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
Trang 2SỐ CỘNG HÒA XÃ HỘI CHỦ NGHĨA VIỆT NAM
CONG TY CO PHAN Độc lập — Tu do — Hanh phic
BANH KEO HAI CHAU kkk
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
4 Phạm Quang Hưng - 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
Trang 3HAI CHAU SOCIALIST REPUBLIC OF VIETNAM
CONFECTIONERY JSC Independence - Freedom — Happiness \ coe www.haichau.com.vn ———— kh» Hanoi, April 27°, 2013 a’ CONFIMATION LETTER
Dear: - Vietnam National University, Hanoi
- 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:
1 Nguyen Cong Khoa - Group Leader
2 Luu Quang Khanh - Member
3 Nguyen Van Tien - Member
4 Pham Quang Hung - Member
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
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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!
nN
Trang 5IRIGC 3) GRIGC : Strategic Management TABLE OF CONTENTS | oe cóc | Content Page | INTRODUCTION | 8 | The necessity of thesis | 8 | 2 Research purpose 9 | 3 Research methodology 9 4 Scope of research _ 7 5
"5 The structure of capstone report 7 9
"CHAPTER I: THEORETICAL BASIC _ F
| 1.1 Introduction to business strategy II
| 1.1.1 Concept of business strategy 11
| 1.1.2 Role of business strategy 11
1.13 Types of business strategy 12
_ 1.2 Business strategy formulation process 13
1.21 Defining the business vision, mission, objectives of the enterprise 13
“1.2.2 Analysis of external environment 13
1.2.3 Analysis of internal environment 19
- 1.2.4 Selecting business strategy 21
CHAPTER II: SITUATION ANALYSIS OF THE BUSINESS OF HAI 25
CHAU CONFECTIONERY JOINT STOCK COMPANY
| 2.1 Overview of Hai Chau Confectionery Joint Stock Company 25
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2.2.1 Macro Environment Analysis 3h
2.2.3, Analysis of Industry Environment _ a
| | 2.2.3 External factors evaluation ee T 400
(2.3 dt \nalysis of the internal environment | 42 |
L2 3.1 Facilities, technologies its” - 42 |
2 3.2 Human resources ˆ 42 |
(2.3.3 Financial capability = 44
aaa Marketing 49
_2.3.5 Internal factors evaluation 51
"2.4 Generating business strategies 52
CHAPTER III : PROPOSED BUSINESS STRATEGY OF HAI CHAU aD
| CONFECTIONERY JSC FOR THE PERIOD 2013 -— 2017
3.1 Strategic orientation for business development of Hai Chau 55
3.1.1 Vision and mission 55
3] 1.2 Strategic orientation of business development up to the year 2017 35
3.2 Proposed strategic options for business development of Hai Chau 56
3.2.1, Proposed options for business strategy 56
3.2.2 Selection of business strategies s7
3.3 Description of selected strategies 58
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 1 Solutions for market and product 60 |
3.4.2 Solution for science and technology 62
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3.4.3 Solutions for financial management — } 62 |
3.4.4 Solutions for production management and organization 63 |
3.4.5 Solutions of investment, repair and construction 64 |
3.4.6 Solution of human resources development 64
Trang 8Gri GG Strategic Management LIST OF TABLES Fable | Page |
“Table 1.1 EFE matrix cóc 17
Table 1.2: IFE matrix 20
“Table 1.3 SWOT Matrix / 22
Table 1.4: QSPM Matrix 23
Table 2.1: Hai Chau Confectionery Market of 3 years from 2010 to 2012 29
| Table 2.2: Business results of Hai Chau in the period 2010-2012 29 `
Table 2.3: Results of Hai Chau confectionery manufacturing and business 30 in the period 2010-2012
Table 2.4: CPM Matrix of Hai Chau, Bibica and Hai Ha 37
Table 2.5: EFE Matrix of Hai Chau 4]
Table 2.6: Financial Report of 2010-2012 of Hai Chau (Unit: VND) 44
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 2.9: IFE Matrix of Hai Chau 52
Table 2.10: SWOT Matrix of Hai Chau 53
Table 3.1: Specific objectives for confectionery products of Hai Chau 56
Table 3.2: QSPM Matrix of Hai Chau 57
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
| from 2013 to 2017
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Figure 1.1 Model of five competition forces of Michael E Porter l5 —
Figure 2.1: Diagram of the organizational structure of Hai Chau 27
Figure 2.2: Some products of Hai Chau 28
| Figure 2.3: Vietnam's GDP growth in the period 2002 - 2012 32
Figure | 2.4: Vietnam confectionery market share 35
Trang 10Ƒ IGGS Grice l Strategic Management INTRODUCTION
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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actual business situation of Hai Chau in the context of international economic integration our Group has chosen a research topic entitled "Building business strategy
for the confectionery industry of Hai Chau Confectionery Joint Stock Company in the
period 2013 - 2017."
