Chiến lược phát triển ngành dịch vụ phân phối của Việt Nam trong kỷ nguyên 4.0
Kỷ yếu Hội thảo quốc tế “Thương mại và phân phối” lần 2 năm 2020
VIETNAM'S STRATEGY FOR DISTRIBUTION SERVICE DEVELOPMENT
IN 4.0 ERA
CHIẾN LƯỢC PHÁT TRIỂN NGÀNH DỊCH VỤ PHÂN PHỐI CỦA VIỆT NAM
TRONG KỶ NGUYÊN 4.0
Pham Van Kiem, PhD, Dinh Thi Viet Ha, MA
Thuongmai University
Abstract
The development of the distribution service industry in 4.0 era is closely related to the level of
development, structural characteristics and policies of each country. On the whole, in the world changing
trends are taking place: the distribution service industry is becoming more and more concentrated, especially
the trend of establishing a goods distribution network on a large scale, the trend of promoting trade
liberalization in the distribution service industry, narrowing trends of traditional wholesale and retail forms…
The paper clarifies the content of Vietnam's strategy for distribution service development and points out the
strengths, weaknesses, opportunities and threats that affect the industry’s development strategy in 4.0 era so as
to propose some a number of major solutions for investment, human resources, science and technology,
wholesale service development.
Keywords: strategy, distribution service, distribution strategy, service industry, wholesale, retail
Tóm tắt
Sự phát triển của ngành dịch vụ phân phối trong kỷ nguyên 4.0 có liên quan chặt chẽ với trình độ phát
triển, đặc trưng cấu trúc và các chính sách của mỗi quốc gia. Nhìn chung, lĩnh vực dịch vụ phân phối trên thế
giới đang diễn ra những xu hướng thay đổi như: lĩnh vực dịch vụ phân phối ngày càng trở nên tập trung hơn,
đặc biệt là xu hướng hình thành mạng lưới phân phối hàng hóa với qui mô và phạm vi rộng, lớn; xu hướng đẩy
mạnh tự do hóa thương mại trong lĩnh vực dịch vụ phân phối; xu hướng thu hẹp của các loại hình bán buôn,
bán lẻ truyền thống…bài viết làm rõ nội hàm của chiến lược ngành dịch vụ phân phối của Việt Nam và chỉ ra
những điểm mạnh điểm yêu, thời cơ và thách thức tác động đến chiến lược phát triển của ngành trong kỷ
nguyên 4.0 và từ đó đề xuất một số giải pháp chủ yếu về đầu tư, nhân lực, khoa học công nghệ và phát triển
dịch vụ bán buôn.
Từ khóa: Chiến lược, dịch vụ phân phối, chiến lược phân phối, ngành dịch vụ, bán buôn, bán lẻ
1. Rationale
In modern market economies, the distribution service industry is a vital connection between
manufacturers and consumers. The distribution service industry accounts for a significant proportion
of total GDP, usually ranging from 8% in Germany to 20% in China. In our country, this industry
usually makes up 14-15% of total GDP and contributes about17.0% to the general growth rate of
annual GDP. At the same time, the proportion of the labor service distribution industry in the total
number of employees working in the economy often accounts for over 10%.
In our country, the distribution service industry has a full range of subindustries, such as
wholesale, retail, agency and franchising with the participation of many economic sectors in and
outside the country. Modern distribution system achieves the highest growth rate in the distribution
service industry. Along with the rapid development of the distribution service market, the State has
amended and promulgated a lot of new policies and legal documents to govern the distribution service
industry. Nevertheless, besides the results achieved, in the distribution service industry of our country,
there still exist various shortcomings. For example, the industry structure is changing, but is till very
inadequate compared to the development requirements of the economy. The current management
system is not strong enough, particularly at the provincial and district levels in proportion to the
development of distribution services. Legal documents related to distribution services do not embrace
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all management requirements. Distribution service development orientation has not yet clearly been
planned…
In the period from now on until 2030, under the socio-economic development strategic
objectives adopted by the 11th National Party Congress, our country will basically become an
industrialized country. At the same time, our country’s process of integration into the world economy
will be more intensive and extensive, which both creates a strong impact and requires the rapid
development of distribution services in the economy. Indeed, it all fits under the umbrella of era 4.0
and there are several steps that companies, the state must consider when they confront the new
landscape. In recent years, distribution and consumer goods companies focused primarily on digitizing
their customer interface. Now, the digital integration of the end-to-end value chain becomes a strategic
priority. This includes digitization of product and service offerings; developing innovative digital
business models; digitization and integration of supply chains; and adopting data and analytics as a
core capability. Implementation involves more than just designing a new strategy; corporate culture,
management approaches, role of IT, and innovation engines must be reexamined and often revamped.
