STATE BANK OF VIETNAM BANKING ACADEMY OF VIETNAM FACULTY OF FOREIGN LANGUAGES GRADUATION THESIS TOPIC: COST-CUTITNG MEASURES AT VIETNAM INDUSTRIAL EQUIPMENT JOINT STOCK COMPANY DURING PERIOD 2015-2017 Supervisor: Mrs. Nguyen Thi Hien Hanh Student: Nguyen Le Hong Hanh Student ID: 17A7510039 Class: K17ATCB HaNoi, May 2018 DECLARATION I pledge this is my own research. The statistic used in the analysis are clearly derived and published in accordance with the regulations. The results from the research are conducted and analyzed by my effort and self-study in the most honest and objective way.
Student Nguyen Le Hong Hanh ACKNOWLEDGEMENTS Firstly, I wish to express my respect towards Ms. Nguyen Thi Hien Hanh M.D, my supervisor from the Banking Academy of Viet Nam for leading me during my whole research and providing me with precious experiences in this learning field. Secondly, I am grateful to Ms. Le Thi Bich Ngoc - Chef Accountant and staff at VietNam Industrial Equipment Joint Stock Company for their kind treatment and enthusiastic support during my internship.
I am gratefully indebted to them for their helpful advice and assistance with the statistical data and analysis. Finally, I would like to extend my gratitude to my beloved teachers and friends at Banking Academy of Viet Nam who has inspired me and motivated me through the process of researching and writing this thesis. Studying at Baking Academy is an extraordinary experience that I will never forget for the rest of my life. TABLE OF ABBREVIATION Abbreviation Meaning VAT Value Added Tax VBSP VP Bank Vietnam Bank for Social Policies VND Viet Nam Dong JSC Joint Stock Company VIECO Viet Nam Industrial Equipment Joint Stock Company TABLE OF TABLES AND FIGURES Tables and Contents Page Figures Number Table 1 The company’s Revenue and Profit 2015 - 2017 24 Table 2 Total assets of VIECO 26 Table 3 VIECO's types of costs 29 Table 4 Production costs of the company 31 Figure 1 VIECO’s total revenue 24 Figure 2 Profit before and after tax 25 Figure 3 VIECO’s Total Assets 27 CONTENTS INTRODUCTION.
OVERVIEW OF COST-CUTTING METHODS IN A TRADING BUSINESS. Definition and types of costs .2 Types of costs. Roles of costs and cost reduction to business .1 Roles of costs to business .2 Roles of decreasing costs to businesses. The main factors that have effects on business costs .1 Scientific and technical development .2 Production management and finanacial management of enterpries .3 Natural conditions and business environment.
Basic cost-cutting steps in business .1 Step one – Start with stragegy: Have a clear view of their strategy and ensure it is consistently understood across the organisation .2 Step two – Align costs to strategy: Differentiate good costs from the bad costs .3 Step three – Create a culture of cost optimisation: Ensure to apply a culture of ownership and continuous improvement. Cost reductions strategies of some famous businesses in the world .1 Southwest Airline and its cost-cutting methods .2 Ford Motor Company and its cost-cutting methods during financial crisis in 2008-2009.3 Walmart and how to be the biggest low-cost retailer in the world. OVERVIEW OF VIETNAM INDUSTRIAL EQUIPMENT JOINT STOCK COMPANY (VIECO). Overview of the organization.
Functions, tasks and characteristics of the company .1 Fields of operation.2 Characteristics of the company. Management of production and accounting. Production and business organization .THE REALITY OF COST MANAGEMENT OF VIECO DURING PERIOD 2015 - 2017. The company’s revenue and profit.
The company’s total assets. The reality of cost management of VIECO .1 The cost of business basing on functions .2 The cost of business basing on elements. RECOMMENDATIONS TO SAVE COSTS AT VIETNAM INDUSTRIAL EQUIPMENT JOINT STOCK COMPANY. The company’s business direction in the coming time .1 Development goals of the company .2 The advantages and the difficulties of the company.
Some recommendations of cost-saving measures at Vietnam Industrial Equipment Joint Stock Company in 2018 .1 Cost-cutting methods for cost of good sold.2 Improving human source to reduce labor cost .3 Strengthening the management and exploitation of fixed assets .4 Controlling strictly the administrative expenses. Rationale of the study The Vietnamese economy is moving into a new phase with many opportunities and challenges. The market economy with many economic components and forms of ownership makes the competition more and fiercer. Businesses who want to win the competition and achieve their goals must conduct market research so that their products are of sufficient quality at reasonable prices.
In the increasingly competitive trend with the scarcity of resources, reducing costs of business to improve product quality is a need of any business unit or organization. State- owned enterprises, private businesses, cooperatives, foreign enterprises or joint ventures consider it a strategic task to survive and develop regardless of purposes of each type of business. Hence, these businesses reducing costs not only to increase profits, bring cheap products with good quality to everyone but also against wastefulness and use efficiently national resources. It facilitates enterprises to enhance their competitiveness in terms of price.
Enterprises that have more reasonable prices will be able to sell more and hence quickly recover capital and increase profits. On the other hand, it helps enterprises to control their resources for effective use. Recognizing the importance of managing costs for businesses in general and for Viet Nam Industrial Equipment Joint Stock Company in particular, the topic: "Cost-cutting measures at Viet Nam Industrial Equipment Joint Stock Company during period 2015- 2017” was chosen as my graduation thesis. Objectives of the study This study primarily aims to identify the concerns and challenges faced by commercial companies in Viet Nam.
