Developing small and medium enterprises in traditional handicraft villages in bac ninh province

DEVELOPING SMALL AND MEDIUM ENTERPRISES IN TRADITIONAL
HANDICRAFT VILLAGES IN BAC NINH PROVINCE
A Doctor Thesis Presented to
The Faculty of Graduate School
Southern Luzon State University, Lucban, Quezon, Philippines
in Collaboration with
Thai Nguyen University, Socialist Republic of Vietnam
In Partial Fulfillment of the
Requirement for the Degree
Doctor of Business Administration
Vuong Quoc Tuan
(Strongman)
December 2014

TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION................................................................................... 1
1.1. Background of the study ......................................................................................... 1
1.2. Objectives of the study............................................................................................ 4
1.3. Hypotheses ............................................................................................................. 5
1.4. Scope and Delimitation........................................................................................... 5
1.5. Significances of the study ....................................................................................... 6
1.6. Definition of terms............................................................................................... 7
CHAPTER 2: REVIEW OF RELATED LITERATURES AND STUDIES................. 9
2.1. Related Literatures.................................................................................................. 9
2.1.1. Concepts.......................................................................................................... 9
2.1.2. An Overview of Small and Medium Enterprises.............................................. 13
2.1.3. Small and Medium Enterprise Development and Business Development in
Traditional handicraft villages in Bac Ninh Province .............................................. 31
2.1.4. Factors Affecting the Development of Small and Medium Enterprises............ 46
2.2. Related Empirical Studies..................................................................................... 50
2.3. Conceptual Framework......................................................................................... 56
CHAPTER 3: RESEARCH METHODOLOGY.......................................................... 57
3.1. Research Design ................................................................................................... 57
3.2. Population, Sample Size and Sampling Technique................................................ 57
3.3. Description of Respondents .................................................................................. 58
3.4. Research Instrument ............................................................................................. 58
3.5. Data Gathering Procedures ................................................................................... 59
3.6. Statistical Treatment of Data................................................................................. 59
CHAPTER 4: FINDINGS AND SOLUTIONS ABOUT CURRENT SITUATION ON
DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES IN TRADITIONAL
HANDICRAFT VILLAGES OF BAC NINH PROVINCE......................................... 61
4.1. Overview of traditional handicraft villages and small and medium enterprises in
traditional handicraft villages in Bac Ninh province..................................................... 61
4.1.1. Traditional handicraft villages....................................................................... 61
4.1.2. Small and medium enterprises in traditional handicraft villages in Bac Ninh
province................................................................................................................... 63
4.1.3. Employment and income in small and medium-sized businesses in handicraft
villages, traditional handicraft villages in Bac Ninh province.................................. 65

4.2. Features of the elements in external environment affect the development of small
and medium enterprises in handicraft villages, traditional handicraft villages in Bac Ninh
province ...................................................................................................................... 66
4.2.1. Group of policy factors .................................................................................. 66
4.2.2. Group of administrative procedure factors..................................................... 71
4.2.3. Group of geography, infrastructure factors.................................................... 80
4.2.4. Group of financial and economic factors........................................................ 85
4.2.5. Group of labor factors ................................................................................... 88
4.3. Assessing the internal problems of small and medium enterprises in handicraft
villages, traditional handicraft villages in Bac Ninh province today............................. 94
4.3.1. Group of business owner factors .................................................................... 94
4.3.2. Group of labor factors ................................................................................... 99
4.3.3. Group of organizational structure factors .................................................... 102
4.3.4. Group of raw material factors...................................................................... 106
4.3.5. Group of technological level factors............................................................. 110
4.3.6. Group of financial capacity factors.............................................................. 115
4.3.7. Group of product and market factors ........................................................... 119
4.3.8. Group of production and business result factors .......................................... 126
4.4. Analysis of factors affecting the development of small and medium enterprises in
traditional handicraft villages in Bac Ninh province................................................... 130
4.4.1. Factors affecting the growth in the number of small and medium-sized
enterprises............................................................................................................. 131
4.4.2. Factors affecting the gross revenus of small and medium-sized enterprises in
traditional handicraft villages of Bac Ninh province.............................................. 133
4.5. Assessing the strengths, weaknesses, opportunities and challenges for the
development of small and medium enterprises in traditional handicraft villages in Bac
Ninh province............................................................................................................ 134
4.6. Limitations and challenges of the SME sector..................................................... 136
4.7. Orientation and solutions for SMEs development in traditional handicraft villages of
Bac Ninh province in the near future ......................................................................... 138
4.7.1. Orientation .................................................................................................. 139
4.7.2. Development Goals...................................................................................... 139
4.7.3. Solutions for the development of SMEs in traditional handicraft villages in Bac
Ninh province ........................................................................................................ 140
CHAPTER 5................................................................................................................ 148

CONCLUSION AND RECOMMENDATION .......................................................... 150
5.1. Summary ............................................................................................................ 150
5.2. Conclusions........................................................................................................ 151
5.3. Recommendations .............................................................................................. 153
BIBLIOGRAPHY ....................................................................................................... 155
APPENDICES ............................................................................................................. 161

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CHAPTER I
INTRODUCTION
Due to the important role of small and medium-sized enterprises,
many countries have focused on encouraging this type of enterprise
development. Institutional support nature to encourage include: Support to create
a favorable business environment (development and promulgation of the law on small and
medium enterprises, to facilitate licensing, supply information , etc.), the business support
capacity building (training resources management, technology support , etc.), and the
support of credit (bank established professional for small and medium enterprise loans,
credit guarantees for enterprises, the establishment of venture capital companies , etc.), and
other support (such as business premises).
According to the Vietnam Association of Small and Medium Enterprises
(VINASME), up to 96% of registered enterprises in Vietnam are SMEs. This unit
generated 40% of gross domestic product, generating more than 1 million new jobs each
year, mainly beneficial especially for untrained labor. For many years, the volume of
SMEs is still the engine that runs the economy of Vietnam. But have to admit the fact, this
volume is also thrive in areas with modest margin, low technology so there is no advantage
in size (financial resources, area of operation, market share, etc.) that often focus on issues
such as selection of business objectives consistent with the ability, stability and
consolidation of market share or develop gradually and selectively market stage, the
sudden most favorable break. SMEs still have the motor and the link to business
cooperation that lack of clarity of the role of state policy.
1.1. Background of the study
Small Business Development Plan and medium period 2011 - 2015 has been
approved by the Prime Minister, in which the goal of bringing the number of newly
established small and medium-sized enterprises in 2011-2015 is expected to 350,000
enterprises. Target set by the time on 31.12.2015, there were 600,000 active enterprises.
(http://baodientu.chinhphu.vn/Home/Ke-hoach-phat-trien-doanh-nghiep-nho-va
vua/20129/148542.vgp).
Small and medium-sized enterprises play an important role in socio-economic
development and active support for the development of big business, but they have certain
restrictions on capital, production technology, production ground... So, requiring solutions,
long-term policies to support enterprises to overcome difficulties and improve
competitiveness towards the goal of sustainable development.

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According to a survey of the Department of Business Development (Ministry of
Planning and Investment), officially recognized in 2001, by the end of June / 2012, the
country has 658,645 SMEs registered establishment, of which 468,023 enterprises activity
(about 71.1%). The number of SMEs in terms of the labor force each year by an average of
22.11% / year (if in 2000 more than 38,000 companies, 2010 was over 283,000).
In 2010, Bac Ninh Province have been granted business registration certificates for
797 enterprises, including: 748 enterprises granted business registration certificates of the
Company Law, 100% new business was established in 2010 small and medium-sized
enterprises; 49 FDI investment certificates associated with the establishment of enterprises,
branches, representative offices under the Investment Law; as the end of 2010, Bac Ninh
province has a total of 4.293 enterprises, in including 5 state enterprises and private
business 4013, 275 FDI enterprises.
In general, businesses in the province to develop good business in accordance with
law, to be effective, has potential exploit local strengths such as capital, labor, skill, level
workers, especially is in the local traditional handicraft villages. Private sector was
contributing to production development, create jobs, increase budget revenues, improve
people's lives; contribute to poverty reduction, economic restructuring towards
industrialization of modernization and contribute significantly to the socio-economic
development of the province. Enterprises have increasingly conscious mouse than in the
observance of safety, occupational health and insurance.
Results of implementation plan for SME development in the province of Bac Ninh
2006-2010. Bac Ninh Province to encourage and create favorable conditions and support
people to establish enterprises; province has planned and established industrial parks, small
and medium-sized industrial clusters, industrial villages, to help people set up businesses
have leased premises conditions for investment in the business.
The province has implemented mechanisms, effective new policies to improve the
business environment. PCI index increasingly improved rankings year after more than year
ago: rated 22 (2006), No. 16 (2008); 2009, provincial competitiveness index of the North
increased security 6 Level No. 10 compared to nationally and internationally as one of
three leading provinces PCI index of the northern provinces; 2010, the provincial
competitiveness index of Bac Ninh increased to 4 Level stand 6 compared with nationally
and internationally as one of the top leading PCI of the northern provinces.
On the business side: The majority of SMEs have small capital, so the investment
in modern technology and equipment (mostly imported from abroad) is very difficult,

