Building business strategy for the confectionery business of Hai Chau Connfectionery Joint Stock Company in 2013-2017

Strategic Management GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT BUILDING BUSINESS STRATEGY FOR THE CONFECTIONERY BUSINESS OF H

Strategic Management

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

BUILDING BUSINESS STRATEGY FOR THE CONFECTIONERY BUSINESS OF HAI CHAU CONFECTIONERY JOINT STOCK COMPANY

IN 2013 - 2017

Group Number: 01 Studeni’s naine:

Nguyen Cong Khoa (Group Leader) Luu Quang Khanh

Pham Quang Hung

Nguyen Van Tien

HANOI 2013

|

CG Global Advanced Master of Business Ady stator

SỐ CỘNG HÒA XÃ HỘI CHỦ NGHĨA VIỆT NAM

Website: www.haichau.com

Hà nội, ngày 27 tháng 04 năm 2013

GIAY XÁC NHẬN

Kính gửi: - Trường Đại học Quốc gia Hà Nội

- Trung tâm Công nghệ Đào tạo và Hệ thống việc làm ETC

Công ty cỗ phần Bánh kẹo Hải Châu xin xác nhận

Thời gian vừa qua, Nhóm 01 lớp GaMBAM0411- Thạc sỹ Quản trị Kinh doanh Quốc tế Trường Đại học Griggs liên kết với Trung tâm Công nghệ Đào tạo và Hệ thống

việc làm ETC đào tạo gồm các thành viên:

1 Nguyễn Công Khoa - Nhóm trưởng

2 Lưu Quang Khánh - Thành viên

3 Nguyễn Văn Tiến - Thành viên

Đã đến Công ty cổ phần Bánh kẹo Hải Châu nghiên cứu và lấy số liệu để làm Đề

tài tốt nghiệp thạc sỹ Quản trị Kinh doanh do Trung tâm Công nghệ Đào tạo và Hệ thống

việc làm ETC tổ chức

Công ty cỗ phần Bánh kẹo Hải Châu hoan nghênh và đánh giá cao tính thời sự của

đề tài: “Xáy dựng chiến lược kinh doanh cho ngành hàng bánh kẹo của Công ty Cô phân Bánh kẹo Hải Châu trong giai đoạn 2013 - 2017” do Nhóm 01 lớp GaMBAM04II thực hiện và Công ty sẵn sàng xem xét, sử dụng kết quả nghiên cứu của Nhóm trong quá trình hoạch định chiến lược phát triển của Công ty

Công ty cũng xin xác nhận Ông Nguyễn Văn Tiến —- Phó Vụ trưởng Vụ Tổ chức cán bộ Thanh tra Chính phủ là thành viên của Nhóm nghiên cứu hiện đang thực hiện chức năng Cổ vẫn cho Công ty của chúng tôi về chiến lược Tổ chức và Phát triển nguồn nhân lực

Vậy Công ty xin xác nhận và thông báo để Quý đơn vị được biết

HAI CHAU SOCIALIST REPUBLIC OF VIETNAM

- Center for Education Technology and Career System Hai Chau Confectionery Joint Stock Company would like to confirm:

In recent time, Group 1 of class GaMBA.M0411 - Global Advanced Master of Business Administration of Griggs University linking with Center for Education Technology and Career System institution, including the following members:

Have studied and collected data of Hai Chau Confectionery Joint Stock Company to

make for their capstone project of Master of Business Administration

Hai Chau Confectionery Joint Stock Company welcome and appreciate the topicality

of the thesis: "Building business strategy for the confectionery industry of Hai Chau Confectionery Joint Stock Company in the period 2013 - 2017" implemented by Group | of class GAMBA.M0411 Our company has willingness to review, use the results of the Group’s study during the company’s planning process of development strategy

The company would like to confirm Mr Nguyen Van Tien — A cadre of the Government Inspectorate, a member of Group | is consulting for the company on the strategy

of human resource organization and development

So Our company would like to make this confirmation for you

DIRECTOR

NGUYEN DINH KHIEM

,

Strategic Management

ACKNOWLEDGEMENT Dear Protessors!

Dear Sir or Madame!

