TECHNOLOGY FORESIGHT OF VIETNAM’S LEATHER AND FOOTWEAR INDUSTRY WITH STEEPL ANALYSIS APPROACH

ABSTRACT

The learther and footwear industry an increasingly important role in Vietnam's national economy. In this study, STEEPL (social, technological, economic, environmental, political and legal) analysis was used, including: literature review, expert interviews and External Factor Evaluation (EFE) matrix. Research results have pointed out 25 factors from the external environment affecting the leather and footwear industry, as well as opportunities and challenges for the industry's development in the future. The study also proposes some recommendations for managers, researchers and policy makers. Especially, technology foresight of Vietnam's leather and footwear industry, in order to accelerate the development of the leather and footwear industry in the coming time.

АННОТАЦИЯ

Кожевенно-обувная промышленность играет важную роль в национальной экономике Вьетнама. В этом исследовании был использован STEEPL-анализ (социальный, технологический, экономический, экологический, политический и правовой), включающий: обзор литературы, интервью с экспертами и матрицу оценки внешних факторов. На основе результатов исследования были выявлены 25 факторов внешней среды, влияющих на кожевенную и обувную промышленность, а также представлены возможности и трудности развития отрасли в будущем. В исследовании даются рекомендации для менеджеров, исследователей и политиков. В статье делается технологическое прогнозирование с целью ускорения развития кожевенно-обувной промышленности Вьетнама в ближайшее время.

Keywords: STEEPL analysis, leather and footwear industry, foresight technology, Vietnam

Ключевые слова: STEEPL-анализ, кожевенно-обувная промышленность, технологическое прогнозирование, Вьетнам.

1. INTRODUCTION

Footwear industry is an important economic sector of many countries. In 2016, the global footwear industry produced more than 23 billion pairs of shoes, basically meeting the needs of the market. Asia leads in volume, accounting for more than 80% of global production capacity. China is the main producer, accounting for nearly two-thirds of shoes sold worldwide. In 2019, China exported 9.542 billion pairs (63.6%), Vietnam 1.42 billion pairs (9.5%), Indonesia 427 million pairs (2.8%), Germany 350 million pairs (2.3 %), India 286 million pairs (1.9%) and some countries with smaller production are Turkey, Belgium, Italy, Netherlands, Cambodia. The countries of India and Indonesia have a large output, but the proportion of exports accounts for only a small part, because production is mainly for the domestic market. Besides Asia being a major producer and exporter, European countries also have a developed footwear industry, including Italy, France, Germany, Spain, Portugal, Belgium, Greece and the United Kingdom [7], because these countries themselves have very developed tanning industries.

The size of the footwear product market has grown over the years, reaching a total value of 373 billion USD in 2021, forecasted to reach 430 billion USD in 2030. This is explained by population growth and rising per capita income. The growing size of the footwear market leads to an increase in the demand for raw materials for the production of footwear products. Figures on the value of animal skin trade worldwide show that it has increased from 77.5 billion USD in 2010 to 91.2 billion USD in 2018. Because the supply of raw materials derived from animal skins is difficult to meet the needs of manufacturers, many alternative materials have been used, including synthetic leather from polyurethane (PU) and polyvinyl chloride (PVC). Demand for auxiliary materials such as glue and rubber also increased. The downside of this growth also produces more hazardous waste, threatening the ecological environment as well as the sustainable development of the worldwide footwear industry.

In the world, there have been many studies on the leather and footwear industry by many scholars. Studies often focus on the decision-making model of waste management in the leather and footwear industry [11], the role of the leather and footwear industry cluster in rural industrialization [5], facing the footwear industry in the process of globalization [1], to gain a competitive advantage in the footwear industry [10], post-consumer waste management issues in the footwear industry [12], alternative tanning technologies [2]. However, studies on the overall consideration of external factors affecting the footwear industry are still few.

Choosing the research context that Vietnam's leather and footwear industry has played an increasingly important role in the economy - society in recent years, we apply STEEPL analysis (Analysis of social factors, technological, economic, environmental, political and legal) with a number of qualitative methods including literature review, interviewing experts and assessment of the External Factor Evaluation matrix (EFE). To date, this is the first study to analyze Vietnam's leather and footwear industry.

Vietnam is the world's second largest footwear manufacturer and exporter, is a developing economy with a fast growth rate, GDP per capita at current prices will reach about $8400 by 2030. [9]. Currently, Vietnam's leather and footwear industry also faces many challenges such as the continuously increasing cost of input materials and labor, environmental pollution problems and many other risks caused by rapid growth. This study aims to propose policy recommendations to managers, researchers and policy makers, contributing to support the promotion of Vietnam's leather and footwear industry to develop sustainably.

