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GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT CAPSTONE PROJECT REPORT BUILDING UPUP BUSINESS BUILDING BUSINESSSTRATEGY STRATEGYFOR YAMAHA MOTOR VIETNAM BYBY 2015 FOR YAMAHA MOTOR VIETNAM 2015 Group Number: 03 Hoang Ha Student’s name: Hoang Nguyen Ke Phu Ha Nguyen Ke Phu Le The Son Le The Son Dang Thi Nhan Dang Thi Nhan Class: GaMBA.X0409 HANOI 2011 HA NOI 2011 DECLARATION We hereby certify that this capstone project report represents the result of our own research No other person’s previously published or written work has been used without due acknowledgement in the text No material has been used in this report which has been accepted for the award of a degree or diploma in any tertiary institution Group – Class: GaMBA.X0409 TABLE OF CONTENTS ASEAN The Association of Southeast Asian Nations BCG Boston Consulting Group DO Direct Operation Shop EFE External Factor Evaluation FDI Foreign Direct Investment GDP Gross Domestic Product HVN Honda Viet Nam Company IE Internal – External Matrix IFE Internal Factor Evaluation QSPM Quantitative Strategic Planning Matrix R&D Research & Development ROA Return On Assets ROE Return On Equity SBU Strategic Business Unit SSC Super Service Campaign SWOT Strengths-Weaknesses-Opportunities-Threats VMTC Vietnam Register Motor Vehicle Testing Center WTO World Trade Organization YFS Yamaha Factory Service YMVN Yamaha Motor Vietnam Co., Ltd LIST OF TABLES LIST OF FIGURES GaMBA.X0409 – Group INTRODUCTION General context, the necessity and implication of the research project Vietnam’s motorcycle assembly and manufacturing industry, formed since 1990, initially based on the investment of Japanese and Taiwanese motorcycle makers, has rapidly developed and sufficiently met the domestic demand for basic motorcycles The positive development of the motorcycle industry has come from the great demand for motorcycles in Vietnamese market and the policies to encourage foreign investment by government Yamaha Motor Vietnam, one of the FDI manufacturers has gained a relatively strong position in the motorcycle market in Vietnam Although it was a latecomer, Yamaha has worked to build products which stand among the very best in the country through its constant pursuit of quality; and at the same time, through these products, it has sought to contribute to the quality of life of people nationwide Following on the success, Yamaha has set up their target to become the number one brand name in manufacturing motorcycles for the youth In order to achieve this goal, the company should engage in strategic planning to make effective decisions Based on the need for intergrating analysis and intuition in strategic management, our group has decided to formulate some strategies for Yamaha in the capstone project report: “Building up business strategy for Yamaha Motor Vietnam by 2015” Objectives of the study The study objectives include: • To explain the concept, role and process of formulating a business strategy • To conduct business strategies for Yamaha by 2015 • To give some recommendations and measures to implement strategies GaMBA.X0409 – Group 3 Scope of the study The study focuses on Yamaha business status in Vietnam motorcycle market from 2006 to 2010, and then proposes some business strategies by 2015 Methodology Many different methods are utilized in this study in order to have a wider understanding of Yamaha business status and to gain an overall picture between Yamaha and its competitors within Vietnam motorcycle market These include: desk research, internet research, comparison, analysis, statistic, summary… Structure of the study Besides the introduction and conclusion, the capstone project report involves three chapters: Chapter 1: Theoretical background on Business strategy management Chapter 2: Building up business strategy for Yamaha Motor Vietnam by 2015 Chapter 3: Some solutions to implement business strategy for Yamaha Motor Vietnam by 2015 In the process of researching, there may be some limitations; thus we would be very grateful to get your comments and feedbacks Thank you very much! Group – Class: GaMBA.X0409 CHAPTER : THEORETICAL BACKGROUND ON BUILDING BUSINESS STRATEGY 1.1 Definition and classification of Business strategy 1.1.1 Definition of Business strategy The term “Strategy” derives from the military field with the meaning to indicate the large and long-term plan on the basis sure what the enemy can and can not GaMBA.X0409 – Group Since then the term “Business strategy” was born According to the traditional viewpoint, "Strategy is the direction and scale of an organization in long-term, which will bring advantages to the organizations through the optimum arrangement of resources in a competitive environment to meet market demands and expectations of stakeholders." According to Alfred Chandler: “Strategy includes the basic long-term goals of an organization, and the selection of the way or process to act, the allocation of necessary resources to implement to achieve these goals." According to William J' Glueck: "Strategy is a consistent, comprehensive and coordinated plan which is designed to ensure that the basic objectives of the organization will be done." According to Fred R David: "Strategy is the means to achieve long-term goals Business strategy may include the development of geography, diversification of activities, property, product development, market penetration, expenditure cuts, liquidation, and joint ventures." According to Michael E Porter: "Strategy is the art of building a solid competitive advantage to defense." 