Training model for owners of small and medium sized enterprises on the air

HOCHIMINH CITY UNIVERSITÐ LIBRE DE BRUXELLES
OPEN UNIVERSITY SOLVAY BUSINESS SCHOOL
MMVCFB 6
MASTER IN MANAGEMENT PROGRAM

NGUYEN DUC BINH
SMALL AND MEDIUM SIZED PROMOTION CENTER
HOCHIMINH CITY BRANCH OF VIETNAM CHAMBER OF COMMERCE AND INDUSTRY




TRAINING MODEL FOR OWNERS
OF SMALL AND MEDIUM SIZED ENTERPRISES
ON THE AIR

MASTER IN MANAGEMENT THESIS

ADVISOR: DR. TRAN DU LICH







HOCHIMINH CITY, 2007
Training Model for SMEs’ Owners on the Air
ii

COMMITMENT






“I commit that this is my own research.
All figures and results stated in this thesis are true”.


Nguyen Duc Binh

Training Model for SMEs’ Owners on the Air
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ACKNOWLEDGMENTS


This is a rare opportunity for me to express my profound gratitude to the
co-directors program, Prof. Michel Allé and Prof. Tran Anh Tuan and all
professors and coordinators of the Viet Nam - Belgium Master in Management
Program, who give me a good opportunity to study this useful program. I
would like to express my sincerely thanks to Dr. Tran Du Lich for his
invaluable guidance, constructive comments, explicit direction and
encouragement throughout the study period.
My thanks are also extended to Mr. Le Binh Hung, Deputy Director of

Hochiminh City Branch of Vietnam Chamber of Commerce and Indutry; Mr.
Pham Hoang Tien, Deputy Director of Small and Medium Sized Enterprises
Promotion Center; Ms. Tran Mai Trinh, Director of Information Department of
Hochiminh City Institute for Economic Research and all of my colleagues for
their valuable advices and warm supports for my study.
Thank all MMVCFB6 members and the Faculty of the Hochiminh City
Open University for their help and boundless inspiration.
Last, but no least, grateful thanks are conveyed to my family for their
support and great inspiration which encouraged me to pursue this study
successfully.
Training Model for SMEs’ Owners on the Air
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ABSTRACT


The fast globalization and integration process nowadays brings a lot of
opportunities but also many threats. Facing with many difficulties, SMEs have to
manage themselves to sustain and develop by strengthen their competitiveness via
business training. On the other hand, realising SMEs’ current situation, the
government issued several support policy and training programs for SMEs, but due
to many reasons, there is still a big gap between the SMEs training demand and
supply, especially on how to start up and improve a sustainable business.
How to fill the gap with current spare and limited result training programs?
In other words, how to fill the gap by creating an opportunity for more SMEs to
approach a relevant training program?
A new model for business training with appropriate content and popular
training method will be the answer to those questions. By analysing SMEs’ training
needs and current situation, the Training model for owners of SMEs on the Air is
designed with systematic training topics on how to start and improve a business
using wider approach to target beneficiary via practical application of advanced

technology on mass media. On the other hand, the Training Model can mobilize
many valuable resources from the government support, donors’ sponsor and SMEs
contribution to overcome SMEs difficulties. The Training Model with its practical
content will not only assist SMEs’ owners to improve their businesses but also
enable potential businessmen to start up new businesses. At the same time, it will
contribute important part in achieving the government strategy on accelerating new
business establishment as core base of economic development. Finally, as result of
new SMEs start-up, the Training Model will help create more qualified jobs, reduce
poverty, balance local economic structure and therefore ensure a stable social
economic development.