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while to the competitive foreign companies to continuously improve equipment, reduce
input costs. State policies to support credit loans but access to capital is impeded by the
small value mortgage, can not afford credit guarantee; SMEs often lack and difficulties
with most kinds of business are not given priority in terms of production, often using their
own homes, and hiring of private land lease prices high, there is still discrimination.
Low level of technology and quality of labor is limited, derived from small-scale
features which should virtually restricted business investment in modern technology and
equipment.
Management level and low-skilled, the number of SMEs through training
percentage is very low and virtually untrained professional; while workers mostly manual
labor, only trained short-term job or the labor shift from agriculture to up the skill is still
limited. Therefore, the application of modern advanced technology is also difficult.
SMEs lack information and remain flat side of the relationship (the state, the
market, banking, science centers and training centers, etc.). Internet access and applications
in business for SMEs constrained by insufficient qualifications as well as the cost is quite
high compared to the size of the small business.
SME Development Goals 2011-2015: accelerate business growth and enhance the
competitiveness of SMEs, business investment environment and convenient, equitable,
transparent to the SME contribution increasing economic development and improve
national competitiveness.
Target SME Development 2011-2015: number of newly established enterprises
increased by 25% / year; each year about 500 new established enterprises and 20,000
employees supported technical training, and technical management in SMEs; meet the
basic business of the production business.
The story of a representative enterprise producing bamboo handicrafts in Y Yen
District, Nam Dinh said: Although the village is famous for its line of bamboo lacquer
products, but the products must through intermediate systems, inaccessible to direct
customers. There is time for the people of this village to busy racing competition, including
not healthy, so it's time for poor quality products. When the product is on the market,
customers see poor quality so next time do not buy anymore.
Notably, there are many large business companies do not get the goods of this
village that takes the product of another village, while other villages choose to buy
products that actually get the product from this village for sale rather than production. This

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situation led SMEs in this village that the deadlock, even feel the "injustice" in the
marketplace. However, according to Pham Chi Lan, this is something quite common in
villages in Vietnam.
Being aware of mentioned issues and with the support from small and medium
enterprises in traditional handicraft villages in Bac Ninh province and consultant from
supervisor, with the purpose of enhancing quality and quantity of not only products of
SMEs but also SMEs themselves, the researcher studied this thesis entitled “Developing
small and medium enterprises in traditional handicraft villages in Bac Ninh province”.
1.2. Objectives of the study
The general objective of the study is to know about the current situation of small
and medium enterprises development and then to propose feasible solutions for the
development of traditional handicraft villages in Bac Ninh province. The specific
objectives of the study are as follows:
1. To determine the profile of small and medium enterprises in traditional
handicraft villages in Bac Ninh province in terms of:
- Capitalization/investment;
- Type of products;
- Number of employees;
- Scope of operation.
2. To analyze elements in external environment and internal environment that
affects the development of small and medium enterprises in traditional handicraft villages
in Bac Ninh province in terms of:
* External environment:
- Policy;
- Economics and Finance;
- Administrative procedure;
- Geography, infrastructure;
- Labor.
* Internal environment:
- Human resource (Business owner; Labor);
- Organizational structure;
- Production (Raw material; Product and market).
- Technological level;
- Financial capacity;
- Production and business result.

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3. To assess the strengths, weaknesses, opportunities and challenges for the
development of small and medium enterprises in traditional handicraft villages in Bac Ninh
province based on SWOT analysis.
4. To determine the significant difference between problems identified by both
groups of small and medium enterprises inside and outside traditional handicraft villages in
Bac Ninh province.
5. To propose feasible solutions for 5-year development plan of small and medium
enterprises in traditional handicraft villages in Bac Ninh province.
1.3. Hypotheses
There is no significant difference among the perception of the respondents about
conditions for the development of small and medium enterprises in traditional handicraft
villages in Bac Ninh province in terms of:
* External environment:
- Policy;
- Administrative procedure;
- Geography, infrastructure;
- Economics and Finance;
- Labor.
* Internal environment:
- Business owner;
- Labor;
- Organizational structure;
- Raw material;
- Technological level;
- Financial capacity;
- Product and market;
- Production and business result.
1.4. Scope and Delimitation
The main goal of this study is to find out solutions for the development of small
and medium enterprises in traditional handicraft villages in Bac Ninh province The
researcher completes this study with belief that its result will help SMEs in traditional
handicraft villages can develop stronger.

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Due to the author’s limitation of time, the research only studied some contents
related to factors of external environment (Policy; Administrative procedure; Geography,
infrastructure; Economics and Finance; Labor) and factors of internal environment
(Business owner; Labor; Organizational structure; Raw material; Technological level;
Financial capacity; Product and market; Production and business result) that affect the
development of SMEs in traditional handicraft villages in Bac Ninh province.
Describing methodology and with survey questionnaires as a main tool to collect
the data and information will be utilized in this study.
1.5. Significances of the study
This study will be beneficial to the following:
For managers of research units:
The study shows out the limitations as well as find out conditions needed for the
development of small and medium enterprises in traditional handicraft villages in Bac Ninh
province, so it helps managers of research units to identify solutions and build strategies to
remove the difficulties and support SMEs in the province in some different ways and
improve investment environment to attract resources from outside of province such as
investment capital, science technology, scientific management, also exploit and promote
the province's comparative advantage in productions and business, trade and services,
infrastructure and available labor resources of the province to enhance the development for
SMEs in traditional handicraft villages.
For research unit:
By realizing appropriate conditions for the development and from which by offered
proper solutions, the study helps research units receive better policies to perform well their
businesses and develop more strongly.
For the researcher:
This study helps to complete the PhD thesis, besides it also enhances studying
ability, accumulate knowledge for the author.
For future researchers:
This study will serve as a reference for future studies and researchers on research
methods, analysis and evaluation of conditions for the development of small and medium
enterprises in traditional handicraft villages, from which researchers’ future studies will
determine the issues for related further studies.

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1.6. Definition of terms
Capitalization: is the sum of a corporation's long-term debt, stock and retained
earnings.
Small and Medium Enterprise: is an independence manufacture base, business
registered pursuant to current law, has registered capital not higher than VND 10 billion or
the yearly average labors numbers are not over 300 people.
Traditional handicraft villages: are villages appear long ago in history and still
exist today, as the village has existed for hundreds of years, even thousands of years, is
closely related to factors traditional and popular experience has been accumulated over
many generations back.
Policy: Refers to the set of basic principles and associated guidelines, formulated
and enforced by the governing body of an organization, to direct and limit its actions in
pursuit of long-term goals to create favorable conditions for enterprises.
Administrative procedure: A fixed, step-by-step sequence of activities or course
of action (with definite start and end points) that must be followed in the same order to
correctly perform a task.
Infrastructure: Refers to basic physical and organizational structures needed for
the operation of enterprises (in this study, they are SMEs in traditional handicraft villages
in Bac Ninh province), and facilities necessary for them to function.
Economics and Finance: Focused on the elements of money, risk, opportunity
cost and other variables related to financial decisions. This field of study concentrates on
how financial moves are made under uncertain conditions.
Labor: The aggregate of all human physical and mental effort used in creation of
goods and services. Labor is a primary factor of production.
Business owner: Individual or entity who owns a business entity in an attempt to
profit from the successful operations of the company. Generally has decision making
abilities and first right to profit.
Organizational structure: The typically hierarchical arrangement of lines of
authority, communications, rights and duties of an organization. Organizational structure
determines how the roles, power and responsibilities are assigned, controlled, and
coordinated, and how information flows between the different levels of management.

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Raw material: Basic substance in its natural, modified, or semi-processed state,
used as an input to a production process for subsequent modification or transformation into
a finished good.
Technology level: The purposeful application of information in the design,
production, and utilization of goods and services, and in the organization of human
activities.
Financial capacity: Refers to ability of enterprises in terms of money, capital and
equity.
Product: Is anything that can be offered to a market that might satisfy a want or
need. In the study, products are types of subjects made by traditional handicraft villages in
Bac Ninh province.
Market: A medium that allows buyers and sellers of a specific good or service to
interact in order to facilitate an exchange.
Production and business result: Refers to output in the process of manufacture
and business operation of the enterprises.

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CHAPTER 2
REVIEW OF RELATED LITERATURES AND STUDIES
This chapter will present concepts and theories that have significant effect on the
conduct of the study. Review of related literatures and study will present what had been
written about the subject. Finally a Conceptual framework that will aid the conduct of this
research work will be established.
2.1. Related Literatures
2.1.1. Concepts
2.1.1.1. Development
Development refers to the systematic use of scientific and technical knowledge to
meet specific objectives or requirements. Development in its simplest definition and
perhaps in its common usage can be considered as the objective of moving to a state
relatively better than what previously existed: “good change” as defined by Chambers
(2007). As change is a process, this definition of development tends to denote a process
towards a desirable state in society.
Whether this state is achieved in the short or long term, change has several
implications for society. Disruption may occur in the established patterns of living within
the society as it moves towards good change, and thus reflect a contradiction to its intended
meaning, and generate a discourse on what constitutes this “good change” (Thomas, 2000).
As a result, the term development in both academic and non-academic fields has enjoyed
an ambiguous position of being alluded to a diversity of meanings defining or evaluating
what “good change” is, and who this good change belongs to.
In general terms, “development” means an “event constituting a new stage in a
changing situation”. If not qualified, “development” is implicitly intended as something
positive or desirable. When referring to a society or to a socioeconomic system,
“development” usually means improvement, either in the general situation of the system,
or in some of its constituent elements. Development may occur due to some deliberate
action carried out by single agents or by some authority preordered to achieve
improvement, to favorable circumstances in both. Development policies and private
investment, in all their forms, are examples of such actions.
Given this broad definition, “development” is a multi-dimensional concept in its
nature, because any improvement of complex systems, as indeed actual socio-economic
systems are, can occur in different parts or ways, at different speeds and driven by different
forces. Additionally, the development of one part of the system may be detrimental to the
development of other parts, giving rise to conflicting objectives (trade-offs) and conflicts.

