Significance of the study
General introduction
Thien Phuc Minh Joint-stock Company (TPM) was established on January
Founded in 2008 by 15 partners from Vinafood I, TPM specializes in distributing consumer goods and establishing a retail chain across northern Vietnam, extending from Hue to the northern regions.
One year after its establishment, TPM invited all ordinary shareholders and strategic partners to participate Aiming to leverage social resources, TPM focused on attracting strategic shareholders, specifically companies with extensive experience in retail distribution or those willing to forge a long-term, committed partnership with TPM.
Significance of the study
As a newly established company, TPM recognizes the importance of developing a comprehensive strategy to achieve its goal of creating a modernized commercial business model, making research into effective strategies crucial for its success.
Conducting thorough research on strategies can enhance Total Productive Maintenance (TPM) by developing a modern business model, establishing a foundation for sustainable growth, and progressively strengthening the brand's position in the consumer goods retail sector.
Purpose of the study
The purpose of this study is to identify proper business strategies that assists TPM in realizing its vision of standing among the top 10 retail companies in Northern Vietnam
The retail sector is characterized by intense competition and numerous challenges, particularly in the Northern region, where few companies have achieved significant success In this landscape, competition arises not only from individual retailers but also from a vast network of grocery outlets that dominate the market, presenting formidable challenges for businesses striving to thrive.
After studying at Griggs, our team developed effective business strategies for TPM Company by logically analyzing and defining problems, identifying target customers, and assessing threats and competitors As a result, we formulated key strategies related to products, pricing, marketing, and human resources These strategies are crucial for the company's progressive growth and enhancement of professionalism.
Study methodology
The study process had knowledge on strategic management, marketing management, human resource management, economic management, and operation management used.
This study was carried out by methods of problem identification, study, analysis and solving.
This study employed a variety of materials, including field surveys, documentation from the General Department of Statistics, and retail market reports from Vietnam It also analyzed data from articles highlighting the business operations of globally recognized retail corporations in Vietnam, such as Metro Cash & Carry (Germany), Bourbon (France), Parkson (Malaysia), and Zen Plaza (Japan).
Analysis tools: PESTLE, PORTER model, SWOT analysis, QSPM
Through the MBA training program at Griggs, combined with practical experiences, survey results, market analysis, and insights from lecturers, we have effectively integrated theory and practice to develop this comprehensive strategy report in collaboration with the company.
Capstone Project Report Structure
Chapter II : Analyzing the situation of Thien Phuc Minh Joint-stock company.
Chương III : Proposing strategies for Thien Phuc Minh Joint-stock company, period 2011 – 2015.
LITERATURE REVIEW
Definitions
A well-defined strategy encompasses a series of actions aimed at establishing a sustainable competitive advantage As noted by McKinsey (1978), it involves a comprehensive plan for managing and leveraging organizational resources, including finance, personnel, and risk mitigation, to assess business efficiency within specific sectors or markets Additionally, it facilitates the mobilization of supplementary capital from credit institutions or private investors, highlighting the importance of strategic planning in safeguarding and promoting a company's essential interests.
Strategy is everything that an organization has to do based on its strengths and weaknesses in the context of opportunities and threats.
A sound strategy will bring effectiveness helping managers define goal, thorough course of action, which creates values for employees and shareholders.
A company's business strategy defines its long-term direction and scope, aiming to achieve a competitive advantage by effectively utilizing resources in a dynamic environment This strategy is designed to meet market demands and fulfill the expectations of all stakeholders Rather than outlining specific methods for achieving these goals, which are the focus of various supporting programs and functional areas, a business strategy serves as a framework to guide decision-making and actions related to the company's overall direction.
The success of a company's operations hinges on the effectiveness of its strategic planning and execution A well-implemented business strategy provides significant advantages and operational efficiency, setting successful companies apart from their competitors.
A well-defined business strategy is essential for a company to clearly outline its goals and direction in its operations This strategic framework enables the organization to structure its business effectively, identify the necessary actions for success, and establish a timeline for achieving its objectives.
Business strategy plays a crucial role in helping a company define its purpose and future direction It guides long-term planning, providing a solid foundation for operational execution This clarity enables administrators to assess and refine their approach, ensuring they stay aligned with their goals and timelines for achieving desired outcomes.
In today's globalized business landscape, organizations must constantly analyze their environment to identify opportunities and threats, as well as their own strengths and weaknesses By doing so, they can effectively evaluate and forecast future conditions, enabling them to develop strategic plans that capitalize on their advantages while mitigating risks This proactive approach helps companies navigate challenges and achieve long-term success.
Effective business strategy enables administrators to allocate resources efficiently, make informed decisions based on the business environment, and foster strong employee relationships It also plays a crucial role in mitigating risks, minimizing financial uncertainties, improving manufacturing efficiency, and promoting stable, sustainable growth for the company.
Corporate-level strategy refers to the overarching plan that guides a corporation's activities across all its business units This strategy aims to provide a comprehensive perspective on the company's objectives and aspirations, ensuring alignment across various operational areas By establishing clear targets, corporate-level strategy helps in effectively managing and coordinating the diverse aspects of the organization.
+/ Business level (sector): is designated for a particular area If the company only participates in one sector, a business level strategy is then also considered a coporate level strategy.
+/ Functional level: is deemed strategy for distincive functions (finance, human resource, marketing…)
Based on strategy content, administrators can classify strategies into following groups :
By this method, strategies consist of :
+/ Orientaing strategy : strategy that mentions major orientation of business objectives It is built on results of analysis of business environment and company’s internal situation.
