BASIC CONCEPTS ON MAKING BUSINESS STRATEGIES
Strategy and business strategy management
Administrators define business strategy and some related ones in different ways It is resulted from their different accesses in researching:
- According to Fred R David “business strategy contains means reaching long term objective”
According to Alfred Chandler of Harvard University, strategy encompasses establishing an organization's long-term fundamental goals, choosing the appropriate methods for implementation, and allocating essential resources to effectively execute that strategy.
- Or according to William J Glueck: “Business strategy is a united, comprehensive and cooperative one designed to ensure the enforcement of basic targets in enterprise”
In general, concepts about business strategy imply the main contents as following:
- To define short term and long term target for organization.
- To introduce comprehensive action programs for reaching targets.
- To select action programs, develop and allocate resources for enforcing those targets.
In the realm of business, an enterprise's success hinges not only on robust strategies but also on effective strategic management This encompasses the implementation of strategic decisions that address critical questions, such as how to achieve established goals, select the right products, gain competitive advantages over rivals, and seize new opportunities.
Strategic management often includes three main parts, namely analyzing strategy, selecting strategy and implementing strategy The 3 parts have a close relation and are illustrated in figure 1.1:
Strategic management involves the comprehensive analysis of both the external and internal environments of a company, assessing its current situation and future prospects This process includes establishing clear objectives, planning effective strategies, and implementing and monitoring these strategies to ensure optimal efficiency in achieving desired outcomes.
Regarding in process, strategic management is considered as a management one including the formation of strategic vision, establishment, draft of a target, enforcement and ajustment over time matching to the reality
A well-defined business strategy enables companies to clarify their direction and optimize their organizational structure and operations for success In a dynamic business environment, a robust strategy not only mitigates risks but also capitalizes on opportunities, ensuring effective resource allocation to achieve set objectives.
Strategy implementat ion Strategy analysis
Process of building strategy
The foundation of any business development begins with a clear mission statement and defined organizational goals Following this, a thorough analysis of both internal and external factors is conducted, leading to the selection of an effective strategy The process culminates in the creation of an organizational structure and the establishment of a control system essential for the successful implementation of the chosen strategy.
The initial phase of the strategic planning process involves defining the organization's mission and goals, which articulate the fundamental reasons for its establishment and ongoing development A clear mission statement addresses the essential question of the company's purpose, encompassing aspects such as products, markets, customers, technologies, and the guiding philosophies that the company embraces.
2.2 Selecting and building business strategy
The primary objective of any enterprise is to achieve sustainable market development, which can vary in focus depending on specific conditions and stages of growth Key strategic goals typically encompass factors such as market share, profitability, resource allocation, risk management, labor productivity, competitive positioning, human resource development, and social responsibility.
- Competitive rivalry withing an industry
Analyzing internal environment Value chain model Process of recognizing sustainable competitive advantages
Suitable organizational structure with the
The following step in strategic management process is analyzing external environment to identify the opportunities and threats to the enterprise The analysis aims at grasping opportunities and avoiding threats.
The goal of macro-environment analysis is to identify and assess external changes, enabling businesses to discern emerging trends that present both opportunities and threats By understanding these dynamics, enterprises can implement strategies to mitigate risks and capitalize on potential advantages.
Environmental analysis encompasses both macro-environment analysis, which examines the overall environment, and micro-environment analysis, focusing on sector-specific factors This analysis is structured within a three-level model that evaluates both internal and external environments.
Political – legal environment (P): includes system of viewpoints, policies of the
State, system of laws, especially those related to business field; domestic and International political affairs and the intervention trend onto socio-economic
M08 Group I Business strategy for rice under VNF1 brand 2011 activities of the Government; the completion of legal system and the effect of their enforcement in the economy
The economic environment encompasses key factors that significantly impact a business's operations and profitability Elements such as economic growth rates, interest rates, exchange rates, and inflation play a crucial role in shaping an enterprise's ability to generate value and income Understanding these macroeconomic influences is essential for businesses to navigate their financial landscape effectively.
The socio-cultural environment significantly influences people's lives and behaviors, which in turn impacts consumer demand and trends Businesses must stay attuned to shifts in consumer behavior and preferences to adapt their business strategies and product offerings effectively.
The technological environment plays a crucial role in shaping new product development, business models, and demand satisfaction methods, directly impacting the competitive edge and performance of companies The rise of digital technology exemplifies significant sectoral and societal restructuring, presenting both opportunities and challenges for enterprises.
The population environment is closely linked to the overall development of society, encompassing various factors such as total population, labor dynamics, demographic structure, age distribution, gender ratios, regional characteristics, religious affiliations, educational qualifications, and career diversity Additionally, it considers income levels and territorial distribution, all of which play a crucial role in shaping the socio-economic landscape.
The natural environment encompasses various elements such as geographical conditions, climate, landscapes, land, rivers, seas, underground resources, forests, and the quality of soil, water, and air This environment plays a crucial role in shaping human life and is closely linked to the formulation of effective business strategies.
International environment: That is the globalization trend which has been developing strongly in the world and bring about the development of the economy,
The emergence of potential competitors in human resources and cross-cultural dynamics is reshaping business strategies and significantly influencing the socio-cultural landscape of nations Furthermore, the swift advancements in science and technology, coupled with the rapid growth of information technology, are accelerating the integration of countries into a global trade network.
2.3.2 Analyzing micro-environment (sectorial environment):
A sector comprises a collection of businesses that offer products and services that are closely interchangeable, effectively meeting similar customer demands In a competitive landscape, companies within the same sector can exert direct and significant influence on one another.
Michael E Porter, a Harvard Business School professor, developed the Five Forces Model, which aids managers in identifying the opportunities and threats faced by businesses within their industry (Michael E Porter, Competitive Strategy, New York: Free Press, 1980).
M.Porter pointed out that when these forces become stronger, they will more constrain the capacities of existing enterprises in raising price and gaining higher profit According to Porter’s model, a competitive force can be considered a threat because it can reduce profit Power of the five forces can be changed over time when sectorial conditions change.
