Enterprises are facing a new situation with many complex economic fluctuations and changes in macro policies. What is the solution now? How to overcome difficulties? Mr. Nguyen Vu Duy Tuan, Business Development Director, Strategy Consulting and Strategy Development Division, Deloitte Consulting Southeast Asia (in charge of Vietnam), shared these issues in an interview with TBKTSG.
TBKTSG: What do you think are the current difficulties of businesses?
– Mr. Nguyen Vu Duy Tuan: In November 2009, the Government adjusted the exchange rate of the VND to the US dollar with a decrease of more than 5% for the VND. In February 2010, the Government adjusted it again with a decrease of more than 3%. The devaluation of the VND causes production costs to increase because most raw materials and machinery must be imported from abroad. In addition, the prices of gasoline, electricity, water, etc. also increase, while the income in VND of consumers does not increase. On the other hand, the market of Vietnamese enterprises, both export and domestic, is facing the risk of shrinking.
TBKTSG: Many goods have started to increase in price and businesses see this as an obvious countermeasure…
– Increasing product prices is also a solution and is the easiest solution to think of. Another way that is also easy to think of is that businesses do not reduce prices but reduce product quality.
However, be careful with these solutions. Should we increase prices and by how much? Or keep prices the same and find ways to rationalize business strategies? What will happen if we reduce product quality without reducing the quality of foreign goods? The market will be easily lost to others and I think this is something that not many businesses want.
TBKTSG: So, in your opinion, what is the optimal solution?
– This is a good opportunity for businesses to look back and build their business strategy and operational strategy for sustainability. To maintain competitive prices in the market, businesses have no other choice but to cut costs.
However, cost cutting here does not mean tightening the belt, cutting costs to the lowest level, but how to regulate costs reasonably to have the opportunity to increase revenue and profit. It is time to move from the push model of resource mobilization, in which customers are viewed as passive, to the pull model, in which customers become network creators.
This reduction needs to be considered not only for the business itself but also across the entire supply and demand value chain, from suppliers, manufacturers to distributors, retailers and consumers. That way, the market share/revenue of the business will “expand”, not shrink. Thanks to a comprehensive view of costs, the business and its partners will be stronger in investing.
TBKTSG: Can you elaborate on this point? What is cost cutting across the entire supply and demand chain and why is it that market share and revenue still increase despite cost cutting?
– Let me give you an example. Company A sells three types of products to B, each for 60,000 VND; B sells them to C for 70,000 VND; D sells them to E for 80,000 VND and E sells them to consumers for 100,000 VND. Assuming the product price remains at 100,000 VND, A’s task is to increase the profits of B, C, D, and E. How?
In addition to B, C, E having to reduce costs themselves, A also has to find a way to automatically save costs for all people in the value chain such as B, C, E. For example, instead of putting all three types of products into all markets, including products with low market acceptance, leading to inventory, causing costs to increase. Costs increase not only for the manufacturer but also indirectly for wholesalers and retailers such as B, C, D, E, and thus they have not received the most attractive profit possible. Now, we redistribute, knowing that the first product, the second product, the third product is best to put into each market/sales channel. In this case, A will guide B, C, D, E to sell only two types of products, instead of having to hold all three types of products, causing inventory. As profits increase, B, C, D, and E will return to invest more, causing A's market share to increase.
TBKTSG: Is there much potential for cost reduction among Vietnamese enterprises, sir?
– The potential is still huge. Our projects in Vietnam show that many businesses spend money on places where there is no reasonable benefit, no clear benefit.
For example, on the issue of brand promotion. Brands are very necessary, I do not deny. But building a brand is about creating and keeping promises. If you spend too much effort without keeping your promises, it means you have increased costs in vain. Not long ago, a book publishing company advertised in a newspaper in Ho Chi Minh City that it was selling the book "The Prince". However, I went to bookstores in Ho Chi Minh City but could not find it for sale, until I went to Hanoi and was able to buy this book. I asked and found out that the book is only sold in the northern provinces. The question is whether the promise is guaranteed and whether the cost is reasonable when the book is only sold in the North but advertised in the South?
Another problem is investment in information technology (IT). Many businesses today are willing to spend a lot of money to invest in buying IT. However, instead of serving business activities, IT is only used as a tool to process information. This is the reason why a series of businesses that bought ERP (Enterprise Resource Planning) software failed to implement it.
TBKTSG: How can we cut costs?
– This entire supply and demand chain must be made transparent so that the company’s leadership can see how much is invested in marketing, advertising, production costs, interest costs; which markets the goods are entering, where they are stuck… Our Vietnamese language has a very good word – risk. In danger there is always opportunity, if we know how to take advantage of opportunities, our businesses will certainly overcome difficulties.
According to Doanhnhan360