The question raised here is how the distribution service industry can develop rapidly, sustainably and
promote its role in the overall development of the economy. Thus, studying the paper “strategy for
distribution service development in 4.0 era” is necessary not only from the perspective of sectoral
development but also from overall development of the economy.
2. Introducing strategy for distribution service development
2.1. Strategic content
Mintzberg defines strategy with 5 Ps: Plan – a series of intended actions; Pattern - behavioral
consistency; Position – concordance between an organization and its environment; Perspective –
cognitive manner; Ploy - way of behaving with an opponent.
Johnson and Scholes define “Strategy is the long-term orientation and scope of an organization’s
activities to gain a competitive advantage by combining resources in a challenging environment in order
to best satisfy market needs and to meet the desires of organization-related players”.
Michael Porter (1996), “Strategy is to create a harmony between a company’s activities. The
success of a strategy is largely based on performing well works and combining them together. The
core of a strategy is to “choose what has not been done”. Under this approach, strategy is to make a
difference in competition, to find and implement what not to do. The essence of strategy is to build
competitive advantages, strategy that only exists in unique activities. Strategy is to build a unique and
valuable position that impacts a group of different activities.
In general, there are many different definitions; however, it’s possible to understand that
strategy of an individual, a business or an organization (jointly referred to as strategic subject) is a
program of action, a plan of action designed to achieve a specific goal of combining long-term
objectives and measures, ways to reach such objectives. It’s possible to understand that strategy is the
key answer selected by the strategic subject to the following basic questions:
• Where does the strategic subject strive to reach in the long term (direction)?
• In which market does the strategic subject have to compete and what kinds of activities should
be carried out in such markets (markets, scope and scale)?
• How will the strategic subject perform better than the competitors in such markets
(advantages)?
• What resources (skills, assets, finance, relationships, technical competencies, equipment) the
strategic subject should have so as to be able to compete (resources)?
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• What external environmental factors affect the competitiveness of the strategic subject
(environment)?
• What values and expectations do people in and outside the organization need (capital
contributors)?
2.2. Strategic scope of distribution service development in 4.0 era
As mentioned above, strategic subjects (those who directly plan and implement the strategy)
include various types of people such as businesses, socio-economic organizations, government
agencies, and individuals. Among strategic subjects there are different ranges of activities: (sectoral)
scope of operations; (local, regional, national, international) operational space; limited range of
resources that can be mobilized. In other words, each strategic subject has a different scope to consider
when planning and implementing a development strategy.
Distribution services are a service economic sector in the economy. Despite the differences in
distribution services of countries in name, scope of operations according to economic sub-system),
especially the difference in organizational model, as well as the scope and the level of government
involvement in the sectoral development process. As an economic sector, the distribution service
industry is a combination of businesses, establishments and small business households that operate in
the circulation of goods from production to consumption.
In the main, the scope of strategy for distribution service development is defined as follows:
+ The scope of distribution service industry is the field of goods circulation from production to
consumption, including 4 main sub-sectors (according to the above-mentioned system of economic
sub-sectors).
+ The spatial scope of the strategy for distribution service development is all over the national
territory and the ability to expand the distribution network to other countries on an international scale.
+ The range of resources that can be mobilized into the development of the distribution service
industry includes domestic resources (State, private) and from foreign investors.
2.3. Basic content of strategy for distribution service development in 4.0 era
As a whole, in order to give full answers to the questions raised questions about the future
development of any strategic subject, a business strategy must show the basic contents such as:
• Making a strategic statement with such main contents as statement about mission, vision
and core values that strategic subjects aim for in the long term;
• Selecting and setting key objectives and development orientation of strategic subjects in the
long term;
• Identifying the key tasks of the strategy;
• Drawing up plans to mobilize and rationally and effectively use development resources;
• Roadmap and solutions to strategic implementation.
In the sectoral development strategy there are also differences in content from the national
socioeconomic development strategy or corporate development strategy. In our country, most
economic sectors have been formulating development strategies. As a whole, the basic contents of the
sectoral development strategies above usually cover: 1) A strategic view; 2) Strategic objectives; 3)
Strategic orientation; 4) Strategic focus programs (not all sectors refer to this content); 5) Strategic
solutions; 6) Strategic implementation organization.
