Project plan to distribute sony ericsson mobile phone in vietnam market

Page TRƯỜNG ĐẠI HỌC MỞ TP.HCM UNIVERSITÉ LIBRE DE BRUXELLES HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSEL SCHOOL MBMM5 Student name: PHẠM THỊ HỒNG ĐIỆP Title of project: Project Plan to distribute Sony-Ericsson Mobile phones in Vietnam Market Tai Lieu Chat Luong MASTER PROJECT MASTER IN BUSINESS & MARKETING MANAGEMENT Tutor’s Name: Assoc Prof Dr Hà Nam Khánh Giao Ho Chi Minh City (2011) Page UNDERTAKINGS I hereby declare “Project Plan to distribute Sony-Ericsson Mobile phones in Vietnam Market” is the result of my own research and work The contents of the plan refers to and use theory and information posted on the books, web pages that are listed in the References accordingly Student Phạm Thị Hồng Điệp Page ACKNOWLEDGEMENT Foremost, I would like to express my sincere gratitude to my Tutor, Assoc Prof Dr Hà Nam Khánh Giao for the valuable guidance, advices, comments, correction and encouragement Besides, I would like to thank my Mentor, Mr Phan Quang Tuan Anh for his continuous support of my project plan, for his patience, motivation, enthusiasm, and immense knowledge I am also grateful to Ms Vân Trần, Mr Tôn Thất Anh Tuấn, Mr Trần Mạnh Phương for their willingness to assist during my research My appreciation also goes to Prof Baeyens, Prof Trần Anh Tuấn and OU-Solvay MBA’s coordinators for the great support during my study and project working I thank my group mates for their cooperation and assistance (especially in my difficult time of baby delivery) and also for the funny time studying together in the last two years Last but not the least, I would like to thank my family: my husband and two sons for their supports and sentiments that encouraged me so much in studying this course Page Undertakings Acknowledgments Tutor’s comments List of signs & abbreviations List of figures & tables Page Chapter I: Executive Summary General Introduction Objectives of project Scope and limitation Methodology Framework Chapter II: Literature Review Key terms Background Chapter III: Project Plan External Analysis 1.1 Environment 1.2 Market 11 1.3 Competition 12 Internal Analysis 14 2.1 Context 14 2.2 SWOT 15 2.3 Objectives and targets 16 2.4 Primary research 16 2.5 Distribution Strategy 18 Page 2.5.1 Product 18 2.5.2 Market coverage 18 2.5.3 Channel system 20 2.5.4 Sales policy 22 2.6 Establishment of distribution system 25 2.6.1 Circulation management 25 2.6.2 Customer and service supplied 25 2.6.3 Facilities, infrastructure and resources 27 2.6.4 Timeline 28 2.6.5 Budget 29 Chapter IV: Conclusion 31 Page LIST OF SIGNS & ABREVIATIONS AFTA: Asian Free Trade Area EBIT: Earning Before Interest and Tax FTA: Name of a market research Company GDP: Gross Domestic Product GFK: Name of a World wide research group IMF: International Money Fund iOS: iPhone OS – Mobile Operating System of Apple IT: Information Technology Petrosetco: PET PSD: Petrosetco Distribution - Another subsidiary of Petrosetco POSM: Point Of Sales Material Smart-com: SC Sony-Ericsson: SE WTO: World Trade Organization Page LIST OF FIGURES Page Figure 1-1 : Subsidiaries of Petrosetco Figure 2-1 : How a intermediary effects economy of effort Figure 2-2 : Channel levels Figure 3-1 : Brand share by category (GFK) 13 Figure 3-2 : Region share (GFK) 19 Figure 3-3 : Monthly Volume by channel (FTA) 21 Figure 3-4 : SC distribution philosophy 22 Figure 3-5 : Retail channel (FTA) 23 Figure 3-6 : Brand Distribution (GFK) 23 Figure 3-7 : Brand growth (GFK) 24 Figure 3-8 : SC Circulation management 25 Figure 3-9 : Overall organization structure 28 Timeline 28 Figure 3-10 : Page LIST OF TABLES Page Table 3-1 : Volume of tiers’ contribution 19 Table 3-2 : List of cities/provinces in tier 20 Table 3-3 : Sales policy breakdown 24 Table 3-4 : Service levels 26 Table 3-5 : Facilities, infrastructure and resources 27 Table 3-6 : Sales target 29 Page CHAPTER I: EXECUTIVE SUMMARY General Introduction: PetroVietnam General Services Joint Stock Corporation (PETROSETCO) is