Luận văn thạc sĩ quản trị kinh doanh quốc tế MBA (23)

CAPSTONE PROJECT REPORT BUILDING STRATEGY FOR VIETNAM NATIONAL TEA CORPORATION IN THE PERIOD OF 2021 TO 2025 GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT BUILDING STRATEGY FOR VIETNAM NATIONAL TEA CORPORATION IN THE PERIOD OF 2011 TO 2015 Group Number: Student’s name: Nguyen Thanh Binh Dao Viet Dung Nguyen Quang Duc Nguyen Thuy Nga HANOI 2011 ACKNOWLEDGEMENT On be half of the group, I would like to thank to Centre for Educational Technology and Career Development – Higher Education – Vietnam National University, America Griggs University, especially all professors in the Board of Director of Faculty who have always supported and given us a very suitable condition to study and grow up for two years at the university We also would like to express our best respect and sincere thank to our instructor who has instructed and helped me a lot when doing research and completing this capstone project And please allow us to say thank to all the librarians in Library and Information Center, related sections of Vietnam National Tea Corporation for helpful materials and documents Finally, we thank to friends and family who always stand by us and become our encouragement in studying Despite of our trying best in researching and collecting materials, our thesis still has some limitation on data and knowledge We really expect to receive the comments and guidance from teachers and friends to make this thesis more meaningful Our group commit that this is our special work Data and figures in this thesis are accurate, our analysis and conclusions have not been announced in any other scientific research i TABLE OF CONTENT LIST OF ABBREVIATIONS iii LIST OF FIGURES AND TABLES .iv INTRODUCTION OVERVIEW OF STRATEGIC PLANNING AND STRATEGIC MANAGEMENT ANALYSIS OF CURRENT SITUATION OF VINATEA BUSINESS 24 STRATEGY AND SOME SOLUTIONS FOR VIETNAM NATIONAL TEA CORPORATION IN THE PERIOD OF 2011 TO 2015 56 CONCLUSION .67 REFERENCES 68 APPENDIXES .70 ii LIST OF ABBREVIATIONS ADB Asia Development Bank EFE External factors evaluation FAO Food and Agriculture Organization FAS Food and Agriculture Services FTA Free Trade Agreement HACCP Hazard Analysis and Critical Control Points IFE Internal factors evaluation ISO International Standard Organization MARD Ministry of Agriculture and Rural Development SBU Strategic business unit VINATEA Vietnam National Tea Corporation UNIDO United Nation Industrial Development Organization USDA United State Department of Agriculture WIPO World Intellectual Property Organization iii LIST OF FIGURES AND TABLES List of figures Figure 1.1: P.E.S.T Model 12 Figure 1.2: Michael Porter’s Five Forces .15 Figure 2.3: Organization structure of Vinatea 26 Figure 2.4: Import volume of main imported tea countries 28 Figure 2.5: Share ration of tea products in the world market 35 Figure 2.6: Average domestic tea consumption .37 Figure 2.7: Some main related and supporting industries for Vinatea 38 Figure 2.8: Productivity of employed population in Agriculture and Forestry .44 Figure 2.9: Tea planting area in Vietnam .48 List of tables Table 1.1: SWOT matrix 21 Table1.2: GREAT matrix .22 Table 2.3: Price of main tea production countries in the world market 29 Table 2.4: Planting area and production of tea from 1995 to 2010 33 Table 2.5: External Factors Evaluation matrix .41 Table 2.6: Main accounting indexes of Vinatea from 2000 to 2010 .42 Table 2.7: Internal Factors Evaluation Matrix .46 Table 2.8: Total capital for tea industry 47 Table 2.9: Export volume and value of Vinatea to main markets 53 Table 3.10: Tea area target up to 2015 57 Table 3.11: Vinatea’s Strategy choice – SWOT matrix 59 Table 3.12: Vinatea’s Strategy choice – GREAT matrix 60 Table 3.13: Attracted capital for tea regions from 2006 to 2015 61 Table 3.14: Summary of procedure to implement strategies 64 iv INTRODUCTION Necessity of project In the context of globalization and integration, comparative advantages and absolute advantages are fully salvaged To maintain and expand profit level, each company needs a suitable strategy to control the world market Foreign market brings the company many profits it also contains number of challenges If the company wants to be success in the world market it needs to examine its internal factors, external factors and competitors and give out a sound strategy Studying the process which a company set up its strategy become a very imperative topic attracts many economic researchers Drinking tea is a long standing tradition of Vietnamese Tea industry not only plays an important role in satisfying domestic consumption but also contribute millions USD into GDP Tea is mainly cultivated in mountainous and highlands and it plays important role in daily life of people in these areas Tea cultivation and production contribute about 50% to 70% their income To raise living