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Based on the theoretical and practical research on developing export markets for leather shoes, the study aims at analyzing the current situation, thereby proposing solutions to develop the export markets for Vietnam’s leather shoes in the new context.
1 INTRODUCTION 1. Rationale for the research Vietnam has become the secondlargest footwear exporter in the world, after China, since 2014, accounting for 4.6% in volume and 9.2%in value of the global footwear exports. Vietnamese footwear products have been exported to more than 100 countries worldwide In the main markets like the United States, the EU and Japan, Vietnamese footwear products continue to gain their significant market share. Several important free trade agreements, such as EUVietnam Free Trade Agreement (EVFTA), Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP), VietnamJapan Free Trade Agreement (VJFTA), VietnamKorea Free Trade Agreement (VKFTA), VietnamEurasian Economic Union Free Trade Agreement (VNEAEU FTA), have been signed by Vietnam, bringing various advantages for Vietnam's shoes products due to the preferential tariffs and diverse sources of raw materials. However, along with the opportunities, Vietnam’s footwear and handbag industry have to face numerous challenges, namely competing with foreigninvested enterprises, harsh requirements on delivery quality and technical barriers, the ability to dominate the domestic market, the rate of localization of raw materials to ensure conditions for enjoying preferential tax rates. At present, the export of Vietnamese leather shoes still contains potential risks because of the fluctuations of the world market, which depend on the imports such as, equipment, sewing thread, leather and artificial leather. Moreover, the existing influence of the global economic recession causing the purchasing power in plenty of markets to decrease, the fluctuations in the Chinese Yuan and the Euro, and Brexit have affected the export situation of Vietnamese enterprises in leather and footwear ỉndustry Therefore, in order to continue strengthening and maintaining the development of traditional markets as well as seizing opportunities and finding ways to export into new and potential markets, a topic has been derived by the author, which is ‘Solutions to develop export markets for Vietnam’s leather shoes’ 2. Aim and objectives of the research 2.1. Aim Based on the theoretical and practical research on developing export markets for leather shoes, the study aims at analyzing the current situation, thereby proposing solutions to develop the export markets for Vietnam’s leather shoes in the new context 2.2. Objectives (1) Systemizing the theoretical basis for developing the export markets of Vietnamese leather shoes (2) Studying experiences on developing export markets for leather shoes of some countries in the world and lessons learned for Vietnam (3) Analyzing the factors affecting the development of the export markets of Vietnamese leather shoes (4) Analyzing the current situation of exporting leather products and the reality of developing export market of Vietnam's leather footwear from 2007 to 2017 (5) Forecasting the trend of developing export markets for leather shoes and proposing solutions to develop Vietnamese leather shoes export market in the new context 3. Subject and scope of the research Research subject: ‘Developing export markets for Vietnam’s leather shoes’ Scope of the research Focus on leather shoes and uppers of leather shoes (HS code 6403). Research on developing footwear at three levels: the state; the associations and the enterprises, which focuses primarily on the subject of enterprises Vietnam and 10 other export markets/regions of leather footwear: the big markets like the EU, the U.S., Japan, China; potential new markets, such as Africa, Middle East, South America, Eastern Europe, the ASEAN; and other niche markets In the 10year period from 2007 to 2017, which updates to 2019 and solutions proposed to 2025, with orientations toward 2030 4. Methodology Dialectical materialism and historical materialism method: to clarify the dialectical relationship between internal factors and factors affecting the development of the leather shoes export markets Document research methods, inheriting previous researches’ results: to clarify the theoretical basis, guidelines and policies of the party and the government in developing export markets, commitments and requirements set out in free trade agreements Controlled comparison method: to compare size, growth rate, product structures, modes of footwear export among different markets/regions 3 Analyzing and processing the collected information and data through combination of qualitative and quantitative analysis to clarify the current situation of the development of export markets for Vietnam’s leather shoes; forecasting the domestic and international context that affect the development of the export markets of leather shoes products; and computing the orientation to develop the export markets of Vietnamese leather products to 2025, with a vision to 2030 5. Contributions of the research Contributing to building and supplementing the theoretical framework for the development of export markets for leather shoes products of Vietnam Identify internal and external factorsthat affect the development of export markets for Vietnam's leather shoes products Building strategies and methods to develop export markets for enterprises producing leather shoes in the new context Proposing orientations and solutions to develop export markets for Vietnamese leather shoes to 2025, with a vision to 2030. 6. Structure of the research In addition to the list of abbreviations, introduction and overview of related researches, the research is divided into three chapters: CHAPTER 1: THE THEORETICAL BASIS OF DEVELOPING THE EXPORT MARKETS FOT VIETNAM’S LEATHER SHOES CHAPTER 2: CURRENT SITUATION OF DEVELOPING THE EXPORT MARKETS FORVIETNAM’S LEATHER SHOES FROM 20072017 CHAPTER 3: SOLUTIONS TO DEVELOP THE EXPORT MARKETS FOR VIETNAM’S LEATHER SHOES IN NEW CONTEXT OVERVIEW OF THE RESEARCHES RELATED TO THE TOPIC Through the research on the development of export markets in general and the development of export markets for shoes products in the world and in Vietnam, some following conclusions can be drawn: Firstly, there are currently a few researches on developing export markets, especially for leather shoes in the world as well as in Vietnam 4 Secondly, the majority of existing studies on developing leather shoes export markets are at the industry level, there rarely is a research at the state, the association or the company level Thirdly,Vietnam's studies on the development of the leather shoes export markets are mostly focused on the EU market, which is the largest market of Vietnam's footwear exports according to the General Department of Vietnam Customs Last but not least, existing researches on Vietnamese leather shoes companies have not established an analytical framework for developing export markets as well as the factors affecting the export market development of three main subjects, namely the state, the association and the organization As a result, the research gap for the topic is the research on building a theoretical framework for developing export markets of leather shoes at three levels: the state;the association; and theenterprises. Furthermore, it is a need for identifying factors affecting the development of export markets for leather shoes andanalyzing the situation, assessing the success, limitations and causes in order to propose feasible solutions to develop export markets for Vietnam's leather shoes products CHAPTER 1: THE THEORETICAL BASIS OF DEVELOPING THE EXPORT MARKETS FOT VIETNAM’S LEATHER SHOES 1.1. Basic concept and maincomprehension of developing export markets 1.1.1. Concept ofdeveloping export markets Based on the above concepts, according to the author, ‘the export market of an enterprise’ is a collection of