Building up business strategy for Yamaha motor Vietnam by 2015

HA NOI 2011 GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT BUILDING UP BUSINESS STRATEGY FOR YAMAHA MOTOR VIETNAM BY 2015 Hoang H

BUILDING UP BUSINESS STRATEGY FOR YAMAHA MOTOR VIETNAM BY 2015

Hoang Ha Nguyen Ke Phu

Le The Son Dang Thi Nhan

Class: GaMBA.X0409

H A N O I 2 0 1 1 CAPSTONE PROJECT REPORT

HA NOI 2011

GRIGGS UNIVERSITY

GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

BUILDING UP BUSINESS STRATEGY

FOR YAMAHA MOTOR VIETNAM BY 2015

Hoang Ha Nguyen Ke Phu

Le The Son Dang Thi Nhan

Student’s name:

DECLARATION

We hereby certify that this capstone project report represents the result of our own research No other person’s previously published or written work has been used without due acknowledgement in the text

No material has been used in this report which has been accepted for the award

of a degree or diploma in any tertiary institution

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TABLE OF CONTENTS

DECLARATION i

LIST OF ABBREVIATIONS vi

LIST OF TABLES vii

LIST OF FIGURES viii

INTRODUCTION 1

CHAPTER 1 : THEORETICAL BACKGROUND ON BUILDING BUSINESS STRATEGY 2

1.1 Definition and classification of Business strategy 2

1.1.1 Definition of Business strategy 2

1.1.2 Roles of Business Strategy 3

1.1.3 Classification of Business Strategy 4

Corporate level Strategy 4

Strategic Business Unit level (SBU) 4

Functional level strategy 4

1.2 Process of generating and selecting strategies 5

1.2.1 The Input Stage 6

1.2.1.1 External Factor Evaluation Matrix (EFE Matrix) 6

1.2.1.2 The Internal Factor Evaluation Matrix (IFE Matrix) 7

1.2.2 The Matching Stage 8

1.2.2.1 The Strengths – Weaknesses – Opportunities – Threats Matrix

(SWOT Matrix) 8

1.2.2.2 The Boston Consulting Group Matrix (BCG Matrix) 9

1.2.2.3 The Internal – External Matrix (IE Matrix) 10

1.2.3 The Decision Stage - The Quantitative Stategic Planning Matrix (QSPM Matrix) 11

CHAPTER 2 : BUILDING UP THE BUSINESS STRATEGY FOR YAMAHA MOTOR VIETNAM BY 2015 12

2.1 General information about Vietnam motorcycle market 12

2.1.1 Southeast Asian motorcycle market 12

2.1.2 Vietnam motorcycle market 14

2.1.2.1 Current situation of Vietnam motorcycle market 14

2.1.2.1 Master plan for the development of Vietnam’s motorcycle industry by 2015, with a vision to 2020 16

2.2 General introduction about Yamaha Motor Vietnam Co., Ltd 18

2.2.1 The process of establishment and organization structure 18

2.2.1.1 The process of establishment 18

2.2.1.2 Organization Structure 19

2.2.2 Situation and Business performance from 2006 to 2010 20

2.3 Building up the business strategy for YMVN by 2015 21

2.3.1 Analyzing factors affecting the business strategy of YMVN 21

2.3.1.1 External factor evaluation matrix (EFE) 21

GENERAL ENVIRONMENT 21

INDUSTRIAL COMPETITION 26

2.3.1.2 Internal factor evaluation matrix (IFE) 34

FINANCE 34

PERSONNEL ORGANIZATION 36

RESEARCHING AND DEVELOPING ACTIVITIES (R&D) 37

BRAND NAME 39

THE MARKETING MIX STRATEGY 40

2.3.2 Constructing matrix to perform feasible strategies 49

2.3.2.1 The Strengths – Weaknesses – Opportunities – Threats Matrix (SWOT Matrix) 49

2.3.2.2 The Boston Consulting Group (BCG) Matrix 51

2.3.2.3 The Internal-External (IE) Matrix 51

2.3.3 Strategy analysis and formualation 56

2.3.3.1 The Quantitative Strategic Planning Matrix (QSPM) 56

2.3.2.2 Business Strategy Analysis 61

CHAPTER 3 : SOME SOLUTIONS TO IMPLEMENT THE BUSINESS STRATEGY OF YMVN BY 2015 64

3.1 Some solutions to implement the business strategy of YMVN by 2015 64

3.1.1 Solutions to implement the Focus and Growth Strategy for Sporty Scooter Market 64

3.1.2 Some solutions to implement the Cost Leadership strategy to increase

the penetration in basic moped market 65

3.1.3 Solutions on functional strategy 66

3.1.3.1 Solutions on marketing management 66

3.1.3.2 Solutions on R&D activities 67

3.1.3.1 Solutions on human resources management 69

3.1.4 Budget for business strategy by 2015 70

3.2 Some recommendations to the state 71

CONCLUSION 73

REFERENCES 75

LIST OF ABBREVIATIONS

ASEAN The Association of Southeast Asian Nations

QSPM Quantitative Strategic Planning Matrix

R&D Research & Development

SBU Strategic Business Unit