Tasks of administrators are to recognize the opportunities and threats that will be brought about by the changes of these five forces to build adapting strategies. Those threats include:
The threat of new entrants in an industry poses a significant risk to existing enterprises, as these potential competitors can disrupt market dynamics and capture market share Recognizing this threat is crucial, as new entrants are typically eager to establish themselves and may engage in aggressive price competition and leverage advanced technologies This competitive pressure compels established businesses to enhance their effectiveness and innovation to maintain their market position and avoid being overshadowed.
Rivalry among competing firms: The second force in the Five Forces model of
ANALYZING REAL SITUATION OF VNF1 COMPANY AND SELECTING STRATERGY
Introduction of VNF1 Company
VNF1 Company was founded on July 1, 2008, following the Prime Minister's directive to the Vietnam Northern Food Corporation to establish a distribution-retail system aimed at ensuring food security The company's primary mission is to create a modern distribution-retail network through strategically capital-contributed locations, enhancing commercial advantages while promoting the VNF1 rice brand and contributing to the overall development of Vietnam's rice industry.
1.1- Vision, mission, tasks and strategic goals of VNF1
VNF1 Company aims to be a leading producer and distributor of clean and safe food, particularly rice, in Vietnam Committed to excellence, VNF1 is focused on developing effective trading and distribution models for high-quality rice under its brand, while providing professional and modern services to elevate the value of Vietnamese rice.
VNF1 Company is dedicated to providing clean and nutritious food products under its brand, utilizing modern distribution channels to enhance consumer access to quality offerings The company not only excels in the professional trading of rice but also educates customers on the key factors that guarantee the safety and nutritional value of its unique, clean products.
Strategic goals: This business strategy serves the short-term goals of the
To achieve revenue and market coverage targets, the company aims to sustainably develop its business by initially directing consumer demand towards its VNF1 rice brand From 2011 to 2015, the focus will be on enhancing the VNF1 brand to establish it as a symbol of safe, high-quality rice products that comply with food hygiene and safety standards, including HACCP and BRC certifications.
VNF1 Company’s capital structure is primarily derived from the paid-in contributions of its founding shareholders, who are part of the Vietnam Northern Food Corporation This corporation has assets and operations extending from Ha Tinh to various northern provinces of Vietnam and has contributed 51% of the governing capital in cash Currently, the company's charter capital stands at VND 200,000,000,000 (two hundred billion Vietnamese dong).
- Vietnam Northern Food Corporation contributed VND 102 billion in cash.
- 15 founding shareholders contributed 19 locations and assets on the ground, worth VND 44 billion.
- The issuance of stocks in 2011 to founding shareholders and the staff as well as strategic shareholders contributed VND 64 billion (projected to gain VND 150 billion).
1.2- Organizational structure of VNF1 Company
VNF1 Company was founded from the Vietnam Northern Food Corporation, a state-owned enterprise in the food industry, bringing together experienced key personnel who possess a deep understanding of the sector Additionally, the company has infused its workforce with young, enthusiastic, and dynamic individuals, creating a balanced team poised for success.
The company features a modern organizational structure with functional departments designed based on clear objectives, job analysis, and job descriptions This integrated approach fosters effective collaboration among various boards and departments, enhancing overall efficiency.
The organizational structure of the Vietnam Northern Food Corporation (VNF1) is based on a modern joint stock company model, adhering to business law At the top of this structure is the general assembly of shareholders Currently, VNF1 comprises 15 founding members The Board of Directors consists of five members, three of whom represent 51% of the corporation's capital.
The organizational structure consists of a chairman, a general director, a commissioner, and two representatives for the 14 founding members A control board, comprising three members—one chief and two commissioners—operates independently to oversee the activities of both the board of directors and the general director The general director's team includes three members: the general director, a deputy general director focused on construction investment and real estate management, and another deputy general director responsible for rice distribution and other agricultural products The general director delegates responsibilities to the deputy general directors, who share accountability for their tasks.
VNF1 is organized into eight functional departments designed for effective coordination and management, based on targeted goals, work analysis, and interdepartmental processes Each department operates according to its specific functions and missions, taking the initiative in their work processes while reporting to the general director on tasks beyond their control Currently, the company employs 56 university graduates, with 10% holding a master's degree.
The company has established branches in various provinces and cities to enhance operational initiative and management independence Each branch follows specific financial management regulations tailored to the unique conditions and production goals of its location, functioning with independent economic accounting aligned with the company's strategic plan As part of the company's five-year vision, these branches will evolve into member units to leverage their strengths and facilitate the company's growth.
VNF1 prioritizes construction investment as a key strategy to enhance value and develop essential facilities The company is currently executing six projects—two in Hanoi and four in cities including Vinh, Thanh Hoa, Hai Phong, and Thai Nguyen—with a total investment of approximately 1,800 billion VND Each project is managed by a dedicated project management unit in compliance with legal regulations.
Organizational structure is present in following diagram:
BOARD OF DIRECTORS BOARD OF DIRECTORS
VNF1 Company not only engages in trading and retailing consumer goods but also emphasizes the strategic utilization of land resources The company focuses on enhancing its core competency in rice trading, particularly with special rice varieties from various regions By developing its unique VNF1 rice brand, VNF1 Company cultivates dedicated areas, employs modern technology for food preservation, and ensures that its production processes meet stringent food hygiene and safety standards, catering to both domestic and export markets.
The Company primarily operates its rice brands in the Northern market, which encompasses provinces starting from Nghe An and has a total population of 35 million people, representing 41% of Vietnam's population.
VNF1 Company currently offers 10 premium rice products, each with its own distinct brand Over the next five years, the company aims to innovate and expand its range of delicious and clean rice products, collaborating with scientists throughout the entire production process, from seed development to harvesting and processing.
