Building a business strategy for personal protective equipment division of 3M Vietnam phase 2012 to 2016

i TRƯỜNG ĐẠI HỌC MỞ TP.HCM UNIVERSITÉ LIBRE DE BRUXELLES HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS SCHOOL MBAVB4 NGUYỄN THỊ THANH HÀ BUILDING A BUSINESS STRATEGY FOR PERSONAL PROTECTIVE EQUIPMENT DIVISION OF 3M VIETNAM PHASE 2012-2016 MASTER PROJECT MASTER IN BUSINESS ADMINISTRATION (PART-TIME) Supervisor: Dr. LÊ THÁI THƯỜNG QUÂN Ho Chi Minh City 2011 i COMMITMENT It is to confirm that I hereby, Nguyen Thi Thanh Ha conducted this final project of the MBA program with the acknowledgement of my professional supervisor and the management of 3M Vietnam. This is entirely my own work and any use of the materials extracted from books, articles, research papers, 3M’s data as well as other sources is indicated in the reference sources. I am confident to submit this project to the professors of the MBA program Ho Chi Minh City, March 2012 Nguyen Thi Thanh Ha ii ACKNOWLEDGEMENT I would like to express my sincere thanks to the professors of Solvay Business School for their lectures with useful knowledge and practical experience that I gained in the entire MBA course, to the program coordinator who provide much support and assistance from the beginning course till the accomplishment time. My deepest gratefulness goes to professional supervisor, Dr. Le Thai Thuong Quan for his valuable and practical advice that helps me complete the thesis. I acknowledge Mr. Parameswaran Nair - Managing Director, Leader team and colleagues of 3M Vietnam for conveniences and conditions they gave me to write this thesis. I am also thankful to my friends for the best sharing and support during my study. Last but not least, I would like to convey my lovely thanks to my husband for his support and great encouragement during the past two years of my study so that I can well complete the MBA course today. With my best regards, Ho Chi Minh City, March 2012 Nguyen Thi Thanh Ha iii COMMENTS OF SUPERVISOR The topic has practical meaning and the author has successfully shown the ability to build a strategy for market development. The results are based on the analysis of the industry structure and the customer survey. Therefore, the solution is persuasive. In overall, the presentation is clear and the thesis is up to the standard. I approve for the public presentation Ho Chi Minh City, March 15 th 2012 Le Thai Thuong Quan iv TABLE OF CONTENTS COMMITMENT i ACKNOWLEDGEMENT ii COMMENTS OF SUPERVISOR iii TABLE OF CONTENTS iv LIST OF FIGURES vii LIST OF TABLES vii LIST OF ABBREVIATIONS viii ABSTRACT ix INTRODUCTION TO THE STUDY 1 1. Rationale of the study 1 2. Problem statement 1 3. Research objectives and questions 2 4. Scope and Limitation of study: 3 5. Methodology and Framework of Research Study 3 6. The structure of study 4 1.1 Definition of Strategy 1 1.2 Stage of Strategic Management 1 1.2.1 Strategy Formulation 2 1.2.1.1 Mission and vision 2 1.2.1.2 External Analysis 3 1.2.1.3 Internal Environment Analysis 8 1.2.1.4 Strategy formulation Choice 9 1.2. 2 Strategy Implementation 12 1.2.3 Strategy evaluation 13 Chapter 2: ANALYSIS OF 3M VIETNAM PPE DIVISION’S EXTERNAL ENVIROMENT 15 2.1 Macro environment 15 2.1.1 Political, Government and Legal environment 15 2.1.2 Economic environment 18 v 2.1.3 Social, Culture, Demography and nature environment 20 2.1.4 Technological environment 21 2.2 Micro- environment analysis 22 2.2.1 Industry and market overview 22 2.2.2 Competitive environment 23 2.2.2.1 Barrier of entry 23 2.2.2.2 Substitute products 24 2.2.2.3 Bargaining power of buyers 25 2.2.2.4 Bargaining power of suppliers 25 2.2.2.5 Rivalry and competitor analysis 26 2.3 Summary of 3M Vietnam PPED opportunities and threats: 28 2.3.1 Opportunities 28 2.3.2Threats 29 Chapter 3 ANALYSIS OF 3M VIETNAM PPE DIVISION INTERNAL ENVIRONMENT 31 3.1 Business background 31 3.1.1 Introduction of 3M 31 3.1.2 Introduction of 3M Vietnam- PPE Division 31 3.2 Organization structure 32 3.2.1 Organization chart 32 3.2.2 Management 33 3.2.3 Human Resource 34 3.3 Business operation 34 3.3.1 Division vision and goals 34 3.3.2 Products and services 35 3.3.3 Market segmentation and customers: 38 3.3.4 Pricing 39 3.3.5 Distribution 40 3.3.6 Business current performance 40 3.4 Summary of 3M Vietnam PPED Strength and Weakness 42 vi 3.4.1 Strength 42 3.4.2 Weakness 42 Chapter 4 DEVELOPING THE BUSINESS STRATEGY FOR PPE DIVISION OF 3M VIETNAM PHASE 2012 – 2016 44 4.1 Strategy Formulation 44 4.1.1 Mission and Goals of 3M Vietnam PPE Division till 2016 44 4.1.2 SWOT strategy 44 4.1.3 Generic Strategies 48 4.1.3.1 Cost leadership