Business_in_Global_Erena_-_Case_of_Saigon_Coop_in_Vietnam

THE PROBLEM: You have been asked by your Managing Director (MD) to undertake a RESEARCH on the effects of the WTO agreements on competitiveness of the organization. The company is worried that Vietnam’s commitments under WTO may be detrimental to the future competitiveness of the organization and would like to know how in SPECIFIC DETAIL the exact commitments Vietnam has made with regard to the company’s industry. The MD would also like you to undertake a preliminary research on some of the commitments made by other SIMILAR countries and if possible some of the major competitor countries. This research report will help the MD to make future strategic plans for the company. RESEARCH: I. INTRODUCTION: Vietnam is currently considered the most attractive investment destination for retailers among the developing countries. Its retail market turnover reached $46 billion in 2007, an astonishing 27% increase over the previous year and is estimated to hit 975 trillion VND (59 billion USD) in 2008, a year-on-year increase of 20.5%. In Vietnam, distribution and retail business contribute 15% to GDP per year. Although wet market remains the primary channel in Vietnam’s distribution channel, modern retail is estimated to account for approximately 14% of the market according to the TNS World Panel Asia-2007. Currently there are approximately 400 supermarkets, 60 trade centres and 2,000 convenience stores…Meanwhile the Ministry of Industry and Trade forecasts that by 2010 the market will witness the presence of 750 supermarkets, 150 trade centres and thousands of convenience stores. In developing countries, supermarkets play a very important role in distribution and retail business with the norm in Asia is 52% for modern trade and 48% for other channels. While in Vietnam, the number is 14% for modern trade. [pic] Source : TNS Worldpanel Asia – 2006 – FMCG excluding Fresh Foods Base on figures as well as the developing experiences from others countries we could see that modern trade is one of drivers for economic growth, increase the consumption, and encourage the developing of distribution. Being chosen as the best modern retail in Vietnam and 330th among 550 modern retailers in Asia in 2004 by Asia Retails Magazines, the top 200 Vietnamese Companies 2007 by UNDP and the best service voted by consumer organized in 2008 by Saigon Advertisement Newspaper, Saigon Co.op is considered the nation’s leading retail store chain operator. Saigon Co.op former was the City Trading Co-operative and was changed to this name in 1989 when Vietnam’s economy changed from subsidized economy to Socialist oriented market economy. In 1992, Saigon Co.op started by joint venture with foreign companies to increase the recourses for development. Being one of the few who had the import and export license of Hochiminh City, Saigon Co.op was very active in import and export activities and brought back high effectiveness, very good position in both domestic market and foreign market and the first supermarket of Co.opMart chain was launched in this year. Till Mar, 2009, the whole chain already had 35 Co.opMart supermarkets, which included 20 in Hochiminh City and 15 in other provinces; Co.op Mart is now becoming a popular brand to Hochiminh City people and whole country consumers. In 2009, they are looking to continue expanding its supermarket and convenience food store chains nationwide. Under its WTO commitments, Vietnam will permit the establishment of 100% foreign-owned distribution and retail businesses. Even though the country does not officially open its retail market until early 2009, both local and foreign retailers have been eager to invest. This paper aims at studying and researching about this opening. The door is opening up to foreign retailers, with Vietnam considered a potentially rich new frontier. But, do local retailers like Saigon Co.op have a reason to be truly afraid. Any advantages resulting from negotiation of host country (Vietnam) on WTO agreements will be the advantages for company’s business and vice versa. II. WHICH PART OF THE WTO AGREEMENT IS RELEVANT' Vietnam officially became a member of WTO on 11-Jan-2007. The accession to WTO is great effort of Vietnam and also proves that Vietnam is willing to change to meet and join with the global economy. With the regard to Vietnam’s accession, there may have opportunities for foreign companies and also have challenges. The advantages or disadvantages for the foreign companies result from the negotiation of Vietnam government based on WTO agreements. So in general, what WTO is about' The WTO establishes a framework for trade policies; it does not define or specify outcomes. The WTO oversees about 60 different agreements which have the status of international legal texts. Member countries must sign and ratify all WTO agreements on accession. These agreements cover goods, services and intellectual property and are often called the WTO’s trade rules, and the WTO is often described as “rules-based”, a system based on rules. They start with broad principles: the General Agreement on Tariffs and Trade (GATT) (for goods), and the General Agreement on Trade in Services (GATS), the third area, Trade-Related Aspects of Intellectual Property Rights (TRIPS). Saigon Coop is not only a trading company but