Tài liệu MARKETING GUIDELINES FOR VIETNAM FOOTWEAR PRODUCERS doc

z
VIET TRADE - LEFASO VIETNAM
THE ABC’S OF FOOTWEAR MARKETING
MARKETING GUIDELINES FOR
VIETNAM FOOTWEAR PRODUCERS
(Making the Transition from Shoe Processing to Full Production)
Produced by: LEFASO VIETNAM
Assistance Provided by:
INTERNATIONAL TRADE CENTRE
UNCTAD / WTO
37
INTRODUCTION
In developing this product, a great deal of material was reviewed including
international marketing textbooks, export marketing guidelines generated by
various international experts, and material contained within the websites of
many companies and international organizations. While this information
was helpful and generated ideas, it was not of the practical, step by step,
nature needed by a company trying to determine if export marketing is a
viable option.
Virtually all the information contained in previously mentioned export
marketing publications deals with marketing branded products rather than
the private label products that Vietnamese companies are called upon to
produce by international buyers. This guidebook’s primary focus is on
marketing private label or customer branded footwear. This does not mean
that Vietnamese companies should not make a greater effort to produce
products for the domestic market nor does it mean companies should not
consider developing their own brand names. Both of these are viable
options and could be a more profitable alternative for many companies now
attempting to export.
This guidebook uses the methodology of analyzing individual companies
from the viewpoint of an international buyer, who has a choice of thousands

of factories worldwide to produce any individual product. The questions
asked are the ones the buyer would ask and the infrastructure and material
referenced are what would be expected from companies with which he plans
to develop a relationship.
Section A is perhaps the most important part of the guidebook. It contains a
quick start analysis with numerous questions a company should answer to
determine where it should focus the efforts of its business. There is no right
or wrong answer to these questions but a company with many negative
answers, should consider the steps necessary to rectify these before
attempting to expand its marketing effort. The questions asked in this
section are critical for companies to discuss internally as they develop short
and long term strategy. These questions could easily become the foundation
for a company’s annual strategic planning session.
Section B discusses the steps in process, knowledge, and human resources
that are necessary to successfully move from producing shoes under export
processing contracts to full product production and marketing. Also
discussed are the same considerations for a company who wishes to focus
on the Vietnamese market.
38
Section C contains the basic marketing guidelines and suggestions for those
companies who wish to pursue the export market.
The Guidebook Appendix includes information sources and important
examples of Vietnamese companies who have become success stories in
developing and exporting footwear to international markets.
This guide is by no means a full fledged marketing textbook but is designed
as a product to help Vietnamese companies approach the international
footwear market in an effective and professional manner.

A. Quick Start Company Analysis
Domestic

 Are you currently producing footwear for the Vietnamese domestic
market?
 Do you have your own retail outlets?
 Do you have your own sales organization or a network of wholesalers
covering the entire country or regions of the country?
 Do you produce goods under a brand name?
 Is this brand name recognized and legally registered?
 If 10 consumers were asked if they were aware of your brand name
would at least 5 likely say yes?
 Do you participate in domestic bids and tenders from government and
private companies and are you aware of most of these opportunities?
 Do you have a process for determining the exact cost of shoe’s you
produce?
 If you produce products under a brand name can you explain what the
brand name stands for and do you try to develop products around that
theme?
 If you produce products under a brand name do you know how much
of your business the top 10% of the shoe styles represent?
 When developing new styles, do you first meet with your dealers or
focus groups of consumers to get their reactions?
 Do you understand how to identify the footwear you produce in
categories other than men’s, women’s, children’s?
 Do you understand the meaning of niche markets? Do you compete
in at least 3 niche markets and how do you make your customers
aware of this?
 Is someone in your company responsible for meeting and dealing
with your customers 100% of his/her time and is that person willing
and able to give you bad news as well as good news concerning
customers?
39

