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Current status of foreign direct investment in Vietnam's retail distribution sector - 1

FOREIGN TRADE UNIVERSITY

FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS MAJOR IN FOREIGN ECONOMICS


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GRADUATION THESIS


Current status of foreign direct investment in Vietnam's retail distribution sector - 1

Topic:

STATUS OF FOREIGN DIRECT INVESTMENT IN

VIETNAM'S RETAIL DISTRIBUTION SECTOR


Student: Pham Thi Thuy Hang

Grade: Japanese 1

Course 43

Instructor: MSc. Pham Thi Mai Khanh


Hanoi - 2008

INDEX

INTRODUCTION 1

CHAPTER 1: OVERVIEW OF VIETNAM'S RETAIL DISTRIBUTION SECTOR 11

I. RETAIL DISTRIBUTION AND THE ROLE OF RETAIL DISTRIBUTION IN THE NATIONAL ECONOMY 11

1. Retail distribution 11

1.1. Definition 11

1.2. Retail location 12

1.2.1. Position of retail distribution in the distribution service industry 12

1.2.2. Position of retail in distribution channel 13

1.3. Main types of retail distribution organizations 14

2. The role of retail distribution in the national economy 15

II. OVERVIEW OF VIETNAM'S RETAIL DISTRIBUTION SECTOR 20

1. Revenue and growth rate 20

2. Subjects participating in the retail distribution sector 21

3. Goods circulating on the market 25

4. Retail distribution systems 26

4.1. Traditional market system 26

4.2. Supermarket system, shopping mall 29

4.3. Self-service retail store system 30

4.4. System of small business households 31

CHAPTER 2: CURRENT STATUS OF FOREIGN DIRECT INVESTMENT IN VIETNAM'S RETAIL DISTRIBUTION SECTOR 33

I. THE NECESSITY OF OPEN UP TO ATTRACT FDI INTO VIETNAM'S RETAIL DISTRIBUTION SECTOR 33

1. Implementing commitments to join the WTO 33

2. Vietnam's retail market needs to be developed more to suit the consumption needs of the people.

3. Improving the competitiveness of domestic enterprises 38

4. Limit monopoly in the distribution sector, improve the market, and better cope with fluctuations in the world economy.

II. CURRENT STATUS OF FOREIGN DIRECT INVESTMENT IN VIETNAM'S RETAIL DISTRIBUTION SECTOR 40

1. FDI capital scale in retail distribution sector 41

2. FDI capital structure in Vietnam's retail distribution sector 45

1.1. Considering investment partners 45

1.2. Considering by investment location 47

III. EVALUATION OF FDI ACTIVITIES IN VIETNAM'S RETAIL DISTRIBUTION SECTOR 49

1. Positive Impact 49

1.1. Growth rate of retail distribution sector changes 49

1.2. Bringing modern management methods and business organization level 51

1.3. Encourage domestic enterprises to improve their competitiveness 52

1.4. Better customer service 54

1.4.1. About price 54

1.4.2. About quantity 55

1.4.3. About quality 55

1.4.4. About customer care services 56

1.5. Support farmers and businesses producing goods 56

2. Negative Impact 58

2.1. Changes in employment status 58

2.2. Changes in income status of social groups .. 59

2.3. FDI enterprises create market manipulation 60

CHAPTER 3: SOLUTIONS TO MAKE THE BEST USE OF FDI CAPITAL FLOWS INTO VIETNAM'S RETAIL DISTRIBUTION SECTOR 62

I. OPPORTUNITIES AND CHALLENGES TO ATTRACTING FDI IN VIETNAM'S RETAIL DISTRIBUTION SECTOR 62

1. Opportunity 62

1.1. World investment trends 62

1.2. Personal spending trends of Vietnamese consumers 64

1.3. Commitment and implementation of commitment 65

2. Challenge 68

2.1. Poor infrastructure 68

2.2. People's consumption style is still heavily traditional 68 2.3. Conflict between domestic manufacturers and foreign retailers 70

2.4. Limited competitiveness of domestic retail enterprises 71

II. SOLUTIONS TO MAKE THE BEST USE OF FDI CAPITAL FLOWS INTO VIETNAM'S RETAIL DISTRIBUTION SECTOR 71

1. State solutions 71

1.1. Implement opening of the market for goods and retail distribution services according to international commitments 71