standard for farmers in mountainous and improve contribution in GDP companies which produce tea need to find out foreign markets for exportation There have been many researches which studied about tea cultivation and exportation: They are: - “Orientation and solutions to promote tea production to 2010”, implemented by Dr Nguyen Kim Phong, Director of Vietnam Tea Association in 2005 In this article, the author proposed some petitions for operation and management in tea industry and policy to promote exportation - as well “Tea production and exportation, reality and solution”, studied by Dr Nguyen Sinh Cuc, Ministry of Agriculture and Rural Development in 2001 Dr Nguyen Sinh Cuc brought out comprehensive solutions for tea production and exportation However, from 2001 to present, with integration trend of the world economy, Vietnam economy has got many big changes So - some of these solutions have not been suitable any longer “Modernize equipment and technology for tea production” implemented by Vietnam Tea Association The project shown out the importance of - improving quality of tea products to compete in the world market “Tea - Current market situation and middle term out look” implemented by FAO in 2005 By using econometric method, the research gave out some predictions about the development of the world market These theses bring meaningful contribution to development of tea industry and also orient strategic managements for managers of tea producing companies However, economic context has changed much so far so data and analysis in these researches cannot cover these changes Moreover, these works concentrate on studying operation of the whole industry and tea market generally We really need a research which study operation of a specific company in a specific market With all these above reasons we decide to choose study production of Vietnamese Tea Corporation and its strategy in the context of globalization from 2010 to 2015 Purposes of project By using practical experiences when working in tea industry and study about strategic management We would like to give out a real picture of operation of Vietnamese Tea Corporation the period from 1995 to 2010 and prediction to 2015 The project will focus on some potential and new market such as: Pakistan, Russia, and EU Through study and analyze operation of company we also give out some short term and long term solution for the company to orient and built up sound strategies when working with global market Scope of project The project aims at analyzing operation of Vinatea when building up strategies for Vinatea in general and its operation in the world market From this analysis the company will get judicious decisions for operation Data and information in this capstone project were collect from production and exportation of company form 1995 to 2010 Methodologies of project The project uses qualitative and quantitative method in studying These methods are: - Collecting and analyzing method - Comparative analysis method - Specialist analysis method - Economic statistic method The project also use kinds of models for analyze such as: SWOT matrix, GREAT matrix, etc A wide variety of academic researches, market report, journals are utilized to bring out the best understanding of the subject The sources of data are listed clearly in the reference Structure of project Besides forewords, conclusion and list of table and abbreviation the capstone project includes three chapters as following: Chapter 1: Overview of strategic planning and strategic management in Vietnam National Tea Corporation Chapter 2: Analyze production and exportation reality of Vietnam National Tea Corporation Chapter 3: Orientations and solutions to implement business strategy for Vietnam National Tea Corporation in the period of 2010 to 2015 OVERVIEW OF STRATEGIC PLANNING AND STRATEGIC MANAGEMENT 1.1 Definitions and roles of strategy and strategic management 1.1.1 Definitions of strategy and strategic management The term strategy has a long history and it originated from military field and from the ancient Greece The strategy was born and developed along with conquests of imperial countries and it was considered as the art of winning in the battle The military origination of the strategy has been shown in its oldest definition: According to the dictionary of American cultural heritages, strategy has been defined as a “science and art of commanding military, it is applied to make master plans and carry out the big – scale campaigns” In the economy field, after the Second World War, global economy has recovered rapidly, business environment have been changing so vigorously The second revolution of science and technologies have promoted industrialization and modernization process more strongly, competition more fiercely That situation has forced companies to have long-term business production and operation