Training Model for SMEs’ Owners on the Air
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TABLE OF CONTENT
ACKNOWLEDGMENTS III
ABSTRACT IV
TABLE OF CONTENT V
ABBREVIATION XI
LIST OF TABLES AND FIGURES XII
CHAPTER I 1
INTRODUCTION 1
1.1 BACKGROUND 1
1.2 OBJECTIVES OF THE STUDY 2
1.3 SCOPE OF THE STUDY 3
1.4 STUDY METHODOLOGY 3
1.5 LITERATURE REVIEW AND APPLICATION: 4
1.6 RESEARCH FRAMEWORK 5
1.7 THESIS STRUCTURE 5
CHAPTER II 6
RATIONALE OF TRAINING MODEL FOR SMES’ OWNERS ON THE AIR 6

2.1 OVERVIEW ON SMES IN VIETNAM 6
2.1.1 SMEs Definition 6
2.1.2 SMEs’ important roles in the economy 9
♣ Create more new jobs. 9
♣ Contribution to GDP 9
♣ Enable free competition 9
♣ Attracting domestic investment and exploiting local resources. 9
2.1.3 SMEs’ advantages and disadvantages 10
2.1.3.1 Advantages 10
Dynamic, flexible and accommodate themselves to market diversity. 10
Easy start up with small capital. 10
2.1.3.2 Disadvantages 11
Limit in financial capability. 11
Disadvantages in buying input material, equipment and selling products. 11
Lacking of information and management skills. 11
Difficult to attract qualified managers and skilful employees. 11
Unstable business operating 11
2.2 THE ANALYSIS OF SMES’ TRAINING NEED 12
2.2.1 The importance of training needs assessment 12
2.2.2 Methodology of survey 13
2.2.3 Some key results of SMEs training need surveys 14
Year of business establishment 14
Subjects of training courses 15
Training mode 16
Training time 18
Training duration 19
Motives for taking part in management training courses 19
Reason for not participated 21
Training and difficulties/ problems solving 21
Training service providers 24

Training fee 26
2.3 GOVERNMENT SUPPORT ON SMES DEVELOPMENT 27
2.3.1 Degree Number 90/2001/ND-CP: 27
2.3.2 Program No. 143: 27
2.3.3 Instruction No. 40: 28
Training Model for SMEs’ Owners on the Air
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2.3.4 Decision No. 236: 28
2.4 TRAINING PROGRAM FOR SMES ON BUSINESS START-UP. 29
2.4.1 Government support training programs on start-up. 29
2.4.2 Other SMEs training programs on business start-up. 30
2.4.2.1 Business Edge 30
2.4.2.2 Start and Improve Your Business Training Program (SIYB): 30
Some remarks on ouputs of business start-up training programs 31
On demand side 33
On supply side 34
CHAPTER III 35
IDENTIFYING TRAINING MODEL FOR SMES’ OWNERS ON THE AIR 35
3.1 OVERALL INTRODUCTION OF THE TRAINING MODEL 35
TARGET GROUPS OF TRAINING MODEL FOR SMES' OWNERS ON THE AIR: 35
3.1.1 Main Components Of Training Model For SMEs' Owners On The Air 36
3.1.1.1 First Component - A Radio Show Broadcasted Live: 36
3.1.1.2 Second Component – Study Groups: 37
3.1.1.3 Third Component - Training Material: 37
3.1.2 Main Activities and Time Frame 38
3.2 TRAINING CONTENT 39
3.2.1 Business Awareness: 40
3.2.2 Business Planning: 40
3.3 ORGANIZATION 41
3.3.1 Preparation: 41

3.3.1.1 Selection Of Leading Organization 42
3.3.1.2 Selection Of Local Focal Points 43
3.3.1.2.1 Organizing Focal Point 43
3.3.1.2.2 Technical Focal Point 43
3.3.1.3 Selection Of Trainers 45
3.3.1.3.1 Selection Of Leading Trainers 45
3.3.1.3.2 Selection Of Local Guest Speakers 45
3.3.2 Implementation Process 46
3.3.2.1 Key Partners Meeting For Preparation And Coordination: 46
3.3.2.2 Radio Show Production 47
3.3.2.2.1 Pre-Tape Recording the First Session: 47
3.3.2.2.2 Making Interviews and Presentations: 47
3.3.2.3 Introduction Campaign: 48
3.3.2.3.1 Brief Introduction Meetings In The Province And Districts. 48
3.3.2.3.2 Propagandizing By Leaflets And Posters: 48
3.3.2.3.3 Advertising On TV And Radio: 49
3.3.2.4 Participant Recruitment 49
3.3.2.5 Selection of Study Group Leaders. 50
3.3.2.6 Training for Study Group Leaders 50
3.3.2.7 Training For Local Radio Station’s Commentators And Technicians: 51
3.3.3 Trainers’ Tape Recording: 52
3.3.4 Live Radio Show Broadcast: 52
3.3.5 Monitoring And Study Group Visits. 54
3.3.6 First Survey: 54
3.3.7 Business Plan Collection And Grading. 55
3.3.8 First Assessment Meeting And Closing Ceremony 55
3.3.9 Second Survey - Impact Assessment : 55
3.3.10 Impact Assessment And Review Meeting. 56
3.4 BUDGET ESTIMATION 56
3.4.1 Budget Estimation by Implementation Process of Activites: 56

