Building business strategy for Hoang Lien Limited Company in period of 2013-2020

Business phone: +8420.3820560 Confirmed: The information and data in the captone report project “BUILDING BUSINESS STRATEGY FOR HOANG LIEN LIMITED COMPANY IN PERIOD OF 2013-2020”.. Com

CAPSTONE PROJECT REPORT

BUILDING BUSINESS STRATEGY FOR HOANG LIEN LIMITED COMPANY

IN PERIOD OF 2013 - 2020

Class : GaMBA.M0311

Group : 04

Hoang Hong Hanh Nguyen Duy Hoa Luong Thi Van Giang

HANOI - 2013

ACKNOWLEDGEMENTS

Lao Cai, March 17, 2013

Hoang Lien Limited Company,

Address: N° 136, Hoang Lien street, Lao Cai city, Lao Caiprovice Business phone: (+84)20.3820560

Confirmed: The information and data in the captone report project “BUILDING

BUSINESS STRATEGY FOR HOANG LIEN LIMITED COMPANY IN PERIOD

OF 2013-2020” The data provided by the Hoang Lien to Groups 4 is consistent with the actual Companies appreciate the captone report project of Group 4 — Ga.M0311 in the Global Advanced MBA and considering this is valuable content advisory business strategy for this company since 2020

WRISGY MOST - Croup 4 Capstone Project

1.1.1 Concepts of business strategy

1.2.1 The input stage

1.2.2 The matching stage

1.2.3 The decision stage

LIMITED COMPANY

2.1.1 History and development

2.4.2 Vision and mission —_

2.1 INTRODUCTION OF HOANG LIEN LIMITED COMPANY

CHAPTER 3 STRATEGY SELECTION AND SOLUTION FOR HOANG

LIEN LIMITED COMPANY IN PERIOD 2013-2020

Mai Long Limited Company

Provincial Competitiveness Index

Pha Minh Vocational Centre Tien Loc Investment Joint Stock Company Tien Thanh Trading Limited Company Trung Lan Limited Company

Viet Y Limited Company Vietnam dong

Yamaha Motor Vietnam Co., LTD

Sale - Service - Spare Parts

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LIST OF TABLES

_ Table 1-1: Corporate strategy

Table 2-1: Basic technical parameters of the motor in Lao Cai

Table 2-2: Motorcycle businesses in Laocai

Table 2-10: Variables FS, CA, ES, IS of HLC

Table 3-1: Suggested strategies of HLC

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Figure1-4: SPACE matrix

Figure 1-5: Grand Strategic matrix example

‘Page

Biptre 1-2: Business environment 7 5 ~

“Figure 1-3: SWOT Matrix 9

Figure 2-1: Ôrgrmizsifon SiruefiiB 17

Figure 2-2: SPACE matrix of HLC 42 |

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LIST OF APPENDIX

| Appendix 2.1: BALANCE SHEET in 2010

"Appendix 2.2: BALANCE SHEET in 2011

_ Appendix 2.4: INCOME STATEMENT 2010

Appendix 2.5: INCOME STATEMENT 2011

Appendix 2.3: BALANCE SHEET in 2012

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INTRODUCTION

i The significance of study The world economy in general, Vietnam's economy in particular in the last 5 years were challenging, the disruption in the public sector,

financial market crisis, the word "restructuring" is usually mentioned in economic

news of Vietnam Many small businesses fall into difficulties due to lack of orientation to adapt to new circumstances Thus, group 4 decided to build business strategy for Hoang Lien Limited Company (hereinafter referred to as HLC) HLC, a small business in Lao Cai (related to a member of Group 4) met certain confusion about strategic direction to 2020, Group 4 expect to find advice on the direction, the best opportunities for development of HLC

ii Objectives of study By summarizing theoretical basis of business strategy and

effective methods, Group 4 can apply our useful knowledge to develop the business

operations of all kind of enterprises regarding its type, scale and location Group 4 desires that our capstone project will be submitted to the leaders of HLC and persuade them to utilize this study as a useful consulting material

iii Method of study With data provided by Hoang Lien Limited Company (HLC) and collect more information, Group 4 will analyse the external environment and

internal environment of the HLC by using analysis tools as EFE, IFE, PEST, 5

forces of Michael Porter, SWOT, SPACE, Grand strategic matrix and QSPM From these matrixes and our experience, group 4 will suggest to select business strategy

and some solutions in term of human resource, marketing, finance, production from now to 2020

iv Structure of study: there are 3 chapters

Chapter 1: Review of Literature on business strategy

Chapter 2: Analysis on Business situation of Hoang Lien Limited Company

Chapter 3: Strategy selection and Solutions to implement selected strategy for Hoang Lien Limited Company during the period of 2013-2020

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CHAPTER 1:

REVIEW OF LITERATURE ON BUSINESS STRATEGY

1.1 BUSINESS STRATEGY

1.1.1 Concepts of business strategy

Strategy is a term derived from the Greek word "Strategos", used in the military, that is the art of leader to win Since the mid-twentieth century, the strategy was applied in business and the term "business management" was used Over the time the economists has many opinions, approaches on different business strategies There are the followings:

Chandler, A (Strategy and Structure Cambrige, Massachusettes MIT Press 1962):

"Strategy is the determination of objectives, basic long-term goals and the

application of a sequence of actions as well as the allocation of resources needed to

accomplish this goal”

Quinn, J., B (Strategies for Change: Logical Incrementalism Homewood, Illinois, Irwin 1980): “Strategy is the pattern or plan to integrate the major objectives, policies and sequences of actions into a tight cohesion”