also a retailer in distributing goods thus there are 2 parts that they should pay attention on. 1. The trading rights in goods : When a company is granted trading rights, it is given the right to directly import and export goods, without having to go through a state-owned or local trading company. For trade in goods in general, these usually consist of maximum tariff levels which are often referred to as “bound tariffs” or “bindings” (GATT Article II). Market access for goods in the WTO means the conditions, tariff and non-tariff measures, agreed by members for the entry of specific goods into their markets. Tariff commitments for goods are set out in each member's schedules of concessions on goods. In the case of agricultural products, these concessions and commitments also relate to tariff rate quotas, limits on export subsidies, and some kinds of domestic support. There are some points relating to “trading rights” in Article II that hereby would love to extract: Article II: Schedules of Concessions: 1.         (a)            Each contracting party shall accord to the commerce of the other contracting parties treatment no less favourable than that provided for in the appropriate Part of the appropriate Schedule annexed to this Agreement.             (b)            The products described in Part I of the Schedule relating to any contracting party, which are the products of territories of other contracting parties, shall, on their importation into the territory to which the Schedule relates, and subject to the terms, conditions or qualifications set forth in that Schedule, be exempt from ordinary customs duties in excess of those set forth and provided therein.  Such products shall also be exempt from all other duties or charges of any kind imposed on or in connection with the importation in excess of those imposed on the date of this Agreement or those directly and mandatorily required to be imposed thereafter by legislation in force in the importing territory on that date.             (c)            The products described in Part II of the Schedule relating to any contracting party which are the products of territories entitled under Article I to receive preferential treatment upon importation into the territory to which the Schedule relates shall, on their importation into such territory, and subject to the terms, conditions or qualifications set forth in that Schedule, be exempt from ordinary customs duties in excess of those set forth and provided for in Part II of that Schedule. Such products shall also be exempt from all other duties or charges of any kind imposed on or in connection with importation in excess of those imposed on the date of this Agreement or those directly or mandatorily required to be imposed thereafter by legislation in force in the importing territory on that date. Nothing in this Article shall prevent any contracting party from maintaining its requirements existing on the date of this Agreement as to the eligibility of goods for entry at preferential rates of duty. All WTO Members have a schedule of concessions which is either annexed to the Marrakesh Protocol to the GATT 1994 or to a Protocol of Accession. The content of the schedules changes over time to take account of different modifications, such as GATT Article XXVIII negotiations or rectification procedures. The schedules represent commitments not to apply tariffs above the listed rates — these rates are “bound”. Non-tariff measures are dealt with under specific WTO agreements. This is the reason why determining a Member's concession for a specific tariff line could involve, in some cases, examining several different legal instruments. More information about the schedule of each country is listed in http://www.wto.org/english/thewto_e/acc_e/completeacc_e.htm The trading rights permit the import and export of goods only and do not cover the ability to distribute goods once they are imported thus the second thing that Saigon Co.op should consider is the distribution goods condition. 2. The distributions rights : The distribution of goods (sale within a country) is addressed in a country’s commitments on distribution services and governs the ability of companies to engage in the distribution of goods once they have been imported. + Market access is the most important in distribution rights which is mentioned clearly in GATS Article XVI Article XVII:  Market Access 1. With respect to market access through the modes of supply identified in Article I, each Member shall accord services and service suppliers of any other Member treatment no less favourable than that provided for under the terms, limitations and conditions agreed and specified in its Schedule. 