Competitiveness in trading activities of Trading Scientific Technological Materials Co.,Ltd (Tramat Co.,Ltd)

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Introduction
In the market economy, competitiveness happens everywhere. As we join
WTO, competitive strategy is a very important factor that every company
cares for. “Competitiveness” is the term used to refer to features which allow
a company to compete effectively with other companies due to lower cost or
superior technology and engineering in comparison with international
matches. In the market economy in our country today, the number of
enterprises involved in business is increasing rapidly. The amount of goods
and products on the consumer markets also increases multifold. Thus,
competition in the market is becoming fiercer and fiercer. Therefore,
improving competitiveness for enterprises of Vietnam is a content that should
be greatly considered. Vietnam's businesses have many advantages, but there
are still many limitations and weaknesses. Being interested in the
competitiveness of companies, I have decided to do some research on the
competitiveness of a company, as my thesis entitled “Competitiveness in
trading activities of Trading Scientific Technological Materials Co.,Ltd
(Tramat Co.,Ltd) “
The Assignment is arranged as follows:

Introduction
Chapter I: Theoretical and practical background of competitiveness
Chapter II: The situation and competitiveness of Tramat Co., LTD
Chapter III: Suggestions & Solutions to improve the competitiveness of
Tramat Co., LTD
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Conclusion

I hope that it will provide the reader with some overviews about Vietnam’s
business in general and TramatCo., Ltd in particular, opportunities, challenges
and solutions to boosting its competitiveness in the trading sector. Due to lack
of references and experiences, my Graduation Assignment is certainly with
mistakes here and there. So I am very happy and appreciate any constructive
comments from anyone who are concerned.

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TABLE OF CONTENTS
Introduction.....................................................................................................1
Chapter I: Theoretical and practical background of competitiveness.......6
1.1. Theoretical background.......................................................................6
1.1.1. What is competitiveness?...............................................................6
1.1.2. Competitive strategy: The core concepts.....................................9
1.1.3. Industry Concepts of Competition..............................................11
1.1.4. Differentiation in competitive strategy.......................................13
1.1.5 Cost Advantage in Competitive strategy.....................................16
1.2. Practical Background of Competitiveness in Vietnam....................18
1.2.1. An overview of industry competitiveness in Vietnam...............18
1.2.2. An overview of company competitiveness in Vietnam..............20

Chapter II: The situation and competitiveness in Tramat Co.,Ltd..........23
2.1. An overview of Tramat Co., Ltd.......................................................23
2.1.1. Establishment and development process of Tramat Co., Ltd,. 23
2.1.2. Organizational structure of Tramat Co., Ltd............................25
2.2. Trading activities of Tramat Co., Ltd...............................................27
2.2.1. Trading activities..........................................................................27
2.2.2. Achievements of the trading activities from 2007 to 2009........31
2.3. General assessments of competitiveness in trading activities of
Tramat Co., Ltd.........................................................................................32
2.3.1. Strengths........................................................................................32
2.3.2. Weaknesses....................................................................................33

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Chapter III: Suggestions and Solutions to Improving Competitiveness of
Tramat Co., Ltd..............................................................................................34
3.1. Company’s action plan for 2010:......................................................34
3.2. Challenges the company faces...........................................................35
3.3. Solutions to improving competitiveness of Tramat Co., Ltd..........36
3.3.1. Solutions to sales increase and marketing..................................36
3.3.2. Solutions to product and warranty.............................................37
3.3.3. Solutions to improving customer services..................................37
3.3.4. Solutions to fostering and motivation staff................................38
CONCLUSION..............................................................................................40
REFERENCES..............................................................................................41

