Managing competition in the field of goods distribution services in Vietnam - 2

4. Research method:

- The topic uses traditional research methods such as analysis, statistics, and interpretation. In particular, the comparative legal method is used to highlight the unique characteristics of each country's legal system.

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- The comparison and contrast method is used to evaluate foreign experiences, thereby drawing lessons for Vietnam.

5. Thesis layout content

In addition to the Introduction and Conclusion, the thesis structure includes 03 chapters as follows:

Chapter I: Overview of distribution services and competition management in the distribution services sector.

Chapter II: Current status of competition management in the distribution service sector in Vietnam and experiences of some countries in the world.

Chapter III: Some solutions to strengthen competition management in the distribution service sector in Vietnam.

Due to the lack of accumulated knowledge and practical experience, my graduation thesis inevitably has limitations and shortcomings. Therefore, I look forward to receiving comments and contributions from teachers and friends to make my graduation thesis more practical.

I would like to sincerely thank Professor, Dr. Tang Van Nghia and the staff of the Competition Management Department, Ministry of Industry and Trade for their dedicated help in completing this Graduation Thesis.

Hanoi, November 6, 2007

Student practice

CHAPTER I. OVERVIEW OF DISTRIBUTION SERVICES AND COMPETITION MANAGEMENT IN THE DISTRIBUTION SERVICES FIELD

I. SOME BASIC ISSUES ABOUT DISTRIBUTION SERVICES

1. Concept

1.1. What is distribution?

In business activities, in order to consume products, in addition to creating high quality products, suitable for the tastes and consumption characteristics of each specific market, businesses need to pay attention to their distribution and movement policies. This is an indispensable part of the Marketing strategy, it ensures a close relationship between production and consumption, between supply and demand in the market.

In economics, there is currently no official definition and research on the field of distribution. According to the Encyclopedia Dictionary [62], distribution is the act of a wholesaler purchasing goods in large quantities from the manufacturer at a price close to cost and reselling them at a higher price to other buyers, who may be sub-distributors or retailers, but not to the final consumer.

Distribution is the process of marketing and making goods available, especially to retailers.

In Marketing, distribution is understood as economic, organizational, and technical processes to manage and transport goods from the place of production to consumers with high economic efficiency [15]. From this perspective, distribution includes activities taking place in the circulation stage, which is the bridge between production and consumption. The content of distribution is to perform a series of services after the production process and before the consumption process.

From the economist's point of view, product distribution is a synthesis of preparation activities, consumption organization and post-consumption activities. There is also a concept that: product distribution is the sales activity of

business. Another broader concept: product distribution is the circulation of goods in society.

The view of managers is that: “Product distribution is the answer to the questions: Who do we provide our products to? How do we provide them? And how do we make our customers most satisfied?”

According to the Service Sector Classification of document code MTN.GNS/W/120 (W120) of the Uruguay Round and the United Nations Provisional Central Product Classification, the distribution service sector includes 4 main groups: authorized agency services; wholesale services, retail services and franchising [10].

Wholesale services: is the sale of goods to retailers, to businesses in the industrial, commercial sectors, to organizations, agencies or to other wholesalers.

Retail services: is the sale of goods for personal or household consumption purposes.

Authorized agent: is the act of representing another trader to conduct transactions and sell goods owned by this trader to wholesalers, retailers or individuals.

Franchising: is selling certain rights and privileges to others (retail model, brand...)

Thus, with different perspectives on product distribution activities, understanding its nature is also somewhat different. But all of those concepts have one thing in common and we can understand product distribution as: all the work to bring a product / service from the place of production to the hands of consumers in need, ensuring the quality, time, quantity, type, style, color, that consumers desire.

Depending on different conditions, businesses consider the nature of their activities from different angles.

Within the framework of the Thesis, the nature of distribution activities will be analyzed based on the combined perspective of Marketing, the perspective of administrators and according to the Service Sub-Sector List of document code MTN.GNS/W/120 (W 120) of the Uruguay Round and the United Nations Provisional Central Product Classification.

1.2. Distribution system

1.2.1. Concept

There are two common distribution methods: direct distribution and indirect distribution. Direct distribution is the method in which goods are distributed directly from the manufacturer to the consumer without going through an intermediary. Companies can implement this method by selling door-to-door, selling by mail order, through the manufacturer's stores and over the Internet. The advantage of this method is that the company can be proactive in deciding on the goods to distribute, closely monitor distribution activities and respond promptly to market fluctuations, and the company does not have to share profits. However, the business must invest a large amount, so this method is difficult to apply for small and medium-sized companies that lack experience.