Analyzing macro-environment (PESTLE model)
The food sector plays a crucial role in Vietnam's economy, as the Vietnamese believe that agriculture is essential for stability, business drives wealth, and strong will fosters prosperity Consequently, the government prioritizes stabilizing agriculture and the food sector to ensure economic and political stability As a result, food trading is significantly influenced by macroeconomic policies, with the PESTLE model highlighting both the advantages and disadvantages of trading rice under the VNF1 brand.
The Government implements various policies to bolster the food sector, including providing loans for the cultivation of food crops, reducing or exempting agricultural land use taxes, and promoting lending for the purchase of food to maintain temporary reserves as part of its strategic plan.
The implementation of a 5% input tariff poses challenges for domestic enterprises, making it difficult for them to compete with private businesses that are exempt from this tariff Additionally, export enterprises benefit from a zero export tariff, further intensifying competitive pressure on local retail businesses.
While the Vietnamese Government offers preferential policies for rice development, it lacks a comprehensive strategy to enhance the country's rice strengths In contrast, Thailand implements a five-year rice development strategy aimed at increasing high-quality rice production to 90% This commitment has positioned Thailand as the world’s leading rice exporter, achieving an average export volume of approximately 10 million tons annually, alongside maintaining competitive pricing.
Vietnam's economy, classified as a developing one, has experienced an impressive average GDP growth rate of 7.2% over the past five years, alongside significant increases in per capita income The trading of commodities, particularly rice, is evolving to align with modern market demands Continuous innovation in domestic rice production, including the adoption of new strains and advanced processes, has resulted in higher productivity and quality, offering consumers a wide variety of choices Additionally, imported rice varieties are gradually entering the domestic market, further enhancing market diversity.
The social gap has become wider A part of population having high income has demand for rice with outstanding quality as well as modern and convenient services
The advancement of science and technology has significantly enhanced the preservation, production, and processing of agricultural products, increasing their value and diversity Modern techniques enable the revival and promotion of unique rice varieties, while cross-breeding methods yield high-quality, high-yield rice strains However, in Vietnam, maintaining advanced agricultural technology is costly, resulting in reduced competitiveness, particularly in post-harvest preservation technologies.
Vietnam's wet rice civilization deeply influences consumer trends, with rice being a staple in daily life Despite this, the concept of safe and clean rice remains largely unknown to consumers A market survey conducted in October 2008 in Hanoi revealed that 82% of respondents were unaware or unconcerned about the safety and clarity of rice, relying instead on the trustworthiness of their familiar rice sellers While awareness of the importance of clean food for health has grown, many still perceive rice as a completely safe product, free from chemical preservation and processing.
Traditional rice consumption lacks specific quality criteria and measures for ensuring food hygiene and safety in the market A survey by VNF1 in October 2008 revealed that 86% of people in Hanoi were accustomed to purchasing retail rice However, consumer habits in major Vietnamese cities are shifting towards modern shopping channels According to an international market research company, Vietnam ranks as one of the top seven most profitable retail markets, attracting renowned retail firms focused on modern shopping experiences.
As living standards continue to rise, consumers are increasingly prioritizing not just food hygiene and safety, but also the nutritional value of their food Additionally, brand reputation has become a critical factor in their purchasing decisions, as customers recognize that a strong brand is closely associated with product quality.
Globalization has introduced significant influences on business operations, particularly in Vietnam, which is affected by global economic crises, food shortages, and the rising trend of substituting rice with alternative commodities Additionally, the growth of the retail sector and the adoption of modern consumption patterns are noteworthy trends shaping the market landscape.
The modern distribution channel in Vietnam has significantly advanced with the emergence of major retail corporations like Big C, Bourbon, Metro, and Lotte, alongside global giants such as Walmart, DairyFarm, and Carrefour These companies are focused on comprehensive market research, systematic large-scale management, and effective strategic tactics to enhance their operations.
MORE MODERN CONSUMPTION HABIT IN 2010
In the era of globalization, Vietnam is experiencing increased competition in its domestic rice market due to the gradual removal of tariff barriers, which currently average 40% for rice imports As foreign distributors and rice products from other countries enter the market, this trend is expected to intensify in the coming years, challenging local producers to adapt and compete effectively.
2.6 Opportunities/Threats to VNF1 Company
Via PESTLE analysis, we can see that opportunities and threats to VNF1 Company when penetrating in the clean and safe rice market as follows:
In the past year, Vietnam's economy has experienced significant growth, averaging over 7% annually, particularly in urban regions As a result, urban residents are increasingly focused on quality of life issues, with a heightened concern for food hygiene and safety They are willing to invest more in clean food products to safeguard their health.
The growing trend of consumers using modern channels is enhancing awareness about the importance of product origin and post-sales services VNF1 Company's commitment to providing clean, delicious products that meet customer satisfaction is a logical approach to addressing these evolving consumer demands.
Political stability and socio-cultural development are crucial elements that enhance the effectiveness of development strategies, reinforcing the VNF1 brand's position in consumers' minds regarding rice.
Analyzing the sector according to PORTER model
In addition to macroeconomic influences, competitive factors significantly impact the strategic and tactical decisions of enterprises within the sector Utilizing Porter's Five Forces model, it is evident that VNF1 Company faces notable threats from various competitors.
The distribution market for domestic rice in Northern Province is characterized by its diversity, with the Vietnam Northern Food Corporation operating 34 units alongside numerous private companies and individual businesses Notable brands such as Thai Duong, Nam Khanh, An Dinh, Yamada, and Bao Minh have effectively established their distribution channels in Hanoi Additionally, some organizations leverage their strengths from other sectors to enter the rice distribution market, exemplified by the Dien Bien Post Office, which distributes special rice from Dien Bien Province However, individual households largely rely on existing regional rice varieties and have not focused on developing their own brands.
We can classify competitors of VNF1 based on the scale and consumption volume as follows:
Small-scaled units, mainly depending on the strengths of material zone, including:
In traditional food trading, individual households often engage directly with farmers to collect rice during harvest time, or they may purchase and exchange rice among themselves, reflecting the value of regional products.