 Is someone in your company responsible for understanding and
developing new products and technology?
 Do you attend at least one trade fair a year with the focus being on
seeing new products, technology, and materials?
 Have you met the managers of the large foreign production
companies and offered your services for subcontracting?
 Have you ever tried to sell cut and fit uppers?
 Do you attend at least one trade fair a year with the focus being on
sales?
 Do you read and apply to your business at least one international
publication per month dealing with footwear/clothing fashion?
 Are you using the same production processes to produce over 75% of
your shoes that you used 5 years ago?
 Do you have access to the internet and use it for business research?
 Do you know your leading suppliers and customers e mail address?
 If a customer calls your company or sends you an e mail, do you have
a system in place so that the call or e mail is always promptly
answered?
 Have you ever developed a fashion show combining your footwear
and clothing / accessories for your wholesale or retail customers?
 Are you able to identify your expenditures on sales, advertising, and
R&D on a yearly basis and compare them to your sales growth?
 Are you a member of LEFASO and /or a local footwear association
and are you aware of the benefits of membership?
Export
 Are you currently producing footwear for the export market?
 Are you now or have you previously produced footwear under an
export processing contract?
 Are you currently engaged in a joint venture agreement? If not have
you tried to locate companies who might be interested in forming

joint ventures?
 Have you developed a business card and basic written profile of your
company in Vietnamese and English which provides information on
your company (production, years in business, employees, etc.) to give
to potential customers?
 Have you ever attempted to export cut and fit uppers?
 Do you have a specific plan to use the exhibitor guides of foreign
trade shows for a marketing prospect list? Have you attempted this?
 Are you aware of every foreign trading company that has an office in
Vietnam and are they aware of your company and its capabilities?
 Do you understand the various methods of pricing your shoes (fob,
c&f, cif, etc.) and can you quickly produce quotes using these
methods?
40
 Have you made major upgrades to the machinery and processes in
your factory over the past 5 years? Are your lasts and molds in
European or American sizes? Do you understand the various
international foot sizes?
 Do you frequently visit the main country you export production to?
 Are you aware of the foreign and domestic producers of raw materials
and components located in Vietnam and have you approached them to
see if their products are a good option for you?
 Do you have a person on your staff that devotes 100% of their time to
dealing with customers? Does that person speak English and have e
mail capability?
 Do you have a formal product costing system that lets you identify
material and labor cost for each product you manufacture?
 If you purchase your raw materials have you developed at least 2
sources for every product and do you receive competing quotes?
 Do you have a person on your staff whose responsibility it is to use

the internet for sales and material sourcing leads?
 Do you have someone your staff with the ability to quickly and
accurately duplicate a sample from either a picture or an actual
sample?
 Do you have an employee or an agent in a center of footwear
materials (Taiwan / Hong Kong) who can supply you with the correct
materials to produce a sample for a customer quickly?
 Do you have an internet website and have you researched and listed
your company with every internet search engine and internet footwear
industry site?
 Are you able to receive orders and bill customers using EDI? Do you
have the capability of receiving customer patterns electronically?
 Have you developed in your main office, an area that displays
awards, citations, and certifications that your company has received
and would want customers to know about?
 Do you attempt to sell your products to markets closest to Vietnam
rather than those the furthest away? Have you developed a list of your
top 5 target markets? Have you tried to locate sales agents in these
countries?
 Do you exhibit at the HCMC International Footwear Exhibition?
 Are you a member of LEFASO and aware of the services it offers to
help you in exporting?
B. Moving Beyond Export Processing Contracts
It’s likely that over 95% of the footwear exported from Vietnam is what we
call private label footwear. These shoes may have a famous brand (Nike,
Doc Martens), the trade name of a chain store (Famous Footwear, K Shoes),
41
or no name at all. But the common factor is that a foreign buyer supplied
the design, and possibly the components and dies to produce the product.
This is the type of production that the majority of foreign buyers are

