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

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GRIGGS UNIVERSITY

GLOBAL ADVANCED MASTER OF BUSINESS ADMINIS FRATION PROGRAM

CAPSTONE PROJECT REPORT

BUILDING BUSINESS STRATEGY FOR THE CONFECTIONERY BUSINESS OF

HAI CHAU CONFECTIONERY JOINT STOCK COMPANY IN 2013 - 2017

Group Number: 01

Student’s name:

Nguyen Cong Khoa (Group Leader)

Luu Quang Khanh Pham Quang Hung

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(Soe HAI CHAU SOCIALIST REPUBLIC OF VIETNAM

CONFECTIONERY JSC Independence - Freedom — Happiness

` x⁄ www.hachaucomvn ———— RRR

Hanoi, April 27", 2013

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 GGMBA.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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Gaic s) Werer si v Strategic Management Hay

ACKNOWLEDGEMENT

Dear Professors!

Dear Sir or Madame!

Getting your enthusiastic teaching and dedicated guiding, the Members of the Grup Nol of the Class GGMBA.M0411 have studied together, formed the team work ani completed this important capstone project report We would like to express our sircere thanks to our professors and teachers, and the CEO and Mangement of Hai Ctau Confectionery Joint Stock Company for their enthusiastic and effective guidance ani support for us to complete this capstone

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

We thank you kindly!

t)

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Gri US) piece : Strategic Management | TABLE OF CONTENTS — Content Page | ‘INTRODUCTION —~ s cóc 8 1 1 The necessity of thesis 8 —— - 2 Research purpose 9 3 3 Research methodology 9 4 Scope of research 9

5 The structure of capstone report - 9

CHAPTER I: THEORETICAL BASIC 11

“1.1 Introduction to business strategy 1]

1.1.1 Concept of business strategy 11

2 Role of business strategy II

1.1 3 Types Of business strategy 12

1.2 Business strategy formulation process 13

1.2.1 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 1 Selecting business strategy 21

CHAPTER II: SITUATION ANALYSIS OF THE BUSINESS OF HAI 25

CHAU CONFECTIONERY JOINT STOCK COMPANY

2.11 Overview of Hai Chau Confectionery Joint Stock Company 25

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GRic c6) Savensi we Strategic Management |

2.2 Macro Environment Analysis 2.2.2 - Anah ysis s of Industry Environment 34 22.3 External factors evaluation 243 Analysis of the internal environment 42 12.3 3.1 Facilities, technologies 42 2.3.2 Human resources 42 2.3.3 Financial capability _ 44 243 3.4 Marketing 49

_2.3.5 Internal factors evaluation 5S]

2.4 Generating business strategies 52

CHAPTER III : PROPOSED BUSINESS STRATEGY OF HAI CHAU Sổ

CONFECTIONERY JSC FOR THE PERIOD 2013 — 2017

3.1 Strategic orientation for business development of Hai Chau 30

"3.1.1 Vision and mission 55

3.1.2 Strategic orientation of business development up to the year 2017 55 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 57

3.3 ‘Description of selected strategies 58

3.3.1 Strategy of Penetrating medium and high-ranking traditional market by 58 con.fectionery 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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A GRic > K2) Dài Strategic Management | 3.4.3 Solutions for financial management | te | pj 62

on 4.4 Solutions for production management and organization ef 63

3.4.5 Solutions of investment repair and construction 64

pte Solution of human resources development 64

3.5 Proposed schedule and budget for implementation of solutions 64 67 68

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GR God Uwversity Strategic ¬ = ° MandgCVmCHI LIST OF TABLES - — Table | - R Page “Table ld.EFEmatrix | 17 “Table 1.2:1FEmatrix, 20 “Table 1.3 SWOT Matrix 22 Table 1.4: QSPM Matrix 23

“Tab le 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

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Grice) De Ra 2 Strategic Management ¬ LIST OF FIGURES ee eS Sha cai — T Figure _ Page |

| Figure 1.1 Model of five competition forces of Michael E Porter 15 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

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GR G69) dữm 6 asirV 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 gemerating 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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Gricos) ME nsfTY 2 Strategic Management ¬

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 Through 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 including production of pure water and seasonings In the framework of this capstone, our group only focus on making strategy analysis and development for the confectionery 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

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GRl¿o) Nive nsity Strategic Management |

- 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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GR Go9) cuvensiea” Strategic Management :