Brace Henderson connected concepts with strategic competitive advantage

"business strategy is careful search for a plan of action to develop and combine

competitive advantage The differences between the company and its competitors are the basis for the company’s advantage.” Michael Porter also agreed with

Henderson “competitive strategy related to the differences It is the careful selection

of a series of special activities to create a unique set of values”

Through the reviews, current popular understandings of business strategy is:

“Business Strategy is the art of coordination and activities control in order to achieve long-term goals of the business”

By studying the theory of business strategy, Group 4 considers the business strategy

is the general plan of what to do in a certain period of time based on the awareness

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of the strengths, weaknesses, opportunities and challenges Group 4 said: "The business strategy is a goal-oriented plan of the enterprise on the basis of the assessment and forecast of specific strengths, weaknesses, opportunities and challenges”

1.1.2 Features of business strategy

Strategy defines the specific objectives and orientation that the business should fully and thoroughly achieve in each period and in the areas of business Strategic direction ensures the continuous and steady development of enterprise in a

constantly fluctuating environment

Business strategy outlines the direction the business operation in long term, the framework of the business in the future It only oriented business in paper,

implementing the strategy requires the combination of strategic goals with

economic goals in considering the reasonableness and adjusting to suit the business environment and context for ensuring business efficiency and correct the bias due to the strategic direction

Business strategy is built on the basis of competitive advantage to ensure maximum

mobilization and combine with the exploitation and usage of resources, core competence in current and future in order to promote the advantages, seize the

opportunity to gain competitive advantage

Business strategy reflects a continuous process from formulation, to organization,

implementation, evaluation, inspection and adjustment

Business strategy always expresses successful ideas to win the competition

Business strategy is formed and implemented on the basis of finding and taking advantage of business opportunities, the comparative advantage of the business in

order to achieve high business efficiency

Business strategy is only used by some senior leaders Al] important strategic

decisions in the process of building, implementation, evaluation and adjustment

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strategies are focused on the senior strategic management group to ensure the accuracy of the long-term decisions, confidential information in competition

1.1.3 Roles of business strategy

Business strategy helps businesses realize the purpose and direction in future as a guideline for all business activities

Business strategy helps businesses understand and take advantage of opportunities,

and take proactive approach to deal with the risks and threats in business market

Business strategy contributes to improve the efficiency usage of resources and strengthen its position to ensure continuously sustainable development

Business strategy creates a solid foundation to make consistent decisions with the

changes of market It enables a solid basis for research and deployment, investment

and development, personnel training, market expansion and product development

In fact, most of the mistakes in investment, technology, market are derived from

business strategy formulation or any difference in strategic objectives

1.2 STRATEGY ANALYSIS AND FORMULATION

According to Fred R David in ’Concepts of strategic management”, process of

formulating and selecting strategy consists three stages (Figure 1-1) Tools in this process can be used in different kinds of snterprises, scales to identify, evaluate and

Opportunities, Threats SPACE matrix ị

(SWOT) : Grand strategy Matrix

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All nine techniques in the strategy formulation process will require a combination

of intuition and analysis The self-governing units within an organization often use techniques to set out the strategy formation and strategic objectives The results of

each analysis is the basis to identify, evaluate and choose between these strategies

in a higher level

1.2.1 The input stage

1.2.1.1 External Factor Ananlysis

The control of the external factors will show the opportunities and threats faced by enterprises which managers can draft strategy to take advantage of opportunities and avoid or reduce the effects other threat The external factors include macro and micro environment (industry environment)

Economic Technology

Potential competitors

Pressure Pressure

of Existing of suppliers competitors buyers

Politic and laws

Figure 1-2: Business environment PEST model studies the impacts caused by the macro environment factors,

including: Economics, Technological, Sociocultural, Nature, Political

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Five competitive forces model The mission of the strategy makers is to analyze and

judge the competitive forces in the industry environment to identify opportunities

and threats Five competitive forces model of Michael Porter helps to determine the

competitive forces: Competition from existing competitors; Threats from potential

competitors; Pressure from suppliers; Pressure from customer; Threats from

substitutes

External Factor Evaluation Matrix (EFE matrix)

External Factor Evaluation (EFE) Matrix allows evaluating major influence of the

external environment on the enterprise: Economy, Socio cultural, Technology,

Politic and laws, and Nature EFE Matrix is deployed through five steps: Step J: Listing key external factors affecting the enterprise’s operation Step 2: Assigning a

weight from 0.0 (indirect, least important) to 1.0 (direct, most important) for each

factor The classification shows the corresponding importance of factors to the success of the enterprise in the industry Step 3: Assigning a rating from 1 (weak response and influence) to 4 (strong response and influence) for each critical success factor to show the response of the enterprise’s current strategy to these factors Step 4: Multiplying the weight of each factor with respective rating to

determine the total weighted score Step 5: Adding the total weighted score of factors with the sector of the enterprise The average score is 2.5 If the total

weighted score is lower than 2.5, it shows a weak response If it is above 2.5, it will

show a strong and positive response to the enterprise

1.2.1.2 Competitive profile matrix

Competitive Profile Matrix is an extension of the external factors evaluation matrix

in the case of the classification and the total number of important points have the

Same meaning Competitive Profile Matrix differs with external factors evaluation

matrix is that the factors of important decisions for the success can also be included

in financial stability, the effectiveness of the ad, the professional activities of

research and development Besides, The differences between the two matrixes are

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provide a strategic information