This requirement matches the nature of strategy definition from military field applying into the economy Over the periods of development, “strategy” definition has some certain changes and not come to agreement, therefore remains many different definitions Based on competition point of view of Michael Porter, strategy definition understands as: “Strategy is the study of finding a suitable position to compete in the industry, a scope of operation where competitive activities occur” Generally, “strategy” was understood as trend and method to resolve long term and overview mission According to UNIDO definition: “Generally, a development strategy can be described as an outline of developing process to reach intended 1.11 Solutions to implement business strategy for Vinatea 1.11.1 Attracting capital solutions The most importance facto to implement business strategies is capital Vinatea can attract capital via below channels: Table 3.13: Attracted capital for tea regions from 2006 to 2015 Source of capital Amount (Billion VND) Government investment 371.40 Shareholder equity 884.00 Credit 2,414.23 Farmers’ contribution Total 44.57 3,714.20 Source: Nguyen Kim Phong, Orientation and solutions for tea development to 2015, Tea planers, 2008 From the table 3.4 we can see some Vinatea capital sources are: ODA, FDI, join venture, credit, capital attracted from farmers and stockholders equity, etc In which, credit capital holds the biggest share (about 65%) Main credit capital is mobilized from ADB Government capital holds about 10% and mainly used for irrigation works, scientific researching and encourage agricultural expansion Besides, company also attracts capital from tea farmers, this number holds about 1.2% in total capital Large number of attracted capital will be allocated for main tea regions or high intensive tea regions (about 70%) From 2001 a project of ADB named: “developing tea and fruit trees” provided tea races for some provinces: Thai Nguyen, Phu Tho, Yen Bai, Lam Dong, Tuyen Quang and Ha Giang – main and high intensive tea regions Other tea regions need to be invested by capital form bank credit Some requirements for capital using: 61 - To use capital efficiently, company needs to invest in modernizing equipment, and technology for tea processing from preliminary treatment to producing finished products Building strictly co-operation between tea - farmers in tea regions and tea companies to ensure benefit for both sides Building steady development for all members in Vinatea with reasonable scale to deploy long tem competitive advantage of the whole industry The company should concentrate on upholding and deploying internal resources to create high quality product to approach the world market, especially exportation 1.11.2 Solutions for agricultural techniques to improve productivity and quality in tea regions Rearrange centralized tea areas with united management structure from cultivation to industrial processing Vinatea now intends to mechanize and automate these following steps: monitoring meteorology issues, harvesting, material transportation, etc to increase tea productivity and quality There are some specific solutions as following: 1.11.2.1 Solutions for tea races - The company needs to research and find out new tea races with high productivity and good quality Besides, imported races should be suitable for - Vietnamese environment Race structure needs to be suitable for each production region in order to - deploy efficiently natural resources and satisfy market demand Determine race structure for main tea regions bases on scientific basis and - comprehensive reality Some standards to choose tea races are: productivity, quality, products’ value - for each race and for all race structure Choose black tea race because Pakistan and other countries in the world now - are more popular in use this kind of tea Besides well deploying domestic tea races the company also uses imported tea races from some countries like: Japan, India, China, etc 62 - Concentrate on taking care of existed tea gardens to get good quality and - high productivity Improve and diversify tea race to satisfy the changes of the world demand in - integration period In mountainous and high regions the company will cultivate Shan tea with many buds and perfume This kind of tea can be produced green tea, yellow tea, red tea, black tea with good quality which highly appreciated by a large number of consumers Imported tea races from Taiwan, China with perfume should be cultivated in regions with more than 500 -1000 m height or cool - climate regions to produce OLong tea and other kind of tea with high value Density of tea plans should be suitable for each tea race to cover bare hills and anti eroding 1.11.2.2 Solutions for fertilizer Organic fertilizer is very suited for tea plan Organic fertilizer can improve tea quality and also help for