Over the past 10 years, with the efforts of the entire textile and garment industry, the localization rate of raw materials has improved significantly, from 20 – 25% in 2000 – 2001, has increased to about 50% now. now on. However, according to a representative of the Vietnam National Textile and Garment Group (Vinatex), qualified fabrics for garment export are still lacking. The reason is that although the textile industry has developed strongly, the dyeing stage is very weak. Domestic enterprises do not have enough capital to develop the dyeing industry, especially investment in wastewater treatment systems.
Textile and garment is one of the few industries of our country capable of competing with other countries, so the Government has identified it as one of the priorities at the negotiating table for free trade agreements (FTAs).
In order for textiles and garments to enjoy preferential import duties from FTA signatories, the product must meet the conditions of origin under the terms of the agreement, such as the yarn-starting rule or the fabric-starting rule. … However, except for Vinatex and a few enterprises that have the strength to invest in yarn, textile and fabric production, most are still waiting for the State’s general policy for the development of supporting industries, including textiles. garment industry, the most essential stage is the construction of textile and dyeing industrial zones with wastewater treatment systems.
Meanwhile, many FDI enterprises, with their outstanding advantages in capital and technology, are implementing large investment projects in the production of raw materials, accessories and apparel to take advantage of tax incentives from FTAs that they cannot afford. Vietnam is about to sign. Many economic experts warn that, most likely, Vietnamese textile and garment enterprises will export “on behalf of” FDI enterprises.
Seeing opportunities, but grasping and exploiting to boost exports is not easy for Vietnamese textile and garment enterprises. From now until the FTAs are signed and come into effect, there is still time for domestic enterprises to continue to expand their sewing capacity, invest in raw materials and accessories, and link between yarn, fabric and garment production stages. to complete the supply chain.
However, for small and medium enterprises (SMEs), the implementation of a competitive strategy in the raw material area is not simple.
For example, at an enterprise specializing in garment processing for export in Ho Chi Minh City, with the main export market being Eastern European countries. In the past time, the company’s competitive advantage is thanks to the source of cheap raw materials from neighboring countries, accounting for 80% of production materials. Therefore, the Company’s exported goods have a competitive advantage in price. As a result, the Company has maintained a stable export market for many years.
However, recently, the raw material market of the Company has experienced many fluctuations: new competitors have appeared to compete for the source of goods, the policies and mechanisms of countries with low-cost raw materials have changed. The import of raw materials encountered many difficulties and the Company began to fall into a shortage of raw materials to meet export orders.
Faced with that situation, many customers complained and some customers canceled their orders. If the company cannot quickly find a source of similar-priced raw materials to replace it, the cost of its products will increase and it will lose its competitive advantage.
Faced with that situation, the CEO of this company said that it was time to change the strategy. “Previously, the Company mainly relied on competitive advantage in price. Now, this advantage is no longer there, so other competitive advantages must be created,” said the CEO.
According to this CEO, the company is forced to find new export markets and position itself in the market segment and higher-end customers. Besides, it is necessary to invest in building a brand image in the domestic market.
Meanwhile, many shareholders of the Company believe that strategy should not be changed because of the immediate difficulties. “What is good, what creates an advantage, the competitors have already done it. Therefore, the Company needs to find other cheap sources of raw materials to replace it. If not, then proceed to cut or save costs, determined to maintain the strategy of creating competitive advantage by price. In fact, over the years, thanks to this strategy, the company has been able to hold on until today,” said one shareholder.
Both of the above opinions have their merits, but the CEO still does not have enough data and arguments to choose the main solution for this situation. Therefore, the CEO decided to sit down with the shareholders again later this week to have a clearer discussion.