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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GR So) Onive lọt ; Strategic Management ¬

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

ancl services for retaining its customers

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GR ce) Onvemsity Strategic Management |

- Strategy of diversifying products and services: Aims to diversify products and services for satisfying customers needs the best to develop customers and increase protits

- 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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Griccd Gmvensine Strategic Management Go

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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Griccd) Dive SITY Strategic Management ¬

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 y

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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Grid Waweneire Strategic Management |

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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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 —— FaetorX A u m | fo Factor Y B v n | L———— | —— FacorZ C t p L——_— L 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 1 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 is

2.50 or above, the enterprise’s response is above average In contrast, if the total score of EFF 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 fact 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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GR Go inavensi re Strategic Management | Table 1.2: IFE matrix ee pe sconces pe The main internal factors The importance Weight Score | | | | | k —— a —— — † _ + — —————— ' | Factor X A | u | m | — Factor Y s B | V n mm - | | Factor Z C t p r ~ Total score q

- 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 1 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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Gnioo) Strategic Management Table 1.3 SWOT Matrix SW( )T matrix | Opportunities (O) | Threats (T) lL Dien 3 Strategy of using the enterprise's strengths to take advantage of external opportunities 1 1 3 2 2 3

Strengths (S) SO Strategy ST Strategy

Strategy of using the enterprise's strengths to respond, avoid external threats (challenges) Weaknesses (W) 1 WO Strategy Strategy of overcoming WT Strategy Strategy of overcoming

Tung 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 weaiknesses 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 relaitive attractiveness of feasible, replaceable strategies used for choosing business

straitegy 1s QSPM Matrix

C2 Giobal Advanced Master ot Business: Admunistranor

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Grice) Strategic Management 2 Table 1.4: QSPM Matrix ! Strategies

| [ S Strategy 1 Strategy 2 Strategy n

| Key | Classific ˆ Atractiven Total Attractiv Total Attract | Total | factors | ation | ess score | attractive | — eness attractive ivenes | attractivenes

| ness score ness s score Ss score | score score Column | F 2 3 4=2x3 5 6=2x5 j=2xi OT Internal - factors _ “External | factors ‘Total | attractiv eness score ~ Internal factors:

- |: The weakest score; - 2: The least weakest score;

- 3: The least strongest score; - 4: The strongest score

External factors:

- |: 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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Gploo) Strategic Management

- Step 1: Listing big external opportunities/threats and internal strenyths weaknesses

- Step 2: Making classification for each internal and external important

successful factor

- 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

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

strategy

CG Global Advanced Visste: of Buisimess Administrator

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Griccd) Strategic Management

CHAPTER II: SITUATION ANALYSIS OF THE BUSINESS OF HAI CHAU CONFECTIONERY JOINT STOCK COMPANY a `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,

Hai Duong and Business Center of Hanoi SUBSIDIARE S (Later)

DEPUTY GENERAL DIRECTOR ORGANIZING ars TECHNICAL 1 m SALES ADMD TRATIVE

DEPARTMENT DEPARTMENT e.a.11 DEPARTMENT DEPARTMENT PP SOI DEPARTMENT c1.4 DEPARTMENT DEPARTMENT

Ỷ ¥ ¥ ¥ ¥ *k ¥ Ỷ ¥ vET I HAI DƯƠNG HÀ NAM HA NOt HUNG YEN NGHE AN DANANG HOCHMDACiy | | susness BRANCH BRANCH BRANCH BRANCH BRANCH BRANCH BRANCH BRANCH CENTER

ú Ỳ Y Y Y TH s22 4y FACTORY

FACTORY — Soper WORKSHOP FACTORY

‘ Mong - tt ean Contaconery Becromechansca Fond samsorengs Prods ots

(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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Go) Strategic Management Food seasonings : lodized seasonings, superior seasonings (not of the studied objects of this report)

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

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

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

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Grlco9) Strategic Management Table 2.1: Hai Chau Confectionery Market of 3 years from 2010 to 2012 Market 2010 2011 2012 - _Nonhemarea 786% 84.9% 86.3% Central area 10.5% 7.4% 6.8% | Southern area 10.9% 7.7% 6.9% (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 produ:tion 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 d 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 idget subnission VND | 13,139,000,000 | —20.841,000,000 | 21.106.000.000 vidends - % 12 14 14

e average income VND (Source: Hai Chau Confectionery Joint Stock Company) 3,500,000 3,910,000 4,500,000 Evaluation: All indicators of business activities of Hai Chau increased from