1.1.2 Roles of Business Strategy The business strategy management will help the organization: • Find their objectives and direction to choose their own ways to achieve the goals and to know the location of businesses in the process of implementing these goals • Identify opportunities and threatens from external environment, the internal strengths and weaknesses; then to promote the strengths, minimize weaknesses, catch opportunities and prevent risks from outside GaMBA.X0409 – Group • Make business decisions in line with the business environment in order to improve efficiency and productivity • Choose the appropriate competitive advantages in the changing business environment, and find out how to survive and grow to enhance the competitive position of the enterprise 1.1.3 Classification of Business Strategy  Corporate level Strategy Corporate level strategy identifies the orientation of the organization in the long term, to complete tasks and achieve the growth target On the basis of corporate level strategy, the organization will develop its own strategies  Strategic Business Unit level (SBU) Strategic Business Unit (SBU) in a company can be a strategy for a segment or a product category, etc This strategy is aimed at the development orientation of each sector or individual product categories for making optimal contribution to the achievement of corporate-level objectives The company must clearly identify the advantages of each sector compared to the competitors to make the strategy consistent with corporate level strategy  Functional level strategy Each company has many functional departments such as marketing, human resources, finance, manufacturing, research and development, etc The departments should have their specific functional level strategies to support the implementation of strategic business unit and corporate level strategies In conclusion, the three basic levels strategies are not independent but have such a closely connection that the strategic level is a precondition for lower-level strategies, 10 GaMBA.X0409 – Group share of the Company exceeding 32% in the coming year; (2) Expanding and improving the production competence of the parts manufacturing factory; (3) Innovating technology so that the products can meet the standards of EU3 and EU4 on gas emission by the year 2013; (4) Improving the logistics competence in the soonest time; (5) Improving the production procedures and technology to ensure competitive ability within the category of Basic moped; (6) Increasing investment in training highly skilled workers  BUSINESS STRATEGY FORMULATION From the above analysis, we select the business strategy of YMVN is FOCUS and GROWTH STRATEGY to differenciate The Style and Quality of their products to meet the growing demand of young customers and gain biggest market share in urban areas YMVN should focus on two key categories: (1) Implementing Focus and Growth strategy for the Sporty Scooter Market with advanced technology and new features; (2) Implementing Cost Leadership Strategy to increase penetration in the Basic Moped Market Both of these strategies have equal important roles  Reasons to select Focus and Growth Strategy for Sporty Scooter Market The selection of this strategy bases on the core competency of YMVN and the chance of success The target of this strategy is always to create new flagship products with outstanding features of genuine value The reasons for selecting the Pioneer strategy in the Sporty scooters category are: Firstly: This category did not exist in the perception of Vietnamese customers before the year 2002, however, thanks to the business orientation of “Stepping off the path and Creating differences” since YMVN’s establishment, the Sporty Scooter Category was formed The concept of Sporty Scooters was formed base on the harmonized combination of advanced features of durability and maneuverability of the 65 GaMBA.X0409 – Group moped motorcycle with the utility features of easiness and comfort of the scooter Through 10 years of untiring research and development, Nouvo-135cc has been highly appreciated by customers In the perception of customers, YMVN is always the pioneer in creating the genuine value for the product in this category Secondly: With a lot of experience and advanced technology, YMVN always takes the advantage in manufacturing engines