The necessity of the research topic
Vietnam's accession to the World Trade Organization (WTO) has transformed its business environment significantly Relying on past advantages alone is insufficient for domestic enterprises to thrive amidst the challenges of regional and international integration To navigate fierce competition and ensure sustainable growth, businesses must identify their unique paths and develop strategies that align with both external market conditions and internal capabilities A well-defined business strategy is crucial, as it serves as a foundational element for building a comprehensive corporate strategy that enhances the company's market position.
Along with the growth of the national economy, Kinh Do has achieved great accomplishments and contributed to upgrade the food and foodstuff processing industry of Vietnam to a higher level
This report aims to contribute to the strategic direction of Kinh Do Corporation, helping it maintain its market position and establish itself as a leading brand in Vietnam By leveraging insights gained from the Master of Business Administration program, we focus on determining the business strategy for Kinh Do Joint Stock Company for the period 2010-2015.
Problems in the research
-Factors in the international environment that have effects on the process of establishing business strategy
-Factors inside the company that have effects on the process of establishing business strategy
-Determining business strategy for Kinh Do Corporation based on a combination of theoretical and practical analysis
Research objectives
- Systematizing some theories on establishing business strategies for enterprises
- Analyzing the business environment of the company during the past and in the coming time
-Analyzing internal factors and development potentiality
-Proposing the appropriate business strategy for the company’s products from now to 2015 and a long-term development direction for the following years
Scope of research
Analyzing the business environment of the company’s products from 2005 to 2009 in order to perfect the business strategy until 2015 for products of the company in the domestic market
Research methodology
This thesis was done by using both primary and secondary data:
- Collecting secondary data through sources such as newspapers, internet, distribution channel, internal documents…
- Collecting primary data through sources such as: employing the method of qualitative and quantitative data collection such as:
+ Method of descriptive analysis, data collection, synthesis to analyze the production and business activities of Kinh Do Corporation
Report structure
- CHAPTER 1: THEORY BASIS FOR ESTABLISHING BUSINESS STRATEGIES IN ENTERPRIESES
- CHAPTER 2: INTRODUCTION OF KINH DO JOINT STOCK COMPANY AND BUSINESS ENVIRONMENT ANALYSIS FOR THE COMPANY, INTERNAL ANALYSIS
- CHAPTER 3: DETERMINING BUSINESS STRATEGIES FOR KINH DOJOINT STOCK COMPANY FOR THE PERIOD 2010-2015
Basic concepts
The concept of "strategy" originated in the military realm, where it is defined as the science and art of military command, focusing on the comprehensive planning and execution of large-scale combat operations to secure ultimate victory, as noted by the Encyclopedia of America.
Nowadays, the term “strategy” is very popular in business filed, “strategy” in business is defined differently as in the following definitions:
“Strategy is a model of goals and objectives and plans to achieve such goals”
”Strategy includes the determination of basic and long-term goals of the company and the selection of method or action procedure and requisite resource allocation to realize such goals
”Strategies are ways and transportation means to achieve the set goals through policies”
”Strategies are trends or plans in order to coordinate goals, main policies and implementation programs of an organization into an unite system”
Strategy involves the effective integration of operations and resource allocation to meet organizational goals It focuses on maximizing the organization’s capabilities and resources to effectively address external opportunities and threats.
”Strategy encompasses goals, policies and plans”
Despite variations in wording or description, all definitions highlight the common characteristics of organizational objectives, policies, and implementation plans In 1987, Mintzberg defined strategy as encompassing plans, tactics, trends, positions, and vision.
+ According to this concept, strategy is the set objectives, policies and implementation plans of an organization
+Strategy is what an organization intend to do in order to pass its competitors -Strategy as trend:
+ Even without predetermination or publication, if the actions of an organization follow a common trend, they can be considered strategies
A company's competitive position within its environment is a crucial aspect of its strategic planning This strategy involves the interaction between the company's internal dynamics and external environmental factors, emphasizing the importance of understanding both to effectively navigate competition.
The position of the company can be identified and developed through plans or action trends
Strategies are fundamentally rooted in the imaginative and creative ideas of managers It is crucial for these ideas to be effectively communicated and shared with all members of the company to ensure alignment and collaboration.
Strategic management involves analyzing both the present and future environments, establishing organizational objectives, and effectively planning, organizing, implementing, and controlling processes to achieve these goals.
In every company, there are 3 levels of strategy: corporate strategy, operational or competitive strategy and functional strategy
Corporate strategy encompasses the overall direction of a company, outlining its product offerings and plans for diversification to leverage its strengths effectively Essentially, it addresses the critical question: "In which markets should we compete?"
+ Also known as product strategy or competitive strategy, since in essence, businesses compete in the market in term of particular product
A successful competitive strategy for each product type should address key questions, including the primary objectives, the necessary competitive advantages to achieve these goals, and the identification of main competitors At the heart of any business strategy lies the identification and development of the company's competitive advantages within the market.
+ Functional strategies such as marketing, finance, human resources management should be combined to create a competitive edge for competitive strategy
The critical things of functional strategy are to clearly defining the added value that each function can bring to customers as well as to higher-level strategies
Models for establishing strategies
Strategic analysis tools are essential for enterprises to evaluate their relationship with the market, helping them identify strengths, weaknesses, opportunities, and threats within their business environment These tools play a crucial role in uncovering competitive advantages and assessing a company's market position, enabling organizations to set clear directions and establish effective strategies to achieve their goals.
1.2.1.1 PEST model- macroenvironment analysis model
The PEST model is utilized to identify key environmental factors that influence a company's operations and to evaluate the extent of their impact By analyzing these elements, businesses can capitalize on opportunities and mitigate risks, ultimately guiding them towards a suitable strategic direction.