Getting your enthusiastic teaching and dedicated guiding, the Members of the Group Nol of the Class GGMBA.M0411 have studied together, formed the team work and completed this important capstone project report We would like to express our

sincere thanks to our professors and teachers, and the CEO and Mangement of Hai

Chau Confectionery Joint Stock Company for their enthusiastic and effective guidance and support for us to complete this capstone

We would also like to commit that this is the capstone studied and firstly published by the Group

We thank you kindly!

CG Global Advanced Master of Susiness Admmistraton

1.21 Defining the business vision, mission, objectives of the enterprise 13

CHAU CONFECTIONERY JOINT STOCK COMPANY

2.2.3, Analysis of Industry Environment _ a

| CONFECTIONERY JSC FOR THE PERIOD 2013 -— 2017

3] 1.2 Strategic orientation of business development up to the year 2017 35

3.3.1 Strategy of Penetrating medium and high-ranking traditional market by 58 confectionery products of high quality (SO)

3.3.2 Strategy of developing potential products: Moon cake, Jam of Tet 60 holiday (WO)

3.4 Solutions for realization of business strategies of Hai Chau for the 60

| period 2013 — 2017

3.4.3 Solutions for financial management — } 62 |

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LIST OF TABLES

Table 2.1: Hai Chau Confectionery Market of 3 years from 2010 to 2012 29

Table 2.3: Results of Hai Chau confectionery manufacturing and business 30

in the period 2010-2012

Table 2.7: Report of Hai Chau Business results of 2010 to 2012 (Unit: 47 VND)

Table 2.8: Some indicators of Hai Chau financial evaluation from 2010 to 48

2012

Table 3.1: Specific objectives for confectionery products of Hai Chau 56

Table 3.3: Proposed schedule for implementing business strategies of Hai 65 Chau in the period 2013-2017

' Table 3.4: Budget for deploying the strategy of Hai Chau in the period 66

Strategic Management

LIST OF FIGURES

| Figure 2.3: Vietnam's GDP growth in the period 2002 - 2012 32

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1 The necessity of the thesis

In business and manufacturing operations of each company, the development and selection of business strategy is an important step as the latter plays very important role in ensuring survival mission and serves the basis for formulation and deployment

of comprehensive enterprise development plans

The world enjoys reach experiences of generating and selecting of business and product strategies It should, however, be noted that the business strategy development

is a relatively new for Vietnamese enterprises in general and Hai Chau Confectionery JSC in particular, in terms of both theory and practice As to the theoretical aspect of strategic management, through the analysis of the company’s external and internal environment, opportunities, challenges, strengths and weaknesses of the company will

be revealed, creating a scientific basis for the identification of practical action-oriented solutions to the best implementation of strategic plans identified As to the practical aspect, confectionery products as one of the key products of Hai Chau Confectionery JSC, are the secondary but not essential items However, these products are indispensable for the consumption of people and in reality are significantly contributing to the economic development of the country With such characteristics of products that the Company has been producing, the issue of competition and further development is really a challenge for the Company

Findings of the researches have showed that in order to sustain and strengthening the competitiveness of confectionery products, Hai Chau should focus

on studying and shaping development trends of the industry for the future as well as generating appropriate business strategies for the new stage and provide comprehensive solutions to creation of greater advantages over competitors in the fierce competition in the confectionery market of Vietnam nowadays and beyond

From the above findings and with the desire to formulate a such business strategy which is in line with the developments of the confectionery industry and

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Go) Snivenaizs Ế Strategic Management

Confectionery Joint Stock Company in the context of current Vietnam economy

Througk which making business strategy with some appropriate solutions for the company in the period from 2013 to 2017

3 Research methodology

Using the methods of analysis, comparison, synthesis with data extracted and

synthesized from the reported data of the financial statements of 2010, 2011, 2012 of Hai Chau Confectionery Joint Stock Company and enterprises of the same industry

| Besides, the capstone also uses a number of data sources, references, books, magazines and specialized teaching materials