1.2.1.3 Internal Factor Evaluation Matrix (IFE matrix)

Senior leaders do the analysis of business regularly However, the requirements of internal business analysis at a higher level is to list out the strengths, weaknesses and advantages in each field and operation, as a basis for planning strategy There are many approaches to analyze the enterprise Group 4 only refers to analyze the

enterprise according to the basic resources of the enterprise

Analysis of the potential resources of enterprise: Analysis of human resources:

Human resources is an important factor of production and business Therefore, the analysis and forecasting of human resources at all three levels: board of directors,

managers, supervisors and employees is an important content of internal analysis Analysis of the financial resource: The function of the finance department including

analyzing and supervising the implementation of the financial plan and the financial situation of enterprises Accounting and finance needs to be analyzed the following aspects: short-term capital mobilization; long-term capital mobilization; the ratio between liabilities and equity; capital costs compared to the industry and the

competitors; tax issues; relationships with owners and shareholders; mortgage loan situation; the ability to utilize alternative financial strategies like lease or sale and

hire; capital, the flexibility of capital structure Accounting systems and performance is effective for cost planning and financial planning, profit planning

Analysis on infrastructure resource: Although infrastructure resources of the

enterprise are significantly different, but in the strategic planning, it plays an

important role The analysis in the right direction: the technique level - the current technology and ability to get advanced technology? Scale production capacity is

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adequate? Current capacity utilization? Distribution network is an effective means

to reach customers? The possibility of cooperation, investment, ventures

In short, businesses need to combine these three resources to create a total force from the existing resources and additional resources This total resource contributes

to the quality of business strategy planning and implementation Analyzing the

internal environment is a detail analysis of the information, factors of the internal

environment, especially, the relationship between the factors and the element analysis In particular, we should pay attention to the direction data rather than quantitative data, especially, time of the data Since then draw out the strengths and

weaknesses of the business

Internal Factor Evaluation Matrix (IFE): A summary step in conducting an internal strategic management audit is to construct an internal factor evaluation (IFE) matrix This strategy formulation tool summarizes and evaluates the major

strengths and weaknesses in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among those areas An IFE matrix

can be developed in five steps: Step 1: List key internal factor as identify in the internal-audit process Use a total of from 10 to 20 internal factor including both strengths and weaknesses List strengths first and then weaknesses Step 2: Assign a

weight that ranges from 0.0 (not important) to 1.0 (all - important) to each factor

The weight assigned to a given factor indicates the relative importance of the factor

to being successful in the firm’s industry The sum weights must equal 1.0 Step 3:

Assign a 1 to 4 rating to each factor to indicate whether that factor represents a major weakness (rating = 1), a minor weakness ( rating = 2), a minor strengths

(rating = 3) or a major strengths (rating = 4) Note that strengths must receive a 3 or

4 rating and weaknesses must receive a | or 2 rating Ratings are thus company —

based, whereas the weights in step 2 are industry - based Step 4: Multiply each factor’s weight by its rating to determine a weighted score for each variable Step 5: Sum the weighted scores for each variable to determine the total weighted score for the organization

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- threats (WT) The combination of the important factors is the most difficult task of

developing a SWOT Matrix and requires good judgment SWOT matrix is shown in

2 3 strengths to 3 Limit weaknesses

3 a exploit business a to exploit the

4 List the 5 opportunities of 5 business

5 opportunities the external ‘ Opportunities

6 " environment for " brought from

Tu creating business outside

3 5 Use strengths to A Minimize risk and

4 4, avoid threats from 4 avoid the threats

5 List the threats 5 the enterprise's 5 from the outside

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1.2.2.2 The SPACE matrix

The Strategic Position and Action Evaluation (SPACE) is another important tool to combine in matching stage, described in Figure 1-4 A four-quadrant framework

indicates whether aggressive, conservative, defensive, or competitive strategies are most appropriate for a given enterprise or company The axes of the SPACE Matrix

represent the two internal dimensions of a competitive firm which are its financial

strength (FS) and its competitive advantage (CA) and two external dimensions, which are environmental stability (ES) and industry strength (IS) These four factors are the most important determinants for the strategic position

FS +6

+5

+4

conservative aggressive

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1.2.2.3 The Grand Strategy matrix

The Grand Strategic Matrix is a popular tool to form feasible strategies All organizations can be located in one of the four quadrants of this matrix Parts of the company can also be located in the same position It will be shown in Figure 1-5, the Grand Strategic Matrix based on the following two aspects to evaluate: competitive position and market growth The appropriate strategies for companies are listed in order of attractive level in each quadrant of the matrix

THE FAST GROWTH OF MARKET

Quadrant II Quadrant |

1 Market Development 1 Market Development

2 Market penetration N Market penetration

3 Product Development 3 Product Development

4 Horizontal integration 4 Forward integration

5 Divestiture 5 Backward integration

6 liquidation 6 Horizontal integration

Quadrant III Quadrant I'V

1 Reduce costs 1 Focused diversification

2 Focused diversification 2 Horizontal diversification

3 Horizontal diversification 3 Diversification

4 Diversification 4 Joint venture

5 Divestiture

6 Liquidation

THE SLOW GROWTH OF MARKET

Figure 1-5 Grand Strategic matrix example The companies in the quadrant I have very good strategic position For these companies, continuously focusing on the current market (market penetration) and products (product development) is the appropriate strategy When the companies

have plenty of resources, the forward/backward or horizontal integration can be effective strategies When a company is so focused on a single product, the related

diversification can reduce the risks of a narrow product line Companies in quadrant

I can be able to take advantage of external opportunities in various fields; they can take risks when necessary

