THEORETICAL FRAMEWORK OF IMPORTING BUSINESS
General overview of importing business
1.1.1 The concept, characteristics and role of imports in international trade
Import is a key component of foreign trade, representing the international exchange of goods between countries based on currency parity It encompasses a system of trade relations involving both domestic and international organizations, rather than being a mere isolated transaction.
( Lequiller, F; Blades, D.: Understanding National Accounts, Paris: OECD
Import activities involve purchasing goods and services from foreign sources to meet domestic demand or for re-export to generate profit Essentially, importing encompasses acquiring products from international economic organizations and foreign companies, facilitating the consumption of these imported goods within the local market, or re-exporting them to connect production with consumption and enhance profitability.
According to Lequiller, F; Blades, D., import of goods has the following characteristics:
Importing offers a diverse market, allowing businesses to source goods and services from various countries By leveraging the comparative advantages of different nations, enterprises can explore opportunities to expand, refine, or transform their import markets.
Inputs and outputs for businesses are varied and frequently shift in response to domestic consumer needs The stability and concentration of supply or output can vary based on the company's operational conditions, its ability to adapt, and its responsiveness to market demands and supply fluctuations.
In the importing business, parties agree on various payment methods, which are outlined in the contract terms Importers frequently utilize strong foreign currencies, particularly the USD, for their transactions.
Import activities are regulated by various legal systems and procedures due to the involvement of multiple partners from different nationalities, necessitating compliance with the relevant laws of various countries.
In today's information age, swift communication with partners is essential, utilizing advanced technologies like email and the internet Modern tools such as telex and fax have become increasingly important for facilitating efficient business transactions.
Import activities are closely tied to international factors, as goods must cross national borders and are typically transported in large volumes via sea, air, or road This necessitates the use of heavy-duty vehicles for internal transportation, leading to significant transportation costs that can impact the overall business efficiency of enterprises.
1.1.1.3 The role of imports in international trade
When a country's economy integrates into the world economy, the role of importing business becomes more and more important, which can be seen in particular:
Imports play a crucial role in enhancing domestic consumption by providing a wider variety of goods than what can be produced locally They cater to the growing demand and diverse preferences of consumers, ultimately improving living standards and contributing to an increase in national income.
Import creates technology transfer, so that goods can be re-exported and expanded effectively, saving time and costs, creating a uniformity in domestic development.
Importing goods fosters healthy competition between domestic and foreign products, motivating local manufacturers to improve and innovate continuously This dynamic not only enhances the quality of domestic offerings but also contributes to the overall development and growth of society.
Import will eliminate the monopoly status, completely break the self- sufficiency mechanism of the closed economy.
Imports address specific needs by providing scarce goods, luxury items, and advanced technologies that are either challenging to produce domestically or require limited resources.
Importing plays a crucial role in maximizing a country's comparative advantage, facilitating active participation in global trade, and enhancing the international division of labor through specialized production and market integration This process allows a nation to progressively align its economy with the global market, fostering a seamless integration of the national economy into the world economy in line with its developmental stage.
The effectiveness of import activities is largely influenced by each country's leadership and perspectives In our country, government orders and decrees have constrained the flexibility of these activities, making them less aligned with their inherent nature However, since the 6th National Congress, the State has reformed its external economic management to better align with market economy principles, leading to a gradual improvement and normalization of import activities.
Import activities have significantly enhanced the vibrancy and diversity of the domestic market, enriching the availability of goods and materials This has fostered strong competition among businesses across various economic sectors, contributing to our nation's economic transformation as it integrates with regional and global markets.
Import-export activities are primarily carried out by direct import-export enterprises; however, various environmental factors, business conditions, and the innovative spirit of entrepreneurs have led to the emergence of diverse types of import activities.
Here are a few forms of import being used in our country's enterprises today:
General overview of business performance and importing business’ efficiency
1.2.1 System of perspectives on business performance
Standing on the scope of individual enterprises, there are economic efficiency categories and business efficiency categories.
Business efficiency in production activities is defined by the economic benefits gained when comparing business results with expenses It emphasizes the quality of business operations rather than their size or form.
As social production evolves, resources are becoming scarcer and more costly, leading to diminishing returns from these activities Business efficiency theory emerged to assess and enhance the quality of production processes, ultimately improving management and organizational effectiveness The concept of business efficiency was first highlighted in 1878 by Sapodonicop and other economists, establishing it as a key indicator of international business performance, but it wasn't until 1910 that a standardized recognition of business performance was achieved.