harmonious collecting tea flavors So the company should use more organic fertilize and minimize inorganic fertilizes 1.11.2.3 Solutions for preventing insects Do not use chemicals which need more than days to break up, strictly controlling excess pesticide insecticide in tea products Minimize using harmful chemicals in preventing insects and use biological methods to replace for chemicals 1.11.2.4 Irrigation solutions Water is very important for tea cultivation Enough water will help to increase productivity, quality and economic efficiency So, the company needs to invest in building new irrigational works such as: water pump, pipe, tap, etc 1.11.3 Marketing solutions The world tea market is a potential but high risk market because of unstableness in political events of main using tea countries So, Vinatea needs to promote market research activities and assign marketing executives to go to foreign 63 market who will carry out studying and investigating activities and bring out meaningful predictions about market development To implementing market research company needs to following actions: - Appointing excellent officers who will directly research in global market to - study market demand and provide necessary information about market trend Promote information collection and analysis to find out right decisions about - market changes Appointing officers who will come to traditional tea exportation to study about tea production and exportation such as: India, Kenya, China, etc 1.12 Processes to implement Vinatea’s production and exportation strategies All strategies need a clear procedure to implement The procedure will help the company define each steps and activity to be successful in reaching strategy’s target From results of SWOT matrix and GREAT matrix, the strategy that Vinatea should follow to approach its target in the period of 2010 to 2015 is low cost strategy In domestic market Vinatea have comparative advantages to expand its market share but in the foreign market the company needs to improve both quality and marketing strategy to enhance the export volume and value The processes to implement these solutions to aim at below targets: - Improve quality and productivity Protect environment Expand market share Details processes for Vinatea to implement above SO strategy can be summarized as Table 14below: Table 3.14: Summary of procedure to implement strategies No Solutions Tea race Purpose Improve quality Period From To 2011 2012 TT year P.I.C Tech Related Cost Necessary Dept (B vnd) procedure Fin & 350.24 -Finding new tea Acc race -Determine race 64 structure -Use clear original tea races Fertilizer Irrigation solutions Capital allocation Protecting 2011 2013 2011 2012 tea 2011 2013 Environment Improve productivity Invest for main regions years year Tech PE 245.98 Tech PE 276.50 Others 543.67 Fin & years Acc -Diversify tea race -Using organic fertilizer -Building irrigational works -Attract Enhance market share 2011 2015 years Sale Others 800.76 capital from bank credit - Marketing new Promote information collection and analysis - Submit business Attract capital Reinforce capital source 2011 2013 Fin & years Acc strategies Others to 56.87 Government - Sponsoring of ADB, FDI To be successful in developing theses above strategies the company needs the support from Government, besides, it needs some innovation to limits its weaknesses and catch up with market opportunities Vietnam Tea Association should intensify information collection activities about foreign markets and give out timely forecasts for Vinatea about market trend and changes in tea demand of Pakistani Vietnam Tea Association also is the bridge to connect and share important information as well as experiences in production and exportation to the world market The Government also needs to support tea industry to improve the infrastructure and capital condition for developing production and exportation: - Tea production is the industry which requires a small amount of capital so, join stock companies are suitable management structure for development 65 - Reduce land using tax for farmers and provides reasonable interest rate in the - first to years Government and related Ministries should give favorable regulations for tea companies in marketing, trading promotion and popularize Vietnamese tea label 66 CONCLUSION Applying strategy and strategic management theories play an important role in analyzing a company’s production and exportation strategies Via indexes and data of IFE, EFE and GREAT matrix we can find out the most suitable strategies for Vinatea to promote its exportation target Actually, Vinatea has some competitive advantage in tea production and exportation, such as: factors conditions, demand conditions and human resource In additional, the world tea demand is expanding year by year, it would be a big opportunities for Vinatea to