Luận văn thạc sĩ quản trị kinh doanh quốc tế MBA (40)

GaMBA01.M1009 TABLE OF CONTENTS 1.3.1 External (macro) environment analysis with PEST model 14 1.3.2 Analyzing sectorial environment with Five Forces Model of Porter 19 3.2.1 SWOT Matrix of HAIHACO 64 GaMBA01.M1009 LIST OF TABLES AND FIGURES 1.3.1 External (macro) environment analysis with PEST model 14 1.3.2 Analyzing sectorial environment with Five Forces Model of Porter 19 3.2.1 SWOT Matrix of HAIHACO 64 GaMBA01.M1009 INTRODUCTION The necessity and implication of formulating business strategy of HaiHa Confectionery Joint-Stock Company In the current period of globalization, Vietnam’s economy is in the final stage of fully integrating into the world economy Vietnamese enterprises not only compete in local and national scale, but also have to compete in regional and global scale The tougher and tougher competitive pressure poses great challenges to the existence and development of enterprises Formulating strategy is one of the most important tasks of managers Most failures in doing business may result from lacking a strategy, having a wrong strategy, or lacking a sound method of deploying a strategy Business strategies for enterprises in each period make significant and decisive contribution to their business and production performance In recent years, Vietnam’s confectionery industry has made steady development steps There are about over 30 well-known confectionery enterprises HaiHa Confectionery Joint-Stock Company (abbreviated name: HAIHACO) is one of the leading confectionery producers in Vietnam and a direct competitor of some companies like Bibica, North Kinh Do with equivalent scale in terms of market share, production capacity and technological qualification HAIHACO is a State-owned company with a long history and owns one of the strongest brands in Vietnam Products of the Company are continuously elected as “Vietnam’s high-quality goods” for many years from 1996 to date Most recently, HAIHACO is included in the list of 100 strongest brands in Vietnam The achievements of HAIHACO over the past years have affirmed that confectionery products of the Company will continue to dominate domestic market However, if wanting to sustain and firm foothold and develop in the volatile market economy, enterprises in general and HaiHa Confectionery Joint-Stock Company in particular have to formulate specific business strategies for each period to cope with the changes of business environment and focus all resources to realize the set targets GaMBA01.M1009 In response to the urgent needs of the Company and to make a small contribution to the formulation of suitable business strategy to the real situation of HaiHa Confectionery Joint-Stock Company in 2011 – 2015 period, our group has agreed on selecting the topic “Formulating business strategy for HaiHa Confectionery Joint-Stock Company in 2011 – 2015 period.” The content of the study is applying basic theories on business strategy to consider and evaluate external environment to determine opportunities, threats, strengths and weaknesses of the Company to make the most use of opportunities, minimize threats and suggest business strategy for HAIHACO in the coming time Objective of strategy Studying bases to formulate strategies, process of formulating strategies and methods of analyzing and selecting optimal strategies to help enterprises select the most appropriate business strategy; Clarifying and applying theory on formulating business strategy into reality to formulate and select an optimal strategy for HAIHACO in 2011 – 2015 period; Suggesting groups of solutions to successfully deploy and implement the business strategy selected Object and scope of the study - Object of the study: production and trade of confectionery products of HaiHa Confectionery Joint-Stock Company - Scope: Confectionary business and production industry nationwide Methodology of the study Within the time limitation to complete this capstone project report, our group has used some key researches: - Qualitative method, expert method: surveying, interviewing and consulting experts’ ideas - Method of studying specific situations GaMBA01.M1009 Data used in the topic are collected from two main sources: primary and secondary sources Implication of the capstone project report The topic is studied based on the theoretical background and the real situation at HAHACO The result of the research can be used as reference for HAIHACO in formulating business strategy in 2011-2015 period Structure of the capstone project report Apart from the introduction, conclusion, table of contents and references, the content of the capstone project report is divided into three chapters as follows: Chapter 1: Theoretical background of formulating business strategy Chapter 2: Bases for formulating business strategy for HaiHa Confectionery Joint-Stock Company Chapter 3: Strategy and solutions to implement business strategy of HaiHa Confectionery Joint-Stock Company in 2011- 2015 period GaMBA01.M1009 CHAPTER THEORETICAL BACKGROUND OF BUSINESS STRATEGY 1.1 Concept of business strategy 1.1.1 Concept of business strategy As there are many different approaches, there are various concepts of business strategy According to Alain Threlart, “Strategy is the art that enterprises use to fight against competition and gain success.” According to Michael E Porter “Strategy is the art of formulating firm competitive advantages to defend.” Therefore, these authors consider business strategy as an art to compete in the market and develop enterprises