and designing for the products in this segment The key point here is the exclusive DiAsil technology which has been developed to the second generation Thirdly: The demand in this category is increasing very quickly from 3% of total demand in 2006 to 18% at present, and YMVN is occupying 51% of market share in this category The sales result holds quite a great weight in the total profit of the company  Reasons to select Cost Leadership Strategy for Basic Moped Market Firstly: according to above analysis, the demand in the Basic moped category will continue to increase highly in the coming years and still account for about 50% of total market demand by 2015 Currently, YMVN ranks second in this category, making up 22% of market share, equivalent to 37% of YMVN output For both HVN and YMVN, this is a very important category as it plays a guiding role for the customers when they intend to purchase motorcycles at a higher segment Secondly: about 12 million Chinese motorcycles are in the time to be replaced due to very bad durability Most of the users in this segment have low income therefore the basic moped motorcycle of FDI makers are their first choices due to affordable prices, quality and fuel consumption level 66 GaMBA.X0409 – Group CHAPTER : SOME SOLUTIONS TO IMPLEMENT THE BUSINESS STRATEGY OF YMVN BY 2015 3.1 Some solutions to implement the business strategy of YMVN by 2015 3.1.1 Solutions to implement the Focus and Growth Strategy for Sporty Scooter Market To ensure the leading position and continue to make up the higher market share in this category, the company needs to consider some solutions as follows:  Increasing the production scale and renovating technology YAMVN should drastically making full use of current experience and technology; develop the 3rd generation DiAsil technology to expand production, meeting the increasing demand of customers Taking all advantages of governmental policy to encourage investment in supporting industries, the company should improve the hi-tech parts producing ability to actively predominate in supplying motorcycles’ components  Diversifying products Sporty scooter category is the newly surged category with a few competitive products; as a result, YMVN needs to make full use of DiAsil technology to diversify their models YMVN should modulize the DiAsil engine to adopt for new products in the future to enhance productivity and reduce production cost They are also advised to take the advantage of low tax according to AFTA and WTO to approach the new Advanced Fuel Injection Technology to improve 50% of the fuel consumption for motorcycles by the year of 2015  Styling and designing Currently, YMVN’s products aim at male customers (accounting for 80% target customers); however, the demand of female customers is becoming more and more 67 GaMBA.X0409 – Group various Thus in this sporty categorization, there should be more products to satisfy the female customers YMVN should keep the advanced design of style and Engine with the most updated technology And YMVN should always focus on the design for young generation with more innovative and characteristic The Design processes should be more improved to reduce time and cost YMVN need to increase its design ability by not only expending the designing division inside the company but also integrating with GK Dynamic Tokyo to set up a special designing divison for Sporty Scooter 3.1.2 Some solutions to implement the Cost Leadership strategy to increase the penetration in basic moped market  Improving current products Sirius and Taurus – the two current products have considerable advantages in quality and style; however, the production cost is 7% higher compared with that of the HVN products in the same category Thus, besides maintaining the current strengths YMVN should carry out renovating production technology for lower cost  Investing in component parts production YMVN currently owns a parts manufacturing factory with advanced machinery and equipments, not only supplying component parts for YMVN but also exporting some motor and hydraulic engine components to Japan and the US This is such a unique advantage that YMVN had better quickly get the preferential treatment from the government towards supporting industries to expand and improve the competence of producing component parts By expanding the Component Parts factory, YMVN can reduce the bargaining power of suppliers and reduces the cost of its basic moped  Expanding channel of distribution and the market There will be an obvious necessity to replace about 12 million Chinese motorcycles and over million units of other brand names Most of the owners are 68 GaMBA.X0409 – Group living in rural areas; hence, YMVN should quickly expand their distribution channels to rural areas to increase the consuming capabilities YMVN aims at the specific target of opening 100 more 3S dealers and 150 2S agents in the countryside nationwide 3.1.3 Solutions on functional strategy 3.1.3.1 Solutions