Japanese market and penetrating ability of vietnamese companies

ĐẠI HỌC QUỐC GIA HÀ NỘI
KHOA QUẢN TRỊ VÀ KINH DOANH
---------------------

NGUYỄN VIỆT DŨNG

JAPANESE MARKET AND PENETRATING ABILITY
OF VIETNAMESE COMPANIES

THỊ TRƯỜNG NHẬT BẢN VÀ KHẢ NĂNG THÂM NHẬP
CỦA CÁC CÔNG TY VIỆT NAM

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

HÀ NỘI - 2018


ĐẠI HỌC QUỐC GIA HÀ NỘI
KHOA QUẢN TRỊ VÀ KINH DOANH
---------------------

NGUYỄN VIỆT DŨNG

JAPANESE MARKET AND PENETRATING ABILITY
OF VIETNAMESE COMPANIES

THỊ TRƯỜNG NHẬT BẢN VÀ KHẢ NĂNG THÂM NHẬP
CỦA CÁC CÔNG TY VIỆT NAM

Chuyên ngành: Quản trị kinh doanh
Mã số: 60 34 01 02

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS.TS. NGUYỄN VIỆT KHÔI

Hà Nội - 2018


DECLARATION
The author confirms that the research outcome in the thesis is the result of author’s
independent work during study and research period and it is not yet published in
other’s research and article.
The other’s research result and documentation (extraction, table, figure, formula,
and other document) used in the thesis are cited properly and the permission (if
required) is given.
The author is responsible in front of the Thesis Assessment Committee, Hanoi
School of Business and Management, and the laws for above-mentioned
declaration.

Hà nội, Feb,2018
Author,

Nguyen Viet Dung


ACKNOWLEDMENT
I have gained huge knowledge, skill and insights from my MBA course. The course
raised my capacity of administration and management up to the next level. I am
now very confident in my position of management. I would like to extend my
sincerest thanks and appreciation to all those who have made this thesis possible.
I woud like to express my great gratitude to my supervisor, Assoc. Prof. Nguyen

Viet Khoi, for him useful comments, remarks and engagement during my process of
doing this master thesis.
Sincere thanks are extended to the Hanoi School of Business & Management – Viet
Nam National University, Ha Noi for equipping me with huge knowledge and skills
through various interesting and practical subjects. I also would like to thank my
classmates for their friendship and reciprocal encouragement to make our class time
unforgettable time.
Last but not least, during the process of writing the thesis, although the effort has
been made, due to the limitations of the level of knowledge, practical experience,
experience in scientific research, the thesis is inevitably limited. I would like to
receive the comments of researchers, teachers and readers so that the thesis is more
complete both scientific and practical reason.
Hà nội,

Feb, 2018
Author,

Nguyen Viet Dung


TABLE OF CONTENTS

LIST OF ABBREVIATIONS ............................................................................ i
LIST OF TABLES ............................................................................................ ii
LIST OF FIGURES.......................................................................................... iii
INTRODUCTION ............................................................................................. 1
CHAPTER 1. THEORETICAL FRAMEWORK AND OVERVIEW OF
JAPAN MARKET ............................................................................................ 3
1.1. Literature Review................................................................................... 3
1.2. THeory framework.................................................................................. 8

1.2.1. The essence of the distribution system of goods ............................... 8
1.2.2. Classification of goods distribution system ...................................... 9
1.2.3. Structure distribution system .......................................................... 10
1.2.4. The intermediate types of goods distribution ................................. 13
1.2.5. Organizing goods distribution system ............................................ 15
1.3. japan economics overview and economics relationship with vietnam . 20
1.3.1. The Japanese Economics ................................................................ 20
1.3.2. Trade relationship Vietnam – Japan .............................................. 23
CHAPTER 2. JAPAN MARKET CHARACTERISTIC OVERVIEW AND
DISTRIBUTION SYSTEM CHARACTERISTIC......................................... 28
2.1. Japan Import - Export Overview and Japan Market Characteristic Overview28
2.1.1. Import – Export current stage ........................................................ 28
2.1.2. Japan Market Characteristic .......................................................... 29
2.2. Characteristic of distribution system in Japan market .......................... 46
2.2.1. Great number of small-scale retailing store................................... 46
2.2.2. Various level of immediate retailers ............................................... 48
2.2.3. Role and influence of general trading company on distribution
system ........................................................................................................ 48