Governmental policies regarding taxation, bureaucracy, preferences, investment stimulation, legislative system
Some national economic development indexes such as economic growth rate, GDP, GNP, inflation rate, investment rate, economic infrastructure
Social culture, customs, tradition, habits or values
The technological level as well as infrastructure development of the economy
- Identifying some basic elements of the environment that affect an organization’s performance
- Assessing the impacts of environmental factors on the organization, both in the past and in the future
1.2.1.2 Five competitive forces model of Michael Porter- Industrial environment analysis model
Professor Michael Porter developed the five competitive forces model to assess the direct competition within an industry This framework identifies five key forces that shape market dynamics: existing competitors, potential new entrants, substitute products, the bargaining power of suppliers, and the bargaining power of buyers.
Bargaining power of buyers Threat of substitutes
Exhibit 1.2: Five forces model of Michael Porter
New entrants pose a significant threat to existing companies within an industry, as they compete for market share and intensify rivalry Increased competition leads to a more challenging market environment for established businesses.
To effectively enter the market, new businesses must overcome specific barriers that vary by industry Key challenges include achieving economies of scale, differentiating their products, securing adequate investment capital, and establishing robust distribution channels.
Suppliers play a crucial role in determining the profitability of both the industry and individual businesses by influencing prices and the quality of inputs The extent of their impact on businesses is determined by several key factors.
+Concentration intensity is greater than customers
+Lack of customer importance relative to suppliers
+High level of product differentiation
+Switching cost for customers is high
Customers play a vital role in the survival and growth of businesses Their bargaining power is influenced by various factors, similar to those affecting suppliers, but with contrasting effects.
Businesses can meet customer needs through various strategies, but the introduction of substitutes can significantly impact the overall market value of an industry By analyzing and forecasting these substitutes, companies can develop timely and effective responses to potential market declines or shifts in industry prosperity.
-Intensity of rivalry among current competitors:
The competitive intensity varies across industries, but overall, rivalry is generally high Competition manifests through price wars, product differentiation, flexible supply capabilities, and value-added services This fierce competition arises from the interplay of several key factors.
Businesses face ongoing influences during their operations, necessitating careful analysis to identify these factors for effective strategic adjustments Failing to understand or accurately assess competitive forces can lead to misguided strategies and potential setbacks.
1.2.2.1 Value chain model of Michael Porter – internal assessment model The value chain model help businesses to analyze their activities in a methodical manner from which to identify their own strengths and weaknesses This model assumes that the major economic activities of any company are to create value, the operation of a company is divided into different parts but the common ultimate goal is to create value The two main operations are: direct operation and supportive operation
The primary activities involved in direct operations encompass a range of processes that impact the physical transformation of products, facilitate the selling process, and ensure the effective transfer of products to customers, along with providing post-sales services.
+ Inputs procurement which are evaluated based on:
The reliability of the system of receiving and managing raw materials as well as the reserves system
The effectiveness of raw materials supplies
Labor productivity, the efficiency of using machinery and equipment of the company in comparison to competitors
Automation in accordance with the production process
Managing the production system to improve product’s quality and reduce cost
The effectiveness of arranging workshops, factories and product rotation flow
+ Output provision which is evaluated based on:
Time and the effectiveness of goods and services provision
The effectiveness of reserving and supplying the final products
+ Marketing and sales focus on:
Market research activities to determine customer needs and appropriate market
Designing and assessing the effectiveness of distribution channels
Organizing, training and stimulating the sales force
Activities that do not directly contribute value to products, instead, they are aimed at helping direct operations to be more effective Such activities consist of:
+ Human resources management: recruitment, training and promotion activities
Employees appraisal and reward system
Creating a working environment that can reduce the rate of absence and resignation
The relationship between research department with other departments
Quality of the laboratory and other equipment
Qualifications and experiences of scientific and technological staffs
Innovative environment inside the company
Exploring and searching for different sources of raw materials to reduce the dependence of the company on suppliers in term of time, cost and quality
The process of purchasing raw materials and equipment
Setting criteria to choose among purchasing, self-manufacturing or leasing
Building good and long-term relations with important suppliers
The ability to identify market opportunities or new products as well as potential threats
Systematizing and planning strategies for the company
The coordination among units inside the company
The ability to find low-cost capital for equipment and working capital investment
Management information system to assist the decision process
Maintaining relations with governmental organizations and other related organizations
Value chain analysis evaluates each business activity within a company, enabling the identification of strengths and weaknesses This process helps determine which operations enhance value for both customers and the company, as well as which aspects may be obstructing the value chain By conducting a value chain analysis, leaders gain valuable insights and an overarching perspective on the company's operational processes.
The McKinsey 7S model is a valuable tool for managers to analyze their company's organizational structure, which plays a crucial role in enhancing market competitiveness By examining the seven elements of the model, businesses can identify strengths and weaknesses within their organization, ultimately driving improved performance and strategic alignment.
Exhibit 1.3: 7S model of McKinsey Structure:
How a company divides its operation into distinct functional units and the relationships among these units
The determination of a company in term of which filed, where or how to compete
To ensure high-quality performance in complex tasks, company staff must possess essential skills that enable them to effectively apply knowledge to real-world operations, ultimately boosting organizational efficiency Additionally, fostering the ability to coordinate individual skills is crucial for creating a cohesive team that leverages collective expertise, driving overall success and productivity within the company.
Quantity and quality of employees
Ideology, values and beliefs of the executive board as expressed through their power exertion manner
Any technology that a company uses to create relationship, coordination, management, control, information and order transferring
Competitive strategies
Competitive strategies are essential for businesses to establish advantages in their specific markets by effectively leveraging valuable resources and core competencies These strategies necessitate the coordination of various business activities to achieve and sustain long-term competitive benefits By doing so, companies can deliver goods or services that increasingly meet customer needs Within the market landscape, businesses occupy distinct positions, with some emerging as market leaders, others as followers, and some targeting niche markets.
According to Michael Porter, the most popular competitive strategies that businesses apply to compete with each other include:
Each company when set up competitive strategy normally complies with one or more than one of the strategies above to create competitive advantages for their products or services
Product differentiation is a competitive strategy that allows businesses to distinguish their goods or services from those of their competitors in the market This approach aims to capture customer attention and drive engagement by highlighting unique features or benefits Various methods can be employed to showcase these differences effectively.