on marketing management  Prices • For Cost Leadership Strategy in basic moped segment, it hardly witnesses the confronting war in price between the two Japanese manufacturers YMVN and HVN, as these two firms will continue to apply the “Sandwich” price strategy Therefore, the two firms need to limit the entry of potential manufacturers into this segment For the sporty moped, YMVN is taking a great advantage, however it is necessary to maintain reasonable price to attract young customers, having medium to high income, preferring sporty, speedy style • For Focus and Growth Strategy in the sporty scooter, the competition mainly takes place in the segment with the price lower than 42 millions VND YMVN needs to strive more in researching technology for lower cost, in order to maintain the strength in this segment However, with the advanced techonology and functional features YMVN should set the price higher than the competive model to affirm product status  Network • For Cost Leadership Strategy in the Basic Moped Segment: YMVN needs to expand their sales network, as the network of HVN has a wider covering density, especially in the rural areas Within years YMVN needs to expand quickly their network up to every rural area nationwide 69 GaMBA.X0409 – Group in order to provide better sales and service to customers and improve the competitiness • For Focus and Growth Strategy in Sporty Scooter Segment: About the location, HVN has a certain advantage as most shops are placed at street corners with crowded traffic, attracting more attention of customers Hence, YMVN needs to look for new partners, prioritizing the shops that lie on crowded streets’ crossroads, streets’ corners, and large area.Besides the competition for location, size and quality of the shop, all the manufacturers also compete for the quality of after sales services for its users As a result, YMVN needs to continue to complete its training process, improve their after sales services – which are the outstanding strengths of YMVN at the moment  Promotion • Continue to sticks its brand-name and promotion activities to Sport Activities in order to strengthen the brand image • Making careful advertisement plan with clear advertising messages • Selecting suitable channels of advertisement, especially advertising on professional publications, outdoor posters or advertising in forums, huge community network like Facebook, blog,…Online social network is considered as most updated and efficient as it requires low cost but is the largest and fastest communication channel to customers 3.1.3.2 Solutions on R&D activities  Researching and predicting the market with higher frequency At present, YMVN often implements many market surveys, such as surveys on the motorcycle shop quantity, brand name recognition for once time per year; customer 70 GaMBA.X0409 – Group surveys on motorcycles’ color and graphic and function preference every four or six months However, it is still necessary for YMVN to enhance the market research frequency to catch up with the latest taste and changes For The Basic Moped motorcycle: The R&D activities should be focused base on the needs and wants of the target customers in rural areas YMVN needs to mass survey in rural with bigger sample size For Sporty Scooter: YMVN need to focus on the young customers in key cities Besides of searching new demands about technical matter, the design and color is one of the most factors for young customers, therefore YMVN needs to check youngsters’ respond to the world latest trend of color and graphics  Closely managing information sources It is essential to manage the information between dealers, branches as well as tightly monitor daily reports on sales status Staffs also need to be sent to each region for a practical market evaluation  Determining the key market in each stage The purpose of this solution is to maximize the efficiency of marketing activities For example, in the Central region, YMVN determines that Da Nang, Hue, Nghe An, Thanh Hoa are major markets, they will concentrate on continuously implementing many sales promotion campaigns here, lasting for about two years to reinforce the awareness of the consumers  Increasing the localization ratio and actively taking part in the supporting industry Together with the development of supporting industries in Vietnam, YMVN tends to increase localization ratio in order to reduce the product cost YMVN should enhance the cooperation with suppliers and improve the spare parts factory productivity in order not only to satisfy direct production but also supply components 71 GaMBA.X0409 – Group for domestic and export automobile manufacturing companies, contributing to the development of supporting industries At the same time, YMVN need to call for some loyal parts supplier of YMC in Japan to Vietnam to some feasibility studies to set-up joint-venture with them to produce motorcycle component parts 3.1.3.1 Solutions on human resources management  