key foreign markets and the potential of the business, which means that the foreign marketsare being purchased or will be purchasedproducts of that business Through this concept, the organization identifiesnot only its goal to target customers with their specific needs but also thestructure of such needs with basic characteristics of the international market, which are affected by factors such as cultural practices, language of life, and natural conditions of the countries 1.1.2. Role of developing goods export markets Developing export marketsplays such an important role towards the government that develops a country's comparative advantage. For export enterprises, it helps increase the number of customers and the opportunity to improve business efficiency and increase employees' income. Besides, developing export marketsmay create more jobs for workers in exporting countries 1.1.3. Categorization of goods export markets According to the author, the export markets can be classified based on the following criteria:(1) Based on geographical location, (2) Based on capacity and purchasing power of the market, (3) Based on import turnover and trade balance between exporting and importing countries, (4) Based on the openness of the market, the level of protection, and the tightness and market access, (5) Based on the competitiveness of exported goods and the competitiveness of the exporting country companies,(6) Based on the type of competition, (7) Based on the category of export product, and (8) Based on whether it isa keytraditional or potential new market 1.1.4. Content of developing goods export markets The main subjects in developing a country'sexport markets of goods include the state, the association and theenterprise.The content of developing export markets of the the state contains several objectives: consolidating key and traditional markets; exploring new and potential markets;searching for other niche markets; diversifying markets; restructuring goods export market areas in order to minimize and disperse risks; selecting partners to negotiate and conclude FTAs; promoting diplomatic status to expand export markets; managing trade promotion activities to promote goods export; facilitating trade; diversifying forms of international payment; supporting technology to improve the exportcapability of enterprises; enhancing the protection of goods and businesses in international trade disputes; developing the distribution system of goods in foreign markets;strengthening linkage of products exported to the market under global value chains[20]. Regarding the association, the sector performs the function of being an effective bridge between the government and exporting organizations, which supports trade promotion activities by providing technical assistance and advanced training of business’s export in trade disputes. In terms of the enterprises, the content of developing the export market consists of four steps based on the Ansoff model (1957): (1) researching and exporting markets; (2) making strategies for developing export markets; (3) developing and implementing export marketing strategies; and (4) checking, assessing, conducting and concluding strategies to develop export markets [59] 1.1.5. Assessment criteria of developing export Theoretically, the development of the export markets of goods can be assessed by following the width and depth, or the combination of both dimensions.Broadbased development is an activity focusing on increasing the export volume of all goods in each market area, called market penetration. It aims at the products that have the potential to expand the production scale for export, and at the same time expanding the market in terms of market space and the geographical scope of export items, which is called market expansion. Besides, the development of products export markets in depth needs to be focused on improving the quality of export goods and accompanying services as well as bringing more highvalueadded export goods to the market to improve export efficiency 1.2. Factors affecting the export markets of leather shoes 1.2.1. Macroenvironment(PESTEL analysis) Factors belonging to the macro environment, which are used in PESTEL analysis model, affecting the development of the export markets of leather shoes are always in uncontrollable complex and unpredictable fluctuations that businesses need to consider, adjust and adapt constantl They are political, institutional and legal factors, economic elements, technological factors, cultural, social and environmental elements, and the country's specific development level 1.2.2. Microenvironment Organizations are also directly affected by factors of the micro environment under the fivepower model of M Porter, whichconsists of current competitors, suppliers, potential competitors, distributors, importers, customers, and other substitutes 1.2.3. Internal factors The intrinsic capabilityof the company itself will be a prerequisite for developing the export markets; whereby the basic elements of the value chain of footwear enterprises are basic internal resources, or primary resources, and supporting resources, named supporting resources 1.3. Experiences in developing export markets of some countries and lessons learned for Vietnam Firstly, Vietnam needs to develop longterm strategies and policies for developing export markets of goods and of leather shoes products in theinternationally and regionallyvolatile context Secondly, Vietnam needs to study and select partners to negotiate, sign and implement FTAs to expand market access through tariff reductions and nontariff method in key and potential export markets Thirdly, expanding new potential markets and niche markets to those that are not too fastidious, taking into account the export on the spot and building factories in export markets, such as the ASEAN, Europe Africa, Eastern Europe, Russia Fourthly, Vietnam should actively participate in dominating the upstream stages of the global leather and footwear value chain, such as design, branding and distribution, by linking or acquiring retail chains and fashion brands in export markets Fifthly, it is a need to build complexes of industrial zones for leather and footwear production, at the same time actively supply raw materials, avoiding dependence on some supplying markets. Sixthly, a nation should build and form prestigious national brands for exported leather footwear products, developing domestic market asa stepping stone to promote export markets CHAPTER 2: CURRENT SITUATION OF DEVELOPING THE EXPORT MARKETS FORVIETNAM’S LEATHER SHOES FROM 20072017 2.1. Current situation of exporting Vietnam’s leather shoes 2.1.1. Overview of footwear industry and leather shoes exports In the past 10 years, footwear production has grown sharply, and the structure of footwear products has also changed. In 2017, the output of leather shoes increased by 22.5% compared to 2007, accounting for 23% of the structure of exported footwear items (down from 38.6% in 2007); canvas shoes increased by 34.6% compared to 2007, accounting for 6.1% (down from 9.4% in 2007); sports shoes increased by 280% compared to 2007, accounting for 70.8% (a sharp increase compared to 52% in 2007).Thus, leather shoes ranked second after sports shoes, but the proportion has decreased significantly from 38.6% in 2007 to only 23% in 2017 2.1.2. Size and growth rate of leather shoes exports In the period between 2007and 2010, the leather shoes export turnover in general had a sudden growth nearly doubled to 2.44 billion U.S. dollar in 2010.From 2011 to 2017, export turnover increased from US $2.91 billion in 2011 to US $4.53 billion in 2017. The biggest import markets of Vietnam’s leather shoes products are the United States, European Union countries, and Asian markets, including China, Japan and South Korea.In 2017, Vietnam exported approximately US $1.8 billion of all types of leather shoes to North America, US $1.678 billion to the European market, of which the EU alone was 1.634 