Business activities in Oristar: Situation and recommendations

ing aggressively thank to free trade policies of countries, which also facilitates oversea agent activity. Basically, the appearance of agent is to help trade flow smoothly and easily. Particularly, an agent provides a service of representing another on doing certain actions following his principle’s instructions. Agent’s activities not only cut down cost and time in case of two-side deals but also help the seller update the market information. For the buyer, he would benefit on the availability of goods or services that the agent provides on behalf of his principle. If there is no agent standing between the buyer and the seller, the trading process must take more time and affords for both the buyer and the seller. However, once an agent participates in the process, the problem will be solved easily and international transactions would flow smoothly. In return, the more international trade develops, the greater opportunities it will create to oversea agent activity. Hence, we might come to a conclusion that international trade and oversea agent activity have a reciprocal relationship. In following chapters, we will work on the real situation of Oristar and see the relation between them more specific. 1.2. Overview of metal market 1.2.1. World metal market Before going in company analysis, we should have an overview on metal market in general to get the basic knowledge on how the market is organized and operated. In addition, market characteristics and trends are also among focuses. Metal market has its own rules which are very different from others. One of the reasons is that metals are special goods, which follows only market supply and demand. There are many factors affecting to metal price. The fluctuation in price of one metal will have widespread influence on the materials, semi-products, and finished products used the metal as well. The movement in metal price is presented on metal exchanges such as LME (London Metal Exchanges), Comex (Commodity Exchange). The leading U.S. exchange for metals futures and options trading These markets are the guide line for all suppliers to make their own price because price of metals, which are inputs for their production, are reflected on such metal exchange markets. Hence, if there is a small change in price of one metal in LME, for example, it will lead to a succession of changes in price of all materials and products made from the metal. Because metal market is very highly organized and operated on market supply and demand through 24-hour transactions, it has been attracting more and more buyers and sellers to make deals in the market. The more deals the metal exchanges carry out, the more exact it reflects on the price of metals regarding to market supply and demand. Studying the relation of the two giants in the world metal market, LME and Comex might explain clearer. Today, LME and Comex are the two world biggest metal exchanges. Each one covers a large part of the world. For example, LME covers EU, Middle East and some part of Asia and Africa while Comex covers all America, Australia and some where else. Even though it seems that the two metal exchanges are fiercely competing to each other, they actually are supporting each other. It is because there is difference in time-belt between New York and London, so working time of each market is different, which enable suppliers and manufacturers around the world to expand the opportunities on booking price by using both prices of the two markets. In particular, they might decide to use LME price during the working day of LME but once LME close, they turn to use Comex price until this market close. Hence, the quotation period Quotation period: period that the seller allows the buyer to book price for the sale contract they has signed. will be expanded and it appears more opportunities for dealers in choosing price. Moreover, regardless of physical distance, all suppliers and manufacturers can still use LME or Comex price as a fix cost in their pricing. Later we will go in more detail. Although both LME and Comex have big influence to metal market in general, LME has still been the leader in metal market. In this report, we will focus on analyzing the most typical metal exchange-LME. LME has been the world biggest metal exchange since it was established 130 years ago at the centre of London. It is the world’s premier non-ferrous metals market offering futures and options contracts for aluminium, copper, nickel, tin, zinc and lead plus two regional aluminium alloy contracts. The Exchange provides a transparent forum for all trading activities and as a result helps to ‘discover’ what the price of material will be months and years ahead. This helps the physical industry to plan forward in a world subject to often severe and rapid price movements. Such is the liquidity at the Exchange that the prices ‘discovered’ at the LME are recognized and relied upon by industry throughout the world. The prices keep moving all the times reflecting supply and demand of materials by industries. In 2006 LME achieved volumes of 87 million lots, equivalent to $8,100 billion annually and between $35-45 billion on an average business day. Despite its location in London, the LME is a global market with an international membership and with more than 95% of its business coming from overseas . Being a 24-hour market, transactions on the LME are taken place through an inter-office telephone market and LME Select, an electronic trading platform. Each day the LME announces a set of official prices, which are determined from the open-outcry trading. This trading is highly liquid and trade and industry has confidence that they properly reflect the current supply/demand situation. These prices are used by industry worldwide as the basis for contracts for the movement of physical material throughout the production cycle. Normally, suppliers set their price based on LME current price + Premium. Premium includes all costs such as production cost, transportation cost, extra costs and profit. The Premium is the only one that makes different among suppliers and their competitiveness in price. However, quality of material is one of the significant factors to compete in such sensitive market. Materials which are listed on LME must be satisfied standards created by LME or equivalent international standards such as JIS (Japanese International Standards), CDA/ASTM (USA), BS (UK), DIN (Germany), ISO (international Standards). Therefore, LME’s role here is not only a guide line for setting prices but a common standard on evaluating quality of materials. In summary, metal market is a high standardized and liquid market which is directed by Exchanges such as LME and Comex. However, the LME has been keeping the position of a world leader thank to its long history and high prestige. The two most important roles of LME are providing prices due to the current supply/demand situation and building quality standard control. 