a member of Vietnam Oil and Gas Group (PetroVietnam) having functions in trading and distribution, oil & gas services and real estates business In term of distribution, the service covers products of telecommunication equipment, Polypropylene, LPG, agricultural… in which, telecommunication equipment distribution including Nokia mobile phones occupies the highest density in terms of revenue and profit in the whole Coorporation Petrosetco Distribution Company, Ltd (PSD) is in charge of this business Rita Gunther McGrath concerned in Harvard Business Review about “the signs that a business model is running out of gas” Firstly, the problem arises when smaller and smaller improvements contained in next-generation innovations And a company’s staffs got stuck with ideas to vary its offerings Secondly, the new alternatives became more competitive and increasingly accepted by customers The last sign implied in financial numbers and other performance indicators The last two signs show up in Petrosetco’s telecommunication equipment distribution, particularly in Nokia mobile phones The Corporation has been finding that it is difficult to maintain the same income and profit from Nokia distribution that they experienced before 2011 and Petrosetco expects to jump off the hook by adding a principal’s entry After seeking for a new potential distribution ship, Sony Ericsson became the appropriate brand to be cooperated Because of an exclusive contract with Nokia, a new company was established in August with name “Smart-com” to take over the duty of distribution for this new product, however, not yet a particular distribution plan has been prepared except an existing general business plan for Nokia to be applied for Sony Ericsson mobile phones despite the difference between two brands’ position in the market Page PETROSETCO PIMD POTS PSA PSD Distribution of Nokia mobilephones PSV PSMT PSSG New subsidiary “Smart-com” Distribution of SonyEricsson mobilephones Figure 1-1: subsidiaries of Petrosetco (source: Petrosetco’s website) Objectives of project In order to make an appropriate distribution plan for the Company, a distribution strategy should be defined and a new distribution system should be organized From those objectives of the project, the title of “Project Plan to distribute Sony-Ericsson Mobilephones in Vietnam Market” has been placed Page 29 Key activities M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 Recruit and train staff First wave application in pilot market Second wave application Full roll-out Figure 3-10: Timeline 2.6.5 Budget a Sales target: based on current Sales report and product road map provided by SE: No Product 10 11 12 13 14 15 16 17 18 19 Elm J10i2 W100i W150i SE txt pro SE Mix Walkman SE SingoWalkman SE txt Zylo W20i Hazel J20i Satsuma Coconut Walkman W8 Xperia Arc Xperia X8 Xperia Mini Xperia Mini Pro Xperia Ray Xperia Arc 1.4 Xperia Neo 5MP 20 Xperia Pro Sales target in unit 525 2.120 1.085 4.000 4.000 2.600 4.717 3.600 560 720 3.100 2.660 2.965 5.930 1.240 1.240 1.660 820 2.400 Total quantity 580 46,522 Average unit price 203.28 Total sales (USD) 9,457,034 Table 3-6: Sales target (Source: Smartcom) Page 30 b Income: 9,457,034 c Total cost of good sold (CIF + 2% income tax) 8,223,508  Gross margin (15%) 1,233,526 d/ Average back margin to retailer (5%) 411,176 e/ Expenses (4%) 328,940  Cost of operations (wages, office expenses, depreciation, etc.) (2.1%)  Cost of logistics (delivery, packaging, labeling, inventory etc.) (0.6%)  Marketing (relationship management, tactical sales push) (0.5%)  Business risk (bad debts, loss on slow-moving products, etc.)