billionU.S. dollar, USD 753.7 million to Asian market, and USD84.4 million to Africa and Middle East 2.1.3. Export market structure of leather shoes Vietnamese leatherupper shoes have been exported to various countries around the world, such as the United States, Japan, Germany. Currently, the supporting industry for Vietnam's shoes industry is not commensurate with development; consequently, domestic footwear enterprises still have to import raw materials, especially equipment, leather and highly technicalaccessories from oversea markets. The output of domestic firms in this segment is not high, but mainly concentrated from FDI enterprises.The structure of export turnover of leather shoes by markets from 2007 to 2017 has changed, which is revealed in the higher proportion of Vietnam's leather shoes export structure in the U.S. market. The structure of export value to the United States has increased from 21.1% in 2007 to 26.7% in 2010 and to 39.6% in 2017. Similarly, the structure of leather shoes exports to Asia is on the rise asit has increased from 10% in 2007 to 12.2% in 2010 and 16.6% 2017. In Asia, particularly in China, the proportion of turnover has increased sharply from 1.5% in 2007 to 5.8% in 2017 2.2. Current situation of the practices of developing export markets for Vietnam’s leather shoes in the world 2.2.1. Practices of the government 2.2.1.1. Guidelines and policies of the state that directly impact the development of export markets in general and export leather shoes in particular In order to develop export markets, the government develops a system of related strategies, planning and plans, from the overall to the branch level These national strategies and policieshave direct impacts on the development of the export market of goods in general and the export of leather shoes, coded HS6403, in particular 2.2.1.2 Promoting negotiations for the signing of free trade agreements with important and potential trade partners to expand export markets The signing of FTAs has the effect of lowering the tariff barriers, facilitating international trade, helping businesses more convenient in developing markets abroad. The negotiation and signing of FTAs with other economic regions and countries around the world has been actively implemented by the government, ministries and branches and has gained significant achievements 2.2.1.3 Supporting the development of export markets and trade promotion through trade officesin foreign countries To fulfill the development of export markets, the Government of Vietnam has built 57 trade offices and 7 Vietnam trade offices overseas, covering the markets with import and export turnover of the largest private sector with Vietnam 9 2.2.1.4 Providing technical assistance, developing a legal system of standards, regulations and assessing the conformity of procedures to meet export markets’ requirements The system of standards and technical regulations is a tool for countries to build and apply to control the quality of goods, including imported goods and goods circulating in each country's market Governments' acceptance of each other's technical standards, licensing of accreditation to international accrediting organizations, recognition of each other's assessment and testing results are the basis for enterprises to receive product certificateswhen exporting goods to foreign countries This is an important technical support step for businesses to export goods to the world market 2.2.1.5. Supporting to handlethe disputes in international trade The Ministry of Industry and Trade has strengthened coordination withthe asociationsto improve the representation of businesses, especially small and medium sized enterprises The ministry is also considered asa focal point for providing information on trade remedies, gathering resources for businesses to better coordinate with state agencies and to participate more effectively in lawsuits and handling disputesin international trade 2.2.1.6. Promoting the reformation of administrative procedures to facilitate trade The government has promulgated the Law onprovision of assistance for small and mediumsized enterprises and thedecreeproviding legal assistance for small and medium sized enterprises, which identifies supporting solutions for small and mediumsized firms in various fields, such asproviding legal information and legal advice for businesses on company’s establishment procedures, tax procedures, regimes accounting, intellectual property, trade promotion about construction, product development, commercialization of products, calling for investment capital,knowledge of standards, technical regulations, test production, testing and quality measurement 2.2.1.7. Activities supporting the production and export of the leather footwear industry including capital and financial support, human resource training, and supporting industrial development 2.2.2. Practices of the association In terms of trade associations, the content of developing the export markets of goods includes: performing the function of acting as a bridge between the state and exporting enterprises; promoting trade promotion activities;having a voice toprotect enterprises and goods in trade disputes; and providing technical assistance and training to 10 improve their export capabilities 2.2.3. Practices of the enterprises The content of developing export market at enterprise level consists of 4 steps: Step 1:Research and assess export markets Market research is the first and a crucial step for any export market development strategy of the business, which helps enterprises produce and export leather shoes productswith clear directions to implement export market development strategies and objectives in each stage of their development Step 2: Set up export market development strategy Market penetration strategy: Most of the export leather shoes enterprises in Vietnam are choosing this strategy to maintain their position and maximize the traditional and key export markets, which account for a large proportion in Vietnam's exports to the United States (39.6% in 2017), EU (37%), China (5.8%), Japan (3.4%), South Korea (2.6%) (taking up a total of 86% of the export turnover in 2017) by increasing sales, expanding market share and adding value to the product lines that have been accepted by the markets Market expansion strategy: Since the traditional market gradually saturated and showed somesigns of slow growth, a number of exporting leather shoes organizations started to exploit new and potential markets that Vietnam has not yet captured a lot of market share, such as in Eastern Europe, the Middle East, Africa, ASEAN, South America, to promote traditional product lines that have been proven quality and brand.Vietnam's signing of a series of FTAs with new trading partners has helped leather shoes products initially set foot in new markets such as in South America, Eastern Europe and ASEAN Product development strategy:Several leather shoes companies have boldly improved their products and exploited different product segments, namely popular, mid end, highend, green and environmentally friendly products, in existing markets Diversification strategy:This strategy is rarely used by Vietnam’s leather shoes enterprises as consuming new products in new markets requires firms to possess a large amount of production resources in order to develop their products as well as distribute them to potential markets Step 3: Develop and implement export marketing strategy (7Ps) Product: theform and quality In the past few years, domestic enterprises have begun to grasp the technology in the design of footwear, some companies have formed a design team not only to receive designs from partners but also build their own new designs.In terms of product quality, 11 over the years, Vietnamese leather shoes has affirmed its position in the world market. The quality of leather footwear products is reflected in the entire quality management cycle from the supply and processing of raw materials to finished