Analyzing product strategy of saigon tobacco company limited in 2009 2012

HCMC UNIVERSITY OF FOREIGN LANGUAGES AND INFORMATION TECHNOLOGY INTERNATIONAL BUSINESS ADMINISTRATION DEPARTMENT GRADUATION PAPER ANALYZING PRODUCT STRATEGY OF SAIGON TOBACCO COMPANY LIMITED IN 2009 - 2012 Student's name: NGUYEN THAo vy Class : KM0901 Advisor : NGUYEN DUe HoAI ANH (PhD) Graduation Paper - Nguyen Thao Vy ACKNOWLEDGEMENT Starting from my sincere heart, I wish to thank to my sweet advisor - Ms Hoai Anh Nguyen Duc - PhD With her enthusiastic supports for knowledge and encouragement, she has accompanied with me to final step in order to build my passionate ideal - the completion of thesis I am grateful to her for everything she gave me Besides that, I would like to express my deep gratitude to Mr Ngoc Huan Nguyen - Dean and Ms Tuy Nga - Deputy Dean They has awakened my confidence and created the good opportunity so that I can reach the most important milestone of university student at HUFLIT To contribute the whole of my thesis, I will not forget the enthusiasm of staff in Market Department of Saigon Tobacco Company Limited They are willing to share their experiences and supply necessary materials to me during last three months for my internship More than ever, my beloved family, parent, friends, and close relative who are always engraved in my memories because of their promotion and encouragement When I am getting discouraged, they are always beside me and raise me up to continue this challenge I would like to thank all! July, 2013 Graduation Paper - Nguyen Thao Vy ADVISOR'S ASSESSMENT " 11 Graduation Paper - Nguyen Thao Vy ABSTRACT Product strategy is the partial strategy which contributes to success of the overall competitive strategy Product strategy defines the product structure to improve business efficiency and increase the competitiveness among business activities Therefore, most of domestic enterprises and foreign enterprises are very interested in the role of product strategy, including Saigon Tobacco Company Limited Analyzing the situation of product strategy of Saigon Tobacco Company Limited from 2009 to 2012 is the purpose of this study The content of this study consists of three parts The first chapter is the summary of theory for product strategy The next chapter is the overview of Saigon Tobacco Company Limited The final chapter analyzes clearly the product strategy of Saigon Tobacco Company Limited from 2009 to 2012 and proposes some specific recommendations in order to improve the product strategy To investigate this study, the author used the analyzing method to dissect the specific situation In addition, aggregating method and comparing method were applied to sum up information and explain figures The information of this study clearly indicated the advantages and disadvantages of the product strategy at Saigon Tobacco Company Limited Moreover, recommendations in this study will help audience catch the main directions of product strategy of this company in the next years Through this study, the author applied the related theory to analysis the business reality However, this study still has restrictions because the author does not have many practical experiences and limitation of researching time 111 Graduation Paper - Nguyen Thao Vy CONTENT Ackn wIed gem ent - - - - i Ad visor's Assessment - ii Allstract iii Con ten t - - - iv TallIes, Pictures and Graphs - viii INTRODUCTION Rational e - - - - - - Research aims - - - - Researc h scope - - - - - Researc h meth od - - - Research des ign - - - - CHAPTER 1: FOUNDATION OF THE RESEARCH 1.1 Product concepts - 1.1.1 The overview 1.1.2 The classification of product 1.1 Product Life Cycle - 1.2 Product strategy concepts 1.2.1 Definition of product strategy - 1.2.2 Content of product strategy 10 1.2.3 Classification of product strategy - 13 IV Graduation Paper - Nguyen Thao Vy 1.3 Factors affect product strategy - 14 1.3.1 Internal factors 14 1.3.2 External factors 15 1.4 Roles of product strategy - 15 CHAPTER 2: OVERVIEW OF SAIGON TOBACCO COMPANY LIMITED 2.1 Introduction about Saigon Tobacco Company Limited - 18 2.1.1 Progress of establishment and development 19 2.1.2 Function, Authority, Mission and Vision 21 2.1.2.1 Function 21 2.1.2.2 Authority - 21 2.1.2.3 Mission - 22 2.1.2.4 Vision 22 2.1.3 Achievement - 23 2.2 Com pan y str uct ure 24 2.2.1 Chart of organization - 24 2.2.2 Function of departments - 26 2.3 Capacity of the company - 28 2.3 Facil ities 28 2.3.2 Human resource - 29 2.3.3 Capital 30 2.4 The result of business activity in 2009 - 2012 30 2.4 Outpu t 30 v Graduation Paper - Nguyen Thao Vy 2.4.2 Revenue -CHAPTER 3: ANALYZING PRODUCT STRATEGY 33 OF SAIGON TOBACCO COMPANY LIMITED IN REALITY 3.1 Analyzing factors affect the product strategy 36 3.1.1 Population 36 3.1.2 Policies of the State - 37 3.1.3 The situation of illicit cigarettes 38 3.1.4 Competitors 39 3.1.4.1 The internal competitors - 39 3.1.4.2 The external competitors 40 3.2 Product strategy of Saigon Tobacco Company Limited - 40 3.2.1 Product structure 40 3.2.2 Material resource 42 3.2 Available markets - 43 3.2.4 Objectives of product strategy 43 3.2.5 Deploying and implementing the product strategy - 44 3.2.5.1: Market expansion 44 3.2.5.2: Market development 45 3.2.5.3: Market defense - 46 3.2.6 The result of product strategy activities in 2009 - 2012 - 46 3.2.7 