- Farming households and owner of farms sell their own products: They sell products that they do not use up or exchange for different purpose of daily life.
Cooperative planning and processing of unique local rice varieties play a crucial role in the region's agricultural economy These cooperatives cultivate and process specialized rice, ensuring high quality and sustainability The finished products are then distributed to various organizations and individuals in different areas, promoting regional food security and supporting local farmers.
Business units engaged in the traditional model of trading special paddy focus on purchasing this commodity within designated material zones for the purposes of storage and redistribution These entities can range from organized groups to individual private households, both of which play a crucial role in distributing or retailing paddy products directly to consumers.
These rice trading units leverage their strategic locations and align with Vietnamese consumer habits by offering convenient access and competitive pricing However, they often lack professionalism in areas such as pricing transparency, packaging, and preservation methods.
Big units having experience in trading food:
- Traditional food trading companies: Most units originated from State- owned food companies in the past They mainly participate in distribution or act as suppliers.
Modern food trading units, such as Thai Duong, An Dinh, Viet Duc, and Bao Minh, prioritize delivering products directly to individual consumers However, these units lack distinctive stores and a comprehensive brand identification system.
- Systems of supermarkets self processing, packing and building brands for their food products (Metro, BigC, Hapro, Fivimart, etc.).
The strengths of VNF1 Company’s competitors closely align with its own, particularly regarding their strategic business locations, retail store systems, and approaches to importing foreign rice varieties.
Comparing some criteria of branded rice with some competitors in the sector:
1 Cost (price) High High Average Average
2 Price High High Average High
3 Financial capacity High Average Very High Average
4 Quality of human resources Average Average High Average
5 Market share (%) or monthly consumption volume 2% 5% 7% 10%
6 Brand Yes Yes Yes No
7 Experience on rice market High Average Average Average
8 Production system satisfying safety standard
9 Post-sale services for customers
Rice is indispensible in daily life of Vietnamese people; however, when working condition changes, the rise of substitute products in daily life happens more frequently Those substitute products are:
- Noodles, bread, instant noodles, pho, vermicelli, etc.
- Other crops such as beans, corn, potatoes, cassava, etc.
- Other types of processed food
Because of the working conditions as well as some movements adopted from foreign countries, the number of people use substitute products of rice is growing.
- Habit of purchasing rice in traditional channel, retail rice, being able to choose the volume and weighing directly
- Loyalty to sellers and the habit of communicating with those sellers. However, loyalty is also affected by other promotion, mode of delivery or guarantee for safety.
Many consumers are reluctant to try new rice varieties due to their familiarity with specific types, which leads to a lack of awareness regarding the unique flavors and aromas of alternatives This established preference makes it challenging to shift consumer habits and encourage the adoption of diverse rice options.
Budget constraints make it challenging for consumers to spend on rice, particularly for those with moderate incomes As a result, the special rice offered by the company is primarily targeted at customers with above-average income levels.
- The lack of understanding about rice safety standards leads to the uninteresting in the safety of the product.
There are many suppliers in the market along with various products and modes of selling However, most suppliers are often:
- Not being familiar with the supply of materials with high standards or the standards of the buyers They only offer what have.
- No committing to supply the materials that have been processed in accordance with the requirements of food hygiene and safety.
- The number of special rice-growing areas is very limited, so suppliers can regulate prices as well as the quality of goods.
Insufficient investment in material preservation significantly impacts the quality, aroma, taste, and safety of rice This lack of funding leads to higher costs for maintaining quality and safety, ultimately affecting market price competitiveness.
- Selling raw materials with very high price if there are sufficient technical standards
Apart from its existing competitors, VNF1 Company also has potential competitors, namely:
- The investment of scientific and technical advancements in food producing and processing of its competitors.
- The foreign enterprises distributing food with strong financial capacity, experienced and methodical management and large scale.
- The power of distributors and retailers: The systems of supermarkets and convenience stores
- Consumers change the habit of using rice and eating habits.
The analysis reveals that competition in the rice trading industry is intensifying both now and in the future Engaging in the distribution of branded rice presents numerous opportunities alongside significant challenges.
Opportunities: in the short term and long term are huge if right now, VNF1
Company can identify targets in a consistent manner, have firm steps, an appropriate business strategy, they will definitely succeed.
To establish itself as a market leader, VNF1 Company must navigate challenges posed by supplier business practices, adapt to evolving consumer habits, and align with current social development trends.
To capture the opportunities and overcome threats, VNF1 Company needs to thoroughly exploit product differentiation strategy, creating unique value chain for products under its brand.
Analyzing internal environment of the Company
VNF1 Company is led by a management team comprised of experienced and dynamic executives from the Vietnam Northern Food Corporation, ensuring a knowledgeable approach to the sector The organization is structured into seven functional departments, designed to maintain professionalism and efficiency throughout various business stages With a production subsidiary in Hung Yen and retail branches in Hanoi, VNF1 also operates in several provinces and cities, including Hai Phong, Nghe An, Thanh Hoa, and Nam Dinh, allowing for a robust and adaptable business presence.
The effectiveness of functional departments at VNF1 Company relies on clear objectives, job analysis, and job descriptions However, challenges arise due to a shortage of knowledgeable staff and the need for training among new recruits unfamiliar with rice Additionally, the diverse backgrounds and qualifications of employees often lead to conflicts To address these issues, the company has implemented regular opportunities for departmental exchanges and invited experts to educate all members on the company's vision and mission Furthermore, VNF1 is actively developing processes that clarify roles within departments, ensuring that tasks are distinct and manageable, which facilitates oversight and peer collaboration.
VNF1 Company places a strong emphasis on human resource management, particularly focusing on recruiting individuals with specialized knowledge in rice, as well as expertise in modern management and trade The company seeks professionals who not only possess high qualifications but also have a clear vision for enhancing enterprise value.