products, packaging, andlabeling Price: processing price and price of finished products In the segment of leatherupper shoes, coded HS6403, Vietnam's products are highly appreciated for quality in export markets with an average value of US $24.13/pair and much lower thanhighclass leather shoes from Italy (US $65.44/pair) and France (US $65.64/pair). Making good use of FTAs, Vietnamese enterprises need to orient their own branding,organize their production activities and further control the leather and footwear industry's value chain to maximize profits Place: distribution channel and export entry modes Regarding the distribution channel and export entry modes, it is estimated that 85% of Vietnam's footwear export turnover is implemented by CMT method, which completelyprocesses according to the designs and raw materials provided by customers 13% of export turnover is under the FOB method, which processes according to the designs provided by the customer and the producer takes the initiative in the source of raw materials and auxiliary materials. Only 2% of the export turnover is conducted with ODM method, of which manufacturerexports products according to its own designs and brands Promotion: trade promotion and ecommerce Conmpanies manufacturing leather shoes products have actively approached many trade promotion channels and participated in variousprograms, conferences, fairs and trade promotion exhibitions to introduce their products to both domestic and foreign markets. In the 4.0 industrial revolution, with the development of digital, ecommerce has become an effective trade promotion channel that helps businesses reduce costs, reach customers promptly and take advantage of numerous ecommerce B2B (businessto business) promoting channels, such as Alibaba and Amazon, to access and penetrate potential export markets People: Domestic leather shoes firms are facing a shortage of human resources both in quality and quantity, including design teams, skilled engineers and unskilled workers.At present, manufacturing enterprises of the industry mainly train laborers themselves, especially unskilled laborers.In particular, as scarcity and labor competition are common, businesses often face the lack labor force; therefore, to retain workers, businesses must ensure the favorable rights and good policies for employees, healthy and cleanworking environment, free health checkup Process: A variety of leather shoes companies have actively applied quality management 12 processes to suit each export market’s standards, such as ISO 9001, ISO 14000, BSCI:2003 standards, occupational health and safety management systems OHSAS 18001, risks management standards ISO 31000. Besides, organizations also apply production management tools such as 5S, Kaizen, LEAN, Cleaner Production (CP), KPI, TPM, MFCA, QCC. [46] Physical: machinery, equipment, infrastructure and financial potential In order to meet the large export orders and reduce time to complete the orders, the leather shoes export enterprises have focused on investing in machinery and equipment to increase productivity in each stage of production Machinery and equipmentused to manufacture leather footwear products in Vietnam are at average level compared to the world so investing in equipment may help businesses increase productivity, reduce costs and enhance labor safety in some stages Step 4: Check,assess, implement, and completestrategies to develop export markets Reassesstheexport market development strategy and business activities are periodically indispensable practices of the enterprise After each fiscal year, theleather shoes exporters organize conferences to reassess the situation of production and business in general and export market development strategy in particular. Especially, in the context of internationally fastchanging market, firms must evaluate their strategies and environment in order to make appropriate adjustments to their business resources and objectives 2.3 Assessment of achievements, limitations and causes of developing export markets practices 2.3.1. Achievements and causes In the 10year period from 2007 to 2017, Vietnam was always in the top 5 largest footwear producers in the world in terms of export value, which is in the same group with the leading exporting countries including China, India and Brazil.In 2018, the leather and footwear industry reached over US $19.5 billion in export turnover, up 8.4% compared to the same period in 2017. In other words, while total footwear exports reached USD16.238 billion, leatherupper shoes, coded HS6403, took about USD 4.95 billion, accounting for about 30% of footwear exports The achievements in developing the export markets of Vietnamese leather shoes products have been accomplished by the following reasons: (1) Stable business environment, (2) Skillful labor with adaptive capacity, (3) Competitive production costs, (4) Established longterm partnerships with many major brands in the world, and (5) Convenientlocation and infrastructure for Vietnam to export goods rapidly to markets 2.3.2. Limitations and causes 2.3.2.1. Limitations and causes from the government Firstly, Vietnam's system of policies and laws has not kept up with international 13 law standards, based on WTO commitments and ‘new generation’FTAs, especially, not creating a legal corridor to encourage SMEs to grow. Secondly, leather shoes products are not yet considered as a strategic export item. Thirdly, the capability to implement FTAs at all levels of the state, associations and enterprises is still limited; therefore, it is necessary to study a number of new export markets that are potentially suitable for businesses such as Africa, China East, South America. Fourthly, trade promotion activities have not really motivated SMEs and not caught up in the context of 4.0 industrial revolution and digital economy as well as new forms of trade promotion through ecommerce channels. Fifthly, the system of standards, technical standards and conformity assessment process of the industry is still lacking. Sixthly, with the rapid fluctuations of international trade, the ability to forecast is limited, thereby the enterprises still passively response to the markets and handlethe issues 2.3.2.2. Limitations and causes from the industrial association Firstly, policy consultations for state management’s agencies have not been regularly paid attention to. Secondly, the resources have been limited and not yet focused. Thirdly, the association has not gathered the strength of the business community in developing export markets. Fourthly, it is still lacking the sufficient surveying activities to build database of the industry on production, labor, supporting industry and the supply of raw materials 2.3.2.3. Limitations and causes from the enterprises The research presents some limitations of enterprises in developing export markets of leather shoes products, which are shown on three aspects: building an exportmarketdevelopmentstrategy (Ansoff model); selecting modes of export; and implementing the export market development strategy (7Psof the marketing mix) Although the growth rate is quite high in the export processing and the scale of the business increases, the domestic leather shoes enterprises still suffera number of limitations: financial resources, design capacity, cord capacity,undeveloped technology and equipment, weaksupporting industry, leather materials and accessories, which make Vietnam’s leather shoes businesses unable to deeply integrate into the export value chain. It can be affirmed that the core cause of limitations in the development of export markets of enterprises lies in the ‘outsourcing production model’since Vietnam's leather and footwear industry has been ‘safe’ for too long with its lowest position in the product value chain Regarding export market development strategy: Ansoff model Marketpenetration strategy: Enterprises producing leather shoes for exporting in Vietnam are choosing to maintain their positions and make the most of key markets