2. In sectors where market-access commitments are undertaken, the measures which a Member shall not maintain or adopt either on the basis of a regional subdivision or on the basis of its entire territory, unless otherwise specified in its Schedule, are defined as: (a) limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test; (b) limitations on the total value of service transactions or assets in the form of numerical quotas or the requirement of an economic needs test; (c) limitations on the total number of service operations or on the total quantity of service output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test; (d) limitations on the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service in the form of numerical quotas or the requirement of an economic needs test; (e) measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service; and (f) limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment. + The next question that Saigon Co.op should concern regarding the distribution rights are the commitments on how much access foreign services providers are allowed for specific sectors. Distribution services which are mentioned in GATS include commission agents' services, wholesale trade services, retailing services and franchising. + And same as the trading rights, the distribution rights in goods also have specific schedule commitments which are stated in Article XX of GATS Schedules of Specific Commitments: 1. Each Member shall set out in a schedule the specific commitments it undertakes under Part III of this Agreement. With respect to sectors where such commitments are undertaken, each Schedule shall specify: (a) terms, limitations and conditions on market access; (b) conditions and qualifications on national treatment; (c) undertakings relating to additional commitments; (d) where appropriate the time-frame for implementation of such commitments; and (e) the date of entry into force of such commitments. 2. Measures inconsistent with both Articles XVI and XVII shall be inscribed in the column relating to Article XVI. In this case the inscription will be considered to provide a condition or qualification to Article XVII as well. 3. Schedules of specific commitments shall be annexed to this Agreement and shall form an integral part thereof. Refer to the above information, some questions should have been raised as below : 1. Under GATT, does Vietnam have any restrictions on trading rights on goods for foreign company in import/ export products' 2. Any special schedule for foreigner companies that the company can take advantage in' 3. Under GATS, does Vietnam have any special schedule for market access' Any special agreement for any sectors. III. WHAT ARE THE HOST COUNTRY’S COMITTMENTS' Under the WTO, distribution services include 4 sectors as below: • Commission Agents’ Services - Commission Agents' Services consist of sales on a fee or contract basis by an agent, broker or auctioneer or other wholesalers of goods/merchandise and related subordinated services. • Wholesale Trade Services – Wholesaling consist of the sale of goods/merchandise to retailers to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services. Wholesale services can either be supplied from a fixed location or away from a fixed location. • Retail Services – Retailing services consist of the sale of goods/merchandise for personal or household consumption either from a fixed location (e.g., store, kiosk, etc.) or away from a fixed location (e.g. direct selling) and related subordinated services. • Franchise Services Franchising services consist of the sale of the use of a product, trade name or particular business format system in exchange for fees or royalties. Product and trade name franchising involves the use of a trade name in exchange for fees or royalties and may include an obligation for exclusive sale of trade name products. Business format franchising involves the use of an entire business concept in exchange for fees and royalties, and may include the use of a trade name, business plan, and training materials and related subordinated services (http://www.usvtc.org/updates/legal) Saigon Co.op works as a retailer thus we will discuss deeply for this sectors only. There are two main things that Saigon Co.op should pay much concern on: the commitment on goods for trade and distribute and the schedule of trading and distribution activities which will one after the other be analyzed for each part. 1. The commitment on goods : Having researched on Vietnam’s commitment in trading WT/ACC/VNM48, dated 27 October 2006, we found one thing that can influence Saigon Coop businesses is the permission on trading rights that Vietnam committed as below: POLICIES AFFECTING TRADE IN GOODS Trading rights (the right to import and export) 137. In response, the representative of Viet Nam observed that Vietnamese individuals and enterprises had been granted full trading rights, with the exception of certain products required to be imported through specific enterprises (set out in Table 8(c)). Individuals were required to register as traders pursuant to the Decree No. 88/2006/ND-CP of 29 August 2006 on Business Registration in order to engage in importation and exportation. He said that time was required to merge the import trading rights systems for foreign and domestic legal persons, promulgate the necessary regulations, and strengthen the management/administrative capacity of the government agencies involved. For these reasons, his Government proposed to grant all foreign individuals and enterprises (including foreign-invested enterprises) full trading rights no later than 1 January 2007, except for some products subject to "State-trading" set out in Table 8(c), and requested that Members grant Viet Nam a transition period until 1 January 2009 for the right of foreign individuals and enterprises to import certain products set out in Table 8(a) and until 1 January 2011 for the right to export rice (Table 8(b)). The full trading