3.4.2 Sources Of Budget 57
3.4.2.1 First Source – SMEs’ Contribution: 57
3.4.2.2 Second Source - Supporting Budget: 58
SUMMARY OF CHAPTER III 59
Training Model for SMEs’ Owners on the Air
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CHAPTER IV 60
FEASIBILITY STUDY OF THE TRAINING MODEL 60
4.1 SWOT ANALYSIS 60
4.1.1 Strengths: 60
4.1.2 Weaknesses: 60
4.1.3 Opportunities: 61
4.1.4 Threats: 62
4.2 DIAGNOSIS OF RISK AND DIFFICULTY 62
4.2.1 Diagnosis Background: 62
4.2.2 Details Of Diagnosis: 63
4.2.2.1 Training Contents: 63
4.2.2.2 Organizing System: 63
4.2.2.3 Technical Aspect: 64
4.2.2.4 Costs: 64
4.2.3 Solutions To Manage 64
4.2.3.1 Training Contents: 64
4.2.3.2 Organizing System: 65
4.2.3.3 Technical Aspect: 67
4.2.3.4 Costs to deploy the program 68
4.2.3.5 Program Output Criteria 69
Criteria for number of learners 69
Percentage of businessmen learners 69
Number of learners completing their own business plans 70

Number of learner establish a new businesses 70
CONCLUSION 71
SMES’ OWNERS AS DIRECT BENEFICIARY 71
GOVERNMENT AND LOCAL AUTHORITIES AS THE INDIRECT BENEFICIARY 72
ANNEX 2.1-DECREE NO. 90 I
ANNEX 2.2- DECISION 143 IX
ANNEX 2.3- DECREE NO. 236 XIV
ANNEX 3.1 – TRAINING CONTENT XVII
ANNEX 3.2 - BUSINESS PLAN FORMAT……………………………………… ……………… …XXV
ANNEX 3.3 - DETAIL BUDGET ESTIMATION ………………………………….……………… XXIV
ANNEX 3. 4 - QUESTIONNAIRE FOR IMPACT ASSESSMENT XXXIV

ANNEX 4.1 -PRICE LIST FOR ADVERTISING XXXIX
REFERENCES XL

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COMMENTS OF ADVISOR






To whom it may concern:

“I, the advisor of Nguyen Duc Binh, the author of the Thesis on
Training Model for SMEs' Owners on the Air confirm that the Thesis
reaches the requirements of the training program and is allowed to
defend in front of the Committee to get MBA degree”.

Hochiminh City, 1
st
March 2007




DR. TRAN DU LICH
Training Model for SMEs’ Owners on the Air
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COMMENTS OF CRITICAL PROFESSOR 1
Training Model for SMEs’ Owners on the Air
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COMMENTS OF CRITICAL PROFESSOR 2
Training Model for SMEs’ Owners on the Air
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i

ABBREVIATION

SMEs : Small and Medium Sized Enterprises
MSEs : Micro Small Enterprises
LEs : Large scaled Enterprises
VCCI : Vietnam Chamber of Commerce and Industry
SMEPC : Small and Medium Sized Enterprises Promotion Center
ILO : International Labour Organization
SIDA : Swedish International Development Cooperation
DANIDA : Danish International Development Cooperation