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The companies in quadrant II need to carefully evaluate their current approach to

the market Although its industry is growing but they can not compete effectively,

and need to determine why the current approach is not effective and how can change to improve for best competition activities Because these companies are running in fast growth rate markets, focalization (as opposed to combination or diversification) is usually the first choice that companies need to consider However, if the company does not have a special ability or competitive advantage, horizontal integration is usually selected strategy Divestiture strategy can provide capital to buy other businesses or its shares

The companies in quadrant III is competing slow growth and weak competitive position These companies must have changed dramatically and quickly to avoid

failure and probability of default The most important action is implementing cost reduction and capital cost Another strategy that can replace the resources of the

current business activities to other areas If all fails, the last option for the

enterprises is Divestiture or liquidation

The enterprises in the fourth quadrant have strong competitive position but under the low-growth industry These companies have the strength to launch diversified

programs into the more promising growth areas The company with high cash flow and limited internal growth needs can successfully pursue focused diversification strategies, horizontal diversification or Alliance The companies of in quadrant IV

may also pursue joint ventures strategy

1.2.3 The decision stage

Analysis and intuition are basis for decisions about the strategy formation The

combination of both techniques are discussed to show selected strategies Many of these strategies are usually proposed by the executives and the staffs involved analysis and strategic selection Any additional strategies that are derived from an analysis of the matching stage can be discussed and added to the list of possible

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strategies selections As mentioned at the beginning of this study, participants can

evaluate this strategy by sorting from | to 4 to set up the list of "best" strategies

In addition to the classification of strategies for the establishment of a priority list, according to the materials, there is one analysis techniques to determine the relative attractiveness of feasible strategies This technique is Quantitative Strategic Planning Matrix (QSPM), it is stage three of the analytical framework for strategy formulation This matrix is a technique which shows objectively which is the best alternate strategy QSPM uses the inputs by the analysis in the first stage and the

matching results of stage 2 to "decide" the attractive points of alternatives I.e the

EFE Matrix, Competitive Profile Matrix and IFE matrix of stage 1, with TOWS

matrix, SPACE matrix and Grand strategic Matrix in stage 2, to provide the

necessary information to set matrix QSPM (stage 3)

This matrix is a technique which shows objectively which is the best alternate strategy QSPM summarizes analytic results in previous phases; helps planners

Select decisions objectively However, like other tools of strategic analysis and establishment, QSPM also requires good judgment by intuition

Strategy 1 Strategy 2 Strategy 3

Internal factors

From IFE

External factors

From EFE

Internal factors: 1 = weakest; 2 = Less weakest; 3 = Less strongest; 4 = Strongest

External factors: 1 = Poor; 2 = Average 3 = Good; 4 = Excellent

Figure 1-6: QSPM

Figure 1-6 is the basic model of QSPM The left column of QSPM include internal and external factors (phase 1), and the top row consists of alternatives strategies (phase 2) In particular, the left column of QSPM includes the factors from EFE

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Matrix and IFE Matrix Column next to the key success factors is the weight of each

factor in the EFE Matrix and JFE Matrix

Based on the concepts, QSPM determines the attractiveness of various strategies by leveraging or improving the key successful factors The relative attractiveness of each strategy among alternative strategies can be calculated by determining the cumulative effect of key success factors A QSPM can include any number of alternative strategies and in a certain strategic groups of any number of strategies

But only new strategies in a certain group are evaluated together For example, in a

group of focused diversification, horizontal diversification, and joint venture, while

a group of other strategies may include issuing divestiture to increase the amount of capital Two strategy groups are different and QSPM only evaluates the strategy in its group Figure 1-8 includes three strategies and they are in a group

Six steps to develop a QSPM Matrix: Step J: Listing important external

opportunities/threats and internal strengths/weaknesses of the enterprise Step 2:

Assigning a weight to each internal and external critical success factor This step is similar to IFE and EFE matrices Step 3: Listing strategic alternatives that the enterprise should consider to implement Gathering strategies into separate group if

it is possible Step 4: Finding out the attractiveness score (AS) of each strategy The

attractiveness score is rated as follows: 1- not acceptable; 2- possibly acceptable; 3- probably acceptable; 4- most acceptable If the success factors do not have influence

on the strategy selection, do not mark them Step 5: Calculating the total

attractiveness score (TAS) by multiplying the weight (step 2) with the attractiveness

score (step 4) in each row Step 6: Calculating the sum total attractiveness score by

adding all total attractiveness scores in each strategy column of the QSPM Higher scores point at a more attractive strategy

The concepts and tools of modern strategy formulation, which were described in

this chapter, are combined strategic framework of three phases SOWT matrix, SPACE, QSPM, which can greatly increase the quality of strategic decisions, cannot be used to control Strategic selection as behavior, culture and politics has

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selection of strategies This is a positive trend for the organizations

According to Fredr David in “Concepts of business strategy”, there are following

Product Seeking increased sales by improving present products or

Development services or developing new ones

elated

ne Diversification Adding new but related products or services

Unrelated , Adding new, unrelated products or services

Diversification

Horizontal Add on products or services relating to current customers

Diversification

Two or more than two companies cooperate to form one

Joint Venture company on the purpose of coordination ie

Regrouping through cost ducti clinin

Eetrenchment grouping 5 and asset reduction to reverse declining

sales and profit Divestiture Selling a division or part of an organization

er elli ` |

Liquidation Selling all of a company’s assets, in parts, for their tangible

worth Synthesis Implement two or more than two strategies in the same time

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CHAPTER 2:

ANALYSIS ON BUSINESS SITUATION

OF HOANG LIEN LIMITED COMPANY 2.1 INTRODUCTION OF HOANG LIEN LIMITED COMPANY

2.1.1 History and development

Hoang Lien Co., Ltd., a two-member limited company, was established in 1993

HLC started to do business in mainly electronics, refrigeration The period 1995-

1998, HLC sold electronics, refrigeration and motors imported from Russia, Germany, Thailand, China

In 1999, HLC became one of trusted dealers of Yahama Vietnam (YAVN) Since

2005, HLC has become the 3S shop of YAVN

In 2007, HLC became exclusive Suzuki 3S dealer in Lao Cai Province of Tien Loc

Group In 2007, HLC participated real estate business in Hanoi and Lao Cai, but

noticing that the field needs more capital and also risky, HLC rapidly withdrawn

out of this field Up to now, properties in Hanoi have sold out, HLC retains only the

few real estate in Lao Cai

In 2011, HLC cooperated with Mai Long company (another Yamaha 3S shop at Lao

Cai, a big rival of HLC) to establish HST Co.,Ltd to build Yamaha 3S dealer in Pho Lu town, Bao Thang district, with the desire to control the motorcycle market

in three lowland districts of Lao Cai, such as Bao Thang, Bao Yen, Van ban

However, due to difficulties this project has not been deployed

In mid-2012, when Trung Lan Co.,Ltd was cancelled the position as a Piaggio motor shop in Lao Cai, HLC and Mai Long continued to cooperate to establish Viet

Y Co.,Ltd as a Piaggio Vietnam 3S exclusive shop in Laos Cai and opened new

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districts in Lao Cai province and Lai Chau province So far, HLC is one of the

leading motorcycle businesses in Lao Cai province; especially the Yamaha Phi Son

brand has achieved a position in the hearts of consumers in Lao Cai

Yamaha 3S system was established in 1999, Yamaha 3S shops are actually important

parts of YAVN This will not change in the near future by this system account for more

than 90% of the total number of, dealers of YAVN Through a network of over 270

Yamaha 3S shops, the needs and opinions of all customers were recorded and YAVN has constant innovation, improved product to provide satisfaction to our customers

Currently, in Lao Cai there are 2 Yamaha 3S dealers as HLC and Mai Long

2.1.2 Vision and mission

With a passion for motorcycles, Nguyen Phi Son, Director of HLC, since 1980, has always owned the leading motorcycle brands of Russia, Germany, Japan As an expert in the field of motorcycles, Phi Son desires to share a passion for motorcycles with everyone; he established HLC and focused on motorcycle

business with three major brands, Yamaha, Suzuki and Piaggio So far, even though

the business has expanded and joint ventures, HLC is faithful to the original mission It is certain that passion is combined with earning profit So the objective

of HLC is: Share your passion, connect business

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2.1.4 Products and services

HLC is selling in many kinds of motorcycles such as Yamaha (Manual & Automatic transmission), Suzuki (Shapphire and Bella), Piaggio (Vespa, Liberty, Beverly, Zip, Fly) However, the main motors of HLC are Yamaha brands such as

Sirius, Jupiter, NOUVO, TAURUS, Exciter, Nozza, Cuxi HLC provides sales,

service to spare parts

2.1.5 Business activities

2.1.5.1 Exclusive shop and development

The period 1999-2005 was the golden age of HLC, while sales was increasing by approximately 30%/ year, then the policy of YAVN that there is only one exclusive agent in each town, provincial, so HLC became a Yamaha exclusive shop in Lao Cai Revenue and profits were much increasing without management of marketing

and human resources Customers themselves purchased and used HLC services

The period of 1999-2005, HLC maintained 02 shops in Lao Cai, including Board of Director, 2 accountants, 2-sales, 2 officers- marketing and 10 technicians Family-

srtucture management, most of their staffs, workers are acquaintances, their YAVN

skills training according to local regulations The management was well operating

in HLC, the statistics show that the growth rate was still very good over the years

2.1.5.2 Failure experience in business

After 2005, when Lao Cai city was established on the basis of merger Lao Cai

Town and Cam Duong Town, the population increased to 10 thousand people, but

the disadvantage appeared to HLC because previously, HLC dominated Lao Cai town, Mai Long dominated Cam Duong town There were 2 Yamaha 3S dealers in Laocai with the same relative scale With the fear of loss of market, in 2005 HLC

invested 3 billion dong to upgrade shop systems in 5 years by loans

In 2006, HLC launched Yamaha shop, the third shop of HLC, with board of

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director, 2 accountants, 5-slaes, two officers, marketing and 20 technicians HLC

also became Suzuki 3S dealer owned by Tien Loc

In recruitment, human resource of HLC is relatives and acquaintances of Directors

or staffs There has been a concern about governance because the director is not

able to manage all 3 shops, warehouse and accessories store By 2008, a series of problems occurred as: Loss accessories, low sales growth, low maintenance quality,

loss of client, dramatic competition As a result, in 2008, 2009 HLC continuously

loss its business Besides, the HLC participant of business real estate in Hanoi and Lao Cai quickly failed HLC really noticed the new change needed

2.1.5.3 Reformation and handshake

In 2010, the wise decision of HLC was to close Yamaha Town and 01 Yamaha

dealer which was no longer effective due to adverse position after changing urban

planning Yamaha open 01 new stores Thus, after less five years to double the

business scale, HLC had to put back as 2005 Since closing Yamaha Town, despite the extremely difficult economy, the growth rate in 2010, 2011, 2012 reached around 15%