2.2.4. The Keiretsu distribution system .................................................... 49
2.2.5. “Special” Custom ........................................................................... 49
2.3. Transforming trend in distribution system in Japan ............................. 51
2.3.1. The Use of Third Country ............................................................... 51
2.3.2. M&A between Immediate Wholesales ............................................ 52
2.3.3. Direct Import in Retailers ............................................................... 53
2.3.4. Penetrating of Foreign Retailers to Distribution System in Japan 54
CHAPTER

3.

DISTRIBUTION

SYSTEM

OF

KEY

IMPORTED

PRODUCTS FROM VIETNAM AND PENETRATING ABILITY OF
VIETNAM COMPANIES .............................................................................. 55
3.1. Texttile and garments ............................................................................ 55
3.1.1. The characteristics, exported and imported products and
distribution system of Japan’s textile and garment industry .................... 55
3.1.2. The current state of import and distribution of Vietnam’s textile and
garment products in Japan’s market ........................................................ 58
3.1.3. General assessment of the penetration of Vietnam’s textile and
garment companies into Japan’s market .................................................. 62
3.2. Wood and wood products .................................................................... 65
3.2.1. Characteristics and distribution system of wood and wood product
in Japan’s market ...................................................................................... 65
3.2.2. The current state of export and distribution of Vietnam’s wood
products in Japan’s market....................................................................... 67
3.2.3. General assessment about penetration to Japan’s market distribution
system of Vietnam’s wood and wood product exporting companies ............. 72
3.4. General assessment of the state of penetration into Japan’s goods
distribution system of Vietnamese enterprises ................................................ 75
3.4.1. Achievement .................................................................................... 75

3.4.2. Existing limitations and their reasons: ........................................... 77


CHAPTER 4. RECOMMENDATION FOR ENHANCING PENETRAING
ABILITY OF VIETNAMESE EXPORTED PRODUCTS TO JAPAN ........ 79
4.1. Development prospect and orientation of Vietnam’s some key export
products to Japan’s market........................................................................... 79
4.1.1. Development prospect and export orientation of Vietnam’s products
to Japan’s markets. ................................................................................... 79
4.1.2. Development prospect and orientation of Vietnam’s some key
export products to Japan’s markets. ......................................................... 79
4.2. Some solutions aimed to improving penetration ability to distribution
system in Japan’s market of Vietnam’s export products ............................. 81
4.2.1. General solutions ............................................................................ 81
4.2.2. Separate solutions for each export sector ...................................... 84
CONCLUSION ............................................................................................... 94
REFERENCE .................................................................................................. 95


LIST OF ABBREVIATIONS

No.

Abbreviations

Meaning

1

ASEAN

Association of Southeast Asian Nations

2

CIT

Corporate income tax

3

CITES

The Convention on International Trade in Endangered
Species of Wild Fauna and Flora