+/ Operating strategy: includes alternative operating plans of the company in particular situations and proposed strategy adjustment.
Strategy building process
The process of building a business strategy is as follow :
2 1 Deriving from company’s mission and goal.
Identifying a company's goals is a crucial initial step, as it involves defining its mission and the targets it aims to achieve within its industry Additionally, the business processes must reflect a commitment to legal compliance and ethical standards that benefit society.
After defining the company's mission, goals, and business area, it is crucial to analyze the various factors that influence them to effectively develop a robust business strategy.
2.2 Analyzing and evaluating external environment.
Companies face various internal and external factors that influence their growth and operations To formulate effective business strategies, it's essential to analyze these factors to understand their impact on production and business activities By evaluating external environmental factors, companies can identify potential opportunities and threats, enabling them to craft strategies that leverage advantages while mitigating risks, ultimately ensuring sustainable development and stability.
External environment includes microenvironment and macroenvironment.
The macroenvironment encompasses various factors that significantly influence a company's existence and growth, including the economic, political, social, cultural, legal, technological, natural, and global environments.
The operation of a company is significantly influenced by key economic factors such as economic growth pace, interest rates, exchange rates, and inflation rates High economic growth creates numerous business opportunities, while economic downturns can reduce consumption and increase risks for companies Additionally, interest rates impact business demand, and policies regarding exchange rates and inflation can either present opportunities or pose risks for businesses.
- Legal and political environment (legal and political factor).
Legal and political environment may have significant impact on companies.
It may create opportunies or even risks for the business on the other hand
This environment comprises : political stability, policies on legal system (ie investment law, labor law, environment and resources law tax policies, fees, regulations on advertisement…)…
- Social and cultural environment (social and cultural factor).
Various factors such as lifestyle choices, ethical considerations, cultural traditions, consumer attitudes, the role of women, population growth and shifts, marriage and birth rates, educational levels, and the formation of consumer protection associations significantly influence business landscapes, presenting both opportunities and risks for companies.
Technological advancements have transformed production methods and product life cycles, leading to the creation of higher quality products at lower costs This shift directly impacts a company's business strategies Therefore, when developing effective business strategies, it is crucial to analyze and evaluate technological factors and trends to ensure alignment with current market demands.
In today's interconnected world, localization and globalization are essential trends that significantly impact businesses Companies face both opportunities and challenges from the international environment, influenced by diverse cultural, social, institutional, and economic factors To navigate these complexities, businesses must develop strategies tailored to their industry, carefully analyzing elements such as free trade agreements, tariff barriers, international quality standards, antitrust laws, and anti-dumping regulations By doing so, they can leverage opportunities, mitigate risks, and formulate effective business strategies.
The micro environment encompasses several key factors that influence a business, including customer pressure, supplier dynamics, the threat posed by potential competitors, the risk of substitute products and services, and competition from existing rivals According to Michel, a strategy authority from Harvard Business School, understanding these elements is crucial for developing effective business strategies.
E Porter has developed a framework that models an industry being influenced by five forces as a basis for strategies to help environmental analysis as follows:
Figure 01: Five competitive driving forces of M Porter
- The intensity of competitive rivalry
In Michael Porter's model, the first force encompasses existing competitors within the market When these rivals are weak, businesses have the potential to raise prices and enhance profitability Conversely, heightened competitive pressure leads to intensified price competition Typically, competition among firms in the same industry involves three key components.
• The industry’s competitive structure: It depends on the separate or concentration level of businesses within an industry.
The business and the intensity of competitive rivalry
The competitiveness of the industry
The threat of the entry of new competitors
The bargaining power of customers
The bargaining power of suppliers
• The industry demand situation: In general, if the industry demand increases, business will have opportunities, as opposed the risk will appear if demand decreases.
Exit barriers encompass various factors such as the investment costs associated with facilities and equipment, the expenses involved in transitioning to a different industry, and the relationships with strategic units Additionally, they include the values and emotions of leadership, as well as the business's historical performance within the industry High exit barriers can result in a business becoming entrenched in an undesirable industry, limiting its ability to adapt or shift focus.
- The threat of the entry of new competitors (new entrants)
When evaluating potential competitors in the market, it is crucial to analyze various factors such as entry barriers, industry advantages, product differentiation, capital requirements, and switching costs Additionally, assessing access to distribution channels, cost disadvantages, and relevant government policies will provide a comprehensive understanding of the risks posed by new entrants.
- The bargaining power of suppliers
Suppliers play a crucial role in providing essential resources such as raw materials, fuels, equipment, labor, and transportation services to firms Their influence can create pressure on businesses, as they possess the power to raise input costs or compromise the quality of the products and services offered Consequently, it is vital for companies to analyze these supplier dynamics and formulate effective strategies to mitigate potential risks when developing their business plans.
- The bargaining power of customers
The bargaining power of buyers significantly impacts businesses, as a large consumer base can present opportunities for growth However, it can also pose a threat if customers demand lower prices or higher quality products and services.
- The threat of substitute products or services
Substitutes refer to alternative products and services that fulfill similar consumer needs To mitigate the risks associated with substitute products and enhance their business strategies, companies must analyze factors such as policy changes, technological advancements, pricing trends, and consumer behavior This comprehensive analysis is essential for creating effective business plans.