rights accorded such individuals and enterprises would include the right to sell the imported product to any individual or enterprise having the right to distribute such product in Viet Nam. 138. He confirmed that, during the transition periods, the goods listed in Tables 8(a) and 8(b) could be imported and exported by any wholly Vietnamese-invested enterprise, while the products in Table 8(c) could be traded only by the designated enterprises. He further confirmed that Viet Nam would ensure that these enterprises complied with WTO rules. So what Saigon Coop needs to take care is the list of goods that the foreign enterprise can not trade: In Table 8(a) set out some products that foreign individuals and enterprises only can import since 1 January 2009: - essential to human life :some pharmaceutical products - sensitive to public morals : motion-picture film, exposed and developed, unused postage, printed cards, calendars..., transmission apparatus for radio-telephony etc; TV camera & other video camera recorders excluding mobile phones (HS 852520) and consumer cameras (HS 85254010), radar apparatus, radio navigational aid apparatus and radio remote control apparatus - Sensitive to public order : industrial printers In table 8(c), Vietnamese individuals and enterprises had been granted full trading rights, with the exception of certain products required to be imported through specific enterprises and this restriction will be applied also for foreigner enterprises: - Both domestic production and consumption are restricted: cigars, cheroots, cigarillos and cigarettes... - Natural monopoly: crude oil from petroleum and bituminous minerals, other aircraft (for example, helicopters, aeroplanes); spacecraft (including satellites) and suborbital and spacecraft launch vehicles. - Cultural products affecting to society morals: specialized newspapers, journals & periodicals, records, tapes and other recorded media. The above are the list of goods and schedule for implementation of import rights – how about the distribution rights' These information are clearly mentioned in WT/ACC/VNM/48/Add.2 Some products that foreign individuals and enterprises only can distribute pursuant to a schedule: - since 01 January 2009 : tractors, merchandized, vehicles, small cars and motor cycle - since 01 January 2020 : liquor, cement and clinker, fertilizer, tyres, paper, iron and steel, audio and visual equipment Some products that are not permitted to be distributed: - Husked rice, sugar caned and sugar beet - Crude oil and processed oil - Pharmaceutical drugs ( excluding products in the form of pills, bars, crystal or powder) - Explosives - Books, newspapers and magazines - Precious stones - Image recorded objects on whatever material 2. For distribution services rights : The Services Agreement which forms part of the Final Act rests on three pillars. a. The first is a Framework Agreement containing basic obligations which apply to all member countries. b. The second concerns national schedules of commitments containing specific further national commitments which will be the subject of a continuing process of liberalization. c. The third is a number of annexes addressing the special situations of individual services sectors. In the schedule of specific commitments in services, working party on the accession of Vietnam, schedule CLX – Vietnam ( WT/ACC/VNM48/Add.2. 27 Oct 2006) – would love to extract hereafter : |Mode of delivery 1) Cross-border supply 2)Consumption abroad 3)Commercial presence 4)Presence of natural person | |Sector and sub-sectors |Limitations on market access |Limitation on national treatment |Additional commitments | |4. DITRIBUTION SERVICES: | |Measures applicable to all sub-sectors in Distribution Services: | |Cigarettes and cigars, books, newspapers and magazines, video records on whatever medium, precious metals and stones, pharmaceutical products and drugs[1], explosives, processed oil and crude oil, rice, cane and beet | |sugar are excluded from the commitments. | |A. Commission agents' services |(1) Unbound, except none for: |(1) Unbound, except as indicated in Mode | | |(CPC 621, 61111, 6113, 6121) |- Distribution of products for personal use; |1, market access column. | | | |- Distribution of legitimate computer software for personal and commercial use. | | | |B. Wholesale trade services |(2) None. | | | |(CPC 622, 61111, 6113, 6121) |(3) None, except: | | | | |+ A joint venture with a Vietnamese partner(s) is required, and foreign capital contribution shall | | | |C. Retailing services |not exceed 49%. As of 1 January 2008, the 49% capital limitation shall be abolished. As of 1 |(2) None. | | |(CPC 631 + 632, 61112, 6113, 6121)[2] |January 2009, none. |(3) None. | | | |+ Upon accession, foreign-invested companies engaging in distribution services will be | | | | |permitted to engage in the commission agents', wholesale and retail business of all legally | | | | |imported and domestically produced products except for: cement and cement clinkers; tyres | | | | |(excluding tyres of airplanes); papers; tractors; motor vehicles; cars and motorcycles; iron and |4) Unbound, except as indicated in the | | | |steel; audiovisual devices; wines and spirits; and fertilizers. |horizontal section. | | | |+ As of 1 January 2009, foreign-invested companies engaging in distribution services