According to management scope, business strategy is a type of plan According to G.Arlleret, “Strategy is the determination of roads and means to reach the set goals via policies.” D.Bizrell and a group of authors supposed, “Strategy is a general strategy to lead or orient enterprises to reach their expected goals It is the basis for mapping out policies and operational tactics” Alfred Chandler thought, “Strategy consists of basic and long-term goals of an organization and the method of selecting action process and allocation of essential resources to realize those goals” According to William J’ Gluecl, “Strategy is a type of united, comprehensive and general plan which is designed to ensure that enterprises’ goals will be realized.” According to consolidated viewpoint, “Business strategy is an art of designing and organizing means to reach long-term goals of enterprises and has relation with the GaMBA01.M1009 changes of business environment and competition.” (GaMBA, 2011, Textbook on Strategic Management) Although concepts are different, all of them agree in a content that is business strategy reflects activities of business units including the process of setting goals and measures and means used to realize those goals According to the textbook of Griggs University, a concise and general viewpoint is that strategy is perceived as a series of combined activities to mobilize resources of an organization/an individual to achieve a certain target 1.1.2 Types of business strategy Classification of business strategy is an important task at which managers need to select suitable strategies with the set goals as well as the function and mission of each division in an enterprise or the whole enterprise * Based on the scale and function of enterprises’ production and business: - Corporate-level strategy: This is the highest-level strategy of enterprises or organizations involving in big, decisive and long-term issues to the future operation of enterprises Normally, corporate-level strategies are highly affected by the changes in the enterprises’ business structure It will have significant influence on the business performance of enterprises It may result in an effect that is an enterprise can continue to operate in that field or not? Or the enterprise should participate in other fields at which profit in general and other objective will be easy to be achieved with higher efficiency The enterprise’s future will much depend on that decision It is inevitable that corporate-level strategy is designed, formulated, selected and responded by the highest level in the enterprise like board of management, board of directors, and high-level strategists, etc - Business-level strategy (Competitive strategy): This is an overall of commitments and actions helping an enterprise gain competitive advantages by exploiting their core capacity into specific markets GaMBA01.M1009 This is a lower level strategy compared to corporate-level strategy The basic issue that each enterprise needs to solve when selecting business strategy is that they will supply to customers which products or services; the methods to create those products and services and how to introduce products and services to customers The core element of business strategy is “selecting actions creating differentiation or implementing different actions compared to its competitors.” - Functional-level strategy: Functional-level strategy is the lowest level strategy of an enterprise It is a set of decisions and actions targeting to short-term goals (under one year) of different functional departments of an enterprise (finance, human resources, technology, marketing, production, investment, etc.) Functional-level strategy has an very important role because when implementing this strategy, managers will be able to exploit strengths of resources in the enterprise This is the basis to investigate and formulate competitive advantages of enterprises to support business strategy Normally, functional departments of enterprises will form their own strategies and be responsible to the Management Board and Board of Directors for their achieved results * Based on the approach of business strategy: - Business strategy focusing on key factors: the guiding thought to business strategy here is not spreading resources, but focusing on business activities having decisive implication to production and business of the enterprise - Business strategy based on relative advantage: The guiding thought for formulating business strategy here starts from the analysis and comparison of products or services of an enterprise compared to its competitors to set the basis for business strategy Relative advantage is shown via different aspects such as quality or selling price of products or services; or technology, distribution network, etc - Business strategy creating attachment: In this type of business strategy, the GaMBA01.M1009 formulation of business strategy follows the basic approach and always looks straight into the issues considered as common and difficult to be changed to set out questions “why” to reconsider what seems have to be concluded By continuously setting out questions, it is possible to have new discoveries to set the basis for business strategy of the enterprise - Strategy on exploiting potentials: The method of formulating business strategy here does not target to the key factors, but exploits potentials of surrounding factors of the key one 1.1.3 Role of business strategy - Helping enterprises to clearly see their orientation in the future and recognize possible