JICA : Japan International Cooperation Agency
MPDF : Mekong Project Development Fund
InWent : Germany Capability Building Organization
SmartWork : US Program for HIV/AIDs Protection at Workplace
MPI : Mistry of Planning and Investment
SMETAC : Small and Medium Sized Enterprises Technical Assistant Center
DPI : Department of Planning and Investment
DOI : Department of Industry
DPC : District People’s Committees
SIYB : Start and Improve Your Business
SYB : Start Your Business
IYB : Improve Your Business
GTZ : Germany Technical Assistant Organization
WISE : Workplace Improvement in Small Enterprises
ROA : Return on Assets
ROE : Return on Equity
SBA : Small Business Administration (America)
AFTA : ASEAN Free Trade Area
WTO : The World Trade Organization
PRISED : Poverty Reduction through Integration of Small Business Development
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ii
LIST OF TABLES AND FIGURES

Table 2.1 - Year of business establishment 15
Table 2.2- Training topics attended by enterprises 15
Table 2.3- Training courses anticipated to attend by enterprises 16
Table 2.4-General of demands on training method, time and fee 17
Table 2.5- Time for training courses on management 18

Table 2.6– Duration of a training workshop 19
Table 2.7- Motives actuating enterprise owners to training courses 20
Table 2.8 - Reasons of not taking part in training courses Error! Bookmark not defined.
Table 2.9 -Which difficulties should be solved first 22
Table 2.10 - Existence time of difficulties 23
Table 2.11- Training Organizers 26

Figure 2.1. Percentage of SMEs by employ 1 8

Figure 2.2. Percentage of SMEs by capita 1 8

Figure 2.3- Training service market shar 1 24

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CHAPTER I
INTRODUCTION
1.1 BACKGROUND
1. During development process of many countries, SMEs have important
position and play a significant role in the economy. SMEs are considered as suitable
business formulation, has advantages on dynamic and flexibility, fast response to
market changing and good tool to solve unemployment. Even though, during its
development, SMEs has also many disadvantages on capital, technology, attracting
skilful human resource, etc. Therefore, the governments pay very much attention
and issue a lot of supporting policies and programs to promote SMEs.
In Vietnam, with strong efforts from government, especially when National
Assembly approved Enterprises’ Law, Investment Incentive Law, Commercial Law,
etc., business environment was significant improved with more foreign and
domestic investment, growing GDP and much better habitants’ lives. According to

Department of Planning and Investment, Vietnamese SMEs occupy more than 99%
in 270,000 businesses operating by Business Law. The right direction of the
government in developing SMEs will mobilize all local potentials and resources to
overcome Vietnam current difficulties such as shortage of capital, backward in
technology and poor of management skills. However, Vietnamese SMEs are still
week due to their own uncompetitive capability and exterior difficulties. On the
other hand, it is also due to limit results in executing government policy, especially
in SMEs training programs.
2. In recent years, first prioritised target of Vietnamese government and
communist party has been supporting potential businessmen to start up new
businesses and assisting SMEs sustainability growth. At Decision number 236/QD-
TTg dated October 23
rd
2006, the government targets to create new 320,000 SMEs,
increasing total enterprises to 500,000 in 2010 and issues supporting mechanism
with a lot of assisting programs for private sector and SMEs development,
Training Model for SMEs’ Owners on the Air

2
especially on business training on human resource and competitiveness
improvement.
However, training programs are mostly organized in classrooms, with limited
approach, with several topics which more relevant to big companies. SMEs are still
in need of a systematic and broad scaled training program for start-up or improving
their businesses.
3. With its broader approach to audiences and training content relevant to
start-up and improve small-scaled business, Training Model for SMEs’ owners on
the Air would satisfy above-mentioned requirements. The Training Model will
simultaneously deliver training and consultancy to 500 and even more participants
in each province. It will help SMEs to save time and expenses while studying in a

