This change can create a new leadership style and
support the firm’s business performance and strategy. Staff restructuring also
means a change in corporate culture, allowances and talent management?
Many local enterprises have been
besieged by a sharp decline in domestic consumption, high inventory levels,
narrowed credit access and bad debts. VIR’s Khoi Nguyen finds out what
solutions some big firms have deployed to ride out the storm and reap fruit.
State-run Vinatex is one local
firm which has managed to get its house in order and ride out the current
economic storm.
The textile and garment maker’s
total revenue in this year’s first half was about $937.5 million, up 11 per
cent on-year. Last year, Vinatex’s total revenue touched $1.73 billion, up 25
per cent on-year and exceeding its initial target by 3 per cent. Its profit was
$64.4 million, up 26 per cent on-year and exceeding its initial target by 8 per
cent.
Vinatex’s deputy general director
Le Tien Truong ascribed the impressive figures to the group’s efforts to expand
the local market, given the global economic crisis shrinking foreign demand for
garment and textile products.
“We have closely supervised
operations of Vinatex’s enterprises. Any managers failing to run their
enterprises effectively within two or three years are punished. We have also
ensured good salaries and allowances,” Truong said.
Vinatex recently opened its 75th
mart in central Quy Nhon city. Duong Thi Ngoc Dung, general director of Vinatex
Mart Company, said an additional 12 Vinatex marts were opened in this year’s
first half. In 2012, the newly opened marts would hit 37. “At present, site
rentals have reduced 40-50 per cent and this is a big opportunity for us to
swell marts,” Dung said.
Vinatex’s story is among many
others about local enterprises finding their own ways to navigate through the
current economic woes.
Kinh Do Group’s Kinh Do Saigon
Food Company is another success story as having since 2009 applied a US-backed
globally famous “Bakery & Café” business model, a combination between a
traditional bakery and a modern café. This K-DO Bakery & Café model serves
young people with big consumption as it provides fresh cakes and assorted
drinks. The company currently has 12 bakeries of the type in Hanoi and Ho Chi
Minh City.
In the coming time, Kinh Do
Group, one of Vietnam’s most high-profile private companies, will focus on
developing its two main business models including K-DO Bakery & Café and
its traditional Kinh Do bakery.
Adversity brings wisdom
Vietnam’s economy has been
experiencing big difficulties and the government has resorted to sturdy fiscal
and monetary measures to monitor the macro-economy. The on-year inflation rate
was slashed from a peak of 23.02 per cent in August, 2011 to 5.04 per cent in
August, 2012.
However, the Ministry of Planning
and Investment last week reported that in this year’s first eight months,
nearly 35,500 enterprises were either dissolved or stopped operations, up 7.1
per cent on-year. Also, in this year’s first eight months, the index for
industrial production (IIP) rose only 4.7 per cent against the same period last
year, when the IIP augmented 7.3 per cent on-year.
Still despite difficulties, some
big private companies like Hoa Sen Group making plated iron sheets have
performed well. The group expanded its local market share from 33.7 per cent in
2010 to 42 per cent now. In the financial fiscal year 2010-2011, Hoa Sen earned
an export turnover of $100 million and became one of the region’s top exporters
of plated iron sheets.
The group’s general director Tran
Ngoc Chu attributed the fruits to the group’s concentration into manufacturing
and marketing assorted steel, while continuously improving production
technologies and distribution system and bettering its corporate cultural
values.
Vinamilk’s story is also
noteworthy. In this year’s first half, Vinamilk reaped a net revenue of $625
million, up 30 per cent on-year and its after-tax profit rose nearly 32 per
cent. It is expected that Vinamilk’s total revenue for 2012 will be $1.27
billion. According to Vinamilk, the big achievement is ascribed to its
concentration into producing and selling milk only, its core business. Two
years ago, Vinamilk also marketed some non-milk items but unsuccessfully.
In another case, fresh foodstuff
producer Vissan Company has just opened its representative office in Cambodia.
In the year to date, Vissan has opened seven outlets in Vietnam, raising its
total outlets to 88 nationwide now and this figure is expected to rise to 100
by the year’s end. “Despite high input costs, it is more necessary for us to
expand our distribution network. This will create a stable distribution
network, which will help us have more information to create more new products,”
said Vissan’s general director Van Duc Muoi.
Over the past two years, Vissan
has been restructuring its business structure via changing its 1,000 agencies
into 100 distributors and investment into improving these distributors’
quality.
In 2012’s first half, Vissan’s
total revenue touched $111 million, including $96.1 million earned from the
distribution network, up 5 per cent on-year.
Words of wisdom
Le Kinh Luan, a senior consultant
from US-backed global professional services company Towers Watson Vietnam, said
a change in staff restructuring was needed for an enterprise to operate
effectively amid the current economic woes.
“This change can create a new
leadership style and support the firm’s business performance and strategy.
Staff restructuring also means a change in corporate culture, allowances and
talent management. It has in many firms created a 901 per cent increase in the
share value and a 756 per cent increase in net income, against the respective
rates of 74 and 1 per cent in firms having no staff changes,” Luan said.
Meanwhile, US-backed Open Minds
Foundation director Douglas Coulter said restructuring was now the sole way for
effective operations. Talking about international experience, he cited
German-invested ball and roller bearings maker FAG Kulgelfischer Company in
Germany as one having taken large debt to purchase too many plants. This
company was called by banks for emergency measures.
“The company’s operation has
revived in a short time following its CEO’s reactions such as taking extreme
measures and focusing on the value to shareholders, selling all the non-core
businesses, cutting the workforce by half and forcing the original family
owners to give up their controlling shares,” Coulter said.
In another case, Swedish ball
bearings maker SKF in Germany using over 3,000 workers has had proactive
restructuring. When SKF got bogged down in difficulties, it was divided by its
leaders into three areas including large-scale bearing production for the main
industries, concentration on services to handle all after-sale services and
specialty bearing products.
“This move was immediately
resisted by SKF’s shareholders. But the company’s CEO put in place those
sharing his view, gave them great latitude and power and forced the change
through. One year later, SKF’s profit doubled,” Coulter said.
At the CEO World Forum organised
early this year in Hanoi, former Deputy Prime Minister Vu Khoan noted that to
weather current difficulties, business leaders should seek energy-saving
solutions and apply new technologies. “If enterprises fail to do business
effectively, do not have innovative technologies and methods of business
management, and do not take care of environmental protection, there will be no
effective and sustainable development for the economy. In other words, the new
development model of the country starts from the effective business model of
enterprises,” Khoan said.
VIR
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