THE ACTUAL SITUATION ANALYSIS OF THIEN PHUC MINH JOINT-STOCK COMPANY (TPM)
The introduction of Thien Phuc Minh JSC
2.1.1 Company name, structure, history and development process
- Company name: Thien Phuc Minh Joint-Stock Company
TPM has strategic shareholders: Vietnam Northern Food Corporation (VNF 1) and its member corporations.
TPM was established with two main business activities:
1 Distribution of consumer goods in the North Vietnam market from Thua Thien Hue to the Northern provinces, which starts on its own distribution systems of supermarket chains and convenience stores.
2 Organizing retail business which operates through three business mode:
- Establish chain of retail stores
- Set up the food chain supermarkets
- Build and operate commercial centers (is a combination of retails and other high-grade commercial activities)
TMP operates as a joint-stock company, where the Annual General Meeting of shareholders elects the Board of Directors This Board then appoints the Executive Committee, while an independent Control Board oversees the company's activities The Chief Executive Officer (CEO) leads the Executive Committee and appoints three subordinate executives responsible for supermarkets, stores, and finance Beneath these executives, various departments manage the company's overall operations.
Figure 07: The company chart ((Source:http://www.vnf1sjc.vn)
In 2012, TPM aimed to rank among the top 10 retail companies in North Vietnam The company is dedicated to establishing itself as a strategic and reputable distributor for leading food brands both domestically and internationally.
TPM successfully implements social objectives: to ensure food safety and hygiene and become most trusted food retail brands in Vietnam.
TPM’s vision is that after 05 years striving, it can launch two commercial centers,
12 supermarkets, 53 specialty shops and a distribution center of goods.
Quality of service: TPM strives to discover and deliver the highest quality products with reasonable prices for consumers.
Effective management in Total Productive Maintenance (TPM) focuses on optimizing operations, ensuring proper maintenance of capital and finances, and achieving a breakeven point by the third year, ultimately leading to profitability and a streamlined management structure.
Directors the senior management certificates Management staffs and sales have the best skills.
Table 01: PROFIT AND LOSS STATEMENT
(Source: Annual business performance report 2009 and business planning 2010)
Analysis of Macro environment (PESTLE model)
Understanding the macro environment is crucial for any business, regardless of the product it offers Key factors influencing this environment include technology, social and cultural dynamics, political and legislative elements, and the overall general environment, often analyzed through the PESTLE framework.
2.2.1 Technology, Social – Cultural, Political - Legislation
The rapid advancement of science and technology has provided leading companies with a competitive edge in the market, presenting both opportunities and threats to business operations TPM has successfully integrated new technology into its retail and distribution management through the implementation of an IRP software system This system enables real-time control over product information across various Points of Sale (POS), including stores, supermarkets, and warehouses, facilitating informed decisions regarding production, purchasing, and distribution Furthermore, modern technology enhances management efficiency, particularly in retail, where effective oversight of multiple POS and suppliers minimizes subjective risks By being the first in its corporation to invest in technology and adopt the IRP system, TPM has established a significant competitive advantage over its rivals.
Vietnam’s political environment is considered the most stable in the world.
To combat inflation and enhance national food security, the government has implemented measures such as reducing agriculture land use taxes, providing lending incentives for agricultural product purchases, and promoting the development of a domestic retail network.
In retail management, the government has yet to implement specific strategies to enhance distribution and retail planning for the promising 80 million market Following our entry into the WTO, efforts are underway to refine the legislative framework across various sectors While the government promotes domestic investment in infrastructure, local firms struggle with management experience and capital shortages Consequently, well-established retailers like Parkson, Big C, and Metro have capitalized on the WTO's free trade agreements to establish a strong market presence in Vietnam.
In her address at the "Overview of Retail/Distribution Industry in Vietnam, 2011" forum, Doctor Dinh Thi My Loan, Vice President and Chief Secretary of AVR, emphasized the critical need for Vietnamese retailers to recognize their shortcomings She highlighted that a lack of professionalism is a significant barrier preventing local businesses from effectively competing with foreign corporations in the retail sector.
Four years after joining the WTO, Vietnam's retail industry has established itself as one of the 15 most attractive markets for international investors Retail firms are actively working to connect production with consumption, engaging in the "Vietnam Consumers Support Vietnamese Products" campaign, and contributing to market stabilization efforts.
Ms Loan emphasized that the key goals for domestic retailers in the coming year include fostering cooperation and leveraging the "Vietnamese consumers support Vietnamese products" campaign It is anticipated that the retail industry will undergo significant changes, marked by steady growth in the years ahead In Hanoi, this year is expected to see a surge in small supermarkets and businesses that blend traditional and modern retail formats, exemplified by establishments like Cua Nam and Hang.
Shopping centers and convenience stores offering medium to high-grade products are expected to expand to meet diverse consumer demands Meanwhile, traditional retail channels will continue to thrive However, fresh markets and traditional retail stores will remain the primary shopping method until 2015, largely due to the challenges in changing established shopping habits and behaviors.
Vietnam secured the second position for national growth rate in East Asia, following China, and is projected to maintain an impressive GDP growth rate of approximately 7% per year from 2009 to 2013 This robust growth rate underscores the country's significant market potential, particularly in the consumer products sector, indicating a substantial expansion in market size.
Vietnam's economy has experienced remarkable growth in recent years, comparable to other developing nations There is a significant disparity in income levels among different social classes and regions, yet the average income per person is rising at a rapid pace According to the Report to the Prime Minister on the economic and social situation in 2010, Vietnam is currently in a phase of robust economic growth and stability, as evidenced by the GDP per capita data from 2000 to 2010.