4 Scope of research

The major activities of Hai Chau Confectionery Joint Stock Company are the confectionery production and business, but it also participates in two other areas includirg production of pure water and seasonings In the framework of this capstone, our group only focus on making strategy analysis and development for the confectonery business segment of the company - this can be considered as 1 SBU (Strategic Business Unit) of the company because of being separately managed in term of finance and human resources, with particular customers and competitors

5 The structure of capstone report

3esides the introduction, conclusion and appendix, the capstone includes three chapters:

- Chapter I: Theoretical basis

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CHAPTER I: THEORETICAL BASIC

1.1 Introduction to business strategy

1.1.1 Concept of business strategy

The concept of strategy has been established for a long time, this concept is

derived from the military Currently, there are many different concepts of strategy:

- Pred R David: "Strategy is the means to reach long-term goals."

- Michael E Porter “Strategy is the art of formulating firm competitive advantages for defence.”

- G.Arlleret: “Strategy is the determination of roads and means to reach the set goals through policies.”

- Alfred Chandler: “Strategy consists of basic and long-term goals of an organization

at the same time selects the method or action process, allocates essential resources to implement those goals”

- According to unity-combined viewscore: “Business strategy is an art of designing and organizing means to reach long-term goals of enterprises and have relationships with the changes of business and competition environment.”

Although concepts are different, all of them have a content that is: Business strategy reflects activities of a business unit including the process of setting goals and measures, means used to achieve those goals

1.1.2 Role of business strategy

Helping enterprises to clearly realize the orientations in the future, recognize possible opportunities and threats that helps them make sound appropriate decisions with the environment ensuring the most effective business and production activities

Helping enterprises formulate better business strategies through the use of system approach method, set the basis for enhancing the coherence and the attachment of strategic staff in implementing the enterprise’s goals

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The business strategy help raise sales, labor productivity, effectiveness of

1.1.3 Types of business strategy

1.1.3.1 Business strategies of the enterprise in general

There are 3 types of the most common strategies used by enterprises today:

- Company-level strategy: As a long-term strategy related to the overall

mission, the size of enterprise to meet the expectations and costs of the bosses, of the enterprise`s senior managers The company-level strategy is long-term one with extensive view and dominates all other strategies such as business strategy, functional strategies

- Business strategy (SBU): As the business strategy regarding how an enterprise can compete successfully in a specific market, involves strategic decisions on product selection, satisfying the customers’needs, finding competitive advantages compared

to its competitors, exlpoiting and creating new opportunities

- Functional strategy: As operational strategy regarding how each department of the enterprise will organize, deploy, and review to implement business strategy and

corporate strategy Functional strategy focuses on specific resources and deployment

strategy such as: product strategy, pricing strategy, distribution strategy, market entry strategy

Also, in the confectionery field, enterprises also have the typical strategies as follows:

- Strategy of consolidating market share: As an strategy that aims to strengthen the position and image of the enterprise through improving management model, making review and completing the control system, improving the quality of products and services for retaining its customers

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- Strategy of diversifying products and services: Aims to diversify products and

services for satisfying customers’needs the best to develop customers and increase

pro fits

- Strategy of expanding distribution network: Aims at diversifying and

expanding the enterprise"s distribution channels

- Focus strategy: Defining segments, fields, products for which the enterprise can be the most powerful then focuses all resources of the enterprise in order to achieve high growth and efficiency

- Differentiation strategy: Identifying and building highlights of the enterprise

in term of products, services, distribution channel, marketing policy, etc compared to its Competitors in order to achieve its own goals

1.2 Business strategy formulation process

The process of developing strategy can be divided into five main steps:

- Step 1: Defining strategic mission and objectives of the enterprise

- Step 2: Analysing external environment to identify opportunities and threats

Step 3: Analysing internal environment to identify the strengths and weaknesses of the enterprise

- Step 4: Selecting strategies

- Step 5: Implementing strategies

1.2.1 Defining business vision, mission, objectives of the enterprise

The determination of vision and mission aims to identify at which position the enterprise is in the current context, which desired position it wants in the future, what its long-term goal is Determining the mission, goals is very important in developing strategy that helps strategic planners identify sources of information needed to be collected, processed and set for strategy

1.2.2 Analysis of external environment

The goal of analyzing the external environment is to identify opportunities and threats of the enterprise, analyze to find ways of implementing and grasping the

