Group assignment digital transformation of vinamilk

products to 60 countries and regions and has a market share of 32.1% in Vietnam’s dairy industry.. Vinamilk faces competition from both domestic and foreign dairy companies, such as TH T

HO CHI MINH CITY UNIVERSITY OF ECONOMICS AND FINANCE (UEF)

FACULTY OF BUSINESS ADMINISTRATION

GROUP ASSIGNMENT DIGITAL TRANSFORMATION OF VINAMILK

Subject code: 231.BUS1128E.B05E

Lecturer - Instructor: Mr Bao Trung Duong

Group: 4

The study was conducted by: Hong Anh Vo 215018485

Nhu Lan Mai Nguyen 205012381 Truong Man Tran 215018833 Thinh Khang Truong 215018741

Table of Contents

Acknowledgement 1

CHAPTER I INTRODUCTION 1

1.Introducing to Vinamilk 1

2.Advantages and Disadvantages in Vinamilk’s digital transformation process 3

a)Advatages 3

b)Disadvangtages 3

CHAPTER II INDUSTRY STRUCTURERS 4

1.Porter’s five forces model 4

a)Threat of substitute products 6

b)Power of suppliers 6

c)Potential of new entrants into the industry 7

d)Power of customers 8

e)Competition in the industry 9

CHAPTER III COMPETITIVE STRATEGIES 10

CHAPTER IV VALUE CHAIN 11

1.Primary activities 11

2.Support activities 12

CHAPTER V THE LINKAGE IN THE VALUE CHAIN 13

CHAPTER VI Management Information System (MIS) 14

References 15

Foremost, we would like to express our sincere gratitude to our advisor, Mr Bao Trung Duong, for the continuous support of our research and for his patience, motivation, enthusiasm, and immense knowledge His guidance helped

us with all the research and writing of this thesis

This research is aided by the utilization of references and insights garnered from a plethora of correlated studies, specialized literary works, and journalistic publications, all of which are authored by numerous academics hailing from various universities, research organizations, and diverse institutions

Nevertheless, the scope of individual capability remains constrained, so research themes are bound to have deficiencies We hope to receive valuable feedback from lecturers, classmates, and colleagues to improve our research Last but not least, we sincerely thank you!

CHAPTER I INTRODUCTION

1 Introducing to Vinamilk

Established in 1976 as a state-owned enterprise with three dairy factories, Vinamilk became a joint stock company in 2003 and listed on the Ho Chi Minh Stock Exchange in 2006 It has expanded its production, distribution, and export network through mergers and acquisitions, joint ventures, and investments in domestic and foreign markets Today, Vinamilk is the largest dairy producer in Vietnam, with a vision to become a world-class brand in the food and beverage industry Vinamilk has been pursuing digital transformation as a key strategy to enhance its operational efficiency, product innovation, and customer

satisfaction Some of the highlights of Vinamilk’s digital transformation journey are:

 ERP system: Vinamilk has implemented an enterprise resource planning

(ERP) system to integrate and automate its core business processes, such

as finance, accounting, supply chain, sales, and human resources The ERP system helps Vinamilk optimize its resources, reduce costs, improve data accuracy, and support decision-making Vinamilk has also successfully deployed the ERP system at its subsidiary, Moc Chau Milk, within 10 months of its M&A in 2020

 Digital workplace: Vinamilk has adopted digital technologies to create a

flexible and collaborative working environment for its employees, especially during the COVID-19 pandemic Vinamilk has enabled remote working, online training, digital communication, and cloud-based applications to ensure business continuity and employee well-being Vinamilk has also invested in advanced technologies such as artificial intelligence, big data, and IoT to enhance its production and farming activities

 Digital marketing: Vinamilk has leveraged digital platforms and

channels to reach and engage its customers, both in Vietnam and overseas Vinamilk has utilized social media, e-commerce, online advertising, and influencer marketing to promote its brand awareness, product differentiation, and customer loyalty Vinamilk has also launched creative and value-added marketing campaigns, such as the

‘Hero Fruit Milk’ for kids, the ‘One Million Trees for Vietnam’ fund, and the ‘Stand Tall Vietnam’ milk fund

Vinamilk’s digital transformation has helped the company overcome the challenges of the pandemic and achieve positive growth in 2020 Vinamilk’s revenue and profit increased by 6% and 6.5%, respectively, compared to 2019,

and its market share in Vietnam’s dairy industry reached 32.1% Vinamilk also exported its products to 55 countries and regions and became the first

Vietnamese dairy company to be licensed to export to EAEU countries Vinamilk’s digital transformation has also been recognized by various awards and honors, such as the Best Corporate Governance in Vietnam 2020, the ASEAN Asset Class, and the Global CSR Award 2020

2 Advantages and Disadvantages in Vinamilk’s digital

transformation process.