4

FDI

Foreign Direct Investment

5

FOB

Free on Board

6

GPD

Gross Domestic Product

7

JAS

Japanese Agricultural Standards

8

JETRO

Japan Export Trade Research Organization

9

JIS

Japanese Industrial Standards

10

METI

Ministry of Economy, Trade and Industry

11

MOFA

Ministry of Foreign Affairs of Japan

12

SME

For small and medium enterprises

13

USA

United State of America

14

VCCI

Vietnam Chamber of Commerce and Industry

15

VJEPA

Vietnam- Japan Economic Partnership Agreement

i

LIST OF TABLES

Table 1.1: Japan Economics Current Indextes ..........................................................21
Table 1.2: Vietnam- Japan Trade Turnover (Measured in Billion US Dollar) .........24
Table 1.3: Japan’s official development assistance to Vietnam ...............................25
Table 2.1: Tastes and habits of consumers in regions of Japan ................................40
Table 3.1. 3 main categories of imported textile products in Japan .........................56
Table 3.2. Vietnam's total garment and textile export value during 2011-2015 .......58
Table 3.3. Preliminary statistics on export performance to Japan in the first 9
months of 2015 by the General Department of Customs ..........................................59
Figure 3.3 Main distribution channels of wood industries in Japan .........................66
Table 3.4. Composition of wood products exported to Japan in July 2014 in
compare to July 2015 (thousand USD) .....................................................................68

ii


LIST OF FIGURES

Figure 1.1. The distribution system of popular personal consumption goods ..........11
Figure 1.2. The distribution system for popular industrial goods .............................13
Figure 1.3. GDP Partern of Vietnam 2015 ................................................................20
Figure 1.4: Vietnam- Japan export, inport and trade turnover from 2007 to 2014 ..........24
Figure 1.5: Vietnam- Japan Import, Export and Balance of Trade from 2009 to 2013......25
Figure 1.6: Total FDI in 2014 ...................................................................................26
Figure 1.7: Total FDI in 2013 ...................................................................................27
Figure 2.1: Japan Import-Export 1005 - 2013...........................................................28
Figure 2.2 The structure of household spending in Japan.........................................29
Figure 2.3 Distribution system of imported goods in Japan .....................................30

Figure 3.1: Distribution channels of textile and garment products in Japan’s market........57
Figure 3.2: The composition of Vietnam’s textile and garment product export to
Japan ..........................................................................................................................59
Figure 3.3 Main distribution channels of wood industries in Japan .........................66
Figure 3.4 Mechanism of distribution of wood products from Vietnam in Japan’s
market ........................................................................................................................70

iii


INTRODUCTION
1. Rationale
Japan is one of the largest economies in the world, as well as a potential
export market of many countries including Vietnam. In these current years, two way turnover, especially export from Vietnam to Japan keeps growing, showing the
rapid development of bilateral trade relations. However, compared to the total
turnover of the Japanese import, the import turnover of Vietnam is still very small.
Although Vietnam's products are constantly improved, in quality and design, style...
Vietnamese enterprises are still small-scale enterprise in compare to domestic and
foreign competitor in Japan market, we have limited resource of information as well
as finance to understand and experience the market, and therefore, the penetration in
the Japanese market remains a challenge for Vietnamese enterprises.
To be able to penetrate the Japanese market more easily, Vietnamese
enterprises need to understand the characteristics of this complex distribution
system and on that basis develop a strategy to penetrate the market in line with the
scale of the business, achieve high efficiency. Looking at the distribution system on
the Japanese market, proposing the solutions to penetrate this difficult markets are
urgency and tremendous practical significance problems for Vietnam enterprises.
2. Research Questions
-

What is characteristic of distribution system of Japan market – one of the
largest export markets for Vietnam?

-

What is the current situation of export as well as penetrating ability of
Vietnam enterprise to Japan market? What are our achievements? What are
our challenges?

-

From that situation, where are the opportunities for Vietnam enterprises?
What we can do to get those opportunities?

3. Subjects and Scope
Subjects: The ability to participate in the chain of distribution of textile
products and woods into the Japanese market of Vietnamese companies
Scope:

1


-

Content

The study focused mainly on distribution system of Japan market and current
situation of two key groups of Vietnamese exports: textile product, wood and wood
products.
The reason for choosing these commodities: these are all commodity groups

evaluated as the focus of Vietnam exporters, with export turnover among 15 items
Japanese exports (www.vinanet.com.vn). Each item has its advantages and initially
receives good response from Japanese consumers, especially the group of wood
product. These are the items which are considered as potential exporters to exploit
the advantages of Vietnam on the Japanese market.
-

Space: the chain of distribution of textile products and woods

-

Time:The statistics were taken from 2006 to the end of the month 3/2016.

