ABSTRACT

Currently, with the trend of the market economy, the economy of Viet Nam is gradually integrate into the world economy. This has created opportunities and challenges for Vietnamese businesses. If the business itself does not have the policies and strategies to adapt to the new situation, then risk of bankruptcy is very high. Since early 2012, there are about 49,000 Vietnamese interprises bankruptcy and discontinued operation that failure may be attributable to deciencies in managerial knowledge and nancial management abilities. On the other hand, failure may be attributable to an inability to adapt to environmental change. In this topic will clearly identify the bankruptcy cause of Vietnamese enterprises and discuss to more clarify the policies of business to cope with difficulties, as well as the policies of the government assistance for business in difficult times.
Key worlds: economy, Vietnamese businesses, bankruptcy

I. Problem statement How to determine small and medium enterprises in Viet nam be recorded in Article 3 of Decree 56/2009/N-CP of the Government on helping small and medium enterprise development: Small and medium-sized enterprises are the basis of business registrered business in accordance with law, is divided into three levels: micro, small, medium scale total capital (total capital equivalent to total assets is determined in the balance sheet of the enterprise) or the average number of employees (total capital is the priority criteria), as follows: 1. 2. Micro enterprises: Number of employees under 10 people Small enterprises:

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a)

The enterprises of agriculture, forestry and fisheries: total capital are

20 billion VND or less, the number of employees over 10 people to 200 people b) The enterprises of industry and construction: total capital are 20 billion VND or

less, the number of employees over 10 people to 200 people c) The enterprises of trade and services: total capital are 10 billion VND or less, the

number of employees from 10 to 50 people 3. a) Medium enterprises: The enterprises of Agriculture, Forestry and Fisheries: Total capital from 20

billion to 100 billion VND, the number of employees from 200 to 300 people b) The enterprises of Industry and construction: total capital from 20 billion to 100

billion VND, the number of employees from 200 people to 300 people c) The enterprisis of Trade and services: total capital from 10 billion to 50 billion

VND, the number of employees from 50 to 100 people. With identified SMEs as above, and the government's policy to create conditions for the establishment of business, SMEs do not stop increasing in recent years. According to the president of the Association of small and medium enterprises in Vietnam (VINASME) Mr. Cao (Cao Sy Kiem), the country has nearly 500 thousand SMEs, accounting for over 97% of the total number of enterprises. SMEs created 45 to 50% of consumer goods and exports, contributing 20% to the state budget, attracting 56% of the employees in the company (2012). This is one of the factors that main component of gross domestic product (GDP) with 50%, contributing to the liberation and development of productive forces, mobilize and promote the socio-economic development, contributing to the decision to economic recovery and growth, increase exports, increase revenue and

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participation effectively solve social problems such as: Job creation, poverty alleviation ...and more Although SMEs have an important role like that, but there are many struggling SMEs in the present situation. Of course, this problem is true. Because, in general difficult economic situation currently, firms are at the greatest risk of failure when they are young and small (Stewart Thornhill and Raphael Amit 2003). This is really a concern not only for SMEs but also the economy of Vietnam. So, what are the causes of difficulties for SMEs? Business development is spontaneous heavily, no clear planning and direction. In 2003, there were 62. 908 business activities, mainly focus in the commerce 39.4%, hotels and restaurants 4.5%, Food & Beverage Industry 6.3%, Textiles, leather 2.6%, wood and wood products 2.6%, assembly and production of consumer goods 3.1%, real estate business and consultancy activities 5.1% ... Enterprises operating in the fields above also means the industry needs less investment, conversion is faster with high interest rates and low risk. In sectors such as: Processing of agricultural products for export, production of chemicals, and some high-tech industries such as manufacturing equipment, electrical engineering, electronics, precision equipment ... needed to increase production capacity, but little attention investment, number of enterprises are little but mostly small-scale, low technology. Non-state-owned enterprises accounted for 87.8% of the total number of enterprises, which are mostly small-scale, mostly established from 2000 onwards, are distributed in all 63 provinces and cities, but no clear direction, spread unplanned development, smallscale severe spontaneous style movement. Many local use administrative measures to put the individual business households in some of the gold and silver business, hotels, fishing, private enterprise, so many provinces there are thousands of businesses to focus