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Consequently, measuring development, i.e. determining whether and to what extent a
system is developing, is an intrinsically multidimensional exercise.
2.1.1.2. Small and Medium Enterprises
Small and medium enterprises are the enterprises with small scale in terms of
capital, labor or revenue. Small and medium enterprises can be divided into three
categories based on size includes micro enterprises, small enterprises and medium
enterprises.
Statistical definition of SMEs varies by country and is usually based on the number
of employees, and value of sales and/or value of assets. According to the criteria of the
World Bank Group, micro enterprises are enterprises with the number of workers fewer
than 10 people, small businesses are the number of employees from 10 to 50 people, while
medium enterprises have from 50 to 300 labors.
To date, a single, universally accepted definition of the term small and medium
sized enterprise (SME) still remains elusive among countries and blocs across the world.
Each country defines SME based on its economy’s characteristics and states of
technological development in order to devise programs to support these targeted firms.
Since there are “significant differences in aggregate income and its distribution, in
production structures and capabilities, and in industrial and technological characteristics
among economies” (Asasen and Asasen, 2003), it is not unexpected that the definition of
SME will vary greatly from one country to another. Some countries distinguish between
small and medium-sized firms, while others put them all into one category. Some use the
capital investment criterion, while others do not. That is also the case with assets and
annual sales criteria.
Furthermore, the level of labor and capital intensity required by firms differs
noticeably among countries and across different sectors within a country. This is because
different countries give preference to different areas. A country with a focus on labor-
intensive industries such as the textile industry will not put as high a capital investment
benchmark to categorize a firm as an SME as does a country with a focus on capital-
intensive industries such as the automobile industry.
Because this research limits its scope to Vietnamese SMEs only, the official
definition by the Vietnamese government (Government Decree 90/2001/ND-CP dated
November 23, 2001) was adopted. The definition is stated as follows:
“SMEs are independent production and business establishments which make
business registration according to the current law provisions, each with registered capital
not exceeding VND 10 billion (equivalent to US$ 621,774.547) or annual labor not

11
exceeding 300 people. On the basis of the concrete socio-economic situation of each
branch or locality, in the course of implementing the support measures and programs, both
or either of the above-mentioned criteria on capital and labor may be applied in a flexible
manner.”
Moreover, according to Decree No. 56/2009/ND-CP dated 30 June 2009, SMEs
comprise the businesses registered in accordance with the Enterprise Law, cooperatives
and individual business households, of either micro, small, or medium size. There are two
criteria for defining the type of SME, namely scale of total assets (as the prior criterion),
and annual average number of employees. In particular, a micro-sized enterprise is defined
as one having 10 or fewer employees.
Table 2.1. Classification of SMEs
Source: Decree No. 56/2009/ND-CP.
Up to May, 2010, over 55% are micro-sized enterprises with the number of permanent
laborers being fewer than 10.
Table 2.2. Classification of SMEs by Scale of Labor Dimension
Source: White book on SMEs in Vietnam 2009.
Note: Unit in %

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According to the White Book on SMEs in 2009, from 2000, the average registered
capital of enterprises increased by 9 times over the 2000 - 2008 period. The increases were
0.962 billion, 3.14 billion, 8.1 billion and 8.7 billion VND in 2000, 2006, 2007 and 2008
respectively.
2.1.1.3. Traditional handicraft villages
The village is a cluster of residents in a village (the village) has one or several lines
are removed from production agriculture to independent business, is the village
nonagricultural sectors dominate the household, number of employees, and the income
from farming.
Traditional handicraft villages are villages appear long ago in history and still exist
today, as the village has existed for hundreds of years, even thousands of years, is closely
related to factors traditional and popular experience has been accumulated over many
generations back. There are many traditional handicraft villages in Vietnam such as the
paper Phong Khe commune, Dong Ho folk paintings, Luy Lau pottery, wood carvings at
Dong Giao, Dong Ky.
In the past, after harvest time, Vietnamese people made handicraft works to meet
their own needs. Their products are very skillful and sophisticated, even though they are
farmers and do not specialize in handicrafts. The techniques were kept secret, but taught to
relatives or fellow villagers.
The village, therefore, became a very important institution in the handicraft
industry. The village's name became the trademark of handicraft products made by its
villagers. “Đình làng”- the village's temple became the place of worship and “tổ nghề” the
man who first taught the villagers to do these handicraft works.
When urbanization came to Vietnam, many people came to towns/cities and
professionalized in the handicraft works they had done in their old village. They did not
compete with one another but gathered in “phường/hội”, the new form of handicraft village,
to help others to improve. The Vietnamese government has recognized about 1.500
handicraft villages, of which about 300 are traditional handicraft villages. These villages
maintain the country's handicraft heritage.
Bac Ninh is a beautiful and famous province in the northern midlands. Just 30km
from Hanoi city, north close to Bac Giang province, Hai Duong province on the east and
southeast, Hanoi on the west, Hung Yen on the south. The province has large rivers follow
through, so the transportation system of roads, railways and waterways are favorable;

13
locate on the adjacent of Hanoi capital that creates many advantages in economic and
cultural development.
Bac Ninh used to be a famous ancient town and today is still well-known for its
richness in tangible as well as intangible heritages. Bac Ninh have now many famous
traditional handicraft villages such as Dong Ky Wood, Dong Ho folk painting village, Dai
Bai Cooper casting and Phu Lang Pottery… that create favourable conditions not only for
economic development but also for tourism development.
Northern Bac Ninh Province, homeland of Quan Ho art, has 62 traditional trade
villages. The most colorful village is Dong Ho The village of Dong Ho (Đông Hồ) in the
province of Bắc Ninh is known as a center of production of traditional
Vietnamese woodblock prints (tranh Đông Hồ), which are sold all throughout Vietnam in
time for the Lunar New Year (Tết) celebrations. All of the free space in the village is used
to dry the papers, making the village look like a colorful painting.
2.1.2. An Overview of Small and Medium Enterprises
2.1.2.1. The Role of Small and Medium Enterprises in Vietnam
Vietnam introduced officially the economic renovation (Doi moi) in 1986, but it
was only in 1989 that it actually adopted a comprehensive and radical reform package
aimed at stabilizing and opening the economy, as well as enhancing freedom of choice for
economic units and competition. Nevertheless, during 1997-2000, the reforms were to a
certain extent retarded, especially after the Asian financial crisis. Since 2000 to date, a new
wave of economic reforms has been stirred up with emphasis on private sector
development, further trade and investment liberalization with deeper international
economic integration. The accession to the World Trade Organization (WTO) at the end of
2006 marked a new milestone in the country’s economic reform and development.
Through the market-oriented reforms and WTO–driven adjustments, Vietnam has
achieved remarkable achievements in the country’s economic growth and stability, foreign
trade expansion, attraction to foreign investment, poverty reduction, and human
development improvement.
It is worth noting that the socioeconomic successes have been significantly
attributed from the country’s small- and medium-sized enterprises (SMEs). In Vietnam,
according to a Spring 2011 report the number of SMEs is nearing 400,000 enterprises. The
SMEs occupy an overwhelming proportion in total number of country’s enterprises
accounting for 97 percent and 87 percent by regular workforce and registered capital
criteria in 2005, respectively. They have contributed 39 percent of gross domestic product

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(GDP), 32 percent of total investment outlays in 2006 (Ho Sy Hung 2007), and about 85
percent of total corporate workforce in 2004 (Le Xuan Ba et al. 2006). Apart from being a
relatively dynamic sector in the economy, SMEs have also played an important role in
creating jobs, maintaining high mobility of the labor market, and narrowing development
gaps among localities of the country.
Further, SMEs are the engine of growth in Vietnam just as small business plays the
same role in developed markets like the U.S. In Vietnam, SMEs on average, have seen
their profits grow approximately 20% each year for the immediate past (Runckel, 2011,
Business in Asia).
The WTO accession is expected to bring about new opportunities for SMEs
development like the creation of a level playing field, easier access to production factors
and cheaper imported inputs in the domestic market, expansion of export markets, and
facilitation of the national economy to engage more in-depth in regional and global
production networks. SMEs have played an important role in the national economy. The
sector has long been a major source of employment generation accounting for about 85
percent of the total corporate workforce in 2004 (Le Xuan Ba et al. 2006). SMEs are a
main vehicle for poverty alleviation particularly in rural areas and narrowing development
328 gaps among provinces, urban, and rural areas. In addition, SMEs help maintain the
high flexibility of the labor market. It also contributed significantly to absorb the “shocks”
associated with the transition from a centrally planned economy to a market-oriented one
especially the collapse of the socialist bloc in Eastern Europe (Le Xuan Sang 2007). The
contribution of the SMEs to economic growth is also important. They occupied a
proportion of 39 percent of GDP in 2006 (Ho Sy Hung 2007). The “precise” trend of the
SMEs proportion in overall GDP over the recent years, nevertheless, is hardly identified
due to the lack of systematic and reliable statistical data. In comparison with the SOE
sector, the SMEs have likely played a minor role as they account for only 32 percent of the
total investment outlays while the former do more than 50 percent. In addition, the SMEs
have very limited export and technological capability.
Moreover, Vietnamese SMEs have been playing an important role in the
development of the country. Not only in generation of non-agricultural jobs, SMEs have
made sizable contributions to the State budget (15 percent in 2003), formed the majority of
the distribution (retail trade) network throughout the country (making up 80 percent of the
network in 2003) and export activities (comprising 39 percent and 41 percent of the
seafood and cashew-nut export revenue in 2004 respectively). Besides, SMEs have been