will | | | | |be permitted to engage in the commission agents', wholesale and retail business of tractors; motor| | | | |vehicles; cars and motorcycles. | | | | |Within 3 years of Viet Nam's accession, foreign-invested companies engaging in distribution | | | | |services will be permitted to engage in the commission agents', wholesale and retail business of | | | | |all legally imported and domestically produced products. | | | | |The establishment of outlets for retail services (beyond the first one) shall be allowed on the | | | | |basis of an Economic Needs Test (ENT)[3]. | | | | |(4) Unbound, except as indicated in the horizontal section. | | | Accordance to the above there was 3 periods that Vietnam had scheduled: - As of 2007, Viet Nam had allowed foreign businesses to form joint ventures with domestic companies in retail distribution, so long as the local partner held a controlling interest. - As of January 2008, the country allowed foreign distributors to contribute unlimited capital to such joint ventures, but the requirement of a local partner remained – so we could understand that the foreign distributors can contribute up to 99% of the joint ventures. - As of January 1, 2009, foreign distributors are allowed to establish 100-per-cent foreign-owned companies, with limitations only on some controlled products. Foreign-owned enterprises will be not be able to distribute liquor, cement, fertiliser, steel, paper, tyres or consumer electronics until January 1, 2010, and will continue thereafter to be barred from distributing rice, sugar, tobacco products, petroleum products, pharmaceuticals, explosives, publications, gemstones, or music or video discs in Viet Nam. And the subsequent retail outlets will require an Economic Needs Test (ENT) which will be used to evaluate how many retail outlets a foreign investor will be allowed to operate. From all of the commitments from Vietnam side, found out some advantages for local enterprises – specifically for Saigon Co.op as they can have the freedom for trade and distribute the essential goods like rice, sugar and some other products. With the schedule as above, expected that the new, big, giant with high reputation like Wal-Mart from the US, Tesco from the UK and France’s Carrefour will soon come to Vietnam – this opening will become great threats for local enterprises like Saigon Co.op. This restriction of limited number of foreign distributors to be allowed for operating is of concern to foreign retailers who have visions of multiple outlets. It is not yet unknown precisely what conditions should be satisfied by the applicants but it can be anticipated that delays will arise in getting permission to open multiple outlets. This year, 2009, is considered to be an important milestone in the trading and distribution sector in Vietnam. On January 1 2009, Vietnam committed under the World Trade Organisation (WTO) to allow full market access to foreign investors seeking to engage in the retail sector. This means that foreign investors are now allowed to establish a 100% wholly-owned company to engage in trading and distribution. IV. CAN YOU COMPARE VIETNAM’S COMMITMENT WITH OTHER SIMILAR COUNTRIES AND MAJOR COMPETITORS' Comparing to other members in ASIA, Vietnam is the latest comer of WTO, so does Vietnam get advantages from the former members or disadvantages' Selectively, based on the similarity if geography, history of economic development, we will research on China’s commitments in comparison to Vietnam’s commitments to see whether Vietnam is more powerful in negotiation than China and with the GDP in 2008 just came after US, China is also the largest market for retail distribution developing – does Vietnam loose the opportunities to China ' Having studied at Vietnam’s commitments and China’s commitments and according salient points discussed in part II and III above we should take into account the things relating to Saigon Co.op as highlighted hereunder ( China’s commitments base on WT/ACC/CHN/49/Add.2 issued on 1 October 2001) |Mode of delivery 1) Cross-border supply 2)Consumption abroad 3)Commercial presence 4) Presence of natural person | |Distribution services : Limitation on market access : exclude | |Vietnam’s commitments |China’s commitments | |(1) Unbound, except none for: |(1) Unbound except for mail order. | |- Distribution of products for personal use; |(2) None | |- Distribution of legitimate computer software for personal and |(3) Foreign service suppliers may supply services only in forms of | |commercial use. |joint ventures in five Special Economic Zones (Shenzhen, Zhuhai, | |(2) None. |Shantou, Xiamen and Hainan) and six cities (Beijing, Shanghai, | |(3) None, except: |Tianjin, Guangzhou, Dalian and Qingdao). In Beijing and Shanghai, a | |+ A joint venture with a Vietnamese partner(s) is required, and |total of no more than four joint venture retailing enterprises are | |foreign capital contribution shall not exceed 49%. As of 1 January |permitted respectively. In each of the other cities, no more than | |2008, the 49% capital limitation shall be abolished. As of 1 January |two joint venture retailing enterprises will be permitted. Two joint| |2009, none. |venture retailing enterprises among the four to be established in | |+ Upon accession, foreign-invested companies engaging in |Beijing may set up their