Limitations on product strategy 3.3 S.W.O T Analysis 50 51 VI Graduation Paper - Nguyen Thao Vy Rec ill ill end ati n - 54 Con c Ius ion - 63 A Ppe n d ix - 64 Re fere nee s - 70 VB Graduation Paper - Nguyen Thao Vy TABLES, PICTURES AND GRAPHS LIST OF TABLES • Table 2.1 Output of Saigon Tobacco Company Limited in 2009 - 2012 31 • Table 2.2 Result for business activities in 2009 - 2012 33 • Table 3.1 Total cigarette output for domestic consumption of Saigon Tobacco Company Limited and entire tobacco industry in 2009 - 2012 - 47 • Table 3.2 Comparative table of customer's perception - 49 • Table 3.3 S.W.O.T Analysis 51 LIST OF PICTURES • Picture 1.1 Five product levels - • Picture 1.2 Product Life Cycle - • Picture 1.3 Classification of product strategy 13 LIST OF GRAPHS • Graph 2.1 Chart of organization - 25 • Graph 2.2 Labor structure 29 • Graph 2.3 Output performance in 2009 - 2012 - 32 • Graph 2.4 Output performance in 2009 - 2012 - 34 • Graph 2.5 Revenue performance in 2009 - 2012 - 34 • Graph 3.1 Growth ofYietnam's population in 2009 - 2012 - 36 • Graph 3.2 Percentage of total output • Graph 39 3.3 Total cigarette output for domestic consumption of company and the others in 2009 - 20 12 - 48 Vlll Graduation Paper - Nguyen Thao Vy INTRODUCTION Rationale In the overall picture of the openmg market, the competition between enterprises is an inevitable issue Product strategy is not only the major factor in creating a business model, but also the motive force in steering the business ship and deciding how the business ship~sink or float Saigon Tobacco Company Limited is a company that has confirmed its dominant position after a long history with more than 80 years of establishment However, today's business environment is changing continually from many kinds of inside and outside factors That's why Saigon Tobacco Company Limited has not escaped some difficult blockades in the development of its business activities According to the government policies, the tobacco industry always suffered, from heavy pressure by strict controlling because it is the product with exceptional characteristics The strict management of the government expressed through 65% tax increasing for cigarette consumption is On the other hand, some tobacco business such as Vinh Hoi Tobacco Company, Thang Long Tobacco Company, and Dien Bien Tobacco Company have to cut back the scale of production and the labor force due to the influence from the remnants of economic crisis Furthermore, the races in technology and the change of customer's trends are causing intense competition in all sectors of industries In fact, Saigon Tobacco Company Limited desperately needs the specific research to make contributions to the improvement of company's product strategy For this reason, the author has carried out the study with title "Analyzing Product Strategy Of Saigon Tobacco Company Limited In 2006 2012." This is considered as the extremely necessary and feasible study for reality of the company Graduation Paper - Nguyen Thao Vy - Package of product of Saigon Tobacco Company Limited is more attractive than the package of product of the others - Price of product of Saigon Tobacco Company Limited IS more reasonable than the price of product of the others To support the development of new products, Saigon Tobacco Company Limited should carry out the following activities: - Investing the market research and technology improvement - Ensuring the working coordination between Market Department and Research & Develop Department Checking the product quality at each stage In whole the producing process 1.2.2 For product attributes • Nowadays, it is essential for those who produce and sell cigarettes to find new ways to ensure the existence and development of this field under pressure of government and agencies for cigarette prevention Due to the increasing pressure from international, regional and national laws, there is a trend in producing low-level Tar, Nicotine and CO products and reducing poisonous substances in cigarette smoke .• Strengthening and enhancing product characteristics This focuses on maintaining and improving the product quality to make the difference and to take competitive advantages On the basis of market research, products must be tested by criteria such as flavor, severity, level of bum, color of tobacco, etc All of them depend mostly on the production line of tobacco processing Based on the above elements, it is necessary to create new types of cigarette that are suitable to characteristics of each target customer It is the low, unbalanced quality of the products (cigarettes ease off halfway due to their tobacco humidity) that leads to the weaknesses in competition As a result, the humidity of the tobacco ingredients needs to be reduced 57 Graduation Paper - Nguyen Thao Vy • Well implementing package decision This method is not only to preserve the quality of products well, but also to enhance the beauty of product as well as the product's information It is undeniable that one package decision that is appropriate to each product, as well as the aesthetic perception of consumers also plays an important role in the implementing package decision To preserve the quality of cigarettes well, the cigarette paper that can resist high moisture should be used Besides, due to the design of product package is too simple, it is not actually