Some Theories and Contents on Improving Business Competitiveness

A place where the exchange of goods and services between buyers and sellers takes place on a scale within the territory of that country.

1.2. Some theories and contents on improving business competitiveness

1.2.1 SWOT Matrix

SWOT matrix is an acronym of the first letters of the English words: Strengths, Weaknesses, Opportunities, Threats. In which, Strengths and Weaknesses are internal factors of the business. Meanwhile, Opportunities and Threats are external factors of the business.

Table 1.1: SWOT Matrix

SWOT

Opportunity (O)

Challenge (T)

Strengths (S)

- SO: use strengths to exploit opportunities

- ST: Use strengths to limit challenges

Weakness (W)

- WO: use weaknesses to exploit opportunities

- WT: Overcome weaknesses and limit challenges

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(Source: Strategic Management Textbook, University of Commerce, page 261) The SWOT matrix is also an important tool to help managers combine strengths, weaknesses, opportunities, and challenges to develop into 4 strategies: Strengths-Opportunities Strategy (SO), Weaknesses-Opportunities Strategy (WO), Strengths-Challenges Strategy (ST), Weaknesses-Challenges Strategy (WT). Combining internal and external factors is a difficult task because it requires being done objectively and with good judgment. The purpose of SWOT analysis is to propose feasible strategies for selection. The SWOT matrix proposes strategies

comb:

+ SO strategy: is a strategy that uses the strengths of the business to exploit opportunities. This is the top priority strategy of the business because when applying the strongest points of the business in implementing the work, it will be easy to achieve high success opportunities without having to spend too much effort. Usually corresponds to short-term strategies.

+ WO strategy: is a strategy that uses a business's weaknesses to exploit opportunities. Using weaknesses will cause the business to spend more resources to exploit opportunities. Many times, after improving weaknesses, the opportunity is no longer there. Usually corresponds to a medium-term strategy.

+ ST strategy: is a strategy that uses strengths to limit risks. Limiting risks is the work that helps businesses minimize financial risks or other factors that are disadvantageous to the business. Businesses use strengths to reduce resource consumption. Usually compatible with short-term strategies.

+ WT strategy: is a strategy to overcome weaknesses and limit risks. Risks are factors that directly affect the weaknesses of the business, forcing the business to overcome weaknesses and also predict possible risks to avoid the risk of directly attacking weaknesses. This is a defensive strategy.

SWOT matrix diagram description consists of 9 boxes. Of which 4 boxes contain important factors (S, W, O, T), 4 strategic boxes (SO, WO, ST, WT) and 1 empty box.

1.2.2. Contents of improving competitiveness

a) Improve competitiveness through product quality

Product quality is the totality of product attributes that express the nature as well as characteristics, characteristics of the product with its own value, determined by measurable or comparable parameters, in accordance with existing technical conditions, determining the ability to satisfy certain human needs. To put it more simply, product quality is one of the factors that determine the success or failure of a product compared to other products of the same industry sold on the market. If in the past, price was considered the most important deciding factor affecting consumer behavior, today, price and product quality have become two parallel criteria that every consumer cares about when choosing a product. Even with the same product line, consumers are willing to choose which product brings convenience, quality at a higher price. Especially in the context of international integration and free economy, when productivity develops in parallel with income of workers increase, they have enough conditions to satisfy their needs for quality without having to worry too much about price. Therefore, improving product quality is always a necessary factor to become the trusted choice of consumers.

Improving product quality is demonstrated through product improvement, through the process of changing product materials or changing product manufacturing technology to achieve criteria of better form, design, and model, higher product durability and above all, convenience and safety when used compared to old products. Therefore, competing with product quality is always an issue that needs to be concerned and each business needs to have a specific and long-term investment strategy for this form because quality is highly competitive for businesses, helping to increase product speed.

consumption and increase the volume of products produced, at the same time it also extends the product life cycle to optimize profits for the business. Besides, it is also a necessary condition for businesses to gain trust from customers.

b) Improve competitiveness through price

For a long time, price has always been considered a priority factor when choosing to consume products from customers. And in the business market, price is one of the important competitive tools of businesses when they first enter the market. Price competition is expressed through product pricing through the following criteria: pricing lower than market price, pricing equal to market price or pricing policy higher than market price.

With a price equal to the market price: Helps businesses find potential customers. If businesses find a way to reduce prices while maintaining the quality of products, it means increasing product consumption volume, increasing business efficiency and earning more profits.

With a price lower than the market price: Helps businesses have an advantage over competitors in the same industry. However, lowering product prices lower than the general market level also means that businesses accept to cut their profits, directly affecting the revenue and profits of the business. To apply the above pricing policy, businesses must meet 3 factors: Have great financial potential, the ability to consume products quickly with large volumes of goods, and control input costs and prices well. Only then can businesses create better profit value for customers than competitors and attract customer loyalty when consuming their products. In short, businesses must choose the right time to apply a low price policy as a competitive factor compared to other competitors in the same industry and must also invest in researching consumer tastes, habits, and customer criteria when choosing products to ensure maximum exploitation of consumption power. product consumption and make big profits.