1.2.2. Metal market in Vietnam As a part of world metal market, Vietnam market has operated on the same regulations of the world metal market. That means Vietnamese industries depend on LME or Comex prices to decide domestic prices. Nevertheless, supply and demand in Vietnam might not go with the trends in the LME or Comex because factors influenced on domestic prices are different to the world market’s. One of the remarkable characteristics of Vietnam market is the isolation among manufacturers in the same industry. Until now, there hasn’t had an official organization in Vietnam which gathers all manufacturers in the same industry and operates on the purpose of protecting domestic industry. That’s why market trends in Vietnam usually move adversely for both the manufacturers and the industry. It is caused by the price wars among manufacturers, which makes metal prices go down much while the world prices still remain or just suffer a small reduction. Such tough and endless competitions have led not only to the failure of manufacturer individually but also the whole domestic industry. For example, the situation of aluminium billet market in Vietnam. Recently, world aluminium price has been increasing each day from about $2346 to $2567/MT within first three weeks of October, 07. However, domestic aluminium price has been continuously rising in the period. The reason is that Vietnamese aluminium manufacturers are stuck in a marsh of price wars, so the domestic price trend goes in a contrast way with the world trend. The roof of the problem might come from the individual behavior of manufacturers which distorted the real supply and demand on the market and led to the unbalances in price between Vietnamese aluminium billet market and the world market. Hence, it appears an urgent demand of establishing an organization which is responsible for directing and orienting the market and preventing such continual price wars as it is being this time in Vietnam. Besides, another reason is that in Vietnam there are hardly any giant in aluminium industry who may have a big influence on the whole market or control the market. It is a fact that almost all big aluminium manufacturers in Vietnam have had similar performance and equal impact to the market. That’s why the competition in the market has become so tough. Some big aluminium manufacturers in Vietnam are Do Thanh, Dong Anh, Song Hong, Scancom, Quang Binh, Nam Hai, and Dien Bien. There are 60 % of these companies which have ever made deals with Oristar Oristar: which will be discussed in following chapters on aluminium billet. However, from time to time the business relationships have some changes. Oristar has to face with the competition coming from some trading companies at this moment such as Tran Phu electric Company, Van Xuan Co., Ltd and Tuong Thanh trading Company. Despite the fact that Oristar still has some competitive advantages over its rivals, there are internal problems that they should improve. In next chapters we will discuss in more detail. Chapter II. Oristar’s overall performance and its Business activity on Aluminium Billet 2.1. Company profile 2.1.1. Foundation and organization Oriental star Import-Export Co., Ltd (shortened form as Oristar.Co. Ltd) was established in 2002 by Mr. Pham Quoc Hung. Oristar has two offices in North and South of Vietnam. Head office is located at No.2, Tran Thanh Tong, Hanoi and another branch at 51/60 Cao Thang, 3 ward, HCM city. The number of employees has increased from 30 to 50 people within 2 years from 2005 to 2007. Oristar has two Business departments at the two offices, one Im-Export department, and one finance department at the head office in Hanoi only. Main business activities of Oristar are carried out in the close coordination of these departments that will be focused later. 2.1.2. Introduction to Oristar’s main business activities Oristar is a trading company special in non-ferrous materials and semi-products. There are two main business activities carried out by Oristar. First, it imports and resells semi-products such as copper Bus Bar, tube, aluminium plate and sheet, anodized aluminium coils and metal ceilings to domestic market. Second, Oristar performs as exclusive sales agent for many suppliers of non-ferrous metals in Vietnam such as Formosa (Malaysia) for Aluminium Billet, Hydro (Norway) for Primary aluminium ingot, MAA (Australia) for Aluminium alloy ingot, Sterlite (India) for Copper Cathode. Even though importing and reselling activity takes more time and affords, it is the activity of being sale representative that brings more money to the company. The commodities sold on behalf of suppliers almost are materials for manufacturing industries. For example, Aluminium billet is input for extrusion industry, Copper Cathodes is used popularly as input for cable and electronic industry. Oristar obtains a commission based on the quantity of the materials it sold and on the agreement between Oristar and its suppliers. Among all materials Oristar sells on behalf of foreign suppliers in Vietnam, Aluminium Billet is the most strategic one with highest annual revenue. In the next part, we will focus more on Aluminium Billet in analyzing Oristar’s business activities. 