The standpoint of business performance is divided into the 3 following systems:
Business performance is fundamentally assessed by the ratio of results achieved to the costs incurred to achieve those results Efficiency in business can be evaluated using a specific formula that highlights this relationship.
In which: Q: Is the result achieved.
Evaluating business performance reveals that higher efficiency is achieved when the results obtained significantly exceed the associated costs.
Colicop emphasizes that production efficiency measures the relationship between output and the costs incurred to achieve it By dividing the total product by the production capital, we determine material efficiency, while labor efficiency is calculated by dividing the total product by the amount of labor used This concept is further explored in the 1982 book "Basic Issues on Improving Economic Efficiency of Social Production."
P.D Tran Van Duc said that: "Business efficiency is considered in the relationship between results and costs on the other” Author Le Thu has also determined: “Business efficiency is the most comprehensive indicator of the quality of production and business activities Its content is to compare the results obtained and the costs”.
* Second point of view system: Assuming that business efficiency is measured by the difference between the production value achieved and the cost spent to achieve that result.
According to this view, business efficiency is determined by the formula:
Where: Q: Is the production value achieved.
Business efficiency can be defined as the increase in value derived from results relative to incurred costs As author Do Thinh states, "Efficiency is typically represented as the difference between outcomes and the associated costs." However, it is important to note that there are instances where such deductions cannot be accurately made.
*Third point of view system: A more flexible interpretation of the second point of view Accordingly, the business performance from this point of view is:
In which: Qt - Qt-1 : Is the result of two linking periods.
Ct - Ct-1 : Is the cost corresponding to Qt - Qt-1.
This perspective assesses economic efficiency within the broader socio-economic context According to LN Canieop, the efficiency of social production is determined and planned based on principles that are universally applicable to the national economy, by comparing production outcomes with the costs or resources utilized.
Business efficiency is an economic category that evolves alongside economic development To conduct a thorough analysis of economic forms using this concept, it is essential to integrate three distinct perspectives Each perspective serves to analyze economic phenomena within specific fields, considering varying levels and temporal contexts.
Business efficiency can be defined as an economic category that assesses the quality of economic activities by analyzing the difference, benchmark, or increment between outcomes and the costs incurred to achieve them, considering various sectors and specific conditions.
1.2.2 The concept of importing business efficiency
Business performance is intrinsically linked to socio-economic efficiency, necessitating a comprehensive evaluation from both qualitative and quantitative perspectives Efficiency should be aligned with the achievement of specific economic, political, social, and environmental objectives It is crucial to reject the notion that entrepreneurs can pursue economic goals at any cost Instead, business efficiency should be understood as an economic concept that measures the effective utilization of production resources and management practices to attain the highest socio-economic objectives at the lowest possible cost.
Importing business efficiency is determined by comparing the outcomes of business activities with the total costs involved, which encompass both physical expenses and labor.
1.2.3 The need to improve business performance and importing business efficiency
Business efficiency, especially in import performance, is crucial for the growth and sustainability of enterprises It is driven by the demands of production and practical business operations, ensuring that companies can adapt and thrive in competitive markets.
Effective business operations are crucial for survival, enabling companies to expand, enhance competitiveness, capture significant market share, and build a strong reputation To thrive and grow, businesses must continuously innovate and improve This involves not only striving for high annual revenue but also focusing on increasing both the quantity and quality of results year after year.
1.3 Basic problems about the item "heavy industrial machinery and equipment"
1.3.1 The concept and characteristics of "heavy industrial machinery and equipment"
1.3.1.1 Heavy industry machinery and equipment concept
Heavy industry refers to the production of high-quality goods tailored to specific usage requirements, utilizing tools and production means Key sectors include cement production, mining, power generation, metallurgy, and mechanical engineering This industry plays a crucial role in enhancing social life, driving economic development, and improving living standards.
The criteria for evaluating the efficiency of importing business
Import profit serves as a key metric for evaluating the performance of an importing business, highlighting both the volume and quality of import activities It provides insights into the effectiveness of essential production factors, including labor, materials, and fixed assets However, it falls short of indicating the efficiency of the importing process in terms of resource utilization and associated costs.