2 Research purpose
Based on the system of theoretical issues on strategic management and analysis process, making assessment of production and business situation of Hai Chau
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 II: Situation analysis of the business of the Hai Chau Confectionery Joint Stock Company
- Chapter III: Proposed business strategy for the confectionery industry of Hai Chau Confectionery Joint Stock Company for the period 2013 - 2017
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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 management avoid financial risks, enhance the capacity of preventing the enterprise’s difficulties Creating firm bases for mapping out appropriate policies and decisions with the market’s fluctuations
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
Suppliers Customers
The competition between
existing enterprises of the industry
Risks from substitute products and services 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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UNIVERSITY Strategic Management
which is directly related to technological innovation, product innovation Moreover the change in market demand is also an important factor creating this threat
1.2.2.3 External factors evaluation matrix (EFE):
Table 1.1: IFE matrix The main external factors The importance Weight Score | 7 Factor X A u m | a Factor Y B V n | a Factor Z C t Pp | | | ae Total q |
External factors evaluation matrix (EFE) helps us summarize and quantify the effects of environmental factors to the enterprise EFE matrix is developed in five steps:
- 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
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Table 1.2: IFE matrix
f d6 esi tsa ig aie a | The main internal factors | Theimportance | Weight | Score - WH th Factor X A | u T m fain as epg _ | | Factor Y | B V n —— | | | _—— FactorZ Ị C t p | | L — ị | Total score | | Le | | :
- 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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Trang 24Strategic Management Table 1.3 SWOT Matrix SWOT matrix Opportunities (O) Threats (T) 1 1 3 | Daa Daze 3
Strengths (S) SO Strategy ST Strategy
1 Strategy of using the | Strategy of using the
Discs enterprise’s strengths to | enterprise’s strengths to
3 take advantage of | respond, avoid external
external opportunities threats (challenges)
Weaknesses (W) WO Strategy WT Strategy
1 Strategy of overcoming | Strategy of overcoming
TÊN, the enterprise’s | the enteprise’s
3 weaknesses to take|weaknesses to reduce
advantage of external | external threats
opportunities (challenges)
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
CG Global Advanced Master of Business Admunistranes
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⁄ GRIG( › Strategic Management Table 1.4: QSPM Matrix | — 7 Strategies
| | Strategy 1 Strategy 2 R Strategy n
| Key | Classifie | Attractiven | Total | Attractiv Total Attract Total "factors _ ation ess score | attractive | eness | attractive ivenes | attractivenes
| | ness score ness s score s score | | | score | score _Columnl | 2 3 | 4=2x3 5 6=2x5 | i Em | Internal - | factors | External | factors ‘Total attractiv eness score | Internal factors:
- 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 3: Studying SWOT matrix and determining replaceable strategies that the the enterprise should consider to implement
- Step 4: Determining the attractiveness score
- Step 5: Calculating the total attractiveness score - Step 6: Adding the total attractiveness score
Trang 27Ggíoo) Strategic Management CHAPTER II: SITUATION ANALYSIS OF THE BUSINESS OF HAI CHAU
CONFECTIONERY JOINT STOCK COMPANY -_ `Aux⁄ 2.1 Overview 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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Production scale of Hai Chau increases annually with high average growth rate, sales of products and goods of around 500 billion VND / year The total volume of
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"
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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,
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(Source: Hai Chau Confectionery Joint Stock Company) Figure 2.1: Diagram of the organizational structure of Hai Chau
2.1.3 Main Products
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)
Soft cake Chocolate Seasonings
(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
Trang 31Strategic Management Table 2.1: Hai Chau Confectionery Market of 3 years from 2010 to 2012 | Market | 2010 | 2011 | 2012 | “Northern area | 78,6% | 84,9% | 86.3% 10,5% 7.4% | 6,8% 10,9% 7,7% 6.9% oa a 1 | | | 4 + | Central area ' Southern area | (Source: Hai Chau Confectionery Joint Stock Company) 2.1.5 Business performance
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 Targets Unit 2010 2011 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 1 provision of services VND 383,662,151,518 | 502,415,802,172 | 565,283,491,654 tal accounting profit before VND 7,914,528, 186 11,224,315,872 14,684,125,019 ofit after corporate income ( VND 6,848,064,508 9,080,374,159 10,895,587,522 dget submission VND 13,139,000,000 20,841,000,000 21,106,000,000 vidends % 12 14 14 e average income VND 3,500,000 3,910,000 4,500,000 (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:
Trang 32Strategic Management - Profit before tax of the company increased from 7,914,528,186 VND to 14,684,125.019 VND: An increase of 86%: - Profit after tax increased from 6,848,064,508 VND up to 10,895,587,522 VND: An increase of 59%: - The state budget submission increased from 13,139,000,000 VND up to 21,106,000,000 VND: An increase of 61%; - Per capita income increased from 3,500,000 VND up 4,500,000 VND: An increase of 29%
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 2010 2011 2012
Output Revenue Output Revenue Output Revenue
L (Ton) (VND) | (Ton)| (VND) (Ton) (VND) Total revenue 383,662,151,518 502,415,802,172 565,283,491 ,654 Confectionery Products 23,680 |361,659,944,021| 25,231) 474,833,174,033| 24,716} 550,405,506,219 Cake ofall types 5,465] 151,316,352,559| 5,558} 186,597,228,927 4,688} 190,330,951,640 -Softcake _ 81| 6,330,425,500 82| 7,787,444,934 62| _7,009,515,297 |- Cream cake 1,535} 46,346,387,903| 1,672} 61,194,244,705 1,520| 66,194,696,873 - Biscuits 828} 22,866,264,230 664} 22,206,778,456 636|_ 25,324,700,426 E Dry provisions 2,540} 58,009,717,310| 2,639) 78,075,415,658 1,959} 64,555,374,747 - Bread 480| 17,763,557,615 501} 22,407,744,777 509} 27,190,135,949 ! |Candy of all types 553} 17,917,022,476 607} 23,814,509,023 524| 24,533,303,538 ¡ |Chocolate 59L 1,573,014,821 II3| 3,617,393,776 6 226,113,397
(Source: Hai Chau Confectionery Joint Stock Company) The total output of Hai Chau Confectionery goods achieved growth in 2011, but 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, no date of production
The government has also issued a number of resolutions and policies to support small and medium enterprises such as: Reducing land rent and other support to help
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Go) University, Strategic Management TH
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 GDP: 2002 - 2012 9.00% 8.40% 8.46% 7.30% _ a, | 8.00% ——D 5 8.23% ` 6.31% 6.78% 5 7.00% = 6.00% _ 710% 7.80% XS om ~ | 5.00% | 4.00% 5.32% 5.03% 3.00% 2.00% 1.00% 0.00% 2002 2003 2004 2005 2006 2007 2008 #2009 2010 2011 2012 (Source: GSO)
Figure 2.3: Vietnam's GDP growth in the period 2002 - 2012
Economic growth rate can much affect the consumption of confectionery products When economic growth is strong, people’s income is high, material life is
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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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However, compared with other countries in the region and in the world, the capacity of technology research, development, transfer of Vietnam is still very poor This is a great restriction for Vietnam enterprises in general and Hai Chau in particular in term of innovating equipment, technological line, deploying new products to compete with the industry of foreign confectionery production
2.2.2 Analysis of Industry Environment
Confectionery market forecast:
- Vietnam economy is one of the economies having the highest growth rates of the world In the trend of globalization, the products of Vietnam have been appearing more and more in the world market, including food, confectionery items Bread, pies are gradually becoming familiar, regular food of many Vietnamese people, the confectionery market of Vietnam is having the leading development potential of Southeast Asia and around the world
- According to the company of organization and coordination IBA (GHM),
Vietnam confectionery output of 2012 was about 706,000 tons, the total value of retail
in Vietnam confectionery market in 2012 was 1.446 million USD The growth rate of confectionery retail sales in Vietnam market in the period 2008 - 2012 calculated in USD was approximately 114.71% / year, while there were similar numbers of regional countries such as China of 49.09%, Philippines of 52.35%, Indonesia of 64.02%, India of 59.64%, Thailand of 37.3%, Malaysia of 17, 13%
2.2.2.1 Competition from existing competitors
Facing pressure of competition and rebranding, the enterprises have made huge effort for developing the number of new product lines to attract consumers
There is no big diffference in term of quality and design of confectionery products of large enterprises Enterprises such as Kinh Do, Bibica, Hai Ha make much marketing investments when having the extensive campaign of advertising, marketing in the market in order to make impression and create the consumers’ curiosity through quality of product packaging and unique advertisements Besides,
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Trang 37Griccd) Strategic Management these companies also make investment in the modern technological line and launch
new products into the market Also, products of foreign companies that is mainly
originated from Asian countries such as Indonesia, Thailand, Malaysia has been invading Vietnam market However, thre is a significant result that currently
domestic enterprises are accounting for 80% of market share, while foreign companies though accelerate their market penetration, but only holds about 20% of market share However, as the result, the consequences of economic growth are overheating, inflation increases, and commodity prices are high that have significantly reduced the profits of confectionery companies Therefore, the ability to control costs and management skills will be key factors for domestic companies to protect their profits
Leading confectionery market of Vietnam is Kinh Do Group Hai Chau’s competitors of the same market share are Bibica and Hai Ha Confectionery JSC (Hai Ha) Bibica 8% Hai Ha HaiChau 6% 6%