2.1.3. Oristar’s market share and position in the market Through five years running business, Oristar has created a good prestige in Vietnamese metal market especially for Aluminium Billet and Copper Cathodes. Today, there are about 30 % of extruding companies in Vietnam which have imported aluminium billets through Oristar. For other materials such as copper cathodes, primary aluminium alloy ingot and secondary aluminium ingot, Oristar has also built rather stable networks among oversea suppliers and domestic companies, which gives it a position in the market. Oristar’s role in the process is like a broker, who connects the buyers and the sellers together. However, Oristar has bigger liability to both suppliers and customers. Particularly, it has to follow up each sale contract and if there is any failure, Oristar has to co-ordinate in solving problem with both sides. Sometimes, Oristar ought to compensate for trivial claims from buyers for maintaining good business relationships with its suppliers. One of the most significant responsibilities of Oristar as being agent is selling materials as much as possible to local customers. Each year Oristar has to meet target revenues set by its suppliers, which is a good way for the suppliers to evaluate performance of their agent and also adjust commission rate to the agent accordingly. The strength of Oristar here is that it knows very well about Vietnamese market, where is rather strange to foreign suppliers to approach. For local customers, they can make advantage of Oristar’s expertise knowledge of metal market, which will support much for their decisions making about where, when and from whom they should import. In short, Oristar plays a very importance role in connecting foreign suppliers and domestic customers and keeping the international transactions between them flow smoothly and easily. In general, company profile has given the key information about Oristar, its organization, market share and major business activities. In the following part, we will go in more detail Oristar’s business performance through 2003 to 2006. 2.2. Business performance of Oristar from 2003 to 2006 2.2.1. Analysis on revenue during the period of 2003-2006 As mentioned Oristar has been started since 2002, until now it has been running for five years. The total revenue through years was increasing dramatically. The following is the table of revenue from 2003-2006: Total revenue between 2003 and 2006 (billion VND) Year 2003 2004 2005 2006 Revenue 20.5 32.5 127 135 Source: Data issued by Oristar finance department 2006 The second year after setting up, the revenue increased about 50% in compared with 2003. The revenue broke record in 2005, which was 4 times bigger than 2004. The increasing trend has still continued in 2006 with a slight rise. All in all, Oristar’s revenue has continuously increased through 5 years especially in 2005 with nearly 100 billions VND. That is a very impressive number to a new established company. In the total revenue, 40% comes from importing and reselling activity and the rest 60 % is from the commission of being agent. The below will explain more the both two main business activities. 2.2.2. Oristar’s main business activities Importing and reselling activity focuses on finished and semi-finished products such as copper Bus Bar, tube, aluminium plate and sheet, anodized aluminium coils, metal ceilings, aluminium sandwich panels. Copper Bus Bar has been leading in turn over and being the strategic product of Oristar from the beginning. For recent years, Copper Bus Bar has reached the revenue around 12 to16 billions VND. Aluminium plate and sheet is the second one after copper Bus bar with annual revenue around 7 to 10 billions VND. This bellow table would describe in detail business activities on these products this year. Total revenue of three quarters 2007 (billion VND) Product Copper bus bar Copper tube Anodized Al Metal ceilings Revenue 9.3 4.8 7.5 5.7 Source: Data provided by Oristar finance dept-September, 2007 The latest figures about business results of Oristar’s business departments are still moving in the increasing trend in annual revenues. As mentioned, Copper bus bar has been the leader in revenue since 2003. The number of 9.3 billions VND in three quarters of 2007 turnover has made it become an uncompetitive rival to others. However, the rest three commodities all have kept increasing sales compared with last years. Business departments (BDs) take responsibility to sell these products to domestic market. Basically, BDs have to do market research first and then decide how much they should import to resell to the local market. A report will be sent to Import-Export department for importing the estimated quantity and here the responsibility has been passed to Im-Export dept (department). The duty of Im-Export dept is working on documents and choosing the supplier who can offer the best quality at the best price. However, in case the imported items can not be sold completely in domestic market, it is again Import-Export department who is responsible to return them to the sellers with 60% lower than import price. Finance department are supposed to open LC or function other terms of payment as TT, D/A, D/P. Normally, L/C and TT are the most popular ones in Oristar’s international payment. L/C is usually used for the payment of whole commercial invoice but for partly payment TT is preferred. Therefore, whenever there is an importing requirement report from Business department, both Im-Export dept and Finance dept must be involved in. Business department must set haft-month plans of revenue for each product which is under a certain staff’s duty. Even though revenue plan is not compulsory for everyone to fulfill, it is still the profile of each sale staff and an evidence for the director to evaluate the efficiency of each individual. Usually, there are two meetings each month to look back the results from business activities of company on the whole and of each individual in particular. One of the most important purposes of these meetings is to make reasonable adjustments to business plans regarding to market movements. This policy seems to be very useful in Oristar because it has applied the policy since 2005 and its revenue in 2005 broke record which