In 2011, HLC cooperated Mai Long Company to establish HST company to build

3S Yamaha dealer in Pho Lu town with the hope of controlling the motorcycle

market at average price in lowland districts of Lao Cai province However,

unfortunately in 2011, difficulties after the completion of the rent payment for land, this project has yet to be implemented However, this cooperation between Hoang Lien and Mai Long has opened many prospects

In 2012, HLC has separated business of Suzuki Tien Loc out of YAMAHA 3S

shop (required of YAVN), but Suzuki Sapphire and Suzuki's Bella of Tien Loc is

declining and losing of market similar to other Suzuki products in Vietnam in

general and Lao Cai in particular HLC seriously considered the possibility of

termination of cooperation with Tien Loc

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focused on restructuring of personnel, in collaboration with the Phu Minh

Vocationa Center to recruit workers; salary and contract based on labor efficiency;

training YAVN standards associated with the workers' commitment to their work at

HLC after training; HLC also have incentives to keep skilled workers and the

quality of labor; insurance, bonuses have also been significantly improved to make

a close working environment and effective labor

With the trend to separate each business division of each different motorcycles

brand and especially in a cooperation with opponents, HLC gradually obtains the leading motorcycle businesses in Lao Cai It can be said that the reformation of HLC is quite appropriate in line with the times and an opportunity to expand in the near future

Lao Cai province is mountainous border in the center of the Northeast and

Northwest Vietnam, 296km from Hanoi and 345km railroad The east is Ha Giang; west is Son La and Lai Chau; south of Yen Bai province, north of Yunnan Province

(China) with 203km border Lao Cai province includes city of Lao Cai (provincial

level) and 08 districts: Bao Thang, Bao Yen, Bac Ha, Si Ma Cai and Muong Khuong, Sa Pa, Bat Xat, Van Ban Natural area of 6,383.88 km2 and a population

of nearly 700 thousand people, ethnic minorities accounted for 64%

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With large, fragmented mountainous traffic, incomplete transport infrastructure, increasing average income of the population, Lao Cai really has been the potential motorcycle market, especially for the long-term brand in Vietnam such as Honda, Yamaha, SYM However the business in Lao Cai is not simple because of the relatively sparse population distribution, the far distance among districts

Lao Cai has urban nearby the border, traditionally have good foreign relation with

Yunnan - China which create 3rd largest export value of nation with the most beneficial structure goods to Vietnam Expected in 2014, the completion of Noi Bai

- Lao Cai expressway will create development opportunities for Lao Cai, especially

the motorcycle industry

Socio — cultural environment

Lao Cai is a multi-ethnic province, including Hmong, the majority of Kinh Cultural

cross of Mong Kinh creates strong traits, liberal, public communication of Lao Cai

Lao Cai society attaches great importance to the word "faith”, trade or business in

order to survive and develop long-term business needs to build good image and strong ties with the community Besides, the trend of "movement" in shopping at

Lao Cai is often taken place due to the low knowledge of many people with high appreciation of the users’ experience With structure of young population in Lao Cai

is a good market for the motorcycle industry, particularly youth oriented brands

such as Yamaha and Honda

Politic and laws

Political system, the government of Lao Cai is relatively good, the provincial

leaders have the vision and investment attraction; Lao Cai is always the leading

mountainous province in attracting investment (including ODA and FDI) More than 1,000 enterprises in Lao Cai and 1,000 enterprises outside Lao Cai are also regular investing in business and trade areas Provincial Competitiveness Index of

Lao Cai PCI was assessed in 2010 ranked No 2/63, in 2011 ranked No 1/63

7 = Global Advanced Master of Business Aciministration 2l

on the street is very normal”

With the merger strategy of the two Lao Cai town and Cam Duong town from 2005, making “a centre moving" in 2007, transferring all government administrative offices is to take the most advantageous position for trade and economic export development Lao Cai has been forming and making a hash effort to fill 21 new

sub-urban areas in the south of Lao Cai city, potential the motorcycle markets for

business in the near future

However, that the salary policy of enterprises has been increasing leads to rise production costs, a challenge for the motorcycle industry Besides, the

implementation of road maintenance charges from 2013 has also increased the costs

for the users, created adverse effects for the industry Best feasible policy in the

future to bring advantages for the motorcycle industry is that the State Bank of

Vietnam is trying to reduce interest rates in the hope of creating significant cost

thrust block businesses, especially small and medium enterprises

Economic environment

Lao Cai has achieved more important economic achievements and society

Economic average growth of the period 2005-2012 was over 13% Agricultural

production is continuously seasonal, many large industrial projects have been being actively implemented; Ha Khau international border gate (Lao Cai) increasingly

confirmed the important role and value of exports and imports in 2011 and 2012 to

reach over $1 billion; tourism development with Sa Pa town which annually

welcomes nearly one million visitors, of which 40% international visitors Lao Cai has many potential advantages such as: industry, many kinds of precious minerals, high quality, large reserves in Vietnam such as: apatite (2.2 billion tons), iron (150

million tons), (100 million tons), gold, feldspar, graphite are mined and processed

