Structure of the Economic - Technical Industry and the Formation of the Industry Value Chain

economic units or economic subjects in the system of social division of labor to divide the economy and thereby divide the national economy into economic sectors. The totality of economic units or economic subjects that fulfill certain economic functions or operate similarly in the system of social division of labor is the national economic sector. The manufacturing sector is a group of enterprises that produce the same type of product with similar characteristics, although there are differences, in general, the products are interchangeable in the process of use. Based on the theory and level of social division of labor, based on the requirements and level of economic management of the country in each period, based on the characteristics of the units, the same or similar functions of the organizations, meeting the requirements of international comparison, all these factors are the principles for dividing the national economic sector. Vietnam's economic sector system includes 5 levels, including: Level 1 sector includes 21 sectors, level 2 sector includes 88 sectors, level 3 sector includes 242 sectors, level 4 sector includes 486 sectors, level 5 sector includes 734 sectors (Decision on Promulgating Vietnam's economic sector system by the Prime Minister) [46].

1.1.2.2. Structure of the economic-technical sector and the formation of the industry value chain

a) Structure of the economic and technical sector

An economic-technical industry is structured by three main elements: agents, functions and corresponding products.

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- Agents: Agents in a commodity industry are economic units that operate independently and decide on their own behavior, which are households and enterprises participating in commodity industries through their economic activities (Pham Van Dinh, 1999). In a broad sense, people use agents to refer to a set of units with the same activities such as: "producers", "processors", "wholesalers", "retailers". In a commodity industry, the relationship diagram of "agents" is often shown as follows:

Raw products

Processed products

Wholesale products

Retail products

People

processing

People

wholesale

Producer

Consumer

Retailer

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Source: Pham Van Dinh (1999)

Figure 1.1. Relationships between actors in the industry

The first agent in the industry is the Producer, they create raw products from the use of raw materials. Raw products can be sold directly to consumers or after the preliminary processing stage. The agent who creates new products using technology, techniques, and know-how to meet consumer tastes from the use of raw products of the production household... is the Processor . The agent who buys goods in large quantities and then continues to resell them to retailers in large quantities without creating new products is the Wholesaler. The agent who buys goods from wholesalers to sell directly to consumers is the Retailer .

- Function: The economic activities performed by the corresponding agents are functions and the agent's name often coincides with the function's name. For example, the production function is of the production household. The processing function is of the processing household. The wholesale function is of the wholesale household... There are one or more functions from an agent. The shift in the nature of the material flow in the industry is created from successive functions. The products of the previous agents are often completed by the agent following it until the agent performs the last function. When the flow of goods ends, the final product of the industry is created (Pham Van Dinh, 1999).

- Product : The result of the activities of each type of agent and function is the product of each agent according to function. In the industry, each individual product is created by each agent. The product of each industry agent is the result of each economic activity, the "output" of the production process of each agent.

but it is not the final product. The intermediate cost of the following agents is the product of the previous agent. The final product of the industry from the last agent reaches the consumer (Pham Van Dinh, 1999). For example: In the rubber industry, the product of rubber growers is rubber latex, the product of rubber processors is raw rubber, the product of rubber processors is rubber products such as tires, foam mattresses, gloves... this is the final product of the industry.

b) Formation of industry value chain

The industry value chain is created by connecting actors, functions and products in a unified whole. Analysis of competitive advantage, according to ME Porter "Value chain is a chain of activities of a company operating in a specific industry". Value chain or value chain analysis is a business management concept. People will obtain some value at each production activity through the process of the product passing through all activities in the order of the chain. The final product with more added value than the sum of the values of the activities combined is the characteristic of the chain of activities.

The value chain can be understood in a narrow or broad sense. In a narrow sense, it is a series of activities performed in a business to create a certain product. The value chain connects producers with consumers through all activities from design, input material process, production, distribution, marketing and sales to after-sales services. The value of the final product is formed from all activities in the chain.

The value chain in a broad sense is a complex of activities carried out by many different participants (primary producers, processors, traders, service providers) in linkages with other enterprises in trading, assembling, processing... to transform a raw material into a final product for consumers.