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largely on a sector that is not the important decisions local economy, of which the majority are small businesses and very small Because scattered development and lack of planning-oriented, so the establishment of enterprises lack the stability and sustainability. According to survey data of 2002, the number of actual business activities accounted for only 67% of registered, making it difficult for management of water and waste in construction investment and business performance of enterprises is not high Multiple enterprises, but small-scale dispersion comes with outdated technology Number From From From of 10 50 300 enterprises to to to less less less less than than than than 50 300 500 10 employees accounted accounted accounted accounted for for for for 48.0%. 32.9%. 14.1%. 2.2%.

employees employees employees

- Over 500 employees accounted for 2.7%. Most of our enterprises are small-scale, low capital business, including lower fixed capital (average of 8.8 billion VND / 1 enterprise), so the technical equipment and technological capabilities advanced is very limited, fixed assets to one employee at a very low level, an average of 119 million / 1 workers (about 7.5 thousand dollars), the highest of which is the foreign-invested enterprises 247 million, state-owned enterprises 137 million, the lowest non-state 43 million the In summary, small-scale, distributed comes with outdated technology is limited to the greatest shortcomings of our enterprises, which dominate so many other weaknesses: low competitiveness, Business efficiency is not high, labor, lack of stability and long-term sustainable Labor

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Labor Labor Labor

qualified

college

or workers

higher

accounted

for for for

12.8%. 29.2%. 7.4%.

technical intermediate

accounted training accounts

level

- No training accounted for 50.6%. Summary, Failure among young rms is attributed to deciencies in general

management skills, while an evolving competitive environment is identied as a signicant inuence. this results reinforce the importance of resource and capability development by small and medium rms as well as conrming the hazards of rigidity and inertia mong more established rms (STEWART THORNHILL AND RAPHAEL AMIT 2003). II. Theory Formal bankruptcy theory began with the recognition that a bankruptcy system is sometimes necessary to solve a collective action problem among the creditors of an insolvent firm. Insolvency may be a function of economic distress, financial distress, or both. Economic distress occurs when the firm cannot earn revenues sufficient to cover its costs, exclusive of financing costs. Such a firm has negative economic value. A firm is only in financial distress if it would have positive earnings were it not required to service its debt. Because a firm's debt is sunk when insolvency occurs, the existence of debt is irrelevant to the question of whether the firm should continue or not (Alan Schwartz 2005). The resource-based view of the rm depicts rms as heterogeneous bundles of idiosyncratic, hard-to-imitate resources and capabilities. Amit and Schoemaker dene resources as stocks of available factors that are owned or controlled by the rm (1993,p. 35). Capabilities are information-based, tangible or intangible processes that are rm-specic and are developed over time through complex interactions among the rms resources (1993, p. 35). Competitive advantage can be derived from a rms
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resources and capabilities to the extent that they are valuable, rare, inimitable, and organized to be exploited. Of these elements, value and rarity are necessary but insufcient in the pursuit of competitive advantage Although the resource-based view has principally been employed in the study of abovenormal performance, it is instructive to apply its tenets in the context of below-normal performance (STEWART THORNHILL AND RAPHAEL AMIT 2003). Superior performance is more likely when resources and capabilities are aligned with strategic industry factors characteristics of the competitive environment that are determinants of rm level protability (Amit and Schoemaker 1993). The failure is more likely when there is misalignment between what a rm can do and whatthe competitive environment requires. Small business plays a key role in the health of the economy by providing employment and job growth (Don B. Bradley III 2005). In the Viet Nam small firms of 500 employees or less employee about half the private work force and provide 44.3 percent of total salaries. Small businesses have been responsible for creating between 60 and 80 percent of new jobs each year. However, Most state enterprises to reduce operating power, scale down production and lay off workers. This is truly the submerged part of the iceberg difficulties that Vietnamese enterprises are facing (Mr. Tran -Director of the Vietnam Institute of Economics). Difficulty is even more difficult, nowadays, European debt crisis has impacted consumption in traditional markets, potential markets, affect the export of business. This requires businesses in Vietnam in general and SMEs in particular have to find new appropriate directions for the market. Especially, SMEs must restructure. Only in this way, Vietnamese SMEs can survive and grow.