15
active and effective actors in the preservation and development of traditional craft villages
and supply of services for bigger businesses.
2.1.2.2. Characteristics of Small and Medium Enterprises in Vietnam
a.. SME Distribution and Development
Vietnam’s SMEs account for an overwhelming proportion in the total corporate
sector by both regular workforce and registered capital criteria. That sector represents for
95 percent, 97 percent by regular workforce criterion and 86 percent, 87 percent by
registered capital criterion in 2002, 2005 respectively (Table 3). Majority of the large
enterprises are SOEs and foreign-invested enterprises (FIEs). Notably, the increase of
SMEs’ share in the context of substantial growth in the number of registered firms implies
that the newcomers are mostly SMEs.
By size of SMEs labor force, it should be noted that almost all of SMEs are micro-
and small sized firms accounting for about 52 percent and about 35 percent on average in
2002, 2005, respectively. Medium- and large sized firms are very few having on average
only 11 percent and 2 percent of the total number in the same period, accordingly (see
Table 3).
However, that structure is only true for non-state SMEs since they occupied as
much as 91-95 percent in 2002, 2005. Indeed, a majority of state-owned SMEs (about 73
percent) and most of FIEs (about 54 percent) are medium- and large-sized (Table 3).
The declining proportion of medium-sized firms and the increasing proportion of
micro- and small-sized ones imply that the increased number of SMEs is mostly
contributed by the latter from non-state sector. Another feature is that mostly SMEs are
concentrated in the forms of limited liability and sole proprietary companies, accounting
for 47 percent and 32 percent in 2005 by workforce criterion respectively.
By the size of registered capital, 90 percent of the firms have a registered capital
less than VND 5 billion (about USD 330,000). Most types of SMEs fall well into the range
of VND 1-5 billion.
By the averaged size of regular labor force, SMEs are small in size, too. In 2005,
the labor force averaged to 32 laborers per enterprise. This is a very slight increase because
in 2000, it was only 30 laborers per enterprise. During the same period, the average capital
of SMEs increased from VND 3 billion to 7 billion.

16
Table 2.3: SMEs distribution by size of employees and by type of enterprise
(2002, 2005)
By economic activities, SMEs are concentrated in trade, repair of motor vehicles
and household goods (42-44 percent), manufacturing (19-21 percent), construction (12- 13
percent) during 2002-2005. Within the manufacturing sector, food and beverage sector
attracts more SMEs, with the largest proportion of more than 4 percent in 2005 (Table 4).
There are new shifts of SMEs “employers” in the corresponding period.

17
Table 2.4: SME distribution by size of employees and by kind of economic activity
(2002, 2005)

18
SMEs’ proportions in manufacturing and construction sectors tended to decline
while, trade, repair of motor vehicles, and household goods increases. One possible
explanation for that situation is that in the third subsector, the entry and skill requirements
are less stringent.
By region, SMEs are mostly located in HCMC (23-28 percent), Ha Noi (15-16
percent) during 2002-2005. Other provinces or cities, as individual accounts, have a share
of less than 4 percent (Table 5). SMEs are gradually ‘moving’ to HCMC, Ha Noi along
with the provinces of Hai Phong and Da Nang. This may reflect, inter alia, the efforts of
the provincial governments in improving business environment, particularly in attracting
investment inflows through many kinds of incentives, even beyond what their authority
can provide.

19
Table 2.5: SME distribution by size of employees and by province (2002, 2005)
Nevertheless, the dynamics of SMEs in terms of employment transition is not high.
According to surveys conducted by Rand and Tarp (2007), majority of microsized
enterprises (88 percent) have tended to stay within their size category. In 2002, some 12
percent in this category remained as micro. But in 2005, some graduated to the small
category only. A similar tendency can be observed on small- and medium-sized
enterprises. Vice versa, enterprises in these categories appear to have a stronger tendency
to move downward in the size distribution over 2002-2005 period (Table 6).

20
Similarly, this tendency is also observed during the 1995-2000 period.
Table 2.6: Employment transition matrix
The last tendency can be partially interpreted by the practices that large firms
generally appear to face greater scrutiny from tax and licensing officials (i.e., generating
higher costs) (Hakkala and Kokko 2007) than do their smaller counterparts. There is also a
number of anecdotal evidence that successful entrepreneurs in Vietnam prefer to spread
their capital across multiple companies rather than concentrate on individual company
growth, specifically in order to avoid what has been referred to as “the tall poppy
syndrome” (Taussig 2005). Moreover, a significant number of firms decline to stay small
in order to get more the tax incentives (Nguyen Xuan Trinh and Le Xuan Sang 2007).
b. SMEs networks
Interfirm networks among SMEs as well as external networks between them and
large enterprises through subcontracting are generally weak. Incubators and clusters are
still in their infant stage. Presently, there are four newly established incubators in
operation.
Almost all of Vietnam’s clusters are concentrated in the countryside in the form of
handicraft and industrial or trade villages. Though there are no vigorous and
comprehensive studies on interfirm cooperation in the villages, internal network among
SMEs (mostly household enterprises) is not close as it can be observed in many economic
ties.

21
Figure 2.1: Vietnamese industrial dualism
Source: Onhno (2004), Vo Tri Thanh et al (2004) and authors’ modifications.
External networks between SMEs and multinational companies (MNCs) are not yet
that strong. The weak linkage can be observed between upstream and downstream
industries (Vo Tri Thanh et al. 2004), more evidently in import-substituting and export
oriented sectors (Ohno 2004), creating industrial dualism in the national economy. On the
one hand, export-oriented manufacturing firms, especially the FIEs, have constituted a
sector with global linkage and competitiveness. On the other hand, the import substituting
firms, especially the SOEs and some FIEs, have been weak and protected.
These two sectors have very weak linkage between each other (Figure 1). This
situation has been largely due to industrial and trade policies by which Vietnam has
pursued for industrial protection for a long time.
The weak network between SMEs and large MNCs can be seen in the low level of
subcontracting and localization. Proportion of SMEs engaged in subcontracting or
assembling has been modest, being merely 14 percent in 2003 (Le Xuan Ba et al. 2006).
It is worth noting that as subcontractors and assemblers, SMEs have tended to
become marginalized at the lower/lowest end of the production supply chain. Despite
enormous efforts of the government in promoting localization, the local content or
procurement ratios for some industries are still low and far from being achieved the
planned targets. According to Mori (2005), the average of local parts procurement ratios in
all the manufacturing sectors is around 22.6 percent in 2003 at the value base, which is
significantly lower than in other ASEAN countries5. After a decade of the localization
course, the local content ratio of automobile industry remains low ranging from 5 percent

22
to 10 percent (Ohno 2004). A similar pattern can be seen in the garment and electronic
sectors (Vo Tri Thanh et al 2004). The local procurement ratio of consumer-electronics
sector has been encouraging for TVs (20-40 percent) but disappointing for PC peripherals
(5-12 percent) (Mori 2005). Success in localization is solely evident in the motorcycle
industry with an average local content ratio of 75 percent in recent years. The key reasons
for the localization fiasco are:
1. Lack of solid supporting industries;
2. Low level of technology and absorptive capability of the SMEs; and
3. Most SMEs cannot meet the MNCs requirements for quality and standards on
goods and time delivery.
It is important to note that the weak linkage between foreign firms and local firms
could obstruct FDI’s spillover effects on the local economy and reduce the FDI efficiency.
The informal network of owners and managers can help an enterprise do business
easier. The social networks play a crucial role in many business aspects, such as the ease
with which business licenses and permits are obtained, easier access to government
contracts, easier access to preferred credit, lower tax, informal payments and so on. The
research by Rand and Tarp (2007) reveals interesting features of specific formal and
informal network ties. The share of owners - members of the Communist Party increases
with enterprise size, with an average share 9 percent of all enterprises. Likewise, the share
of enterprises having network ties with one or more bank officials is also increasing in
enterprise size. A first glance at the differences in revenue growth rates between
enterprises with and without network ties, however, does not show any significant
differences in economic performance (Table 5). Thus, a more vigorous analysis is required
to establish causality.
Generally, SMEs do not buy services unless it is the only solution to a need. When
they engage in one, they go for simple products first. To this end, demand-driven human
resources training has been by far more popular than quality management consultancy.
Many providers compete in providing supply-driven training services without thinking of
moving into other business areas such as developing customized solutions. At present, the
commonly available support services from domestic providers are training, partial
consulting, marketing, and so on.

23
Table 2.7: SMEs’ network ties
c. SMEs Innovativeness
It should be noted that among the three stages of developing technology including
adopting technology, mastering technology, and creating technology, to date, Vietnam is
basically at the first stage. Technology creation requires efficient knowledge-intensive
activities such as research and development (R&D), which are very limited in Vietnam.
According to Dinh Van An and Vu Xuan Nguyet Hong (2004), investment value of SOEs
in R&D accounts for merely 0.25 percent of their revenues, much less than developed
countries (5-10 percent); private sector has virtually no investments in R&D.
The lack of technology-creating capability of Vietnamese private firms largely
stemmed from the following:
1. Education and vocational training system have not been efficient with the
university curricula being very theoretical. The private firms still pay inadequate attention
to formal training of human resource (see, for example, Rand and Tarp (2007); and
2. Commercialization of technology products has been very limited due to the weak
linkage among research institutions, universities, and enterprises. Additionally, majority of
the labor force (70-75 percent) is unskilled causing the low absorptive capability of the
domestic firms. Shortage in labor along with poor vocational training has significantly
hindered every stage of technology development.
Making technology available for domestic firms is very important for many
developing countries. Technological availability in Vietnam is varied. In the early 2000, Le
Xuan Ba et al. (2006), found out that a significant number of Vietnam’s SMEs used old or