SWOT Strengths-Weaknesses-Opportunities-Threats

VMTC Vietnam Register Motor Vehicle Testing Center

YMVN Yamaha Motor Vietnam Co., Ltd

LIST OF TABLES

Table 1.1: SWOT Matrix 8

Table 2.1: YMVN product categories 18

Table 2.2: Business performance from 2006 to 2010 (Unit: Thousand USD) 21

Table 2.3: Comparison of motorcycle manufacturers in Vietnam 27

Table 2.4: EFE Matrix for YMVN 33

Table 2.5: Financial data of YMVN and HVN 34

Table 2.6: Employment status of YMVN 36

Table 2.7: YMVN and HVN product strategy comparison 40

Table 2.8: The distribution system characteristics of YMVN and HVN 44

Table 2.9: Advertising strategy comparison between YMVN and HVN 47

Table 2.10: IFE matrix for YMVN 48

Table 2.11: SWOT Matrix for YMVN 49

Table 2.12: Relative market share position and Industry sales growth rate 51

Table 2.13: IFE Score for Each Strategic Category 52

Table 2.14: EFE Score for Each Strategic Category 53

Table 2.15: The IFE ad EFE Total weighted score for YMVN 54

Table 2.16: QSPM for YMVN 56

Table 3.1: Budget allocation for total YMVN strategic plan by 2015 70

LIST OF FIGURES

Figure 1.1: The Strategy-Formulation Alnalytical Framework 6

Figure 1.2: BCG Matrix 9

Figure 1.3: The IE Matrix 10

Figure 2.1: Market share of motorcycle makers in main ASEAN markets 13

Figure 2.2: Yamaha Motor unit sales by country in main ASEAN markets 13

Figure 2.3: Demand for motorcycles in Vietnam from 1995-2010 15

Figure 2.4: Motorcycles demand in Vietnam 2006-2010, with a prediction to 2015 16

Figure 2.5: YMVN Organization Structure 19

Figure 2.6: The sales results and market share of YMVN period 2006-2010 20

Figure 2.7: The five-forces model of competition 26

Figure 2.8: Customers’ evaluation about YMVN and HVN brand name 40

Figure 2.9: The diagram of pricing competitive products 42

Figure 2.10: YMVN and HVN distribution channels comparison 44

Figure 2.12: The IE Matrix for YMVN 55

Figure 2.13: The demand trend for over 20 million VND motorcycle 59

Figure 2.14: Basic Moped Motorcycle Demand Trend 60

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INTRODUCTION

1 General context, the necessity and implication of the research project

Vietnam’s motorcycle assembly and manufacturing industry, formed since

1990, initially based on the investment of Japanese and Taiwanese motorcycle makers, has rapidly developed and sufficiently met the domestic demand for basic motorcycles The positive development of the motorcycle industry has come from the great demand for motorcycles in Vietnamese market and the policies to encourage foreign investment

by government

Yamaha Motor Vietnam, one of the FDI manufacturers has gained a relatively strong position in the motorcycle market in Vietnam Although it was a latecomer, Yamaha has worked to build products which stand among the very best in the country through its constant pursuit of quality; and at the same time, through these products, it has sought to contribute to the quality of life of people nationwide

Following on the success, Yamaha has set up their target to become the number one brand name in manufacturing motorcycles for the youth In order to achieve this goal, the company should engage in strategic planning to make effective decisions Based on the need for intergrating analysis and intuition in strategic management, our group has decided to formulate some strategies for Yamaha in the capstone project

report: “Building up business strategy for Yamaha Motor Vietnam by 2015”

2 Objectives of the study

The study objectives include:

• To explain the concept, role and process of formulating a business

strategy

• To conduct business strategies for Yamaha by 2015

• To give some recommendations and measures to implement strategies

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3 Scope of the study

The study focuses on Yamaha business status in Vietnam motorcycle market

from 2006 to 2010, and then proposes some business strategies by 2015

4 Methodology

Many different methods are utilized in this study in order to have a wider

understanding of Yamaha business status and to gain an overall picture between Yamaha and its competitors within Vietnam motorcycle market These include: desk research, internet research, comparison, analysis, statistic, summary…