Differences in term of nature or traits of the products, in materials or utilities…
In all pre-sales, in- sales and post-sales services
The way to make product appearance to be in accordance with the tastes, customs, consuming habits or ideas, symbols or cultural criteria in customers consumption
Innovative changes in product design and structure, utilizing cutting-edge techniques and technologies, aim to optimize efficiency and functionality These enhancements ultimately lead to improved quality and greater utility of the product.
Good reputation or the fame of the company is regarded as one of the most important factors to expand the scope of relationship and customer influence to the product
Producing or manufacturing following the module model by assembling components into finished products in a flexible manner This will create comfort for customers during the using process
It is when a company’s products may contain certain values other than normal values that customers can exploit
Being capable of creating product differentiation compared to competitors in the market enable businesses to enjoy huge advantages such as:
-Prominent or outstanding in the market:
Products of any company that possess such advantage can easily to make competitors be “overshadowed” in customers’ perception and simultaneously maintain and even enhance the reputation of the company
-Easy to attract and keep customers:
With reputation about product differentiation capability, the company can be sure that customers will be “loyal” to it even when there is a change in the product price
Business reputation and customer loyalty will be big barriers to prevent and hinder new entrants or substitutes from entering into the market
Product differentiation normally allow businesses to take advantage of legally high or monopolistic price
Customer loyalty is essential for any business and can only be achieved when a company offers products with exceptional utility By differentiating their products, businesses can gain appreciation from consumers To effectively implement these strategies, companies must meet certain necessary conditions.
+ Existing capacity in goods or services research and development They must make huge investments in equipment or technology to support this important function
+Qualified and skilled employees with leading experts or excellent professional technicians full of innovation and creativity This require large investment in human resources development
+ Appropriate management structure or mechanism while encouraging innovation and risk taking
In order to realize this strategy, businesses must cope with a great deal of challenges or threats such as:
+ Reasonable capacities in term of technology, human resources, market research and application ability which normally require huge investment
+ Other rivals also have similarly competitive policies and measures, thus, the company must always promote investment in human resources development
Businesses may struggle to outperform competitors using this strategy, especially if those competitors have advanced automation capabilities or strong market positions.
+ Huge required investment to compete by product differentiation would affect operational productivity of businesses
To successfully implement a cost-lowering strategy, a company must establish an efficient operational system and maintain strict cost control, enabling it to achieve higher productivity than its competitors This approach requires minimizing all business expenses to the lowest possible level.
To successfully implement a competitive strategy, the company should target a wide market while leveraging economies of scale This may involve reducing unnecessary expenses and investing more in research to streamline production processes, ultimately leading to lower production costs.
By maintaining low production costs, businesses can offer their products at more competitive prices than their rivals, effectively mitigating the adverse effects of price wars in the market.
Attracting price-sensitive customers, particularly those with lower incomes, can provide a significant competitive edge for businesses in a market where affordability is a key factor.
With low production expenses, the company can still make profit even when input prices increases
New competitors often lack the necessary conditions, business experience, and capability to engage in price competition within the market Utilizing low prices can serve as an effective strategy to deter new entrants and substitute products from gaining a foothold in the industry.
-Required conditions for cost lowering:
To thrive in a competitive market, businesses must engage in mass production of standardized products, which significantly reduces production costs and sales expenses, ultimately boosting consumer demand.
Business experiences play a crucial role in fostering innovation and rationalization in production processes, ultimately leading to increased productivity and reduced costs.
Production specialization is another solution in cost lowering strategy since it allows mass production, increasing productivity and lower other expenses
-Threats underlying in cost lowering strategy:
In order to have lower price compared to other competitors, businesses must confront with potential risks in product or service quality
Expenses reduction in the production process may lower some values of the products or create lower-than-expected quality
Implementing cost-cutting strategies can lead to intense competition, as rivals may leverage these measures to gain an advantage Overemphasizing this approach risks diminishing the company’s competitiveness in critical areas, such as product quality and adaptability.
Businesses can establish a competitive advantage by implementing a niche market strategy that combines product differentiation with cost reduction This approach focuses on targeting specific geographical areas or customer segments, allowing companies to tailor their offerings effectively Key characteristics of a niche market strategy include a deep understanding of customer needs, specialized products or services, and a commitment to delivering unique value within a defined market space.
- Lowering cost in a small market size following a clear and appropriate manner
- Product differentiation: Niche market strategy directs the company to serve a particular market or a certain customer category to create or demonstrate the superiority and uniqueness of its products
- The choice of the company to serve a niche market is an important basis to demonstrate, exploit and realize its competitive advantages in this selected niche market
Companies often target niche markets to achieve product differentiation, as this strategy allows for a more focused approach By narrowing their business scope, many businesses enhance their ability to respond quickly to market demands.
- Niche market strategy may bring in disadvantages or risks for businesses since it weakens their ability to change if the conditions change
Formation and development
Kinh Do joint stock company, previously known as Kinh Do construction and food processing company, was founded in 1993 at Decision No 216-GP dated
27 February 1993 promulgated by chairman of the Ho Chi Minh city people’s committee and business license number 048307 issued by Ho Chi Minh city economic arbitrator center on March 2 nd , 1993
In its early days, the company began as a modest 100m2 workshop in District 6, Ho Chi Minh City, employing 70 workers with an initial investment of 1.4 billion VND It specialized in producing snack cookies, introducing a unique product that had not previously existed in Vietnam.
In 1994, Kinh Do company expanded its operations by increasing its charter capital to 14 billion VND and importing a $750,000 production line from Japan, following over a year of success with snack products The popularity of Kinh Do's affordable and delicious snack cookies resonated well with domestic consumers, serving as a crucial foundation for the company's ongoing growth and advancements.
In 1996, Kinh Do expanded its operations by investing in a new factory located at 6/134 National Highway 13 in Hiep Binh Phuoc ward, Thu Duc district This facility features a state-of-the-art cookies production line equipped with advanced technology and machinery sourced from Denmark.