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opportunities from the environment, simultaneously in order to avoid the necessary

threats for the enterprise

The scope and content of environmental analysis include: Analysis of the macro environment (general environment) and analysis of micro environment which is also

known as industry environment

1.2.2.1 Analysis of macro environment

Macro environment is the environment within the entire national economy, including: Economy, technology, culture, society, politics, law The changes in the macro environment can directly impact on any certain forces of the industry that therefore can relatively affect other forces and even itself, ultimately can change the

attractiveness of an industry

- Political-legal environment (P): This includes a system of perspectives and policies of the State, of the legal system, especially the laws related to business; the political changes occurring in the country and in the world, the factors relating to

politics and law

- Economic environment (E): This is a factor directly and powerfully making impact on the enterprise’s business activities through the volatility of macroeconomic variables as well as the impact of macroeconomic policies through the regulatory tools

of the State

- Sociocultural environment (S): The socio-cultural factors affect the lives and

behaviors of human, thereby affect the structure of demand, purchase behavior,

consumption trend of consumers

- Technological environment (T): Technical-technological factors decide the

creation of new products, form business method, the method of demand satisfaction

that affects the competitiveness and business efficiency of enterprises

1.2.2.2 Analysis of the micro-environment (industry environment)

A narrow manufacturing industry or technical - economic industry includeing many enterprises can offer the same or similar products and services that can replace

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for each other The mission of strategists is to analyze and judge the competitors of the

industry environment in order to identify opportunities and threats for their own

enterprises Michael E Porter, a strategy theorist of Harvard business administration school has proposed a framework which helps administrators identify the opportunities and threats that enterprise must face in an industry (Michael E Porter, Competitive Stratery, New York: Freepress, 1980) The framework established by Michael e Porter

is called model of five competition forces, M.Porter scores out that the stronger these forces are, the more the ability of existing firms is limited in term of raising prices and getting higher profits The strength of the five competitive forces can change over

time, as industry conditions change

Potential competitors

Risks from new

competitors

Suppliers’ ability Competitors of the Buyers’ ability

of negotiation industry of negotiation

existing enterprises of the

Substitute products

Figure 1.1 Model of five competition forces of Michael E Porter

- Competitive pressure from existing competitors: The first of five forces of Michael E Porter’s model is the size of competition among the existing enterprises of

a production industry The weaker competitors are, the more opportunities the

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enterprise will have to raise price and get greater profit Conversely, when the existing

competitors are strong, the competition of price is significant, all competitions of price also lead to damage Competition among enterprises of a production industry often includes the main contents such as: industry competition structure, industry status and exit barriers

- The risk from the potential competitors: The potential competitors are

enterprises which currently do not compete in the same indsutry, but are able to

compete if they choose and decide to join the industry This is a threat for existing enterprises Current enterprises of the same industry should try to prevent potential competitors from joining their industry, because the more enterprises there are in the same industry, the fiercer competition is The advantages and disadvantages for the potential competitors’s participation depend mostly on barriers of industry penetration

- The power of buyers: Buyers can be considered as a competitive threat when they are in a position which forces enterprises to reduce price or have demand of higher quality and better service Conversely, enterprises will have the opportunity to raise price and get greater profit Buyers can request enterprises or not that depends on their relative power to the enterprises

- Power of suppliers: Suppliers can be considered as a threat pressure when they have the ability to raise price of input or reduce quality of products and services that they offer, therefore reduce the profitability of enterprises Conversely, if the suppliers are weak, enterprises will have opportunities to push off discounts and require high quality The requirement ability of suppliers for enterprises depends on relative power between them and enterprises

- Threat of substitute products or services: The last force of M Porter’s model is the threat from substitute products Substitute products are other products that can satisfy the needs of customers Its basic characteristic is that it is often superior to the replaced product by separate characteristics This threat requires enterprises to have frequent analysis, monitoring of the scientific - technical — technological advances,

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1.2.2.3 External factors evaluation matrix (EFE):

Table 1.1: IFE matrix

- Step 1: Making a list of major opportunity and risk factors which have great influence on the company’s success in the business industry (commonly from 10 to 20 factors)

