Vietnamese firms should focus on market niches and sectors that are not the strength of Chinese firms, like customer oriented services, to maintain their competitive edges, a German professor from the University of Leipzig told Tuoi Tre News.

“If you want to be competitive, you should be innovative first,” said Prof Dr Utz Dornberger, director of the International Small Enterprise Promotion and Training program, while visiting Vietnam as a trainer for the Praxispartnership Project, a project organized by Leipzig University, Vietnamese German University and  Vietnam Chamber of Commerce and Industry.

What lessons have German SMEs operating in the textile industry learned from their battle with Indian and Chinese products in both their home and international markets?

In the past, the German textile sector faced stiff competition with Chinese and Indian firms, a battle which some 65 percent of them, mostly small and medium enterprises (SMEs), lost.

To cope with the situation, the Germans think about response strategies to focus on textiles for technical purposes, like textiles for construction, and cooperated with the chemical industry for the final outcome. Though not all of those applying those strategies succeeded, many got the job done.

Today Germany once again has a vibrant textile industry, mostly focusing on textile with technical applications.

Now, it is a little bit difficult for the Chinese competitors to produce such textile products, as the production of such products requires a proportion of innovation resulted from research and development (R&D), which will take them much more time. When they have finished copying the products, they have to face new innovations from German R&D labs.

For German firms now, to stay competitive now means to be innovative, as we cannot compete in price with Chinese products.

It is an ongoing game, you can be successful today, but it you stand still, Chinese firms will churn out the same products in the next two-three years, so you keep being on the move.

So what lessons can Vietnamese SMEs draw from this? What market niches can Vietnamese firms penetrate?

In my opinion, any country has to rely on competitive and comparative advantages you have, and in the case of Vietnam, agriculture and aquaculture-based products, the enhancement of processing industry [instead of exporting raw materials], and knowledge intensive services, may be good choices.

The world needs food, and the world population is growing, so there is a secured market in the future.

Moreover, with the focus on agriculture and aquaculture-based products, not many move to the city, as they have good business bases in the rural areas, [so there will be not much pressure on urban population and urbanization.]

I’m a little bit skeptical about the garment and textile industry, as you have to compete with newcomers with cheap labor costs, like Myanmar, except for some big firms that can incorporate the factor of design into their products and sell in their own brands.

I think the capacity of design is an edge of Vietnam, as Vietnam has a history for this, just look at your handicraft industry.      

I have seen some young Vietnamese designers become successful internationally, so you need those people for the implementation of these growth strategies for the garment and textile industry.

Knowledge-based industries – electronics and software, are also worth consideration for future growth. For consumer electronics, the question is if Vietnam can set up a sustainable supply chain, a good supporting industry, for foreign electronics giants like Samsung. 

You can stay at the lower-end part first, and move up the ladder for more advanced parts in the supplier industry for the motorbike or even the automobile industry later, maybe in the next 15-20 years.

What is your advice for Vietnamese SMEs and startups in the current economic context?

You need entrepreneurs who can recognize the new opportunities, the new demand trend of the local people. Vietnam has a growing middle class, so they need to understand what the people from the middle class are demanding in the future. 

You are living in a fast changing society in which consumers’ behavior is changing fast, so it is necessary to understand what will be in demand in the next two years.

The third thing is how to bring together all the resources you need to make the final products and service for the market, making questions about where to buy the resources, to get the support, and to distribute their products/services. The problem here is to pick the right suppliers and distributors.

In Germany we sometimes call it component entrepreneurship, which enable the firms to concentrate only on marketing and distribution, leaving all the other parts to competent suppliers.  You don’t really need to produce a product, just focus on assembling, packing and selling the product.

Can you tell us more about your plan to establish a team that trains businesspeople in Vietnam?

We have the project called “Praxispartnership Project” because the idea is that universities, including Leipzig and Vietnamese-German University (VGU), want to go together and support more development of SMEs in HCMC.

We want to transfer all knowledge to companies here, and specifically we want to do it in innovation and innovation management. For this, we need to develop a team of trainers because in innovation management you don’t have experts so much here in VN. We need to train people that can become trainers, and then with this capacity of trainers we can go to Vietnamese companies.

Which sectors do you want to focus on?

It can be service and manufacturing. There’s no specific sector to be focused on here. We have one more partner which is VCCI. It represents lots of companies in Vietnam and they have good access to lots of companies in both HCMC and Hanoi.

This is to us awareness creation – making more events about the topic of innovation. In other countries in the world, you have big Best Innovators Awards, always because we have to motivate our companies to be innovative. I think in Vietnam we also need it.

We want to contribute awareness creation in the society that innovation is important and that we have to invest in innovation management and so on so that the companies can be more successful.