it has never had before. The continuous increase in revenues through later years is also a very persuasive proof for the conclusion. That’s why Oristar has intention of setting revenue target for sales on behalf of foreign suppliers as well. Oristar has two business departments at the north and the south of Vietnam and each department cover a separate market accordingly. As special in aluminium and copper product, Oristar’s customers are mainly in industries such as electrical equipment manufacturing, metal fabrication, and automobile and motorbike production. However, one of difficulties to Oristar here is that most of its potential customers are Japanese companies which import materials directly from its mother company in Japan at a very low price. Therefore, Oristar hardly has any competitiveness in such situations except for the case of shortage. To overcome this problem, business departments have strategies to approach Vietnamese companies in the same industry to make advantage of market knowledge. Moreover, Vietnamese companies are more independent and easier to work with because they have the same language and working style. Besides, Oristar has also searched for niche markets which big competitors usually ignore. For example, small and medium side enterprises which have unusual demand or seasonal demand. In general, business activities of Oristar ought to face many difficulties but thank to applying smart strategies Oristar is still become a big rival in Vietnamese metal market. Another key activity of Oristar, which contributes about 60% in annual revenue, is acting as agent for foreign suppliers in Vietnam. Recently there have been four strategic materials that Oristar sells on behalf of the suppliers: Aluminium Billet, Primary Aluminium Ingot, Aluminium Alloy Ingot, and Copper Cathodes. As said above, the revenue from these activities is the commission on the quantity Oristar sold. The amount of commission is depended on different materials and suppliers but normally the commission is around 5 to 10% of each sale contract. Aluminium Billet has kept the top turnover during 3 recent years, Copper Cathodes just follows Al Billet a small quatity, but Primary Al ingot and Al alloy ingot do not have a very good performance at this moment. The following table will describe the contributions of each material in the total revenue through three quarters 2007. Total revenue of first three quarters 2007(billion VND) Materials Al Billet Primary Al Ingot Al alloy ingot Copper Cathodes Revenue 32.8 11.5 9.5 26 Source: Statistics from Oristar’s Im-Export dept September, 2007 As the figures say, Aluminium billet has still kept the leading position in revenue. The second one is belong to Copper Cathodes which is just about 6 billions VND lower than Al Billet. The rest two materials Primary Al ingot and Al alloy ingot have the revenue about 1/3 of the two top ones. In spite of the differences among these figures, they all have a common which is the revelation of important role in this business field of Oristar. Each year the commission on quantity of materials sold on behalf of suppliers brings about 80 to 100 billions VND. However, these business activities do not require a lot of personnel as importing and reselling activity carried out by Business departments. Therefore, efficiency in this business field is much higher than the other. Being an agent in Vietnam, Oristar has liability to reach target revenue each year and will benefit a fixed commission as mentioned which is about 5-10% of sale contract value. But in case Oristar can not fulfill its duty successfully its suppliers might think to change to another agent, which is expected to have better performance. Therefore, Oristar must strike hard to keep its position in such competitive market. Efficiency of an agent is considered basically on annual revenue but today customer relation is becoming more and more important among criteria. That’s why there is increasing important role of agent nowadays. The most vital characteristic of an agent is that he connects the seller and the buyers together, and lends his credibility to both sides. For the seller, they might not know well about their customers and also foreign market as his agent does, so it will be more risky for the suppliers to sell to the customers that they don’t have enough information to evaluate their credibility. For the buyer, most of them are not expert in foreign markets; therefore, it will be smarter for them to find another person who can help them to choose the best material at the best price from the best supplier. That might be the main reason for the successes of Oristar until now. Besides, Oristar has also provided a guarantee for both the seller and buyer of shipment and payment respected to the sale contract signed between them. In short, the role of Oristar here is the credibility that it allows both buyers and sellers to borrow. For everyday transactions Oristar needs to follow up sale contracts (SC) such as requiring the seller to issue SC, sending back to the buyer to get the signed SC. Once SC has signatures of both sides, a new task for Oristar is to boost the buyer to open LC in time and the seller to ship the materials as schedule. That is the most significant liability of an agent after SC is signed. However, normally not all SC flow smoothly but there are many potential problems such as delay in documents or shipment, which make the buyer get into trouble to receive the cargo in time for their production. It is not mentioned the case of poor-quality materials or missing cargo. Such claims should be solved gently and satisfactorily for both sides, so it is the liability of Oristar to support them to find out the best solution and maintain the good business relationship between them. Hence, the role of agent is becoming more and more important in international transactions today. This partly reasons for the successes of Oristar recently. 