A study on the impact of cost reduction measures in achieving the competitive advantages in footwear industry By Pham Thuy Phuong Graduation Project Submitted to the Department of Business Studies, HELP University College, in Partial Fulfillment of the Requirements for the Degree of Bachelor of Business (Accounting) Hons April 2011 i Declaration of originality and word count DECLARATION I hereby declare that the graduation project is based on my original work except for quotations and citations which have been duly acknowledged. I also declare that it has not been previously or concurrently submitted for any other course/degree at HELP University College or other institutions. The word count is 10,399____ words. _____________________ Date: ii ACKNOWLEDGEMENTS In order to complete this project, I must be grateful to the following people for guiding me. 1. Ms. Sumathi: a teacher of HELP University College. She helps me understand how to prepare a graduation project and what I should do and should not do in a graduation project. She gives me many various sample topics to help me choose and understand aspects and issues can be exited in accounting topics. 2. Ms. Shenbak: a teacher of HELP University College. She helps me find the way to choose a topic of a graduation project. After I can choose some topics, she also shows me what topic is easier for me to do and what issues I should consider in this topic. 3. Mrs. Dao Thu Giang: a vice - director of Foreign Trade University. She helps me understand what I must do in a graduation project. In each chapter, she defines clearly how I should do and what aspects I should examine. She helps me reexamine and check accounting information, tables and figures. She also shows me what information I should focus on or not. After finishing this project, she examines and considers the graduation project. 4. Ms. Ngo Hong Anh: an accountant of Thuong Dinh Shoes Company Ltd. She gives me accounting information as well as financial data of two years ( 2009, 2010 ). Thank to these information, I can calculate and draw table and figure in this project. 5. Mr. Le Van Duong: a manager of The Research and Development department of Thuong Dinh Shoes Company Ltd. He gives me all old strategies which company iii used in the previous year 2009 and new strategies company will use in the next year. He also gives me the objectives of company wants to achieve. Basing on this, I can see and understand clearly the condition of company. iv ABSTRACT A study on the impact of cost reduction measures in achieving the competitive advantages in footwear industry By Pham Thuy Phuong April 2011 Supervisor : Nowadays, the world trends to globalize, organization not only considers the way to maximize profit, but also cares its competitive advantage in the market. Because of this, many companies find way to improve their competitive advantages in the opened market as today. There are many methods to help company improve their competitive advantages but the best way company can use is to reduce cost. Reducing cost can create many opportunities for company to compete with other companies. In the market, one of the most elements can attract customers most is price. The lower price is, the more attractive company can gain. Especially, in Vietnam, the footwear industry become more and more developed day by day. Thuong Dinh Shoes company is one of the most developed shoes manufactures in Vietnam. It not only has expanded its market in Vietnam but also in many foreign countries. As a result, I choose Thuong Dinh Company Ltd as a specific example to analyze. v TABLE OF CONTENTS Declaration of originality and word count i DECLARATION i ACKNOWLEDGEMENTS ii ABSTRACT iv TABLE OF CONTENTS v LIST OF FIGURE viii LIST OF ABBREVIATIONS ix Chapter 1 : INTRODUCTION ix Chapter 2 : LITERATURE REVIEW 5 2.1. Definition of accounting and its functions : 5 2.1.1. Definition of accounting 5 2.1.2. The main functions of accounting 6 2.2. Definition of cost accounting and its function and objectives 7 2.2.1. Definition of cost accounting: 7 2.2.2. Functions and objectives of cost accounting 8 2.3. The nature of competition and competitive advantage 10 2.3.1. The nature of competition 10 2.3.2. The nature of competitive advantages 11 2.3.2.1. The basic nature of competitive advantage 11 2.3.2.2. Sustaining Competitive Advantage 12 2.3.2.4. Types of competitive advantage strategic 14 vi 2.4. The factors that can affect to the competitive advantage 15 2.4.1. The suitable strategic to gain competitive advantage in the new environment 15 2.4.1.1. Porter’s five forces 15 2.4.1.2. Low cost strategy 17 Chapter 3 : METHODOLOGY 19 3.1. Characteristics in organization production and business activities of Thuong Dinh Shoes Company Ltd 19 3.2. The method to implement this project 23 Chapter 4 : ANALYSIS 25 4.1. Analysis of the financial situation of the Thuong Dinh Company Ltd. in 2010: 25 4.1.1. Assessment of general financial situation of the Thuong Dinh Company Ltd. in 2010 through the balance sheet accounts: 26 4.1.2. Analysis to capital for business operations situation: 29 4.1.3 Analysis of the relationship and the fluctuation of the items in the balance sheet accounts: 31 4.1.4. Analysis of the relationship and the changing situation of indicators in the profit and loss statement: 34 4.1.5 Analysis of the situation of solvency of Thuong Dinh Company Ltd in 2010: 36 4.1.6. Analyze the effective and efficient of business performance of Thuong Dinh Company Ltd 39 4.2. Analyze the use of materials Thuong Dinh Company Ltd in 201 42 vii 4.2.1. Analysis of the major materials supply condition: 43 4.2.2 Analysis of the major used materials 44 4.2.3. Analysis of the primarily reserve of material