such as the United States, the EU, China and Japan However, while Vietnamese enterprises are mainly SMEs applying indirect or processing mode of export, the barriers in developed markets are immensely high, which leads to very low added value to the 14 products. The strategy and method of developing export markets in width is only suitable for the first stage in international economic integration, enterprises need to be aware of developing export markets in depth and to proactively dominate the upstream stages of the value chain, focusing on building their own brands Market expansion strategy: Some enterprises produce leather shoes products by seeking and exploiting new and potential markets that Vietnam has not gained much market share, such as in Eastern Europe, the Middle East, Africa, ASEAN, and South America.This strategy and method of developing export markets is in line with the current capability of leather shoes enterprises. However, since these markets’ barriers to entry are low, some potential businesses need to consider the sustainable development steps, such as direct export, direct investment, owning the distribution channel and brand when establishing the market position Product development strategy: Several Vietnam’s leather shoes enterprises have boldly improved and exploited their popular, intermediate, highend, green and environmentally friendly products in existing export markets, which is a favorable sign as investing in R&D, developing models and own brands can lead the leather shoes business to owning the international playground. The development of new segments of leather footwear requires companies to pay careful attention to the needs of the international market, methodically investing on the design stage, inputs, production lines and equipment, manufacturing procedures and high quality manpower Diversification strategy: This strategy is difficult for Vietnam’s leather shoes enterprises to apply because consuming new products in new markets requires enterprises to possess huge amount of resources, to improve products as well as introduce distribution to potential markets Regarding methods to develop export markets (modes of export): Enterprises producing leather shoes with domestic capital mostly choose to export indirectly through outsourcing for foreign partners, which makes enterprises passive in developing export markets Regarding the implementation of export market development strategy (7Ps of the marketing mix) Product: On the one hand, firms producing leather shoes mostly received designs from foreign design units and outsourced to partners' designs.Many businesses manufacturing leather shoes have the design capability but lack the financial resources to carry out marketing strategies to promote products; consequently, the efficiency is not high, the selfdesigned products have not created an effect in foreign markets. On the other hand, the fashion market in the world is so vibrant that always requires new models and new products to catch up with the consumer market Price: The average value of a Vietnamese leather shoes product (US $24.13/pair) is at the average level of the world. As the footwear enterprises mainly 15 perform the outsourcing, the domestic value collected is exceedingly low . Promotion: Leather shoes producingenterprises have approached many trade promotions channels such as conferences, fairs, exhibitionsto promote the brand of Vietnamese leather shoes to themarkets Currently, with the development of the 4.0 industrial revolution, businesses need to explore new trade promotion methods such as business matching and ebusiness matching, ecommerce B2B, business information . Place: The same as the distribution channel and export entry modes . People: At present, domestic leather shoes enterprises are facing a shortage of human resources both in quality and quantity from design and marketing department to skilled engineers andunskilled workers, whích results inlow productivity andincreased operating costs for businesses Process: Most organizations have applied the product quality management processes regardinginternational standards and environmental standards like ISO 9001, EMAS, and Ecolabel . Physical evidence: Small businesses, due to limited capacity, may not receive direct orders from foreign partners but outsource from large enterprises and FDI enterprises in particular stages. Besides, up to 90% of machinery and equipment in the production of leather shoes in Vietnam have to be imported CHAPTER 3: SOLUTIONS TO DEVELOP THE EXPORT MARKETS FOR VIETNAM’S LEATHER SHOES IN NEW CONTEXT 3.1. New context and prospects for developing export markets of Vietnamese leather shoes to 2025, with a vision to 2030 3.1.1. New context Firstly, the trend of globalization and international economic integration is still the dominant trend around the world in the future. Secondly, the Fourth Industrial Revolution brings a drastic change in productivity, scale and management model, which affect all economies in the world and in all sectors, including the leather and footwear industry and the leather shoes manufacturersin Vietnam. Thirdly, due to low labor and environmental costs, other nations tend their to move factories to Vietnam and Southeast Asia, which is an opportunity for Vietnam to take advantage of foreign investment flows around the world in order to boost production and to participate in global value chains. Fourthly, the escalatingtrade protectionism due to the impact of the global economy, along with the consequences of the US China trade war make developing countries like Vietnam find solutions to counteractprotectionism and trade facilitation 3.1.2. Forecasting on the development of export markets for Vietnam's leather shoes products in the new context 3.1.2.1. Regarding export markets In general, it is forecasted that the export market of footwear in general and leather 16 shoes products in particular in Vietnam will still focus on high turnover and traditional export markets such as the EU, the United States, China, Japan and South Korea, followed by the markets of ASEAN, the Middle East, Africa and South America 3.1.1.3. Regarding modes of export Firstly, indirect export is applied in the form of outsourcing to foreign partners, who will distribute the goods to markets around the world Secondly, direct export with the brand of a manufacturing unit is a form of production that enterprises directly perform the exportation of their goods to foreign partners without going through intermediaries.In the EU and the U.S markets, the share of exports directly under the brand name of domestic manufacturers is expected to increase but unlikely to grow sharply. Thirdly, entrusted export is forecasted not to increase, and may decrease. Leather shoes produccing businesses are now becoming more and more professional in export trade so the forecast of export by trust may be reduced 3.2. Goals and prospects of developing export markets for leather shoes products on the world market 3.2.1.Goals by 2025 The government has oriented the development of the leather and footwear industry, as an industry of the economy, that promotes the creation of jobs for society, raises workers' incomes and fulfills their responsibilities tocorporate social responsibility 3.2.2. Prospects of developing export markets for footwear products in the new context Vietnam has now been promoting the signing of a series of FTAs with potential markets for footwear like the EU, theU.S., Asia Pacific; as a result, it will create great price competitiveness compared with many other exporting countries that have not signed theFTAs 3.3. Some perspectives on developing export markets for Vietnam's leather shoes products Firstly, developing the export markets for Vietnam's leather shoes products is to implement the goals, strategies and visions of the party and the state in order to diversify and multilateralize export markets in the fastchanging context Secondly, the development of export markets for leather shoes