5. Research Methodology
- Qualitative data finding, collection: This study contains collected secondary
data that are related to concepts, opinions, values and behaviors of the subject in the
studyfor the purpose of analyzing.
- Data analyses: This study conducts processes and procedures whereby we
move from the qualitative data that have been collected into some form of
explanation, understanding or interpretation of the people and situations we are
investigating.
6. Structure of Research Study
This thesis has 3 chapters:
CHAPTER 1. THEORETICAL FRAMEWORK AND OVERVIEW OF JAPAN MARKET
CHAPTER 2. JAPAN MARKET CHARACTERISTIC OVERVIEW AND
DISTRIBUTION SYSTEM CHARACTERISTIC
CHAPTER 3. DISTRIBUTION SYSTEM OF KEY IMPORTED PRODUCTS
FROM

VIETNAM

AND

PENETRATING

ABILITY

OF

VIETNAM

COMPANIES
CHAPTER

4.

RECOMMENDATION

FOR

ENHANCING

ABILITY OF VIETNAM EXPORTED PRODUCTS TO JAPAN

2

PENETRATION


CHAPTER 1. THEORETICAL FRAMEWORK AND OVERVIEW OF

JAPAN MARKET

1.1. Literature Review
Distribution System has not drawn enough attention from reseachers. There is
not much paper on this field so far. The most influent researchs on this paper are
listed below.
Le Thuy Ngoc Van – “Vietnam-Japan Trade Relationsin the 1 st Decade of the
21 st Century”
Since the early years of the past century, the expansion of integration and
economic cooperation has become an inevitable trend for economic development of
countries. The globalization has opened up significant economic opportunities to
countries that no one can deny. In such context of the international division of labor
is going strong, the international economic cooperation has become the best way for
states to promote their maximum advantage, as well as fully exploit the benefits of
the other countries to serve their country namely, Singapore, Malaysia and
Thailand.Vietnam, too, to accelerate the process of industrialization and
modernization, the Communist Party and government have been implementing the
foreign policy of openness and diversification and multilateral international
economic relations, taking the objectives of peace and development as the standard
for all external activities.
Unexceptionably, both Vietnam and Japan have found each other in the favorable
conditions, as well as the mutual national economic benefits to develop and strengthen
bilateral cooperation relationships between the two countries. The pinnacle of this
relation was marked by the Vietnam-Japan Economic Partnership Agreement signed in
2008. After over three years of implementation, there have been a significant benefits
and opportunities gaining from the Vietnamese-Japanese trade relations. Besides the
positive results achieved in the trade relations, there have been some limitations that
need to be surmounted, removed to further develop the full potential of the two
countries, to strengthen the relationship between the two nations.

3


The purpose of this research is to evaluate economic effects of Vietnam’s accession
to Vietnam-Japan Economic Partnership Agreement (VJEPA) by implementing tariff
elimination, logistics enhancement, and reduction in service trade barriers. The
hypothesis is that two participating countries can benefit from the accession, resulted in
higher real GDP and economic development. The research has found out that VJEPA is
an important step on a longer journey of partnership between the two countries through
the evidences of new opportunities for both but there is still a lot of work to be done on
both sides to take full advantage of the relationship
Motoshige Itoh – “The Japanese Distribution System and Access to the
Japanese Market”
There has been an increasing amount of criticism from both inside and outside Japan about the efficiency of the Japanese distribution system and the
difficulty in obtaining access to the Japanese import market. According to this
criticism, the Japanese distribution system is quite complicated, Japanese business
practices are outdated, the system is inefficient, and it leads to trade barriers.
The following points are often made: (1) The Japanese distribution system
has many small-scale firms, both wholesale and retail, and a multilayer structure
that consists of many layers of wholesalers. (2) There seems to be a strong
linkage among the domestic producers, wholesalers, and retailers. It is not easy
for new entrants, foreign or domestic, to penetrate the market.
This paper concentrates on the economic mechanisms that underlie the
Japanese distribution system and its business practices. Itoh presents a rough
overview