group right at their own place but it keeps modern training methodology with
participant-oriented method based on systematic training content and material on
business start up. It has many advantages in comparison with remote training on TV
or internet (in terms of initial investment on equipment and broadcast expenses) and
traditional training in classroom (in terms of broad scale and moving time).
1.2 OBJECTIVES OF THE STUDY
1. Identify the necessity and important of training broadly on business
knowledge and skills, especially on how to start up a business on the air for SMEs’
owners and potential businessmen.
2. Building a Training model for owners of SMEs on the air is a method to
encourage and support businessmen to start up or improve their business
sustainability, reduce number of bankruptcy SMEs, improve business
competitiveness in WTO and global integration, create more qualified job,
contribute to economic development.
3. Feasibility study on Training model for owners of SMEs on the air to find
out best implementing solution to different provinces, supporting SMEs to improve
business start up skills as well as to meet government’s objectives in SMEs
development.
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1.3 SCOPE OF THE STUDY
1. The study mainly focuses on SMEs’ current situation and government
supporting policy and training programs, especially on how to start-up and improve
a new business for SMEs, not for large scaled company.
2. The design of Training Model for SMEs’ Owners on the Air based on
selection and complement from training content of Start and Improve Your
Business (SIYB) and remote business training programs on TV and Radio in some
provinces such as HCMC, Binh Duong, Dong Nai and Can Tho.
3. The analysis on the Training Model for SMEs’ owners on the Air bases on

the concept of mobilizing multiparty cooperation and contribution from central and
local government, donors and SMEs.
1.4 STUDY METHODOLOGY
• Data compilation and analysis: Data compilation from various
resources such as newspapers, documents, books, magazines, internet, seminar and
workshops on SMEs and SMEs training programs, etc.
• Study on SMEs training needs: Analyse data on surveys and report on
SMEs training needs in 2003 and 2006 conducted by VCCI, GTZ, DANIDA, and
Inwent. The surveys are conducted by direct interview, sending questionnaires via
mail, fax and email to SMEs’ owners and participants of VCCI workshops and local
partner organizations.
• Impact assessment: Sum up collected information and data to have
statistics and figures to illustrate for the study.
• Direct contact: information exchange and discussion with SMEs owners
and person in charge of training, trainers, participants in SMEs training workshops
and seminars. Experience sharing with GTZ, ILO, Inwent, JICA, JETRO
international experts on SMEs development, representatives of local government
authorities related to SMEs, radio and TV station and VCCIHCM colleagues.
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1.5 LITERATURE REVIEW AND APPLICATION:
The study on Training Model for SMEs’ Owners on the Air is designed in
conjunction with some knowledge and skills which are drawn out from MMVCFB
Training Program and applicable mainly in the Model’s training content but also in
the organization. Some of those are as follows:
♣ The Roles of State in the economy in many supporting fields, including local
social - economic development through enterprises support, business environment
improvement, poverty reduction and job creation.
♣ Organization management is applicable in two ways. Firstly, some types of

organizing structure are introduced to build a sample of company Organization
Structure in Business Planning part of the training content. Secondly, knowledge of
organization management is also applied in organizing method of the Training
Model by mobilizing all local resources from local government, authorities, mass
organizations, and business specialize associations, mass media and enterprise
community in the implementing province.
♣ Business Planning and Corporate Finance with business planning and
assessment skills are used in SWOT analysis of the Business Ideas and main
financial ratios such as ROA and ROE, in conjunction with knowledge from
Accounting & Control in session Plan for Profit topic of the training content. The
SWOT analysis is also applied to Feasibility Study to find out the advantages and
disadvantages of the Training Model to have solutions overcoming the difficulties.
♣ Marketing Management is partly introduced in Market Assessment topic of
Business Planning module and applied to design an implementing system through
marketing channel of local government agencies and through mass organizations
and business-specialised association in the implementing province.
♣ Human resource management with Maslow Hierarchy of Human Motivation is
applicable to Managing People in Business Planning of the training content.
♣ Labour Laws and Business Laws is introduced in Business Planning content
with labour contract and legal business forms with advantages and disadvantages.
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1.6 RESEARCH FRAMEWORK

1.7 THESIS STRUCTURE
Chapter I: Introduction.
Chapter II: Rationale of Training Model for SMEs’ Owners on the Air.
Chapter III: Identifying Training Model for SMEs' Owners on the Air.
Chapter IV: Feasibility study of Training Model for Owners of SMEs on the Air.
Conclusion
Rationale of Training Model
• SMEs’ important roles
• SMEs’ difficulties
• SMEs’ training needs
Rationale of Training Model
• Government Objectives in
SME development
• Limit of current government
support and training program
for SMEs

