Solutions to develop export markets for Vietnam’s leather shoes’

nesses to export goods to the world market. 2.2.1.5. Supporting to handlethe disputes in international trade The Ministry of Industry and Trade has strengthened coordination withthe asociationsto improve the representation of businesses, especially small and medium-sized enterprises. The ministry is also considered asa focal point for providing information on trade remedies, gathering resources for businesses to better coordinate with state agencies and to participate more effectively in lawsuits and handling disputesin international trade. 2.2.1.6. Promoting the reformation of administrative procedures to facilitate trade The government has promulgated the Law onprovision of assistance for small and medium-sized enterprises and thedecreeproviding legal assistance for small and medium-sized enterprises, which identifies supporting solutions for small and medium-sized firms in various fields, such asproviding legal information and legal advice for businesses on company’s establishment procedures, tax procedures, regimes accounting, intellectual property, trade promotion about construction, product development, commercialization of products, calling for investment capital,knowledge of standards, technical regulations, test production, testing and quality measurement. 2.2.1.7. Activities supporting the production and export of the leather - footwear industry including capital and financial support, human resource training, and supporting industrial development. 2.2.2. Practices of the association In terms of trade associations, the content of developing the export markets of goods includes: performing the function of acting as a bridge between the state and exporting enterprises; promoting trade promotion activities;having a voice toprotect enterprises and goods in trade disputes; and providing technical assistance and training to improve their export capabilities. 2.2.3. Practices of the enterprises The content of developing export market at enterprise level consists of 4 steps: Step 1:Research and assess export markets Market research is the first and a crucial step for any export market development strategy of the business, which helps enterprises produce and export leather shoes productswith clear directions to implement export market development strategies and objectives in each stage of their development. Step 2: Set up export market development strategy - Market penetration strategy: Most of the export leather shoes enterprises in Vietnam are choosing this strategy to maintain their position and maximize the traditional and key export markets, which account for a large proportion in Vietnam's exports to the United States (39.6% in 2017), EU (37%), China (5.8%), Japan (3.4%), South Korea (2.6%) (taking up a total of 86% of the export turnover in 2017) by increasing sales, expanding market share and adding value to the product lines that have been accepted by the markets. - Market expansion strategy: Since the traditional market gradually saturated and showed somesigns of slow growth, a number of exporting leather shoes organizations started to exploit new and potential markets that Vietnam has not yet captured a lot of market share, such as in Eastern Europe, the Middle East, Africa, ASEAN, South America, to promote traditional product lines that have been proven quality and brand.Vietnam's signing of a series of FTAs with new trading partners has helped leather shoes products initially set foot in new markets such as in South America, Eastern Europe and ASEAN. - Product development strategy:Several leather shoes companies have boldly improved their products and exploited different product segments, namely popular, mid-end, high-end, green and environmentally friendly products, in existing markets. - Diversification strategy:This strategy is rarely used by Vietnam’s leather shoes enterprises as consuming new products in new markets requires firms to possess a large amount of production resources in order to develop their products as well as distribute them to potential markets. Step 3: Develop and implement export marketing strategy (7Ps) Œ. Product: theform and quality In the past few years, domestic enterprises have begun to grasp the technology in the design of footwear, some companies have formed a design team not only to receive designs from partners but also build their own new designs.In terms of product quality, over the years, Vietnamese leather shoes has affirmed its position in the world market. The quality of leather footwear products is reflected in the entire quality management cycle from the supply and processing of raw materials to finished products, packaging, andlabeling. . Price: processing price and price of finished products In the segment of leather-upper shoes, coded HS6403, Vietnam's products are highly appreciated for quality in export markets with an average value of US $24.13/pair and much lower thanhigh-class leather shoes from Italy (US $65.44/pair) and France (US $65.64/pair). Making good use of FTAs, Vietnamese enterprises need to orient their own branding,organize their production activities and further control the leather and footwear industry's value chain to maximize profits. Ž. Place: distribution channel and export entry modes Regarding the distribution channel and export entry modes, it is estimated that 85% of Vietnam's footwear export turnover is implemented by CMT method, which completelyprocesses according to the designs and raw materials provided by customers 13% of export turnover is under the FOB method, which processes according to the designs provided by the customer and the producer takes the initiative in the source of raw materials and auxiliary materials. Only 2% of the export turnover is conducted with ODM method, of which manufacturerexports products according to its own designs and brands. . Promotion: trade promotion and e-commerce Conmpanies manufacturing leather shoes products have actively approached many trade promotion channels and participated in variousprograms, conferences, fairs and trade promotion exhibitions to introduce their products to both domestic and foreign markets. In the 4.0 industrial