( 0.5%)  Service charge to PetroVietnam and Petrosetco (0.3%)  EBIT (6%) f/ Bank Interest: 493,410 Total capital needed: 25,479,064 Total loan 22,145,731 Interest (~14.5%/year) g/ Tax (25% of earning after interest)  Net profit 267,594 56,454 169,362 Page 31 CHAPTER IV: CONCLUSION The Company should be well aware of the need of penetration the market in different way, rather than using the strategy of a successful Distributor As indicated in the beginning, a new strategy should be defined and a distribution system should be set to be appropriate with the position of concerned product in Vietnam market Through analyses in environment, market, competition…, this project plan has indicated, in simplest way, the strategy for product, customer, coverage, channel system, sales policy that are most needed in the beginning step of distribution system setting The Company should further consider the actual situation of capital, potential of area retailer, customer’s demand… that may be changing from time to time, to choose right options for actions plan such as in warehouse system, out-sourcing logistics, sub-distributor system in the remaining tear as well as to adjust the sales policy each time being After all, the opportunity for Smartcom is quite clear, this plan is proposed to the Company in the try to maintain the income for the whole corporation and gain the successful distribution ship with new principle as the first step for Smartcom to become a remarkable name in Vietnam mobile distribution market As mentioned, this project is made with limitation of time and thus, can only be a solution for the company in the short term With the vision of becoming a widely respected company in mobile-phones distribution like FPT, CMC, PSD… a marketing plan with further primary research such as surveys of buying preference of consumers, positioning of product such as in price… should be executed with objectives of not only extending market share and strengthening brand awareness of Sony Ericsson, but also that would be good preparation for the coming chances from other brands in the future Page 32 REFERENCES Ahmad (2010), “The state of well-being in South East Asia at the turn of the new millennium and a decade after”, GEOGRAFIA online TM Malaysia Journal of Society and Space issue 1, pp 60-67 BuddeComm (2011), “Vietnam - Telecommunications Infrastructure, Forecasts and Major Fixed-Line Players”, Retrieved: February 2, 2012 from: http://www.budde.com.au/Research/Vietnam-Telecommunications-InfrastructureForecasts-and-Major-Fixed-Line-Players.html Corey E R (1976), Industrial marketing: Cases and Concepts, 4th ed., ch.5 GFK (2011) , “ News_events”, Retrieved: December 10, 2011 from: http://www.gfkrt.com/asia/news_events/news/news_single/008665/index.en.html GSO Vietnam (2011), “Vietnam export-Import highlights in year 2010 GSO Vietnam”, Retrieved: December 10, 2011 from: http://www.vietpartners.com/statistic-imex.htm IMF (5th January 2012), “IMF forecast”, Vietnambusiness, Retrieved: December 10, 2011 from: http://vietnambusiness.asia/imf-forecasts-vietnam%E2%80%99s- inflation-at-18-8-pct-in-2011/ Indexmundi (2010), “Vietnam Inflation rate”, Retrieved: December 10, 2011 from: http://indexmundi.com/Vietnam/inflationrate(consumer_prices).htm Indochina Capital (2011), “Investing in Vietnam”, Retrieved: February 2, 2012 from: http://www.indochinacapital.com/investing_in_vietnam.php Page 33 Internet world Stats (2010), “Vietnam Internet usage stats & Marketing report”, Retrieved: December 10, 2011 from:: http://internetworldstats.com/asia/vn.htm Retrieved: December 10, 2011 from:: http://www.internetworldstats.com/stats3.htm Kotler P (2000), Marketing Management, Millennium Edition, ch 13, pp236-236 Kotler P (2000), Marketing Management, Millennium Edition, ch 13, pp241 Kotler P (2000), Marketing Management, Millennium Edition, ch 13, pp238-239 Kotler P (2000), Marketing Management, Millennium Edition, ch 13, pp245-247 McKenna, R (1991), "Marketing is Everything”, Retrieved: December 10, 2011 from: Harvard Business Review, http://hbr.org/1991/01/marketing-is- everything/ar/1 McGrath, R G (2011), “when your business model is in trouble”, Harvard Business Review, Retrieved: December 10, 2011 from: http://hbr.org/2011/01/whenyour-business-model-is-in-trouble/ar/1 Stern and El-Ansary (1995), marketing channels, pp.5-6 Viết Lê Quân (2011), “lãi suất cho vay cao chót vót”, Retrieved: February 2, 2012 from: http://vef.vn/2011-12-13-nghi-van-lon-lai-suat-huy-dong-giam-cho- vay-van-cao Wireless Federation (2010), “Vietnam mobile subscribers reaches the mark of 57mln by the end of September (Vietnam)”, Retrieved: February 2, 2012 from http://wirelessfederation.com/news/12913-vietnam-mobile-subscribers-reaches-themark-of-57mln-by-the-end-of-september-vietnam/ Page 34 APPENDIX 1/ Questionnaire: For the research to analyze distribution strategy for a product that having low market share, comparing to strategy for a leading product taking a major share of the market, and also to define a strategy in the position of the Distributor, since most of found theoretic literatures were in the position of the Manufacturer This question list had been sent to senior experts to prepare before conducting interviews 2/ E-mailing Question: to collect the idea from SC’s director about the reason why previous distributors fail in SE mobile phone distribution in order to analyze the competition 3/ Breakdown of cost and income: to illustrate the income data showed in the “budget” content 4/ Expenses: to illustrate the expenses data showed in the “budget” content 5/ Capital: to illustrate the interest data showed in the “budget” content Appendix QUESTIONAIRE (Direct interview) Topic “The distribution strategy for a mid-tear product that is having low market share, comparing to a leading product’s that is taking the biggest market share in Vietnam market” 1/3 Instructions: please complete the following questions to reflect your opinions as accurately as possible to the best of your knowledge and experience Your information will be kept confidential I/ 1/ 2/ 3/ Your information Your name: Your former and/or present duties regarding Distribution: Please choose product range you are/were responsible to distribute: II/ 1/ Your opinion: please mark the blank you think appropriate The mission  Maximize the market coverage Mid-tear product Leading product  Jump into the market Mid-tear product Leading product 2/ Brand building  Brand awareness Mid-tear product Leading product  Brand loyalty Mid-tear product Leading product Appendix QUESTIONAIRE (Direct interview) Topic “The distribution strategy for a mid-tear product that is having low market share, comparing to a leading product’s that is taking the biggest market share in Vietnam market” 2/3 3/ Target Market coverage  Big cities/provinces only Mid-tear product Leading product  All the areas Mid-tear product Leading product 3/ Intermediary  One level channel (one selling intermediary) Mid-tear product Leading product  Two-level channel (Two intermediaries) Mid-tear product Leading product  Three-level channel (Three intermediaries) Mid-tear product Leading product 4/ Channel system  Vertical Mid-tear product Appendix QUESTIONAIRE (Direct interview) Topic “The distribution strategy for a mid-tear product that is having low market share, comparing to a leading product’s that is taking the biggest market share in Vietnam market” 3/3 Leading product  Horizontal Mid-tear product Leading product  Multi-channel Mid-tear product Leading product III Your recommendation Please give your point of view for a right distribution plan to help the distributor to improve market position of a mid-tear mobile product in Vietnam Market THANK YOU SO MUCH FOR YOUR TIME IN COMPLETING THIS SURVEY APPENDIX -Original Message From: Phan Quang Tuan Anh [mailto:phan.tuan.anh@smartcom.com.vn] Sent: Wednesday, December 21, 2011 10:24 AM To: 'Pham Thi Hong Diep' Subject: RE: Emailing: Smartcom Company Profile, Chanel & Coverage, GFK_LOCALCHARTSET_SMPH_VN_VN_SONYERICSSON_May11, Business Plan Hello Diep, Below are the key problems with previous distributors: Market coverage: they did not try to coverage the retailer but focus on key customers such as TGDD, VTA only Market controlling: They are not mutual in term of Sales policy It made dealer uncomfortable when doing business with Sony Ericsson brand Anything need to explain futher, please let me know Thanks, Tuan