Identifying Training Model
• Training Content
• Implementation Process
• Budget
•
Im
pact
A
ssess
m
e
n
t
Conclusion
Feasibility Study of the Model
• SWOT analysis
• Risk Diagnosis
• Solutions & Recommendation
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CHAPTER II
RATIONALE OF TRAINING MODEL FOR SMEs’ OWNERS
ON THE AIR

2.1 OVERVIEW ON SMEs IN VIETNAM
2.1.1 SMEs Definition
In the world, depends on type of businesses, there are two type of scale:
Small and Medium Sized Enterprises (SMEs) and Large Scale Enterprises. Many
countries define enterprises based on annual capital, average turnover and/or

average number of employees …
In Europe, including Belgium, “the category of micro, small and medium-
sized enterprises (SMEs) is made up of enterprises which employ fewer than 250
persons and which have an annual turnover not exceeding 50 million Euro (1.050
billions dong), and/or an annual balance sheet total not exceeding 43 million Euro.’
(Extract of Article 2 of the Annex of Recommendation 2003/361/EC)
1
.
In Japan, SMEs definition is stated in Basic Law for SMEs
2
as follows:
• For manufacturer: less than 300 employees or 100 million Yen in average
capital (equal to 14.5 billions dong).
• For wholesaler: less than 100 employees or 30 million Yen in average
capital (equal to 270,000 USD).
• For retailer and service: less than 50 or 10 million Yen in average capital
(equal to 90,000 USD).
In America, for the most part, size standards businesses are the average
annual receipts or the average employment of a firm. Small businesses are defined
with average employment less than 500 (but especially for some heavy industry

1
Resource: SMEsNET National Assessment Report, FEVIA, November 4th 2005
2
Resource: New Basic Law for Japanese SMEs, 1999
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businesses such Line-Haul Railroads, Pipeline Transportation of Refined Petroleum
Products Petroleum Refineries, and average employment is less than 1,500). The

annual receipts of American small businesses are various from $ 750,000 (Dairy
Cattle and Milk Production, Hog and Pig Farming, etc) to $165 million in assets
(Commercial Banking, Savings Institutions, Credit Unions, other Depository Credit
Intermediation, Credit Card Issuing and International Trade Financing, etc), but
mostly at 6.5 million USD (equal to 104.305 billion dong)
3
.
In Vietnam, at Degree No 90/2001/N§-CP date 23
rd
November 2001, SMEs
are defined with 2 characteristics: Register Capital is less than 10 billions
Vietnamese dong and Annual Average Employment is less than 300 employees”
4
.
Characteristic of employment are almost similar with many other countries
such as Germany and Japan, but characteristic of capital is much lower, especially
in comparison to Thailand SMEs with 5.4 million USD in capital (equal to 86.67
billions dong).
Until 31
st
December 2005, according to official figure of National Statistic
Bureau, there are operating 113,352 enterprises (increased 23.54% in comparison to
Dec. 31
st
, 2004) and 3,053,011 household businesses with 5,583,617 employees.
In 5 years from 2001-2005, average number of enterprises increases 27,95%
per year (more new 14,213 enterprises each year), contribute 53,0% to GDP, 55,0%
to investment.
Non-state enterprises, increased very fast from 35,004 enterprises in 2000 to
105,596 enterprises in 2005, in which 96,81% are SMEs with average number of

employees is 30 and capital is 3 billions in 2000 and average number of employees
is 32 and capital is 7 billions.

3
Source: SBA website:
www.sba.gov
4
Pls. see Annex 1 – Government Degree No. 90/2001/ND-CP dated 23 October 2001.
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In which mainly small and micro small enterprises (MSEs) with less than 10
employees: 51.3% (see Figure 2.1) and less than 1 billion dong capital: 41.8% (see
Figure 2.2).
Figure 2.1. Percentage of SMEs by employ
51.3%
1.43%
44.07%
< 10 empl.
10-200 empl.
200-300 emp.

Figure 2.2. Percentage of SMEs by capital
41.8%
8.18%
37.03%
< 1 billion dong.
1-5 billions dong.
5-10 billions dong.