With a higher price than the market: This is the pricing policy that businesses will apply to new products on the market when consumers first see them and cannot compare prices with similar products in the same line. In other words, this is a psychological tactic that targets consumers when "buying at a higher price means better quality". Applying this tactic will make the business's profits greater, but to apply it, the business must actually own a big brand, the products produced must be

The performance must be superior to that of competitors in the same industry and must be convenient, aesthetic, and have the unique characteristics of the business. Most businesses use this pricing level as a competitive weapon when the demand for the product is greater than the supply or when the business has a monopoly on selling the product or the business sells rare items with historical value.

In general, when applying any pricing level to become a competitive tool in the industry, businesses should consider the company's current advantages, research the current market situation, customer needs and psychology to choose a suitable pricing policy to maximize the business's product consumption capacity.

c) Improve competitiveness through distribution system

The distribution channel system always plays an important role in the process of transporting goods from the place of production to the end consumer, it limits the stagnation of goods or solves the problem of circulation. In order for the consumption activities of the enterprise to take place smoothly, regularly and fully, the enterprise needs to choose distribution channels to study the characteristics of the market and customers. From there, there are reasonable and effective product distribution policies to meet the needs of customers. Reasonable product distribution policies will increase capital turnover, promote consumption, and increase the competitiveness of the enterprise. Normally, the distribution channels of enterprises are divided into 4 types:

- Very short channel: Producer → Consumer

- Short channel: Producer → Retailer → Consumer

- Long channel: Producer → Wholesaler → Retailer → Consumer

use

- Shortened channel: Manufacturer → Agent → Retailer → Consumer Depending on each business item, depending on geographical location, depending on customer needs

Buyers and sellers, depending on the business scale of the enterprise, use different distribution channels appropriately and effectively because sometimes distribution channels act as brokers but sometimes they bring cumbersome obstacles.

d) Improve competitiveness with resources

- Financial capacity (capital resources): Financial capacity, also known as capital resources, is always the core issue of enterprises when participating in business activities. Any investment activity, expanding the scope of business or improving the supply chain system must consider the financial capacity of the enterprise. An enterprise with good financial capacity will easily mobilize capital from organizations.

foreign investment, has high prestige for both small investors through the stock exchange, not only that, with good financial potential, they can easily purchase modern equipment, invest in in-depth production systems, increase production capacity, have good compensation policies for employees, and retain workers for a long time. If a business is weak in finance, it will not have the conditions to purchase, pay off debts and thus will not create prestige in terms of payment ability and ability to meet high quality products for customers, directly affecting the competitiveness and survival of the business in the market. Therefore, financial capacity is the first important factor that helps businesses form and develop.

- Human resources: Human resources or specifically people are always the top concern of every business and are an important factor determining the success or failure of each company. The reason why the above factor is so important is because only people know how to come up with ideas, coordinate groups and implement plans and only people have the intelligence and initiative to create products, build the reputation and image of the business in the market. Therefore, businesses must pay attention to using people to develop human resources, build a disciplined business environment and above all, the spirit of solidarity to achieve the set goals. At the same time, businesses must pay attention to very basic indicators such as the number of employees, professional qualifications, labor productivity, average income and capacity of management staff.

e) Improve competitiveness through technology and technical resources. Technical resources will clearly reflect the competitive strength of the enterprise.

compared to its competitors. Because machinery and equipment and technological level are two main factors that reflect the strength in the production stage of finished products and the quality of products of the enterprise in the market. A business that has invested systematically in the production line system, modern equipment, advanced technology, the quality of the products of the enterprise when reaching consumers will be fully preserved. Besides, with a modern machinery system, it will help to increase the process of creating output and consuming products of the enterprise, increase the capital turnover and even when the technology level of the enterprise is highly developed, it will create faster steps in the process of production and distribution of products, eliminating old traditional methods and minimizing the cost of products to be produced and spent as before. It can be said that in the current context, under the impact of technology and scientific and technical development, the competition between enterprises has even become a race of intelligence, technology, and the level of investment in equipment. material equipment. In general, advanced technical material and high technology level are two criteria.

Ensure production efficiency, high product quality, minimize costs and establish new standards in the engineering industry for each business.

f) Improve competitiveness through business management skills

The management level of an enterprise is demonstrated through the capacity of the administrator, more specifically through the development of strategies and business development plans for the enterprise. A good administrator must be a person who is good at qualifications, good at professional expertise, has the ability to communicate, knows how to perceive and solve problems flexibly and sensitively, has the ability to persuade others to obey his orders voluntarily and enthusiastically. Know how to care, motivate, and encourage subordinates to work responsibly. In addition, the administrator must also be a person who can look far and wide, outline future business strategies with a macro perspective, in line with the general development trend in the market economy.