nice In addition, this work depends mainly on outside designers In the present context, Saigon Tobacco Company Limited should establish a specific and independent department which is responsible for designing the product package This section which includes skillful and well-trained designers can become one department of the company • Building an appropriate label decision Based on the actual business of Saigon Tobacco Company Limited, it cannot be denied that different label decisions for different products are necessary and suitable They help the company restrict branding risks, exploit different market segments and ensure the competitive advantages But, it is necessary for the company to make a difference with other competitors The products should have some special names to differentiate the products of the company from others In fact, the products of the company are not outstanding on the market It is the design of a typical label that best draws a distinction between the products of the company and the others The combination between the diversification of models and labels will promote the company's production and consumption • Promoting the control to product quality Manufacturing process, technical preparations for production must be rigorously controlled In the technical preparations, producing directions, the establishment of the production process, and the preparation of equipment, and materials must be determined At each stage of production process, it is 58 Graduation Paper - Nguyen Thao Vy essential for managers to inspect regularly the execution of the workers' duty The company should encourage staff to go on a training course, and organize some mini test phases for staff each year The company must guarantee to supply materials properly, in a high quality and punctually so that the factories can work effectively Due to the fact that the quality of the materials directly influences the quality of the cigarettes, the company enhances the control for the input, offers incentive to those who make good products, and fines those who make fault products The company should regular examine how well the machines operate, reduce the rate of the production of low-quality cigarettes and the crumbling of cigarette fibers Relying on that, the quality of cigarettes is improved During the inspection, only after technicians observe, examine and analyze the causes of the appearance of fault products; they come out to market The company should carry out three-check mode; that is, workers' self-check, team leaders' self-check and testers' self-check This mode should be applied at each stage of the producing process Apart from the well-trained testers, having the workers who have a vague knowledge of the worker carry out the inspection should be avoided The measurement equipment is required to be adequate and highly accurate, such as the moisture measurement, flavor spray, balanced blending and chemical analysis equipment The machine maintenance and repair should be organized properly, periodically and go according to plan Machinery accessories should be well prepared in order to ensure that the company works normally and continually, and to reduce the downtime 1.2.3 Material resource _ Importing some tobacco seeds with high quality from Cuba and Zimbabwe; cultivating these tobacco seeds on large scale for replacing the volume of import materials 59 Graduation Paper - Nguyen Thao Vy - Hybridizing between the old seeds and the innovated seeds in order to create the new one with special characteristics - Developing the growing areas of tobacco leaves to take the initiative in the material production - Stressing the importance of processing materials, ensuring materials of good quality, strictly examining and reporting situation of the musty cigarette ingredient and the wastage rate of input - Closely managing those who have responsible for exammmg the input quality - Getting officers to the growing areas of tobacco leaves to frequently examine the implementation of farming methods and pest-preventing measurements 1.2.4 Human resource - Nominating the excellent staff for foreign training - Allocating logically the numbers of staff in each plant and department Inspecting periodically the professional qualifications and skills of all employees - Minimizing the human resources in necessary cases 1.2.5 Facilities Saigon Tobacco Company Limited should apply the steaming system m vacuum for fiber processing line because it helps to maintain the moisture of tobacco leaves 1.2.6 Market research During the period of integration with the world's economy, the more intense the competition environment is, the more challenging the purpose of maintaining and developing Saigon Tobacco Company Limited's market is It 60 Graduation Paper - Nguyen Thao Vy IS necessary for Saigon Tobacco Company Limited to propose some breakthrough solutions to the research of the customer's needs Particularly, it IS: Supporting sale team in both quantity and quality due to the diversification of the company's product Professionally effectively, training confirming salesmen how to introduce new products the stability of prices, maintaining a good relationship with customers, and setting up the loyalty to consumers Increasing the staffs professionalization of Market Department so that they can understand the important role of market