- Step 2: Defining importance by sorting from 0.0 (not important) to 1.0 (the most important) for each factor The total importance of listed factors is 1

- Step 3: Classifying from | to 4 for each represented factor (actually may make larger range of score) For the biggest threat as classified by 1, the smallest threat as classified by 2, the smallest opportunity as classified by 3 and the biggest opportunity

as Classified by 4

- Step 4: Calculating scores for each factor by multiplying the importance level

of that factor with the corresponding classification score

- Step 5: Calculating the total scores for all factors given in the matrix by adding

up the scores of similar factors and components of each enterprise

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Accordingly, if the total score of the entire list of factors put in EFE matrix is 4,

the enterprise has good response to opportunities and threats from environment If it 1s

2.50 or above, the enterprise’s response is above average In contrast, if the total score

of EFE matrix is smaller than 2.50, its response is lower than average level

1.2.2.4 Competitive Profile Matrix (CPM)

Building Competitive Profile Matrix aims to give evaluations, comparision between enterprise and major competitors of the same industry This comparison is based on factors affecting the competitiveness of enterprises of the industry Thereby, the Administrators recognize the enterprise’s strengths and weaknesses comparing with its competitors, determine the competitive advantage and weaknesses needed to overcome for the enterprise

To build a Competitive Profile Matrix, it is necesary to follow 05 steps:

- Step 1: Making a list of 10 factors which have important impact on the competitiveness of enterprises of the industry

- Step 2: Classifying the importance level from 0.0 (not important) to 1.0 (very

important) for each factor The importance of each factor depends on its impact level

to the competitiveness ability of enterprise of the industry The total classification

levels defined for these factors must be 1.0

- Step 3: Making classification from 1 to 4 for each factor of success determining shows how the enterprise’s current strategies respond to this factor In which, 4 is good reaction, 3 is rather good reaction, 2 is average reaction and | is poor reaction These coefficients are determined by expert method which is based on the enterprise’s operational results

- Step 4: Multiplying the importance of each variable with its classification level to determine the total importance score

- Step 5: Adding the total importance score by variables to determine the total importance score for each enterprise (the highest score an enterprise can achieve is 4 the lowest one is 1.0 and the average one is 2.5)

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1.2.3 Analysis of internal environment

The strategist must understand the internal environment in order to know the

mao strengths and weaknesses of their own organizations This is of paramount importance because it will indicate the enterprise’s strengths and weaknesses that should be considered when making decision on to selecting business strategies

In tact, it is impossible to evaluate all factors of the internal enterprise because

of its enormous amount Therefore, in order to assess the enterprises’ internal environment, it is necessary to show the main factors whose presence can represent the internal operation situation of enterprises Those factors are the enterprises’ value chain and core competency

Regarding the analysis content of internal enterprise, it is necessary to consider the following factors:

- The enterprise’s products and business areas

- Human resource management of the enterprise

- Information system

- Marketing activities

- Financial factors

- Brand and reputation of the enterprise

- Business culture of enterprise

Analysis of internal enterprise aims to identify the enterprise’s potentials, strengths and weaknesses that is related to competitiveness strengthening, thereby becoming a basis of the enterprise’s sustainable existence and development in the market Therefore, when analyzing the internal environment, it is necessary to analyze both models: model of value chain and model of identifying sustainable competitive

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Table 1.2: IFE matrix

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- The internal factors evaluation matrix (IFE) summarizes and evaluates

important strengths and weaknesses of the functional business departments as well as

of the entire enterprise The IFE matrix is developed by 5 steps:

+ Step 1: Making a list of factors having decisive role to the enterprises’ competitiveness in the same industry (commonly from about 10 to 20 factors)

+ Step 2: Defining the importance by sorting from 0.0 (not important) to 1.0 (the most important) for each factor Thus as for enterprises of an industry, the importance of factors listed in step | are the same

+ Step 3: Classifying from 1 to 4 for each represented factor (actually may make larger range of scores) The biggest weakness as classified by 1, the smallest weakness as classified by 2, the smallest strength as classified by 3 and the biggest strength as classified by 4

+ Step 4: Calculating scores for each factor by multiplying its level of importance with the corresponding classification score