Since 2000, economic growth has rebounded, surpassing previous years, creating favorable conditions for TPM Company to invest in production and business activities While inflation has remained relatively high, it is well-controlled, and monetary and foreign policies, along with foreign exchange rates, are stable The food and goods business landscape is evolving daily, with domestic food products increasingly utilizing new breeds and advanced manufacturing processes that enhance productivity and quality, offering consumers more choices Additionally, imported food products are gradually entering the domestic market, further diversifying available options.
The increasing collaboration in production processes is leading to the creation of higher-quality products in the economic sector As society evolves, a growing segment of high-income residents is demanding superior quality food The expansion of the Hanoi area is contributing to an improved standard of living A significant portion of the urban high-income population, particularly in Hanoi's historic areas and expanding districts, is prioritizing food quality, reflecting their ability and interest in premium offerings.
Cultural values significantly shape business activities and consumer behaviors in every country, including Vietnam, where traditional markets and small street stores dominate shopping habits Following Vietnam's entry into the WTO, consumer income has risen, leading to an increased demand for branded products and professional services Higher-income consumers and the youth are increasingly willing to spend more at supermarkets and shopping centers, reflecting a growing trend across all social classes in line with the nation’s economic growth.
As awareness of product quality's impact on personal and social health grows, consumers are increasingly turning to modern shopping methods, like weekly or monthly shopping, to accommodate their busy lifestyles In response to this trend, international retail corporations are anticipated to enter the Vietnamese market However, domestic companies aiming to compete, particularly those employing a differentiation strategy to enhance product value and consumer service, will face significant challenges.
Integration and globalization are significantly influencing business operations, with Vietnam experiencing the impacts of the global crisis Additionally, the rapid growth of the retail industry and the rise of modern consumption channels are key trends to observe.
Analysis of industry environment (PORTER model)
Besides from macroeconomic factors, industry competition is critical to the strategies of companies Following Porter’s five forces model, TPM is facing competitions from the following aspects:
North Vietnam's retail market is characterized by a high number of suppliers, with 30 companies involved in food trading and small-scale retail Prominent local brands in Hanoi include Hapro, Fivimart, Intimex, Phu Thai, and City Mart, alongside international retailers such as Metro, Parkson, and Big C.
TPM’s competitors can be classified due to scale and sales figures as followed:
Small-scale companies, with advantages based on distribution location
- Manufacturers and farmers selling their own products.
Traditional agricultural products and consumer goods traders benefit from their strategic locations and align with Vietnamese consumers' preferences for convenience and affordability However, their lack of professionalism in pricing, packaging, and product storage fails to attract modern consumers.
Large companies, with experiences in agricultural products trading:
- Modern Retail Company: Hapro, Fivimart, Intimex, Metro
- Supermarkets with own brands: Metro, Big C, Hapro, Fivimart
In these companies, Metro and BigC has branding advantage, while Hapro has the same model and advantage as TPM, growing and developing existing locations
Table 02: Comparation to domestic retail competitors
1 Cost High High Medium Medium
2 Price High High Medium High
3 Financial ability High Medium Very High Medium
6 Brand Yes Yes Yes Yes
9 After sales services High Medium Medium Medium
(Source: Market analysis reports of TPM, 2010)
In the retail distribution market, TPM stands out for its superior after-sales service compared to competitors such as Happro, Fivimark, and Intimex Additionally, TPM excels in production systems, packaging, and safety standards, significantly surpassing the performance of these rival companies.
+ Market shares of TPM are lowest compared to Happro, Fivimark and Intimex with only 2% which equals by 1/5 the market shares of Fivimark.
TPM's human resource quality and retail market experience are lower than Finimark but comparable to Happro and Intimex While TPM has an advantage in financing compared to Happro and Intimex, it struggles with cost and price competitiveness against Finimark and Intimex In a competitive landscape, companies that are dynamic and earn consumer trust are more likely to capture significant market share The rise of competition has posed challenges for TPM, resulting in a notable decline in market share as it competes with other firms expanding their local presence, product diversity, and market reach With the industry facing intense competition, numerous substitute goods, and low entry barriers, TPM must implement appropriate strategies to maintain its market share and customer base.
The instant noodle market is highly competitive, featuring a wide range of substitution goods such as Vietnamese noodles, Chinese noodles, and vermicelli This intense competition has resulted in frequent promotions and discounts from noodle producers, which in turn has constrained the demand for traditional pasta and other noodle varieties Furthermore, the abundance of alternative products limits the company's pricing power in the market.
- Different types of Vietnamese noodles, breads and instant noodles
To maintain a robust sales system with existing customers and attract new ones, TPM must establish a competitive advantage through strategic pricing, high-quality products, timely delivery, flexible payment terms, product availability, and exceptional customer care services, with a particular focus on enhancing marketing efforts.
TPM Company targets high-income consumers who prioritize quality and possess discerning preferences These customers are also sought after by competitors as VIP clients To effectively attract this demographic, TPM must offer exceptional products and services while establishing a reputable and trusted brand name.
Moreover, other features must be noticed:
- The habit to shop through traditional channels, buying at low amount at small stores, with the ability to choose the exact amount.
- Habit of preferring convenient since the majority of the population use motorbike, while the portion that uses cars meets difficulty in finding parking spot.