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Hoang Lien mountain range with peaks high Fanxipan 3.143m, very rich natural

ecosystems, accounting for 50% of Vietnam's rare plant species, tourism, climate, landscape and local culture of 25 ethnic Lao Cai with many famous tourist sites

such as: Sa Pa and Bac Ha with unique tourism products: eco-tourism, tourism,

cultural tourism; special, Lao Cai has the advantage of commercial development,

Lao Cai is located on the economic corridor Haiphong - Hanoi - Laocai - Kunming,

gateway linking Vietnam, ASEAN countries with the southwestern provinces of

China

Economic growth is creating increased income for residents of Lao Cai, especially poor ethnic minority, a great opportunity for the motorcycle industry opens to generate the most spectacular growth However, in the context of high inflation, the speed of economic recovery in the current period is a barrier to the motorcycle

industry to develop the potential market

Technology environment

Technological environment in Lao Cai fairly compared to the country, is compatible with the border areas and relatively up to date In transport in Lao Cai, gasoline-

powered vehicles still dominate largely At the center of the province and district

automatic transmission motors is a great advantage, but most of the other terrain, manual transmission motors still preferred Advanced technologies such as electronic fuel injection, dual-clutch, CVMatic engine are newly furnished in luxury motors such as Honda Future or Yamaha Jupiter For the average motor current

popularity (more than 60% of sales) as Sirius Yamaha, Honda Wave, Suzuki Revo, SYM Angela, SOHC engine is popular, technology vehicle ownership, relatively

similar characteristics of advanced basic technique but different in style, weight and

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| Engine _ _ _ ee

| Engine type Air cool 4-stroke, single cylinder, 2 valve, SOHC, Cylinder arrangement Single

Starting system type Electric starter and kick starter

Lubrication system Wet sump AM Ignition system type DC.CDI

| Clutch type Dry, centrifugal automatic

Shift type Constant mesh 4 speed

Chassis

Frame type Steel under bone

Front brake Hydraulic disc

Rear brake Mechanical

Front/ rear Suspension Telescopic, Swing arm

However in the recent strategy, both Honda and Yamaha announced will deploy the

advanced electronic fuel injection technology to the most popular motors that do not increase the price, and if this happens, this is a good opportunity for businesses in the motorcycle industry to improve business performance of the popular line of

motorcycles which always yields more than 50% of the whole industry

A major limitation is the imitation of current Honda motorcycle parts, imitation is common in all markets For Yamaha this risk also started to become a reality, now

in Lao Cai there are some important fake details of Yamaha vehicles, counterfeit

goods Interests in non-genuine parts are created major difficulties for the

motorcycle industry development

Michael Porter’s Five Force Model

Analysis on competitive pressure from existing competitors

Being newly great potential market to the motorcycle business in Lao Cai, out of 2S

shops, small shops, but now in Lao Cai province, there have seven motor business enterprises with twelve Yamaha 3S shops accounted for more than 95% of the

market

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Table 2-2: Motorcycle businesses in Laocai

Z Companies | Motorcycle brand | Numbers of Showroom | Location of showroom str

Tien Thanh Honda - em JBG LENE QC:

7 1 Yamaha 1

oan, Diet Suzuki Tien Loc 1

Mai Long Yamaha 2 Centre of Laocai Trung Lan SYM, KYMCO 2

Viet Y Piaggio 1

| _Cuu Lam Suzuki Vietnam 1

| Dang Tuyet Honda 1 Bao Yen district Out of seven enterprises, Dang Tuyet only runs business in Bao Yen district in Lao Cai province and Luc Yen, Yen Bai, and 100km far from Lao Cai City, competition with other businesses is negligible, in other words, other business are

not interested in Bao Yen and Lu Yen market Cuu Lam Suzuki, Suzuki Motor

Vietnam 3S shop, but it seems that there are no longer place for Suzuki in Lao Cai market So in addition to a 5% motors in black market, in the district there havenot 3S shops, Dang Tuyet and Cuu Lam also holds no more than a 5% share of the

province market

Thus, the motorcycle market in Lao Cai in fact is fierce competition 90% market

share of the five businesses, in which Tien Thanh with long reputation was held

dominant leader with 35% market share by Honda brand, No 2 is Hoang Lien and

Mai Long share; each company holds about 20% market share with Yamaha and

general 5% market share Piaggio Chi Lan accounts the remaining 10% share of

with SYM and Kimco motors

With the handshake between the two directors Yamaha 3S shop, Nguyen Phi Son (HLC), and Truong Ngoc Hoa (Mai Long), from 2010, HLC and Mai Long shared

Yamaha's market share, cooperated Viet Y (each of which owns 50% of the total

capital) to win Piaggio 3S dealer from Trung Lan, increasing the total market share

of 45% to 35% of of Tien Thanh Honda So now the main rival of the HLC as Tien Thanh, the biggest rival, Trung Lan

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For high-end automatic transmission segment in Lao Cai, mainly competition between Honda $H150 (Tien Thanh) with Vespa LX150 (English Italy), essentially high-end scooters do not have too many customers that only served a group of high-

income residents in the city of Lao Cai Currently, it seems that the noble, elegant of Vespa and the youthful, dynamic of SH are equally popular

The luxury automatic transmission motors segment is competition among Honda Airblade (Tien Thanh) and Yamaha NOUVO (HLC and Mai Long), SYM Shark and KYMCO People Honda Airblade, Yamaha NOUVO are quite nice and have superior features, while Airblade 125 is preferred by the middle-aged, NOUVO 125

is selected by the youth; SYM Shark and KYMCO People are not appreciated In

addition, Yamaha Exciter 135 (manual and automatic clutch version), the preeminent sports motors, is the choice of almost young people, YAVN always supply in small order in order to maintain high prices

For the average price scooter in Lao Cai, there is the competition between Yamaha Nozza, Honda Lead and SYM Attila Honda Lead is dominated by its big designs

chump, which is suitable with the girls and women; SYM Attila also has its own

advantages with Victoria 2 version of Attila and Attila Elizabeth towards younger

customers; Yamaha Nozza is improved from Yamaha MIO, Yamaha Cuxi which is preferred by the youth