revolution, with the development of digital, e-commerce has become an effective trade promotion channel that helps businesses reduce costs, reach customers promptly and take advantage of numerous e-commerce B2B (business-to-business) promoting channels, such as Alibaba and Amazon, to access and penetrate potential export markets. . People: Domestic leather shoes firms are facing a shortage of human resources both in quality and quantity, including design teams, skilled engineers and unskilled workers.At present, manufacturing enterprises of the industry mainly train laborers themselves, especially unskilled laborers.In particular, as scarcity and labor competition are common, businesses often face the lack labor force; therefore, to retain workers, businesses must ensure the favorable rights and good policies for employees, healthy and cleanworking environment, free health check-up. ‘.Process: A variety of leather shoes companies have actively applied quality management processes to suit each export market’s standards, such as ISO 9001, ISO 14000, BSCI:2003 standards, occupational health and safety management systems OHSAS 18001, risks management standards ISO 31000. Besides, organizations also apply production management tools such as 5S, Kaizen, LEAN, Cleaner Production (CP), KPI, TPM, MFCA, QCC. [46] ’. Physical: machinery, equipment, infrastructure and financial potential In order to meet the large export orders and reduce time to complete the orders, the leather shoes export enterprises have focused on investing in machinery and equipment to increase productivity in each stage of production. Machinery and equipmentused to manufacture leather - footwear products in Vietnam are at average level compared to the world so investing in equipment may help businesses increase productivity, reduce costs and enhance labor safety in some stages. Step 4: Check,assess, implement, and completestrategies to develop export markets Re-assesstheexport market development strategy and business activities are periodically indispensable practices of the enterprise. After each fiscal year, theleather shoes exporters organize conferences to re-assess the situation of production and business in general and export market development strategy in particular. Especially, in the context of internationally fast-changing market, firms must evaluate their strategies and environment in order to make appropriate adjustments to their business resources and objectives. 2.3. Assessment of achievements, limitations and causes of developing export markets practices 2.3.1. Achievements and causes In the 10-year period from 2007 to 2017, Vietnam was always in the top 5 largest footwear producers in the world in terms of export value, which is in the same group with the leading exporting countries including China, India and Brazil.In 2018, the leather and footwear industry reached over US $19.5 billion in export turnover, up 8.4% compared to the same period in 2017. In other words, while total footwear exports reached USD16.238 billion, leather-upper shoes, coded HS6403, took about USD 4.95 billion, accounting for about 30% of footwear exports. The achievements in developing the export markets of Vietnamese leather shoes products have been accomplished by the following reasons: (1) Stable business environment, (2) Skillful labor with adaptive capacity, (3) Competitive production costs, (4) Established long-term partnerships with many major brands in the world, and (5) Convenientlocation and infrastructure for Vietnam to export goods rapidly to markets. 2.3.2. Limitations and causes 2.3.2.1. Limitations and causes from the government Firstly, Vietnam's system of policies and laws has not kept up with international law standards, based on WTO commitments and ‘new generation’FTAs, especially, not creating a legal corridor to encourage SMEs to grow. Secondly, leather shoes products are not yet considered as a strategic export item. Thirdly, the capability to implement FTAs ​​at all levels of the state, associations and enterprises is still limited; therefore, it is necessary to study a number of new export markets that are potentially suitable for businesses such as Africa, China. East, South America. Fourthly, trade promotion activities have not really motivated SMEs and not caught up in the context of 4.0 industrial revolution and digital economy as well as new forms of trade promotion through e-commerce channels. Fifthly, the system of standards, technical standards and conformity assessment process of the industry is still lacking. Sixthly, with the rapid fluctuations of international trade, the ability to forecast is limited, thereby the enterprises still passively response to the markets and handlethe issues. 2.3.2.2. Limitations and causes from the industrial association Firstly, policy consultations for state management’s agencies have not been regularly paid attention to. Secondly, the resources have been limited and not yet focused. Thirdly, the association has not gathered the strength of the business community in developing export markets. Fourthly, it is still lacking the sufficient surveying activities to build database of the industry on production, labor, supporting industry and the supply of raw materials. 2.3.2.3. Limitations and causes from the enterprises The research presents some limitations of enterprises in developing export markets of leather shoes products, which are shown on three aspects: building an exportmarketdevelopmentstrategy (Ansoff model); selecting modes of export; and implementing the export market development strategy (7Psof the marketing mix). Although the growth rate is quite high in the export processing and the scale of the business increases, the domestic leather shoes enterprises still suffera number of limitations: financial resources, design capacity, cord capacity,undeveloped technology and equipment, weaksupporting industry, leather materials and accessories, which make Vietnam’s leather shoes businesses unable to deeply integrate into the export value chain. It can be affirmed that the core cause of limitations in the development of export markets of enterprises lies in the ‘outsourcing production model’since