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III.

Research objectives

This topic will research some objectives following: 1. Current economic situation of inside and outside Vietnam. According to many organizations and personal inside and outside country, in 2012, especially in the first half, the economy will generally have more gray signal in 2011. In particular, the gold price will continue to fluctuate sharply, many major world currencies continue to trend weaker and weaker, including USD, Euro; Japanese Yen and Russian Ruble increase slow ... Identify gaps and good treatment results have been and will be incurred by the abovementioned economic shocks become one of the urgent demand in order to better prevent and control the reproducibility of the shock in the future

2. Determining objective and subjective causes of Vietnams SMEs bankruptcy. The business failure in business is often only poured in for two reasons lead to bankruptcy are the economy in recession and lack of capital. Against failure or bankruptcy, the fact that only a single method: the entrepreneur must be aware of quick draw lessons from the failures, not to repeat the mistakes that led to bankruptcy. 3. Current solutions of Vietnam enterprises and Government. Things to do now is focus on solving difficulties, support enterprises to reduce inventory, access to bank capital to promote business development, sustained growth and development. At the same time, boost exports, opening of markets, limit imports of consumer goods and domestic goods can be produced.

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IV.

Research questions

The surveys main research questions can be broadly classified as: 1. Vietnam's current economic situation how impact on SMEs? 2. Bankruptcy causes how impact on SMEs? 3. Are current solution the government and SMEs are appropriate or not? Things are especially important in the current situation, must clearly identify the economic situation in the inside and outside country, government as well as business can make the corresponding policies. V.

Methodology of Research and discussion

The data of enterprises those getting loss, the ratio of fixed assets, the business capital of collection lots were drawn from the investigation report businesses published on the site (http://www.gso . gov.vn) General Statistics Office of Vietnam (from 2000 to 2003). Assuming that the linear relationship between the dependent variable (ratio of bankrupt enterprises) and the independent variables are Ratio capital of bankrupt enterprises, Ratio of fixed assets and investment in long-term of bankrupt enterprises relationship with each other. The model equations of the form: Y = 0 + 1X1 + 2X2 + ei Y: Ratio of bankrupt enterprises X1 : Ratio capital of bankrupt enterprises

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X2 : Ratio of fixed assets and investment in long-term of bankrupt enterprises From the this data, we use STATA for the following tables: . reg y x1 x2 Source | SS df MS Number of obs = F( 2, Prob > F R-squared 73

-------------+-----------------------------Model | 3101.93102 Residual | 9812.36214 2 1550.96551 70 140.176602

70) = 11.06 = 0.0001 = 0.2402

-------------+-----------------------------Total | 12914.2932 72 179.365183

Adj R-squared = 0.2185 Root MSE = 11.84

-----------------------------------------------------------------------------y| Coef. Std. Err. t P>|t| [95% Conf. Interval]

-------------+---------------------------------------------------------------x1 | x2 | -3.537452 4.575962 .895978 .9788721 -3.95 0.000 4.67 0.000 12.44 0.000 -5.324424 2.623663 17.47776 -1.75048 6.528261 24.15148

_cons | 20.81462 1.673084

------------------------------------------------------------------------------

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The F test for the entire model is F (2, 70) = 11.06, Prob> F = 0.0001), said this model has statistical significance.