interested in producing in Vietnam.
In discussions with Mr. Nguyen Gia Thao, Chairman of LEFASO, a major
objective of the industry must be the transformation of companies from
processing export contracts to full shoe marketing and production. Many
Vietnamese companies have been able to successfully make this move but
many others have expressed concerns as how to accomplish this move and
question whether their company should make the attempt. This section will
discuss the steps a company should follow in order to make the move, the
requirements in process and knowledge, and the challenges.
In today’s business there are several phases in the life of a style of footwear:
Concept Phase – Research, Design
Production Phase – Engineering, Materials Procurement, Manufacturing
Distribution Phase – Logistics, Wholesale Marketing, Retail Marketing
These percentages aren’t this exact, but to illustrate our point let’s assume
that each of the 8 tasks above represent 12.5% of retail value of a shoe. A
company that operates under a processing contract has the opportunity to
add only 12.5% of the value to a shoe whereas a company that is engaged in
full production has the opportunity to add up to 60% of the value to a shoe
depending on its ability to sell to the retailer or a distributor.
The characteristics of a typical company operating under an export
processing regime:
42
In order to be successful, companies operating under this type of process
must have the skills to obtain and train a workforce, understand their
production costs, and have access to a building and machinery. Some
machinery and the product dies and patterns will likely be supplied by the
customer. They are not participating in the concept phase or distribution
phase of the shoe and only 30% to 50% of the production phase. They are
adding a very small amount of value by selling only labor. Even so, they
still may not be able to turn a profit as their labor cost will be compared to

the same in countries all around the world. While the downside risk is
limited for a processing company so is the profit potential. Many
companies have decided they do not wish to make the investment in
personnel and systems to move to the full production stage and are
successful footwear processors. If a company can understand and control its
production costs, try to increase its value by performing more functions in
the manufacturing phase of the product, and develop a network of
customers, remaining a shoe processor makes good strategic sense.
In order to add value, many Vietnamese companies have attempted to move
to full production. While some have been successful, many have had
problems. This usually occurs because of a lack of understanding about the
knowledge functions required to move to the next level.
43
We call the next step, Full Stage I Production. This type of company is
responsible for its own machinery, purchasing of raw materials, and
producing footwear for a select group of trading or distribution companies
that supply a sample or a picture of the product that they wish to purchase. It
must upgrade the knowledge functions of its business but also must have
modern production processes to make footwear of a more complicated
nature. The size of the staff required need not be large, as its sphere of
customers will be small and they are likely to be based in the home country
as buying offices. This type of company has added the value steps of the
entire production phase and a portion of the distribution phase to its resume
and has the ability to charge higher prices than a processing company, but
has taken on some higher risk. Many domestic Vietnamese companies are
operating at this stage.
Requirements for Processing Companies to Move to Full Stage I
Production
• Trained Product Development Commercialization Employees (link
between design & manufacturing).

• Trained Materials Sourcing & Purchasing Employees.
• Trained Sales & Customer Service Employees.
• Trained Export Documentation Employees.
• Trained Finance Employees.
• Upgrade of Production Process & Machinery.
The next stage of the process is defined at Full Stage II Production. These
companies take the previous stage a bit further and add value to the process
by fulfilling the functions of the trading companies. Instead of marketing to
trading companies, they are marketing their products to importers or
volume retailers located outside of Vietnam. Several Vietnamese
companies are operating at this stage. Many others have attempted the
transition but have either not understood the process or have not allocated
the necessary resources to be successful.

Requirements for Stage I Production Companies to Move to Full Stage
II Production
• Upgrade of Product Development Commercialization Staff.
• Upgrade of Materials Sourcing & Purchasing Staff.
• Upgrade of Customer Service Staff.
• Development of a Fully Trained Marketing Staff with International
Offices and/or Agents.
• Upgrade of Export Clerks to Fully Trained Logistics Staff.
• Upgrade of Finance Clerks to Fully Trained International Credit Staff.
44

Companies at Stage II are able to add a portion of the concept phase, all of
the production phase, and the majority of the distribution phase value steps
to each shoe they produce giving them the ability to charge higher prices
than any of the companies mentioned previously. There also comes more
risk in that this company has a higher fixed overhead and a higher

investment in plant and machinery than those of other company types. A
company at full stage II production is exactly the goal Chairman Thao has in
mind for many more Vietnamese companies.
Building brands is usually a long and expensive process. It is best done in a
home market where a company has experience and a feel for what its target
customers prefer in style, size, and price range. Packaging, fashion trends,
advertising, in store promotion and merchandising are necessary skills
required in the marketing of branded goods. These skills and a heavy
budget is the difference in a Japanese consumer paying $800 for a Prada
purse at a fashionable store or $8 for an item looking much the same in the
local market. It takes a huge amount of advertising and promotion to
convince consumers that a Mercedes Benz automobile or an Armani suit
gives the purchaser the look of elegance and success. Several Vietnamese
companies have successfully been able to build wholesale and retail brands
for the domestic market. These have not translated well when the attempt
was made to transfer them to international markets.
Many companies with a large domestic presence have a difficult time
becoming successful in selling private label goods on an international basis.
This is usually because the thought process necessary for success is so very
different between the two. A long established business that manufacturers
footwear for its own stores and independent retail network in a domestic
market has likely built up systems and procedures, that while being
necessary, slow down its market response and add cost to the products. The
best example of this is the Canadian company Bata, which has a huge
presence in many countries around the world in wholesale and retail but has
never become a factor in the international sourcing and distribution of
footwear, outside its own network. If this sounds like your company here
are a few suggestions:
1. Consider forming a joint venture instead of attempting direct
international marketing. Joint venture partners are not easy to find