+ Step 5: Calculating the total score for all factors given in the matrix by adding

up the scores of similar factors and components of each enterprise This total score shows that this is the absolute competitiveness of that enterprise

- Accordingly, if the total score of the entire list of factors put in IFE matrix is

4, that enterprise has absolutely high competitiveness If it is 2.50 or above, that enterprise has absolutely competitive capacity that is above average In contrast, the

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total score of IFE matrix is below 2.50 showing that the enterprise’s absolute

competitive capacity is lower than average level

1.2.4 Selecting business strategy

1.2.4.1 Generating strategies

Model of SWOT analysis (Strengths - Weaknesses - Opportunities - Threats) is such an useful tool to form the strategic plans SWOT Analysis sets strengths and weaknesses of an enterprise in a clear situation with its opportunities and challenges

SWOT Matrix is used to synthesize studies on internal and external environment of an enterprise (or an industry) Analysis of external environment helps detect opportunities and threats for enterprise Analysis of internal environment is to identify its strengths and weaknesses Based on the analysis of factors in the matrix, based on its own objectives and directions of business and resource development, the enterprise can set up the combinations In principle, there are four types of combination:

- Opportunity with Strength (OS);

- Opportunity with weakness (OW);

- Threat with strength (TS);

- Threat with weakness (TW)

In order to develop strategies based on SWOT analysis, enterprises need to design a matrix of factors that is called Strengths - Weaknesses - Opportunities -

Threats matrix (also known as SWOT matrix) as shown below:

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external opportunities threats (challenges)

advantage of external | external threats

In which:

- S-O Strategy: Pursuing opportunities consistent with strengths of enterprises;

- W-O Strategy: Overcoming weaknesses to pursue and seize opportunities;

- §-T Strategy: Identifying the ways by which a company can use its strengths

to reduce the possibility of damage due to external threats;

- W-T Strategy: Forming a defensive plan to prevent the company’s main weaknesses from from being damaged by the external threats

1.2.4.2 Selecting strategy

After classifying strategies, it is necessary to establish a table of priorities list According to documents, there is only one analysis technique set up to decide the relative attractiveness of feasible, replaceable strategies used for choosing business strategy is QSPM Matrix

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| Key | Classifie | Attractiven | Total | Attractiv Total Attract Total

"factors _ ation ess score | attractive | eness | attractive ivenes | attractivenes

- 1: The weakest score;

- 2: The least weakest score;

- 3: The least strongest score;

- 4: The strongest score

External factors:

- 1: The enterprise’s action is poor;

- 2: The enterprise’s action is average;

- 3: Response of the enterprise is above average;

- 4: Response of the enterprise is very good

Strategies considered must be of the same group

There are 6 steps to develop QSPM Matrix as follows:

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- Step 4: Determining the attractiveness score

- Step 5: Calculating the total attractiveness score

- Step 6: Adding the total attractiveness score

- Evaluation: The higher total attractiveness score a strategy has, the more attractive that strategy is The difference level of the total score of a certain group of strategies will show the relative attractiveness of this strategy compared to other strategy

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Ggíoo) Strategic Management CHAPTER II: SITUATION ANALYSIS OF THE BUSINESS OF HAI CHAU

CONFECTIONERY JOINT STOCK COMPANY

2.1.1 The process of formation and development

With the help of two provinces Thuong Hai, Quang Chau (China), Hai Chau plant (the precursor of Hai Chau Confectionery Joint Stock Company) was established

on September 02nd, 1965 It is a member of Sugar Corporation I - Ministry of Agriculture and Rural Development

Name: Hai Chau Confectionery Joint Stock Company

Address: 15 Mac Thi Buoi Street - Vinh Tuy Ward - Hai Ba Trung district - Hanoi

Website: haichau.com.vn

As one of the leading companies of Vietnam in the field of manufacturing confectionery, food with nearly 50 years of continuous development, keeping on technological innovation and investment in modern equipment with increasing development scale In recent years, Hai Chau Confectionery JSC has continued to invest and improve the quality power of most modern 7 equipment line of the Federal