Inbound logistics, operations (production), outbound logistics, marketing and sales, and service (maintenance) are the main activities of the value chain. Administrative infrastructure management, human resource management, technology, and procurement are the

support activities. The value-added chain consists of six business functions: 1) Research and Development, 2) Product, service, process design, 3) Production, 4) Marketing & Sales Research, 5) Distribution, 6) Customer Service. The lowest value-added stage in the value chain is production. Therefore, developing countries often have to perform this stage because developed countries have taken over most of the high value-added stages (M.E. Porter, 1985).

1.1.2.3. Theories related to factors of economic and technical development

a) Marxism-Leninism : studies the production process in the combination of constant capital C and variable capital V. In which C includes C1 which is capital for purchasing machinery, equipment, factories... and C2 which is capital for purchasing raw materials, fuels, and materials for production. In the above two types of capital, only variable capital V is the source of surplus value creation. Production development is also expressed through the transformation of the organic structure of C/V depending on the level of application of technical advances in production, causing the organic structure of C/V to tend to increase.

The combination of fixed capital and circulating capital is essentially the process of production. The value of machinery, equipment, and factories is fixed capital, which transfers its value partially to the value of the product through depreciation costs. The value of purchasing raw materials, fuel, and materials and paying wages to workers is circulating capital, which transfers its entire value at once to the value of the product. The efficiency of production depends on the good preservation of fixed assets, rapid depreciation, and savings in circulating assets. Rapid turnover of fixed and circulating assets is the way to effectively use capital. That process helps save depreciation costs, management costs, and financial costs through increased labor productivity. Shortening production time (labor time, labor interruptions, and reserves) and circulation time (purchasing production factors, selling goods) is a requirement that must be implemented.

Profit and profit rate are measures of economic efficiency of capital investment in production. However, due to the increase in organic structure, the profit rate tends to decrease. The profit rate of an enterprise is a form of expression of surplus value that depends on all three methods of surplus value production: absolute surplus value, relative surplus value and super surplus value. Thereby showing that

The decision of production efficiency mainly depends on the process of applying science and technology to production to increase labor productivity.

The process of production development is also the process of expanded reproduction, which both increases scale and innovates techniques, increasing labor productivity. The condition for doing so is to accumulate capital, that is, to capitalize surplus value. To increase capital accumulation, it is necessary to improve labor efficiency and apply science and technology to production.

To produce effectively, we must comply with the law of value, according to which conformity with the necessary social labor expenditure of producing goods is a requirement of the production and circulation process of goods. Production is allowed to expand when supply is less than demand and price is greater than value and conversely, production needs to be narrowed when supply is greater than demand and price is less than value. Therefore, producers must consider price as a market signal to plan production in accordance with market requirements.

b) Sustainable development perspective

The idea of sustainable development, according to Cobb (1992) [69] was known to the world through the 1975 Conference in Nairobi-Kenya regarding equity in the distribution and use of resources (Todorov, 2009) [101]. This concept was first defined by Brundtland, stating that sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs (World Commission on Environment and Development - WCED, 1987) [108].

The goal of sustainable development is to ensure adequate resources for people; equitable distribution of resources, economic development as well as environmental protection for the benefit of both present and future generations (Malcom, 1994) [86]. The 2002 World Summit on Sustainable Development further expanded the standard definition of sustainable development with three pillars: economic, social and environmental. Kates, Parris & Leiserowitz, 2005 [83] pointed out that sustainable development includes all types of economic and social development, protection and enhancement of the natural environment and ensuring social equity. Therefore, sustainable development seeks to resolve conflicts between different competing goals and involves the pursuit of economic prosperity simultaneously with environmental quality and social equity.

c) Theory of competitiveness

Michael E. Porter's Diamond Model is a method for creating sustainable competitive advantage for a specific industry/field of that country in the market. The Diamond Model theory was researched by Michael E. Porter - Founder of the Institute for Strategy and Competitiveness at Harvard Business School. According to

ME Porter (1990), competitiveness “is the ability to create valuable goods and services through the use of human, capital and natural resources of the country”. The diamond structure model with 4 factors determining competitive advantage proposed by ME Porter (1990) is: (1) Factor conditions, (2) Demand conditions, (3) Related and supporting industries, (4) Firm strategy, structure, and rivalry. In addition, (5) Chance and (6) Government are two decisive factors affecting the environment, having an indirect impact on the four main factors [88].