$5 million The number of employees at that time increased to 500 people
Between 1997 and 1998, the company invested $1.2 million in a bread and industrial flan cake production line, achieving a daily capacity of 25 tons Additionally, by the end of 1998, an $800,000 investment led to the launch of a new chocolate production line.
In 1999, Kinh Do increased its charter capital to 40 billion VND and launched the Savico-Kinh Do trading center in District 1, marking a significant expansion beyond confectionery production That same year, the company opened its first bakery, paving the way for a nationwide chain of candy stores from the North to the South.
In 2000, the company increased its charter capital to 51 billion VND and expanded its factory area to 40,000 m² To enhance product differentiation, it invested $2 million in a European cracker production line, which was the largest of its kind in the region at that time.
- In 2001, the company invested in a hard candy production line and a soft candy production line with the capacity of 2 tons per hour worth $2 billion Also in
In 2001, the company enhanced its cracker production capacity to 50 tons per day by investing $3 million in a new salty cracker production line This year marked a significant milestone as the company's products were widely exported to various countries, including America, France, Canada, Germany, Taiwan, Singapore, Japan, Laos, Cambodia, and Thailand.
In 2002, Kinh Do Joint Stock Company was established to effectively manage the growing production and trading activities, focusing on selling products in southern and central regions as well as internationally This followed the establishment of North Kinh Do Food Joint Stock Company in 2001, which aimed to meet the production demands of the Northern market.
- Patented trademarks of Kinh Do company that are in use:
Exhibit 2.1 Logo of Kinh Do Joint Stock Company
Company name: Kinh Do Joint Stock Company
English name: Kinh Do Corporation
Chartered capital: 571,148,760,00 VNĐ (updated up to 30/09/2009)
Headquarter: 6/134 National Highway 13, Hiep Binh Phuoc Ward, Thu Duc District, Ho Chi Minh City
Scope of business: Food processing, confectionery production, clean water and fruit juices
Operational results
2.1.3.1 Main product categories of Kinh Do corporation:
Currently, Kinh Do’s business covers 9 main product categories: Cookies, crackers, snack, waffle, moon cake, industrial bread, hard and soft candy, chocolate and fresh cake
-Main ingredients: flour, eggs and sugar
Kinh Do's cookies, with a production capacity of 10 tons per day, dominate the market, capturing 45% of the total cookie market share in the country As one of Kinh Do's traditional offerings, these cookies play a significant role in the brand's identity and success.
- There are diverse types of Kinh Do’s cookies:
+ Butter and salty cookies that are packaged in mixture form: More, Yame, Amara, Besco, Bisco up, Bosca, Celebis, Doremi, Dynasty, Gold
Time, Famous, Lolita, Rhen, Spring time, Sunny, Year up…
+Jam-corecakes:Fruito, Cherry, Fine, Ki-Ko, Kidos,Fruito, Fruittreasure, Big day, Tropika, TFC, Fruitelo…
+ Vitamin-enrichment butter cookies: Vita, Marie…
+ Miscellaneous butter cookies: Fine, Always, Angelo, Big day, Cookie town, Elegent, Heart to heart, Legend, The house of cookies,Twis, Good time, Let’s party
Kinh Do is the leading producer of rice crackers in Vietnam, utilizing advanced technology to achieve a production capacity of 50 tons per day across two production lines These rice crackers are made from fermented wheat flour, highlighting Kinh Do's dominance in the market.
AFC and Kinh Do's salty cakes dominate the market, holding a significant 52% share, and have successfully expanded their reach through exports to countries like Australia and the United States.
- Types of crackers that Kinh Do is currently producing include:
+ Salty cake, original crackers: AFC, Hexa, Cosy…
+ High calcium content crackers: Cracs, Bis-cal,Hexa…
+ Mixed flavored biscuits: Deli, VIP, Creature of the sea, Round, Marie, Merio, Lulia…
Kinh Do's waffles are a unique type of cake, characterized by their tube shape, porous texture, and delicate nature While they may not generate significant revenue compared to the company's crackers and cookies, Kinh Do's waffles stand out for their exceptional flavor, offering a delightful variety with 14 distinct types.
Since 1994, modern technology has been utilized in the production of snacks, with Kinh Do offering a wide range of flavors that cater to Vietnamese tastes Their diverse selection includes shrimp, crab, squid, chicken, beef, barbecue, coconut milk, and chocolate snacks, marketed under popular brands like Sachi, Bonbon, Big Sea, Crab, Chicken, and Dino.
Industrial bread is very popular for its convenience, nutrition, hygiene, deliciousness and low price
- Some popular bread brands are: Scotti, Aloha…
- Industrial flan cake which belongs to industrial bread category is different from traditional flan cake with storage duration of 6 months rather than 1 week as for traditional flan cake
Moon cakes are a seasonal product that significantly contributes to Kinh Do's total revenue, accounting for approximately 15% There are over 80 varieties of moon cakes, which can be categorized into two primary lines: sticky cakes and traditional moon cakes.
Kinh Do remains the leading brand for moon cakes in Vietnam, outperforming competitors such as Duc Phat, Dong Khanh, Bibica, and Hy Lam Mon in both quality and quantity.
Candy is has been put into production since 2004 Up to now, there are more than 40 types of candy including:
+ Fruit candy: Stripes, Crundy, Fruiti…
+ Mixed flavor candy: Milkandy, Crundy, Tip Top…
Currently, Kinh Do is mainly producing pellet chocolate or core chocolate by modern technological production line, chocolate of Kinh Do has vary stable quality and nice package
(Source: www.hsc.com.vn)
The revenue distribution among products shows a significant imbalance, with cookies and crackers generating a relatively high share, while candy and chocolate contribute only a small fraction to overall sales.