products must conform to the overall socioeconomic development planning and the national industrial development planning as well as the local socioeconomic development planning Thirdly, developing export markets for leather shoes products must mobilize economic sectors, domestic resources and attract foreign investment to build and develop Vietnam's leather and footwear industry in the direction of proactively serving exports, which helps increase foreign currency earnings for the country, jobs and incomes coupled with improving the lives for workers. It is a need for considering leather shoes as a strategic product, in which 17 development of leather and supporting industries is the core of the industry. Fourthly, developing the export market for leather shoes products associates the rapid development of production scale with the focus on expanding the export market as well as the domestic market, also the research on the application of scientific technology and the development of quality human resources. Fifthly, developing the export market for leather and footwear products is to strongly develop the production of raw materials and supporting industries for the leather shoes industry. Sixthly, developing the export market for leather shoes products is a fast, stable and sustainable development of enterprises that produce leather shoes products in the direction of specialization, modernization and application of new modern equipment, environmentally friendly approach. Seventhly, developing export markets for leather shoes products to enhance the capacity of selfdesign, develop new products, manufacture highquality leather footwear with high added value and prioritize application of automation technology in production management organization. Last but not least, enterprises must make efforts to overcome challenges and become pioneer in "finding a way to open the realms", dare to develop and dare to expand export markets to reach out to the world 3.4. Orientation of developing export markets for Vietnam's leather shoes products 3.4.1 Orientation from the government to develop the export marketsforVietnam’s leather shoes 3.4.1.1 Actively international integration to develop export markets: Vietnam actively integrates into the international economy through the negotiation and signing of many ‘new generation’ FTAs including EVFTA with the EU, CPTPP with 11 important trade partners in the world, RCEP (China), VKFTA (Korea), VNEAEU FTA (Eurasian Economic Union) At this point, we can consider the signing FTAs with key partners, such as Africa, the Middle East, Central and South America, Eastern Europe, the United Kingdom, in order to explore new and potential markets in the world 3.4.1.2. Formulating strategies and plans for development of leather and footwear and supporting industries to develop export markets: The government plays an crucial role in building up strategies and the development of the leather and footwear industry, namely strategic product planning, planning and development of clusters and secondary regions for leather shoes production activities. Furthermore, leather footwear must be considered as a strategic export item. Planning of development centers and production capacity according to territories are based on the advantages of human resources; the supply of raw materials; transportation and seaports in the direction 3.4.1.3 Orientation of developing export markets for Vietnam’s leather shoes products This orientation includes market orientation of the USA, the EU, ASEAN, Middle East and Africa, Russia and Eastern Europe and South America 18 3.4.1.4. Assistance in resolving international trade disputes Vietnam promulgates the Competition Law (2018) and theordinanceon anti dumping of imports into Vietnam, antisubsidy and trade remedies in accordance with international law standards and practices. This is an important legal basis for Vietnam to apply safeguard and trade countervailing measures when necessary. The Ministry of Industry and Trade upgraded this system to help businesses understand useful information, identify risks of antidumping lawsuits in key markets, forecast risks, proactively formulate and adjust plans, and strengthen coordination among businesses in the industry 3.4.1.5. Trade promotion to develop export markets In the new international context, Vietnam needs to continue innovating, orienting and improving the efficiency of national trade promotion activities in order to support enterprises to develop export markets The Decree details the Law on foreign trade management on a number of measures to develop foreign trade. In addition, the National Trade Promotion Program in 2018 has had many innovations when focusing on supporting key projects in terms of industries and markets, which gives priority to brand development for some key products annually 3.4.1.5. Technical assistance to develop export markets In order to meet the increasing goods’ technical standards of export markets, in recent years, Vietnam has continued to implement and perfect the legal system of standards, technical regulations and conformity assessment process 3.4.2 Orientation from the association to develop the export marketsforVietnam’s leather shoes 3.4.2.1. Orientation of Vietnam Leather and Footwear Association in developing export markets practices LEFASO needs to focus on the several orientations: linking, cooperatingin terms of economy and technology in production, business and service, which enhances the product value; representing and protecting the legitimate interests of members; contributing to create more jobs and the lives of workers in the leather and footwear industry; organizing conferences and seminars to exchange market information and encourage cooperation as well as the links between members to coexist and develop. The association should carry out trade promotion activities and provide information, documents, seminars, training courses, technical demonstrations, technology transfer, tours, surveys domestically and internationally 3.4.2.2 Assistancein protectingbenefits of enterprises in foreign markets and sponsoring their export products The Association should establish a division inforeign countries to represent and protect the legitimate advantage of its members in its overseas activities; help and patronize individual research works, protect copyrights for research works, inventions and 19 innovations in the leather and footwear industry, and protect policy interests in production and sale of products in accordance with the laws of the State; receive and gather information about problems encountered by member enterprises when conducting overseas business activities in order to provide timely legal support, and also report to the Vietnamese management agencies andforeign managing agencies in order to guide and handle the benefits of Vietnamese leather and footwear enterprises doing business in foreign countries; act as an agency representing the community of Vietnamese leather and footwear business firms doing business in exchanging and cooperating with the local foreign business community; build and develop international relationships with international individuals and organizations 3.5. Solutions to develop export marketsforVietnam's leather shoes products in the new context 3.5.1. Solutions from the government 3.5.1.1. Group of solutions to develop export markets for leather shoes products Firstly, the government should continue to improve Vietnam's institutions, policies, laws according to international standards, based on WTO commitments and ‘new generation’ FTAs, which helps to create a legal corridor and an open investment environment for businesses, especially SMEs, to develop into national and international brands of leather shoes manufacturing Secondly, the state should consider aboutcompleting and effectively implementing strategies, plans, programs and policies of developing export markets for leather and footwear products.Leather footwearproductsshould be given to considering