For the low price automatic transmission in Lao Cai there is major competition between Honda Vision, Yamaha Luvias, SYM Passing and KYMCO Jockey That

Honda and Yamaha do not care much on this segment enabled a little advantage for

SYM and KYMCO

For some classic motors, competitive product is essentially a confrontation between Future Honda and Yamaha Jupiter, this motor also has the distinction of customers

when the youth chooses Yamaha Jupiter while the elderly more often chooses

Honda Future

— Glohal Advaneed Master of Business Administration 26

Yamaha Serious, Yamaha Taurus; SYM Angela, SYM EZ, SYM Elegant with the

significant advantages in the design of Wave and Serious, in overall evaluation of

economic models, these kinds of motors bring the biggest sales for motorcycle companies in Lao Cai (60 % of total sales of Honda, Yamaha 50% of total sales)

In general, the competitive environment in the motorcycle industry in Lao Cai is fiercely strong Especially Tien Thanh Honda is much taking advantage of prestigious brands, the number of special shops and 35% of the motorcycle market

share in Lao Cai province; Tien Thanh did not stop the promotion to potential target

markets left vacant in Lao Cai The HLC is not considered Mai Long as a direct

competitor but create mutually beneficial alliances as they both have great lessons if

HLC and Mai Long confrontation, the only benefit of Tien Thanh Trung Lan only

focus on the market with competitive products SYM and KYMCO, there

competitiveness of Trung Lan has decreased significantly since after they lost the Piaggio, Italy; however, advantages on the price will probably be paid attention by

Mai Long in to create pressure on other motorcycle businesses in Lao Cai in the

slow economic growth context

Analysis on threats from potential competitors

Motorcycle business often requires experience, a certain understanding of the field,

so the barriers of this business does not only lie in the basis of good business, good mechanic, large working capital but also a certain understanding of the CEO That Cuu Lam Suzuki left the industry a few years entry is an example of the lack of specific skills, knowledge of the CEO leading to the failure of the enterprise The

fact that for nearly 10 years, although inflation is high but price tends to decrease,

this proves the competitiveness of industry in general is quite high

In Lao Cai city, the popular motors in Vietnam have appeared, so far the relative saturation and relative consumer confidence, customers are quite familiar with

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in Vietnam motorcycle have issued policy on 3S protection schemes with the provisions of certain geographical range for each dealer to avoid internal competition within Yamaha shops

The distance between the centers of the districts in Lao Cai is quite far, it is difficult

to create sustainable regional 3S affiliate shops Honda has two authorized shops in the city of Lao Cai, Bao Thang and Bao Yen (Honda does not have 2S system agents) Yamaha has two 3S shops in the city of Lao Cai and four 2S agents (warranty, maintenance, after-sales service and genuine parts) in Van Ban, Sa Pa

and Bac Ha, Si Ma Cai, in general, the ability of Yamaha 2S upgrade into 3S shops

is not feasible due to the lack of a lot of conditions Muong Khuong, Bao Thang,

Yen without the presence of Yamaha, however HLC and Mai Long established HST

in Bao Thang in 2011 with the idea to set up a Yamaha 3S dealer in the near future,

this project also has been paid " attention" by YAVN

It can be said that the potential competitive business faces obstacles After Yamaha's internal handshake between the Hoang Lien and Mai Long, the motorcycle market Lao Cai is the competition between Honda Tien Thanh and

Hoang Lien - Mai Long Yamaha There is not much opportunity for new business

venture to compete with existing businesses in the motorcycle industry in Lao Cai Analysis on bargaining power of suppliers

The one particular thing in the control of YAVN 3S shops is the principle of the

agent's input control For the motors, the dealer must order 1 month in the number, type and color of paint But when replying to orders, YAVN based on the total

amount of the national production and product distribution model and color of paint

for the agent If agents agreed to pay 100% of the value of new orders, get the

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motors For spare parts, YAVN allows 3S and 2S agents order on demand and debt

in 1 month The discount rate for 3S dealer parts is 23% and 2S is 15%

Treatment of YAVN with exclusive agents is considered as monopoly suppliers That agent takes each other's motors also very limited because increasing costs and

will be fined YAVN once discovered So it clearly stated that YAVN suppliers have

a strong pressure to the HLC because YAVN input is likely to increase the price or

reduce the quality of the product, which can reduce the ability to make a profit of HLC Together with those difficulties, attempts of YAVN to cut previously very

aggressive marketing support programs for dealers are the greatest threat to the HLC to promote the image and distribution

Analysis on bargaining power of customers

HLC customers are retail, individual households in Lao Cai Customers really have

much choice in every segment from high-end, luxury, medium budget or with

different brands such as Honda, Yamaha, Piaggio, Suzuki, SYM, KYMCO

However, selling motors is under pressure from customers, but sales after service and spare parts, the pressure of clients with HLC is not great due to the popularity

of the customers always want to use after-sales service, spare parts at 3S agents HLC have the relative superiority of maintenance services, and spare parts With the

trend of after sales service and spare parts gradually account for a large proportion

of growth in the motorcycle industry, the pressure of customers is not too high

Analysis on threats from substitutes

Substitutes of motors are not much and not common in Lao Cai Car is the most

effective substitutes with many brands But only a small number of residents have

the economic ability to pay for this type of vehicle For cheap electric bicycle and

bicycle is not popular due to limited range of movement and movement speed There are no public transport in Lao Cai , cars cost high, electric bikes and bicycles are more limited, it is clear that motorcycle is common transportation in Lao Cai Thus, the pressure from substitute products for motorcycles is not large, however,

—— Pinhal Advanred Macter of Riisiness Administration 29