2.1.3.2 Summary of some achieved targets of Kinh Do in 2007 and 2008
Table 2.2: Targets of Kinh Do in 2007, 2008
Business environment analysis
2.2.1 Microenvironments analysis based on PEST model
Despite the implementation of Vietnam's legal system to protect brand and intellectual property rights, the penalties remain insufficient and lack thoroughness Additionally, the market management resources are limited, hindering the timely detection and resolution of fraudulent violations.
Joining the WTO offers domestic companies opportunities to expand their markets, access modern technology, and enhance management practices However, it also introduces competitive pressures that necessitate restructuring, reducing prices, and adapting to the new business environment.
Vietnam's commitment to joining the WTO includes the elimination of import tax protection policies, posing significant challenges for domestic companies that may struggle to compete with foreign competitors.
Confectionery plays a vital role in everyday life by meeting the nutritional needs of all social classes This industry significantly employs the domestic workforce and utilizes local materials such as eggs, sugar, and milk Consequently, confectionery companies benefit from favorable government policies, including incentives related to estate tax, corporate income tax, and import tax for machinery, aimed at encouraging domestic investment.
Legal ties for confectionery industry mostly relate to food safety and consumers’ rights protection They are also the problems which Kinh do has noticed a lot in recent years.
Kinh Do's entry into the international market exposes the company to various political and legal factors from around the globe Consequently, it is crucial and urgent to enhance the skills and awareness of its workforce to navigate these challenges effectively.
In recent years, Vietnam's economy has experienced robust growth, with GDP rates reaching 7.1% in 2002, 7.23% in 2003, and peaking at 8.4% in 2005, while projections suggest a sustained growth of 7-8% annually This economic expansion has contributed to an increase in GDP per capita, subsequently boosting demand for high-quality goods, including confectionery However, during economic downturns, when incomes decline and basic needs are compromised, the confectionery industry faces significant challenges.
Since 2008, Vietnam's economy has experienced significant growth; however, various global and domestic factors have negatively impacted this progress Rising oil prices, a depreciating US dollar, increasing commodity prices, natural disasters, and health crises in certain provinces have all contributed to economic challenges As a result, inflation reached alarming levels, with the Consumer Price Index (CPI) in the first half of 2009 rising by 10.27% compared to 2008, severely affecting the livelihoods of those in vulnerable areas, particularly low-income households.
Vietnam, with a population nearing 80 million as of 2009, ranks 13th globally in terms of population size, experiencing an average growth rate of approximately 1.2% from 1999 to 2009 With a youthful demographic—61.7% of the population under 30—Vietnam presents a significant opportunity for the food and confectionery industries The promising domestic market offers Kinh Do a strategic base to expand its reach into the global market.
In an open economy, the removal of tax barriers will create enhanced development opportunities for Vietnamese companies, allowing them to engage with a global market of over 7 billion people.
In some big cities like Hanoi, Hochiminh, Haiphong, Danang…, the GDPs per capita are high They are big markets for luxury confectionery.
Despite rapid urbanization, approximately 74% of Vietnam's population continues to reside in rural areas, primarily relying on low-income farming This demographic reality significantly impacts the income levels and pricing strategies of Kinh Do.
The allure of foreign goods remains prevalent among consumers, who often gravitate towards these products if they are financially capable and well-promoted Utilizing such items serves not only as a personal preference but also as a means to signify one's social status.
Confectionery plays a vital role in Vietnamese culture, often serving as a thoughtful gift during special occasions such as birthdays, New Year's celebrations, weddings, and when welcoming guests The importance of hospitality in Vietnamese society ensures that sweets are a staple in every household During the Mid-Autumn Festival, moon cakes are particularly popular, symbolizing generosity and tradition, with thousands of tons consumed annually as cherished presents for friends and family.
In recent years, consumers have increasingly opted for industrially packaged cakes over handmade alternatives due to food safety concerns This shift in preference is generating significant opportunities for the confectionery industry.
The rapid advancement of technology has significantly shortened the lifespan of technological products, compelling companies to continuously innovate to avoid obsolescence This is particularly evident in the confectionery industry, where consumer trends shift frequently, leading to increasingly shorter product life cycles Amidst fierce competition, companies face the challenge of enhancing production while managing rising investment costs Nevertheless, globalization presents Kinh Do with opportunities to adopt new technologies and modern machinery, enabling the company to strengthen its market position.
Table 2.3: Summary of microenvironments analysis:
The confectionery industry relies heavily on a significant workforce, prompting the government to implement beneficial policies aimed at encouraging growth These incentives include reductions in real estate tax, corporate income tax, and import tax for machinery and tools, all designed to support the sector's development and sustainability.
- They are also protected by import tax for foreign goods.
- The legal ties with confectionery mostly relate with food safety and customers’ rights protection.
- There are the disadvantages of companies not being strong enough in order to compete with foreign ones when lowering tax in the path of joining WTO
Economic - High GDP rate will lead to the development of the industry.
- Increasing income, ensuring basic needs are going along with the needs of using confectionery products.
- High inflation will affect the need of using confectionery products.
Social - Vietnam population is young, including 61.7% under
30, so the country is a potential market for food industry in general and confectionery in specific.
- The thought of using foreign goods is still common.
- The trend of consuming is changing frequently so product cycle is getting shorten.
Technological It is easy to apply new technology and modern machines.
- Quick technology development leads to life cycle of technology is getting shorter
- The high initial cost challenges companies with weak financial ability
Internal analysis based on the value chain
Currently, the management of supply inputs is overseen by the Office of Order Form and Supply Management The Quality Management Division rigorously checks input quality to ensure it meets the company's established quality standards.
Weak point: Too large amount of material input make difficulty for supply input management, and meets the disadvantage of narrow warehouse space.
+ Material inputs can’t be kept in a long term requires strict preservation with big expense.
Kinh Do Company boasts the most advanced confectionery production lines in Vietnam, with several of these lines recognized as the finest in the Asia-Pacific region and globally All machinery at Kinh Do is brand new and fully equipped, featuring an optimal blend of state-of-the-art technology sourced from renowned countries.
One production line with European technology valued 2 million US$, with capacity of 30 tons/day, operation commenced in early 2000.