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Abbreviations and Acronyms

WTO

World Trade Organization

ASEAN

Association of Southeast Asian Nations

APEC

Asian Pacific Economic Conference

GDP

Gross Domestic Production

TramatCo.,Ltd

Trading Scientific Technological Materials Co.,Ltd

VFA

Vietnam Food Association

ICOR

Incremental Capital-Output Rate

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Chapter I: Theoretical and practical
background of competitiveness.
1.1. Theoretical background
Among the most economists, who do research about” competitive advantage”,
Michael E.Porter stands out as professor in this field. In his book entitled
“Competitive advantage” (1985), Michael E.Porter shows two elements that
play a key role in competitive strategy. That is differentiation and cost
advantages.
1.1.1. What is competitiveness?
For the company, competitiveness is the ability to provide products and
services as or more effectively and efficiently than the relevant competitors.
In the traded sector, this means sustained success in international markets
without protection or subsidies. Although transportation costs might allow
firms from a nation to compete successfully in their home market or in
adjacent markets, competitiveness usually refers to advantage obtained

through superior productivity. Measures of competitiveness in the traded
sector include firm profitability, the firm's export quotient (exports or foreign
sales divided by output), and regional or global market share. In the traded
sector, performance in the international marketplace provides a direct measure
of the firm's competitiveness. In the non-traded sector, competitiveness is the
ability to match or beat the world's best firms in cost and quality of goods or
services. Measuring competitiveness in the non-traded sector is often difficult,
since there is no direct market performance test. Measures of competitiveness
in this part of the economy include firm profitability and measures of cost and
quality. In industries characterized by foreign direct investment, the firm's
percentage of foreign sales (foreign sales divided by total sales) and its share
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of regional or global markets provide measures of firm competitiveness.
At the industry level, competitiveness is the ability of the nation's firms to
achieve sustained success against (or compared to) foreign competitors, again
without protection or subsidies. Measures of competitiveness at the industry
level include overall profitability of the nation's firms in the industry, the
nation's trade balance in the industry, the balance of outbound and inbound
foreign direct investment, and direct measures of cost and quality at the
industry level. Competitiveness at the industry level is often a better indicator
of the economic health of the nation than competitiveness at the firm level.
The success of a single firm from the nation might be due to companyspecific factors that are difficult or impossible to reproduce. The success of
several firms from the nation in an industry, on the other hand, is often
evidence of nation-specific factors that might be extended and improved.

Assessing the competitiveness of an industry in which there is only one
important firm requires an assessment of whether its success is due to
monopoly rents, government support, or true efficiency. It is also important to
note that the competitiveness of a single firm does not necessarily imply the
competitiveness of an industry.
For the nation, competitiveness means the ability of the nation's citizens
to achieve a high and rising standard of living. In most nations, the
standard of living is determined by the productivity with which the nation's
resources are deployed, the output of the economy per unit of labor and/or
capital employed. A high and rising standard of living for all the nation's
citizens can be sustained only by continual improvements in productivity,
either through achieving higher productivity in existing businesses or
through successful entry into higher productivity businesses. The level and
growth of the nation’s standard of living, the level and growth of aggregate
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productivity and the ability of the nation’s firms to increase their
penetration of world markets through exports or foreign direct investment
measure competitiveness at the national level. Although it is tempting to
equate a nation's competitiveness in certain industries or sets of industries
with competitiveness at the national level, or with a positive balance of
trade, this temptation should be avoided. Comparative advantage dictates
that any nation will be competitive in some industries and uncompetitive
in others. A positive balance of trade has as much to do with the balance of
domestic savings and investment as it does with the intrinsic capabilities of

the nation's firms.
Why is competitiveness important?
A nation's standard of living is increasingly dependent on the competitiveness
of its firms. Competitiveness is vital if the nation's firms are to take advantage
of the opportunities presented by the international economy. World trade and
foreign investment have grown faster in the last several decades than world
output. Competitiveness in industries subject to international trade and
foreign direct investment can therefore provide substantial advantage for
economic growth. This is especially true for small nations, where
competitiveness can allow firms to overcome the limitations of their small
home markets in order to achieve their maximum potential. Competitiveness
is also vital if a nation's firms are to guard against the threats posed by the
international economy. International competition has become fiercer than ever
before. Lower costs for transportation and communication, reduced trade
barriers, and the spread of technology have combined to sharpen international
competition. This competition has put unprecedented pressure on all a nation's
economic actors, including management, labor, and government. In an
environment in which the nation's firms must continually improve in order to
meet the threat from an ever-wider array of competitors, the failure of
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management, labor, or government to meet the challenge can spell disaster for
the nation’s firms.
Competitiveness in the non-traded sector is also vital to the nation's economic
health. The non-traded sector is a large portion of each economy. At a time