branches in the same city (i.e. Beijing). | |distribution services will be permitted to engage in the commission |Upon China's accession to the WTO, Zhengzhou and Wuhan will be | |agents', wholesale and retail business of all legally imported and |immediately open to joint venture retailing enterprises. Within two | |domestically produced products except for: cement and cement clinkers;|years after China's accession to the WTO, foreign majority control | |tyres (excluding tyres of airplanes); papers; tractors; motor |will be permitted in joint venture retailing enterprises and all | |vehicles; cars and motorcycles; iron and steel; audiovisual devices; |provincial capitals, Chongqing and Ningbo will be open to joint | |wines and spirits; and fertilizers. |venture retailing enterprises. | |+ As of 1 January 2009, foreign-invested companies engaging |Foreign service suppliers will be permitted to engage in the | |in distribution services will be permitted to engage in the |retailing of all products, except for the retailing of books, | |commission agents', wholesale and retail business of tractors; motor |newspapers and magazines within one year after accession, the | |vehicles; cars and motorcycles. |retailing of pharmaceutical products, pesticides, mulching films and| |Within 3 years of Viet Nam's accession, foreign-invested companies |processed oil within three years after accession and retailing of | |engaging in distribution services will be permitted to engage in the |chemical fertilizers within five years after accession. | |commission agents', wholesale and retail business of all legally |None, within three years after accession, except for retailing of | |imported and domestically produced products. |chemical fertilizers, within five years after accession; and- those | |The establishment of outlets for retail services (beyond the first |chain stores which sell products of different types and brands from | |one) shall be allowed on the basis of an Economic Needs Test (ENT)[4].|multiple suppliers with more than 30 outlets. For such chains stores| | |with more than 30 outlets, foreign majority ownership will not be | |(4) Unbound, except as indicated in the horizontal section. |permitted if those chain stores distribute any of the following | | |products: motor vehicles (for a period of five years after accession| | |at which time the equity limitation will have been eliminated), and | | |products listed above and in Annex 2a of the Protocol of China's WTO| | |Accession. The foreign chain store operators will have the freedom | | |of choice of any partner, legally established in China according to | | |China's laws and regulations. | | |(4) Unbound except as indicated in Horizontal Commitments. | With the above comparison, we can see that Vietnam had the high protection to local enterprises with the limited in unbound for mode “cross- border supply”. However there are different commitments in the commercial presence. China also limited the number of foreign enterprises to open outlets but they limited in some specific places – with specific numbers while Vietnam base on ENT to decide and until now it is not yet unknown precisely what conditions should be satisfied by the applicants but it can be anticipated that delays will arise in getting permission to open multiple outlets. For the trading rights on goods, China just had the restriction for some kinds of products to distribute pursuant to schedule but did not have the restriction forever for any kind of products like Vietnam did. These commitments from China will open China’s retail and distribution sectors wide open to foreign investors and will set off a new round of faster growth. Thus local enterprises had to prepare and be competitive to these new comers. Non-technical barriers can be used by Vietnam as a hedge against dominance of the domestic market by global retailers, following the success stories of other countries. In Malaysia, it is required that at least 50 per cent of goods on foreign retailers’ shelves must be locally produced. The Thai government regulates that mega-retailers must open their stores 15 kilometres from a city centre. Japan’s Retail Law of 2000 requires compliance with parking, noise, traffic and garbage removal specific regulations. IV. SWOT ANALYSIS – SAIGON CO.OP : Would love to summarize all the learning from this research into the SWOT analysis so that we can give some direction to Saigon Co.op for growth, for share gain accordance to what Vietnam had committed in WTO. Strengths: - Currently Saigon Coop is the local enterprise that have high belief from consumers in Hochiminh city – the highest contribution in modern trade channel – according to the survey from AGROINFO, 2008. [pic] - As a local enterprise, Saigon Co.op will understand the local consumption culture and existing distribution networks ( currently Saigon Co.op has developed Co.op Mart store brands for dried, frozen and ready-made food products) - Especially in the list of products that are permitted to be imported and distributed like husked rice, sugar caned and sugar beet, crude oil and processed oil…so local enterprise like Co.op will take this as an advantage. Weakness: - Even being chosen as a leader in modern trade – Saigon Co.op is still unprofessional, lacks of logistics, has not the long term strategy. - Saigon