of

the system; discuss

the

theory

of

repeated and long-term

transactions; analyze structural change in the Japanese distribution system using
apparel distribution as a case study; and, consider the issue of access to the
Japanese market.
Itoh and Maruyama present new evidence to the effect that value-added
per worker, gross margin, and retailer and wholesaler operating expenses
relative to sales and profits relative to sales are all lower in Japan than in the
United States or Germany.

4


Itoh makes the added point that even vertical arrangements that efficiently
resolve problems in the marketing of products can nevertheless impede entry.
But the reason entry is made less profitable and is impeded is that the
arrange- ments lead incumbents to expand output, which lowers prices. Efficient
vertical contracts, although they may indeed deter imports, cannot logically
explain why identical products have higher prices in Japan than elsewhere.
Nguyễn thị Vân - “Business Culture of Japan market and Access Ability of
Vietnam enterprises”
As global markets want to get closer, besides achievements we also confront
challenges that are more complicated. Experts identify the root cause of this comes from
difference in culture. Therefore, business culture is getting more and more attraction.

Japan is one of Vietnam’s most important partners. In the last 30 years, Japan
and Vietnam enterprised have been processing on assess to other’s market. They all
confront challenges in cross-culture environment and this leads to other difficulties
in doing business.
From these reason, this paper goes deeper to understand Japan business culture
and assess ability of Vietnam enterprises. The author went from overview about
business culture and its influence on assess ability of foreign firms. Following that,
author wrote in detail challenges and opportunities of Vietnam enterprise and
finally, came up with solution.
Kobe University – “Is the Japanese distribution system becoming more
accessible to foreign firms?”
This discusstion papers are a series of research papers in their draft form,
circulated to encourage discussion and comment.
Complexities in the Japanese distribution system are well-publicized. An
emerging body of literature has documented recent changes in the Japanese
distribution system. In this paper, it is examined whether foreign firms’accessibility
to Japanese distribution system has changed in a favorable direction in recent year.
Furthermore, as foreign firms vary widely in term of institutional barriers and
complexity they face in the Japanese market, the authors also investigate the

5


determinants of inter-firm heterogeneity in thỉ assessment of the Japanese
distribution system.
VCCI – Market Profile: Japan
This paper provides overall information about Japan market with up-to-date
data (April 2015). This paper starts with a quick look at Japan as a coutry with
knowledge about history, geography, culture, business culture … After that, the
paper focuses on information about economics, diplomacy – policy relationship,

economics relationship with Vietnam and cooperation with VCCI. Thank to the
paper, I utilized information about current economics performance between
Vietnam and Japan for my thesis.
Dr. Đinh Văn Thành, Dr. Trương Đình Chiến, Master. Vũ Bá Sơn – “Solution for
Improving Distribution System of Vietnam Export in term of Economics Integration”
In front of pressure to compete in free trade environment in term of
international economics integration, Vietnam enterprises are forced to improve
competency in distribution system, in not only domestic market but also exported
market. Only from that, enterprises show their abilities to produce and serve market
demand and create premise to improve production onshore. These demands are ones
of the most important support that enterprises ask from the government in the time
of integrating into international economics.
This research project is under Trade Affair. In the project, the definition and
role of distribution system is first mentioned. The project explains the operation and
management of distribution system. After explaining theory framework, authors
raise the current situation of distribution system for Vietnam exported products,
state their judges about achievement, and learning; limit and reasons behind;
challenges to take. In the third chapter of the research, solutions for develop
distribution system of Vietnam exported products is researched and presented. This
final chapter is started with the forecast about opportunities and challenges for
distribution system. From that, they propose the direction for distribution system of
Vietnam export operation and macro solution to develop the system in term of
economics integration.