opportunities and threats to help them make sound decisions with the environment to ensure the most effective business and production activities - Helping enterprises formulate better business strategies via the use of systematic approach method to set the basis for enhancing the coherence and the attachment of managers in realizing their goals - Raising sales, labor productivity, effectiveness of management, avoiding financial risks, and enhancing the capacity of preventing and fighting against difficulties of enterprises - Creating firm bases for mapping out appropriate policies and decisions with the market’s fluctuations GaMBA01.M1009 1.2 Process of formulating business strategy Figure 1.1: Process of formulating strategy Function, mission and strategic goal of an enterprise (1) Analyzing business environment (Opportunities & Threats) (2) Analyzing the internal of the enterprise (Strengths & weaknesses) Selecting strategy (4) Corporate-level strategy + Business-unit level strategy and functional-level strategy Implementing strategy (5) Checking & evaluating the result (6) Feedback Figure 1.1: Process of formulating strategy (source: Textbook on Strategic Management of GRIGGS University, 2011) The process of formulating strategy will undergo following steps: Step 1: Function, mission and strategic goal of an enterprise: From the function and tasks of an enterprise determining the vision and mission of the enterprise Vision: is a message to concretize mission into a general goal, creating belief into the figure of the enterprise 10 GaMBA01.M1009 CONCLUSION Theory and practice has proven that business strategy plays an important role in the business activity of enterprises and decides the success or failure of enterprises in the long run For HaiHa Confectionery Joint-Stock Company, this fact is even more important because it works in the area where competition is very tough Confectionery products are secondary products that are not necessities, but they are indispensable in the market and contribute to the development of the national economy The policy of reducing import duties and other confectionery easing confectionery business has increased strongly confectionery company in the country and foreign companies, making competition in the market Vietnam confectionery field tend to increase To maintain and improve competitiveness of confectionery products, HAIHACO must focus on research and sharp the development trends of the industry in the future The company must also choose for themselves a reasonable strategy in new phase, while providing uniform solutions to create advantage over rivals in the Vietnam fiercely competitive confectionery market today and in the coming year Wishing to develop a strategy consistent with the characteristics of the confectionery business and the practical situation in the Company in Hai Ha Confectionery trend Regional Integration and International, our group studied studied and proposed business strategies for HAIHACO in the period 2011-2015 Perspective, the strategy in this study will help HAIHACO get well prepared before the attacks of opponents, controlling the risk of losing market share and position as a leading company in the market Vietnam candy 78 GaMBA01.M1009 Finally, our group would like to express our sincere thanks to lecturers at Griggs University, Center for Education Technology and Career System (ETC) Hanoi based Vietnam National University and HaiHa Confectionery Joint-Stock Company for their enthusiastic support and contributed ideas to help us finish this capstone project report 79 GaMBA01.M1009 LIST OF REFERENCES Vietnamese: Document for internal use of HaiHa Confectionery Joint-Stock Company; Financial Statement of HAIHACO in 2007; Annual reports of HAIHACO in 2010, 2009, 2008; Charter of HAIHACO, 2007; Statistics by the Ministry of Industry and Trade in 2010; Textbook on Strategic Management of GRIGGS University, 2011 Pham Thi Thu Huong (2002), Strategic management in global economy – Statistical Publishing House Fred R.David (2006), Strategic Management Notes – Statistical Publishing House Rudolf Gruning (2003), Formulating strategy by process – Publishing House for Science & Technology 10 Garry D.Smith (1994), Business Strategy and Tactic – Statistical Publishing House 11 Micheal E.Porter (1996), Competitive Strategy – Publishing House for Science & Technology 12 http://www.haihaco.com.vn 13 Bakery industry report, (2010), http://tinnhanhchungkhoan.vn English: 14 Fred R.David, Strategic Management, 2011 15 P.Rinđova & C.J Fombrun, “Constructing competitive advantage The role of film-constitute interactions”, Strategic Management, 2007 16 D.F.Abll, Defining the Business: The Starting Point of Strategic Planning, Egglewood Cliffs, N.J Prentice Hall, 2000 80 GaMBA01.M1009 APPENDIX APPENDIX 1: ORGANIZATIONAL STRUCTURE OF HAIHACO Hai Ha Confectionery Joint-Stock Company is organized and operated under the 2005 Enterprise law, other relevant laws and the Company’s regulations Number of staff: 1265 people Chairman of the Management Board: Mr Bui Minh Duc General Director: Mr Tran Hong Thanh The company structure: -Shareholders’ General Assembly: The highest authority that makes all company's important decisions under the Enterprise Law and Company regulations Shareholders General Assembly determines the long-term investment policies on developing the Company, forming capital structure, electing Department of General and Administration Department of the Company - Board of Directors: The management unit that has discretion on