2.3. Oristar’s business activity on Aluminium Billet Aluminium Billet is the most fruitful material in agential activity of Oristar. In this part we will focus on analyzing business activity of Aluminium Billet only. However, before going into detail the analysis, it will be better to give a general idea about what Aluminium billet is, how it is used and where its market is. Then we will discuss about Oristar’s recent business performance on Al billet including the information about its customers as well as Billet suppliers, and also the competition among Billet suppliers in Vietnamese market. Now let’s look at each matters turn by turn. 2.3.1. Introduction to Aluminium Billet Al Billet is a kind of alloy using in extrusion industry Extrusion is a manufacturing process used to create long objects of a fixed cross-sectional profile. A material, often in the form of a billet, is pushed and/or drawn through a die of the desired profile shape. . Alloy is different to base metals which are extracted from nature such as Primary aluminium ingot or Copper Cathodes. Normally, Alloy is produced for the purpose of output. Aluminium billet is the alloy for extrusion only but different series are for different aims of extrusion. For example, AA 1 series which has hardest temper are usually used in motorbike manufacturing. AA 7 series with the lowest temper are used in prefabricated structure. In Vietnam Al billet 6030 with medium temper are most popular and used in domestic buildings for window and door frame systems. Even though Aluminium Billet has its own international standards, suppliers still can be able to make some changes in chemical composition of billet to meet their customer’s requirement. However, the difference should be fluctuated in set standards for Aluminium Billet. Aluminium billet is produced into profiles in different shapes for its different purposes. For example, thin profiles are used in domestic buildings while thick profiles are often used in transport for airframes, road and rail vehicles and in marine applications. 2.3.2. Market situation of Aluminum billet in Vietnam Because Aluminium Billet is the material used in extrusion industry, its market will be considered as production market and its customers are manufacturers as well. The market has some differences to consuming market. The basic difference is the purpose of purchase. Customers in consuming market buy goods to satisfy their demand but customers in production market purchase materials for commercial aims. Another difference is the competition level among customers to have goods. In production market, manufacturers have to compete to each other toughly in purchasing needed materials in shortage time, which rarely happens in consuming market. Shortage and speculation are also the top two influences on metal market. Aluminium Billet’s market must follow the regulations of metal market as well. Aluminium Billet market of South East Asia has suffered a big changes in the position of Billet regional giants due to such above reasons of metal market. That is the case of PT.H.P Metal and Formosa that will be analyzed more specific later. Recently, each year Vietnam has used up about 15,000 to 20, 000 MT Billet imported from Asia countries such as Malaysia, Thailand, Indonesia, China and Japan. Today, Malaysia has been the top exporter of billet to Vietnam. Thai land has taken the second position in the rank. The biggest Al Billet supplier in South-East Asia is Formosa (Malaysia) who Oristar is being representative in Vietnam. Formosa is well-known for high quality but high price as well. In Vietnam market, Formosa has some big rivals from other Asian countries such as UAI (Thailand), PT.H.P Metals (China), and Sumitomo (Japan). Nevertheless, at different periods, the competitiveness of these suppliers is changeable. Normally, when one supplier becomes more competitive, it is the time his rival becomes less competitive in some ways. Let’s take the competition between Formosa and PT.H.P Metals in Vietnam as an example. Just before July, 2007 when China still applied unpaid duty to export activity with many goods including Al billet, so price of Billet originated in China are much lower than other countries. At that time, Formosa could hardly compete to PT.H.P Metals in Vietnam market. However, every thing has changed since July, 2007 when Chinese government announced to stop unpaid export duty on Al Billet, which pushed China Billet price up to sky and PT.HP Metals now has the same situation of Formosa just 2 months ago. Another reason which made the price rise so high is the speculation caused by the large excess of demand over supply in China market. Normally, world metal prices base on supply and demand on international metal exchanges such as LME or Comex but in China pricing is decided both on these exchanges and domestic demand and supply. The demand of Aluminium Billet in China is much larger than the supply, which created golden opportunities for speculators to make money by keeping China market in endless shortages. The way they control market prices can be described shortly as follow: Speculators purchase a large quantity of materials, keep them in stock and wait when the shortage they created brings price up to the top, then they begin to sell out to gain the highest profits. This is the way speculators distorted China market and make it run in another way to the rest of the world. Moreover, it is the huge demand of Aluminium Billet in China about 20-30% of the whole world that makes China markets find it difficult to get out of such shortage times. Hence, at the moment, PT.H.P Metals has to step out in its race with Formosa at Vietnam market. There are two reasons that we should choose Formosa and PT.H.P Metals in the comparison. First, they are the two representatives of two pricing mechanisms in the world. Formosa sets its price based on LME price (world market price) while PT.H.P Metals based on domestic supply and demand in China market as major criteria. Second, both Formosa and PT.H.P Metals are the suppliers who Oristar has become their agent in Vietnam at the same time. It seems to be conflicted as said that Oristar is the exclusive agent for one supplier in a certain material in Vietnam; however, it is reasonable because they are a trading company and commercial aim is the most prior. At different times the competitiveness of Formosa and PT.H.P Metals were changeable, that’s why Oristar has adapted their policy to utilize its expert knowledge in metal market and maintain high benefit level. The above analysis has given the basic knowledge about both product and market for Aluminium Billet. Therefore, it should be better to go in detail the business activities of Oristar on Aluminium Billet. 