6


The research provides knowledge and information to promote the
development of sustainable and competitive distribution system first in domestic
market and for foreign market in the following time. Distribution system research

need a deep understating from different aspects such as social-culture, legal,
management … therefore, it should be aware and update in detail.
Le Thanh Thuy – Graduate Thesis: “Solution for Promoting Vietnam Product
to Export to Japan Market”
Japan is one of the largest markets in the world nowadays because of dense
popularity as well as high income per people. For Vietnam, Japan is also one of the
most important trade partners. To maintain and promote export key products of
Vietnam to Japan market is what government has been working for.
In the age of globalization and internationalization, competition in export,
especially in export to Japan market is becoming tougher and tougher. Vietnamese
key export products are also products that other ASEAN countries or China has
advantage of production. Besides, Japan market is famous for its quality
requirements. This is the challenges for Vietnamese products to adapt to Japan
market, utilize our strengths and advantages to maintain and develop this market.
Recent years have been recording positive result in export Vietnamese product to
Japan market. The key note is that some of our products like seafood or wood products
have been improving enough to compete and raise market share in Japan market.
The thesis explains in details characteristic of Japan market; analyses and
evaluates current situation of Vietnam export to Japan market and from that, the
thesis states opportunities and challenges for Vietnam enterprises; finally, some
solution is proposed to promote export goods from Vietnam to Japan, in
government scale and enterprises scale.
Nguyễn Đức Thắng – Thesis “Import Policy of Japan and Vietnam Ability to
Export to Japan Market”
Japan and Vietnam has signed many trade agreements to promote bilateral
trade relationship. Japan market not only has important role at present but also be a
potential partnership for import-export of Vietnam in the future. Macro-economic

7

regulations of Government always have big influence on the economy to promote
and orient business and international business. The thesis emphasizes in the first
chapter important legal regulations, tax barrier and non-tax barrier, procedure… Mr.
Nguyen Duc Thang also highlights and evaluates import policies which Japan
applying to Vietnamese products. For chapter 2, current situation and potential in
Vietnam product to penetrate deeply in Japan market are demonstrated and
evaluated. From those, the final chapter is recommendation to promote export from
Vietnam to Japan.
Research subjects of this thesis is foreign trade policies of Japan, especially
import policies. The thesis limits itself in material products, not to expand to
service. The analysis and evaluation are based on information from the year 2000
until now.
This is the first thesis that not only focuses on Japan import policies but also
based on those researches and understanding, the thesis proposes macro solution to
promote export from Vietnam to Japan market in the following time.
1.2. Theory framework
1.2.1. The essence of the distribution system of goods
1.2.1.1. The conception
There are many different views of economists about the distribution system of
goods. According to Japanese economists Kasturi Rangan, the distribution of goods is
like a vertical marketing system, where ownership is transfered through intermediate
levels, like moving a stick on the track relay. There is another view that the goods
distribution system is a group of organizations and individuals performing the activities
that make the product, service is ready for the final consumer, or industrial users can
purchase and use. In general, we can say that the distribution system of goods is a
collection of enterprises and individuals that depend on each other, participating in the
process of bringing goods from producers to the final consumer.
1.2.1.2. Characteristics of the distribution system of goods
The distribution system of goods is a chain of relationships between

organizations and individuals involved in the process of buying and selling goods.

8


Each enterprise during business must participate in one or some distribution system
of goods.
If we consider the distribution system of goods as a multi-chain that one
chain is a member, the connection between that link is formed by motor lines as:
negotiation, payment, ordering promotion, risk sharing, transfer of ownership,
recovered and re-used wood shavings … This moto lines has created a strong rope
which bonds chains together and makes the whole line of distribution system
operate stable.
There is always a division of labor and specialization in the distribution
system of goods. Each business organizations undertake one or some certain
distribution jobs. In addition, there are organizations or companies that specialize in
performing the distribution known as commercial intermediaries. They not only
share part of the work with the manufacturers, but because only focus on the
ditribution, so, they operate effectively than other manufacturers, which helps
increase the efficiency of the whole system.
Goods flow in the distribution system through a mechanism called "pull - push”.
The "pull" mechanism means that the business uses measures influencing the demand of
final consumers to create gravity of goods on the market. The "push" mechanism means
that the business use measures to promote distribution system, enhance operational
coordination consumption, and create push of goods on the market.
1.2.2. Classification of goods distribution system
 According to the link between the levels of membership, the distribution
system divided into the traditional distribution systems and vertical
marketing system.
Traditional distribution system: the distribution which is formed in a spontaneous