To overcome the above disadvantages, businesses can use indirect distribution methods. This method uses an intermediary system called the distribution system or distribution channel. It is a system of independent organizations involved in the process of creating products or services ready for consumers. This intermediary class includes wholesalers, retailers, agents, brokers, representatives of sellers and buyers, including transportation companies, advertising agencies whose task is to support the activities of the business. The distribution system is a very important internal resource of the business that often takes years to build and is very difficult to change. It characterizes the binding relationship between the manufacturer and the distributor. And it is also a close link between the business's policy system and the actual fluctuations in the market. Government

Therefore, building a distribution system is not only about immediate goals but also about future plans.

1.2.2. Distribution system structure

a. Components of the distribution system

Distribution systems have very complex relationships and structures like network systems because they include independent and interdependent businesses and individuals. Members or elements that make up a distribution system include:

 Producers: include many types of businesses from agriculture, industry, construction to service industries. However, within the framework of the thesis, only business producers (production enterprises) are mentioned. These are manufacturing companies of different sizes but all have the same goal of meeting market demand and making profits. To satisfy market demand, their products must always be ready to supply those markets. However, most large and small companies do not have favorable conditions to distribute their products directly to end consumers. On the other hand, they lack both the necessary experience and the effective scale to carry out all product distribution work. Therefore, they need intermediary distribution organizations. Producers are the first factor of distribution channels.

 Wholesalers: are those who sell goods and services to buyers for resale or business use. They often have large capital capabilities, provide financial credit and can control large market relationships. Wholesalers often deal more with manufacturers than with consumers. This will provide financial support to manufacturers, helping them focus capital on production investment. Because of their ability to control the market, wholesalers often tend to have exclusive purchasing power with manufacturers. However, because wholesalers also have little contact with end consumers, they are less dynamic and feedback from the market is also secondary information.

 Retailers: are those who distribute goods to final consumers to satisfy personal needs, not for commercial purposes. They often

Although not large in scale, retailers have diverse means of sales and a rich system of stores such as supermarkets, department stores, and shopping centers. Therefore, they often contact end customers, grasp their needs, tastes, and shopping habits. In addition, their business security is often higher than that of wholesalers because they have to provide diverse goods and predict market fluctuations. However, retailers are under the control of wholesalers or agents, so they tend to want to establish directly with manufacturers.

 Agent: is a representative of the buyer, seller, wholesaler or retailer. They usually do not have ownership of the goods and do not bear business risks. The agent's profit is calculated by the percentage of commission that the seller or buyer must pay according to the provisions of the agency contract. Agents do not have the right to decide the price of goods, so their competitiveness and business competitiveness are poor.

 Broker: is the person who searches for market needs, selects appropriate sources of supply to satisfy those needs. They are the ones who promote the buying and selling of goods on the market, helping supply and demand meet. Therefore, they will receive commission from both buyers and sellers.

 Final consumers: are the people who directly use the products sold by the manufacturer, are the target market served by the channel's commercial systems. They are the ones who directly influence the revenue of the channel members and are the deciding factor in the existence of the business.

From the advantages and disadvantages of members in the distribution channel system, manufacturers (enterprises) must always research and develop channel members to suit the scale of production and business, meet market needs in the most effective way, and ensure the implementation of the ultimate goal that every business wants to reach, which is to maximize profits.

b. Structure of the distribution system

Based on the distribution method, distribution channels can be divided into the following types of distribution channels:

Channel 0: is a direct distribution channel, in which there are only producers and final consumers, so it has advantages and disadvantages as presented above.

Channel 1: is an indirect channel, a short channel that includes sales activities through a type of intermediary. This channel helps businesses not only promote the advantages of a direct distribution channel but also free up part of the circulation function to increase specialization, reduce production and capital and human resources invested in distribution activities. However, this type of channel still has certain limitations such as not fully promoting the advantages of high-level social division of labor, manufacturers or retailers must also perform the wholesale function. Therefore, the allocation of reserves in channel 1 is still unreasonable and unbalanced, leading to many difficulties in the circulation of goods. Normally, this channel is used for specialized goods, serving some regular and stable needs of consumers.

Channel 2: is the most common type of channel in distribution activities and is often applied to large-scale manufacturers. This channel has the advantage of being highly specialized, helping manufacturers separate themselves from distribution activities and focus resources on production. Therefore, goods are circulated quickly and flexibly, satisfying market demand. However, manufacturers do not have a direct relationship with end consumers, so the information obtained is often secondary information, which is not timely and inaccurate.

Channel 3 (full channel): is the channel used by many small manufacturers and retailers. Here an agent is used to help collect goods and coordinate the supply of products in large quantities. This channel best meets the requirements of social division of labor between producers and circulation and also within circulation. It allows society to maximize commercial activities in all retail locations and all residential locations. However, the biggest limitation of this channel is that internal conflicts within the channel can occur because other members do not achieve their interests.

On the other hand, businesses may not be able to control their members and may not receive useful feedback from consumers.