The basic contents of strategy for distribution service development can be devised in the same
way with other sectoral development strategies. However, in devising the specific contents of strategy
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for distribution service development, the differences in the scope of operations, the position, the role in
the national economy system…must be clearly shown.
Some points to keep in mind when devising the basic contents of strategy for distribution
service development:
Firstly, the content of statement about strategy for distribution service development.
For the distribution service industry, the statement about mission must show the position, role
of the industry in the process of social reproduction, as well as the benefits that it brings to
manufacturers and consumers. As a partial strategy the statement about vision in strategy for
distribution service development should be in line with the nation's socio-economic development
strategic vision. At the same time, as a State management system in the national economy, the
statement about the core values in the strategy for distribution service development must reflect the
nature of the State, as well as the core values that have been identified in the nation's overall
development strategy.
Secondly, the content of strategic perspective of distribution service development.
Strategic perspective of distribution service development should be established based on
considering the position, the role of the industry in the national economy, the relationship between
distribution service industry and other industries and between the distribution service subindustries, the
level and rate of development manufacturing industries, the level and rate of increase in income and
procurement of the population, as well as the prospects of development of other infrastructure services
in the national socioeconomic development strategy. The important thing in establishing strategic
perspective of distribution service development is to understand clearly the dialectical relationship
between the distribution service industry and other sectors in the economy.
Thirdly, the strategic objectives for distribution service development.
For the distribution service industry, strategic objectives must reflect the industry's position
(size and level of development) in the economy over the long-term, including the basic objectives to be
set such as the level of contribution to general GDP; label of labour attraction of the industry in the
economy…At the same time, setting strategic objectives for distribution service development must
also follow the general principles as Specific, Measurable, Achievable, Realistic, Timebound,
Engagement, and Relevant.
Fourthly, the strategic orientation for distribution service development.
For the distribution service industry, derived from the basic objectives for the industry’s
development, the strategic orientation content is related to the plan and the way to ensure GDP growth,
the plan and the way to develop distribution services by territory, the plan and the way to develop
distribution service subindustries, as well as to establish relationships within the industry and with
other economic sectors.
Fifthly, the content of strategic solutions and policies for distribution service development.
For the distribution service industry, strategic solutions and policies often focus on such issues
as supplementing and improving the legal framework governing distribution activities; creating a fair
and transparent competitive environment in the distribution services market; policies to
encourage/restrict the development of distribution firms by subindustry, by region, by business line;
policies to guide and support the development of distribution networks in difficult, disadvantaged
regions and areas; fulfilling commitments on opening the distribution market…
3. Research methodology
In this research, the author uses a general methodology to clarify the strategy for distribution
service industry of Vietnam so as to analyze the strengths, weaknesses, opportunities, threats, as well
as proposing solutions to developing this service industry.
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Secondary data sources for this research include books, newspapers, scientific reports, results
from scientific works related to the field of socio-economic development, trade development strategy
of Vietnam, regulations on wholesale, retail, franchising and especially the data used in the Statistical
Yearbook 2014-2018. The author carefully reads the information from the secondary documents above
and sorts out the comments, figure, and information that are necessary and useful for the research
topic. To consolidate the research data, the author uses the method of interviewing 5 State
management experts from the Ministry of Industry and Trade, who are experienced in managing and
developing distribution services of Vietnam for many years.
After collecting all the data, the author proceeds to save in a meticulous and careful way by
taking notes, typing… and then, classify them by different content to facilitate the research process.
Official information, with clear resources, and updated will be retained, and the author will remove
information that is poorly accurate and less up-to-date. The use of secondary data brings many benefits
for this study as this is an available, published data source so it is easy to collect, thus saving time and
money in the collection process. In the analysis process, the author also use deductive methods to
make his arguments based on the knowledge, experience and inheritance from the research works by
domestic and foreign authors.
4. Swot analysis results for distribution service development till 2030 in 4.0 era
4.1. Strengths
+ Distribution service industry in our country is quite large in size and is being in a period of
rapid growth. All indicators that reflect the size and growth rate in terms of GDP, labour force, number
of firms of the industry are at a high level. At the same time, the prospect of growth and expansion of
the industry in the strategic period 2011 – 2020 until 2030 is being supported by the rapid growth
prospects of the economy, both from the supply and demand sides. On the supply side, the prospect of
increasing the size and number of producers and suppliers is supported by the finalization of the
industrialization process in the strategic period 2011 – 2020. On the demand side, with a population of
over 90 million, the size and level of domestic consumption will also increase rapidly along with the
process of improving incomes at the above-average threshold and the impact of urbanization and
international economic integration.
