economic growth in Vietnam. Because foreign investment projects mostly implemented and the fast speed of urbanization has changed Ho Chi Minh City the most modern city in Vietnam. In conclusion, the market enlargement strategies of Cau Duong factory should be carried-out by fully exploitation of the actual market and searching for the new market policy. 4. Political and legal factors. Political and legal institutions are considered as a foundation and frame, in which, people must obey. Its existence is not only in social category, but also is in economic activities. Political and legal environment consists of the government policies, political structure, and administration management system that effect on all fields of a country. Regulation and law content in legal environment can create a favorable or obstruction condition to marketing activities. (Truong, Marketing in business management, 1998) In Vietnam today, the real state of political and legal factors is that law corruption, rampant smuggling, confusing legal system... should have been recognized as the main factor, which discouraged foreigner investors and weaken the economy. The disadvantage of Vietnam legal system are shown in cumbersome provision, unstable, inexactitude...that have not attracted overseas businessmen and hold back domestic manufacturers. Vietnam’s political stability coupled with its leaders’ commitment to economic growth created a reason for economic factors to maintain a fairy optimistic of further economic growth prospect. The major instrument that the government uses to act upon economic activities is tax-policy. Vietnamese government has been applying a Value-added-tax policy to all the firms since 1999. This policy drives at getting more income to State’s budget with 10% worth of selling-price. Being affected by Value-added-tax, all kinds of product in Cau Duong factory has increased 4% in selling-price as a result of maintaining the old price before applying this policy. The main reason to maintain the price is that, this actual price is being in the minimum but it is still from 20% to 25% higher than other firms are. If Cau Duong calculated value-added-tax into its selling-price, it would far more expensive and affect to consume ability. Like the trend to day, Vietnam is on the way to attend the international economy, the government must initiated many concrete solutions to continued improve the investing environment. That consists of the policy system issue and perfection, qualitative delineation improvement, investing stimulation, State management effectiveness strengthen...(VIR, March 2000) However, according to Financial Ministry, Vietnam has just crossed out the tariff impose on some imported products in April 2000, following the international integration commitment. It means, protective tariff mechanism of State to domestic product has been come down and many foreign manufacturers will build up competitive intensity. In this circumstance, local enterprises and Cau Duong factory in particular must be more and more dynamic, active and try their best to be steady, to develop and enhance its competition power. 5. Demographic factors Vietnamese people well known for its population crowded, approximate of 80 million people with the annual average growth of 9%. The population blooming has led to a strong demand in many fields: Accommodations, jobs, study, and health-care, etc. For the pass few years, together with impressed increase in GDP growth, many foreign investment projects have been flowing to Vietnam for infrastructure projects, included Houses, schools, hospitals... Popula._.