Vietnam's leather and footwear industry has been ‘safe’ for too long with its lowest position in the product value chain. Regarding export market development strategy: Ansoff model - Marketpenetration strategy: Enterprises producing leather shoes for exporting in Vietnam are choosing to maintain their positions and make the most of key markets such as the United States, the EU, China and Japan. However, while Vietnamese enterprises are mainly SMEs applying indirect or processing mode of export, the barriers in developed markets are immensely high, which leads to very low added value to the products. The strategy and method of developing export markets in width is only suitable for the first stage in international economic integration, enterprises need to be aware of developing export markets in depth and to proactively dominate the upstream stages of the value chain, focusing on building their own brands. - Market expansion strategy: Some enterprises produce leather shoes products by seeking and exploiting new and potential markets that Vietnam has not gained much market share, such as in Eastern Europe, the Middle East, Africa, ASEAN, and South America.This strategy and method of developing export markets is in line with the current capability of leather shoes enterprises. However, since these markets’ barriers to entry are low, some potential businesses need to consider the sustainable development steps, such as direct export, direct investment, owning the distribution channel and brand when establishing the market position. - Product development strategy: Several Vietnam’s leather shoes enterprises have boldly improved and exploited their popular, intermediate, high-end, green and environmentally friendly products in existing export markets, which is a favorable sign as investing in R&D, developing models and own brands can lead the leather shoes business to owning the international playground. The development of new segments of leather footwear requires companies to pay careful attention to the needs of the international market, methodically investing on the design stage, inputs, production lines and equipment, manufacturing procedures and high quality manpower. - Diversification strategy: This strategy is difficult for Vietnam’s leather shoes enterprises to apply because consuming new products in new markets requires enterprises to possess huge amount of resources, to improve products as well as introduce distribution to potential markets. Regarding methods to develop export markets (modes of export): Enterprises producing leather shoes with domestic capital mostly choose to export indirectly through outsourcing for foreign partners, which makes enterprises passive in developing export markets. Regarding the implementation of export market development strategy (7Ps of the marketing mix) Œ. Product: On the one hand, firms producing leather shoes mostly received designs from foreign design units and outsourced to partners' designs.Many businesses manufacturing leather shoes have the design capability but lack the financial resources to carry out marketing strategies to promote products; consequently, the efficiency is not high, the self-designed products have not created an effect in foreign markets. On the other hand, the fashion market in the world is so vibrant that always requires new models and new products to catch up with the consumer market. . Price: The average value of a Vietnamese leather shoes product (US $24.13/pair) is at the average level of the world. As the footwear enterprises mainly perform the outsourcing, the domestic value collected is exceedingly low. Ž. Promotion: Leather shoes producingenterprises have approached many trade promotions channels such as conferences, fairs, exhibitionsto promote the brand of Vietnamese leather shoes to themarkets. Currently, with the development of the 4.0 industrial revolution, businesses need to explore new trade promotion methods such as business matching and e-business matching, e-commerce B2B, business information. . Place: The same as the distribution channel and export entry modes. . People: At present, domestic leather shoes enterprises are facing a shortage of human resources both in quality and quantity from design and marketing department to skilled engineers andunskilled workers, whích results inlow productivity andincreased operating costs for businesses. ‘. Process: Most organizations have applied the product quality management processes regardinginternational standards and environmental standards like ISO 9001, EMAS, and Ecolabel. ’. Physical evidence: Small businesses, due to limited capacity, may not receive direct orders from foreign partners but outsource from large enterprises and FDI enterprises in particular stages. Besides, up to 90% of machinery and equipment in the production of leather shoes in Vietnam have to be imported. CHAPTER 3: SOLUTIONS TO DEVELOP THE EXPORT MARKETS FOR VIETNAM’S LEATHER SHOES IN NEW CONTEXT 3.1. New context and prospects for developing export markets of Vietnamese leather shoes to 2025, with a vision to 2030 3.1.1. New context Firstly, the trend of globalization and international economic integration is still the dominant trend around the world in the future. Secondly, the Fourth Industrial Revolution brings a drastic change in productivity, scale and management model, which affect all economies in the world and in all sectors, including the leather and footwear industry and the leather shoes manufacturersin Vietnam. Thirdly, due to low labor and environmental costs, other nations tend their to move factories to Vietnam and Southeast Asia, which is an opportunity for Vietnam to take advantage of foreign investment flows around the world in order to boost production and to participate in global value chains. Fourthly, the escalatingtrade protectionism due to the impact of the global economy, along with the consequences of the US - China trade war make developing countries like Vietnam find solutions to counteractprotectionism and trade facilitation. 