- Habit to use chemical processed products to increase flavor and
- Habit to use a certain kind of food (due to taste)
Being a necessity, food products can come from many distributers with diverse and convenient distribution method However, most of the suppliers:
- Is not willing to commit because TPM’s brand is not strong enough.
- Do not one to sell at small amount
- Want to receive revenues immediately
- Are not acquainted to supplying high quality food products.
- Do not accept orders for highly standardized products.
- The tendency to supply to acquaintances only.
- Do not accept to orders for high quality, pure ingredients that match TPM’s order.
- Prices are very high if products meet requirements.
To effectively persuade suppliers, TPM must demonstrate that partnering with them will yield long-term benefits, including opportunities for expansion, enhanced productivity, and improved reputation.
Thien Phuc Minh JSC identifies their potential competitors as:
- Foreign retail companies with strong financial capabilities, professional management, and large business scale.
- Supermarket chains with own production ability.
- The stability of political and social situation in the country.
- Stability in economic growth, people's lives are better, the increasingly expenditure of people, increasingly requirements on product quality, food safety and hygiene.
- The trend of international economic integration and policies of encouraging export.
- Science and technology are more and more growing together with the incentives for companies to import equipment, machinery, modern technology.
- The market for both domestic and export are also highly potential.
- Weather conditions are more complicated, droughts, floods, epidemics always threat to crops and difficult to forecast and prevent.
- Competition in the market place is increasingly fierce.
- The risk of new competitors is high due to low industry barriers to entry.
- The export markets are more difficult due to the developed countries offerring more standard of quality products.
Analysis of internal environment
TPM boasts a seasoned management team with extensive industry expertise, complemented by a vibrant and proactive workforce The organization is strategically divided into seven functional departments and three manufacturing divisions, promoting professionalism and efficiency This structure enables TPM to maintain comprehensive control over all business operations, effectively manage supply sources, and ensure a dynamic sales department.
The functions and tasks of the departments are defined by job objectives, job analysis, and job descriptions to ensure clear specifications and coordination among units Of the 160 personnel, 60 percent hold postgraduate degrees in fields such as Agriculture, Technology, IT, Financial Accounting, and Business Administration, while 10 percent possess master's degrees.
TPM faces a significant challenge due to the lack of well-trained personnel to effectively learn from experts, which can lead to subpar recruitment quality when those experts depart This limitation is crucial for TPM to address in the near future Additionally, the diverse recruitment sources for TPM's employees contribute to varying performance levels, potentially causing conflicts and inconsistencies within the workplace.
In term of brand management, the evaluation of customer awareness and effectiveness of marketing campaigns is still untimely and unpractical.
TPM places significant emphasis on human resource management, recognizing the critical need for skilled personnel However, there is a limited pool of experts in agricultural products and modern business management, which presents a challenge in understanding the agricultural market effectively.
2.4.2 Production facilities & raw material areas
A convenience store is a compact retail outlet located in urban areas, offering a variety of everyday essentials It caters to consumers with a monthly income of VND 4.5 million or higher, primarily focusing on fast-moving consumer goods The product range includes processed foods, cosmetic items, and cultural products, ensuring a quick and convenient shopping experience for customers.
- has a sales area of 80 square meters
Table 03: Product structure – Convenience store
Health-care product Cleaning chemical Toilet paper
Children’s cosmetic and chemical product
Nutritious milk powder Canned food
Food additive Vinafood product Confectionery Crispy confectionery
Frozen food that can be eaten immediately
Frozen food that need to be processed 13% before eating Fresh food
Tea Soft drinks Fruit juice Alcohol Mineral water Cigarette
(Source: Market analysis reports of TPM, 2010)
- Operate in form of: (1) Kiosk, or (2) Independent kiosk with 2 fronts.
- Total investment for 1 store: VND 108 million
According to the plan, in the next 3 years, TPM will open 53 convenience stores, with their locations shown in the following table:
(Source: Market analysis reports of TPM, 2010)
TPM's supermarket model is designed to specialize in food products, which are anticipated to make up approximately 60% of the total inventory These supermarkets will operate under the brand name SIÊU THỊ VINAFOOD.
- has area of 800 square meters or more.
- serve customers within a radius of 5 km from the center of the supermarket.
- will start with 8 product sectors, which are listed below:
Table 05 : Starting product sector- Supermarket
(Source: Market analysis reports of TPM, 2010)
TPM plans to launch 12 supermarkets across strategic locations in Vietnam over the next three years These locations will include real estate properties initially contributed by member companies of the Vietnam Northern Food Corporation, supplemented by additional leased sites to support the expansion plan.
Table 06: Location and construction plan- Supermarket
2 50 Minh Khai – Thai Bình Construct X
3 19 Le Huu Lap- Lam Sơn –
4 Quang Trung – Thai Nguyên Construct
6 63 Nguyen Hue - Ninh Binh Construct X
7 200 Hong Ha- Coc Luu- Lao Cai Construct X
8 Số 2 Lê Loi- Hung Bình- Nghe
9 Đoi Ga – Vinh Yên Construct X
10 34 Nguyen Van Linh – Hung Yen Construct X
11 Đap Cau - Bac Ninh Construct X
12 Chi Linh- Sao Đo- Hai Duong Construct X
(Source: Market analysis reports of TPM, 2010)
Expanding distribution channels through the establishment of chain stores and supermarkets is a key component of the company's marketing strategy By leveraging the abundant land resources and existing infrastructure in the Northern Province, the company aims to efficiently deliver its products to customers via a robust retail system Consequently, the company's strategic focus over the next three years will be on rapid and extensive investment to drive sales growth.