24
outdated machines and equipment. Over the years, in Rand and Tarp’s 2007 study, SMEs
technological innovativeness revealed the availability of new machinery and equipment in
which some 88 percent of these SMEs have equipment no more than 10 years old.
Table 2.8: Innovation rates
However, around 10 percent of the SMEs still use hand tools and 4 percent use
manually operated machines. As much as 25 percent of the firms already use power driven
equipment. Furthermore, more than 61 percent of the technology was purchased new and
around 34 percent was bought second hand. During the past three years, around 41 percent
of the SMEs introduced some new products; while only 30 percent was able to introduce a
new technology in the production process. Larger enterprises are more innovative and able
to improve technological production processes more often (Table 8).
According to respondents, the key driving force for introducing new products are:
(1) requirements by purchasing customers (62 percent); and (2) increasing competition
from domestic producers (29 percent). The enterprises’ adoption of new technology has
been largely due to: (1) needed upgrading in order to face competition (37 percent); (2)
buyers’ requirements (32 percent); and (3) increase benefits (22 percent).
d. Domestic Market
As noted earlier, there has been an increasing tendency of GDP growth rate of non-
state sector in Vietnam (from 6.4 percent in 2001 to 8.7 percent in 2006) unless its share in
overall GDP tended to decline steadily over the past six years (from 47.8 percent in 2001
to 45.6 percent in 2006) (CIEM 2007). According to General Statistics Office (GSO)’s

25
data, SMEs’ gross revenues have also grown at quite high rate: 28 percent annually during
2001-2005. However, non-state loss-makers in total number of enterprises increased
steadily accounting for 20.4 percent in 2002 and 24.5 percent in 2004. If that trend is true
for the SMEs, it can be said that their production efficiency has declined.
Rand and Tarp (2007) have shown a relative high level of Vietnam’s SMEs’
capacity utilization and technical efficiency in manufacturing. In the question on how
much enterprises would be able to increase their production from the present level using
existing equipment or machinery, only around 17 percent of the sampled SMEs said they
would not be able to increase production but around two-thirds said they could increase
production by no more than 25 percent. The surveys also indicated that micro and small-
size enterprises are closer to producing at their optimal capacity than medium- and large-
sized enterprises. Likewise, 7 percent of urban enterprises could expand two times or more
than their existing production as compared to 1.6 percent in rural areas. The results of
surveys also showed the technical efficiency level of 68 percent of Vietnam’s
manufacturing, which falls well within the best practice frontier for developing countries
(60 percent-70 percent).
By sales structure, SMEs sell most important products largely to the domestic non-
state firms as intermediate inputs comprising 58 percent of the total sale revenues. The fact
that very small proportions of products were sold to SOEs (6 percent) and FIEs (0.7
percent) re-confirms the very loose linkage networks between the SMEs and large
enterprises.
e. SMEs Export Market and Readiness to Go Global
SMEs directly engaged in export activities are still limited. The studies by Kokko
and Sjöholm (2004), Le Xuan Ba et al. (2006), and Rand and Tarp (2007) revealed that
direct export covered 3-6 percent in 2002-2005. Notably, direct exports are basically made
on handicraft (ASMED 2006) and indirect exports are carried out through large (especially
state trading) enterprises.
Moreover, Rand and Tarp (2007) found out that the larger the size of the enterprise,
the higher is their probability of exporting. Additionally, on the average, the enterprises
exported over 60 percent of sales. Exporting enterprises have relatively few foreign trading
partners (i.e., only five foreign customers) when engaging in direct exports. Furthermore,
around 72 percent of exporting enterprises are still much dependent on their foreign trading
partners receiving product specifications, designs, or materials and 76 percent for
technology or expertise. It is commonly agreed that

26
Vietnam’s SMEs lack international legal knowledge and expertise, nevertheless,
only one-third of them use legal advisors when entering direct export contracts.
Surprisingly, majority (two-thirds) of rural exporters seek legal advice before committing
to an export contract (Table 9).
Vietnam has been a WTO member for only a year. SMEs’ perception and
knowledge of economic integration remain vague. Hence, readiness to inter-
nationalization is very limited although there are already a few enterprises which are
preparing. A 2003 survey by Kokko and Sjoholm showed that SMEs’ perception on
internationalization revealed no expectation on any notable changes. Majority of the rural
household enterprises (70 percent) do not know what liberalization means. A 2005 survey
results10 show a positive perception and knowledge on internationalization: 72 percent of
the enterprises “have information on economic integration.” However, there were 15
percent managers who do not know the challenges they are facing in the future, and 31
percent of firms who do not know WTO issues.
Table 2.9: Details on exporting enterprises
2.1.2.3. Constraints of Small and Medium Enterprises in Vietnam
SMEs are central to the structural transformation of the Vietnamese economy. The
private sector in Vietnam continues to grow and evolve, accounting for increasing shares
of economic output and employment. It is therefore vital to understand the constraints
facing SMEs and the potential of these enterprises.

27
Despite significant improvements in the business environment that have fostered
Vietnamese SME development, these firms still face numerous difficulties. Besides the
problems typical of SMEs, which have been well reported in the literature, such as lack of
managerial and marketing skills, lack of financial resources, and so on (see Huang and
Brown 1999 for a full list of typical constraints to SMEs),
Vietnamese SMEs are further constrained by external and internal factors grounded
in the unique institutional development of Vietnam. Such constraints are listed below, but
this is by no means an exhaustive list. It should be noted that the order of items in this list
is arbitrary.
Targeting utilization of internal resources for improving SMEs’ competitive
capabilities to enter global markets, the government has, to a certain extent, greatly
improved the business environment’ conduciveness to SMEs development. However,
despite the government‘s strong initiatives in promoting the business environments and
market factors in Vietnam, there are still a numbers of inadequacies.
a. Poor Financial and Capital Market in Vietnam
The results of our study indicate that SMEs in Vietnam are currently facing
significant difficulties in accessing formal credit and they have to rely heavily on informal
credit. This is consistent with the statistical data from GSO (2004) that, although credit
capital is too low, more than half of the credit is reserved for SOEs. The results from our
study also show that while SMEs have almost no access to long-term credit, or even to
short-term credit in domestic formal credit funds, they also have nearly no access to
international formal credit. Similarly, Pham (2002) observes that credit for SMEs from
venture capital and foreign funds is very small.
b. Low Level of Technological Development
As stated by Le (2006), an inadequate technological market or weaknesses of
technological support services are significant barriers. The technological market has failed
to meet the demands for technological research development and transfer. The author also
reveals that there is no real technological support for SMEs, since only state-owned
technological research institutions and state-owned technological support services are
operating in Vietnam, and they support large SOEs. This is consistent with our research
findings.
This observation is consistent with our research results that supporting
technological development activities are too underdeveloped to assist SME growth. On the

28
other hand, those support policies seem to pay more attention to SOEs’ technological
research and development, rather than supporting and facilitating the sustainability and
growth of SMEs in private sector.
c. Inadequate Business and Legal Environment
* Market support factors: Land, legal framework, labour
According to the vnexpress.net (as at 6 Dec 2006), the Vietnamese growth
competitiveness index (GCI) has dropped to a rank of 104 in a list of 175 countries.
Despite the fact that Vietnam is one of the countries that have undertaken notable reforms
in public administrations, and gained some positive improvements in the business
environment, these achievements are not enough to sustain economic development as well
as enhance the competitiveness of the economy. From our research findings, there is clear
evidence that the existence of some inadequate business factors has obstructed the
development of a business environment in Vietnam. Basic business environmental factors
are not adequate for supporting SMEs. These business factors include: A poor level of
technology development, unskilled labour, insufficient capital for business activities, poor
land management, and inadequate quality of business support services for technology and
information.
* Poor quality of support services for SMEs
It could be said that due to many defective market factors, the current unfavorable
business environment does not allow SMEs to utilize their creativity and undertaken
further business expansion due to a lack of information about the legal and business
environment. Moreover, the results of our study indicate that SMEs are neglected by
consulting firms. As a result, they tend to seek guidance from unofficial sources or they
rely on their hired advisors for market information. Hence there is a gap between SMEs’
needs and the services available for SMEs.
d. Poor Support Infrastructure
A study reveals that the monopoly of SOEs in several key industries has led to
created unreasonable costs, such as high internet and telecommunication fees, utilities fees
and transportation fees for SMEs. As a result, business expenses in Vietnam are higher
than in other regional countries. These expenses include land rental and business premises
rental fees and other business expenses. According limited number of SMEs and other
business firms can access such funds.

29
e. Social and Cultural Environment
* Discrimination among business sectors
The research findings describe SMEs’ vital roles are not widely acknowledged by
the government and Vietnamese society. This is agreed by Le (2006) and Pham (2002). On
the other hand, SMEs have tended to be viewed negatively by labourers and the public as a
high-risk policy that would generate insecurity in the job market. As a result, it is very
tough for SMEs to attract qualified labour and access adequate support such as credit, land,
and other external resources. Negative social perceptions towards the roles of SMEs would
have a significant influence on the development of this private business sector and
discourage SMEs from business development in many ways. Although the current legal
regimes do ensure fairness of competition between the public and private business sectors,
so called “unwritten laws” of discrimination against SMEs still exist strongly in society.
Operating in such unfavorable environment, together with defective supporting
institutional developments, inadequate regulatory frameworks and the SMEs’ poor internal
resources, it is obvious that SMEs are struggling to survive and develop.
* Strong uncertainty avoidance and attitudes of mistrust
Our findings show that strong uncertainty avoidance and attitudes of mistrust exist
among SMEs and other business entities. Having no reliable information about business
opportunities for cooperation, poor internal resources, and social discrimination against
them may also deter SMEs from seeking the opportunity to establish strategic alliances,
business cooperation with other firms and financial supporting institutions and to achieve
better performance. This finding is consistent with the findings from Nguyen, Le, and
Freeman (2006) and Ha and Swierczek (2003).
f. Presence of business clusters and networks
According to the results of our study, there are no strong linkages between SMEs
and other supporting agencies. As stated by a respondent, “Linkages between academic
and research institutions, universities, supporting organizations, and SMEs are still
questionable”. SMEs and those institutions tend not to seek cooperation because of a lack
of mutual trust between them. SMEs still consider that they are self-contained firms, so
that they prefer not to form any clusters or to develop linkages and networks.
Numerous studies, such as McMillan and Woodruff (1999), Nguyen (2005),
Nguyen et al. (2005), and Nguyen et al. (2006), indicate that trust is an important factor for
cluster and network development which may help to facilitate the development of

