A SWOT Analysis of Wood Furniture in Vietnam

Strengths

1. Plentiful labor that is readily adaptable and low cost relative to neighboring countries.

2. Excellent handicraft skills and a wide range of handicraft materials that give a basis for decoration and differentiation in the product.

3. An attractive environment for FDI by furniture companies due to its plentiful low cost labor and relatively stable environment both socially and fiscally.

4. The Government of Vietnam facilitates incentives for the sustainable development of the furniture industry.

5. The Vietnamese worker is flexible and has a striving work ethic that makes the development of a business an exciting and rewarding activity for those entrepreneurs able to invest in enterprise.

6. Vietnam has a growing name as a good destination for investment in furniture production, capable of competing with China with much less exposure to risk.

7. Recent accession to membership of WTO gives Vietnam a regulatory environment which is relatively predictable.

8. In no small measure due to its recent history Vietnam is the focus of much international development aid and it is developing the capacity to effectively absorb such aid.

9. There is a working export oriented infrastructure in Vietnam that has successfully minimized ‘red tape’ on both necessary imported inputs and exported product.

10. Foreign owned furniture factories, -around 50% of the factories are owned and managed by Taiwanese, Chinese, Korean, Singaporean, European, etc. You got the benefit of stable and low cost labor with foreign management.

Weaknesses

1. The Vietnamese furniture industry is heavily dependent on imported raw material. Almost 80% of wood used is imported.
   
   

2. The very rapid growth of the furniture producing industry is masking serious problems in management such as lack of marketing, poor pricing, lack of training and a general euphoria that the increases in exports can continue regardless. 

3. There is a shortage of training institutions. Those that do exist are weak and have little input to industry’s needs. The institutions urgently need adaptation to meet the needs of the industry.

4. The supplies infrastructure for machinery, tooling, finishing and fittings materials is underdeveloped for an industry as large as it is.

5. The lack of a design culture in furniture and the lack of designers and design schools to develop it.

6. The lack of basic market information has led to acceptance of pricing well below that achievable in the market place.

7. General technical know-how is only embryonic and there are no institutions that are catering expressly for the urgent upgrade of technological know – how.

8. Industry overall is producing relatively low quality product selling with no advantage other than ‘lowest price‘ to large multinationals who bring large quantities of sales but with little or no margins.

9. Lack of an International Exhibition facility that meets international standards reduces the opportunity for exposure to international buyer.

Opportunities

1. Furniture manufacture is still a ‘sunrise’ industry in S.E. Asia. There is ample space in the market place for quality producers supplying well designed furniture to controlled quality and on time.
2. Vietnam has a long history of stability from the 10th Century through to the latter half of the 19th Century during which arts and crafts flourished leaving behind a legacy that can now be drawn upon for design and decoration. This was further tempered by the French period which enhanced the already developed arts.
3. Being a relative newcomer to the market there is still time for Vietnam to develop a presence in the market through design, quality and business culture. It is essential to differentiate from its immediate neighbors but this differentiation should be based on positive aspects of quality, design, presentation, service and consistency and NOT just on price.
4. The traditional furniture production area in Bac Ninh has enormous potential in a number of areas;
   
   a) Product designed for the international market using the existing styles as the basis for design development to meet international tastes, and,
   
   b) The production of Classic French and English styles initially for the US market and then the European market.
   
   c) The production of decorative components as sub-contractors to the large indigenous and FDI companies.
5. The need to develop a material supply side in Vietnam is clear. It is essential that in doing so plantations and natural forests are developed within the guidelines of sustainability whether it be under Forest Stewardship Council (FSC) or other model.
6. The development of a strong furniture industry, of necessity, demands the development of a strong service industry to supply that production. This has the potential to create as many jobs as the furniture industry itself and can lead to many more exporting companies serving the needs of manufacturers overseas and in adjacent countries.
7. Innovation in the production of panel materials from rice husk waste, bamboo and other fibrous materials will help to reduce the dependency on imports and lead to product innovation as well.

Threats

1. The biggest threat to the long term development of the Vietnamese furniture is unprofitable or only very marginal production for large multinationals. This ties up vast amounts of capacity for minimum, if any, profit and leaves little or no scope for future development of the enterprises or workforces engaged in this business.
2. Lack of exposure of senior management to international markets and technical and financial training and the lack of training for designers, middle management, technical supervisors and skilled workers presents a major threat to the medium term development of the industry. Indeed the necessity to introduce training on short, medium and long term perspectives could be termed a crisis needing immediate action.
3. The ongoing debate on global warming may substantially increase the cost of transport and thus increase the cost of wood imports and the export of finished product. This would threaten the competitiveness of many marginal producers.
4. India, with cheap labor, maturing Teak plantations and an excellent position on sea routes may emerge as a competitive threat to the outdoor producers before they have had time to establish themselves and develop their identity and their market niche.
5. Competition from Vietnam’s neighboring countries is expected to intensify as a result of the implementation of the Asian Free Trade Agreement (AFTA). This may also lead to curtailment of their raw material supply to Vietnam.
6. Competition from wood material supplying countries like Brazil, South Africa… when these countries go into furniture production.