2.3.3. Oristar’s business activity on Aluminium Billet As mentioned Aluminium Billet is the material which brings the biggest profit to Oristar through commission on quantity they sold in Vietnam. The following table will describe the quantity sold through 2004-2006. Total quantity on turnover of Al Billet from 2004 to 2006(metric ton) Year 2004 2005 2006 Quantity(MT) 2,200 3,000 3,200 Source: provided by Im-Export dept 2006 The increasing figures of quantity sold reveal a good performance of Oristar recently. Although the required quantity of Al Billet Oristar must meet each year is about 2000 MT, it always reaches above the requirement. In 2005, the quantity jumped 800 MT compared to 2004. Oristar has been very successful in keeping the increasing trend in 2006 with a slight climb of 200 MT. In 2007, Oristar estimates the number should be 3500 MT. In general, there is a continuous increase in quantity of Billet sold through years by Oristar. Business activity on Al Billet of Oristar is carried out at the Im-Export department. There Oristar gives supports on every transaction between the buyer and the seller such as making sale contract, establishing LC, transferring other documents like Bill of Lading, invoice or packing list. Besides, Oristar on behalf of supplier is also responsible for satisfying all questions from the buyer and also settling insignificant claims from the buyer. Oristar’s role here is like an assistant for both seller and buyer. To day, Oristar has covered all Aluminium Billet market of Vietnam from the north to the south with its two offices. Therefore, the distance is not a barrier here to Oristar. Oristar’s customers are located through out Vietnam such as Dong Anh mechanical company (HN), Do Thanh Co., Ltd (HN), Ham Hai (HN), Song Hong (Phu Tho) and Quang Binh industrial and trading company (QB). They are also the main billet customers of Oristar now. Even though Oristar has established good business relationships with these customers, it also needs to maintain such relations by offering both good customers services and trade preferences to be more competitive in Vietnam. The table below will give more specific information of the total quantity that each customer bought through Oristar from 2004 to haft 2007. Quantity of Billet Oristar sold to customers through years (metric ton) Year Company 2004(mt) 2005(mt) 2006(mt) Haft 2007(mt) Dong Anh 500 700 700 400 Do Thanh 600 800 900 500 Quang Binh 600 800 800 400 Nam Hai 500 700 800 350 Source: Statistics provided by Im-Export dept September, 2007 During 2004 to 2006, Do Thanh has been the biggest customer of Oristar with annual quantity about 800 MT per year. Quang Binh is just lower than Do Thanh about 100 MT per year. Dong Anh and Nam Hai have the same average quantity at about 700 MT per year. In Vietnam, they are all leading extrusion manufacturers who provide about 25,000 to 30,000 MT profile per year. Due to increasing demand on aluminium profile for domestic structures, these companies are planning to expand their production and hopefully the quantity will rise in the near future. Therefore, we now have evidence to say that Oristar is performing well its business activity on Aluminium Billet thank to both favorable internal and external factors. In summary, the focus of charter II is the overall view on Oristar business performance and its business activity on Aluminium Billet. Furthermore, product description and market information is also added to support company analysis. Both market and company analyses in the two first chapters are aimed at giving the background Oristar’s business activities and reasoning for which it should improve in recommendations in the last chapter. Chapter III. Recommendations on improving Oristar’s overall business performance and its Al Billet business activity. As we have had a look at Oristar business activities on Aluminium Billet in chapter II, it is considered to have a good business performance lately. However, Oristar could have had better business results if it had made some changes in the company as a whole. Therefore, in this chapter we will focus on pointing out problems and working out the best solutions for each. These issues consist of business scope, policy, administration, management and marketing. 3.1. Business scope The first problem is in the name of the company itself: Oristar Im-Export Co., Ltd. The trading name shows legal scope of business including both import and export. Nevertheless, Oristar has just made advantage haft of its business abilities stated on its registration when it just carry out importing activity. Exporting activity seems to be ignored by Oristar. Since the company was established in 2002, it has not made any deal in this business field. One of the reasons is that exporting activity requires a lot of experiences and relations to be successful in foreign market especially for a new business with only 5 year experiences. It is not mentioned the difficulties in finding materials in domestic market to export because Oristar is just a trading company and there is no production carried out by Oristar at all. In brief, two basic obstacles to exporting activity at Oristar are less experiences and relations in foreign markets as well as difficulties in looking for the materials to export at the domestic market. However, it does not mean that Oristar will find no way to carry out their exporting activity. There are still some opportunities for them to succeed. Oristar could make use of their relationships with foreign suppliers who need inputs for their production. Let’s take aluminium bauxite for an example. In Vietnam, there are a lot of bauxite mines which have big reserve at the South and High land, however, current technologies in Vietnam has not allowed producing Aluminium Billet at high quality as in