strategy 48 4.1.3.2 Differentiation Strategy 49 4.1.3.3 Focus Strategy 50 4.2 Strategy Choice 50 4.3 Strategy Implementation 51 4.3.1 Implementing differentiation strategy 51 4.3.2 Management in strategy implementation 52 4.4 Evaluation strategy 53 CONCLUSIONS 55 REFERENCES 56 APPENDICES 58 APPENDIX A - EMPLOYEE SURVEY 58 APPENDIX B - RESPONSE FROM EMPLOYEE SURVEY 61 APPENDIX C - CUSTOMER SURVEY 66 APPENDIX D - RESPONSE FROM CUSTOMER SURVEY 71 vii LIST OF FIGURES Figure 1.1 – Framework of the study 4 Figure 1.3 – Porter’s Five Forces Model 4 Figure 1.4 Vietnam’s exchange rate and inflation 20 Figure 1.5 Population and Health Expenditure Indicators 2006 - 2012 21 Figure 1.6 Market share by competitors 26 Figure 1.7 3M Vietnam organization chart by big businesses 32 Figure 1.8 Organization chart by division 32 Figure 1.9 Sales by market segment and geographic in 2011 38 Figure 1.10 Division’s sales and earnings before tax by commodities 2011 41 LIST OF TABLES Table 2.1 Generic Strategies and the Five Forces 12 Table 2.2 Summary of Vietnam’s key economic indicators 18 Table 2.3 FDI Investment by industry 19 Table 2.4 Six competitive platforms of 3M and key competitors 28 Table 2.5 Benchmark 3M PPE product line with key competitors 37 Table 2.6 Summary of Financial Statement of 3M Vietnam PPED 41 Table 2.7 Summary of financial projection 2012-2016 44 Table 2.8 SWOT summary 45 Table 2.9 Summary of strategy valuation 51 viii LIST OF ABBREVIATIONS ANSI American National Standards Institute AS/NZS Australia and New Zealand Standard CE Conformité Européenne COB Consumer and Office Supply Business CPI Consumer Price Index DGB Display and Graphic Business ECB Electronic and Communication Business EN471 European Standard FDI Foreign Direct Investment GDP Gross Domestic Product HCB Health Care Business HCMC Ho Chi Minh City ILO International Labor Organization IMMA International Mining and Minerals Association IT Information and technology ITB Industry and Transportation Business KOSHA Korea Occupational Safety and Health Agency KPI Key Performance Index LCU Local Currency Unit MOH Ministry of Health MOLISA Ministry of Labor Invalids and Social Affairs NFPA National Fire Protection Association OEM Original Equipment Manufacturer OSHA Occupational Safety and Health Association PEST Political, Economic, Social and Technological analysis PPE Personal Protective Equipment PPED Personal Protective Equipment Division R&D Research and Development SSPS Safety, Security, Protection Services Business SWOT Strengths, Weaknesses, Opportunities and Threats WTO World Trade Organization ix ABSTRACT 3M Vietnam Limited is a subsidiary of 3M Global headquartered in the United States, a diversified company serving customers with more than 69,000 products and services. Personal protective equipment (PPE) division is one of the over 35 divisions of the company, has been operating in Vietnam for many years and achieving strong growth rates year by year. The division has soon realized many good opportunities in Vietnam PPE market and, at the same time, been aware of the increasing competition among players. More and more PPE suppliers are coming to Vietnam and some of the famous players are considering the option to build factories here to dominate the local market. In a recent press conference held by Honeywell Vietnam, a key competitor of 3M in PPE market, the management of Honeywell expressed their interests in investing in Vietnam, especially setting up a local factory (as www.dantri.com.vn posted 5th Dec 2011). As a result, PPED of 3M Vietnam is now facing a strong competition from not only other global and regional firms but also domestic players. With the aim to maintain loyalty customers, expand market share and become a leader in supplying PPE in Vietnam market, PPED needs to develop business strategies to drive accelerated growth. Joes Ross and Michael Kami stated: “Without a strategy, an organization is like a ship without a rudder, going around in circle, it’s like a tram; it has no place to go”. In response to business objectives that maintain high growth rates and dominate the market, this thesis will analyze the external and internal environmental factors that impact on business and indentify what external opportunities and threats are, what internal strengths and weaknesses are in order to choose the best strategy for the division. Recommendation will be made to guide how to carry out the strategy properly to achieve the best result. To support this thesis, there is an external survey conducted to collect customer’s feedback to 3M PPE products and services. The employee survey is conducted to understand the organization and human resource of division. The study has used the [...]