One production line of Denmark, Holland and America technology valued 3 million US$, with capacity of 30 tons/day, operation commenced in early 2003.
In 1996, a cookie production line imported from Denmark, valued at $5 million and capable of producing 10 tons per day, began operations By 2007, Kin Do successfully assembled and operated an advanced cookie production line utilizing European technology.
-A line producing Moonquake with the machinery of Japan and Vietnam.
-Two lines producing bread and sponge cake industrially.
Production line valued 1.2 million US$, with capacity of 25 tons/day, operation commenced in 1997.
A line producing bread of France technology, valued 2 million US$,operated in 2004.
In 2004, Kinh Do launched a new sponge cake production line utilizing Italian technology, with an investment of $3 million This initiative was part of the "Principal Industrial Products of Ho Chi Minh City 2004" program and received support from the Ho Chi Minh City People's Committee, which facilitated access to bank loans and trade enhancement programs.
A line producing snack of Japan technology, valued 0.75 million US$, operation commenced in 1994.
A new line produced by Italy.
-A line producing waffle produced by Malaysia.
-A line producing chocolate candy of Malaysia, China and Taiwan technology, valued 0.8 million US$, operation commenced in 1998 In early 2005, Kin Do imported one more line formatting chocolate, originating from Europe.
-A line producing candy of Taiwan, valued 2 million US$, capacity of 2 tons/hour operation commenced in 2001.
Kinh Do's machinery is relatively modern compared to local competitors; however, to enhance exports and reduce reliance on imported confectionery, Kinh Do must invest in more advanced machinery and technology.
-The quality management system applied now:
Now, Kinh Do is applying product quality management system of ISO 9001:2000, issued by BVQI in the UK, in 10/2002.
The system ISO 9001:2000 has been complied strictly by Kin Do Since
2002, company’s goods quality has been re-evaluated by BVQI organization in every 6 month-cycle, with good results.
- Division of Product quality checking:
Product quality checking is implemented by the division of administration and… (Q&A) and the Research and Development (R&D).
-The matter of food safety.
The company prioritizes food safety as a key factor in enhancing the competitive edge of Kin Do products Stringent measures to ensure food safety are consistently applied throughout all stages, from sourcing materials to the point of sale.
The company consistently monitors and updates the regulations set by the Ministry of Health of Vietnam and the countries in its export markets This proactive approach ensures that all additives used in its products are safe and do not negatively impact customer health.
Uses the materials imported from the famous and prestigious suppliers to ensure the origin and quality
Inspects strictly input materials on safety, packed state, certified documents from the suppliers.
The article emphasizes the importance of stringent food hygiene regulations in the manufacturing process It highlights that workers handling food products receive comprehensive training in food safety practices and are required to wear appropriate protective gear, including comforters, gloves, and hoods Additionally, it notes that manufacturing and containment tools are regularly and appropriately cleaned to maintain high hygiene standards across each specialized unit in the production line.
Always has a staff of quality check (QC), ensure following,supervising the implementation of food safety regulations in manufacturing process.
Products are packed in close wrapping to ensure food hygiene.
Instructs sales personnel and distributors how to preserve, display products in accordance with the enquiry of each type of products, to avoid making them spoilt before expiry date.
Kinh Do Joint Stock Company prioritizes food hygiene and safety, recognizing its importance in today's world To adhere to the stringent food safety standards of various countries, it is essential for Kinh Do to swiftly implement the HACCP system alongside other advanced global quality management systems.
+ High effect in using equipment.
+ The strict food safety standards of many countries and the present matter of food safety makes the company cost a lot expenses in management.
Kinh Do has large distribution network mainly through 3 channels: agent system, supermarket system and Kin Do bakery system.
Kinh Do, a leading confectionery enterprise, boasts the largest domestic agent system in the country, comprising approximately 200 distributors and over 650,000 retail outlets This extensive network is responsible for generating around 85% of the company's total revenue.
-Supermarkets system: This is the principal market of Kinh Do, this system sells about 10% of company’s turnover.
Since its establishment in 1999, the bakery system has expanded to 25 locations across Ho Chi Minh City and Hanoi With the implementation of a concession business model in April 2005, the bakery system is poised for significant growth in the coming years, not only in these two cities but also in other regions.
-Apart from above distribution terms, Kinh Do organizes more than 6,000 points of sales Kinh Do Mooncakes yearly.
+ Company has available transport staff, always ready to serve the customers. + Large distribution network throughout the country.
+ The distributor management is still weak, not corresponding to the scale.
-Kinh Do has deployed market researching activities in different terms, as follows:
Collecting customers’ opinions during selling process through marketing staff and distributors, then Kinh Do always gets feedback to improve product quality and especially for new products.
Through professional consultant companies, Kinh Do has surveyed market’s demand and the effect of advertising campaigns to the customers, etc
Market researching activities have had active effect on product strategies and general business strategies of company, contributed large portion to company’s turnover and profits.
Kinh Do adopts a tailored pricing strategy for different market segments, enabling effective price management This approach allows for a higher discount rate for distributors compared to competitors, facilitating the expansion of Kinh Do's distribution network.
Advertising and public relation (PR):
Kinh Do’s advertising and marketing strategies focus on maximizing effectiveness while maintaining reasonable costs to avoid increasing product prices The company frequently conducts seasonal advertising campaigns, particularly for products like mooncakes, candies, and New Year gifts, as well as promoting new items prior to their market launch.
Kinh Do implements various promotional programs during festivals and holidays, such as Tet, the Full Moon Festival, Children's Day, and International Women's Day, effectively reaching a wide customer base Their promotional strategies yield quick results, demonstrating a strong impact on consumer engagement Notably, during the 2009 Mid-Autumn Festival, Kinh Do collaborated with Pepsi Vietnam to enhance their promotional efforts, showcasing their commitment to innovative marketing methods.
-Kinh Do takes part in many domestic and international commercial fairs, yearly Vietnam high quality goods fairs in order to advertise the brand.