Source: Competitive Advantage of Nations, ME Porter, 1990

Figure 1.2. ME Porter's diamond model

- Input conditions of production factors: Efficiency, quality and specialization of available conditions for enterprises are input requirements of enterprise activities.

To fulfill that requirement, a business environment consisting of available conditions for business operations including capital, human resources, natural resources, physical and administrative infrastructure, and information technology are necessary conditions for business operations to create the basis for forming competitive advantages.

- Structural strategy and industry competition: The level of competition in the industry creates productivity incentives, which are the regulations, rules, incentives and pressures that govern the type of business activities.

- Demand conditions: The competitiveness and production scale of enterprises depend on market and customer demand. The scale of market growth, the diverse and complex nature of customer demand force enterprises to provide higher quality goods and services to meet market demand.

- Related supporting industries: The micro-business environment requires a large number of local suppliers of raw materials and spare parts instead of each enterprise producing them themselves. This support is a necessary factor for the success of enterprises in improving their competitiveness.

- In addition, opportunities and government have indirect but decisive impacts on the factors of competitiveness enhancement.

1.2. THEORY ON DEVELOPMENT OF RUBBER INDUSTRY IN THE PROCESS OF INDUSTRIALIZATION AND MODERNIZATION OF AGRICULTURE AND RURAL AREA

1.2.1. Overview of rubber and rubber trees

According to the Southern Institute of Science and Technology: “Rubber, originally called Hévéa, grows along the Amazon River in South America and neighboring regions, and is a tree of the equatorial tropics. Originating from South America, the first rubber tree was brought to Vietnam by the French in 1878 but did not survive. In 1892, 2,000 rubber seeds from Indonesia were imported into Vietnam and by 1907, the presence of rubber trees in Vietnam was marked”. “The rubber tree is a woody plant that can grow up to over 30m tall. White sap or latex is found in the veins of the bark. When the tree reaches 5-6 years old, people start harvesting latex and it produces the highest yield between the ages of 11 and 25, then it will decrease and stop producing latex when it reaches the age of 26-32 years”. (http://iasvn.org).

The humid tropics, with an average temperature of 22°C to 30°C (best at 26°C to 28°C) are suitable for rubber tree growth, especially in areas with a lot of rain (best at 2,000mm). In conditions of prolonged drought of about 4 to 5 months, rubber trees can still endure but productivity will decrease. Due to the requirements of specialization, rubber trees are now often grafted on natural seedling roots, i.e. asexual reproduction, to create varieties. The amount of latex that the tree can provide depends on the time of tapping, which is usually done before 7am, which is the appropriate time to achieve high productivity. (Nguyen Thi Hue) [32].

Natural rubber (natural rubber): is a material obtained from the latex of rubber trees. It is a mixture of isoprene polymers (C5H8)n, these polymers have very long carbon chains with cross-branches like hooks. The carbon chains twist together, hooked by cross-branches, when stretched do not break and tend to return to their original form, thus creating the elasticity and durability of natural rubber [9]

Synthetic rubber (synthetic rubber): “ Since the 1890s, when road vehicles using pneumatic tires were introduced, the demand for rubber has increased rapidly. Geopolitical issues have caused the price of natural rubber to fluctuate greatly. Shortages in supply, especially during the war years, have led to the need to create synthetic rubber from petroleum. Synthetic rubber is produced by the condensation reaction of single-cell structures including isoprene (2-methyl 1,3-butadiene), 1,3-butadiene, chloroprene (2-chloro-1, 3-butadiene) and isobutylene (methylpropene) with a small percentage of isoprene for chain linkage” [9].

Basic construction period of rubber trees

The period of 6-7 years from planting for the rubber tree trunk girth to reach 50 cm (measured 1 m from the ground) is called the basic construction period of the rubber tree. However, the basic construction period of the rubber tree can be earlier or later depending on the ecological conditions, care and variety. For example, in the specific ecological conditions of the Central and Northwest coastal regions, the basic construction period is about 7-8 years while in the Southeast it is only about 5-6 years. However, the time can be shortened.

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