In fact, according to MPI’ statistic at the end of 2006
5
, there are more than
270,000 enterprises and 3 millions household families operating, in which 99% are
SMEs with capital of 30 billions USD, using 3 millions employees and contribute
40% in GDP and 29% export turn over.

5
Source: Presentation on “Developing SMEs in Vietnam –Achievement and Threats”, Mr. Bui Liem, Deputy
Director of SMEPC Supporting Bureau, MPI at Seminar on Vietnam-Japan Conference on SME Policy in
Vietnam under the Impact of Globalization , 31 August-1 September 2006.

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2.1.2 SMEs’ important roles in the economy.
♣ Create more new jobs.
In many countries, SMEs occupied more than 95% in total enterprises and
supply employment for 2/3 of social labour force. In 1997, in Germany, while large-
scale enterprises cut off 312,000 employees, SMEs still create more new 723,000
jobs. From 1985 to 1987, British SMEs created more 29,000 jobs, while big
corporations created only 20,000 jobs. In Vietnam, even there is limit percentage in
GDP, but SMEs are using 3 millions employees, equal to 49% in total employment
in non-agriculture field in rural areas and 26% in total of Vietnamese employment.
♣ Contribution to GDP.
With high percentage in total number of enterprises, SMEs contribute more
than 50% GDP in American, 55% in Japan and 53% in Germany in 1994. In
Vietnam, SMEs contribute a very important part of more than 40% GDP and 29%
export turn over, along with large scale, foreign and joint venture companies as

mentioned above.
♣ Enable free competition.
Different from big companies which need big market and protect from
government leading to monopoly, with its big number, SMEs easily accept free
competition with its high self control and independent, ready to exploit
opportunities to grow, risk taking without government subsidy, play very important
role in breaking business monopoly situation.
♣ Attracting domestic investment and exploiting local resources.
Due to relationship of kindred and close friends, SMEs can easily borrowing
idle money to invest in business. On the other hand, SMEs can develop local
advantages by establishing or participating in local handicraft villages or
cooperatives using specific potentials on natural resources, labour and material, etc.

Apart from those, SMEs also contribute in some other aspects such as:
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Establishment of balanced economic development and transfer of regional
economic structure, to accelerate local potentials in rural and far remote areas to
promote local production and services, contribute to the transfer of regional
economic structure. That also contributes significantly to industrialization and
modernization in agriculture and rural areas.
Creating a lot of products and services, diversifying market by matching
various customers’ need that leads to innovation and quality improvement; increase
the competitiveness of domestic products and services.
Supporting for large-scale companies, in market approach, balancing
demand and supply in community, subcontracting and processing input materials
and semi-products. On the other hand, SMEs are basis for the establishment of big
business corporations in development process of a market economy.
2.1.3 SMEs’ advantages and disadvantages

2.1.3.1 Advantages.
Dynamic, flexible and accommodate themselves to market diversity.
With small and medium size, simple management structure, SMEs easily
approach and satisfy some certain requirements. On the other hand, SMEs usually
have direct contact with customers and market, therefore quick response to market’s
changes. With few equipment and simple technology infrastructure, SMEs can
smoothly expand or reduce their production scale causing no bad affect for society.
Easy start up with small capital.
It needs low initial capital, small office or premises and little equipment to
establish new SMEs. Therefore, taking full advantages of family heritages and
experience, most of SMEs’ owners continue to run business effectively after the
establishment. The profit may grow slowly but more and more stable thanks to their
simple management structure, easy to control, more flexible to the market leading to
lower market risk when there are some changes in the economy.
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2.1.3.2 Disadvantages
Limit in financial capability.
SMEs based mostly on their owners’ equity, low access capability to loans
due to small scale of production, small amount of loan, therefore their loans always
are low in priority consideration of credit institution. On the other hand, SMEs
cannot persuade banks because lacking of collateral and a feasibility business plan
for their loans. The same thing happens in other countries, including America and
Japan, banks hesitate to SMEs high-risk loans.
Disadvantages in buying input material, equipment and selling products.
SMEs rarely have discount when buying material with big amount due to
their limit financial capability. In case of importing equipment from aboard, SMEs
usually lack of foreign currency to buy directly from foreign manufacturer, but
through Vietnamese middleman with higher price. In contrary, SMEs cannot have