random way. It is a discrete network, loosely connected the manufacturers, wholesalers
and retailers whose direct trade operation with each other. The advantage of this
distribution system is that the trade relations are not continuous and stable. It also
lack of centralized leadership, have poor performance and many conflicting.

9


Vertical intergration distribution system: the distribution system goods which
have focus and professional management program designed to achieve effective
high distribution and maximum impact on the market. Members of the distribution
system have close links with each other and operate as a unified whole. Using
vertical integration distribution system, enterprises can control works distribution
and conflict resolution initiative.
 According to the distribution properties, goods distribution system divided
into retail and wholesale distribution system.
Retail distribution system: the goods distribution system in which goods or
services are sold directly to final consumers for their personal use, not commercial
in nature.
There are many organizations - manufacturers, wholesalers, retailers perform retail functions, but the majority of the retail are done by professionally
retailers. The retailer will be done through a system of retail outlets, supermarkets.
Wholesale distribution system: the goods distribution system in which every
goods or service is sold to those purchaser for resale or for business purposes.
Compared with the retail system, the wholesale system has the following
different characteristics:
- Firstly, the object of the wholesalers in the wholesale distribution
system is not the final consumer.
- Secondly: because the wholesalers deal mainly with trade customers
so they are less interested in the ad, the location and the atmosphere of
the store.

- Thirdly: wholesalers usually have a wider range of trading and
commodity trading volume is also larger.
- Fourthly: wholesalers are under the provisions of the tax laws which
is different with other retailers.
1.2.3. Structure distribution system
Structure of goods distribution system described gathers members of the
distribution system and the division work among them. There are three basic factors

10


influence the structure of the goods distribution system, which are: the length of the
system distribution; the width of the distribution system and intermediate types at
each level the distribution system.
The length of the distribution system is determined by the number of
intermediate levels presenting in the distribution system. When the intermediate
level in the system increases, this system will naturally increase in length. For
example, the distribution system from the producers - wholesalers - retailers consumers will be longer than the distribution from producer to consumer.
The width of the distribution system expressed in the number of
intermediaries in each intermediate level.
The intermediate types at each level of the distribution system

Figure 1.1. The distribution system of popular personal consumption goods
Source: Author Agreegated
The distribution system A is a direct distribution system, because the
producers sold goods directly for the final consumer. In fact, many products and
services are distributed in this way. Because there is no intermediary in the direct
distribution, so the producer must perform all the functions of a distribution system.

11

Direct distribution system is very suitable for perishable goods, high value, bulky,
complicated techniques, customers concentrated in a geographical area …
The distribution system B is known as one - level distribution system, means
that the product from the manufacturer go to the retailer and then go to the
consumer. This distribution system is formed when the retailers have large scale,
can buy large quantities of products from the producers. The producers or the
retailers undertaking wholesale functions themselve will be more efficient than the
independent wholesalers will.
The distribution system C is known as two - level distribution system, which
have more wholesalers. This distribution system is widely used for all kinds of
goods with low unit value, low cost and the consumers often buy such as candy,
cigarettes, newspapers and magazines. These are the goods that have a large number
of consumers and wide distribution in the market.
The distribution system D is the longest system, also known as three - level
distribution system, which is used by many producers and small retailers. Agents
are used to gather goods and coordinate supply goods in a large quantity. Some
large business enterprises trading in a large market can also use their agents in the
region to undertake market supply of goods for the regional markets.
Due to less number of customers and large-scale customers, the distribution
system for the consumer goods industry often have little intermediate level.