1.3. Criteria for evaluating the competitiveness of Song Hong Garment Joint Stock Company in the domestic market.

a) Market share of the enterprise

In fact, there are many different methods to evaluate the competitiveness of a business compared to other businesses, in which market share is a commonly used indicator. Market share is understood as the market share that a business occupies in the total market capacity. Therefore, the market share of a business is determined:

Relative market share =

Absolute market share of the enterprise

Absolute market share of largest competitor

× 100%

To evaluate the competitiveness of a business compared to its competitors, we use the relative market share indicator: This is the ratio of the business's market share compared to its strongest competitor, from which we can know its strengths or weaknesses compared to its competitors. The advantage of this indicator is that it is simple and easy to understand, but its disadvantage is that it is difficult to accurately grasp specific and realistic data of competitors.

Absolute market share =

Business sales revenue Total market sales revenue

× 100%

The larger this index is, the wider the market domination of the enterprise. Through the fluctuation of this index, we can evaluate the level of business performance or not because if the enterprise has a large market segment, the above index reaches the highest level and assigns the enterprise a dominant position in the market. If the enterprise has a small market scope, the above index is at the level

If the business has a small market scope, the above index is low, reflecting the situation that the business is being squeezed by competitors. By using the market share index, the business can preliminarily assess the ability to dominate the market compared to the whole industry.

b) Labor productivity of the enterprise

Labor productivity is a factor that greatly affects the production and business efficiency and competitiveness of enterprises. Because through labor productivity, we can evaluate the management level, labor level and technology level of the enterprise. The formula for calculating labor productivity (W) is shown as follows:

Labor productivity(W)= Total sales revenue in the period ×

Total number of employees in business or directly involved in business

100%

The higher the labor productivity, the more the enterprise is able to reduce costs and prices, thus having high competitiveness in the market. In the context of international economic integration and increasingly fierce competition, improving productivity and quality, especially labor productivity, is necessary for every enterprise.

c) Business profits

Profit is the remaining part of revenue after deducting all costs used in production and business activities. Profit is considered a comprehensive indicator to evaluate the competitiveness of an enterprise. Because, if an enterprise earns high profits, it certainly has high revenue and low costs. Based on the profit indicator, enterprises can evaluate their competitiveness compared to competitors.

Business profit is calculated by the formula: LN = ∑ 𝐷𝑇 - ∑ 𝐶𝐹

In which: LN: Business profit

∑ 𝐷𝑇 : Total revenue of the enterprise

∑ 𝐶𝐹 : Total cost of the business

If the profit is high, the business's competitiveness is high and the business's performance is considered very positive and vice versa.

d) Profit margin

This is one of the criteria showing the competitive potential of the enterprise.

+ Return on sales (ROS) = Profit after tax

Net revenue

This ratio shows how much profit is generated for each dollar of revenue earned during the production and business process. The higher the ROS, the higher the ability to generate profits from revenue. This ratio also indirectly shows the ability to manage costs of the enterprise: The higher the ROS, the lower the ratio of costs incurred per dollar of revenue, proving that the enterprise manages costs effectively.

+ Return on total assets (ROA) = Profit after tax

Total Assets

This ratio shows the scale of after-tax profit generated from each dong invested in the total assets of the enterprise, thereby reflecting the ability to generate profits from assets or the frequency of exploiting the assets of the enterprise. This indicator shows how much profit is generated on average for each dong of assets used in the production and business process. The higher the magnitude of ROA, the higher the ability to generate profits on total assets or the frequency of exploiting total assets, demonstrating the efficiency in using the assets of the enterprise. However, it is necessary to be on guard against the case where the enterprise temporarily has a high ROA not necessarily because of effective exploitation of assets but because of a lack of investment in assets, which can affect the long-term operation of the enterprise.

+ Return on equity (ROE) = Profit after tax

Equity

This ratio shows the scale of after-tax profit generated from each dong of owner's capital, thereby reflecting the efficiency of exploiting the enterprise's equity. Therefore, the ROE index is of particular interest to investors when evaluating the profitability of the enterprise, as a basis for making investment decisions. The higher the ROE, the higher the profitability on equity.

1.4. Factors affecting business competitiveness

1.4.1. Macro factors

a) Economic forces

This is a group of factors that have a strong influence on the development of business sectors as well as business operations of enterprises. The basic macroeconomic factors that enterprises often consider are: economic growth rate, interest rates, exchange rates and inflation. The above group of factors can be both a challenge and a constraint but at the same time a source of opportunity for enterprises.

b) Political and legal forces

These factors have a great impact on the level of opportunities and threats from the environment. Political stability and a clear legal system will create a favorable environment.

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