... secondary data and internal materials/ data of 3M Global and 3M Vietnam, some research that had been completed by Corporate Marketing and Public Affair Department of 3M Global and 3M Vietnam The analysis based on the framework of Fred D David, the theory of some subjects I have learned during the MBA course such as: Strategy Management, Marketing, Labor Law, Applied Marketing, Management and Organization,... regulations and standards pertaining to occupational hygiene, determination of health standards for specific fields of work, management of occupational health care service delivery through its branches, performance of periodic health examination for workers, diagnosis of occupational disease, education and implementation of therapy and rehabilitation of workers and enhancing international cooperation... chapter will focus on identifying and evaluating the external environment beyond the control of 3M Vietnam The content will reveal the opportunities and threats that exist and confront to 3M Vietnam PPE business so that the manager of company can formulate strategy to take advantage of opportunities and avoid the threats 2.1 Macro environment Macro environment analysis is a part of the external analysis... business 5 Chapter 3: Analysis of 3M Vietnam PPED Division s Internal Environment The current situation of business includes company organization, business operation and financial that will help to identify what are strengths and weaknesses of business Chapter 4: Develop the strategy for 3M Vietnam PPE Division phase 2012- 2016 Based on the SWOT and competitive analysis in chapter 2 and chapter 3, strategies... workers, accounting 6% of national population With an average population growth rate of 1.2% / year, every year Vietnam has an addition of 62000 workers This promises of an optimistic picture for all PPE business in Viet Nam According to prediction of the labor safety department of Ministry of Labor Invalids and Social Affairs, there are about 170,000 people who have occupational accidents every year and... that enable an organization to achieve its objectives” Similarly, Thomas L Wheelen and J.David Hunger have defined strategy as “set of managerial decision and actions that determines the long run performance of a corporation” As above definitions implies, the strategy focus on integrating all functional activities and contribution of organization to achieve a particular goal in long term The strategy. .. health and life 3M Vietnam PPED has been set up in Vietnam since 1997 and be a first PPE supplier under multinational company having operation in Vietnam Although having nearly 16 years of operation and achieving the success in building brand in PPE market and high growth by yearly, 3M PPED in Vietnam has not had a 2 clear strategy to develop business and protect its share in Vietnam market PPED’s market... conducting a strategic analysis or doing market research, and gives an overview of the different macro environmental factors that the company has to take into consideration PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management It is a useful strategic tool... market share is now smaller than what it should have gained if its own strengths had been used There are not much contribution to top line and bottom line among Asia subsidiaries The aim of this thesis is to analysis the external environment factors that impacts to business growth to take advantages of opportunities and avoid the threat that creates barriers to business The natural internal analysis... organization a competitive advantage The firm must also look within itself to indentify internal strategic factors, that will give analysts know what are organization’s strength and weaknesses- those critical strengths and weakness that are likely to determine if the firm will e able to take advantage of opportunities while avoiding threats The internal analysis refers to as organization’s analysis and . study has used the x secondary data and internal materials/ data of 3M Global and 3M Vietnam, some research that had been completed by Corporate Marketing and Public Affair Department of 3M Global. strategy management has no roadmap to guide them. 1.2 Stage of Strategic Management Strategic consist of three stages are formulation, implementation and evaluation of strategies. Each stage. Review Strategy Formulation process Porter’s Five Forces and Generic Strategy Mission and Goal of Division External Analysis Internal AnalysisSWOT Analysis Generic Strategy analysis Strategy Choice Strategic