other regional countries. It is Vietnamese extrusion manufacturers who themselves admit that Billet originated in Vietnam can not satisfy requirement in producing high-quality profiles, so they still need to import Al Billets outside Vietnam despite higher cost it may take. That is the opportunity for Oristar here. It could export bauxite to the suppliers whom it has already had business relationship with. Here, there are still two choices for Oristar: First, it could import directly from these suppliers. By this way, Oristar can be more independent in its own business activities from the beginning. Second, Oristar might sell the materials made from the Al bauxite on behalf on the suppliers to domestic market. Whatever choice it may make, Oristar will certainly be able to gain better trade references from these suppliers. Therefore, at the same time Oristar could carry out both import and export activities, which not only maximizes business advantage but brings higher profits to the company as well. However, there is a barrier with tariff duty at this moment in Vietnam. Since 8th December, 2006, Vietnamese government has tightened its policy on exporting natural resources out of Vietnam by raising tariff imposed on 30 commodities belonging to natural resources including Aluminium bauxite up to 5 to 10 % instead of 0% as before. The policy seems to be unfavorable to exporting activity this time but it is the common policy of nearly all governments in shortage time of natural resources. The recent increase in price of almost all metals is the clearest evidence for this point. Nevertheless, because it is the common rise in price, the small movement in tariff level won’t be the factor for canceling exporting activity. In case Oristar wishes to avoid the risk, there is still another alternative to choose. That is through international processing activity. By doing this Oristar might avoid the barrier because the tariff imposed on the materials for oversea processing is lower than for exporting purpose about 5%. In spite of difficulties, Oristar could still have chance to carry exporting activities by many ways. 3.2. Business policy The second problem is in the company business policies. As mentioned, Oristar was introduced as exclusive agent for foreign suppliers in Vietnam at different materials. However, Oristar seems to ignore business commitments between the two sides once market situation moves unfavorably for the supplier they are representative. The case of Formosa and PT.H.P Metals is an evidence for this. In chapter II, we have analyzed the recent market situation of Aluminium Billet and also the competition of the two leading Billet suppliers in South-East Asia. Although Oristar knows well that Formosa and PT.H.P Metals are big rivals to each other, it still carries out the activity of being representatives for the two suppliers at the same time. The business behavior is not fair and can not be the base for a long business relationship. Once these suppliers know the truth, the position of Oristar as their exclusion agent in Vietnam will be completely in danger. Although market trend might move unfavorably to one supplier at one time, it doesn’t mean that the situation will remain unchanged in the future. Every thing is moving in the way we can not predict. Therefore, a true business relationship should be based for good business relationships in long time. This business policy of Oristar leads us to come into a conclusion that they are prior to today profit than future profit. In particular, Oristar has violated the commitment of being exclusive agent for one supplier in Vietnam because at the same time it acts as representative for both two suppliers in Aluminium Billet: Formosa and PT.H.P Metals. This business behavior might bring more profit to Oristar now but in long term when one of the two suppliers finds out the truth, Oristar will have to face a fact that they will lose all commission from this activity. Hence, a recommendation for Oristar here is that they should be a fair player in his own match and that is the only way to be survived in such competitive market as today. 3.3. Administration 3.3.1. General administration The third problem of Oristar is in its internal administration. As said in company profile, Oristar is a limited company and it is the director who makes all decisions, which sometimes causes problem of discretion because the director can not always make right decision all the times. The monopoly might lead to bad results if the director makes wrong decisions or he can not give a decision in time. A director has to cover a pile of works in everyday running business but it does not mean that he himself must make all decision even for trivial things because this not only takes time but shows inefficiency in administration as well. Therefore, Oristar’s director had better give more tasks and rights to other staffs who can handle works within his duty and responsibility. By this way, the director will have time to focus on significant things to the company. Once Oristar changes their working style following the above recommendation, they will certainly improve their business performance at this moment. 3.3.2. Treatment manner Besides, there are still some remains regarding to business administration in Oristar such as unequal treatment among individuals and also among departments. Of courses, a company must have its own reasons to make such discrimination but everything needs to be reasonable. In order to inspire employees to work at high spirit, Oristar could not keep such policies any longer. Discrimination might cause bad results on efficiency and job satisfaction of employees, which directly influent on business performance. That’s why Oristar should avoid this by minimizing discrimination in its policies especially in salary and rewards. 