• Profit-to-sales ratio (ROS)
This indicator measures the profit generated for each dollar of revenue in the importing business A higher value signifies greater capital profitability and improved efficiency in the importing operations of the enterprise, while a lower value indicates the opposite.
= Dc: the profit-to-cost ratio
This indicator measures the profit generated for every dollar spent on imports, showcasing the efficiency of an enterprise's importing operations A higher value indicates greater efficiency in the importing business, while a lower value suggests the opposite.
• Rate of return on owned capital (Return on equity – ROE)
P De: rate of return on owned capital 31
This indicator measures the profit generated for each dollar invested by the owner in the importing business A higher value signifies greater capital profitability and increased efficiency of the importing operations, while a lower value indicates the opposite.
➢ Effective use of working capital
Svlđ: the turnover of import working capital Rn: net import revenue
This indicator measures the revenue generated for each dollar of working capital invested in the importing business, reflecting how effectively the working capital is utilized over a given period A higher value of this indicator signifies greater efficiency in managing working capital within the importing sector.
Tn: time of analysis period Sn: import working capital turnover Tv: time per capital turnover
The working capital turnover indicator measures the duration in days required for an importing business to convert its working capital A shorter turnover time signifies a higher turnover rate, indicating greater efficiency in the importing business, while a longer turnover time suggests the opposite.
1.4.3.Criteria reflecting the efficiency of using labor for importing business
D: rate of return for an import worker
P: total import profit L: number of labor
This indicator measures the profit generated by employees involved in business activities during a specific analysis period A higher value indicates greater labor efficiency, while a lower value suggests reduced effectiveness in utilizing workforce resources.
1.4.4 Indicators showing socio-economic efficiency
Socio-economic efficiency serves as a crucial quantitative indicator for businesses, highlighting essential criteria for success While social efficiency in import activities encompasses benefits that are often difficult to quantify, it significantly influences the decision-making process regarding import options The considerations of social effectiveness are diverse and intricate, reflecting various impacts that shape practical implementation.
• Impact on socio-economic development: Contributing to increase in gross product, increase accumulation
• Impact on social development: Create jobs for workers, eliminate the distinction between rich and poor.
• Impact on ecological environment and urbanization rate
CURRENT STATUS OF IMPORTING BUSINESS OF NATIONAL
About National Fortune Trading & Technical Services Co., Ltd
- Full name: National Fortune Trading & Technical Services Co., Ltd
- Type of business: Limited liability company with two or more members
- Address: No 121A, Lane 87, Tam Trinh Street, Mai Dong Ward, Hoang Mai District, Hanoi
- Representative office address: 8th floor, 1 Luong Yen, Bach Dang ward, Hai
- Date of operation: May 16, 2013 (operated for 8 years)
- Website: https://www.nationalfortune.vn
National Fortune Trading - Service - Technique Co., Ltd was established in
Founded in 2013 by Mr Nguyen Trung Thanh, National Fortune initially specialized in supplying heavy industrial equipment for the cement industry By 2015, the company expanded its operations to include thermoelectricity and residual heat, establishing Loyal Partner Co., Ltd and CPDT Success Company to manage these segments Since then, National Fortune has concentrated on serving its primary clientele—cement factories across the country—and currently operates two branches.
Ho Chi Minh City and Hanoi.
National Fortune Co., Ltd., founded by a dynamic team of young professionals, has nearly a decade of experience in supplying heavy industrial equipment The company is committed to continuous innovation, ensuring it keeps pace with advancements in the heavy industry and broader societal developments.
National Fortune serves as a key representative and distributor of equipment, materials, and machinery from renowned global companies in countries like France, Switzerland, India, Korea, and China The company's primary clientele includes major factories from leading cement, coal, and mineral corporations in Vietnam, such as Vicem, Vissai, Thang Long, and Vietnam Construction Materials Co., Ltd.
National Fortune was established to address the challenges of exclusive distribution and customer costs in Vietnam's heavy industry With a dedicated professional team, the company prioritizes customer interests and fosters understanding and support Committed to continuous exploration and innovation, National Fortune aims to deliver top-notch solutions and cutting-edge technology The ultimate goal is to become a leading provider of heavy industry equipment in Vietnam, renowned for its prestige and quality.
National Fortune, a relatively young player in the heavy industrial equipment supply market, currently employs around 90-100 people However, the company's limited experience and lesser-known brand hinder its competitiveness against established industry rivals.
