Research revealed how free trade and competition enhance the efficiency of businesses and economies. Import competition drives firms to increase productivity, stimulate investment and innovation, and reallocate resources among production sectors, thereby contributing to industrial development and overall economic growth.

Research revealed how free trade and competition enhance the efficiency of businesses and economies. Import competition drives firms to increase productivity, stimulate investment and innovation, and reallocate resources among production sectors, thereby contributing to industrial development and overall economic growth.

Studies on how trade impacts firms’ operations often consider firms as single-product producers, overlooking the impact of trade on resource allocation within firms. Therefore, it is necessary to consider the reality that firms may produce multiple products and analyze the product mix within firms and how firms adjust their product mix to cope with competitive pressures from imports. 

Quantitative results show that product quality plays a crucial role in firms' product mix and their competitiveness in both export and domestic markets. Core products of firms, i.e., products with a high share in the product mix, are those with high quality and prices. In contrast, peripheral products (with low shares) often have lower prices and quality. Experimental results indicate that firms also focus on producing core products to cope with import competition. Firms reduce the number of products and concentrate revenue on core products. Import competition has a stronger impact on the number and structure of products in firms that only sell domestically, confirming the impact of import competition on the product mix.

To further enhance the competitiveness of Vietnamese firms in the context of international integration, several policy implications are proposed as follows:

Firstly, international integration and regional economic integration, in particular, are essential for industrialization and economic development processes. Research results show that regional economic integration can contribute to enhancing competitiveness and industrial development in Vietnam by promoting firms to improve product quality and adjust product mixes towards higher-quality products.

Secondly, since product quality plays a crucial role in firm competitiveness, industrial policy should prioritize improving product quality within firms. This can be achieved through training and improving the quality of human resources, facilitating access to quality production inputs and advanced technologies, as well as promoting research and innovation activities within firms.

Thirdly, creating a competitive domestic environment is also crucial. Domestic competition can help firms innovate and enhance product quality. According to the research, a competitive domestic environment is necessary to realize the potential benefits of regional economic integration.

Fourthly, to facilitate the digitalization of trade in Vietnam, there is a need to strengthen the legal framework, improve the quality of telecommunications services, and promote digital transformation in the financial sector and electronic payment.

Finally, while the Vietnamese government has various forms of support for SMEs, there is a need for more reform in the SME support process, particularly with more foreign trade promotion programs. One of the policy changes is to sponsor trade and support methods for SMEs to access foreign markets by designing products suitable for foreign markets.