improve its share in the world market However, Vinatea’s exportation also has some limitations: low quality, low price, lack of information, etc To promote tea production and hold a bigger share, Vinatea needs to apply some kind of comprehensive solutions which mentioned in chapter III The most suitable solutions for Vinatea to apply in the period of 2011 to 2015 are ST, SO strategies Besides, the company also needs to deploy its strength in providing low price tea products then focusing on diversification and low price strategies Because of limitation of time and studying condition, solutions shown in the thesis are not really specific To be success in setting up tea production and exportation strategies Vinatea needs to continue to study comprehensively about the world market, marketing and brand name strategies Results of these researches and appropriate solutions will strengthen and improve not only Vinatea share but also Vietnamese position the world market 67 REFERENCES ADB, Commercialization and Poverty Reduction, 2008, pp – FAO, Current Market Situation and Middle Term Out Look, July 2005 Hoa Nguyen and Ulrike Grote, Agriculture Policies in Vietnam: Producer Support Estimate, 1986-2002, International Food Policy Research Institute Hoang Thi Thu Huong, Feasibility study for Organic bitter tea production and Marketing in Cao Bang province, Helvetas, December 2007, pp 21 – 31 March R Birch, Factors affecting the caffeine and polyphenol contents of black tea and green tea, America Chemical Society, 2001, pp 5341 – 5344 Nguyen Mai Phuong, Nguyen Kim Trung, The Vietnamese Tea Industry, Vinatea, 2004, pp 18 – 19 Robert E Ankli, Michael Porter’s competitive advantage and business history, University of Guelph,1992, pp 288 - 300 Pham Thi Bich Ha, Vietnam’s tea processing industry in the context of economic intergration, Lund University, June 2006 Porter M, The competitive advantage of Nations, Harvard Business Review, March1990, pp 73 – 93 10 Vo Thai Dan, Assessing genetic Diversity in Vietnam tea Camellia Sinensis using morphology and microsatellite markers, August University, Department of Crop Science, October 2006 11 UNDP International Statistic 2000 – 2007 12 Fred R.David, Strategic Management: Concepts and Cases, 12th Edition, 2008 13 Jay Barney; William Hesterly, Strategic Management and Competitive Advantage: Concepts, Prentice, 2008 14 HallJay Barney, Gaining and Sustaining Competitive Advantage, Prentice Hall Philip Kotler, Principles of Marketing, 13rd Edition, 2007 15 Philip Kotler, Principles of Marketing, 13rd Edition Website www.traviet.org/van-hoa-traviet www.euromonitor.com/hot-drinks www.vietnamembassy-pakistan.org www.untrade.un.org www.viats.org.vn 68 www.fao.org www.vinatea.com.vn www.vneconomy.vn www.viettrade.gov.vn 10 www.allafrica.com 11 www.bilaterals.com 69 APPENDIXES Appendix 1:Vietnamese market share in tea production from 1996 to 2005 Unit: 1,000 tons Total output Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 The world Vietnam 939.44 952.76 1,013.21 1,028.92 1,013.43 1,025.22 1,052.06 1,043.85 1,042.21 1,028.01 46.8 52.2 56.6 70.3 69.9 75.7 94.2 104.3 119.46 132.525 Vietnamese share (%) 4.98 5.48 5.59 6.83 6.90 7.38 8.95 9.99 11.46 12.89 Source: FAO’s report, 2006 Appendix 2:Comparison between Vietnam’s, Kenya’s, and world tea price Source: comtrade.un.org Appendix3: Prediction of green tea production and exportation to 2014 Production Exportation 70 World China Japan Vietnam Indonesia Reality Prediction (2003) (2014) Growth rate Reality Prediction (2003) (2014) Growth rate (%) (%) 756.1 975 2.3 202.6 275 2.8 585.0 740.1 2.2 178.6 242 2.8 87.0 92 0.5 0.8 1.2 3.2 30.0 39.6 2.6 17.0 28.0 4.5 41.0 49.1 1.7 5.5 5.8 0.5 Source: Tea – current situation and midterm outlook, FAO, 2005 Appendix 4: Prediction of black tea production to 2016 Production (1,000 tonnes) 2005 (reality) 2016 (pred) World Vietnam Growth rate (%) 1995 - 2005 2006 - 2016 245.9 2972.7 2.3 1.8 62 117.7 15.0 6.0 Source :Tea – Current situation and mid term out look, FAO 71 Appendix 5:Planting tea area planning from 2005 to 2010 Unit: Region/ Province Planting New planting area Planting area area in Province 2002 Total 03 - 05 Total Lai Chau Son La Thai Nguyen Ha Giang Lao Cai 100,061 63,946 2,342 3,025 13,358 12,356 3,454 24,600 12,600 500 2,500 2,000 500 16,000 10,900 500 2,000 1,800 1,000 500 Yen Bai Tuyen 11,407 1,000 700 300 11,457 11,757 Quang Phu Tho 4,177 8,437 2,000 2,000 1,200 1,500 800 500 5,027 9,287 5,827 9,787 The red river Delta 3,778 - - - 3,181 3,181 The Middle Coastal 8,997 4,000 2,200 1,800 10,717 12,517 Region Vietnam High and Middle land of the North Central Highland 05 - 10 2005 2010 8,600 107,481 116,081 5,300 69,804 75,104 2,842 2,842 2,000 5,105 7,105 700 13,758 14,458 1,000 12,456 13,456 3,835 3,835 23,322 4,400 2,900 1,500 23,772 25,272 Source: Institute of Planning and Agriculture Design 72