Republic of Germany, the Netherlands, Taiwan, China and manufacture diverse product categories such as: biscuit, cream biscuit, dry provisions, wafers, chocolate

coated wafers, hard candy, soft candy of all kinds, seasonings and iodized seasonings with nearly 100 types of goods which are plentiful and of high quality

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current products, candy, seasonings of types is nearly 30,000 tons / year

To integrate with the general development trend of the market economy, Hai Chau has developed and implemented the program of ISO-9000: 2000, the management of production and business is more innovative in term of management methods, the scientific and technical staff of economic management accounts for 20%

of labor force and skilled technical workers are trained and experienced in the field of confectionery production, food processing

All of Hai Chau products are manufactured with high quality materials, carefully selected and strictly inspected by the State standards The production is

implemented by a closed line with advanced technology, from the process of primary

processing of raw materials to product packaging that ensures the technical standards and environmental sanitation

Hai Chau products have been popular for a long time throughout the country and has been trusted by consumers because of its ensuring quality, rich types, reasonable prices, innovated packaging design that better meets the increasing demands of consumers

In recent years, the products of Hai Chau participated in annually national and international exhibitions of Vietnam industrial goods have been awarded with gold medals and voted to be of the TOP TEN "Vietnam high quality goods"

Hai Chau has established its commercial relationships of large-scale with organizations of production and domestic business and foreign companies such as France, Germany, the Netherlands, England, Japan, Belgium, Italy, Indonesia, Taiwan, China, Singapore and distribution channels of products nationwide with 350 agents

as the main focal which accounts for large market shares of Hai Chau products in cities, provinces

2.1.2 Organizational structure

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The number of departments, units include:

- Board of Management, Board of Directors, Supervisory Board

- 7 divisions: Labor and wage organizing, Engineering, Finance and

Accounting, Business, Planning and Investment, Administration, Product Development

- A factory: Hai Chau Confectionery factory in Vinh Khuc ward, Van Giang district, Hung Yen province

- 4 factories of: Wafers, Superior Confectionery, Seasonings, food and bread

- 7 branches: Hanoi, Ho Chi Minh City, the Central region, Ha Nam, Viet Tri,

Hai Duong and Business Center of Hanoi

SUBSIDIAREES

(Later)

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<< DEPUTY GENERAL DIRECTOR

ORGANIZING Hung TECHNICAL blame nan? SALES ADMIN TRATIVE

DEPAR IMENT DEPARTMENT sgt DEPARTMENT DEPARTMENT eee | | ee eer DEPARTMENT DEPARTMENT DEPARTMENT

VET TU HAI DƯƠNG HANAM HANOI HUNG YEN NGHE AN DA NANG HO CHI MINH City BUSINESS

BRANCH BRANCH BRANCH BRANCH BRANCH BRANCH BRANCH BRANCH CENTER

Biscuits of all types: soft cake, wafers, biscuits, bread, dry food

Candy: soft candy, chew candy

Chocolate

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Food seasonings : lodized seasonings, superior seasonings (not of the studied

objects of this report)

Purified water (not the object of study of this report)

(Source: Hai Chau Confectionery Joint Stock Company) Figure 2.2: Some products of Hai Chau

2.1.4 The consumption market

The distribution system of Hai Chau is organized in the traditional form with a diverse, flexible system of policies, mode of consumption, market facilitating the introduction and sales of products in the market Accordingly, customers can buy products directly in showrooms of Hanoi as well as branches of Hai Chau plants nationwide

The majority of Hai Chau market is the northern region It is also the market that has brought big sales and continuous growth in recent years for Hai Chau

In recent years, productivity and sales of Hai Chau products have been

relatively stable The company has invested more modern, advanced equipment and

production lines to improve the quality and quantity of products

2.1.5.1 Business performance of Hai Chau of 3 recent years

Table 2.2: Business results of Hai Chau in the period 2010-2012

les of goods and services VND | 384,910,621,088 | 506,667,348,657 | 570,943,208,062

t revenue from sales of goods

(Source: Hai Chau Confectionery Joint Stock Company)

Evaluation: All indicators of business activities of Hai Chau increased from

2010 to 2012 This proves that the company has sustainable growth Net revenue of

Hai Chau increased from 383,662,151,518 VND (2010) to $ 565,283,491,654 VND

(201 2) leading to the growth of other indicators of 3 years from 2010 to 2012:

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2.1.5.2 Business results of confectionery items

Table 2.3: Results of Hai Chau confectionery manufacturing and business in the period

2010-2012

L (Ton) (VND) | (Ton)| (VND) (Ton) (VND)

then decreased in 2012 that is primarily due to:

- Production close to consumption for limiting large inventory;

- The domestic economic situation gets many difficulties, people’s income is

low that affects the purchasing power in the market because they have to tighten and

reduce their spending while confectionery items are not the essential things:

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- Competition of product is increasingly fierce, affecting the production and

consumption of Hai Chau

Although confectionery output of 2012 decreases compared to that of 2011,

revenue from confectionery items still increase because:

- The company has invested in new products to offset the products of saturation

or recession: Researching and introducing superior dry provisions, cream biscuits, wafers, assorted cookies, canned biscuits and candy; Improving and enhancing product quality: Using high quality materials to replace low-quality materials for improving product quality; Organizing for enterprises to research new products of highly competitive quality

- The leadership has made more drastic measures: Allocating criteria for each staff in term of sales management, marketing enhancing and products advertising, organizing marketing sales, promotion, increased marketing mode, discount or promotion, reducing public consumer debt, creating competitive advantage

2.2 Analysis of the external environment

2.2.1 Macro environment analysis

2.2.1.1 Political Environment

The Vietnam’s political and legal environment system continues to be stabilized and improved by trend: Maintaining political stability and further reforming administrative procedures to attract investment

The government has issued the Law on Food Hygiene and Safety, Law of industrial property rights that regulates labeling, packaging to protect the consumers’ interests and make the company strictly abide by the law However, there is still an existence of fake confectionery goods, not ensuring quality, especially in the Lunar New Year first appearing hundreds of confectionery items of: No label, no expiry date,

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enterprises overcome the difficulties of the domestic economy and the world’s

influence

2.2.1.2 Economic Environment

International Economic Environment: The economy of 2012 had disadvantage from the instability of the world economy due to the financial crisis and the public debt crisis of Europe that was unresolved The disadvantage from the world market had an adverse effect to domestic business, production activities and residential life, showing that the goods consumption market was shrunken, high inventory was at high level, purchasing power of population reduced, the proportion of bad banking loans was at the level of concern

Vietnam economy environment: According to the report of the General

Statistics Office, the total gross domestic product (GDP) of 2012 increased 5.03% over

2011 Although the growth rate of this year is lower than the increase of 5.89% of

2011, in the context of global economic difficulties, the whole country focused on implementing the priority of curbing inflation, stabilizing the macro economy, then the growth rate was so reasonable

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guaranteed, the needs of improving nutrition, presenting luxury foods, in which confectionery items also increase and vice versa

2.2.1.3 The social, cultural and demographic environment

Despite not being essential needs of human, confectionery items are products of cuisine tradition of Vietnam in general and of areas, regions in particular In recent years, the trend of using domestic confectionery items has been more preferred

Besides those who believe in the domestic goods, there are still many people

who prefer foreign goods They assert that foreign goods are of more high-quality than

domestic goods This is really a big challenge for the company to penetrate the luxury market of goods

Cultural traditions and lifestyles of each region significantly affect the

confectionery consumption needs There is a difference on the consumption taste for confectionery products of the Northern, Central and Southern people so the consumption capacity of the company’s products in each market will be different

The majority of materials used for confectionery products is from agriculture

However, Vietnam’s weather changes complicatedly with storms, floods, drought constantly, as a result, the domestic market suppling raw materials is unstable, the cost

of raw material reserves is high

The demand for confectionery consumption varies greatly according to season:

Mid-Autumn Festival, Lunar New Year, holidays

2.2.1.4 Technological Environmental

The imported confectionery items of high quality, beautiful packaging designs

is flooding in the market that makes requirements on innovative technologies and techniques to improve productivity, product quality to meet the market demand of domestic enterprises In particular, by the understanding of domestic consumption

habit, the domestic enterprises have studied and created new flavors to suit the tastes of

consumers

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