Personnel organization It is necessary to complete the forms of production groups, teams at the factory and delivery sections, transportation, departments as per the optimal number in a group is 8-10 people basing on the basis that each laborer can to replace one part or all the jobs of others in the responsible group Leaders of the groups, teams should be those who are prestigious people with organizational capability, responsibility and high selfcontrol, excitement, leading in working  Training programs • Expanding methods of training human resources: YMVN currently implements the policy of promoting staffs to advanced countries, however YMVN should launch and implement a program in which foreign talents work with Vietnamese managers and engineers in Vietnam This method not only helps transfer their manufacturing skills and attitude in practical setting but also takes lower cost • It is also necessary to improve the facilities for learning: It is necessary to improve the facilities so that the learners can directly approach modern technology, advanced techniques, at the same time, bringing about belief and aspiration for the laborers  Personnel evaluation 72 GaMBA.X0409 – Group The human resources evaluation needs to be held more frequently and thoroughly In order to have precise evaluations, YMVN needs to apply the following measures: • Collecting feedback through questionnaires, survey or direct interviews • Examining the knowledge, skills of staffs annually • Referring the evaluation of managers or direct superiors • Conducting comparison among staffs in order to work out training plans for those who are below the standards 3.1.4 Budget for business strategy by 2015 Obviously, to carry out these strategies, YMVN need to estimate and allocate the budget for each key plan: Table 3.18: Budget allocation for total YMVN strategic plan by 2015 No Discription for each key plan Budget (USD) Investment for Part Factory (target 50% of Localization) 31,200,000 Develop the 3rd generation of DiAsil Engine technology 5,200,000 Develop new generation of Basic Moped Motorcycle 4,300,000 Investment for Fuel Injection Technology (FI) 1,700,000 Investment for Emission Control (EU3 & EU4 std) 2,500,000 Sales Network Expansion 3,000,000 Trainning for employees Total Estimated Budget 650,000 47,550,000 The above estimated budget is quite huge amount of money but it is necessary investment to maintain the competitive strength and wealthy growth of YMVN to the 73 GaMBA.X0409 – Group year 2015 in order to achieve the goal The proposal for budget will be considered and approved based on the feasibility of this study by YMC 3.2 Some recommendations to the state  Protecting intellectual property rights Like many other countries, Vietnam currently has quite a sufficient legal framework on Intellectual property Although the peak period of intellectual property rights violation has passed (from 2005-2008), it is still rampant in Vietnam By far, the most common infringements in Vietnam’s motorcycle industry are industrial design especially regarding external plastic cover and trademark violation In fact, to drastically deal with the violation of the intellectual property rights, it is necessary to combine the three parts: State, society and market, of which the state takes a central role to coordinate these powers It also requires a combination among many authorities: National Office for Intellectual Property, economic police, market management department, Vietnam Register Center, Provincial People’s Committees Besides, it is necessary to increase the fines for intellectual property rights violation According to the Decree No 97/2010/NĐ-CP about administrative violation in industrial property, violating behaviors will be warned or fined at maximum 500 million VND The fine is still small compared with the sales profit and thus does not significantly deter violators from repeating the offense  Reducing some motorcycle registration procedures Authorities should consider exempting the procedures of issuing technical safety and environmental protection certificate for the imported motorcycles if manufacturers use those models for R&D purposes without doing business and selling  Developing supporting industries and industrial human resources 74 GaMBA.X0409 – Group • Enhance the attraction of investment in five targeted sectors of the supporting industries, i.e pressure processing (forging, pressing), casting, welding, thermal treatment, and mold and die; • Formulate a master plan to develop supporting industries of the motorcycle industry, which will play a leading role in the development of supporting industries for other assembly industries • Build a supporting industry database in conjunction with business matching service between FDI assemblers and local suppliers to narrow the information and perception gap between enterprises  Improving organization structure and activities of an industry association • Improve and enhance a focal point