Co-op has been established in 1996 while foreign enterprises like Wal-mart, Tesco have had many years in retailing and their brands name are well-known all over the world and their capital potential are very high. Opportunities: - The shopping trend of Vietnamese consumer in modern trade is growing. However, local and overseas retailers face limitations as the modern retail market, though rapidly expanding, is still largely confined to urban areas, where retail space meeting the needs of such retailers is still quite limited. Modern retailing is not yet available to the majority of Vietnamese, and is not likely to be for some time. [pic] - Under the ENT, the foreign-invested company would apply for a separate license for each subsequent outlet, with approvals made on a case-by-case basis based on three criteria: the number of existing service suppliers in a particular geographic area, market stability, and geographic scale – this will be the opportunity for Co-op and also the challenges to expand their business before new comers come. Threats: - Until now, there are 2 big foreign enterprises, Big C and Metro already came to Vietnam and expanding their business gradually however we can not apply the WTO’s commitments in limiting their outlets so Saigon Co.op should be careful not only to new comers but also the existing competitors. - Foreign enterprises not only work with producers of household goods, construction materials, electronics and electrical appliances, they also directly co-operate with farmers, farms and co-operatives to ensure an abundant supply. - In order to expand the business, Saigon Co-op need to investigate in the location – however in the meantime with the recession, the real estate are decreasing cause many difficulties. Conclusion: To turn the challenges ahead into opportunities for development, I would suggest that Saigon Co.op improve their competitiveness and formulate suitable long-term business strategies as well as tightening their management methods and structures. - Saigon Co.op should strengthen its local position by co-operating with domestic producers of consumer goods to build recognisable trademarks that would attract domestic buyers, to enhance the quality of domestic products. - They also need to establish the strong corporation relationship with biggest companies such as Unilever, P&G, Vinamilk, etc… to firm their contribution and distribution. - Customer service will also become a crucial component to distinguish Saigon Co.op in the eyes of consumers so they need to have the staffs trained. - With the advantage in knowledge of local culture, Saigon Co.op should focus on and develop the rural market, which is big and gradually developing due to the increasing income of rural people. Besides building chain shops, they should learn lessons from foreign distributors to build market share in this segment. The more professional the well-establish they are References: http://www.usvtc.org/trade/wto/ : for downloading report of Working Party on the accession of Vietnam, General Agreement on Trading in Services (GATS), Vietnam’s commitment on Services. http://www.wto.org/english/theWTO_e/whatis_e/tif_e/org6_e.htm: For downloading the other country’s commitment. http://www.wto.org/english/theWTO_e/acc_e/completeacc_e.htm : for downloading Protocols of accession for new members since 1995, including commitments in goods and services http://www.vietpartners.com/Statistic-FDI.htm: FDI stastistic Some websites relating to Vietnam’s government: www.mpi.gov.vn: Ministry of Planning and Investment's website fro documents relating to investment www.mot.gov.vn: On the Ministry of Trade's website for documents concerning trade rules and regulations. www.moc.gov.vn: On the Ministry of Construction’s website for documents concerning construction rules and regulations. www.mof.gov.vnL: On the Ministry of Finance's website for documents relating to tax and finance. www.moj.gov.vn: A number of draft documents were also published on the website of the Ministry of Justice ----------------------- [1] For the purposes of this schedule "pharmaceuticals and drugs" do not include non-pharmaceutical nutritional supplements in tablet, capsule or powdered form. [2] For transparency purposes, this commitment includes multi-level sales by properly trained and certified Vietnamese individual commission agents away from a fixed location for which remuneration is received both for the sales effort and for sales support services that result in additional sales by other contracted distributors. [3] Applications to establish more than one outlet shall be subject to pre-established publicly available procedures, and approval shall be based on objective criteria. The main criteria of the ENT include the number of existing service suppliers in a particular geographic area, the stability of market and geographic scale. [4] Applications to establish more than one outlet shall be subject to pre-established publicly available procedures, and approval shall be based on objective criteria. The main criteria of the ENT include the number of existing service suppliers in a particular geographic area, the stability of market and geographic scale. ----------------------- 52 48 86 14 68 32 Asia Vietnam Philip. 48 52 China 46 54 42 58 42 58 40 60 Korea Thailand Malay Taiwan Others Modern Trade