2. STEEPL ANALYSIS

STEEPL analysis is a very effective tool when conducting market research or strategic management. STEEPL considers the factors that affect the macro environment on businesses that are social, technological, economic, environmental, policy, and legal. Compared with SWOT analysis, which focuses on internal factors, STEEPL analysis focuses on external factors.

STEEPL analysis is used by large companies and corporations to gain competitive advantage. In addition, STEEPL analysis is also used to make forecasts and strategic management for government agencies. STEEPL analysis has an analytical framework like PEST analysis.

3. METHODOLOGY

We use qualitative analysis method to clarify the research problem according to the STEEPL analytical framework. First, we used document analysis and in-depth interviews with experts to analyze and collect data. Experts include all employees, managers, scientists working in enterprises, research institutes, universities. Professionals should have experience in the footwear industry.

Data were collected by conducting open-ended interviews combined with assessment sheets. Before the interview, the researcher introduced himself and explained the objectives of the study. Interviews lasted an average of 40 minutes.

After data collection, we use the weighted score method in the matrix of External Factor Evaluation (EFE). The EFE Matrix includes a list of external factors that indicate and evaluate the relative importance of social, technological, economic, environmental, political and legal factors in the Vietnam’s leather and footwear industry. The EFE matrix is an effective method, allowing opportunities to be identified and potential external threats to be avoided.

4. RESULT

4.1. Social factors

Social factors can directly or indirectly affect demand for a product.

Brand loyalty: Vietnamese consumers are increasingly interested in product designs and quality, but also care about the origin of products. This is explained by once the quality of life is growing, people's intellectual level is getting higher and higher, consumers are more interested in quality and brands. Lassoued found that trust is the driving force to buy branded products (Lassoued 2015). This requires manufacturers to build brands to meet consumer needs. Following this trend, some Vietnamese enterprises have focused more on building their names and brands in Vietnam such as Bitis (Binh Tien Leather and Footwear Company), to gradually move up the leather value chain shoes with high added value.

Educational conditions: Education and training to provide high-quality human resources plays an important role in the entire Vietnamese leather and footwear industry. Vietnam has many research facilities on leather and footwear such as the Vietnam Leather and Footwear Research Institute, the Leather and Footwear Institute of Hanoi University of Science and Technology, which is a place to train and supply experts in the fields of leather and footwear. However, due to the rich and diverse technology and designs of the leather and footwear industry, the wide range of specialized fields, it is difficult to meet the human resource needs for all specialized fields is one of the limitations to the industry's ambition to participate in high value chains.

Aging Population: Observing population changes over the years, Vietnam's population growth will slow down in the next decades, Vietnam may face population aging, leading to a shortage of labor resources impact in the economy in general and the most negative impact is on labor-intensive economic sectors including the leather and footwear industry. In addition, the aging of the population also leads to changes in consumption behavior. According to Rezai there is a significant difference in purchasing behavior between younger and older people [3]. In Vietnam, the older generations are less interested in branded products, they only care about the quality of the products. However, this is different from the younger generation who have a higher preference for branded products. Branded products such as Nike and Adidas sports shoes are always interested by young people. In addition, young people tend to prefer to buy big brands in Europe due to brand trust in European-origin goods.

4.2. Technological factors

R&D activities: Companies in Vietnam's leather and footwear industry are quite interested in keeping up to date with changes in technology. FDI enterprises focus on research and development of new products, research and development including research into new environmentally friendly materials technologies, research and development of tanning technology.

Automation: Automation with the advantage of information technology is attracting the attention of many manufacturers in the field of leather and footwear. The use of computer graphics software to design shoes, the use of 3D printers in shoe form design, the application of artificial intelligence, virtual reality technology, helps to shorten the time to develop new products, profitable in the footwear industry. The application of IT in business administration, such as cloud computing technology, is also of interest to businesses to improve governance and improve labor productivity.

Online e-commerce platforms, allowing manufacturers and retailers to distribute directly to consumers, help reduce transportation and warehousing costs.

Application of information technology to verify the origin of goods by applications on mobile phones. Radio frequency identification (RFID) is also used. An easy and convenient anti-counterfeiting identification and traceability system helps businesses protect their brands from intellectual property rights violations.

The speed of technology change: Investment in research and development costs a great deal, so there are still many businesses that have not invested properly, while the majority of enterprises in the Vietnamese leather and footwear industry are small and medium enterprises. Although it is recognized that it is necessary to promote innovation, to develop new products, to meet the diverse needs of consumers, limited investment resources also have a negative impact.