but the sphere of companies you will be contacting for this purpose
will be small and can be done directly by you, as the company
director. The joint venture partner will bring many strengths which
combined with your will make you both better companies.
45
2. If you are committed to direct international marketing, consider hiring
a manager from outside your company and let him/her choose the
staff from within and outside your company.
3. Locate the operation in another building or another city. The new
operation needs to be able to respond quickly to its customers and
provide the services needed at minimum cost but maximum quality.
The theme should be looking forward and not so much the history of
the parent company.
4. Communicate well to everyone in the organization that the new
international exporting operation may be the future of your company
and it is imperative that its needs and requests are supported by the
rest of the company. If this message comes from the top it has a
much better chance of being understood and accepted.
5. Consider licensing an international brand name for distribution in
select countries. Licensed brand names in footwear and clothing have
become multi billion dollar businesses. Many international licensing
agencies have been skeptical about the distribution of their products
in many Asian countries, including Vietnam, because of potential
illegal use of brands and trademarks. An established domestic
company has a much better chance of obtaining the licensing rights to
an international brand than an upstart company. Accurate records and
timely licensing payments made and domestic success can allow
expansion to countries within the region.
There are examples in Vietnam of companies who have begun as processing
companies, formed joint ventures, and have begun direct export marketing.

Those companies have continued to operate on all three levels. This gives
the company a good foundation and allows them the security of having a
secure amount of business to absorb overhead when other portions of the
business are not going as well. This type of business requires exceptional
top and mid level management to insure that all areas of the business run
smoothly without undue conflicts. Much credit should go to companies
who can make this complex operation work and their methods should be
studied by others.
This section of the guidebook has focused on showing you the steps
necessary to move from export processing to some form of full production
and marketing. Most of these steps are knowledge based and can be
accomplished by even a small company who is willing to properly train its
employees in the critical tasks outlined. There are examples in Vietnam of
the largest companies failing to continue to upgrade the knowledge
processes of its staff and even though they had the resources of plant and
equipment and were well known with access to capital, could not keep up
with smaller, more nimble companies.
46
A key for smaller companies is to try very quickly to identify the type or
types of products you wish to specialize in and become the best at producing
them. A buyer who sees a small factory trying to produce leather and
synthetic dress shoes and suede hiking boots at the same time understands
that this is a company that is unlikely to be efficient in producing either. As
soon as possible find your specialty and strive to become the most efficient
producer of that type of shoe.
C. Marketing Guidelines & Real World Suggestions
Your company has decided that it should become involved in the export
market as a full production company. Now what should you do? Marketing
textbooks might spend 100 pages in telling you the studies you should
undertake and the formal process you should follow in order to determine

how to convince a buyer in another country to buy your product.
Experience teaches us that selling is not rocket science but occurs when a
buyer understands that what the seller offers is of enough value to cause him
to spend his money. It’s that simple. The difficult part is locating the buyer
and convincing him that you are the right person to supply that product.
Here is a 6 step approach that should give you the best opportunity for
success:
1. Contact LEFASO VN.
2. SWOT Your Company.
3. A Professional Presence.
4. Familiar Is Better.
5. Selling Begins With A Discussion.
6. Success Follows Persistence.
7. A Critical Mass Is Necessary For Long Term Industry Success.
Contact LEFASO
LEFASO should be your first point of contact as soon as you decide that
exporting is the right path for your company. Membership in this
organization brings with it benefits in the years of experience that LEFASO
has. It would be helpful to explain to the LEFASO staff what you wish to
do and ask them what types of information they can provide you from
previous foreign trade missions, inquiries, and from other member’s
experiences. The ability to use the information LEFASO can provide will
put you a step ahead in the export process. LEFASO has very nominal
membership fees and you should take full advantage of the services they
offer. The same is true of your local footwear trade associations which
should also be a point of contact.
SWOT Your Company
47
A huge mistake that companies make is in not understanding what they
have to offer a potential buyer or company with which they want to develop