30
necessary supporting infrastructure. According to the VNCI project and building
Vietnamese competitiveness (VNCI-1, 2003, p.2), “Efforts on building commercial
collaboration among cluster members were limited. As a result, the foundation for trust
and cooperation among cluster member were not significant enhanced. The effectiveness of
forming a broad partnership with key cluster champions, including association leaders,
local governments, VCCI, universities and other donor is low.”
g. Access to information and global networks for cooperation
Our research findings reveal that most of the information for SMEs is from
informal sources. This is consistent with Webster and Taussig (1999), Harvie (2001), Ho et
al. (2002), Vu (2001), and Pham (2002). According to a respondent in our study,
information about market, opportunity for SMEs, the importance of strategic plan and trade
policies are not widely revealed to SMEs by the concerned parties. SMEs have limited
access to market information and information.
Harvie (2001) observes that most information is obtained through the media or by
personal contacts of firms, and not through formal channels. Only the more dynamic SMEs
tend to get in touch with formal organizations like the SMEs club, the VCCI and the
various trade associations for information. As a result, SMEs may face problems of
missing out on business opportunities and cooperation or being deceived by their overseas
partners due to the lack of reliable information.
h. Other constraints
A joint study by Vietnam’s Institute of Labor Sciences and Social Affairs, the
Asian Regional Team for Employment Promotion of the International Labor Organization,
and the Swedish International Development Authority (ILSSA-ILO-SIDA 1993) reveals
that besides the lack of capital and a clear government policy, Vietnamese SMEs are faced
with problems in marketing and distribution, market limitation, a lack of power supply,
market competition, and a shortage of materials.
Furthermore, they suffer from high input costs such as office rental, transportation,
social security payments, accessing material goods, equipment, etc. (Business Issues
Bulletin, 2004). SMEs in the private sector suffer even more constraints due to remarkably
negative public opinion toward them as a result of misinformation from the media, which
is the main source of information about the private sector in Vietnam (Galaxy Ltd. Co,
1999). They are perceived to be unstable, vulnerable to bankruptcy, exploitative of their
employees, dishonest, opportunistic, incompetent, and non-contributive to the nation; thus,

31
they are the least desirable employers as well as the least preferred applicants for funds
(Galaxy Ltd. Co, 1999). Meanwhile, entrepreneurs report that severe competition,
unreliable employees, and the inability to obtain short-term and long-term capital are their
most serious problems (Benzing et al, 2005).
2.1.3. Small and Medium Enterprise Development and Business Development in
Traditional handicraft villages in Bac Ninh Province
2.1.3.1. Overview of Small and Medium Enterprises in Traditional handicraft villages in
Bac Ninh Province
Bac Ninh is a province in the northern plains in the northern key economic sectors,
from Bac Ninh old born and appeared with preserving the unique variety of occupations
associated with the names of villages, called communes, associated native tradition,
survival and development for hundreds of years. Entered a period of renewal and
modernization investment in development zones and industrial clusters of craft villages,
rehabilitation and development of craft villages in Bac Ninh is the key to accelerating the
growth of economic Assembly, in accordance with guidelines developed by the Party and
economic authorities of Bac Ninh.
To December, 2008, Bac Ninh province has built eight zones and industrial parks,
26 small and medium industrial clusters, industrial clusters of craft villages, of which 18
industrial zones have been put into business action. Until now the province of Bac Ninh
has 62 villages, 53 villages including industrial production and small industry is distributed
throughout the province and most active in major economic sectors.
Table 2.10: The medium and small villages in Bac Ninh province in 2008
(Source: Bac Ninh Department of Trade in 2008)

32
Businesses in the well-developed village 32% (20 villages) are the producers of
products suitable to the market, there is increased investment in production capacity, this
group includes producers of wooden handicraft products, steel, copper, paper, bamboo,
woven...
Businesses in the village produce moderately active, very difficult to develop: (26
villages) occupy 42% of the business including production and processing of products such
as residential wood products, processed silk, rattan, bamboo ... processing of agricultural
products from rice and maize.
Businesses in the village poor production, it risks losing a job tomorrow: (16
villages) 26%: is the household production, cooperatives, whose products do not adapt to
the market, with fierce competition of industrial products such as ceramic products, folk
and processing of forest products (rattan, bamboo ...).
Businesses in the village of Da Hoi iron and steel production – Chau Khe
Commune, Tu Son town is a village tradition to date, the enterprise has produced more
than 30 kinds of metals such as steel construction D6-D20, twisted steel, square steel.
Lanyards, wire mesh, nails ... with the output of 100,000 tons, the product generated on the
output value of 700 billion / year, there are 25 companies and 731 production and business
households, the average income generated 10 million VND / person / year, the commune
has 1,300 people, including 600 workers employed.
The enterprises in the villages and fine art furniture for domestic consumption and
export include village clusters Dong Quang, Huong Mac, Khe Phu, Tu Son town, the
products mainly furniture , beds, paintings and statues, their products have been on both
domestic and foreign markets in Europe, Asia, every year the village enterprises in the
industrial production value creation over 200 billion / year , products made for domestic
purposes 35% and 65% for export, at Dong Quang ward has a population of 11,000 people
including 6,000 employed workers, in addition to attracting more than 4,000 workers from
outside . So far in Dong Quang have 102 businesses and nearly 1,000 household and
business furniture and fine art per capita income accounts for 8.4 million VND / person /
year.
Businesses in paper production villages Phong Khe – Bac Ninh city comes from the
production of paper. As early as 90 have turned to low-level paper: toilet paper, paper
packaging, paper. In recent years some companies have switched to production of new
products such as paper Duplex printing paper.... Now at Phong Khe have 125 production

33
lines of industrial paper capacity of 300 tons / year to 2,000 tons / year. Sales of small and
medium enterprises in craft villages in Bac Ninh province was increased significantly year
over year increase.
Table 2.11: Value of production of small and medium enterprises
in the villages in Bac Ninh
(Source: Department of BacNinh Trade, 2008)
The producers are concentrated in the distribution of districts: Tu Son, Yen Phong,
Tien Du, Gia Binh, Thuan Thanh are local businesses with industrial production value in
the region economy of the province. By May /2008 on 1000 enterprise, Co., cooperative
industrial production and handicraft in the village of Bac Ninh.
Table 2.12: Number of enterprises in the villages
(Source: Department of Planning and Investment in 2008)
Production and business models of enterprises in the village is rich and diverse
addition to the production and business units operating under corporate law, cooperatives
are mostly active in household production model individual companies, to the present time,
in the village has 15,759 households with 36,515 employees.

34
Table 2.13: Number of households - labor small industry production in 2008
(Source: Department of Trade in 2008)
After 10 years of re-establishment of small and medium enterprises in the village of
Bac Ninh province to grow, is the place known, the industrial products Bac Ninh village
preferred by customers, the market consumption has been spread around as the U.S., EU,
Japan, Korea, Thailand...
Model management structure, operating small and medium enterprises in the
village of Bac Ninh today: On the product structure and industrial structure: the
diversification of production most consumer goods and exports, such as the type of paper,
steel, brick, wood handicraft, wood appliances, processing forest products, embroidery,
rattan, giang, weaving, pottery, textiles .... This demonstrates that the handicraft villages in
Bac Ninh province has great ability and industry to produce many different products.
On the organization of production and management organization: The Company is
organized primarily in the form: Cooperative hand, business owners, Ltd., a shareholding
company, the organization generally lack scientific management, the management model
in family, spontaneous, instinctive, not any depth to the affected economic efficiency.
Since the Enterprise Law was born, the enterprise has been equipped and trained so
many businesses have developed, removing the management model family instinct. The
enterprise has developed the organizational structure, management model and operating
companies under the Enterprise Law.
For labor of small and medium enterprises in Bac Ninh primarily the number of
employees under 100 people, only 32 companies have between 100 - 200 people, 10
companies have between 200 – 300 people. The workers are not trained, which is
transmitted from person to person, as of May 9 / 2008 Bac Ninh has 47,236 employees

35
(according to 2008 DPI). Businesses wage regime is implemented in accordance with
salary payment as the workload is generally income of workers is increased.
The apparatus management firms typically compact, reasonable layout, operating
on the basis of the functions, powers clearly promote efficiency. Director authorized to
assign tasks to specific jobs deputy director of the inspection, control and adjust
accordingly. These enterprises are mainly small producers, economic thinking also take the
form manually.
Production activities of small retail businesses are often scattered, each component
of the laborers are employed, self-training by training and communication transmission
lines for the other person, to imitate nature. The technical workers, workers operate has
been selected by the school and receive training through the training program.
2.1.3.2. The Business Environment of Small and Medium Enterprises in Traditional
handicraft villages of Bac Ninh Province
* Overview of Business Environment Analysis through PEST Analysis:
Before creating business plans or making decisions, it is important to 'scan' the
external environment. This can be achieved through a PEST analysis. PEST analysis aims
to identify and summaries influences on the way an organization or industry operates. The
PEST analysis is a useful tool for understanding market growth or decline, and as such the
position, potential and direction for a business. A PEST analysis is a business measurement
tool. PEST is an acronym for Political, Economic, Social and Technological factors, which
are used to assess the market for a business or organizational unit. In the other terms, it
involves identifying the political, economic, socio-cultural, technological, legal and
environmental factors and conditions that impact on an organization (Anthony, 2008). This
provides a way of auditing the influences that have impacted on an organization or strategy
in the past and how they might do so in the future.
PEST analysis uses four perspectives, which give a logical structure, in this case
organized by the PEST format that helps understanding, presentation, discussion and
decision-making.
PEST analysis can be used for marketing and business environment assessment and
decision-making, and the PEST template encourages proactive thinking, rather than relying
on habitual or instinctive reactions (Lesley et al, 2005). PEST becomes more useful and
relevant the larger and more complex the business or proposition, but even for a very small