Ensuring production and product quality is crucial for every enterprise, including VNF1 Company, as quality directly influences brand reputation To successfully develop its branded product line, VNF1 must not only allocate financial resources but also invest in advanced technology By embracing modern technology, the company is actively establishing manufacturing processes and technical standards for rice production that not only comply with industry regulations but also align with VNF1's specific quality benchmarks.
VNF1 Company has established rice processing factories under its brand at the Hung Yen Branch, boasting a capacity of 75 tons per shift The factory network of Vietnam Northern Food Corporation, strategically located in key rice-producing regions, ensures a reliable supply of rice for VNF1 as needed Currently, material zones are being meticulously surveyed and planned to leverage the unique strengths of each specialized rice cultivation area.
VNF1 Company is a leading provider of high-quality rice, adhering to stringent product quality management standards, including Vietnam’s Standard and HACCP (Hazard Analysis Critical Control Point) This commitment ensures both food safety and hygiene, allowing the company to independently manage and proactively monitor product quality throughout the processing stages.
VNF1 Company benefits from an established network of convenient points-of-sale and retail branches, making it well-positioned to distribute its rice products Collaborations with major supermarkets and convenience stores, including Fivimart, BIG C, and Citimart, will enhance the brand's reach This strategic approach is particularly advantageous as leasing costs for retail spaces continue to rise.
In addition to supplying points-of-sale, retail branches, and supermarkets, VNF1 Company caters to customers with stringent quality standards for safe rice production, including the kitchens of joint-venture companies like Toyota, Honda, Acecook, Heineken, and Hanoi Beer, as well as a variety of restaurants.
The Company has made significant investments in enhancing its brand image by developing a cohesive brand identity and creating professional websites, including vnf1jsc.vn and gaovnf1.vn, for online sales Additionally, it has partnered with the Smart Choice program of Central Cable TV to further strengthen its market presence.
Analyzing SWOT
Conducting a SWOT analysis enables a company to identify its strengths, weaknesses, opportunities, and threats, providing a comprehensive understanding of its current situation This insight is crucial for formulating effective business strategies for the VNF1 rice brand, allowing the company to select the most suitable strategy for each phase of its development.
1 Economic growth rate and political condition of Vietnam are stable.
2.Distribution channels and retail market of Vietnam has become more and more developed.
3 Consumers’ habit is gradually changed in the direction of paying attention to food hygiene and safety, using high-quality products and requiring good services.
1.Market entry barriers are low and there is likely penetration of foreign enterprises in rice distribution.
2 There are many rivals and variation in varieties and patterns.
3 There is the habit of purchasing retail rice.
4.Some material zones have not been applied with advanced technology to preserve rice → affecting rice quality
5 The profitability of the sector is not high.
6 Tax policy of the State causes difficulties for domestic retailers.
1 There are plants processing rice under
VNF1 brand in key rice cultivating areas
2 Products have high quality, eye-catching patterns and convenient package.
3 The Company is expanding its distribution network to cities and provinces to customers; at the same time cooperate with other retail companies and corporations.
Department is completed to have strategies to promote products and dominate the market.
Based on advantages and strengths of the enterprise, we put forth product differentiation strategy or price competitive strategy.
Expanding and establishing a high-qualified and skillful staff from the core employees of the Company.
Formulating appropriate marketing strategy with the focus on changing consumers’ habit
Expanding distribution channels by cooperating with increasingly developed retail corporations in Vietnam.
Continuing to expand distribution channels
Enhancing customer convenience is essential for boosting competitiveness against rivals By leveraging the strengths of management software, businesses can lower costs and mitigate challenges posed by tax policies Utilizing modern software and networks not only improves sector profitability but also helps agencies reduce expenses, ultimately leading to more competitive pricing.
5 Core cadres and staff have experience and deep understanding about the jobs.
6 ERP management software is modern. competition conditions.
1 Being a new company → VNF1 brand has not become familiar to consumers.
2 Since distribution network has not been developed strongly → personnel have not timely met the demand in terms of quantity as well as quality.
3 Income of laborers has not been competitive.
4 There is no strategic product making extraordinary development for the Company.
5 The channel of receiving and processing feedbacks from customers is not good.
Investing in developing VNF1 brand.
Completing the channel of receiving feedbacks from customers, investigating consumers’ demand to form
“mainstream” product of the Company.
Based on available materials of Vietnam Northern Food Corporation (Vinafood1) to develop products and recruit personnel.
Human resource and purchasing strategies: Taking advantages of the network and human resources who understand the food purchasing in material zones.
Strategy on creating new products: cooperating with material zones to create new break-through products for the Company.
Customer vision strategy:forming data about customers and regularly practice customer care services to raise customers’ awareness of rice under VNF1 brand.
Selecting business strategy for VNF1
6.1 External factors affecting VNF1 (EFE)
External factors (EFE) Weight Rating Weighted score
1 Stable and safe political and social environment 0.08 3 0.24
5 Changes in behavior and habit of consumers 0.08 3 0.24
6 The appearance of giant retailers 0.10 2 0.20
7 Stable exchange rate and loosened foreign exchange conversion 0.05 2 0.10
8 Expanding investment and urban area 0.06 3 0.18
The total weighted score of 2.75 indicates that VNF1's response to external opportunities and threats is at an average level, outperforming the sector's average of 2.5 The company effectively addresses competitive challenges and capitalizes on market potential, as evidenced by the rising living standards and increased demand for health protection Consequently, it is essential for VNF1 to continue and enhance its strategy of producing high-quality and safe rice to leverage these opportunities for sustainable growth.
6.2 Internal factor affecting VNF1(IFE)
Internal factors (IFE) Weight Rating Score
1 Raising productivity and supplying to customers in large volume 0.07 4.00 0.28
3 Free delivery service and better post-sale services 0.05 3.00 0.15
5 Expanding market and participating in retail association 0.06 2.00 0.12
VNF1 has achieved a total weighted score of 3.41, significantly higher than the sector average of 2.5, indicating a strong internal strategic position However, the company must address challenges such as its cumbersome organizational structure and high general and administrative expenses, which impact operational efficiency Additionally, revising management policies and enhancing human resource development are essential for improving competitiveness.