when economic prosperity remains only a dream for most of the world's
population, inefficiencies in the non-traded sector should be reduced to the
greatest extent possible. In addition, the competitiveness of the non-traded
sector has a substantial impact on the competitiveness of the traded sector,
which relies on it for a wide range of goods and services. An inefficient,
bloated non-traded sector can drag down the nation's productivity directly and
indirectly through its impact on other non-traded and traded industries.
There is a growing realization that nations cannot avoid the rigors of
international competition. No nation is very self-sufficient. Nations are linked
to the international economy through trade in goods and services, through
international capital flows, and through commodity prices. The experience of
developing nations in the 1980s has indicated that attempts to isolate an
economy can have lasting detrimental effects. In the modern world, nations
can try to run from the world economy, but they cannot hide. This is
particularly true for small nations, in which the costs generated by economic
isolation in terms of rent seeking and losses in efficiency can be substantial,
and for developing nations, in which any loss of efficiency often means
higher levels of poverty.
1.1.2. Competitive strategy: The core concepts
The Structural Analysis of Industries: The first fundamental determinant of
a firm’s profitability is industry attractiveness. Competitive strategy is to cope
with and, ideally, to change those rules in the firm is favored. In any industry,
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whether it is domestic or international or produces a product or a service, the

rules of competition, the threat of substitutes, the bargaining power of buyers,
the bargaining power of suppliers, and the rivalry among the exiting
competitors.
The collective strength of these five competitive forces determines the ability
of firms in an industry to earn, on average, rates of return on investment in
excess of the cost of capital .The strength of the five forces varies from
industry to industry, and can change as an industry evolves. The result is that
not all industries are alike from the standpoint of inherent profitability. In
industries where the five forces are favorable, such as pharmaceuticals, soft
drinks, and database publishing, many competitors earn attractive returns. But
in industries where pressure from one or more of the forces is intensive, such
as rubber ,steel ,and video games, few firms command attractive return
despite the best efforts of management. Industry profitability is not a function
of what the product looks like or whether it embodies high or low technology,
but of industry structure .Some very mundane industries such as postage
meters and grain trading is extremely profitable, while some more glamorous,
high-technology industries such as personal computers and cable television
are not profitable for many participants. The five forces determine industry
profitability because they influence the prices, costs, and required
investment .Buyer power influences the prices that firms can charge, for
example ,as does the threat of substitution. The power of buyer can also
influence cost and investment, because powerful buyers demand costly
service. The barging power of suppliers determines the cost of raw materials
and other inputs. The intensity of rivalry influences prices as well as the costs
of competing in areas such as plant, product development, advertising, and
sales force. The threat of entry places a limit on prices, and shapes the
investment required to deter entrants.

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Chart 1: Five Forces Mode l

Potential Entrants

Industry
Competitors
Suppliers

Buyer
Rivalry among
Exiting Firms

Substitutes

Source: A framework for Marketing Management, Philip Kothler,
2003
1.1.3. Industry Concepts of Competition
An industry is a group of firms that offer a product or class of products that
are close substitutes for each other .Industries are classified according to
number of sellers; degree of product differentiation; presence or absence of
entry ,mobility, and exit barriers; cost structure; degree of vertical integration
and degree of globalization.
Number of Sellers and Degree of Differentiation: The starting point for
describing an industry is to specify the number of sellers and determine
whether the product is homogeneous or highly differentiated. These

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characteristics give rise to four industry structure types. In a pure monopoly,
only one firm provides a certain product or service in a certain country or area
(such as a local gas company).An unregulated monopolist might charge a
high price, do little or no advertising, and offer minimal service. If partial
substitutes are available and there is some danger of competition the
monopolist might invest in more service and technology .A regulated
monopolist is required to charge a lower price and provide more service as a
matter of public interest. In an oligopoly, a small number of large firms
produce products that range from highly differentiated to standardize. In pre
oligopoly, a few companies produce essentially the same commodity (such as
oil), so all have difficulty charging more than the going price. It competitors
match services, the only way to gain a competitive advantage is through lower
costs. In differentiated oligopoly, a few companies’ services. Each competitor
may seek leadership in one attribute, attract customers seeking that attribute,
and charge a premium for that attribute. Monopolistic competition means that
many competitors able to differentiate their offers in whole or part.
Competitors focus on market segments where they can better meet customer
needs and charge more. In pure competition, many competitors offer the same
product and services, without differentiation, all prices will be the same. No
competitor will advertise unless advertising can create psychological
differentiation, in which case the industry is actually monopolistically
competitive.
Entry, Mobility, and Exit Barriers: Industry differ greatly in ease of