a long term relationship. SWOT stands for strengths – weaknesses –
opportunities – threats. It is sometimes difficult for a company to analyze
themselves and you might consider having someone at LEFASO or a
business associate you deal with to look at the answers you arrive at and see
what he comes up with. A good start is to answer the questions in section
A. The answers to these should begin to give you some idea of your present
situation. Next take a piece of paper and start taking inventory of your
company by function. Start from manufacturing from the first operation.
Here is an example:
1. 4 clicker cutting machines. (3 operators and 1 manager trained in
cutting leather).
2. 45 sewing machines for the fitting operation. (25 experienced
operators, 20 trainees, and 1 manager). Follow this process for the
entire factory.
3. Our current machinery can produce 800 pair of vulcanized outsole
shoes per 8 hour shift. We can easily find more workers, train
them, and increase to 2 shifts per day. Employees for stitching are
easy to find and train.
4. Our Vulcanized molds are in European sizes 36-45. We
understand how to convert these to American sizes. New molds
will cost us $2,500 each and are required for each new size per
width. We buy these in Taiwan and it takes 2 months to receive
them from order date.
5. We currently have dies to make a low top and high top basketball
shoe in canvas. New dies for a full set of sizes cost us $3000 and
also come from Taiwan. We have an experienced patternmaker
who can develop the paper patterns we sent to the die shop. The
time to receive these is 3 weeks.
This process should then be followed to your office staff:
1. 1 individual with finance training in letters of credit transactions.

2. 1 individual with previous export experience who speaks English
and Russian. Has training in export document preparation. No
experience in footwear.
3. 1 individual with design and patternmaking experience. Can
duplicate samples from pictures or supplied sample.
4. 1 individual with purchasing and material sourcing experience.
Can locate materials necessary for samples and select reliable
sources.
5. 1 engineer with experience in formal costing.
6. I (owner) speak Italian and Vietnamese. My expertise is finance.
7. We have e mail, which we check every 2 hours.
48
The total of the above inventory is your resources. How you put these
resources to use becomes your company’s strengths. Use the same
inventory to determine your weaknesses. Here is an example:
1. Our process equipment is for making vulcanized footwear. If a
customer wished cement lasted or stitchdown footwear we cannot
produce that without major equipment changes.
2. We can make 800 pair per day per shift or 1600 pair per day on 2
shifts. We now sell 600 pair per day so to sell more than 1000
additional pair per day will require longer delivery times or another
factory.
3. Our molds are made in European sizes and widths. It will take major
expenditures to make Japanese sizes and widths.
4. We cannot obtain raw materials for leather shoes in less than 60 days
after an order receipt.

We follow the same process on opportunities and threats. Here are
examples:
1. We had very good interest at the shoe fair in Russia. We had an order

from one company and interest from 3 others. Maybe it could be a
good market and we can ask the current customer if he has some
leads for us and our export manager can communicate with the others
by telephone or fax. (opportunity)
2. Our biggest customer opened an office in China. He likes our shoes
but says the prices in China are 20% lower. (threat)
The SWOT analysis tells us a few things about this company:
1. The primary export markets this company should consider are those
that speak Italian or Russian.
2. The primary products the company should consider offering are
vulcanized outsole canvas shoes in low and high tops. We can easily
offer 200 pair per day for early delivery and another 800 pair per day
for slightly longer delivery.
3. The company should consider offering to sell uppers of somewhat
higher quantities.
4. We can make samples of other products using the same processes and
give an accurate cost quote on them.
5. We should not attend the trade fair in Japan next month as suggested.
6. We should make a longer trip to Russia and see if we can develop
more customers there.
It is important that you answer the questions in section A and in the SWOT
analysis very honestly. The purpose is to get an accurate understanding, not
paint a better picture of your company than is there. It is also ok to have a
49