as strategic export items in Vietnam and the development of leather manufacturing industry is a prerequisite for leather shoes Thirdly, the Government, Ministry of Industry and Trade, and Ministry of Foreign Affairs should continue to promote negotiation, signing and implementation ofFTAs with key markets, andimprove capacity to effective implementation of FTAs at all three levels of the government, the association and the enterprises Fourthly, the Government and the Ministry of Industry and Trade need to continue to innovate thinking and promote trade promotion activities to catch up with the rapid development of industrial revolution 4.0 and digital economy, focusing on effective, low cost trade promotion method that are suitable for SMEs such as ecommerce channels Fifthly, it is a need to build and perfect the system of Vietnam quality standards, Vietnam national brand and the leather and footwear industry brand. Vietnam needs to continue signing more mutual recognition agreements to help businesses overcome technical barriers in export markets. The National Steering Committee against smuggling, trade frauds and counterfeits (Steering Committee 389) continues to promote effective market management activities to manage substandard imported leather footwear, thereby 20 raising high quality of domestic production to support the development of export leather footwear products Sixthly, the state should help the firms to negotiate, resolve commercial disputes, deal with the possibility of legal disputes The Vietnam Chamber of Commerce and Industry (MOIT), in collaboration with relevant ministries and the Vietnam Leather and Footwear Association, enhances the ability to forecast legal risks with the rapid changes of the international environment; thereby assisting enterprises in preventing legal risks and proactively handling disputes in export markets Seventhly, the government and relatedministries need to continue promoting customs procedures reform, simplifying and standardizing, increasing transparency in customs procedures, assisting SMEs in producing leather footwear to export and attract many types of both domestic and foreign investment into production activities and export worldwide 3.5.1.2. Group of solutions to enhance production capacity Firstly, planning and developing footwear centers; Secondly, researching and training to develop highquality human resources; Thirdly, solutions to develop the production of auxiliary materials and supporting industries, investment, development of tanning industry to ensure environmental treatment; and Fourthly, developing design centers 3.5.2. Solutions from the association LEFASO needs to continue to perform well the role of a bridge, representative and support for the rights of businesses; making recommendations to the state in developing policies on the development of the footwear industry; remove obstacles for businesses; provide market information; technical assistance, training advice; promotion; protect the legitimate interests of enterprises and perform other obligations to the state 3.5.3. Solutions from the enterprises 3.5.3.1. Solutions to raise awareness about developing export markets In terms of the companies, besides exploiting the domestic market well, the first and most important thing for enterprises producing leather shoes is to raise awareness of developing export markets 3.5.3.2. Group of solutions to improve the capacity of developing export markets The solution group for developing export markets consists of 4 steps according to the Ansoff model: (1) Regarding the research and assessment of export markets: Enterprises also need to have certain research and understanding of consumer markets and order trends. Researching and assessing export markets allows businesses to make adjustments within the enterprise, adjust sales policies, prices that are most appropriate, most profitable, and increase adaptive capacity beforechanges of markets (2) Setting up strategy to develop export markets development according to 21 Ansoff model: Market penetration strategy: Businesses need to continue to effectively exploit this strategy by increasing sales, market share and added value in 5 traditional markets, with the focus being the United States, theEU, China, Japan and South Korea (accounting for 85% of the export turnover of Vietnamese leather footwear). Enterprises need to seek more ordering partners or import partners in each market to diversify market partners, minimize risks, and allow businesses to penetrate deeper into the market. Another method of penetration is to contribute capital or buy back shares of local trading partners in order to guide trading partners to import more goods and to contribute capital to partners to expand the distribution system Market expansion strategy: Vietnamese businesses need to take advantage of the signing of many FTAs to open opportunities to access new and potential markets in ASEAN, Africa, the Middle East, South America, in accordance with production and export capacity, especially SMEs Besides, companiesshould actively look for new marketsthat have FTAs with Vietnam or ASEAN, such as India, China. Regarding SMEs of the leather and footwear industry, it is necessary to seek for import partners in near and potential markets such as Cambodia, Thailand, and Myanmar For large footwear enterprises with good production capacity, it is a need to study and approach import partners in new markets such as South American countries In order to expand successfully, businesses need to contact closely with the association and onthespot business to capture demand and contact partners Product developmentstrategy: Vietnamese leather shoes enterprises should continue to boldly improve their products and exploit different segments of footwear products in existing market The direct solution to implement a product development strategy is to invest in design capacity, invest in equipment to expand the capacity of machinery and equipment to produce new products. Enterprises need to have longterm and synchronous solutions, from accumulating capital, investing in people, investing in machinery and equipment, finding suitable partners to build smart marketing strategies and building stabledistribution channels Diversification strategy: This strategy is not really feasible at the moment because consuming new products in new markets requires businesses to own large resources in both production and export, in order to introduce the distribution to potential markets Regarding the modes of export: Indirect export or processing (CMT, FOB) is only suitable for the first stage of international economic integration, which brings very low added value, so the footwear enterprises need investment activities, participating more deeply in the leather footwear value chain to bring about greater value. Vietnamese leather shoes enterprises need to follow direct export under the manufacturer's brand name (ODM) approach as the added value is larger. If this is the case, they need to be 22 able to access it directly,and contact customers to reduce their reliance on intermediaries, invest in production overseas, build their own brands for Vietnamese enterprises and develop distribution channels in export markets (3) Developing and implementing export marketing strategy (7Ps) 1.Product: Regarding the design of designs, manufacturing enterprises need to continue building a quality design team with design capacity. Regarding product quality, it is necessary to ensure the quality of footwear products throughout the entire quality management process of this item from various activities, such as input raw material supply, material handling, processing of finished products, and packaging, labeling, after sales services. In terms of features, companies need to continue improving their products and developing new and highquality leather footwear products to meet the needs of different customer segments 2. Price:In terms of price, the average value of a Vietnamese leather