good prices when selling products because buyers consider them as small and not
important retailers and manufacturers.
Lacking of information and management skills.
Nowadays, information is very important input of business process, but
SMEs still face many difficulties to access market information, new production
technology and advance management skills or late update important information
resources on new market and customers.
Difficult to attract qualified managers and skilful employees.
Due to small sales and profit, SMEs cannot pay high salary and difficult
invest in better working condition like large-scale companies, therefore they always
difficult to recruit good labour resources for their product manufacturing and
business management.
Unstable business operating.
Even dynamic and flexible in running business, SMEs easily go bankruptcy
because they don’t have a long-run strategy, no contingency fund and financial
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assistants to recover from market risks. However, fortunately, rate of SMEs
bankruptcy is still lower than rate of new business start-up, therefore in general,
number of SMEs operating in the market is still growing, causing no chaotic or
unbalanced economic situation.
2.2
THE ANALYSIS OF SMES’ TRAINING NEED
2.2.1 The importance of training needs assessment
Training is one of important business assistance services for the development
of enterprises, especially for the enterprises of small and medium size. In Vietnam,
small and medium enterprises (SMEs) make up a major part of private enterprises.
This sector was formed in the early 1990s but it has had significant changes in
recent years, especially since the Enterprise Law was put in force (January 2000).

Within only 3 years (1999-2002) the number of enterprises registered according to
the Enterprise Law was almost double, reached 80,000 enterprises. This figure does
not include 2.2 million individual business households of semi-informal legal status,
and to some extents they have considerable demand on accessing business
development services, including training services.
The training demand of Vietnamese enterprises increases not only because of
the appearance of more and more new enterprises but also because of the awareness
of the enterprises in the trend of integration. On one hand, newly emerged
enterprises with young businessmen are aware of opportunities and are always
ready to improve their knowledge to expand to the widely opened world market. On
the other hand, the challenges of globalization require enterprises to develop
continually, gain new administration knowledge to penetrate existing markets and
look for new ones. The main constraints usually mentioned by Vietnamese
enterprises are limited management skill and low qualification. While the concept
“knowledge economy” is more and more perceived by enterprises in the world, the
value of “training” is also enhanced in the awareness of Vietnamese enterprises. In
the past, capital was considered the biggest constraint, nowadays it is the “market
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13
accessing ability”
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. It is clear that in order to achieve the market accessing ability,
enterprises should obtain many skills, and these skills are mostly gained through
training.
In the first years of the 21
st
century, the trend of commercializing services
provision, especially training services for SMEs have been affirmed by many
donors. This means that the training assistance for SMEs should be first based on

the needs of the enterprises themselves. The Government’s 90/ND-CP decree about
the SMEs development assistance policy affirmed the Government’s policy in
assistance SMEs regarding training issue. It was followed by the Resolution 5 of the
Central Committee of Vietnam Communist Party (Term IX) about the continual
changes of mechanism and policy to promote the development of the private sector,
affirming the Party’s policy in training assistance for the private sector. In the 2002
action program the Government entrusted Vietnam Chamber of Commerce and
Industry (VCCI) to study and establish a training assistance fund for firms of private
sector. The training needs research and assessment, proposed by VCCI, received
positive support from Mekong project development facility – MPDF and Danish
International Development Assistance – DANIDA.
2.2.2 Methodology of survey
The analysis of training needs is mainly based on the survey result of 679
private enterprises in eight provinces with biggest SMEs training market: Ha Noi,
Ha Tay, Hai Phong, Quang Ninh, Da Nang, Quang Nam, Binh Duong and
Hochiminh City. Number interviewed enterprises that were chosen as survey
sample equal to about 0.1% of total Vietnamese SMEs in 2001. The survey was
carried out by SME PC of VCCI in March 2003 with support from MPDF and
DANIDA. The data can be compared to the impact assessment of SIYB training
program carried out by ILO and VCCI in 2001. There are also some extracts from
SMEs’ Training Needs Analysis conducted by VCCI and Inwent in 2005.

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Source: VCCI’s Survey of SMEs in 2001