(Source: Report on Vietnam confectionary industry) Figure 2.4: Vietnam confectionery market share
- Bibica was established in 1998 from the equitization of 3 workshops: biscuit, candy, malt of Bien Hoa Sugar Company The company's main products are all kinds
of sweets, assorted biscuits, moon cake, Hura cake, Lottepie cake In recent years,
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developing distribution systems for retail outlets At the same time, its sales capabilities and brand have constantly been enhanced with the support of Lotte (since
2008), the strategic shareholder of the company as well as a famous confectionery company of Korea Most of Bibica’s products are distributed through the system of retail agents In recent years, Bibica has focused on developing the distribution system
and currently the company has achieved 75,000 retail outlets in 2013 will increase to 90,000 outlets
- Hai Ha was established on December 25th, 1960, as a workshop of sauce (soy sauce) In 1970, the Hai Ha officially received Hai Chau Confectionery factory
Currently, Hai Ha has become one of the leading confectionery manufacturers of Vietnam with over 1,000 staff and employees, providing the confectionery market with over 100 categories of different confectionery products Hai Ha Line of chew candy keeps the number-one position of technology, reputation and brand in the market Hai Ha is also the leading company manufacturing, with modern line and equipment of the Federal Republic of Germany, all fondant products of Hai Ha occupy large market
share of this product line that exceeding all domestic fondant manufacturing
companies
Despite being subjected to severe competition with other enterprises, sales of
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Table 2.4: CPM Matrix of Hai Chau, Bibica and Hai Ha | | | | ——
Level HaiChau | ~~ Bibica = Hai Ha
No Targets The importance NT Classification Score Classification TT Score Classification TT Score | | 1 Finance _ 0.16 2 (032) 25 |040) 3.048 2 _| Human resource 0.12 3 0.36 3 0.36 2 0.24 3 | Brand 0.06 3 0.18 3 0.18 3 0.18 ae = q | Distilbution 0.13 2 0.26 2 0.26 2 0.26 | System 5 Product Price 0.05 3 0.15 2 0.10 2 0.10 6 Product Quality 0.08 3 0.24 3 0.24 3 0.24
7 | Mhediversityer | gag _ products 25 | 0.25 3 |030| 3 0.30
g | Source of raw materials 0.07 2 0.14 2 0.14 2 0.14
|9 _| Technology 0.08 3 0.24 3 0.24 3 0.24
jg | eevertising | Activity 0.15 2 0.30 2 0.30 2 0.30
- | Total: 1.00 2.44 2.52 2.48
(Source: Synthesis and evaluation of Group | - M0411) 2.2.2.2 The threat from potential competitors
Along with the opening, integration, exchange with regional and global economy, Vietnamese enterprises have to accept an equal game with foreign competitors right in the country The potential competitors of current confectionery manufacturing enterprises are mainly foreign confectionery manufacturers who tend to enter Vietnam market The foreign potential competitors may be the confectionary
manufacturing companies of China, Malaysia, Indonesia, Thailand, the United States,
France In which especially are Chinese companies with prominent advantages:
cheap price, eye-catching designs, rich category
The confectionery manufacturing industry has simple technical and techinological processes with relatively limited capital investment in comparison with
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other industries On the other hand, the current ordinances and regulations on food hygiene and safety as well as the management of the State and agencies for the
confectionery industry are loose Thus, the barrier to entry into the confectionery manufacturing industry is very low There are a lot of small and low-quality
manufacturing units newly joining the confectionery market
What makes many enterprises and consumers be concerned is state attaching the new expiry dates to sell by cheap price competing with domestic goods Also, there are
many Chinese labels, there is no Vietnamese subsidiary label recording information of
products, there is not quality assurance, food safety and hygiene
However, with the fact that some domestic confectionery brands have confirmed their names in the market and people are more alert to the goods originating
from China, confectionary items of Chinese origin less appear in the market
2.2.2.3 The threat from substitute products
As for confectionery products, the substitute products are only fruits When getting a big crop of fruits, confectionery sales will be slow, because then people will consume fruits instead of candy Therefore in summer months, confectionery products are not sold
In addition, the fast-food products made from fruits such as: jackfruit, dried potatoes, sugared dry, fruit juices, flavored milk are growing rapidly and are now very popular with consumers that is a threat to existing products of Hai Chau, but it also suggest the company the research and development directions of new fruit flavored products These products are created to compete with substitute products above
On the other hand, with the consumption habits of Vietnamese people, the confectionery products are used more in the holidays, meetings, conferences, weddings, birthdays Thus competitive pressures from substitute products is not large 2.2.2.4 The power of suppliers
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