36
local businesses a PEST analysis can still throw up one or two very significant issues that
might otherwise be missed.
Deriving from these reasoning, it is very significant and important to know how the
business environment in Bac Ninh province currently is in order to support Small and
Medium Enterprises in Traditional handicraft villages by appropriate approach. The
business environment of Small and Medium Enterprises in Traditional handicraft villages
of Bac Ninh Province could be identified, and assessed through PEST analysis as follows:
2.1.3.2.1. Environmental politics and law
a. Laws environmental
State Enterprise Law issued, bidding laws, domestic laws Investment, construction
law ... to create conditions for enterprises of production and business activities.
Economic institutions: The State has enacted several provisions on procedures and
competent business conditions; the mechanisms of investment, financial institutions are
specified, using mode invoices, institutional credit, bank loans.
The relationship between the business sector: The trade unions through the system
to understand the institutional sector, the sector policies, the State.
b. Political environment
Expression of political stability and business environment production, Bac Ninh
province has worked out many programs and policies consistent with the characteristics of
the locality, creating more opportunities for small and medium enterprises in the village
development, such as Resolution 02, 04 of the Committee of Bac Ninh province on the
development of village clusters.
However, some policies are not specified with investors, democratic openness and
transparency between the investors and contractors, the mechanism is not consistent with
changes in market prices.
2.1.3.2.2. Economic environment
Socio-economic structure continues to shift towards industrialization - OS, the
proportion of GDP and Construction industries in 2008 is 53.7%, to 56.5% in 2010 as
private industry is 53.4%, the price Industrial production value in 2008 was 16,045 billion
VND, in 2010 plans to be 21,500 billion VND, of which local industry accounts for 58.3%.
After more than 10 years of trying and build, in Bac Ninh province has become a
comprehensive development, economic growth with a high rate, an average of 13.4% of

37
GDP in 1997-2005 years, in 2008 increased 14 , 7% more than 1.5 times the national
average, ranking second in the northern key economic sectors. Economic structure shift
quickly in a positive way. Share in GDP of industries - XD increased from 23.8% in 1997
to 53.7% in 2008, state budget revenue reached 2450 billion, up 23.7% annual average,
local budget revenues and expenditures the target is close to balance, people's income is
increased, per capita GDP $ 978.2.
Labor structure has a positive shift over the 1996-2000 period in the labor sector is
8.2% industry – construction; 2001-2005 is 12.9%.
Economic Planning stage the 2006 - 2010: in 2010 GDP growth rate reached 15-
16% per year, in which industry – construction increased 19-20% (only 20% industry
growth), up 17 service -18%, agriculture, forestry and fishery increased by 4-5%. By 2010
the proportion of industry – construction is 55%, services 31% Agriculture and forestry is
14% of GDP. GDP per capita in 2010 reached $ 1,300, social capital at about 39-40% of
GDP, budget revenue reached 3200 billion, up 25% on average, the percentages of GDP
budget with 15% in in 2010.
In 2010 the total export value of over $ 1 billion. GDP growth over the past year
and plan economic development in the period 2006-2010 reveals a total capital investment
in the economy. The Bac Ninh economic growth opportunities for manufacturers and
investment in industry - Construction, which is mostly industrial.
Bac Ninh creates jobs with an average of over 2.3 thousand workers / year from 39-
40% of the workforce through training.
2.1.2.3.3. Environmental science and technology
In recent years the rapid development of scientific and technological revolution, the
small and medium enterprises in the village of Bac Ninh province with the application of
new technology, replacing old equipment with new equipment modern products gradually
to meet the market demand at home and abroad.
However, a number of manufacturing enterprises in the villages still use the device
manually, ancient technology, mainly based on experience with hereditary properties,
therefore producing products with low productivity, number of individual products, poor
quality, high cost, limited to the competitiveness of products of craft villages.
- Many small and medium enterprises in the village had marked improvement, they
have adopted advanced technologies in the production chain, engineering and production,
business Luy Lau pottery village, Phu Lang applied technology ceramics by microwave

38
heating tunnels, soil heating by gas, have reduced the environmental pollution, product
heating time from 72 hours down to 24-32h for each kiln, producing results that high
quality products. Businesses in the village fine art furniture Dong Quang, Xuan Lai
Bamboo invested machinery for the export of cut, polished, boiled technology, steam
drying technology of Germany. The business paper production in Phong Khe village has
invested in the automated production line from the stage of soaking, soaked pulp output to
cutting and packaging...
The technological innovation takes place slowly due to the use technical and craft
level engineering and sales still account for a high rate, production equipment is mostly
old, some companies produce tools , engines and machinery imported from China, Taiwan.
The technological innovation takes place not in synchronization, yet the system
only focused on a number of stages and a number of important sectors, which affect the
entire production process, while the other phases make use of labor mainly manually.
The technological innovation is not paying attention to issues of environmental
protection and occupational safety, environmental pollution is becoming a pressing issue in
the industrial village.
2.1.2.3.4. Socio-cultural environment
a. Society of the population and labor
Labour structure in 2008 in Bac Ninh province has 56,683 employees in small and
medium enterprises. In North and security in 2009 is 1024.3 thousand people. Population
increases, a limit on investment funds, on the other hand the higher requirements on
industry infrastructure, urban and other products for people's lives.
b. Population quality
Bac Ninh's human resources are plentiful, people with working capacity (up to
50.5%) average annual number of people entering the working age increased from 10,000
to 15,000 people, the number of employees trained 25%, higher educational level, 30-40%
every year from high school students pass the university, college and technical secondary
schools, contributing significantly to local economic development and create resources for
the enterprise.
c. Cultural Environment
Social growing modern civilization, international integration, the shift in social
values towards human beings, concern for health care, guaranteed health care system,

39
social insurance settlement , health insurance, safety in production environment, working
and living.
Bac Ninh countryside Quan Ho (traditional music) where is their first place of
Buddhism, with many festivals, craft villages. Bac Ninh and studious tradition of
academic, feudal examinations for more than 800 years of Han, northern Bac Ninh is home
to more than 600 doctors, there are those who have become the historical figure, celebrity
culture as Le Van Thinh, Nguyen Gia Thieu, Nguyen Dang Dao ... from these factors the
company was interested in issues of religion, philosophy, language, literature and art with
the indirect influence they have on with business enterprises.
The environmental factors of population and labor opportunities, the growing
conditions of human forces, creating favorable conditions for enterprises and utilize local
labor arrangement.
d. International Environment
International Economic Relations increasing trends can most of the world economy
with the development of transnational companies is a matter of concern to build the right
strategy.
International Environment impacts on economic policy, science and technology in
the country. Activities held in Vietnam in ASEAN, AFTA, WTO, globalization trends,
international integration, the region, facilitate the mobilization of investment capital,
expanding links, international co-production business of import tax reduction, increased
business opportunities for enterprises and expand markets, acquire technology,
management skills, increase flexibility and efficiency of the enterprise.
In another way, the above factors as well as pressure on enterprises in developing
strategy. The Company faces stiff competition of imports from outside, facing the foreign
enterprises have higher capacity, potentially greater financial, managerial experience
better; respect the overall objectives of social attention boost morale; value the talent, build
a business culture; renewing the leadership.
2.1.3.3. The Key Issues related to the Current Situation and Development Prospects of
Small and Medium Enterprises in Traditional handicraft villages of Bac Ninh Province
a. Current Competition
Socio-economic status of the sector: The industrial sector which produces
consumer industry, small industry and the State Party concerned, priority investment and

40
development; with investments for the industry – construction to 40% at this stage, small
industry sector is at the stage of development and growth.
Conversion of industries: high exit barriers due to the characteristics of equipment
and buildings; workers specialized in high-status loans, debt settlement slowly; high cost
of leaving the sector (training, marketing new schools, fire); existing partnership relations
and association; tradition, history, emotional, dependent economic sectors. These factors
increase the difficulty for the business sector and increase the competitiveness of the units
in the industry.
Competitive pressure on 5 sides and it is the pressure of new businesses,
competitive pressures among enterprises with industry, the competitive pressure of
substitutes or alternative service, the bargaining power of suppliers, pressure from
customers.
b. The pressure of new businesses entering the market
Due to the production characteristics of small and medium enterprises in craft
villages in Bac Ninh is the production of traditional products with high art, the high
barriers to entry, but there are market segments in the resource sector, the professional easy
to imitate, creating a large discount, any benefits for businesses.
Enterprise sector has the advantage of cost, experience, specialized technology,
capacity (labor, equipment and capital), the advantage of scale, higher yields, high costs, of
distribution channels, has the advantage of capital criterion, choose the stage, has the
advantage of product differentiation, new technologies, technology transfer in time, the
advantage prestigious image sector businesses.
The competition to replace the above product set small and medium enterprises
interested in maintaining and promoting the expansion of products of wood handicrafts,
wood industry, paper, writing paper, packaging, cardboard, various types of steel and iron
plants, steel sheets, steel sheets, steel ....The combination of ancient pottery modern.
The small and medium enterprises in the village of Bac Ninh to inherit the unique
products that meet the special needs, nature crafts products, aesthetics is not a modern
factory which produced; as icon paper, unique decoration by the artist Phong Khe village
paper production, calligraphy paper, paper for special offers for Han Nom Institute. The
handicraft products are outstanding, furniture Dong Ky, Quang Dong, Tu Son has known a
large area and exported to China, Taiwan, Thailand, Laos, Cambodia .. Products Smoked
Bamboo is unique to Vietnam that Xuan Lai Bamboo, Gia Binh.