1.2. The State needs to have measures to develop and master plan to attract foreign direct investment in the retail distribution sector 72

1.3. The State needs to take measures to improve the investment environment 73

1.4. Support manufacturing enterprises to access capital 78

1.5. Support businesses in the retail distribution sector 78

2. Business solutions 82

2.1. Enterprises need to proactively mobilize capital from all forms 82

2.2. Make the most of your understanding of the domestic market 83

2.3. Innovation in organization and management 84

2.4. Improve product quality 85

2.5. Improving labor quality 85

2.6. Expanding the market to rural areas 86

CONCLUSION 87

LIST OF TABLES


Table 1: Position of retail services in the distribution services industry 13


Table 2: Position of retailers in the distribution channel 13


Table 3: Summary of indicators on market networks nationwide by 2006 ... 28 Table 4: Summary of data on supermarkets nationwide by 2006 30

Table 5: Comparison of total retail sales of goods with final consumption fund in the period 1996-2005 35

Table 6: FDI in Vietnam's retail distribution sector by investment capital receipt time 41

Table 7: FDI in Vietnam's retail distribution sector by investment partner as of March 2008 46

Table 8: FDI in Vietnam's retail distribution sector by investment location as of March 2008 48


LIST OF CHARTS

Chart 1: Revenue and growth rate in the retail distribution sector 20


Chart 2: Total retail sales of goods and consumer service revenue by economic sectors in the period 2002-2005 42

Chart 3: Structure of total retail sales of goods and services in the period 2002-2005 ...43


Chart 4: Types of retail distribution in Vietnam in the period 2002

- 2005 ......................................................................................................... 69

INTRODUCTION


1. Urgency of the topic


Perhaps until now, businesses operating in the market have not forgotten the story of Tan Hiep Phat Company Limited. A story about business failure just because of not being proactive in the retail distribution channel for its products. At that time, the company was preparing to launch Laser fresh beer on the market with large investments in product quality (investing about 3 billion VND to import production lines & technology), continuously marketing with impressive advertising models on television and achieving the factor of being a strange product (the first bottled fresh beer in Vietnam) that immediately made an impression on consumers and was a threat to foreign giants. However, after just over a week of appearing, Laser could not find a foothold, could not reach customers. Most stores, beer bars, agents... in large cities such as Ho Chi Minh City, Bac Lieu, Vung Tau... did not accept to sell Laser beer. They even did not dare to display advertising samples with Laser beer images because Tiger, Heineken, and Bivina had signed exclusive contracts with them, requiring them not to sell or display any other beer brands, in return, they received a sponsorship of hundreds of millions of dong. Laser beer did not reach consumers because there were no retailers. The retail story is now not only for brokers, but businesses themselves must also be proactive in their own distribution channels.

The story of 4 years ago is even more meaningful at present when our country is gradually opening up the retail distribution sector according to the commitment to join the WTO. Opening the market and attracting FDI capital is a very necessary thing in the cause of socio-economic development of our country. However, the retail distribution sector is considered the lifeblood of the economy because it is related to

related to both production and consumption. FDI capital in the retail distribution sector not only has an economic impact but also creates many social impacts in Vietnam. How to attract foreign investment in this sector to take advantage of the positive impacts while limiting the negative impacts of that capital flow is the key to our country's economic development. In response to that question, the author chose the topic " The current status of foreign direct investment in the retail distribution sector of Vietnam " as the topic of his thesis.

2. Research purpose

Assessing the current status of development of Vietnam's retail distribution sector Researching the current status of foreign direct investment in the distribution sector

Vietnam's retail distribution to evaluate the achievements and shortcomings

Proposing solutions to best utilize FDI capital flows into Vietnam's retail distribution sector in the coming time.

3. Research object and scope


The thesis focuses on studying FDI activities in the retail distribution sector of Vietnam from 1996 to early 2008 in the context of the development of the retail distribution sector in general.

4. Research methods


This study is conducted mainly based on quantitative and qualitative analysis and evaluation through a number of research methods such as: comparative method, statistical method, synthesis - analysis method, and charts to clarify and enrich the theory to solve the proposed tasks.

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