3.1.2. Forecasting on the development of export markets for Vietnam's leather shoes products in the new context 3.1.2.1. Regarding export markets In general, it is forecasted that the export market of footwear in general and leather shoes products in particular in Vietnam will still focus on high turnover and traditional export markets such as the EU, the United States, China, Japan and South Korea, followed by the markets of ASEAN, the Middle East, Africa and South America. 3.1.1.3. Regarding modes of export Firstly, indirect export is applied in the form of outsourcing to foreign partners, who will distribute the goods to markets around the world. Secondly, direct export with the brand of a manufacturing unit is a form of production that enterprises directly perform the exportation of their goods to foreign partners without going through intermediaries.In the EU and the U.S. markets, the share of exports directly under the brand name of domestic manufacturers is expected to increase but unlikely to grow sharply. Thirdly, entrusted export is forecasted not to increase, and may decrease. Leather shoes produccing businesses are now becoming more and more professional in export trade so the forecast of export by trust may be reduced. 3.2. Goals and prospects of developing export markets for leather shoes products on the world market 3.2.1.Goals by 2025 The government has oriented the development of the leather and footwear industry, as an industry of the economy, that promotes the creation of jobs for society, raises workers' incomes and fulfills their responsibilities tocorporate social responsibility. 3.2.2. Prospects of developing export markets for footwear products in the new context Vietnam has now been promoting the signing of a series of FTAs with potential markets for footwear like the EU, theU.S., Asia Pacific; as a result, it will create great price competitiveness compared with many other exporting countries that have not signed theFTAs. 3.3. Some perspectives on developing export markets for Vietnam's leather shoes products Firstly, developing the export markets for Vietnam's leather shoes products is to implement the goals, strategies and visions of the party and the state in order to diversify and multi-lateralize export markets in the fast-changing context. Secondly, the development of export markets for leather shoes products must conform to the overall socio-economic development planning and the national industrial development planning as well as the local socio-economic development planning. Thirdly, developing export markets for leather shoes products must mobilize economic sectors, domestic resources and attract foreign investment to build and develop Vietnam's leather and footwear industry in the direction of proactively serving exports, which helps increase foreign currency earnings for the country, jobs and incomes coupled with improving the lives for workers. It is a need for considering leather shoes as a strategic product, in which development of leather and supporting industries is the core of the industry. Fourthly, developing the export market for leather shoes products associates the rapid development of production scale with the focus on expanding the export market as well as the domestic market, also the research on the application of scientific technology and the development of quality human resources. Fifthly, developing the export market for leather and footwear products is to strongly develop the production of raw materials and supporting industries for the leather shoes industry. Sixthly, developing the export market for leather shoes products is a fast, stable and sustainable development of enterprises that produce leather shoes products in the direction of specialization, modernization and application of new modern equipment, environmentally friendly approach. Seventhly, developing export markets for leather shoes products to enhance the capacity of self-design, develop new products, manufacture high-quality leather footwear with high added value and prioritize application of automation technology in production management organization. Last but not least, enterprises must make efforts to overcome challenges and become pioneer in "finding a way to open the realms", dare to develop and dare to expand export markets to reach out to the world. 3.4. Orientation of developing export markets for Vietnam's leather shoes products 3.4.1. Orientation from the government to develop the export marketsforVietnam’s leather shoes 3.4.1.1. Actively international integration to develop export markets: Vietnam actively integrates into the international economy through the negotiation and signing of many ‘new generation’ FTAs including EVFTA with the EU, CPTPP with 11 important trade partners in the world, RCEP (China), VKFTA (Korea), VN-EAEU FTA (Eurasian Economic Union). At this point, we can consider the signing FTAs with key partners, such as Africa, the Middle East, Central and South America, Eastern Europe, the United Kingdom, in order to explore new and potential markets in the world. 3.4.1.2. Formulating strategies and plans for development of leather and footwear and supporting industries to develop export markets: The government plays an crucial role in building up strategies and the development of the leather and footwear industry, namely strategic product planning, planning and development of clusters and secondary regions for leather shoes production activities. Furthermore, leather footwear must be considered as a strategic export item. Planning of development centers and production capacity according to territories are based on the advantages of human resources; the supply of raw materials; transportation and seaports in the direction. 3.4.1.3. Orientation of developing export markets for Vietnam’s leather shoes products This orientation includes market orientation of the USA, the EU, ASEAN, Middle East and Africa, Russia and Eastern Europe and South America. 3.4.1.4. Assistance in resolving international trade disputes Vietnam promulgates the Competition Law (2018) and theordinanceon anti-dumping of imports into Vietnam, anti-subsidy and trade remedies in accordance with international law standards and practices. This is an important legal basis for Vietnam to apply safeguard and trade countervailing measures when necessary. The Ministry of Industry and Trade upgra