The analysis and the findings of the sutdy will make a practical contribution to the stragtergy of cost-cutitng measures at trading companies. Scope of the study This thesis is implemented basing on information and statistic of Viet Nam Industrial Equipment Joint Stock Company in the duration of 2015 and 2017. Methodology of the study For the accomplishment of this study, the following methodologies are employed: - Synthesizing and analyzing information - Statistics: Data is amassed from the published reports, articles, and documents 1 relevant to cost of business, which are available either online or in print. Structure of the thesis Beside introduction and con conclusion, this study includes: Chapter 1: Overview of cost-cutting methods in a trading business Chapter 2: Overview of the Vietnam Industrial Equipment Joint Stock Company Chapter 3: Business result of the company during period 2015 - 2017 Chapter 4: Orientation and measures to save costs at Vietnam Industrial Equipment Joint Stock Company 2 I.
OVERVIEW OF COST-CUTTING METHODS IN A TRADING BUSINESS 1. Definition and types of costs 1.1 Definition Business activities of enterprises are to manufacture certain products and to sell these products on the market for profit. However, when operating, enterprises have to cover necessary expenses. The costs that businesses have to spend first are the cost of production.
In the production process, enterprises must consume materials such as: raw materials, machinery, tools, expenses of wages and labor. However, in a trading company, whose business activities main business activities are purchasing and selling goods with an aim of gaining profits and performing other economic targets, the first cost incurred in buying process are transportation cost, salaries for employees who are involved in purchasing process in a period of time. Next is the cost of storage and selling process, which are expenses for packing, preservation, freight, leasing for warehouse, marketing, fixed assets depreciation and other costs. Besides to these above-mentioned costs, the other costs are cost of administrative of trading company.
During operation process, the businesses have to perform other tasks such as: investing in credit system, buying and selling stock and liquidating fixed assets. Thus, from enterprises’ perspective, it can be seen that business costs are all the expenses related to business activities and taxes that are spent in a certain period of time. Analysis of business activities of trading companies.HaNoi Publisher) Besides, enterprises mustmaket new products. In this process,they also have to pay some expenses of packaging, delivery and storage.
In addition, to widely launch a product,to attract consumers andcarry outmaket research as well asto make reasonable decisions for production, businesses must also take care of the costs for marketing, advertising and product warranties.Furthermore, general and administration expensesrelating to the business activities are also incurred during the operation ofthe enterprise. In order to reach good business results, the businesses are required to have revenue from their business activities to cover all the costsand get high profit. This shows that not every cost is included in the operation costs, which means that we have to consider characteristics of each type. Cost of business is an important measure to assess management standard, the use of capital and cost savings.Enterprises have to be concerned about cost management because each unreasonably used penny leads to increasing cost price and decrasing revenue.
Thus, 3 lowering costs is a decisive condition that makes enterprisesmeet their sales targets and boost production as well as expand their businesses.2 Types of costs There are many types of business costs must be paid in a fiscal year. These costs have different economic elements, characteristics and roles in creating an item or a service. In order to facilitate the management activities and accounting ofcostsfor evaluating business result, the classification of costs according to various criterionsis very necessary. Basically, three main criterions are applied: 1.1 Costs basing oneconomic elements Costs are divided into differentcategories, each only includescosts which have the same economic elements irrespective of arisingfrom diferrentfields.
The total cost of production is divided into five categories: Outside purchasing materials cost: is all the value of addedassesories used for business activities, such as: auxiliary materials, fuels and spare parts. Salaries cost: includes wages paid by enterprises to people participating in business activities and extra expenses such as: social insurance, health insurance andunemployment insurance which enterprises must pay in the period. Fixed asset depreciation: is the value of an assetdimishing by a fixed amount each period. Outside purchasing services cost: is the cost that enterprieses have to pay for used servies that are provided by outside companies (electricity service, water service,…).
Other cost: is the cost beside the above mentioned costs. Classifying expenses according to economic elements plays an important role in cost management. It shows the structure, the proportion of each type of expense to analyze and evaluateproduction costs according to the elements in the financial statement, provides references for estimating costs, material supply planning, wage funds, calculation for capital required for the next period.2 Costs basing on purposes This criterion depends on the purpose of each cost and where the cost is incurred to classify costs into categories: Direct labor cost: is the salaries, wages, allowances, social insurance, health insurance, labor contract of employees. 4 General operation cost: is used for factories, business departments such as: salaries and allowances for directors, fixed assests cost, outside purchasing services cost,other costs incurred in factories and warehouses.
Selling expenses: include salaries cost, allowances for emloyees, maketing, delivery, storage, executing machine depreciation, material - packing cost, outside purchasing services cost, other costs (product warranty, advertising,.) General and administration expenses: are all the expenses for the management of the enterpriseand the general operation as: Fixed asset depreciation, tool cost, other expenses incurred in the enterprise (salaries and allowances for Board of Directors, staff of management departments), materials cost, stationary cost, insurances, outside purchasing services cost, taxes, inventory cost, transaction and external expenses,… This criterion allows enterprises to calculate price for each product unit, manage expenses incurred to reduce product price.3 Costs basing on the relationship between costs and business scale According to thiscriterion, business costs are divided into two categories: fixed cots and variable costs. Fixed costs: are unchangeable which arebased on the change in the scale of business. This type of cost includes: Fixed asset depreciation, salaries for employees, experts, loan repayment, financial leasing.