+ Compared to other economic sectors, especially in the service sector, the distribution service
is a relatively fast-moving industry according to market mechanisms and currently less dependent on
investment from the State budget. According to statistics of the Statistical Yearbook, the proportion of
State sector investment in wholesale, retail, repair of motor vehicles, motorbikes and other motorized
vehicles in the total social investment in this industry only accounted for 18.86% (2018), while the
proportion of State investment in the whole economy in 2018 was 37.83% and in the service sector
was 40.54%. The low dependence on investment capital from the State budget is one of the strengths
of the distribution service industry in the development period from now on to 2020 and 2030 as there
is no "shortage" due to the reduction of investment from the State budget. This will certainly happen in
the coming period due to the implementation of the policy of developing the market economy and
especially the limitation of the State budget due to the impact of the current crisis.
+ The ability to absorb investment capital into the distribution service industry in our country by
2030 is still quite large. The ability to absorb investment capital of the distribution service industry is still
quite large. On the one hand, as analyzed above, the current targets of the industry such as the level of
investment capital per worker is still rather low, the amount of capital needed to produce one unit of
GDP still small, the overall profit margin of the industry quite high. On the other hand, the economic
development prospect and the need to invest in infrastructure to carry out distribution activities are the
basis to ensure the ability to maintain the added value and profit in the distribution service industry. The
high level of attractiveness of investors and the ability to absorb capital of the industry is one of the
important motivations for promoting the development of the distribution service industry.
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+ The structure of the business sector in the distribution service industry is changing towards
increasing the dynamism of firms in the industry. The dynamism of firms in the distribution service
industry by 2030 will increase significantly due to the fast growing trend of sub-agencies and trade
concession; the trend of rapid increase in the number of small-sized enterprises in the industry (from
the business household sector); the trends of forming and developing supply/distribution chains; the
trends of strongly replacing modern trade types, etc. These, on the one hand, create many investment
and business opportunities for enterprises in the industry, and on the other, create a great competitive
pressure within the distribution service industry.
+ Foreign-invested enterprises in the distribution service industry have been increasing
investment in rapidly developing business systems. Though the presence of foreign distribution
enterprises, especially retail enterprises in our country is still the subject of many controversial issues,
the role of these enterprises in the distribution service industry in our country today is undeniable,
especially in the aspect of developing the industry towards modernization. In the period 2014-2020,
the attractiveness of the Vietnamese market, along with the implementation of the open-door policy
and the government's commitment to institutional reform, will continue to boost foreign and industry
investment. To some extent, foreign-invested enterprises with financial potential, supply chain
management skills, sales management qualifications, etc., will bring strengths in developing the
distribution service industry in our country at the next stage.
+ A number of domestic distribution companies have been expanding their overseas
investments in all four distribution service industry segments. Currently, according to the above-
mentioned statistics, distribution service is one of the industries with a large number of foreign direct
investment projects. This is one of the strengths of our country's distribution service industry in the
process of international economic integration, the existing basis for increasing the connection of
Vietnam's distribution system with foreign countries, extending the domestic production/supply chain
and developing the brands of domestic distribution companies on the regional and even global scale in
the future. By 2030, this strong point of our country’s distribution service industry will continue to be
maintained and promoted along with the prospect of forming the ASEAN Economic Community as
well as the market opening trend of economies.
+ Another strong point in developing the distribution service industry in our country until 2030
is the potential of labor force. At present, distribution service is one of the industries that attract a lot of
labor, especially labor from agriculture and rural areas. This trend will continue in the coming period.
Although the labor force participating in the distribution service industry is still very limited in terms
of training level and occupational skills and cannot meet the requirements of developing a modern
distribution system, the Vietnamese labor force in general has such advantages as being young labor;
most having achieved general education; able to acquire knowledge; hard-working; easy to accept low
wages... Therefore, in the coming period, along with the recruitment requirements of companies in the
distribution service industry and the pressure to compete for jobs will surely create a large workforce
trained, professionally qualified and ready to participate in the industry.
4.2. Weaknesses
+ In the current distribution service industry structure, there exist quite many important
"points" and "paragraphs" when entering the period of rapid development towards modernization and
international economic integration.
In the current distribution service industry structure, there exist quite many important "points"
and "paragraphs" when entering the period of rapid development towards modernization and
international economic integration.