12


Figure 1.2. The distribution system for popular industrial goods
Source: Author Agreegated
1.2.4. The intermediate types of goods distribution
1.2.4.1. Retail intermediaries

Retail intermediate forms can be classified according to several following criteria:
 According to the number of services offered
 According selling categories
 According to the nature of trade services
 According to store ownership
 According to the concentration of stores
a. According to the number of services offered, there are the following
formats: Self retail stores (automatic selling machine), Freedom retail Stores have
sellers to help (such as discount stores, grocery stores); retail stores serving
restrictions (such as department stores, mobile sales outlets); retail stores with full
service (like specialized shops, department stores luxurious synthetic).
b. According to selling categories, there are the following formats:
Specialized stores focus on a business in selling one goods; Store with a variety of
items such as department stores, supermarkets …

13


c. According to the nature of trade services, there are the following formats:
Retail sale via mail-order or telephone; automatic selling machine; mobile selling
machine; ..
d. According to store ownership, there are the following formats:
Independent retail stores: Retail stores are owned by an individual and selfemployed manage.
Chain retail groups: include many retail stores belonging to the one owner,
selling similar items and the purchases have the focus management.
Retail cooperative: include some independent retailers uniting and forming a
number of organizations purchasing with centralized nature and operate sales job,
ad with concentration.
Consumption cooperative: is held by major retail customers.
The exclusive agent: is the link under the contract between the sovereign

(Producers, wholesalers or service organization) and franchisees (retailers) want to
buy property rights and business products rights.
e. According to the concentration of stores, there are the following formats:
central business district, Regional shopping center; Local shopping centers; …
1.2.4.2. The wholesale intermediary
The wholesale intermediary forms can be classified into four major groups:
The real entrepreneurs merchandise
Brokers and agents
Branches and sales representatives of manufacturers
Specialized wholesalers
The real entrepreneurs merchandise
These are enterprises with independent property rights, they are actually
buying and selling goods, they own and have the right to decide for their goods.
According to business methods that they carry different names such as: the
wholesalers, the wholesale distributors, the suppliers. The wholesalers can be
classified into two major types: Wholesalers with full service and limited service
wholesalers.

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Wholesalers with full service ensure services such as preservation of reserves,
supply for saler, loans, guaranteed shipping and supports the management. According to
nature can be divided into wholesalers and distributors of capital goods.
Limited service wholesalers for those who supply their clients and have
fewer services ((Example: do not provide transportation services to the home ...)
b. Brokers and agents
Brokers and other agents are different from with real wholesalers on two
criteria: They do not have the right to ownership of goods and make a distribution
of certain functions. Their basic function is supporting the sale, which enjoy a

percentage on sales.
Brokers: The basic function of the broker is bringing buyers to the sellers and
helping them to deal with each other. The broker's remuneration may be received
from one or both sides.The brokers do not reserve goods, not involved in the
financing for the deal, does not incur a risk.
Agents: Agents represent for the buyers and sellers on a permanent basis.
They also perform many more functions distribution, are responsible and have more
benefits than the broker has.
c. Branches and sales representatives of manufacturers
This type do purchase and sale promotion themselves by the buyers and sellers,
do not attract independent wholesalers. There are two types of enterprises implementing
this activity, including parts and office consumption; purchasing office.
d. The specialized wholesalers
In some economic sectors. there are some separate specialized wholesale
such as agricultural wholesalers, the petroleum wholesalers …
1.2.5. Organizing goods distribution system
1.2.5.1. The content of the organizing goods distribution system activities
In view of the wholesalers, the organization of the distribution network of
retail goods is that businesses make decisions about the distribution of goods and
the choice of organizational form links in the distribution system. The decision on
the distribution of goods is the organization of the work that the goods distribution

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