The distribution of rice from Thua Thien Hue to northern provinces, primarily Hanoi, is aimed at meeting local food demands and stabilizing domestic prices through various shops and supermarkets In the international market, the company's traditional rice exports focus mainly on Asian countries, including the Philippines, Malaysia, Indonesia, and Singapore.
By 2013, TPM JSC plans to establish an extensive distribution network featuring 53 convenience stores, 12 supermarkets, and 2 plazas The company also intends to create a coordination center to oversee the allocation and quality control of goods for internal distribution while expanding its network in Northern regions.
The coordination center, which is about 20,000 square meters, will perform two main tasks:
- Purchasing and distributing goods to TPM’s retail system
There will be storages for foods, frozen products, and cosmic chemistry that meet Asian standard.
TPM began the construction of the center at 10 th KM, Van Dien, Hanoi, in January 2011, with total investment of VND 30 billion It was finished in March 2012.
Table 07: Swot analysis (Source: authors’ calculation)
1 The governments and Vinafood are very concern about the distribution channels.
2 Life quality is better than in
1 There are more and more companies that operates in food industry appear with effective marketing plan. high quality, hygienic and safe products, along with good service.
3 The need to use high quality products are increased.
4 New residential areas are built There are more convenience stores than before.
5 Market potential for high quality food products is still high. experience in food brand business.
1 Financial capacity is relatively strong.
2 Having the ability to purchase raw materials in large quantity and quality.
3 Having the capacity to meet demand at any time.
4 Having enthusiastic leaders with experience in the field of agricultural products, along with staff of dynamic
1 S1,2 + T2: -> Strategy to select members of distribution channels.
2 S2,3,4,5 + T1,2: ->Strategy to simplify distribution channels to reduce costs, increase profits for channel members. young people.
2 Does not have a complete distribution network to consumers.
3 Marketing division is not dynamic.
4 Qualifications and professionalism of the staff is not high
Employees are unenthusiastic Labor shortage Low income.
5 Customer awareness of the products is low.
6 Cost is high because of VAT
7 Customers’ feedback management is bad
Access to information is difficult.
1 W1,2,5 + O3,4: -> Strategy to establish strategic distribution channels.
5 W6 + O2: -> Cooperating with suppliers, signing contracts to control the input quantity and quality effectively.
2 W4 + T1,2,3: -> Strategy to improve human resources
4 W2 + T2: -> Strategy to develop better sales policy to encourage suppliers and retail outlets.
- Strengths (S)- Opportunities (O) Strategy: focus on the company’s strengths to take advantage of external opportunities.
- Weaknesses (W)- Opportunities (O) Strategy: improve internal weaknesses to take advantage of external opportunities.
- Strengths (S)- Threats (T) Strategy: use the company’s strengths to avoid or reduce the external threats.
- Weaknesses (W)- Threats (T) Strategy: to improve the company’s weaknesses to avoid or reduce the threats from outside.
SWOT analysis serves as a tool to identify a range of potential strategies rather than determining the best one From the comprehensive list generated, specific strategies will be chosen for implementation during suitable timeframes.
Table 08: Selected strategies (Source: authors’ calculation)
Strategy to establish strategic distribution channels
To enhance supplier engagement and support all channel members, it is essential to establish a comprehensive policy on crediting, purchasing, and discounting tailored to each distribution channel Special attention should be given to implementing a discount policy for retail outlets, as they typically operate with lower profit margins.
Use credit policy to encourage the suppliers
Increasing marketing activities, product branding ( A complete marketing plan is required)
Focus on important products, with brand and price advantage to penetrate market effectively. PRODUCTION S2,3,4 + O1,2: Product quality strategy
To control the inputs quality closely, to meet the quality and safety requirement of consumers. FINANCE W6+T1: Input cost management strategy, to reduce cost and increase profit rate.
To effectively manage accrued expenses and production costs, it is essential to engage multiple suppliers to identify the most cost-effective sources for inputs Additionally, implementing an efficient inventory management plan can significantly help in minimizing overall costs.
To offer a suitable discount policy for members in the distribution channels to improve the distribution flow.
W4 + O3,4: Employee training strategy (forward integration)
Build salary policy and bonus scheme to motivate employees, hire skilled/ talented personnel and increase the working performance
Organize training courses for current employees and orientation for new employees.
Implement sales management software across your company, retail stores, and suppliers to effectively manage distribution channels Identify and select appropriate products tailored for each market and retail outlet to maximize market potential.
PROJECTED BUSINESS PLAN FOR TPM DURING 2011-2015
Development objectives
TPM tries to make the most of their strengths to achieve a long-term goal, which serves three main objectives:
(1) Define potential customers that TPM targets, which will determine the retail model.
(2) Define the suitable retail model to provide goods and services to its targeted customers.
(3) Define which investing and operating method TPM will use to maintain the competitive advantage with other retailers (in both short-term and long- term).
Selecting strategy
External Factor Evaluation Matrix (EFE)
The EFE matrix is a strategic tool that evaluates external factors, identifying potential opportunities and risks that can influence a company's performance This model enables managers to understand their organization's response to these external influences, determining whether they are beneficial or harmful to the enterprise.
