At the point of death
The Kim Boi Wood and Handicrafts Company has been trying to “rob Peter to pay Paul” in order to overcome the current difficult period. New orders are still coming, but importers have been trying to force the prices down. If Kim Boi accepts to take the orders, he would not get profits.
A client from the US has placed an order of making 500,000 products from coconuts, put only paid 13,000 dong per product, a decrease of 13 percent in comparison with the previous prices. If Kim Boi had accepted the order, it would have incurred the loss of 30 percent.
Therefore, the company refused the order, trying to seek other clients. The importers from Europe have accepted to pay 5-10 percent more, but the price increases are not high enough to offsets the input material price increases.
Dang Quoc Hung, General Director of Kim Boi, said that despite the modest profits, the company still has to accept the orders, or it will have to shut down. Currently, the company’s exports which have decreased by 50 percent compared to 2010’s, just bring the profit high enough to pay to workers and cover some other main expenses.
Kim Boi is not alone. Most of the crafts and handicrafts companies have been fallen into big difficulties and they have to struggle to survive. The input material price increases have made finished products less competitive.
According to Hung, the production cost per product has increased by 20 percent. Meanwhile, most of handicrafts businesses are small ones which are not financially capable enough to buy modern equipments to improve the productivity. As a result, the sale prices of finished products have become overly high, which are unacceptable by customers in the context when they have to fasten their belt.
Besides, the heavy reliance on one export market has also made businesses suffer. For example, when the exports to the US decrease by 50 percent, Kim Boi’s export turnover has also dropped by 50 percent.
According to Hung, 80 percent of the member companies of the Wood and Handicrafts Association have been on the verge of bankruptcy. While some companies still struggle to survive with their main career, others have shifted to other types of business.
Getting adapted to circumstances
While many businesses have been facing difficulties, some others have well got adapted to the market changes to survive. Despite big difficulties, Ba Nhat Cooperative in HCM City still has seen the exports up by two or three folds in comparison with the previous year.
In order to obtain orders with stable prices, Ba Nhat has designed a lot of new products, made of different materials, except the traditional products made of bamboo and rattan which are now no more favorite.
Gia Long Company has decided that it needs to focus on making the products with medium price levels of 300,000-500,000 dong and that it needs to focus on diversifying products. Thanks to the diversification of products, the company still can export products to Australia, Japan and South Africa and can be sold on the domestic market.
Meanwhile, the Minh Long 1 Ceramics Company still can sell products domestically and export because it has found out a new production method which allows to cut one of the four phases in ceramic firing, but still ensure the high quality of products.
Doanh Nhan Saigon
Business & Investment Opportunities
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