Reality has shown that the subagents and trade concessions in the distribution service industry
in our country have been newly formed and developed along with the transition and integration of the
economy. In the wholesale subsector, modern types of retail has developed rapidly since the early
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1990s, but the mode and form of business organization is still quite outdated, modern retail market
share accounts for only 20%. In the distribution channels from production to consumption, there are
too many intermediaries, lack of linkage or loose association. Most retail businesses have only one
store and have sole ownership, while many business households do not have a fixed point of sale.
Labor structure in the industry is mainly low-level and untrained. In general, the structure of the
current distribution service industry can be rated as being fragmented, small and scattered; relying
heavily on traditional business practices; lacking capacity to provide services to buyers; using a lot of
unskilled labor and natural advantages of business location; low added value and business technology
level. The intrinsic weaknesses in the distribution service industry structure may reduce the industry’s
development speed and efficiency until 2030.
+ The institution and the legal system governing distribution activities are in the process of
being finalized, there still exist "loopholes" and "gaps".
Shortcomings in the organization and management of the industry, as mentioned above, include
the existence of many loopholes and gaps in policies and in implementing the management of
wholesale and retail activities, etc. For example, under the WTO accession commitment, the licensing
of foreign investors to open a second retail outlet must be based on an economic needs test (ENT).
However, the concretization of economic needs test into regulations has not yet been officially
announced. Or, according to the ordinance on prices, it is required that retail establishments must list
prices, but in fact many retail establishments do not list prices, or list prices not in accordance with
selling prices... policy loopholes in management as well as in policy making not only create an
intransparent and unequal business environment but also negatively affects the development strategies
of enterprises in the industry, the behavioral acts of businesses in the industry with each other as well
as with customers and suppliers.
+ Logistics service provision in the distribution service industry has not been developed.
Today, due to the diversified development of goods sources, the expansion of supply sources,
the varied consumer demands..., logistics services play an essential role in developing supply chains in
wholesale and retail activities. As a matter of fact, except for a number of large domestic distribution
firms (Hapro, Co-op mart, etc.) and foreign-invested enterprises that are actively investing in the
development of supply chains, the rest are still largely based on the traditional market network. On the
whole, supply chains in our country are still small, fragmented and costly. This not only affects the
profitability of distribution companies but also limits the ability to expand the size of goods sources
and expand consumption. It can be said that the underdevelopment of logistics services in our country
at present is the weak point of not only the distribution service industry but also the economy as a
whole which is in the period of speeding up the industrialization process.
+ The infrastructure in the distribution service industry is still backward, underdeveloped and has
low investment efficiency. As analyzed above, the wholesale and retail infrastructure in our country at
present is still mainly based on the system of traditional markets. In addition, the investment and
development of traditional markets are heavily dependent on investment capital from the central and
local budgets, while this source of investment capital is increasingly tight. Modern wholesale
infrastructures are still lacking, while popular retail infrastructure is small, especially private retail stores
that use residential areas for business. This not only makes it difficult to issue norms, standards for retail
establishments but also limits the ability of executing business activities of distributors in the market. .
+ The force participating in the distribution service industry is usually in small or micro size.
Labor is an important factor in all growth models both at the size of the economy and in each industry.
Meanwhile, this force in the distribution service industry in our country today, as mentioned above, is
mainly in small or micro size, which is generally characterized by lack of capacity to expand
investment; most have not undergone professional training or with low level of training; management
qualifications and skills are mainly at the household business scale. This certainly reduces labor
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productivity and will cause a large shortage of quality human resources before the development
requirement of the distribution service industry towards modernization until 2030.
4.3. Opportunities
+ Opportunities to build distribution service industry structure are directed towards
modernizing, improving productivity, service quality and competitiveness. Analyses of
macroeconomic environment and distribution service development environment as well as the above-
mentioned tendency of external factors show the opportunities to build a more modern industry
structure with higher productivity and quality and at a higher level of competition. Specifically, the
determination to reform and improve institutions and laws will create a more equal competitive
environment. The prospect of economic growth and other factors of the macroeconomic environment
will provide a wider "space" and more "nutrients" for the development of distribution service industry.
+ Opportunities to participate in the regional and global supply/distribution chain of
Vietnamese distribution companies until 2030
This opportunity is a gathering point of such factors as: 1) The trend of trade liberalization and
economic integration that takes place strongly, especially in ASEAN and Asia-Pacific region, making
favourable conditions for flows of goods and services and expanding supply/distribution chains, in
which Vietnam is an ASEAN member and is playing an increasing role in the Asia-Pacific region; 2)
Trends of penetrating into the market of distribution services among economies, especially from
economies with higher levels of development to economies with lower levels of development; 3) That
the process of industrialization taking place strongly in the period of 2011-2020 in our country offers
the prospect of increasing Vietnam's supply of goods in terms of scale, structure and product quality,
especially agricultural, forestry and aquatic products; 4) Increasing trends of foreign direct investment
into Vietnam both in manufacturing and distribution; 5) Vietnam's distribution companies have been
and will be actively investing abroad to expand their business networks; 6) Vietnam has the advantage
of geographical location and favorable conditions for the development of logistics services; 7) The
domestic consumer market is large in size and is being in a period of rapid growth.