Kinh Do has established a positive image among Vietnamese consumers by actively participating in various social activities and sponsoring cultural and sporting events Notable initiatives include their exclusive sponsorship of the Kinh Do V-League in 2004 and the Sao Mai Diem Hen competition, as well as ongoing social charity efforts.
Internal analysis 7S model
This is a joint stock company, present organizing structure includes:
Diagram 3.2: Organizing diagram of Kinh Do joint stock company:
(Source: Kinh Do joint stock company www.kinhdo.vn)
Kinh Do Joint Stock Company operates in accordance with business law and adheres to relevant regulations and company policies The updated regulations, revised during the shareholders' meeting on March 16, 2005, serve as the foundation for governing all company activities.
4 List of shareholders who hold at least 5% shares of the company measured on March 31 st 2005
The Annual General Meeting (AGM) is the company's most authoritative body, consisting of all shareholders with voting rights Legally required to convene at least once a year, the duration of the AGM must adhere to regulatory standards During this meeting, critical decisions regarding the company's operations and future direction are made.
- Company’s charter amendment and supplementing
- Types and number of shares to be sold
- Dividend rate for each type of shares
- Electing or firing members of the board of management or the supervision commission
- Approving annual reports, operational reports of the board of management or the supervision commission
The Board of Management is responsible for the company's management functions and holds the ultimate authority to make decisions regarding the company's objectives and rights, excluding matters reserved for the Annual General Meeting (AGM) Comprising five members, the Board serves a term of five years, with the possibility of re-election for its members.
The Supervision Commission serves as the regulatory authority for the Annual General Meeting (AGM), holding the power to oversee and manage all operational activities of the company Comprising a minimum of three members, the Commission must include at least one individual with expertise in accounting Each member's term lasts five years, with the possibility of re-election.
The Board of General Directors, appointed by the Board of Directors, is responsible for overseeing and managing the company's daily production and business activities in alignment with the strategies and plans approved by the Board of Directors and shareholders Each member of the Board of General Directors serves a term of three years.
Functional departments of company include:
2 Department of order form and supply management.
7 Division of advertising, marketing, publicizing trade name.
Each of these functional sections has concrete, relevant and independent duty but supporting each other, endures the management and supervision of seniors according to work provision.
Strong points of this organizing structure:
No overlap in work operation.
Specializing in every workshop, producing group.
Relevant task provided to every division, person.
Weak points of this organizing structure:
Unwieldy management pattern, big management expense.
Slow information communicated among divisions.
Complex work combination process among divisions.
Company still has old opinions in management, operation, in some manners:
Decentralizing rights and responsibilities within each division allows for swift resolution of internal issues However, if divisions fail to collaborate effectively, the entire system may experience stagnation.
The company’s collective working agreement emphasizes the preferential recruitment of employees' relatives, fostering a strong sense of family and generational ties within the organization.
Strong points: Creating close working environment.
Weak points: Having consideration in work, difficult to apply regulations, process, and no strict discipline.
The company's management system is well-structured with established regulations and processes; however, its reliance on a document-centric approach for information reporting limits the effective use of information technology in management, control, communication, and ordering As a result, this can hinder the company's ability to address issues promptly.
Over the past 15 years, Kinh Do has consistently prioritized product quality, with its leadership and workforce dedicated to maintaining high standards in all activities The company places a strong emphasis on delivering exceptional products and services, ensuring customer satisfaction remains at the forefront of its operations.
“ QUALITY IS FOREMOST, ENSURING PROPER RIGHTS
Therefore all activities of company direct toward quality, this is considered to be the guideline, the vital element of company.
Total of present officers of company is 2,221 people Labour structure of company as follows:
Table 2.9: Labor structure in accordance with criteria in 2008.
Education level Office Indirect Workers Total
(Source: Announcement of Kinh Do joint stock company)
As a prominent food processing enterprise in Vietnam with 15 years of growth, the company prides itself on its skilled workforce, with approximately 15% of employees holding degrees from universities, colleges, or vocational schools This qualified human resource is crucial for the company's development, and to further enhance expertise, the company regularly organizes training programs aimed at improving specialized knowledge for all staff members, aligning with the branch's growth objectives.
Having good specialized knowledge, with many experienced specialists in food processing branch.
Low level of foreign language.
The company has established strategies to compete effectively in the national confectionery market To maintain a competitive edge, it is crucial to identify and implement suitable strategies that align with the current state of the enterprise and market dynamics.
Table 2.10: Internal analysis based on 7S model:
Activities Strengths and opportunities Weaknesses and threats
- Specializing and decentralizing concrete work to each division
- Slow information communication and working combination among divisions.
Difficulty in applying regulations and discipline.
System Relevant regulations, process Inclining to documents, form.
Human Good knowledge, enthusiastic Low level of foreign language, bad solidarity.
Through internal analysis in accordance with value chain and pattern 7S, we can see valuable sources of company:
1 Leading position of company in Vietnam confectionary branch in market portion and large distribution system.
2 Prestige and trade name “Kinh Do” on the market.
Core competencies and competitive advantage of company
To meet the increasing market demand, Kinh Do JSC focuses on investing in advanced machinery and models to produce a diverse range of high-quality food products that cater to customer preferences Recognized for its renowned offerings in the domestic food processing sector, Kinh Do JSC stands out among competitors, showcasing a unique capability that sets it apart in the industry.
Table 2.11: Products comparison against competitors’ products
Product group Kinh Do Bibica Hai Ha Pham
Kinh Do JSC distinguishes itself from competitors by offering a diverse range of five product groups, which collectively enhance the company's turnover This strategic investment not only fosters competitive advantages but also ensures the introduction of high-quality, verified products to the market in a timely manner.
Since its inception, the company has prioritized product quality and service excellence, guided by the motto "Quality is Foremost - Ensuring Proper Rights for Consumers." Adhering strictly to the ISO 9001:2000 quality management system, the company's products have gained recognition for their high quality and stability, establishing a strong reputation and prestige for the "Kinh Do" brand in the market.
Products of company have achieved a lot of honor and awards, this creates the difference from products of other competitors.