Steps to build a EFE matrix:
- Make a list of opportunities and risks that are likely to influence on the enterprise’s performance
In evaluating opportunities and risks, it is essential to assign a point scale ranging from 0.0 (not important) to 1.0 (very important) This scale reflects the significance of each factor based on its potential impact on the specific sector in which the enterprise operates.
- Determine a weight of an opportunity or a risk following a 1-4 point scale A weight depends on how the enterprise reacts to a factor
- Multiply the importance of a factor and its weight for a respective number.
- Add the results of all factors for the matrix mark.
The higher the total mark is, the better the enterprise reacts to opportunities and risks
Table 09: EFE matrix of a TPM (Source: authors’ calculation)
5 The appearance of retail giants 0.09 3 0.27
* Comments: The total mark of 2.70 (compared to the average level of 2.5) shows the
TPM demonstrates a strong response to external opportunities and risks, yet faces challenges from fierce competition and robust sales distribution systems Despite this above-average reaction, it remains insufficient to drive significant growth Consequently, Vinacomin's development strategy should prioritize enhancing its responsiveness to these critical factors.
Interal Factor Evaluation Matrix (IFE)
Internal factors play a crucial role in shaping an enterprise's development strategy Understanding the strengths and weaknesses of these internal elements, as well as their responses to changes, is essential for strategists To effectively analyze these aspects, the Internal Factor Evaluation (IFE) matrix is commonly utilized.
Steps to develop an IFE matrix
- Make a list of strong and weak points that may impact on an enterprise’s performance
In evaluating an enterprise's performance, it is essential to classify its strong and weak points using a point scale from 0.0 (not important) to 1.0 (very important), ensuring the total importance of these points sums to 1 Additionally, each factor should be assigned a weight on a scale of 1 to 4, reflecting its significance in the overall assessment.
- Multiply the importance of a factor with its weight for a mark of each factor
- Add marks of all weights to know a total mark of the martrix
The enterprise with a high mark for a matrix shows its internal factors are highly responsive to challenges
Table 10: IEF martrix of a TPM (Source: authors’ calculation)
No Internal Factor Evaluation (IFE) Weight Rating Weighted score
With a total score of 3.49, TPM surpasses the average in its internal strategic position To enhance its performance, the company should address key weaknesses by launching a comprehensive advertising campaign to promote its brand in broader markets and by improving the professionalism of its distribution systems.
Thanks to the marks of IFE and EFE martrix, the group members build an I-
E matrix to accurately identify its strategic position
The total mark of the IFE martrix horizontally is 3.49 and the total mark of the EFE vertically is 2.70 Connecting those two points to identify TPM’s strategic position.
Figure 08: I – E martrix, a total martrix of internal and external factors of TPM
From the I-E martrix, it can be seen that the strategic position of TPM is
TPM should implement a unique developmental strategy, highlighted by the low costs indicated in the SWOT analysis By adopting an SO strategy, TPM can effectively enhance its retail sales and product distribution system while making strategic investments in retail distribution in the Northern provinces of Vietnam, ensuring sustainable growth and operational efficiency.
Strategic solutions
Traditional food distribution methods often carry a significant risk of pathogens due to pesticide residues, excessive preservatives, and mold, which consumers may not easily detect.
As a result, quality issues need to be considered carefully This consideration requires tight control over the production process, from buying raw materials to maintenance and produce
The product strategy alone is not enough; investment in factors outside the product decides 80% of the success to bring the product to the customer.
* Participate in fairs and events organised by the government and Hanoi committee.
* Establish manuals analysing the danger of using unsafe food, and helping consumers recognize the risk of unsafe products
* Word of mouth marketing: through company’s customers.
* Develop attractive advertising programs to target customers to launch them on major television channels, radio, newspapers and e-newspapers
* Advertising using electronic tools: e-mails, text messages.
* Organize advertising campaigns in supermarkets, shopping centers, fairs, shopping festivals, sponsor gifts bearing the company’s logo to famous hotels and restaurants.
Nghe An province and the Northern region are focused on developing modern distribution channels to enhance consumer convenience, including home delivery services The strategy involves actively utilizing phone and online sales channels while consistently maintaining the company's image through its personnel, processes, and physical representations, ensuring a unified approach across the entire system.
Develop after-sales services: care, counseling, replace defective products, customers’ familiar card, VIP card, birthday, wedding
TPM is dedicated to maintaining high quality by strategically positioning its average prices within the premium range, informed by a thorough analysis of competitor pricing across various brands and distribution channels.
On the basis of product chain has been built, VNF1 establishes a clear pricing mechanism, and has specific strategies for each line For examples:
• Popular product line, easily comparable and highly competitive over price; TPM builds low rate of profit, even no profit in certain stages to create customer loyalty
• Advanced product line, due to the high difference, need to be priced on the basis of high profit in order to generate profit to the company
In addition, promotions, sales promotion, marketing must be combined harmoniously and effectively together to pull consumers towards the products of TPM, help it achieve its goals.
To establish itself as a leader in the production and distribution of food, TPM must develop a robust human resource strategy that prioritizes employees as key operators and places customers at the center of its operations.
One significant advantage of TPM is its experienced human resources in agricultural products and management, particularly in the clean food sector To achieve stable operations, TPM must prioritize developing an organizational structure and a comprehensive human resource plan that includes recruitment, selection, and training across all professional levels The company emphasizes careful personnel selection, having established recruitment processes informed by thorough position analyses and job descriptions, ensuring effective control over the entire recruitment process.
To effectively evaluate job performance, it is essential to develop a system that integrates various factors, including compensation policies—both financial and non-financial—alongside motivation and training and development plans.