4.3. Economic factors

Participating in the globalized market: Vietnam is a member of free trade agreements from ASEAN (AFTA), EVFTA, and APEC, with a small import tax rate, which is very advantageous for footwear businesses to participate in these markets. Currently, Vietnam's leather and footwear products are mainly exported to European and North American markets. In addition, the ASEAN and Indian markets are also promising. India is one of the countries with a developed leather and footwear industry, India's footwear output is large, but mainly serves domestic demand. With a large population of 1.4 billion people, the Indian market is an attractive market for leather and footwear businesses.

Economic growth: For the domestic market, Vietnam as an emerging market, has a young population, and young people's spending on fashion is increasing day by day. With a population of over 100 million people, per capita income is increasing sharply, the average consumption of footwear in Vietnam is still low, so there is room for development. Vietnam's economic growth in recent years has always maintained at 6-7% annually. Vietnam's leather and footwear industry is also growing steadily with an annual growth rate of 7% in exports.

Controlling inflation is good, and the Vietnamese government always keeps the macro- economy stable, lending interest rates stable and inflation well controlled. The above figures are a good sign that Vietnam's leather and footwear industry is expected to develop and grow sustainably.

4.4. Environmental factors

Tanning industry wastewater control

The leather industry for footwear production in Vietnam is still underdeveloped. As of 2020, there are only 45 tanning enterprises out of a total of 2034 leather and footwear enterprises across Vietnam. In fact, the tanning industry is a very polluting industry [8]. In recent years, there has been a significant increase in awareness of the potential environmental impact of heavy metals in wastewater. Especially, tanning wastewater contains chromium (III) metal ions. Chromium (III) itself is non-toxic, but it is feared that, during the heating and drying process of tanning, chromium (III) may be converted to chromium (VI) as group 1 carcinogens by the International Agency for Research on Cancer. Tanning wastewater, untreated or substandard, can lead to high levels of contamination in soils and rivers, absorbed by animals and plants, which can enter the human food chain. Although many enterprises have invested in wastewater treatment systems, the discharge standards in Vietnam are still low. Therefore, it is necessary to raise the discharge standards for wastewater containing toxic heavy metals, according to the discharge standards of European countries and OECD.

Solid waste control in the production process

Solid waste in the production of footwear, scraps of leather, excess fabric, defective products. Solid waste also includes ethylene vinyl acetate (EVA), copper glue mixed with polyurethane (PU) in the production of shoe soles [6].

Increase the use of renewable energy and save water resources

The animal tanning industry uses a large amount of water in the treatment process, and Vietnamese tanneries have also applied new technologies to save water. To achieve green production certificate, Vietnamese leather and footwear enterprises also actively use renewable energy such as rooftop solar power. Towards a green, circular and carbon-neutral production.

The Vietnamese government has actively solved the above issues in order to protect the environment and cope with climate change. Technically, businesses are encouraged to use advanced tanning technology with closed systems, save water resources including wastewater collection system. In the future, raise discharge standards for wastewater containing heavy metals, especially chromium metal ions, and plan a landfill for sludge.

4.5. Political factors

The government plays an important role in the leather and footwear industry. The government will perform many tasks including planning, promulgating development policies, managing, promoting and training human resources for enterprises. In Vietnam, the political factors are government appraisal and certification, implementation of administrative procedures, tax incentives and financial support. In addition, the government issued a master plan for Vietnam's leather and footwear industry, setting the goal of Vietnam to become a global center of leather and footwear production. To achieve this, one of the measures is tax incentives, including tax exemption and reduction. Issue policies to attract foreign enterprises to invest in Vietnam. To develop ancillary industrial parks including an industrial zone for tanning, supplying raw materials, an industrial park for producing imitation leather from petroleum, to serve the leather and footwear industry. These are a driving force for the sustainable development of Vietnam's leather and footwear industry.

In particular, the Vietnamese government is accelerating administrative reform, moving towards e-Government. Create favorable conditions for enterprises to invest and develop. This is a good strategy to affirm Vietnam's commitment to support the growth of the footwear industry.

According to Goh, the development of highway construction infrastructure, industrial parks, connecting seaports with industrial parks, will accelerate the growth of economic sectors, including the leather and footwear industry [4].

4.6. Legal factors

The study of the legal system applied in the footwear industry is very important. Vietnam has developed a full set of laws such as antitrust law, intellectual property law, and labor safety law. However, it is necessary to update and perfect the law according to international standards. To create a public and transparent legal corridor to attract FDI, Taiwanese, Korean, Japanese leather and footwear enterprises. Participating in the world intellectual property organization, strictly controlling trademark piracy in the territory of Vietnam. It is necessary to issue global technical standards such as ISO 9002 certification, so that the quality control process is more effective. It is necessary to improve the law to protect consumers against fraudulent businesses. Create a legal corridor for schools and training institutions to provide human resources to meet the needs of the leather and footwear industry.