Such competitive advantages are derived from these valuable resources:
First: Modern technology machines, equipment.
Almost machines, equipment of Kinh Do are the latest generation and most modern equipment line in Europe.
Secondly: High quality imported raw materials:
The company primarily relies on wheat flour and food additive materials, which are predominantly sourced from international suppliers To guarantee the quality and origin of its ingredients, the company utilizes imported materials from reputable sources.
To maintain high product quality and competitive production costs, Kinh Do, a leading confectionery enterprise in Vietnam, consistently conducts tenders to select the most reputable material suppliers Over the years, the company has established stable partnerships with both domestic and international suppliers Kinh Do prioritizes suppliers that can efficiently meet the demands for quality and quantity at reasonable prices, ensuring the best materials for their production needs.
The company has skillful management officers, engineering officers and workers with deep experience in food production, processing.
The primary factor driving the company's rapid growth and development has been its ability to enhance the living standards of its employees while simultaneously increasing shareholder value over the past years.
SWOT Analysis
A SWOT analysis identifies a company's strengths and weaknesses while recognizing future opportunities and challenges, enabling the development of effective business strategies for continuous growth.
Kinh Do has established a strong market presence nationwide, with its products highly regarded by consumers for their quality and design The company adheres to stringent manufacturing and quality control processes to meet both domestic and international standards By effectively implementing the ISO 9001:2000 quality management system, Kinh Do has earned recognition for its high-quality offerings The brand's reputation is a valuable asset that the company is committed to maintaining and enhancing.
Company has distribution of products throughout the country Now company has about 200 distributors and more than 650,000 retails outlets in the country.
The company boasts a skilled and experienced team of administrative officers, technicians, and workers who are well-versed in food processing With years of active involvement in the industry, they play a crucial role in adapting to market demands and driving the company's growth and development.
The company utilizes state-of-the-art machinery from Europe and Japan, ensuring that all products are manufactured with the latest technology By making focused investments in modern equipment, the company guarantees high-quality production standards.
Therefore, company produces high-quality and stable products, decreases scrap and undergoing loss.
In recent years, together with the growth of receipt, profits has also increased quickly The following table points out the profits after paying tax:
Table 2.12: Revenue, profit and shareholders’ equity target
Order Target Unit Year 2005 Year 2006 Year 2007
(Source: Ho Chi Minh stock exchange)
Thanks to profits accumulated, company is active in manufacture and business, material reservation, investment in modern equipment.
Company is the leading confectionary enterprise in the market and it regulates the market.
The company is experiencing rapid growth, but its limited space of only 49,000 m² is impacting management activities, including the placement of machinery, equipment, and warehouses for materials and finished products, as well as internal transportation and delivery processes Therefore, relocating production facilities to a larger area has become critically important.
Production costs still remain high even though the company has applied several measures and mechanism to boost saving According to the auditing report in 2008, some biggest expenses are:
+ Sales expenses: 133 billion VND, equal to 9.07% of the total revenues
+ Administrative expenses: 121 billion VND, equal to 8.25% of the total revenues
Management activities may occasionally fall short of meeting the demands of all business operations, particularly when there is insufficient coordination among departments or workshops, ultimately impacting the company's overall performance.
The Vietnamese economy is experiencing rapid growth, with projections indicating an average GDP growth rate of 7% to 8% from 2007 to 2015 Notably, the food processing sector is expected to expand even more significantly, with a growth rate of approximately 20% during this period.
Vietnam's accession to the WTO in 2006 significantly impacted the food processing industry, presenting Kinh Do with a major opportunity to expand its consumer market, particularly in Southeast Asian countries.
-Because of using large amount of labor and domestic materials, food processing branch is cared in renting area, workshops, import duty by the state.
Material costs significantly impact product pricing, and any fluctuations can directly affect a company's profits A sudden surge in material prices, driven by changes in the global market, can adversely impact businesses if they are unable to adjust their product prices accordingly.
Seasonal changes significantly impact the prices of imported wheat flour and additives, affecting overall operational costs Additionally, as the machinery used is also imported, investment projects are subject to foreign exchange risks.
Vietnam's accession to the World Trade Organization (WTO) in 2006 has significantly impacted its confectionery industry The gradual removal of import duties, customs formalities, and quotas has led to an increase in foreign confectionery products entering the market This shift, along with participation in the ASEAN Free Trade Area (AFTA), poses substantial challenges for domestic manufacturers facing heightened competition from imported goods Additionally, foreign investors are establishing confectionery operations in Vietnam, intensifying competition with local products.
Vietnamese consumers have a strong preference for foreign goods If tax barriers are eliminated and transportation costs are reduced, foreign confectionery will be able to compete directly with local products, especially those from Kinh Do.
2.6.5 Kinh Do position in the market:
Kinh Do currently dominates the Vietnamese confectionery market with a substantial market share of 29.5% The company primarily focuses on three key product categories: moon cakes, cookies, and crackers, holding impressive market shares of 80%, 32%, and 50%, respectively This strategic positioning is crucial for Kinh Do to achieve higher revenue growth and profitability compared to its competitors.
Table 2.13: Summary of WSOT analysis results:
- Good ability of research and development.
- Modern machines, equipment, good production capacity.
- Good supply chain, facilitates the company to have stable development and competitive price.
- Products are verified and meet international standards, have high quality and food safety.
Specific working regulations and process.
- Narrow area, cannot satisfy production scope.
- High production and business expense.
- Growth of some products are now slow.
- Sometime, there has unreasonable coordination among divisions.
- Unprofessional human resource management, high rate of workers giving up jobs, dissatisfied salary.
- Only a few product types satisfy high- class market (moon cake, fresh cake) but almost of products only satisfy medium and fair market.
- Integrating trends and export encouragement policy.
- Development of science and technology facilitates increasing productivity and quality.
- Income increase of people makes domestic market potential.
- Getting domestic protection by import tax.
- More and more competitors, especially foreign competitors.
- Curtail life-span of products.