+ The opportunity to accelerate the growth of the distribution service industry and shorten the
development time of the industry towards modernization.
The opportunity to accelerate the growth of distribution service industry is a gathering point of
such factors as: 1) Capital investment in the industry, including domestic investment and foreign
investment, will increase sharply thanks to the industry’s capital absorbility that is still quite
considerable, the ability to create added value per monetary unit invested is high, the growth prospect
of manufacturing industries and especially the development of the domestic product consumption
market, etc. 2) Advanced business technology will be significantly improved thanks to the favorable
international exchange environment and direct foreign investment enterprises in Vietnam, thereby
improving productivity in both wholesale and retail; 3) Labour in the industry will also be rapidly
improved thanks to the abundant workforce and its accessibility to international business knowledge.
The opportunity to accelerate the growth of the industry will lead to the opportunity to shorten
the development period of the industry. At the same time, the opportunity to shorten the development
period of the industry towards modernization is also supported by: 1) The presence of foreign capital
distributors in Vietnam; 2) Prospects of development and participation in the supply/distribution chains
of domestic distribution companies; 3) The high rate of industrialization, urbanization and rapid increase
of per capita income by 2030 will promote the rapid development of a modern distribution type.
+ Opportunities to accelerate the process of reforming, improving the institutions and laws
governing the distribution service sector.
This opportunity is a gathering point of such factors as: 1) Under the WTO accession
commitments, Vietnam must be recognized by its members as a market economy country; 2)
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Institutional reform has been identified as one of three strategic breakthroughs in the Socio-Economic
Development Strategy for the period 2011-2020; 3) The extent of the State's intervention in the
distribution service industry has been reduced slightly during the implementation of the recent
reforms; 4) The trend of internationalization of distribution service industry in general and retail
service industry in particular is and will be stronger and stronger in the Asia-Pacific region. This trend
not only puts pressure but also creates realistic materials and environment to implement institutional
reforms and improve the law in Vietnam; 5) The prospect of a rapid increase in the number of
domestic and foreign distribution companies will also put pressure on institutional reforms and
completion of laws to improve management efficiency for the distribution service industry in the era of
globalization.
+ Opportunities to accelerate the process of forming infrastructure synchronization and
modernization in the field of distribution.
This opportunity can be seen as an inevitable corollary of the above development opportunities.
Because, when the industry structure is built towards modernization, then the infrastructure must also
be developed at the corresponding level; when the growth rate of the industry is high, it will both offer
a higher possibility of reinvestment and create new investment attraction; participating in the global
and regional supply/distribution chains involves building facility capacity to ensure the movement of
goods...
4.4. Threats
+ Potential risks to the development of distribution service industry under unsustainable
structure.
The development process of distribution service industry in Vietnam until 2030 will be marked
with a powerful transformation from a small, fragmented, backward model based on unskilled labor as
the main and low productivity to a model modernly structured in terms of distribution channels,
business methods, substructure and level of business organization at the industry level. Nevertheless,
the industry development process may fall into a hot growth situation, forming an unbalanced and
unsustainable industry structure.
This potential risk is probably caused by the slow completion of the institutional and legal
system, the inability to correct phenomena, such as: 1) In the market mechanism, businesses tend to
overemphasize highly profitable business lines and locations; 2) Foreign retail businesses mainly rely
on transnational supply/distribution chains without attaching much importance to developing domestic
supply/distribution chains due to higher investment costs (in building goods sources, organizing
distribution channels, training human resources, etc.); 3) The lack of investment capacity (capital,
organizational qualifications, etc.) of domestic enterprises is currently on a small and micro scale; 4)
The current situation of high retail space costs and problems in site clearance, etc.
+ The risk of domestic businesses participating in the supply/distribution chain at the low
value-added stage.
The reality of development in the era of globalization and international economic integration
shows that this is an existent risk for low-developed economies. This risk not only harms the economic
interests of domestic enterprises and the economy as a whole, but also creates the high dependence of
the distribution service industry.