entry .It is easy to open a new restaurant but difficult to enter the aircraft
industry. Major entry barriers include high capital requirements; economics of
scale; patents and licensing requirements, scarce a firm enters an industry, it
may face mobility barriers in trying to enter more attractive market segments.
Firms often face exit barriers, such as legal or moral obligations to customers,
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creditors, and employees, government’s restrictions, low asset salvage value;
lack of alternative opportunities; high vertical integration; and emotional
barriers. Many firms stay in an industry as long as they cover tier variable
costs and some or all of their fixed costs; their continued presence, however,
dampens profits for everyone.
Degree of Vertical Integration: Many companies benefit from integrating
back-ward or forward (vertical integration).Vertical integration often lower
costs in different parts of the value chain to earn profits where taxes are
lowest .On the other hand, vertical integration may cause high costs in certain
parts of the value chain and restrict a firm‘s strategic flexibility .This is why
firms are increasingly outsourcing activities that can be done better and more
cheaply by specialists.
1.1.4. Differentiation in competitive strategy
A firm differentiates itself from its competitors if it can be unique at
something that is valuable to buyers. Differentiation is one of the two types of
competitive advantage a firm may possess. The extent to which competitors
in an industry can differentiate themselves from each other is also an
important element of industry structure. Despite the importance of

differentiation, its sources are often not well understood. Firms view the
potential sources of differentiation too narrowly. They see differentiation in
terms of he physical product or marketing practices, rather than potentially
arising anywhere in the value chain .Firms are also often different but not
differentiated, because they purpose forms of uniqueness that buyers do not
value .Differentiators also frequently pay insufficient attention to the cost of
differentiation ,or to the sustainability of differentiation once achieved.
Sources of differentiation: A firm differentiates itself from its competitors
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when it provides something unique that is value to buyers beyond simply
offering a low price .Differentiation allows the firms to command a premium
price, to sell more of its product at a given price, on the other hand, to gain
equivalent benefits such as greater buyer loyalty during cyclical or seasonal
downturns. Differentiation leads to superior performance if the price premium
achieved exceeds any added costs of being unique. A firm’s differentiation
may appeal to a board group of buyers in an industry or only to subset of
buyers wanting traditional clothing; for example, through many buyer view
Brooks Brother clothing as too conservative.
Differentiation and the Value Chain: Differentiation cannot be understood
by viewing the firm in aggregate, but stems from the specific activities a firm
performs and how they affect the buyer. Differentiation grows out of the
firm’s value chain. Virtually any value activity is a potential source of
uniqueness. The procurement of raw materials and other inputs can affect the
performance of the end product and hence differentiation .For example,

Heineken pays particular attention to the quality and purity of the ingredients
for its beer and uses a constant strain of yeast .Similarity, Steinway uses
skilled technicians to choose the finest materials for its pianos, and Michelin
is more selective than its competitors about the grades of rubber it uses in its
tires. Value activities representing only a small percentage of total cost can
nevertheless have a major on differentiation .For example, inspection may
represent only one percent of cost ,but shipping even one defective package of
drugs to a buyer can have majors negative repercussions for a pharmaceutical
firm’s perceived differentiation .Value chain developed for purpose s of
strategic cost analysis, therefore ,may not isolate all activities that are
important for differentiation .Differentiation analysis requires a finer division
of some value activities, while others may be aggregated if they have little
differentiation impact.
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A firm may also differentiate itself through the breadth of its activities, or its
competitive scope. Crown Cork and Seal offers crowns (bottle caps) and
filling machinery plus cans. It thus offers a full line of packaging services to
its buyers, and its expertise in packaging machinery gives its more credibility
and access in selling cans .Citicorp’s breadth of activities in financial services
enhances its reputation as well as allowing its sales channels to offer a
broader product range. A number of other differentiating factors can result
from broad competitive scope:
 Ability to serve buyer needs anywhere
 Simplified maintenance for the buyer if spare parts and design