2010 0 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

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Gr a - Profit before tax of the company increased from 7.914,528,186 VND to 14.684.125.019 VND: An increase of 86%: Strategic Management - 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 Lo 2010 2011 2012

| Output Revenue Output Revenue Output Revenue

oe (Ton) (VND) (Ton) (VND) (Ton) (VND) Total revenue 383,662,151,518 502,415,802,172 565,283,491 ,654 Confectionery Products 23,080 |361,639,944,021| 25,231} 474,833,174,633| 24.716| 530.405,500,219 | |\Cake of all types 5,465 | 151,316,352,559| 5,558} 186,597,228,927 4,688} 190,330,95 1,640 | 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 _- Dry provisions 2,540} 58,009,717,310} 2,639] 78,075,415,658 1,959} 64,555,374,747 pĐBread _- 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 3 Chocolate 59} 1,573,014,821 113} 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;

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Gio9) imivensire Strategic Management |

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

3 |

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GRIGG Strategic Management 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 leve | 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, im 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 scone 8.40% 8.46% 7.30% es —— 8.00% — il _— 823% N ÌN 631% 6.78% 7.00% 7.10% #— 7.80% a om 5.89% 5 6.00% ny —=— 5.00% “> 5.32% 5.03% 4.00% 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 product's When economic growth is strong, people’s income is high, material life is

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Gho3 tếtvEASirx Strategic Management ¬

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 preter 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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Gri x3 Saves try Strategic Management ,

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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án ( c9)

CRIoc ? 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 pretect 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, Bibiica has been continuously restructuring products, expanding production capacity,

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GRiuo) QEAIVR Si TY Strategic Management ;

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 Vietram 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 Fedle:al 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 Hai Chau confectionery items of 2012 still grew quite well compared with the previous years through investing in more equipment and machinery to improve product quality

CPM Matrix:

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Go) Strategic Management Table 2.4: CPM Matrix of Hai Chau, Bibica and Hai Ha a |

Level Hai Chau | Bibica Hai Ha

No Targets | The importance Classification Score Classification Tóc Score Classification Score | “1 Finance 0.16 2 032, 25 040, 3 | 0.48 L2- s 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 j | Destibution 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 j | PHẾ EU | mụn _ | products 25 | 025 3 0.30 3 0.30 g | Souree'oruaw | 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 19 | Advertising | 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 1 - 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 technological processes with relatively limited capital investment in comparison with

^

a 37

\ Global Advanced Moste: of Busiess Adpunistratior

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Gi6o9) Uraveasury Strategic Management shes

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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Grice) tờ /DEBIPỆ Strategic Management "

The main input raw materials of confectionary industry include flour, sugar, the remainings are milk eggs and other raw materials The cost of raw materials accounts for 55% to 60% of cost of goods sold, in which the cost of flour and sugar account for the largest proportion Therefore, the increase in raw material prices of 2012 has put pressure on the profitability of Vietnam confectionary industry

- As Vietnam imports most of wheat flour so the domestic price of wheat flour will be affected directly from the world price of wheat As reported by the

International Association for Cereal (IGC), the variable weather conditions of the main

producing areas of Europe, wheat output of the world is likely to fall and highly increase wheat price

- Most of the sugar supply comes from Vietnamese enterprises, while the sugar market has escaped for the imbalance of supply - demand as the previous years Volume of Vietnam sugar, including production, import under WTO and inventory can meet the demand in the short term

In the period 2013-2017 the company must import mostly foreign materials such as flour, flavoring, milk powder, cocoa, sugar (partly imported), accounting for a large proportion of the cost To ensure the quality of products the company is required to ensure the best raw materials input So the company is not subject to high price of raw material but also is ruled by foreign suppliers, policies of import and export and other factors that disrupts the supply process This makes the company be not much proactive in its production

2.2.2.5 Pressure from customers

The primary customers of confectionery enterprises are individual consumers They buy to serve the needs of individuals, families or organizations With the population of about 89 million people (2012), Vietnam is a potential confectionery consumption market, especially during the holidays, weddings Economy develop so the demand of confectionery consumption also increases According to estimates, Vietnam confectionary industry has an average growth rate of 7.3 - 7.5%, this is a

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