VNF1 Company boasts significant strengths, including strong relationships with loyal suppliers, which stem from its commitment to reputation and mutually beneficial cooperation However, the company faces challenges related to tax policy, as it diligently complies with tax regulations and pays its dues to the state, while competitors, including private enterprises and traders, often evade taxes or are not subject to the 5% input tax, allowing them to offer lower prices.
VNF1 Company boasts several internal strengths, including superior post-sale services and professionally designed product labels that promote a green brand, registered for copyright to combat counterfeit products The company prioritizes vertical investment and the development of new, environmentally friendly products under the VNF1 brand However, a notable shortcoming is the lack of a reputable foreign partner for trading high-quality rice.
6.3 Quantitative Strategic Planning Matrix (QSPM) and selecting optimal strategy
Strategy 2: Cost leadership strategy Response capacity of the enterprise
Stable and safe political and social environment
Changes in behavior and habit of consumers
The appearance of giant retailers 0.06 2 0.12 2 0.12
Stable exchange rate and loosened foreign exchange conversion
Expanding investment and urban area
Raising productivity and supplying to customers in large volume
Free delivery service and better post-sale service.
Expanding market and participating in retail association
Our group has adopted a differentiation strategy through a comprehensive SWOT analysis and Quantitative Strategic Planning Matrix (QSPM) This strategy emphasizes product cleanliness, safety, and adherence to standards such as nutrient content and flavor (HACCP, BRC) The uniqueness of the VNF1 brand rice stems from our commitment to continuous research and development, enhancing production processes, preservation methods, delivery services, distribution management, and supply chain efficiency Additionally, we focus on building a strong corporate image, social responsibility, and professionalism, which collectively highlight the distinctiveness of VNF1 Company while leveraging our strengths and addressing weaknesses.
The company places significant emphasis on its product differentiation strategy, which aims to develop high-quality products that offer unique features and create substantial customer value.
“supplying visible value”, “difficult to imitate”, making customers appreciate the Company’s product and building VNF1 brand from this product.
Characteristics of targeted customers
Current rice-use habit of customers:
- Habit of purchasing rice from traditional channel, purchasing retail rice, being able to choose the volume and weigh directly
- Loyalty to sellers and communication habit with those sellers However, loyalty is also affected by promotion, mode of delivery or guarantee on safety.
Many consumers are resistant to trying new rice varieties due to their established preferences and unfamiliarity with the distinct aromas and flavors of these alternatives As a result, altering these long-standing habits proves to be a significant challenge for promoting new rice options.
-The lack of understanding about rice safety standards leads to the uninterestedness in the safety of products.
In Vietnamese culture, market shopping is primarily a responsibility of women, with only 3% of men frequently purchasing food items, according to an AC Nielsen survey Typically, these shoppers belong to households with an average income of at least VND 5 million per month, often aged between 25 and 55 While individuals from other age groups also participate in shopping, their numbers are significantly lower Branded rice, being a commonly consumed yet low-value product, targets this demographic As of 2009, the average income per capita in Hanoi was VND 6,448,837, representing 14% of the city's population, highlighting the potential market for companies catering to this income bracket.
The targeted market segment consists of quality-conscious customers who prioritize high product standards, safety, and excellent post-sale services Young consumers are attracted to innovative, convenient products with appealing designs and cultural significance, while middle-aged customers emphasize food hygiene and safety, often willing to pay an additional 3-10% for rice with verified origins to ensure their family's health With an average age range of 25-55, these working individuals typically make regular rice purchases, which can feel mundane; therefore, they appreciate additional services such as home delivery and flexible delivery times that align with their busy schedules.
In short, targeted customers of VNF1 Company are households with relative high income, having a busy life, industrial working style and preferring good services.
Market segmentation
Market segmentation involves categorizing the market into specific groups of buyers who share similar traits and needs Effective segmentation enhances marketing strategies, customer service, post-sale support, and product offerings, ensuring they align with the unique demands of each segment.
8.1 Bases for segmenting the market
Market segmentation can be approached through various criteria such as demographics, behavior, psychology, demand, habits, attitudes, purchasing criteria, purchasing processes, and geographical areas For frequently consumed goods aimed at high-income customers, it is essential for companies to concentrate on behavioral and psychological factors in their market segmentation strategies.
Consumers prefer convenient rice distribution methods due to the large volume required for purchase, especially in unregulated cultivation areas They prioritize food hygiene and safety while seeking assurance of quality, origin, and accurate weight Additionally, customers expect their spending to reflect the value and trustworthiness of the products and services offered.
To customers having relatively high income and industrial working style, the purchase via electronic information tool is preferred and convenient.
To effectively define its market segment, VNF1Company must focus on several key criteria to remain competitive This includes ensuring high product quality through HACCP standards, maintaining safe and hygienic packaging, and enhancing customer convenience Additionally, professional customer service is essential, encompassing well-trained sales staff, diverse product offerings, timely delivery, courteous interactions, clear address communication, and responsiveness to customer feedback.
VNF1, as a new company, must focus on understanding customer psychology and building trust in its professional products and services to effectively meet market demands To enhance customer satisfaction, it is essential to not only develop the VNF1 brand as a provider of high-quality rice but also to establish a strong collective brand for the company.
VNF1 brand rice features a unique selection of special rice varieties sourced from various regions across the country, expertly processed and blended to create distinct flavors and aromas that cater to the diverse preferences of customers nationwide The production and processing of these rice varieties adhere to stringent technical standards, ensuring high levels of food hygiene and safety This meticulous approach requires significant investment and a rigorous management process encompassing every stage from seeds to seeding, harvesting, preservation, and processing Currently, only a limited number of domestic companies can fulfill these demanding criteria.