philosophies are common for a wide line
 Single point at which the buyer can purchase
 Single point for customer service
 Superior compatibility among products
Most of these benefits require consistency or coordination among activities if
a firm is to achieve them. Differentiation can also stem from downstream.
Firm’s channels can be potent source of uniqueness, and may enhance its
reputation, service, customer training, and many other factors.
Firms can enhance the role of channels in differentiation through actions such
as the following:
 Channel selection to achieve consistency in facilities, capabilities or
image
 Establishing standards and policies for how channel must operate
 Provision of advertising and training materials for use by channels
 Providing funding so that channels can offer credit
Firms often confuse the concept of quality with that of differentiation .While
differentiation encompasses quality, it is much broader concept. Quality is
typically associated with physical product. Differentiation strategies attempt
to create value for the buyer throughout the value chain.
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1.1.5 Cost Advantage in Competitive strategy
Cost advantage is one of the two types of competitive advantage a firm may
possess. Cost is also of vital importance to differentiation strategies because a
differentiator must maintain cost proximity to competitors. Less the resulting

price premium exceeds the cost of differentiating, a differentiator will fail to
achieve superior performance .The behavior of cost exerts a strong influence
on overall industry structure.
The behavior of a firm’s costs and its relative cost position stem from the
value activities the firm performs in competing in an industry .A meaningful
cost analysis, therefore, examines costs within these activities and not the
costs of the firm as a whole .Each value activity has its own cost structure and
the behavior of its cost may be affected by linkages and interrelationships
with other activities both within and outside the firm, Cost advantage results
if the firm achieves a lower cumulative cost of performing value activities
than its competitors.
Defining the Value Chain for Cost Analysis
The starting point for cost analysis is to define a firm’s value chain and to
assign operating costs and assets to value activities .Each activity in the value
chain involves both operating costs and assets in the form of fixed and
working capital .Purchased inputs make up part of the cost of every value
activity, and can contribute to both operating costs and assets. The need to
assign assets to value activities reflects the fact that the amount of assets in an
activity and the efficiency of asset utilization are frequently important to the
activity is cost.
For purposes of cost analysis, the desegregation of the generic value chain
into individual value activities should reflect three principles that are not
mutually exclusive:
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- The size and growth of the cost represented by the activity
- The cost behavior of the activity
- Competitor differences in performing the activity
Activities should be separated for cost analysis if they represent a significant
or rapidly growing percentage of operating costs or assets .While most firms
can easily identify the large components of their cost, they frequently
overlook smaller but growing value activities that can eventually change their
cost structure. Activities that represent a small and stagnant percentage of
costs or assets can be grouped together into broader categories.
Activities must also be separated if they have different cost drivers, to be
defined in more detail below .Activities with similar cost drivers can be safely
grouped together. For example, advertising and promotion usually belong in
separate value activities because advertising cost is sensitive to scale while
promotional costs are largely variable .Any activity a business unit shares
with others should also be treated as a separate value activity since conditions
in other business units will affect its cost behavior .The same logic applies to
any activity that has important linkages with other activities .In practice ,one
does not always know the drivers of cost behavior at the beginning of an
analysis ,hence the identification of the value activities tends to require
several interactions .The initial breakdown of the value chain into activities
will inevitably represent a best guess of important differences in cost behavior
.Value activities can then be aggregated or disaggregated as further analysis
exposes differences or similarities in cost behavior .Usually an aggregated
value chain is analyzed first ,and then particular value activities that prove to
be important are investigated in greater detail.