41
From the starting point was to create a competitive advantage for small and
medium enterprises in the village of BacNinh.
c. Pressure from customers
The small and medium enterprises in Bac Ninh produce mainly non-ferrous metals
(copper, aluminum, silver ...), handicraft items, beds, wardrobes, tables, chairs, paper,
customers are mainly the State agencies, including contract manufacturing equip
Government agencies, Ministry of defense, Ministry of culture and information the rest
sold to private investors, tourists and visitors. Dong Ky own furniture, the company also
exports to China, Taiwan, Thailand, Cambodia, Laos which occupies 65% of market share.
These companies manufacture products smoked bamboo provides Dinh Pagoda, Temple of
appearance, ecological zones, and entertainment.
The village products exported to Europe, America is difficult, in this market not
only requires the traditional models of Asia, but they require the selection of the type of
wood shrinkage, warp, so to enter this market, companies must produce European-style,
and the consumption of foreign traders, mainly through direct contact with each order or
through a channel to the general consumer space.
The ability of investors dominant (state) in the current mechanism is very high: On
the plan, criteria for choosing the wrong product, imposing price (bidding criteria "bid";
price adjustments; additional volumes arising ...) rigid institutional shares; enforce
payment (payment arrears extended), the closed status less objective and responsibility of
the investors are not regulated clear, in fact the advantage is always in favor of the
customers, investors, causing losses to producers.
Exports to other countries, even more annoying procedures through intermediaries,
leading to many businesses do not get rid of debt, capital imbalances.
d. The pressure of suppliers
The supply of raw materials such as rare types of wood such as timber monitoring,
Pomu, driving... to import more raw materials from abroad. The types of bamboo litter, the
clouds, to purchase from the Northern provinces such as Son La, Lai Chau and Ha Giang.
The production of iron materials, paper to be collected from all over, need to provide
customers with guaranteed stability.
These providers compete with each other: The provision of a vertical integration
strategy (local materials, iron, bamboo ...) create disadvantages for the buyer; The
suppliers also difficult, due to outstanding debts in capital construction, supply contracts

42
often accompanied by the prepayment, the payment immediately, causing great difficulties
for enterprises which purchase; current difficult capital available to suppliers on credit. The
corporate strategic alliances "customers".
The supply of labor: workers in small industry are available from the following
sources:
- Sources from the state schools, universities, colleges, middle...
- Labour is handing down from one person to another, with the pair.
- The labor recruitment in place, from local
e. Competition among same field enterprises
Shown by the scale of enterprises in the sector, currently exists in three sizes:
Form One: The big business corporations, large manufacturing plants such as Bai
Bang Paper, Thai Nguyen steel, wood Binh Dinh,… creating highly strategic industry
groups - to create strategic ; the dependence of the distribution; the corporation, the factory
is mainly engaged in large packages, the situation ought not to stiff competition.
Form two: The small and medium enterprises in the province have the same ability
to produce commodity products such as Nam Dinh, Thai Binh, Ha Tay. They often have a
structure, the same caliber and characteristics of products lead companies more and more
competition.
Form three: a new business entrants, competing primarily in the retail market as the
region remains slow economic growth, competition does not have to worry much.
f. Manufacturers Capability
The small and medium enterprises in craft villages in Bac Ninh province has
established that the production capacity, production focus, creating synergy, unions,
cooperative villages, forming common labor market in the villages and adapt to the market
mechanism, level of education is changed, their risk assessment application of scientific
and technological advances to production, respect of human resource training, solving the
problem social problems. They are willing to raise capital for production to meet to ensure
the project construction schedule to meet product demand, many items of art, furniture and
technical such as Dong Ky, the copper picture Dai Bai.
g. The ability to provide credit, capital
Capital is critical to ensure the operation for the companies, demand for capital for
production companies increasing. Investment capital equipment production, capital for raw

43
materials, capital investment in production.... The companies in Bac Ninh provinces still
lack capital to exploit domestic resources. Bank has supported the village actively create
conditions for enterprises to sign long term contracts and large shipments.
2.1.3.4. SWOT Model about General Position of Small and Medium Enterprises in
Traditional handicraft villages of Bac Ninh Province
Based on analysis, integrated assessment of the position of small and medium
enterprises in the village of Bac Ninh SWOT model as follows:
Opportunities
+ Demand for traditional products,
handicrafts increased, from central to local.
(Rising High on capital maintenance,
restoration and upgrading of the relics,
scenic, cultural values are elevated).
+ Science & technology.
+ Support policy of the State in the
expansion of villages, on the development
of industry, handicraft, handicraft
production technology, improved
administrative environment; solve
problems, building clearance construction
of industrial zones, creating conditions for
developing production.
+ Improved financial, credit, capacity
building for producers.
+ Encourage the development of human
resources training new culture of Bac Ninh.
+ Stable in political environment, policy
development planning zones village cluster
Threats
+ There are many alternative products,
capital of the restoration project, not a lot of
upgrades.
+ Problem WTO makes the small and
medium enterprises have difficulty
competing with large enterprises. Should
have policy ventures.
+ For the same policies apply.
+ Debt packages and responsibility of the
customer (the State) is not fair, pose a risk
to the contractor and policies of credit
institutions changes, lack of routes to
contractors respond.
+ Import and export policies are
insufficient.
+ Transport system leading to inadequate
circulation of goods is difficult.
+ Market is constantly changing
+ The management of state-synchronous
mechanism and policy
+ Pollution
Strengths
+ The infrastructure business has ground
production and leadership experience.
Weaknesses
+ Small capital market did not meet the
required joint venture.

44
+ Attract talented people, skilled workers.
+ Product is a unique product of individual
enterprise (product differentiation)
+ Resources away from enterprises
themselves should make sure, that progress,
that withdrawal, the specific expertise of
each job from input to output.
+ Enterprises that link together to form a
synergy.
+ The advantage is that other people can
see:
- Unique Product.
- Relations with partners.
- Make a difference in the product.
- The compact machine operating entity.
+ The production scale is small
+ Production costs for the product remains
high, many places are inadequate.
+ Foreign language and technology,
information and restrictions.
+ The number of skilled workers is not
much, mainly through training and
coaching, not trained.
+ Technology equipment is obsolete, not
keep pace with advanced technology
markets.
+ Lack of a class mechanic, construction
equipment manufacturing.
+ The market for products is difficult,
unstable,
+ Not developing new products, many
designs are ancient natures and not
satisfying consumers.
+ There is vision-oriented, management
level missing sync, especially the financial
management process.
+ Source materials not in place, some raw
materials have lost their ability to
exhaustion. (Mahogany, wood flooring,
wood Pomu ....)
2.1.3.5. Competitive Strategy and Strategic Options for the Development of Small and
Medium Enterprises in Traditional handicraft villages of Bac Ninh Province
From the condition of small and medium enterprises in craft villages in Bac Ninh
province allows us to see the strengths, opportunities, to germinate and develop, the risks
and limitations and weaknesses to overcome.
a. SO (strengths - opportunities)
Bac Ninh is a province located in the alley north of Hanoi, located in the economic
growth triangle Hanoi – Hai Phong - Quang Ninh, located in key areas of economic

45
development in the North, there are big roads important to run through, connecting the
center of economic, trade and culture north of Highway 1A, Highway 18, Highway 38, the
trans-Vietnam railway axis to Lang Son - China, abundant labor resources, high
educational level, Bac Ninh is home to many unique traditional festival, the tourist
destination with bold cultural history (Dau Pagoda, Thap pagoda,…), Bac Ninh provincial
authorities have the main mechanism investment incentives, the province has made the
investment environment is relatively transparent and open for business attraction. The
villages in Bac Ninh province has a long-lasting products of the village bearing the culture,
art, production premises have been given priority, the business owners have more
experience from their workers. The companies have combined, associated synergy created
from raw materials to the output, the compact executive management. This is the
opportunities and advantages that the small and medium enterprises in the village of Bac
Ninh to develop strategies to build business production.
b. ST (strengths - threats)
Along with the strengths of the company has, the environmental pollution is
increasingly serious, especially in the village paper, steel, CO2 has caused environmental
pollution is severe. At the village in Phong Khe paper waste per day 900 - 2000 m3
wastewater (brought a concentration of organic matter, chemicals, and bleached great
(Source: Scientist - Technology Bac Ninh, 2008).
This is the downside of production, it has consequences, just cause a direct impact
to the process of research development should be addressed. Although businesses are well
developed, but only in the first step, and lack of strong development. State agencies outline
the planned long-term orientation as a basis for encouraging business development in
villages, but the situation deteriorated infrastructure (electricity, water, transport),
ecological problems have no interest, market difficult not stable, the tax policy is still
inadequate. These issues are but a threat to the enterprises.
c. WO (Weakness - Opportunities)
The small and medium enterprises in craft villages in Bac Ninh often produce
small, low capital, poor technology, backward and technical specialization of labor is low,
limiting the level of management, information often comes slow song of Bac Ninh has the
advantage of natural conditions, social and cultural. The companies have overcome the
weaknesses, advantages to promote self-development for his company.
d. WT (Weaknesses - Threats)

Developing small and medium enterprises in traditional handicraft villages in bac ninh province

Developing small and medium enterprises in traditional handicraft villages in bac ninh province

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