VNF1 is focused on targeting the market segment of individuals with an average monthly income of VND 5 million and above by producing high-grade rice under its brand The company plans to launch this initiative in Hanoi initially, with an aim to expand its reach across the entire Northern region over the next 5 to 10 years.
OTHERS SUSSGESTING STRATEGY FOR RICE UNDER VNF1 BRAND
Functional strategies and solutions
The diverse range of rice varieties and their fluctuating prices often leads to a lack of oversight regarding quality and origin As a result, rice sold through traditional distribution channels may pose significant health risks due to potential residues from plant protection chemicals, preservatives, and yeast Consumers face challenges in identifying these issues and are often unaware of the nutritional content they are consuming.
A safe and clean quality strategy is essential in rice production, necessitating strict control at every stage, from sourcing input materials to preservation and processing Investing in advanced preservation and processing technologies is crucial Notably, the purchase, processing, and preservation of VNF1 rice adhere to HACCP standards, the first of its kind implemented in Vietnam, ensuring hygiene and safety in food production With modern technology and procedures that meet international standards, VNF1 rice guarantees health safety by being free from plant protection chemical residues, harmful preservatives, and yeast.
* Product: Create the image of high-quality rice of VNF1 for consumers that
VNF1’s products contain fully factors like regional specialty, high quality and meeting food hygiene and safety standards.
* Brand: Be registered to be protected and having been built the new absolute image in the field of modern rice distribution.
* Packing: The design of packing is modern, environment-friendly, eye- catching, and user-friendly
* Technological application is carried out to the post-harvest preservation and absolutely saying no with the use of plant protection chemicals which is poisonous to consumers.
* Goal: Reaching the standard “Vietnam High-quality Product and Safe
Developing a new product line under the VNF1 brand is essential for the company, as it not only enhances brand recognition but also drives overall growth In a constantly evolving market with increasingly diverse customer demands, it is crucial for the company to innovate its existing products or introduce new ones to address unmet needs This product renovation enables the enterprise to seize opportunities presented by the business environment, while also differentiating itself from competitors and strengthening its competitive edge.
5 LEVELS OF PRODUCTS advantages Of course, the product renovation is not out of the purpose to raise profits or reduce costs.
Developing new products is essential for enterprises to remain competitive in the market, and this process can be summarized through a series of key steps These steps guide businesses in effectively navigating the product development landscape, ensuring they meet market demands and enhance their competitive edge.
Main factors needed paying attention to in the successful development of new products:
- Whether have system organization and human resource arrangement been proper?
- Marketing (form, method, progress, cost, efficiency, etc.)?
- Input (information, raw materials, ingredients, labor, etc.)?
- Machine and equipment meet the production demand in terms of quality and quantity?
- Product (form, shape and quality compared to the design)?
- Output (distribution and consumption of the product)?
- Check, supervise, and assess the report (detailed indicators and proposals)?
Filter the ideas Develop the ideas Marketing strategy
Verify the market Commercialize product
VNF1 is dedicated to maintaining competitive pricing while ensuring high quality, achieved through thorough market surveys on competitor pricing This commitment allows VNF1 to offer average prices that effectively compete with other market players without compromising on quality.
The company must closely monitor the selling prices of its products from distributors to consumers The pricing of new products is determined by the competitive landscape, ensuring profitability for both wholesale and retail partners while maintaining the company’s competitive edge and overall profits.
A strong brand alone cannot guarantee positive revenue for a company; a well-structured distribution system is essential The success of a business in reaching the market relies on two key factors: establishing an effective distribution model and committing to its long-term development.
The best distribution model for Fast Moving Consumer Goods (FMCG) enterprises includes three main approaches: agency distribution, distributor distribution, and direct distribution Agency distribution is effective for achieving market dominance with high-output, low-cost products and rapid market penetration The distributor model, exemplified by Unilever, offers extensive market coverage and is widely adopted by prominent Vietnamese companies such as Vinamilk, Kinh Do, and Cholimex Additionally, many enterprises utilize direct distribution to reach consumers, particularly for premium products.
For VNF1 Company, enhancing public awareness and market presence is crucial, but the effective transfer of products to customers is equally important This involves implementing a professional delivery strategy, utilizing modern distribution channels, and ensuring convenience through home deliveries and online sales Maintaining a consistent brand image across all touchpoints is vital, supported by a skilled workforce and streamlined processes As we expand our range of high-quality rice products under the VNF1 brand, strengthening distribution channels will be essential for success.
There are three important indicators to assess the effectiveness of the distribution channel as follows:
- Customer data: This allows realizing whether the company sells a lot of products or raises the recognition about the brand.
- Percentage of customers’ feedbacks: Reveals the success of the brand
- Revenue achieved: This revenue has to be defined based on the field of action to assess the belief of each region.
Build post-sales services: Customer service, consultant service, change error products, loyal customer card, VIP card, birthday, weeding anniversary, etc.
Thereby, group 1 proposes rice distribution system under VNF1 brand as follows:
DISTRIBUTION CHANNEL SYSTEM OF VNF1
The direct channel established by VNF1 encompasses specialized stores, convenience stores, and supermarkets, all designed to enhance customer engagement This channel serves as a platform for collecting customer feedback, enabling VNF1 to standardize its products and improve customer service effectively.
Traditio nal channel Modern channelModern channel
Conven ience stores of VNF1
Conven ience stores of VNF1
Consumers – Restaurants (Hotels) – Factories Consumers – Restaurants (Hotels) – Factories
Restaurant/Hotel channel: Rice under VNF1 brand is distributed to high- level restaurant and hotel systems and through this channel, brand of VNF1 Company is improved.
Factory channel: Are factories using high-quality rice of VNF1 as materials for producing high-grade foodstuff and beverage where they have the strictest requirements on the product’s quality.
The VNF1 rice brand utilizes a direct distribution channel, where its products are delivered to consumers through one or multiple intermediary distributors This approach significantly enhances sales and increases market coverage for the VNF1 rice brand.