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1.2. Practical Background Competitiveness of Vietnam
1.2.1. An overview of industry competitiveness in Vietnam
Table 1: The Global Competitiveness Index 2008 – 2009
Country
Rank
Score
Singapore
5
5.53
China
30
4.70
Thailand
34
4.60
India
50
4.33
Indonesia
55
4.25
Turkey
63
4.15
Vietnam
70
4.10

Cambodia
109
3.53
Source: The Global Competitiveness Report 2008 - 2009
 After more than 20 years from 1986 to date, the competitive power of Viet
Nam has improved. Now we set trade with more than 120 countries in the
world. We have joined trade some economic organizations such as
ASEAN, APEC, and WTO...GDP of Viet Nam has increased more than eight
times from 2000 to 2009 (GDP in 2000 was US $31.35 billion and GDP in
2009 was US $277.700 billion). We are improving Vietnam industry
competitiveness and Vietnam company competitiveness in both domestic
market and international market. Many industries of Viet Nam are not only
meeting the needs of domestic market but also play an important role in
foreign market. Example: Vinamilk with high quality Products for domestic
consumption and exports. Company’s turnover had increased to VND
10,613,771 million last year, 4.6 percent higher as compared to 2008.
 Industry of Vietnam is now facing with many disadvantages. Industry
competitiveness is decreasing. Most of key exports from industries (such
as Computer, cafe, rice, and sugar, paper....) are higher than those from the
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similar industries of the other countries in ASEAN from 20% to 30
%.However, some elements such as quality, sale, after sale services of Viet
Nam industry are worse than those of other countries.
 Vietnam is also known as rice basket in Asia. In 2008 Vietnam signed a

contract to export 5.1 tonnes, with 4.65 million tons; delivered at US $ 2.9
billion, more than double compared to 2007.
Rice output in 2009 reached 38.9 million tons, up 116 thousand tons
compared to 2008.
In 2009 a "record year" for rice, but with rice price fluctuations making the
value lower than that last year. Rice exports reached 5.8 million tons,
turnover revenue of 2.6 billion, 22.6% higher in volume, but decreased 10,
34% in value.
 According to the Vietnam Food Association (VFA), the volume of our
country's rice exports this year is 6 million tons the same as the record one
in 2009, but turnover has increased, to the century record at 3 to US $3.2
billion. This means that rice prices will range between 500-533 dollars per
ton, up by US $ 94.58 to US $ 127.58 per ton (23.33 to 31.47% as
compared with that of the year 2009 is US $ 405.42 per ton .)
 Vietnam’s largest foreign exchange earners were garments and textiles,
(US$1.2 billion, up by 32.9 per cent a year), footwear (US$290 million),
and wooden products (US$27 million). Vietnam also faces a huge trade
deficit with the US, US$1.967 billion in the first quarter this year.
 According to Customs statistics, exports in 2009 of the country's aquatic
products reached 1.216 thousand tons, worth 4.25 billion dollars, down by
1.6% in volume and 5.7% in value as compared with the year 2008, the
first decline after 13 years. However, this is still considered a positive
outcome for the export business, in the context of the difficulties in raw
materials, markets, technical barriers and tariffs of the importing country.
 In 2009, Vietnam exported 85 types of fish products to 163 markets.The
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number of export products and markets all increased as compared with
2008, thanks to the flexibility of diversifying products and markets of the
exporting enterprises. In particular, frozen shrimp volume accounts for the
highest proportion (39.4%), catfish, squid (31.6%), octopus (6.45%), tuna
(4.26%), dry goods (3.77%) sea fish and other marine products accounting
for 14.5%.
1.2.2. An overview of company competitiveness in Vietnam
 Obviously, the quality and competitiveness in terms of management is still
poor. Team managers and company managers are still short of knowledge
and management skills. The number of companies with good directors,
high professional level and management capacity is not many. A large
proportion of business owners have not been trained in business and
management in lack of economic knowledge - social and business
management skills, particularly the weak capability in international
business. As a result they are mainly engaged in common business
operations according to their management experience, with short strategic
vision, poor knowledge on such aspects as organizational management,
competitive strategy, brand development and use of computer and
information technology. A number of businesses open only because the
company is available and interested in business and capital, without
knowledge and skills in business. Consequently they have all kinds of
risks leading to failure.
 Secondly, it is low labor productivity, and high in production costs
weakening the competitiveness of companies. Comparisons of the cost of
products made in other countries such as China, Thailand, Malaysia,
Philippines, ... the products produced by companies of Vietnam at the cost
1.58 to 9.25 times higher although the price of labor is lower as compared
to that in other countries in the region.

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