Furniture Vietnam – Industry and Competitive Structure

Research Project: Furniture VIETNAM – Industry and Competitive Structure Outline

  1. General View

2 3 Over all attractiveness of Industry General View. Vietnam presents a solid wood industry, with around 3,400 wood production companies in operation, 95% of which are privately owned and the remaining 5% are state-owned. About 16% of the total corporations obtain foreign direct investment (FDI). At this time there are a range of countries that have invested in the timber industry in Vietnam. Taiwan presently maintains the largest amount of companies in Vietnam (200), followed by the Republic of Korea (40), United Kingdom (uk) (30), Japan (25), and China (23). Over 2012 (the up-to-date information accessible at the moment of publishing this note), wood trade income placed 5th among the exported products, hitting over US$ 3.4 billion dollars. The present tendency of market indicates the fast development of the industry. The Vietnamese wood industry is actually export-oriented, with the United States and European Union as the two principal locations, totaling for around 80 % of the wood trade profits. Resources availability Yearly in Vietnam, over 6-7 million m3 round wood corresponding (RWE) are used for the furniture sector. In 2013, the whole volume of wood gathered from Vietnam was 4 million m3 RWE of which 3.7 million m3 (95%) are from forest plantations and the residual 0.3 million m3RWE from all-natural forests. Wood gathered through plantations is usually small, so almost all of the manufacture is utilized. In general, Vietnam has to import over 4 – 4.5 million m3 RWE every year to furniture processing, or over 60 – 70% of the entire wood necessary for that industry. By 2013, Vietnam owned 3 million ha of planting forests lands. In general, the location addressed by plantation forests grows over 150,000 – 250,000 ha every year. The Vietnam Forest improvement places a goal in which by 2020 the whole area of estate forests in Vietnam will likely be 4 million ha. Nevertheless, the accessibility of area for forest plantations offers a huge concern, because most of the area where could possibly be utilized for forest plantations has currently been designated to individuals and also several organizations. Numbers of enterprises The amount of companies inside Vietnam is over 2.400. This amount has grown fast, approximately 17% each year. Timber handling firms are mutually spread from the northern area and the southern area. Foreign trade income, in contrast, is primarily originated through firms over the south. The timber production firms in Vietnam is actually small-scaled, equally in terms of work force as well as total funds spent in manufacture. Companies/Size and Growth/Rate Graph Industry Structure Vietnam offers an extensive history of manufacturing furniture, however Vietnam looks like newbie to the community of international industry furniture for exterior as well as interior desing. Timber furniture manufacture in Vietnam is held over in either craft communities and by professional handling manufacturer. The larger manufacturing processing of timber furniture, other than regular, in Vietnam is concentrated in 3 principal locations: Southern area Vietnam Binh Dinh province, the main highland Gia Lai and southern Vietnam, Ho chi minh. Those 3 locations accounts for the highest of Vietnam’s exports of wood furniture, particularly the southern region as well as the south central districts. Vietnam furniture exports come to 2,400 local as well as 300 international corporations. The industry hires 325,000 individuals, and also is one of the crucial leading trade industries of Vietnam. The sector has brought substantially progress of living standards for individuals in various country locations of Vietnam. The improvement of the wood furniture sector also delivers potential for the improvement of different sectors in the region like equipment, components, finishing products, adhesives, veneers, machines, and service sectors in consulting, software, advertising, transportation, and funding etc. The leading international businesses in Vietnam are Taiwan, Japan, Sweden, and Singapore. Virtually all international investments in this industry target production to export. Besides the leading economies of the world currently being questioned due to the fact of the international financial situation, furniture exports of Vietnam continue to grow in 2013, hitting US$7 million, up 20% in comparison to 2012. As a consequence, Vietnam placed as the globe sixth place exporter and count 2 in Southeast Asia. Vietnam furniture goods ended up purchased by customers of more than 110 nations, with the United States, China, European Union and Japan importing the most. The UNITED STATES ended up being responsible of 40% of the income, China 16%, European Union 13%, Japan 12%, and the specialized rising market of South Korea 4%. The wood goods sector in Vietnam is defined by most of small-scale suppliers, which are a lot more versatile however lag under their international competitors in terms of efficiency, promotion and actual fashions knowledge, other than controlling expertise. The Northern clusters are the production facilities for home decorations and reliable timber standard Vietnamese furniture with exports mainly to Asian nations. Based on Hawa’s approximate, the North reports for just 11% of the general manufacture. Binh Dinh, as well as Nhon are home to plenty outdoors furniture producers. Reliable timber outdoor furniture is widely produced in this location in which it is fairly simpler to purchase wood through Vietnamese and also surrounding nations’ providers, also due to the fact the country is well linked to both Laos and Cambodia. At the same time, producers in the Southern region are concentrating not only on outdoors but also interior furniture. In this region, we can easily locate many leading suppliers of middle-high or even high standard interior furniture, which tend to be offered in the local market and to export. A mix of Vietnamese owned and foreign-managed businesses can be found there. Ho Chi Minh