behalf of the Company to determine all matters relating to the purpose of interests of the Company, except for Shareholders’ General Assembly’s matters The Board of Directors orients the survival and development policies to implement the Shareholders’ General Assembly’s decisions by formulating policies, presenting action resolutions in each particular time corresponding to production and business situation of the company - Board of Controllers: elected by Shareholders General Assembly, having full right to control all business activities, administer and operate the company on behalf of the Shareholders - Executive Board: Appointed by Board of Directors including one General Director, two Deputy Directors, and one chief Accountant General Director, a legal representative of the company is assigned by Shareholders General Assembly and 81 GaMBA01.M1009 being in charge of all daily activities of the company before the General Assembly Two Deputy Directors and a Chief Accountant are appointed by Shareholders General Assembly according to General Director’s proposition - System of Departments + Finance Department has function to mobilize capital for production, calculating the cost, the loss or gains, and payment both inside and outside the company +.Sale Department has function to make and balance the production plans, regulate production and carry out supplying material plan, make contracts for purchasing materials and equipment, monitor the performance of the contracts, sell products and conduct marketing activities from the process of sales, market survey, advertising, etc as well as make development project for the following years + Head Office has responsibility for establishing time rate for the product categories, calculating salary, bonus for staff and workers, recruiting employees, being in charge of insurance, labor safety, industrial hygiene, customer service + Security Board has function to make safe for the infrastructure system of the company + Test quality department has the function of testing quality of input materials The materials meeting the quality standards will be carried into warehouse for manufacturing and rating the inputs’ quality + Technical Department studies technology of manufacturing candy or cake to satisfy the tastes of consumers and suit the climate of Vietnam Then the technical department transfers the technology to member companies It also is responsible for monitoring products on production line in producing process - The system of member-factories: The Company has member-factories: + Chew Candy Factory: Producing various kinds of candy such as: Strawberry Chew, Orange Chew, Banana Chew, Grape Chew, chocolate chew, etc + Soft Candy Factory: Producing soft candy such as: Orange soft candy, Lemon soft candy, Banana soft candy, Tamarind soft candy, Mango soft candy, etc 82 GaMBA01.M1009 + Hard Candy Factory: Producing hard candy such as Mix Core Hard Candy, Strawberry Core Hard Candy, Orange Core Hard Candy, etc + Cake Factory: Producing many types of cakes like Cracker, Biscuit, cream wafers, etc + Viet Tri Factory: producing many kinds of candy like Jelly, soft candy, marshmallow, glucose, etc + Nam Dinh Factory: Specializing in producing ice-cream wafers, etc Factories located in the Company's headquarters are all subsidiary, General Director direct runs the enterprise Factories in Viet Tri and Nam Dinh are relatively independent For example, the company sells raw materials to factories and purchases finished goods by fixed prices 83 GaMBA01.M1009 APPENDIX 2: CURRENT COMPETITORS OF HAIHACO ∗ Hai Chau Confectionery Company At the second position nationwide, Hai Chau Company just stands behind Hai Ha Confectionery Company with the capacity of 6.000 ton/per year and over 60 billion of investment capital In recent years, Hai Chau has paid great attention to diversifying and improving the product quality The company has invested over 15 billion VND to import German and Netherland production line of chocolatecovered scream wafer as well as reorganizing the agency system with over 200 dealers and supermarkets nationwide Their strength is the longtime reputation in the confectionery industry, broad product portfolio, the distribution network primarily located in the North with fairly cheap prices However, most of Hai Chau products have medium quality, not very attractive patterns except for scream wafers, the dominant product, having good quality The company’s aim is to strengthen the Northern market, expand the internal market, mainly focus on the high-income ones and gradually enter the foreign market Therefore, Hai Chau Company competes with HaiHa Company mainly in Northern market with democratic products ∗ Trang An Confectionery Company Trang An is a fairly strong company in Northern market Their products compete direct with Hai Ha company’s ones The main competitive products are hard candy, soft candy, especially green-rice flavor candy which is diversified, cheap and satisfying the customers’ taste in the North ∗ Kinh Do Join-Stock Company Kinh Do Join-Stock Company has become a leading business in Vietnam’s confectionary market with modern technological lines and equipments from the most developed countries in the world This company has a wide range of confectionary products Their main products are cake and candies (mainly cakes, only 2% of candies), pure water and juice for the high-income people with 28% 84 GaMBA01.M1009 market share in the domestic confectionary market and over 20% of turnover growth rate The company leads the Moon cake