Figure 09: Connection of Evaluation system
Companies should systematically evaluate their compensation strategies, encompassing direct financial remuneration, indirect financial benefits, and non-financial rewards It is essential to assess revenue and production costs to refine the existing compensation policy Currently, while TPM has invested significantly in its compensation framework, adjustments will be necessary due to time constraints and limited resources Future changes will align with market standards, ensuring fairness for employees and enhancing motivation, ultimately fostering long-term commitment to the company.
To foster a strong enterprise culture, it is essential to establish clear rules and guidelines for communication and behavior This approach enhances employee engagement in all activities, stimulates enthusiasm for their work, encourages innovative initiatives, and recognizes the creative contributions of staff members.
Strengthen solidarity towards the same goal, establish a friendly environment and commit to employees development
Create democratic atmosphere with long-term goals to promote all staff to support and maintain a new style of leadership
Create a highly and fairly competitive environment, always be conscious learning, improved methods to meet the requirements of the job and improve effectiveness.
To enhance daily HR operations, it is essential to create a comprehensive list of management and supervision issues This involves ensuring that coordination meetings effectively address the specific needs of the professional division Additionally, providing strategic advice to leadership on long-term development plans is crucial for sustained organizational growth.
As a business operating in the fields of manufacturing and distributing high quality products, TPM should focus on:
TPM utilizes data analysis to forecast product demand by integrating insights from marketing, sales, and planning This enables the creation of strategic plans for material reservation and production operations, effectively minimizing costs and eliminating unnecessary expenses, such as excessive inventory and production waste due to inadequate machinery Additionally, it addresses employee skill gaps and awareness to reduce product failure rates In the retail sector, TPM aims to decrease the loss rate from 1% to 0.25% over the next 2 to 3 years, enhancing overall efficiency and profitability.
To enhance productivity and reduce production costs, it is essential to identify the factors contributing to decreased labor efficiency By implementing solutions that boost labor productivity and integrating automated equipment for processes such as production, packaging, and product classification, companies can achieve significant improvements Additionally, maintaining hygiene and food safety standards within the factory is crucial to align with operational goals.
Effective product quality management is essential for companies aiming to enhance their production processes This involves optimizing the production layout and implementing modern methodologies such as Just-In-Time (JIT) and Lean manufacturing Additionally, adopting 5S programs and adhering to quality control standards like HACCP and ISO 9001/22000 can significantly improve product quality By focusing on these strategies, companies can ensure a consistent and high-quality output.
Besides, to achieve the strategic objectives, TPM must have other functional strategies:
A solid financial strategy is essential for optimizing a company's financial operations, enhancing the utilization of existing resources, and attracting external funding By focusing on improving capital efficiency and increasing profitability, businesses can achieve sustainable growth and success.
To maximize the benefits of land ownership from Ha Tinh to the Northern region, TPM requires a well-defined long-term investment strategy that enhances its distribution system and capitalizes on regional advantages.
Develop and implement macro policies relating to the operation of the company, regularly updated, adjusted to suit the realities of the market as well as operation of the business.
Enterprise business activities are structured and executed in alignment with an approved strategy, serving as the foundation for the development of Total Productive Maintenance (TPM) action plans on an annual, quarterly, and monthly basis, while also establishing short-term business objectives.
Action plan
The development plan for the TPM project is informed by comprehensive market research focused on the retail sector in the North This strategic plan outlines key objectives and initiatives aimed at guiding the construction, completion, and overall development of TPM over the initial five-year period.
- Complete and approve detail plans for 5 years.
- Key personnels are responsible for recruiting enough employees to work for their funtional divisions.
- Complete management and information system
- Prepare area for retailing in 2011.
- Form distribution center and rough-wrought center.
- The rest of year 1 and the following years will follow this plan :
Year Shopping malls Supermarkets Shops
The purpose of the research: determining business strategy for TPM Jsc, with the goal of becoming the top 10 retailers in Vietnam.
With strategic objectives bind to agricultural products and consumer goods and retail distribution systems, TPM’s business strategy are:
- Compliance with common trend of the economy when joining WTO
- Compliance with the development strategy of the Goverment.
- A springboard for the company to develop business flexibility and independence in the long term.
- Contribute to improving the value of agricultural products and consumer goods in Vietnam.
- Penetrate the world market through the international retail channel in Vietnam.
The challenge facing TPM is the establishment of retail chains that consistently deliver high-quality products and exceptional service By conducting a strategic analysis, TPM can leverage its strengths as a retailer and implement a quality strategy that enhances service quality, ultimately transforming these improvements into a competitive advantage in the market.
The distribution and retailing of agricultural products present significant opportunities, but they also come with considerable risks To navigate these challenges successfully, company leadership must demonstrate strong determination and alignment with their objectives; any fluctuations or lack of commitment can result in failure.
The modern retail distribution market is evolving, yet there is a significant shortage of knowledgeable human resources in Trade Promotion Management (TPM) Without effective human resource management and strategic investment planning—both short-term and long-term—companies are likely to encounter increasing challenges and face inevitable failures.
In a competitive market shaped by consumer behavior, businesses must prioritize effective marketing alongside quality Companies should focus on reshaping their public image throughout all business processes to positively influence consumer perceptions and behaviors A key strategy involves investing in advanced technologies for breeding, storage, and processing, which serves as a core value to attract customers Any delays or subjective approaches could allow competitors to surpass them.