The main factors leading to this risk are: 1) It’s hard for domestic enterprises, mainly small and
micro-sized, to build supply/distribution chains, or to undertake important stages in the chain; 2) While
world trade is shifting sharply from push supply to pull demand mechanisms, i.e. retail businesses
directly build supply/distribution chains, Vietnam still lacks large scale retail enterprises; 3) Vietnam's
supplies of goods, especially agricultural products and foodstuffs, are still small-scale and scattered.
Therefore, the stage of purchasing and collecting goods still needs numbers of traders involved. This,
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on the one hand, creates opportunities for businesses (including business households) to participate in
the supply/distribution chain, but on the other, also makes them lack the effort to participate in the
higher stages of the chain.
+ The risk of oversupply of unskilled labor, but lack of qualified labor force and high
occupational skills.
This is an existent risk to the development of distribution service industry until 2030. In reality,
the labor force in the industry at present is mainly unskilled labor and moved from agriculture, thus
lacking management knowledge, skills in selling, pre-treating and storing goods, etc. Meanwhile, the
vocational training system in general and the sales profession in particular in our country are still
underdeveloped. At the same time, domestic distribution enterprises currently still mainly use family
labor or 100% of family labor (for business households). As a result, there is almost no pressure on
them to compete for employment and improve the labor force.
+ The risk that domestic distribution enterprises can hardly expand their business and cluster
together in areas with low profit margins (in terms of space, per capita income, type of goods, etc.).
This risk, firstly, originates from the weaknesses of domestic distribution enterprises such as:
force of mainly small-scale enterprises; lack of investment capacity both financially and governancely;
incapability of self-training labor... Secondly, due to the commitment to open the distribution market,
many foreign distributors are planning to invest in Vietnam and the trend of expanding existing foreign
distributors in Vietnam. Naturally, under competitive market conditions, foreign distributors, with their
advantages by far greater than domestic enterprises, will not only capture areas with high profit
margins, but also continue to invest to win benefit by scale. Thirdly, since most domestic enterprises
lack the cohesion, thereby reducing the ability to organize the supply/distribution chain and being
unable to develop consumer markets. Or, having no position in the supply/distribution chains,
domestic distribution businesses lack competitive strength in terms of goods sources, role for
evaluation, etc.
+ The risk of losing the ability to manage and regulate the market of the State in the market of
distribution services.
The management and regulation of the development of the distribution service market in our
country at present are revealing many inadequacies, as mentioned above, in both terms of constitution
and legal system. Such inadequacies are the causes of a series of manifestations of reducing
effectiveness of management and regulation of the distribution services market. For example, under
commitments, foreign retailers can open a second outlet, but it must be based on an economic needs
test (ENT). In fact, there are no clear regulations on ENT criteria, but Big C has opened up to 25
hypermarkets, Lotte Mart has also had 4 supermarkets, etc. Terminal market network planning is
considered a hyphen in the development process from small-scale business to large-scale business, but
the implementation has not been effective. In the retail industry, violations of the origin, product
quality, business conditions, etc. still occur popularly in big supermarkets such as Big C (foreign
labeling for fruits domestically produced), Minimart (products have no expiry date), etc.
5. Some strategic solutions proposed for distribution service development
5.1. Solution for mobilizing and using capital
+ Creating a favorable, stable, transparent and equal investment environment to promote all
domestic and foreign economic sectors to invest in developing distribution services. The State should
focus on improving the capacity and quality of public services; improving the capacity of
infrastructure supply related to the development of distribution activities; revising and completing the
legal framework to ensure transparency and stability;
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+ Restructuring sources of capital mobilized for the development of distribution service
industry towards gradually reducing the proportion of investment capital from the State budget and
rapidly increasing the proportion of investment capital from the domestic private sector on the basis of
on the basis of promoting the socialization of investment capital for construction of commercial
infrastructure, especially in market construction;
+ Creating conditions for enterprises to invest in large-scale commercial infrastructures (at the
regional and national levels), in developing supply chains of agricultural products to get access to low
interest capital sources (ODA, commercial credit with interest rate support, capital from development
investment funds, etc.);
+ Diversifying the forms and methods of raising capital of economic units in the distribution
service industry;
+ Continuing to amend, improve and promulgate circulars guiding support policies related to
the development of distribution activities, such as: Decision No. 33/2009/QD-TTg dated March 2,
2009 of the Prime Minister promulgating financial mechanisms and policies for border-gate economic
zones; Decision No. 14/2009 QD-TTg dated January 21, 2009 of the Prime Minister promulgating the
Regulation on guarantee for enterprises to borrow capital from commercial banks; Decision No.