City additionally has various large-scale production facilities, which have thousands of employees in advanced manufacture lines, and it is home to around 73% of 650 prominent furniture companies. Especially, timber manufacture and export in Duong area, which is a next-door neighbor of Ho Chi Minh City, has been growing in present years. Nowadays, Binh Duong has over 365 timber running companies, of that almost 110 are international ones. Since 2002, overall trade of Duong is almost 2.4 billion dollars. Duong area trade in the beginning 8 months of 2011 achieved 166.4 million dollars, with a boost of over 14.5% in comparison to the same time in 2010. An additional point that need be viewed is the poor focus to items style. Numerous businesses produce furniture with layouts and requirements supplied by their clients. Enhancements have been accomplished primarily on manufacturing innovation and its productivity, while the sector as a whole has minimal design know-how. Internal Market Around 70% of furniture goods consumed in the nation is imported from nearby international locations like China, Malaysia and also Thailand, and that the leftover 30% is primarily manufactured through Vietnamese-owned, small-scale companies. The organizations sells its goods in the local market obtain timber through several places in the nation, such as plantations and domestic gardens. Although the vast majority of items sold in local markets are created from ordinary and low-value wood. Clearly, regionally manufactured furniture has ruled the market by its considerable production. Nevertheless, the nation has also imported a specific amount of furniture to provide its market’s different needs. Leading consumers of foreign furniture are rich people, international expats. Market and high-class workplace structures that are mostly found in larger metropolitan areas of the nation, such as Hanoi and Ho Chi Minh City. The leading cities in which most of leading importers/suppliers of furniture are situated consist of Hanoi and Ho Chi Minh City. For the foreign furniture, many of importers are also the vendors and they usually promote the goods in their own showroom. Aside from lower and moderate retailers in which Chinese furniture is primarily found, imported furniture is generally located in showrooms of the importers. Nowadays they are also promoting in department shops which consumers are rich individuals. Government Regulations Trade Regulations, Customs and Standards Import Tariffs Vietnam considerably lowered its tax rates on several goods of interest to the United States once it signed up with the WTO in January 2007. As an outcome, the absolute majority of UNITED STATES. Exports nowadays face charges of 15 % or less. Nevertheless, in present years, Vietnam has improved utilized tariff costs on a range of goods, and while the costs continue under its World Trade Organization boundary levels, international companies have been impacted by the increases. UNITED STATES business has also revealed high tariffs charged on some agricultural and manufactured goods such as fresh food, fresh and frozen meats, and materials and machinery, by which tax reduction might generate important unique possibilities. The United States and Vietnam are presently discussing preferential tax concessions in the framework of the TPP agreements. Business Obstacles Vietnam removed numerous nontariff barriers underneath the 2001 United States-Vietnam Bilateral Trade Agreement (BTA) and throughout its addition to the World Trade Organization, such as quantitative limits on imports, quotas, restrictions,, prior agreement requirements, certification requirements, and some other limitations creating the same result, that showed up to be discrepant with its World Trade Organization obligations. Nevertheless, several other nontariff barriers persist. Forest for Production Because the announcement of the Doi Moi (restoration) plan in the 1980s, the forest area in Viet Nam has underwent significant adjustments. Conventional forest that stressed wood exploitation has transformed to socialize forest that has opened opportunities for wide engagement in forest production, forest protection, and handling of wood from planting forests in order to satisfy the wood needs of local and also international markets. Crucial drivers of this plan consist of policy changes not only in the forest field, but also in other fields such as international trade. Investing Obstacles Vietnam’s investing regulation establishes requirements assigning specific industries in which international investment is forbidden and others in which international investment is matter to conditions. Investing in conditional industries and other projects are matter to considerable and further analysis, often needing the Prime Ministers endorsement, which can often postpone the endorsement of investment permits. All area in Vietnam is possessed and handled by the authorities, and none foreign nationals nor Vietnamese can acquire land. The 2005 investments Law allows foreign-invested companies to rent property for a time period of 55 years and up to 75 years in special circumstances. Investors can acquire land use legal rights and can finance each the buildings constructed on that area and the benefits of the usage rights. Competitive firms As this paper mentioned through this research we see that the furniture industry has just flourished thought the eyes of the world, and the multination corporations in the furniture field, which have most of their manufacture lines in china, but now due to Vietnam becoming attractive from last decade and growing each year, we begin to see some shift, movement from China to Vietnam in the furniture industry. Nowadays what most multinational companies do is to buy furniture or raw materials from small companies in Vietnam for the cheapest price possible and them selling it in their respective markets. Still some multinational corporations see now Vietnam as being really attractive and they also moving some production and setup new facilities there. They doing this with FDI 1

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