3.4. Information management Information management in Oristar also has problem. According Oristar director’s instruction, each department must keep their internal information in secret to other departments even draft sheets. Every times they need to exchange information in form of department internal report, it is required the approval of the director first. This process sometimes becomes redundant and inefficient. Despite purpose of business information security, it should not be so hard with company people in some case. For example, when the information is not important or in urgent situations, staffs don’t have time for waiting the approval from their boss. In brief, the recommendation on this problem is that Oristar should be more flexible in information management for a better business result. 3.5. Marketing activity The final recommendation for Oristar is on marketing activities and customer service. As agent and supplier of materials in Vietnam, Oristar’s customers almost are manufacturers. Therefore, Oristar’s marketing strategies might have some differences to marketing strategies of consumer market. For instance, Oristar won’t have to spend a lot of money on advertising on public media but they do need to advertise on the internet especially through its own website. Oristar’s website has not provided enough information to satisfy viewers. The design is not very professional and attractive to make a good impression on viewers. In the future, Oristar should pay more attention to improve its website. However, at some other marketing events such as trade fair, working festival, Oristar has been very successful in marketing themselves to both potential customers and candidates. This is a good way to approach market and strengthen its position. Customer service of Oristar is quite good but they can still do it better. Because Oristar’s customers almost are manufactures, so supporting services is highly valued. Oristar has offered their customers services such as keeping them update market information, consulting about commodities and trade terms, co-coordinating in settling disputes between buyer and seller. Besides, Oristar also arranges business trips to visit their customers often to strengthen their relationship. However, in general updating market information for customers is valued most due to metal market characteristics. As mentioned price of metals keep moving all the times and there are a lot of factors affecting on the price such as monopoly, speculation and shortage. In order to deal with fluctuations in price, both suppliers of materials and the manufacturers using the materials must keep themselves update to market movements so that they could minimize loss caused by adverse changes. Therefore, Oristar’s role of informing market information to their customers is becoming more and more important. The recommendation here to Oristar is that they should expand this business activity to become more professional and efficient. In summary, the findings from Oristar’s business activities are concentrated on business scope, policy, administration, and marketing activities. Even though Oristar has kept a good business performance during through last 5 years, there are still some problems which certainly prevent them from getting best business result. However, all the inefficient points are possible to be improved easily. Hopefully that such above recommendations will be helpful to Oristar. CONCLUSION In conclusion, we have covered all chapters mentioned in the introduction including the basic knowledge of import and export activity and metal market in chapter I. In Chapter II, we focus on Oristar’s current performance and its business activity on Aluminium Billet, which are basics for the development in the next chapter. In this chapter, recommendations to Oristar about how they should improve in order to step higher levels in the industry line are concentrated on. This is also one of the main purposes of the report that gives suggestions to Oristar in improving its current performance. Despite the separation among chapters in the whole view, they are all coming to the same destination as the aim of the report. Although the report is just studied on Oristar only, it brings much valued market information for other Vietnamese companies in the industry. Therefore, the suggestions on Oristar might work properly on other companies. However, for many cases, changes are necessary to be made to adapt different situations in different companies for a more efficiency. In general, the biggest value that this report brings is in the fundamental background knowledge of metal market that might be used flexibly in planning business strategies by companies in this industry. However, due to the limit in time and scope of study, shortcomings and mistakes can not be avoided. Any suggestions and cooperative comments from readers, therefore, will be highly appreciated. As mentioned in introduction, there are many matters around this subject need further discussion. Hopefully, this report will be helpful for deeper researches. REFERENCES Books International Business – JOHN.J.WIDE—Published Prentice Hall (2005) Mastering Commerce International Marketing-KENNERRTH ( 2003) 4. Reports on Import and export materials from Statistics of Vietnam (2005, 2006) Internal documents issued by Oristar Revenue annual reports 2003,2004,2005,2006. (Finance Dept 15 September, 2007) Revenue reports on quarter I, II, III 2007 (Finance Dept 20 September, 2007) Annual revenue reports on the materials sold as agent 2003,2004,2005,2006 (Im-Export Dept 12 September, 2007) Oristar’s catalogue 2005, 2006 (Published 2005, 2006) Oristar’s policy and regulations (Published 24 Jul, 2002) Websites Ralf Schmitz, German non-ferrous trade association VDM (Europe); Shi Lili, journalist and consultant, China; “Markets boosted by Chinese Import data”; March 26 2007; 2.* Ralf Schmitz, German Non-Ferrous Trade Association, VDM (Europe); * Kumar Radhakrishnan, General Manager, International Division of Simsmetal Ltd, Australia (Asia & Pacific Rim) * Ian Martin, Recycling, International’s Editorial, Consultant (North America “Energy prices take their toll”, 1 August 2005 3. Lisa Twaronite, Market Watch “China shrugs off G7, IMF pressure on Yuan”, Oct 22, 2007. 4. Ian Martin, Recycling International’s Editorial, Consultant (North America) “High prices increase substitution risk”- 3 August, 5. 6. Glenys Sim, 19 Oct., 07, “MF Global Forecasts Higher Copper, Aluminum, Tin, Lead Prices”