Anh -Original Message From: Pham Thi Hong Diep [mailto:dieppham@petrosetco.com.vn] Sent: Tuesday, December 20, 2011 10:11 AM To: 'Tuan Anh' Subject: RE: Emailing: Smartcom Company Profile, Chanel & Coverage, GFK_LOCALCHARTSET_SMPH_VN_VN_SONYERICSSON_May11, Business Plan While you're so busy please just give me some ideas in analyzing "why SE's previous distributors fail in VN market", I'm really in need of that to finalize my project Tks a lot -Original Message From: Tuan Anh [mailto:phan.tuan.anh@smartcom.com.vn] Sent: Tuesday, December 06, 2011 4:36 PM To: Pham Thi Hong Diep Subject: RE: Emailing: Smartcom Company Profile, Chanel & Coverage, GFK_LOCALCHARTSET_SMPH_VN_VN_SONYERICSSON_May11, Business Plan Trua thu nha, anh dang o Hanoi, mai ve :-D Được gửi từ điện thoại Sony Ericsson Xperia arc Pham Thi Hong Diep viết: >Lúc có thời gian a explain giúp e ý sau:(it's not urgent, as long as you don't ignore the answer :) > > > >1/ Market analysis: what “weighted distribution” and “numeric distribution” mean? How you commend of Nokia and Sony Ericsson’s performance in here, as examples > > > > > >2/ What “Ths Units” and “Mio Value” mean? Does this table desribe the “winners” and “losers” in each category such as Sales? > > > > >I have to apply theory to the project so please try to help (referred theories as attached My writing is still primitive draft so please delay commending on that :) > > > >Thanks a lot >> > >(muốn gom nhiều câu hỏi để a đỡ thời gian nhiều thỉnh thỏang nhảy vào viết nên đành tới đâu hỏi tới vậy, sorry for that) > APPENDIX Breakdown of cost and income Month Q'TY 3 07 month 1,862 4,550 5,355 8,715 8,680 8,680 8,680 46,522 Average cost Cost of good sold = CIF+2% Import tax USD (=3*4*1.02) Total income USD 6(=5*1.15) 166 315,274 362,565 169 784,329 901,978 175 955,868 1,099,248 161 1,431,177 1,645,854 198 1,753,013 2,015,965 198 1,753,013 2,015,965 139 1,230,650 1,415,248 173,30 8,223,508 9,457,034 APPENDIX Expenses Item Description Fixed cost Labor cost Labor insurances Electricity (office) Office rental Stationary Maintenance & Reparing cost (office, warehouse…) Telephone, fax, internet Maintenance & Reparing cost (IT system) 10 11 Uniform Value 2.541.541.667 149.941.965 12.000.000 819.000.000 50.400.000 11.000.000 35.000.000 8.000.000 31.500.000 Business rate 3.000.000 Depreciation 78.033.333 Variable cost Good Delivery 302.025.658 Label cost 24.154.400 Label sticking cost 30.193.000 Packaging 28.000.000 Bank bond 115.505.000 Travel cost 129.600.000 Bad debt 555.357.733 Low moving good 198.593.265 Other oursoursing expenses 10 Customs fee 11 Good auditing, certifying 104.000.000 112.000.000 Note 106.000.000 12 13 14 15 16 Product introduction, seminar, exhibition 104.000.000 Marketing and intensive 577.525.000 Relationship cost Service charge to Petrosetco (0.05%) Service charge to PetroVietnam (0.05%) Total VND USD 127.000.000 288.762.500 288.762.500 6.853.507.995 328,940.00 doanh thu 198.593.265.000 Loi nhuan 1.054.000 APPENDIX Capital Month Inventory Q/ty Total month VNĐ Custormer debt Pre-payment to manufacturer Capital need Charter capital VNĐ VNĐ VNĐ VNĐ VNĐ USD VNĐ Bank loan Loan interest 3.188 11.113.368.000 5.964.595.560 6.490.932.000 23.568.895.560 10.000.000.000 13.568.895.560 7.807 163.957.488 6.825 24.706.363.500 16.297.593.576 16.147.950.000 57.151.907.076 10.000.000.000 47.151.907.076 27.131 569.752.211 8.033 30.109.826.250 25.279.177.546 - 55.389.003.796 10.000.000.000 45.389.003.796 26.117 548.450.463 13.073 45.082.084.950 38.375.846.847 - 83.457.931.797 10.000.000.000 73.457.931.797 42.267 887.616.676 13.020 55.219.903.200 51.452.713.948 - 106.672.617.148 10.000.000.000 96.672.617.148 55.625 1.168.127.457 13.020 55.219.903.200 59.298.834.209 - 114.518.737.409 10.000.000.000 104.518.737.409 60.140 1.262.934.744 13.020 38.765.487.600 55.535.773.325 - 94.301.260.925 10.000.000.000 84.301.260.925 48.507 1.018.640.236 70.178 260.216.936.700 252.204.535.012 22.638.882.000 535.060.353.712 70.000.000.000 465.060.353.712 267.594 5.619.479.274