Figure 2.1: Organization chart of National Fortune company
(Source: Human Resources Department of National Fortune Company)
The company's workforce is organized based on departmental needs and the current state of the organization Each department is assigned specific functions and responsibilities to effectively meet the company's requirements.
Mr Nguyen Trung Thanh, the director and legal representative of the company, is accountable for business outcomes and compliance with state regulations He oversees all business activities and has the authority to determine the company's organizational structure and management framework, prioritizing efficiency for optimal operations The director's role is crucial in steering and managing the company's activities effectively.
Mr Phan Quoc Huy, the Deputy Director, outlines the company's strategy, emphasizing that the director is responsible for signing off on the promulgation He assists the director and exercises the authority to manage the company as delegated by the director.
Sales admin department: researching and developing the product consumption market, planning the flow of product management, planning to import and sell products.
Purchasing Department: Head of Department – Ms Tran Thi Hien, carrying out main importing business activities of the company, sourcing goods and doing import procedures.
Technical department: perform technical inspection, survey at factories, etc. Administration and Human Resources Department:
Ms Pham Quynh Thuong, the Head of Department, oversees office functions and manages labor and wages Her responsibilities include maintaining records, managing the salary fund, and implementing employee policies She is also tasked with aligning employee placements with the company's needs and business objectives while monitoring discipline and reward practices within the organization.
Accounting and Finance Department: Chief Accountant – Miss Tran Thi
Huong effectively manages and mobilizes the company's capital for optimal use, while the accounting department meticulously records financial transactions, assesses business performance, and prepares regulatory-compliant financial statements This analysis provides crucial insights for management to devise profitable strategies, supported by collaboration with tax accountants and banking partners.
National Fortune Company employs a horizontal human resource management model, originally developed by Frederick Winslow Taylor in 1911 This model organizes human resources into distinct departments, each with its own specific functions and independent management, enhancing operational efficiency and effectiveness.
+ Performing tasks and professional work in the business
+ Break down jobs by working position, department, and subsidiary division for implementation
+ Design the management relationship to ensure work in accordance with the strategy of the enterprise
In this model, the heads of each functional department report to the general director or deputy director.
The functional organization of the operating structure is ideal for small and medium-sized companies like National Fortune, enabling the Board of Directors to effectively oversee all enterprise activities while minimizing human resource management costs due to the company's manageable size.
Based on the investment certificate of National Fortune Trading & Technical Services Co., Ltd., issued on May 16, 2013.
National Fortune Trading & Technical Services Co., Ltd has the following functions:
Supply of machinery and equipment for heavy industry such as belts, balls, gears, gearboxes, control and transmission components
Supply of mechanical energy transmission equipment such as: Shaft and rotation: camshaft, crank, hand crank, Flat shaft, friction gears, Manufacture of flywheels and pulleys
Wholesale of machinery, equipment and spare parts for mining and construction machinery
Provide consulting services for construction and renovation projects.
2.1.4 Import market of heavy industrial machinery and equipment of
Vietnam and National Fortune Co., Ltd
China has consistently been a vital trading partner for Vietnam, with the import turnover of machinery, equipment, and spare parts from China experiencing significant growth From 2018 to 2020, this turnover surged by 2.44 times, reflecting an impressive annual growth rate of 11.8% This robust double-digit growth has been sustained for nearly a decade, highlighting the strengthening economic ties between the two nations.
Import market of Viet Nam's heavy industrial machinery and equipment 2017-2020
Figure 2.2: Vietnam's import market share of machinery and equipment
(Source: Author compiled from data of the General Department of Vietnam
In the first five months of this year, Vietnam experienced a 4.2% decline in the import turnover of machinery, equipment, and spare parts compared to the same period last year The country sources these imports from approximately 43 markets, with 17 of those markets exceeding 1 billion USD in value, including major suppliers such as China, Korea, Japan, Germany, and Taiwan.
Thailand, Malaysia, Italy, the US, India, Singapore, UK, Hong Kong, Indonesia, and France).
Three key markets—China, Korea, and Japan—each exceed 5 billion USD in import turnover, with China leading at 28.1 billion USD, which represents 42.1% of the nation's total machinery, equipment, tools, and spare parts imports This marks a significant increase of over 4.3% compared to a decline in general commodity exports, translating to an additional nearly 3 billion USD year-on-year In contrast, the overall import growth for this category was only 2.3%, amounting to 1.6 billion USD.