situation: 46 Chapter 5: CONLUSION 48 REFERENCES/ BIBLIOGRAPHY Error! Bookmark not defined. viii LIST OF FIGURE Figure 2.1 : Types of competitive advantage strategies 14 Firgue 2.2 : Porter's 5 Forces - Elements of Industry Structure 17 Figure 3 : The general financial conditions of Thuong Dinh Shoes Company Ltd. 20 Figure 4.1 : Assessment of general financial situation of the Thuong Dinh Company Ltd. in 2010 through the balance sheet accounts (Unit: Vietnam Dong ) 26 Figure 4.2: Analysis to capital for business operations situation in year 2010 30 Figure 4.3 : Analysis of the relationship and the fluctuation of the items in the balance sheet accounts: 31 Figure 4.4 : The income statement of Thuong Dinh Shoes Company Ltd in 2010 35 Figure 4.5 : Analysis of the situation of solvency of Thuong Dinh Company Ltd in 2010 37 Figure 4.6 : The analysis the using synthetic efficiency costs 39 Figure 4.7 : The analysis of the effective business performance 40 Figure 4.8: Analysis of the major materials supply condition 43 Figure 4.9 : Analysis of the major used material in 2010 45 Figure 4.10 : Analysis of the primarily reserve of material situation in 2010 of Thuong Dinh Company Ltd. 46 ix LIST OF ABBREVIATIONS ASEAN Association of South - East Asian Nation APEC Asia - Pacific Economic Co-operation WTO World Trade Organization AFTA ASEAN Free Trade Area [...]... accounting is considered as one of the best method to provide information for management accounting and financial accounting Cost accounting is used to measure, analyzes and report financial as well as non-financial information that concern to the costs acquiring or using resources in an organization Normally, cost accounting specializes in controlling and calculating cost of product 2.2.2 Functions and... production and business activities 25 4.1.1 Assessment of general financial situation of the Thuong Dinh Company Ltd in 2010 through the balance sheet accounts: Overall assessment of the financial situation is a process of reviewing and examining the preliminary first step of the financial situation of the company This work will provide managers know the financial status and assess the financial strength of. .. company in a certain period Financial analysis is used as the methods and tools to collect and settle accounting information and other information in the company management to assess the potential and financial strength of the company, fertility words to help decision makers to appreciate the real situation, the financial situation of their company Since then the right decision in choosing the optimal... for manager as well as companies 2.1.2 The main functions of accounting Accounting always plays a vital role in organization’s business Almost all companies which are existing in the market today, need at least an accountants Nowadays, accounting becomes more and more important because the functions of accounting help companies many things in operating its business Accounting has many functions but there... strength of the company Understanding the financial situation of the company is promising or not promising to make decisions effectively in nature The analysis of financial content will include the general criteria nature and reflect the key aspects of financial operations (organization, mobilization, distribution, use and management of capital) On the other hand, the calculation of this criterion must... 4.1 Analysis of the financial situation of the Thuong Dinh Company Ltd in 2010: Financial business is monetary relationships directly related to the distribution of organization to mobilize and use capital in management business processes Financial analysis is the process of review and comparison test to compare financial data with the time of current through it can appreciate the potential business... process of accounting for cost, which begins with regarding and classifying of incomes and expenditures and ends with the preparation 7 of periodical statements and reports for ascertaining and controlling costs” And cost accounting can be determined as the process of measuring, analyzing, computing, and reporting the cost, profitability and performance of operations To see it in other aspect, cost accounting... Thirdly, cost accounting is used as a measure to evaluate increasing efficiencycost accounting that involves a study of various operations used in manufacturing a product or providing service The study facilitates measuring of efficiency of organization or a whole as well as of departments besides devising means of increasing efficiency Furthermore, cost accounting can create control Cost accounting aims... business concept innovation is the foundation for value creation in the new economy” These new business concepts will often relate a reconfiguration of the value chain of the industry in question 2.3.2.2 Sustaining Competitive Advantage Assuming that the greatest threat here is imitation, so barriers of imitation must be found To become successful, a firm needs to identify the advantage and has to find... Definition of cost accounting and its function and objectives 2.2.1 Definition of cost accounting: Cost accounting is considered as an expanded phase of the general financial accounting of a business concern which provides management promptly with the cost of producing or selling each product or of rendering a particular service" To put it in other way, cost accounting is a step further of financial accounting . A study on the impact of cost reduction measures in achieving the competitive advantages in footwear industry By Pham Thuy Phuong. LIST OF ABBREVIATIONS ASEAN Association of South - East Asian Nation APEC Asia - Pacific Economic Co-operation WTO World Trade Organization AFTA ASEAN