92/2009/QD-TTg regulating credit for traders doing business in difficult and disadvantaged areas, etc.
5.2. Solutions for developing human resources
+ Strengthening the supply, dissemination, spreading of social feedback and criticism on the
qualifications and service quality of enterprises in the distribution service industry. Encouraging
domestic, foreign organizations and individuals, especially consumer protection associations, retail
associations, manufacturers' associations by industry and business line to participate in credit and
brand ratings of distribution businesses;
+ Encouraging organizations, businesses and business households in the distribution service
industry to formulate strategies, plans of training, retraining and regularly popularizing relevant
knowledge for officials, public servants, officials and employees; proposing solutions to strongly
attract all trained human resources;
+ Training institutions need to renovate training programs, content, methods and processes in
order to improve the quality of human resource training for distribution service industry, such as:
designing standard training programs for various fields of training on distribution business
management; managing value chains; managing human resources…;
+ Increasing investment from the State budget in developing human resources for the
distribution service industry.
5.3. Solutions for scientific and technological development in 4.0 era
+ Designing and implementing national science and technology programs and projects to
mobilize synergy for achieving distribution service industry development objectives. Specifically,
focusing on implementing a number of groups of science programs and projects, such as: groups of
science programs and projects to improve the competitiveness of the industry and distribution
enterprises; groups of science programs and projects to improve the State management capacity
according to the market mechanism in the field of distribution services; groups of applied science and
technology programs and projects in the process of organizing and circulating goods from production
to consumption;
+ Renewing the mechanism of using State budget for science and technology, mobilizing social
resources for science and technology. Clearly stating the State budget allocated to science and
technology according to the scientific and technological tasks in the distribution service industry;
renovating in a fundamental, synchronous and comprehensive way organizational structure,
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management mechanism and operation mechanism science and technology in the industry; promoting
research and application of modern distribution service modes and types; implementing the State-
ordering mechanism for science and technology tasks; applying forms of purchasing and piece wage
system suitable to the characteristics of scientific and technological activities in the field of distribution
services; simplifying the procedures of invoice and financial documents suitable to the specific
characteristics of scientific and technological activities; applying a number of groundbreaking
mechanisms and policies to promote socialization of investment in science and technology, especially
investment of enterprises in business technology research and innovation activities;
+ Building research programs, projects and tasks related to improving distribution service
industry capacity in Vietnam and seeking funding from abroad.
5.4. Solutions for developing wholesale services
+ Applying policies on credit, tax and preferential fees for distribution businesses in building
and developing sources of goods, strengthening linkages and cooperation with farmers. Using the price
stabilization fund to support large wholesale enterprises to ensure the circulation reserve capacity, and
participating in market price stabilization;
+ In addition to the research, building and implementation of modern wholesale forms, the
State should focus on supporting the development of terminal markets for agricultural products that
have been and are being constructed under the approved planning;
+ Encouraging the centralization of wholesale and retail businesses through merger, association
and cooperation in order to build and develop supply/distribution chains; proactively and positively
renovating the organizational model, management technology and business methods towards
professionalization and modernization;
+ Encouraging the attraction of foreign direct investment enterprises to invest in and operate
models of wholesale centers, commodity trading floors, etc. in newly opened industrial centers and
urban centers in line with the international economic integration and commitment to open markets and
national socio-economic development planning, policies for regional and territorial economic
development…
6. Conclusion
Distribution services in 4.0 era play an important role in the economy not only from their
contribution to GDP and job creation, but more than that, they support manufacturing industries as a
limited service industry. Currently, the distribution service industry contributes some 13-14% of
Vietnam's GDP. In reality, the distribution service industry in recent years has been growing rapidly at
most development targets, particularly the increase of enterprises in the industry. That, on the one
hand, reflects the growing attractiveness of the industry, but on the other, also reflects the increasing
level of competition in Vietnam's distribution service market. Especially, the participation of foreign
distributors not only has a strong impact on the development of distribution service industry towards
modernization, but also is raising concerns about the risk of uneven development among areas,
regions, among economic sectors, among types of wholesale and retail services, etc. From the research
results above, the paper proposes strategic solutions for distribution service development in our
country in 4.0 era. The content of the strategic solutions includes a solution to develop the distribution
service industry. In general, the strategic solution content is based on objective, scientific analysis,
evaluation and selection. With the results achieved, the paper is expected to be used as a document for
the official planning of the Strategy for distribution service development in the context of Industry 4.0.
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