a) Advatages

 Vinamilk’s factories and farms all apply automation and 4.0 technology, ensuring systematic and remote management

 Vinamilk’s supply chain operates entirely on the information technology system, connecting the input to the final output

 Vinamilk’s ERP system (enterprise resource planning) was employed 15 years ago, which helped facilitate sales and distribution activities, improving business efficiency

 Vinamilk’s cashless payment system helps the business run smoothly and reduces the risk of fraud

 Vinamilk’s digital transformation has helped the company overcome the pandemic and realize dual goals of governance, technology, and human resources

b) Disadvangtages

 Vinamilk’s digital transformation may face challenges such as

cyberattacks, data breaches, or system failures

 Vinamilk’s digital transformation may create a gap between the company and its customers or partners who are not familiar with or ready for digitalization

 Vinamilk’s digital transformation may require a change in organizational culture and employee behavior, which may encounter resistance or difficulties

 Vinamilk’s digital transformation may require a large initial investment

in technology and infrastructure

CHAPTER II INDUSTRY STRUCTURERS

1 Porter’s five forces model

Porter’s five forces include supplier power, which is the ability of suppliers to affect businesses by changing prices, quality, or supply of their products Supplier power depends on how many and how big the suppliers are, how different their products are, and how hard it is to switch to other suppliers For Vinamilk, supplier power is moderate to high, as most of its raw materials are imported and subject to price fluctuations and quality issues Vinamilk has been building long-term and sustainable partnerships with major domestic and foreign suppliers, such as Fonterra, Hoogwegt, or Perstima, to ensure a stable supply of high-quality and low-cost raw materials Vinamilk also operates its own farms and factories to control the quality and quantity of its production Vinamilk has eight main departments: dairy development, production and R&D, supply chain, finance, project management, marketing, sales, and HR and administration The company has a professional and systematic organization chart with clear hierarchy and responsibilities for each function

Vinamilk operates 15 farms and 17 factories in Vietnam and abroad, supplying up to 250 SKUs in its product portfolio Vinamilk also exports its

products to 60 countries and regions and has a market share of 32.1% in

Vietnam’s dairy industry

Vinamilk faces competition from both domestic and foreign dairy companies, such as TH True Milk, NutiFood, FrieslandCampina, Nestlé, and Fonterra Vinamilk has a competitive advantage in terms of brand perception, product quality, distribution network, innovation, and sustainability

Vinamilk’s industry structure is influenced by various factors, such as

consumer demand, government policies, environmental issues, and

technological trends Vinamilk has been pursuing digital transformation as a key strategy to enhance its efficiency, innovation, and customer satisfaction

diversity

Switching cost Liquid Milk Fonterra (SEA) Pte Ltd

Hoogwegt International BV Tetar Pak Indochina Perstima Binh Duong

Powdered Milk Fonterra (SEA) Pte Ltd

Hoogwegt International BV Tetar Pak Indochina Perstima Binh Duong

Yogurt Fonterra (SEA) Pte Ltd

Hoogwegt International BV Tetar Pak Indochina Perstima Binh Duong

Medium Medium Medium

Condensed Milk Fonterra (SEA) Pte Ltd

Hoogwegt International BV

Tetar Pak Indochina

Perstima Binh Duong

Table 1: Vinamilk’s supplier power.

a) Threat of substitute products

The threat of substitute products refers to the availability and attractiveness of alternative products that can satisfy the same customer needs as the industry’s products A high threat of substitutes reduces the profit potential of the industry,

as customers may switch to cheaper or better alternatives Factors that influence the threat of substitutes include the relative price and performance of the substitutes, switching costs, and customer loyalty

In the case of Vinamilk, the threat of substitutes is moderate to low, as dairy products are popular and essential for nutrition and health However, there are some potential substitutes that could affect Vinamilk’s market share and revenue, such as plant-based milk, cereal drinks, or soft drinks Vinamilk has been developing innovative and differentiated products, such as organic milk, probiotic milk, or functional milk, to meet changing customer preferences and needs Vinamilk has also been expanding to new markets and implementing responsible marketing and communication strategies to enhance its customer experience, market access, and brand reputation

Overall, Vinamilk’s competitive advantage in terms of brand perception, product quality, distribution network, innovation, and sustainability can help mitigate the threat of substitutes and maintain its market position in the dairy industry

b) Power of suppliers

Establishing a long-term and sustainable development target for major domestic and foreign strategic suppliers is the main goal of Vinamilk, which ensures the supply of raw materials Stable in high quality but also at very competitive prices Dairy farms are very important strategic partners of Vinamilk in providing consumers with the best products Milk purchased from farms must always meet the quality standards that have been signed between Vinamilk and domestic dairy farms, thanks to Vinamilk's support as well as capital and technical spending for this supplier