research more deeply; whereby the company is able to propose appropriate product strategies for each period Combining with market research activities such as having some officers investigate, establishing comment mailbox, conducting questionnaires to collect information of customers so as to avoid the failure to meet customers' satisfaction when a product is come out Establishing an appropriate investment for frequent and constant market research Concentrating on studying cigarette characteristics that satisfy consumers' tastes Implementing many supporting programs for sale and develop new products To keep the relationship with current consumers and attract new customers, Saigon Tobacco Company Limited needs to develop some new customer services such as: Developing wholesalers - supporting services on product delivery Providing detailed information of products so that customers can decide on their quickly and easily choice Introducing the electronic information page of company in order to facilitate customers on update information and online order 61 Graduation Paper - Nguyen Thao Vy II Recommendations to Vietnam National Tobacco Corporation - Suggesting for repression and prevention of the smuggled cigarette - Suggesting for lower profit targets in next year in order to Saigon Tobacco Company Limited can save money to focus on innovation and investment in product strategy III Recommendations to the State - Notifying officially about all specific regulations for creating the environment of fair competition among tobacco business in domestic market - Developing the social programs for fighting against illicit cigarettes - Raising the tax of importing cigarettes in order to protect the domestic tobacco business in domestic - Imposing strict regulations on cigarettes importing 62 Graduation Paper - Nguyen Thao Vy CONCLUSION ith W the efforts for the product strategy in 2009 - 2012, Saigon Tobacco Company Limited has obtained some significant achievements However, the product strategy of this company is also facing to some challenges With the mentioned recommendations, the author hopes that it can contribute to minimizing some limitations of the product strategy and to describe some directions of product strategy in the coming years Applying the theory of product strategy into practical environment is one of the effective methods for gaining experiences and researching the new knowledge Overall, this is not the perfect study because of the author's lack of practical experience and because of limitation of researching time Therefore, the author looks forward to feedback of teachers for building the feasible study Thank you! 63 Graduation Paper - Nguyen Thao Vy APPENDIX Domestic product mix of Saigon Tobacco Company Limited Criteria Characteristic Form of package Taste Products of product Premium products 555 Cardboard pack (20 cigarettes) British Filter MARLBORO Cardboard pack (10+20 cigarettes) British Filter DUNHILL Cardboard pack (20 cigarettes) British Filter VINATABA Cardboard pack (20 cigarettes) British Filter SAIGON (red) Cardboard pack (20 cigarettes) British Filter SAIGON (blue) Paper pack (20 cigarettes) British Filter COTAB (red) Cardboard pack (20 cigarettes) American Filter COT AB (menthol) Cardboard pack (20 cigarettes) American No filter SOUVENIR Cardboard pack (20 cigarettes) American Filter HOA BINH (red) Paper pack (20 cigarettes) American Filter HOA BINH (blue) Cardboard pack (20 cigarettes) American Filter VITAE Cardboard pack (20 cigarettes) American Filter SUPER Cardboard pack (20 cigarettes) American Filter MEMORY (blue) Cardboard pack (20 cigarettes) American Filter MEMORY (red) Cardboard pack (20 cigarettes) American Filter CATUS Cardboard pack (20 cigarettes) American Filter STAR (white) Cardboard pack (20 cigarettes) American Filter STAR (blue) Cardboard pack (20 cigarettes) American Filter Medium products 64 Graduation Paper - Nguyen Thao Vy Common products ERA (blue) Cardboard pack (20 cigarettes) American Filter ERA (Tiger) Cardboard pack (20 cigarettes) American Filter ERA (pink) Cardboard pack (20 cigarettes) American Filter DU LICH (blue) Paper pack (20 cigarettes) American Filter DU LICH (red) Cardboard pack (20 cigarettes) American Filter MELIA (green) Paper pack (20 cigarettes) American Filter FASOL (red) Cardboard pack (20 cigarettes) American Filter FASOL (brown) Cardboard pack (20 cigarettes) American Filter FASOL (blue) Paper pack (20 cigarettes) French Filter DA LAT Paper pack (20 cigarettes) French Filter GLOBE Paper pack (20 cigarettes) French No Filter MAl Paper pack (20 cigarettes) French No Filter MIC Paper pack (20 cigarettes) French No Filter (Source: Market Department of Saigon Tobacco Company Limited) 65 Graduation Paper - Nguyen Thao Vy Exported product mix of Saigon Tobacco Company Limited Criteria Characteristics Form of package Taste of product Product Premium product HOA BINH LIGHT Cardboard pack (20 cigarettes) British Filter D&J Cardboard pack (20 cigarettes) British Filter ERA FULL FLAVOR Cardboard pack (20 cigarettes) British Filter ASKA Cardboard pack (20 cigarettes) British Filter ASKA LIGHT Cardboard pack (20 cigarettes) British Filter MEMORY CLASSIC Cardboard pack (20 cigarettes) British Filter (Source: Market Department o/Saigon Tobacco Company Limited) 66 Graduation Paper - 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