market with approximate 75 percent of market Along with high quality, attractive patterns, the company always attaches great importance to advertising to polish the company’s name They have very potential and promising real-estate projects Kinh Do Company is actually a very big competitor of HaiHa Confectionery Joint-Stock Company in the process of entering high-class confectionery market ∗ Hai Ha- Kotobuki Joint-venture Company Hai Ha Joint-venture Company specializes in producing confectionary The Company operated independently under license 489/CP on December 24th 1992 Compared to other companies, Hai Ha - Kotobuki Company has more advantages, especially about technology The main products are snack, fresh cake, chocolate, hard candy and many other cake boxes which are varied with high qualities, attractive designs and quite expensive price * Bibica joint –stock company Bibica joint-stock company is formerly the Bien Hoa Confectionery Company, founded in 1998 from the equalization of three confectionery factories of Bien Hoa Sugar Company In 2007, Bien Hoa Confectionery Company was renamed Bibica Corporation (BBC) Currently, the BBC is the second largest brand-name, just behind Kinh Do, with about 8percent of confectionery market share over the country The BBC has been changing their business from serving the common market to high-rank market and aiming to the world market BBC focuses on main types of products including cake, candy, chocolate, malt and nutritional products The main turnover of the company comes from candy (35%) and nutritional products (10%) Some confectionery products have become well-known in the market As to sugar, the company has great advantage because of close connection with Bien Hoa Sugar Company The nutritional product has high prestige and the chocopie products are exported to over 15 nations 85 GaMBA01.M1009 APPENDIX 3: SUMAZING BUSINESS RESULSTS OF HAIHACO IN 2008, 2009, 2010 Unit: billion VND 2010 2009 1.Total revenue 531.268 462.754 - Net sales 527.585 458.602 - Financial income 1.223 1.339 - Other incomes 2.460 2.813 Total cost 506.058 435.604 Earnings before tax 25.210 27.150 Profit after tax 18.908 20.363 (Source: From 2008- 2010 HAHACO annual report) 2008 421.325 416.005 0.700 4.620 399.241 22.084 18.990 - The net sales in 2010 (527.585 billion VND) increased by 15.04% (approximately VND 68.983 billion) compared to 2009; in 2009, it was VND 458.602 billion, up10.24% (or VND 42.597 billion) compared to 2008 The net sales seem to go up yearly - The total cost in 2010 increased by 16 17 % (or VND 70.454 billion) compared to 2009; In 2009, it increased by 9.11% (about VND 36.363 billion) from a year earlier - Earnings before tax in 2010 of the Company was VND 25.210 billion, down 7.14 % (about VND 1.94 billion) from 2009; In 2009, it was VND 27.150 billion, up 22.20% (about VND 5.07 billion) from 2008 Although the annual net turnover in 2010 increased by 15.04 percent (about VND 68.983 billion) compared to 2009, the profit before tax fell VND 1.94 billion compared to 2009 It may result from main reasons: + The huge competitive pressure (some strong products of the company might be affected by some new competitors For example, Kinh Do’s products were entering the North and Central market It made the selling ability of the Company 86 GaMBA01.M1009 face a lot of difficulties; the appearance of the same products with different flavors attractive to customer also has a direct impact to the life cycle of the Company's products) Therefore, the Company has to pay more for the cost of advertising, promotion, market expansion, agent development so the profit was reduced + Global economic crisis lifted the cost of raw materials, such as sugar, wheat flour That the exchange rate of dollar increased made the cost of imported raw materials increase Also other factors such as increasing price of electricity and water also raised production costs, let profits decreased + The Company prepared for leasing new location (Vietnam-Singapore Industrial Park (VSIP) in Tu Son, Bac Ninh), checking the possessing equipment to prepare for new ones In 2009, net sales of the Company increased by 10.24% (compared to 2008) It was lower than those in 2010 and augmented in comparison with those in 2009 (up 15.04%) However, earnings before tax in 2009 increased by 22.20% compared to 2008 It was higher than those in 2010 and lower than those in 2009 (down 7.14%) The total cost in 2009 increased by 9.11% compared to 2008 and it was lower than the increasing percentage in 2010 The total cost in 2010 increased by 16.17% in comparison with that in 2009 The results of production and business activities in 2009 were better than in 2010 because in 2009, there were more advantages than difficulties In 2011- 2015, the Company still has to face with these challenges which causing a lot of difficulties for production activities of companies in general and HaiHa Joint-Stock Company in particular 87 ... reach long-term goals of enterprises and has relation with the GaMBA01.M1009 changes of business environment and competition.” (GaMBA, 2011, Textbook on Strategic Management) Although concepts... scale and great potential The most prominent is Kinh Do Company with abundant financial resources and a nationwide system of dealers and shops Currently Kinh Do Corporation is entering the North market... income levels of consumers Especially, Kinh Do seems to be a leader in manufacturing fresh cake which meets the increasing demands in urban areas 45 GaMBA01.M1009 Subsequently, HAIHACO has successfully