shoes product is already higher than the world average, and the footwear business needs to take advantage of newly signed FTAs, removing tariff barriers and expanding access to export markets, making leather shoes exports more competitive in the future. In terms of costs, the production cost of leather shoes tends to increase due to the fact that it has not mastered the supply of raw materials, animal husbandry to obtain leather that does not meet the technical requirements; therefore, in order to maximize profits, businesses need to determine directions to build own brands and further control the value chain of the leather and footwear industry 3. Promotion: In the form of traditional trade promotion, businesses access many traditional trade promotion channels such as domestic and foreign programs, conferences, fairs and exhibitions. Regarding modern trade promotion, with the strong development of the industrial revolution 4.0, businesses need to be dynamic and innovative in thinking about new trade promotion methods such as ecommerce with efficiency with low cost, suitable for enterprises of Vietnam leather shoes SMEs 4.Place: For enterprises directly exporting products, it is possible through local distribution partners in export markets to penetrate the market. A modern method is now through international electronic exchanges to find partners before proceeding to build a longterm distribution channel Strong enterprises can build their own distribution channels through setting up agents at all levels. Accordingly, businesses can set up in each target market a large distribution agency and cooperate with parties to build a system of smaller agents, thereby gradually building distribution channels in the exportmarket 5. People: For unskilled workers, it is necessary to consider training programs, closely associated with vocational schools, to create conditions for students to practice at the factory right from the first year. For the design, marketing, skilled engineers and enterprises teams, there should be mechanisms to attract, treat and recruit highquality human resources 23 6. Process: In general, most of Vietnamese leather shoes enterprises have applied product quality management processes according to international standards and environmental standards such as ISO 9001, EMAS, and Ecolabel Regarding waste treatment, businesses need to invest in renovating equipment to improve product quality and reduce waste sources, contribute to improving environmental pollution, meeting meet the environmental standards of many demanding export markets 7 Physical evidence: Vietnamese enterprises need to invest in machinery, automate many production stages in order to increase productivity, improve quality and save time and costs. Investing in machinery and technology in high valueadded stages in the leather shoes production value chain, such as design development and production, for theautomation of significant production stages For SMEs, because of the limited economic potential, firms need to proactively call for more investment to expand and link production, access preferential credit packages on technology investment of the state, participate in cheaper technology transfer activities supported by the association and foreign partners. Enterprises should step up activities of researching, manufacturing and improving machines to meet the demands of leather shoes in Vietnam in the coming time (4) Checking, assessing and completingstrategy to develop export markets With the US, EU, Japan, and South Korea markets: penetrating the market byincreasing sales and communication value in products, and developing products inhighclass, green segment products, taking advantage of commitments in FTAs, occupying upstream of the Value Chain, exporting directly With the Chinese market: penetrating into the market and developing medium and popular segment products, developing distribution channels, joint ventures, building own brands With ASEAN, Eastern Europe markets: expanding markets, investing abroad, developing distribution channels, joint ventures, building own brands With African markets: market expansion, external investment, development of distribution channels, own brands, FTAs research studies With Middle East market: market expansion, enhancingtrade promotion, FTA research study. Withthe South American market: expanding markets, direct export, direct trade promotion, FTAs research study With the U.K. market: New bilateral FTAs negotiations and signing 24 CONCLUSION The research has solved the following specific objectives: Firstly, the thesis clarifies the methods of developing export markets built from Ansoff's theory to select strategies todevelopexport markets that enterprises will implement these strategies by 7P sof the marketing mix. The paper studied experiences in developing export markets of some major shoes producing countries in the world and learned a lesson for Vietnam; as well as analyzing the factors that affect the development of the export market of Vietnamese leather shoes on three levels: macro; micro; and internal environment Secondly,the research analyzes the current situation of exporting leather shoes and the practice of developing export markets of Vietnamese leather shoes from 2007 to 2017, at the same time assesseson the dimensions of scale, growth rate, export market structure, and the mode of export. It also evaluates the measures of the state, the sssociations and the enterprises on developing export markets as well as analyzes the achievements, limitations and causes Thirdly, these new elements were identified including: the rise of protectionism; the U.S China trade war; the Industrial Revolution 4.0 Facing these fluctuations, Vietnam's export of footwear is expected to continue to increase thanks to many favorable factors in the medium and longterm. It is forecasted that Vietnam's footwear export turnover will continue to grow by 8% per year from now to 2025 In terms of state management areas,the government shouldput all efforts in 25 negotiating other with countries in order to create favorable legal conditions, tax conditions and trade regimes for enterprises to develop markets, support enterprises in legal stages and technical barriers in each market, support trade promotion for footwear in each country Leather and Footwear Association, it is necessary to continue activities of supporting businesses, proposing policies, proposing technical standards of industries, organizing production links, supporting trade promotion organizations in markets to support the growing community of footwear businesses and market penetration As regards theenterprises, it is necessary to drastically improve production capacity, enhance international trade management capacity, actively research the market and select effective market entry methods to increase the productivity as well as the export value, bringing higher profits for businesses. In order to achieve the overall effect, these groups of solutions must have a synchronous and close coordination between all three entities involved in the development of export markets for leather shoes products ... CHAPTER 2: CURRENT SITUATION? ?OF? ?DEVELOPING THE? ?EXPORT? ? MARKETS? ?FORVIETNAM’S? ?LEATHER? ?SHOES? ?FROM 20072017 2.1. Current situation? ?of? ?exporting? ?Vietnam’s? ?leather? ?shoes 2.1.1. Overview? ?of? ?footwear industry and? ?leather? ?shoes? ?exports... Besides, up? ?to? ?90%? ?of? ?machinery and equipment? ?in? ?the production? ?of? ?? ?leather? ?shoes? ?in? ?Vietnam have? ?to? ?be imported CHAPTER 3:? ?SOLUTIONS? ?TO? ?DEVELOP? ?THE? ?EXPORT? ?MARKETS? ?FOR? ? VIETNAM’S? ?LEATHER? ?SHOES? ?IN? ?NEW CONTEXT... and most important thing? ?for? ?enterprises producing? ?leather? ?shoes? ?is? ?to? ?raise awareness? ?of? ? developing? ?export? ?markets 3.5.3.2. Group? ?of? ?solutions? ?to? ?improve the capacity? ?of? ?developing? ?export? ?markets? ? The solution group? ?for? ?developing? ?export? ?markets? ?consists? ?of? ?4 steps according? ?to? ?