Table 1.

External factors affect Vietnam's Leather and Footwear Industry

Source: Information collected and processed by the Authors.

Table 1 shows that there are 3 factors that are considered extremely important ("Vietnam's economic growth is stable at 6-7%/year", "Industrial automation and robotics" and "Government tax incentives”), and has the lowest 4 rating factors as “Chrome-free tanning technology”, “climate change”, “Population Aging leads to lower Labor Force Participation rate” and “Educational conditions”.

The total weighted footwear industry is 4.17, higher than the average, thus showing that the industry is doing very well.

From Table 1 above, Technological factors have the most influence on the footwear industry with a composite mean score of 0.87, followed by economic factors (0.76) and political factors (0.71), legal factors (0.66), social factors (0.61) and environmental factors (0.58).

Environmental factors recorded the lowest total weighted score due to Vietnam's lax regulations on environmental issues. Vietnam also does not have many businesses operating in the tanning industry, which has a very high level of environmental pollution. Furthermore, traditional tanning technologies using chromium (III) continue to operate. Chromium-free tanning technologies have not yet materialized and entered industrial production in large quantities. Next is the social factor, although Vietnam is forecasted to be a country with a high rate of population aging, human resources for the leather and footwear industry are still sufficient to meet the needs of businesses.

Technological factor is the most important factor in Vietnam's leather and footwear industry, the factor "Industrial automation and robotics" has the highest weighted score with 0.2. And the elements "Information technology applied in the leather and footwear industry", "3D Software and 3D Printing in Product Design and Development", "Cloud computing technology" and "Business Management Software" are all businesses are interested in. Due to the increasing price of raw materials, wages have increased due to the increase in Vietnam's per capita income in recent years. Therefore, technology is a key factor that businesses need to invest heavily in technologies to improve labor productivity and reduce product costs. Especially in the industrial age 4.0, businesses applying new technologies will increase their profits significantly.

The second most important factor is the economy, Vietnam has continuously high economic growth and macroeconomic stability. Especially the domestic market with a population of nearly 100 million makes Vietnam an important link in the global footwear supply chain.

Analyze opportunities and challenges

The opportunity for businesses in Vietnam's leather and footwear industry is that global footwear demand continues to grow strongly. Vietnam has been deeply involved in the global footwear supply chain, and has a lot of experience in the manufacturing field. Vietnam has room to grow to higher positions in the supply chain such as product design and development. Autonomous production of raw materials for the leather and footwear industry. However, businesses are also under pressure from external threats such as the increasing competition among countries in the region with cheap labor such as Bangladesh, Indonesia, and Cambodia.

Table 2.

Opportunities and Challenges Analysis on Vietnam's Leather and Footwear Industry

Source: Information collected and processed by the Authors.

Input materials fluctuate unpredictably and labor force is increasing. The European and North American markets are increasingly strict, green certification of products and factories must be ensured. Small and medium-sized enterprises (SMEs) find it difficult to meet, leading to a decrease in orders. The limited capacity of Vietnamese companies due to the majority of SMEs is also a threat and this must be addressed by both the government with a support mechanism for SMEs. Preferential loans for technological innovation and application of advanced technologies. Failure to address this threat will lose opportunities and competitive advantages of Vietnam's leather and footwear enterprises.

5. CONCLUSION

In this study, we analyzed the macro-environmental factors affecting the footwear industry in Vietnam. The results show that there are 25 external factors affecting the footwear industry. External factor matrix analysis identified opportunities and avoided or minimized threats. Technological factors have the greatest influence on Vietnam's leather and footwear industry, followed by economic factors. The government should step up administrative reform, encourage small and medium-sized enterprises to innovate and apply new and advanced technologies, by transferring technology. At the same time, there should be a national-scale project on technology foresight in Vietnam's leather and footwear industry.

Vietnamese leather and footwear enterprises also need to find new markets such as the Asian market and the markets of countries in the Arab bloc to bring Vietnam's footwear industry to sustainable development. It is possible to expand the distribution network within ASEAN. In addition, socio-cultural factors show that consumers are more and more aware of product designs and origins. Vietnamese leather and footwear enterprises need to focus on branding and improving innovation.

However, STEEPL analysis has not yet reflected the entire Vietnamese leather and footwear industry because the external macro environment is always changing. Therefore, this study is only qualitative and does not have experimental evidence. We hope future research will quantitatively analyze all factors, to create a more complete analysis.

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