Fonterra (SEA) Pte Ltd Powdered milk

Hoogwegt International BV Powdered milk

Tetra Pak Indochina Beer and beverage canning machines

Table 2: Vinamilk’s Suppliers

Because most of Vinamilk's raw materials are imported, Vinamilk is highly dependent onenormous pressure from competitive suppliers In recent years, the increasing price of raw materials has also been the cause of increasing

production costs of Vinamilk

c) Potential of new entrants into the industry

The threat of new entrants for Vinamilk is relatively low, but not negligible According to the web page context, some of the factors that affect this threat are:

 Capital requirement: The dairy industry requires a lot of investment in

breeding animals, cooling systems, milking systems, and processing

facilities This creates a high barrier for new entrants who want to compete with established brands like Vinamilk

 Brand loyalty: Vinamilk has a strong brand image and reputation in the

domestic market, as well as in some international markets It has a wide distribution network and a diversified product portfolio Customers tend

to trust Vinamilk’s products for their quality and nutritional value This makes it hard for new entrants to attract and retain customers

 Government policies: The Vietnamese government has some policies

that support the dairy industry, such as tax incentives, preferential loans, and development plans These policies can benefit both existing and new entrants, but they also create some challenges, such as complying with regulations, standards, and quality control

 WTO membership: Vietnam joined the WTO in 2007, which opened up

the market for more foreign competition Vinamilk faces more pressure from international brands that have more resources, technology, and experience However, Vinamilk also has the opportunity to expand its export markets and attract more foreign investment

d) Power of customers

Vinamilk is the leading enterprise in Vietnam in manufacturing milk and milk products, accounting for about 40% of the national market It has over 240 distributors and 300,000 sales points nationwide This gives Vinamilk a strong position and bargaining power over its customers, as it can offer a wide range of products and services at competitive prices

Product differentiation and switching costs: Vinamilk has a strong brand image and reputation in the domestic and international markets It has a

diversified product portfolio, including dairy products, beverages, ice cream, yogurt, cheese, and milk powder It also produces A2 milk products, which are considered to have more health benefits than regular milk These factors make Vinamilk’s products more differentiated and increase the switching costs for customers who want to switch to other brands

Customers in the dairy industry are generally price-sensitive, as milk and milk products are essential commodities for daily consumption Customers also have access to information about the quality, price, and availability of different products and brands through various channels, such as online platforms, social media, and word-of-mouth This makes customers more aware of their choices and preferences, and reduces their loyalty to a single brand Customers can also compare and negotiate the prices of different products and brands, and switch to cheaper or better alternatives if they are dissatisfied with Vinamilk’s products or services

e) Competition in the industry

Vinamilk is one of the major players in Vietnam’s dairy industry, which has been growing rapidly in recent years According to a report by

ResearchAndMarkets.com, Vietnam’s dairy industry revenues nearly doubled from USD4.4 billion in 2017 to USD8.4 billion in 2021 The dairy market in Vietnam is mainly dominated by major players such as Vinamilk, Nestle Vietnam, Nutifood, FrieslandCampina, and TH Group The number of cows in Vietnam is expected to increase from 330,000 in 2019 to 700,000 in 2030, and fresh milk production is expected to rise from 1.2 billion liters in 2021 to 2 billion liters by 2030 Despite the rise in production, domestic fresh milk production can only meet 40–50% of domestic demand, with the rest relying

mainly on imports To remain competitive, local companies are looking for quality management and food safety solutions, while larger companies are investing in Industrial 4.0 technologies and R&D

Overall, the dairy industry in Vietnam is highly competitive, and Vinamilk faces competition from both domestic and international companies However, Vinamilk has a strong brand reputation, economies of scale, and a wide range of products, which gives it an advantage over its competitors

CHAPTER III COMPETITIVE STRATEGIES

 Brand identity: Vinamilk has changed its logo and slogan to reflect its

vision and mission of becoming one of the 50 largest dairy companies in the world It has also developed a consistent and distinctive brand image across its products and packaging Vinamilk has been recognized as one

of the strongest brands in Vietnam and Asia, and has won many awards and certifications for its quality and prestige

 E-commerce and online marketing: Vinamilk has expanded its online

presence and sales through various e-commerce platforms and social media channels It has also launched its own online store, Vinamilk eShop, to offer direct delivery and exclusive promotions to its customers Vinamilk has also implemented effective online marketing campaigns using a mix of traditional and digital media, such as TV, billboards, fan pages, websites, and mobile apps Vinamilk leverages e-commerce channels to reach more customers, especially during the pandemic, by cooperating with partners to customize its products and services for different markets, such as South Korea

 Innovation and diversification: Vinamilk has continuously improved

and innovated its products, both in terms of quality and variety It has