VNF1 Company emphasizes the significance of promoting its products to shift consumer awareness and behavior, as this strategy plays a crucial role in establishing a positive brand image By focusing on these elements, the company aims to foster favorable conditions that support long-term and sustainable growth.
Funding for television cooking competition programs and meetings of the Association of Hanoi Chefs is essential for promoting culinary skills Additionally, developing initiatives to showcase effective rice cooking techniques and providing financial support for the construction of a live rice exhibition at the Vietnam National Museum will enhance the appreciation of this staple food.
Participation in government initiatives and programs organized by the Hanoi People’s Committee is crucial, especially in supporting relief efforts for underprivileged areas and regions affected by floods and natural disasters, as well as engaging in price stabilization initiatives.
Creating a website for VNF1 will position the company as an expert in rice cultural values, while linking to both domestic and international sites to guide customers in discovering new rice-related insights This strategic online presence will enhance customer engagement and promote the appreciation of rice's cultural significance.
US Rice Federation – A World of Great Ideas: towards to potential customers, the next generation, raising the demand for a lot of high-quality rice varieties with attractive processing
* Building a handbook analyzing the risks of using unsafe rice and guiding consumers how to realize these risks as well as safe rice products.
Recommendations
The State ensures to stabilize politics, economy, culture and society of the country The State manages by laws, creating a level playing field for all economic sectors.
The Vietnamese government must implement a strategic development plan for the rice sector to support domestic producers and lower product prices This involves leveraging science, technology, and appropriate production techniques tailored to the country's specific needs.
To safeguard consumer health and protect the interests of rice farmers and domestic rice producers, the State must implement effective policies and measures to combat counterfeit goods and illegal rice imports at border gates.
Revamping registration processes and reducing the time required to certify product quality and industrial design rights fosters a conducive environment for businesses to timely introduce their products to the market This approach not only facilitates market entry but also helps mitigate the risks of imitation and counterfeiting.
The State speeds up carrying out the reforms in administrative procedures, clearing the system of the State.
The governing sector serves as a crucial mentor for both new and existing enterprises, guiding their projects and expansions To enhance long-term development and boost business efficiency, it is essential for the governing sector to accurately understand and anticipate market demand, ultimately reducing overall investment costs for society.
The governing sector plays a crucial role in connecting manufacturing enterprises with rice-producing businesses, actively facilitating the sourcing of domestic raw materials This collaboration significantly reduces reliance on foreign imports, ultimately conserving valuable foreign currency resources.
Based on the actual ability of the enterprise and the market demand, the governing sector chooses the direction of investment and scale of effective investment.
The Company should have a plan to train employees more practically, for example:
Sending some experts to work abroad to learn modern experiences in rice distribution of other countries.
Developing programs on coaching salesperson team about sales skills, customer serving skills and marketing skills
Investing more in researching and developing the market
Leveraging the benefits of prestige, recognized products, and financial strength is essential for successful strategy implementation, while promptly addressing weaknesses can enhance management capabilities and drive overall success.
Continuing to take part in social welfare programs to reinforce the company’s brand as well as contribute to developing the society.
This study aims to assess VNF1 Company's current market position to formulate a targeted business strategy focused on niche markets By prioritizing food hygiene and safety, the company seeks to enhance the overall brand of Vietnamese rice while increasing brand recognition for VNF1 specifically.
VNF1 Company’s differentiation strategy aligns with its mission to prioritize product quality and customer service, ensuring maximum customer satisfaction With Vietnam's integration into the WTO, developing a strong brand linked to high-quality products is essential Implementing a strategy focused on differentiation in quality, packaging, and production processes is crucial for establishing a foothold in the global market, particularly through retail distribution channels and partnerships with international enterprises in Vietnam.
VNF1 Company was established to enhance the retail and distribution system, supporting the price stabilization program mandated by the Government through the Vietnam Northern Food Corporation (Vinafood1) The company's focus on branded rice distribution aligns with government guidelines, providing a significant advantage in the market.
Successful high-quality rice production and distribution involve both opportunities and challenges Company leaders must maintain strong and consistent commitment to their objectives, as any uncertainty can lead to failure Establishing reliable distribution channels is essential, alongside a unified effort from all staff members Additionally, the company should implement comprehensive strategies across marketing, human resources, finance, and investment to enhance value creation.
The strategies outlined are developed from current insights into both the macro and micro business environments, with future projections assuming a stable business landscape Moving forward, it is crucial to continuously update and process information regarding changes in the business environment to ensure the effectiveness and efficiency of these strategies for the enterprise.
The business strategy for the VNF1 brand, proposed by Group 1, aims to establish VNF1 Company as a premier supplier of safe and clean rice, thereby contributing to the community's development.
1 Document related to Strategic Management of MBA Program – Griggs University
2 Strategic Management – Le The Gioi and Nguyen Thanh Liem
3 Website of VNF1 http://vnf1jsc.vn
4 Report on Vietnam rice sector and suggestion to develop distribution channel, VNF1, July 2009
5 Plan to develop distribution system of VNF1
6 Survey on rice consumer behavior in Hanoi of VNF1 Company.
7 Website of General Statistics Office of Vietnam http://www.gso.gov.vn/
8 Website http://www.saga.vn/Marketing/Phantichvadubao/13140.saga
10 Website: Riceonline; Vinafood1.com.vn
11 Strongly developing the core distribution system in domestic market, Ass. Prof Dr Hoang Tho Xuan, Head of Domestic Market Department, WTO portal of Ministry of Industry and Trade
12 http://wto.nciec.gov.vn/Lists/MarketAccess_vn/DispForm.aspx?ID4
13 Investment Bridge No.218 on February 14-20, 2011- Way to the market 14.“It is necessary to establish brand for Vietnam rice” May 31, 2005, According to the Laborer
15 Finding out the solutions for sales: Do Hoa, PhD, Web http://www.marketingchienluoc.com of International Management Excellence Ltd