Variance coefficient R-squared = 0.2402 We have the equation: Y = 20.08 - 3.5 X1 + 4.6 X2 1 = -3.5, when the interpisess capital decrease 0.35% then lose rate increase 1%, and opposide. This indicates Vietnamese enterprises are missing capital, this leads to lost business bankruptcy 2 = 4.6, when the Fixed assets and long-term investments rate increase 4.6% then lose rate increase 1%, and opposide. Maybe this is a paradox, when long-term investment property increased, the number of loss enterprises increased. However, perhaps in Vietnam, this is happening, while small and medium enterprises accounted for 98% of total business. The most of them did not invest in the manufacturing and fabrication, they invested in some fields to earn money easily as trade and services which dont need much fixed assets and long-term capital. On the other hand, this also shows the weakness in investment, management and exploitation of the capital of Vietnamese enterprises - an unsustainable business method and are the causes of loss, bankruptcy. In the difficulties, businesses receive much support from government policy. On 30-62009, the Government issued Decree No. 56/2009/ND-CP, the provisions of the policy and management of State aid help small and medium enterprise development. Support policies include the funding and implementation of solutions, which are included in the annual plan. The goal of this program priorities help small and medium enterprises,
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especially in priority women-owned businesses and enterprises use more female employees. According to this Decree, the State apply eight basic policy to support small and medium enterprises development, including: financial assistance policy; production premises; innovation, technological capacity, the technical level; promotion and market expansion; participate in the procurement plan, the provision of services ; information and advice; human resources; incubators business. Financial aid policy, the State encourages the establishment of a credit guarantee fund small and medium enterprises. State Bank will issue the incentive and for a number of technical assistance projects to strengthen the capacity of relevant financial institutions to extend credit to small and medium-sized enterprises. In addition, through training assistance programs, state support of small and medium enterprises capacity building projects, business plans; established small and medium enterprise development fund capital grant from the state budget and other lawful sources. This fund will provide funding for programs and projects that help improve competitiveness, technical capabilities for small and medium enterprise Government has very specific policies to support the development of small and mediumsized enterprises. For their part, businesses need to actively review the work to create transparency in administration and keep credibility. In addition, in the current conditions, small and medium enterprises need to cooperate with each other and with strategic foreign investors to develop production and business. This is the right direction, helping small and medium enterprises for sustainable development and increased competitiveness in the market.

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VI.

Conclusion

The causes for small business failure and ultimately bankruptcy are many. A successful entrepreneur is, no doubt, the consummate businessperson who must be a jack-of-alltrades. It is evident that nearly all entrepreneurs have the opportunity to control their own destiny. Success is obviously not a guarantee, but nor is failure. A well-rounded

businessperson who has carefully planned and prepared with a clear vision of who and what the company is will have an excellent opportunity for success. Some of the major causes of bankruptcy are poor planning, lack of financing, lack of business experience and lack of personal discipline. Anyone considering opening their own business should have not only the vision of where the business is going to end up, but a strong business plan. An important part of this business plan should be an exit strategy in case the business runs into problems. No business should start with just enough money to actually open the door. Many entrepreneurs do not realize that it takes two to three years for most businesses to turn a profit. Even though you are your own boss, the customer still controls a lot of your life and how your time is spent. Therefore, self-discipline becomes a very important element of being successful in owning a small business. Along with self-discipline, an individual should possess experience in the industry in which they are trying to establish their business. It is always a good idea to work for someone in the industry and make your mistakes on their money rather than on your own money.

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References
1. Lectures in Business research mothod of Dr. Nguyen Phan 2. Business research mothod textbook
Open University Malaysia

3. http://www.gso . gov.vn 4.
http://vneconomy.vn/20120517060658110P0C9920/chinh-phu-ly-giai-nguyen-nhan-

doanh-nghiep-gap-kho.htm

5. Anastasio, Susan (1999), Small Business Insurance & Risk Management Guide, The Travelers, Hartford, November 1999 6. Holland, Rob (1998), Planning Against A Business Failure, Agricultural Development Center, University of Tennessee, 7. Bradley III, D. B. & H. L. Saunders, (1985), Bankruptcy: A Management and Marketing Problem, Small Business Advancement National Center, University of Central Arkansas

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