role of an industry association in gathering all motorcycle assemblers and part suppliers in Vietnam together, improving their product quality and productivity • Organize meetings to exchange information among manufacturers, draft a plan for structuring the existing association or establishing a new association with an aim to build up an industry association that will serve all members’ interests 75 GaMBA.X0409 – Group CONCLUSION Building business strategy and making decisions for the development of a corporate for the next four, five or ten years is quite a difficult task as the external factors like policies, consumption demand, competitive conditions… often vary year by year However, it is still a vital activity for strategists in each enterprise A sound strategy will encourage the internal resources and enhance the ability to adopt with changes of external factors From now to 2020, motorcycles still are important in people life With the huge potential market, YMVN has conditions to become one of the biggest suppliers for motorcycle and spare parts manufacturing On the bases of analyzing external and internal factors affected business results and with a vision of making up higher market share, competing with the current major competitor HVN, the group proposes to YMVN the followings strategies: • Diversifying products in designing and engine with the two main suggestions: implement the pioneer strategy in Sporty scooter category; and increasingly penetrate into basic moped category • Maintaining and expanding network by three levels: DO, 3S, 2S • Closely fastening brand-name and promotion activities with outdoor activities, especially sport events and social activities Besides these key strategies, the company also needs to implement long-term and comprehensive training program to improve their highly-qualified and professional workforce This is a core issue that ensures the success with a long-term vision The strategic-management process results in decisions that can have significant, long-lasting consequences It is also essential, therefore, that strategists systematically and timely review, evaluate and control the execution of strategies 76 GaMBA.X0409 – Group The “Building up business strategy for Yamaha Motor Vietnam by 2015” has concretized the content of development strategy for YMVN Many persons have contributed time, energy, ideas and suggestions for improving this thesis We would like to thank my professors and classmates at Griggs University and hope to receive your feedbacks for further useful strategies for YMVN Group – Class: GaMBA.X0409 77 GaMBA.X0409 – Group REFERENCES Le Van Be (2010), Feasible Studies on Solutions for Traffic Jam in Ho Chi Minh City and some additional proposals, Development & Research Institute of Ho Chi Minh city Master Dinh Hong Long (2009), The Experience of Motorcycle Industry Development from other countries, Economic and Forecast Magazine http://www.tinkinhte.com/viet-nam/ho-so-tu-lieu/kinh-nghiem-phat-trien-congnghiep-xe-may-o-mot-so-nuoc-va-bai-hoc-voi-viet-nam.nd5-dt.56198.113207.html Master Le Viet Long (2010), Copyright Violation: Status, reasons and solutions, Ministry of Trade and Industry Nguyen Nam Anh (2007), Development Plan for Vietnam Motorcycle Industry in 2006-2015 and a vision to 2020, Institue of Industry Strategy - Ministry of Industry and Trade Tran Nam (2010), Vietnam Motorcycle Industry in Intergration Progress by, Sai Gon Giai Phong, http://www.stockbiz.vn/News/2010/11/12/158891/nganh-cong-nghiepxe-may-viet-nam-trong-hoi-nhap.aspx Duc Tho (08/02/2011), Two Faces of Vietnam Motorcycle Market, Vietnam Economic News, http://vneconomy.vn/201102070659192P0C23/hai-mat-cua-thitruong-xe-may.htm The Degree 97/2010/NĐ-CP issued on 21/09/2010 about sanctions on administrative violation of industrial copyright General Statistic Departement, Average population by gender, by urban and rural areas in 2009 10 General Statistic Department (30/12/2010), Press Meeting for announcing the economic and social figures 78 GaMBA.X0409 – Group 11 General Statistic Department (2010), Economic and social figures in period 20062010 throught key statistical indicators 12 David, R Fred, “Strategic Management: Concepts and Cases”, Pearson Prentice Hall, South Carolina 13 Yamaha Business Operation - Annual Report (31/12/2010) 14 Honda Vietnam Annual Report (31/12/2010) 79 ... been accepted for the award of a degree or diploma in any tertiary institution Group – Class: GaMBA.X0409 TABLE OF CONTENTS ASEAN The Association of Southeast Asian Nations BCG Boston Consulting... YFS Yamaha Factory Service YMVN Yamaha Motor Vietnam Co., Ltd LIST OF TABLES LIST OF FIGURES GaMBA.X0409 – Group INTRODUCTION General context, the necessity and implication of the research project... strategies for Yamaha by 2015 • To give some recommendations and measures to implement strategies GaMBA.X0409 – Group 3 Scope of the study The study focuses on Yamaha business status in Vietnam motorcycle