5 Structure of the study

Besides the introduction and conclusion, the capstone project report involves three chapters:

Chapter 1: Theoretical background on Business strategy management

Chapter 2: Building up business strategy for Yamaha Motor Vietnam by 2015 Chapter 3: Some solutions to implement business strategy for Yamaha Motor

Vietnam by 2015

In the process of researching, there may be some limitations; thus we would be

very grateful to get your comments and feedbacks Thank you very much!

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CHAPTER 1 : THEORETICAL BACKGROUND ON BUILDING BUSINESS STRATEGY

1.1 Definition and classification of Business strategy

1.1.1 Definition of Business strategy

The term “Strategy” derives from the military field with the meaning to indicate

the large and long-term plan on the basis sure what the enemy can and can not do

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Since then the term “Business strategy” was born According to the traditional

viewpoint, "Strategy is the direction and scale of an organization in long-term, which will bring advantages to the organizations through the optimum arrangement of resources in a competitive environment to meet market demands and expectations of stakeholders."

According to Alfred Chandler: “Strategy includes the basic long-term goals of

an organization, and the selection of the way or process to act, the allocation of necessary resources to implement to achieve these goals."

According to William J' Glueck: "Strategy is a consistent, comprehensive and

coordinated plan which is designed to ensure that the basic objectives of the organization will be done."

According to Fred R David: "Strategy is the means to achieve long-term goals

Business strategy may include the development of geography, diversification of activities, property, product development, market penetration, expenditure cuts, liquidation, and joint ventures."

According to Michael E Porter: "Strategy is the art of building a solid

competitive advantage to defense."

1.1.2 Roles of Business Strategy

The business strategy management will help the organization:

• Find their objectives and direction to choose their own ways to achieve the goals and to know the location of businesses in the process of implementing these goals

• Identify opportunities and threatens from external environment, the internal strengths and weaknesses; then to promote the strengths, minimize weaknesses, catch opportunities and prevent risks from outside

1.1.3 Classification of Business Strategy

Corporate level Strategy

Corporate level strategy identifies the orientation of the organization in the long term, to complete tasks and achieve the growth target On the basis of corporate level strategy, the organization will develop its own strategies

Strategic Business Unit level (SBU)

Strategic Business Unit (SBU) in a company can be a strategy for a segment or a product category, etc This strategy is aimed at the development orientation of each sector or individual product categories for making optimal contribution to the achievement of corporate-level objectives The company must clearly identify the advantages of each sector compared to the competitors to make the strategy consistent with corporate level strategy

Functional level strategy

Each company has many functional departments such as marketing, human resources, finance, manufacturing, research and development, etc The departments should have their specific functional level strategies to support the implementation of strategic business unit and corporate level strategies

In conclusion, the three basic levels strategies are not independent but have such

a closely connection that the strategic level is a precondition for lower-level strategies, while lower-level strategies should adapt to the higher-level strategies so that the new strategy implementation can be sucessful and effective

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1.2 Process of generating and selecting strategies

According to Fred R David, importance strategy-formulation techniques can be

integrated into a three-stage decision-making framework, as shown in Error!

Reference source not found The tools presented in this framework are applicable to

all sizes and types of organizations and can help strategists identify, evaluate and select

strategies

 Stage 1 – The Input Stage: consists of the EFE matrix, IFE matrix, and the

Competitive Profile Matrix (CPM)

 Stage 2 – The matching stage: Stage 2 techniques include the SWOT

matrix, BCG matrix, IE matrix, and the Grand strategy matrix

 Stage 3 – The decision stage: involves a single technique, the Quantitative

strategic planning matrix (QSPM)

With a limited scale of the capstone project report, we hereby just base on some keys tools to analyze Yamaha business performance such as: EFE matrix, IFE matrix, SWOT matrix, BCG matrix, IE matrix and QSPM The followings will examine the concepts and basic knowledge of tools needed to conduct a strategic audit for Yamaha

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Source: Fred R David, Strategic Management Concepts and Cases, Figure 6-2, P.222

Figure 1.1: The Strategy-Formulation Alnalytical Framework

1.2.1 The Input Stage

1.2.1.1 External Factor Evaluation Matrix (EFE Matrix)

An EFE matrix allows strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information The EFE matrix can be developed in five steps:

• Step 1: List 10 to 20 key external factors, including both opportunities

and threats

• Step 2: Assign to each factor a weight that ranges from 0.0 (not

important) to 1.0 (very important) The sum of all weights must equal 1.0

The input stage

External Factor

Evaluation Matrix (EFE)

Competitive Profile Matrix

Internal Factor Evaluation Matrix (IFE)

The matching stage

Grand Strategy Matrix

The decision stage

Quantitative Strategic Planning Matrix (QSPM)

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• Step 3: Assign a rating between 1 to 4 to each key external factor to

indicate how effectively the firm’s current strategies respond to the factor (4= the response is superior)

• Step 4: Multiply each factor’s weight by its rating to determine a

weighted score

• Step 5: Sum the weighted scores for each variable to determine the total

weighted score for the organization

Regardless of the number of key opportunities and threats included in an EFE matrix, the highest possible total weighted score for an organization is 4.0 and the lowest possible total weighted score is 1.0

1.2.1.2 The Internal Factor Evaluation Matrix (IFE Matrix)

The IFE matrix summarizes and evaluates the major strengths and weaknesses

in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among those areas An IFE matrix can be developed in five steps:

• Step 1: List 10 to 20 key internal factors, including both strengths and weakenesses

• Step 2: Assign weight that ranges from 0.0 (not important) to 1.0

(all-important) to each factor The sum of all weights must equal 1.0

• Step 3: Assign a 1-to-4 rating to each factor to indicate whether that

factor represents a major weakness (rating= 1), a minor weakness (rating= 2), a minor strength (rating= 3), or a major strength (rating= 4)

• Step 4: Multiply each factor’s weight by its rating to determine a

weighted score for the organization

• Step 5: Sum the weighted scores for each vaiable to determine a

weighted score for the organization

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Regardless of how many factors are included in an IFE matrix, the total weighted score can range from a low of 1.0 to a high of 4.0, with the average score being 2.5 Total weighted scores well below 2.5 characterize organizations that are weak internally, whereas scores above 2.5 indicate a strong internal position

1.2.2 The Matching Stage

1.2.2.1 The Strengths – Weaknesses – Opportunities – Threats Matrix (SWOT Matrix)

SWOT matrix is used to list all the opportunities, threats, strengths and weaknesses within the business by appropriate order and position Based on the relationship between these factors, the analysis will select suitable solutions through strategic combinations:

• S-O (Strengths-Opportunities): Use a firm’s internal strengths to take

advantage of external opportunities

• S-T (Strengths-Threats): Use a firm’s strengths to avoid or reduce the

impact of external threats

• W-O (Weaknesses-Opportunities): Aim at improving internal

weaknesses by taking advantage of external opportunities

• W-T (Weaknesses-Threats): Aim at reducing the internal weakness to

avoid external threats

Table 1.1: SWOT Matrix

1.2.2.2 The Boston Consulting Group Matrix (BCG Matrix)

The BCG Matrix allows a multidivisional organization to manage its portfolio

of businesses by examining the relative market share position and the industry growth rate of each division relative to all other divisions in the organization

Source: Fred R David, Strategic Management Concepts and Cases, Figure 6-6, P.232

Figure 1.2: BCG Matrix

• Question Marks: The organization must decide whether to raise market

share by improving product, service or invest more to enhance competitiveness

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• Stars: Forward, backward, and horizontal integration; market

penetration; market development; and product development are

appropriate strategies fir these divisions to consider

• Cash Cows: Product development or diversification may be attractive

strategies for strong Cash Cows However, as Cash Cows division becomes weak, retrenchment or divestirure can become more

appropriate

• Dogs: Cost reduction can become the most appropriate strategy

1.2.2.3 The Internal – External Matrix (IE Matrix)

The IE Matrix positions an organizations’ various divisions in a nine-cell display, illustrated in Figure 1.3 Each division of an organization should construct an IFE matrix and an EFE matrix, based on that, IE matrix is built up

Source: Fred R David, Strategic Management Concepts and Cases, Figure 6-9, P.234

Figure 1.3: The IE Matrix

VII VIII IX

Strong 3,0 to 4,0

The IFE total weighted scores

Average 2,0 to 2,99

Weak 1,0 to 1,99

Medium 2,0 to 2,99 Low 1,0 to 1,99

Grow and build

Hold and maintain

Harvest or divest

• Step 1: Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in the left column of the QSPM

• Step 2: Assign weights to each key external and internal factors

• Step 3: Identify alternative strategies that the organization should consider implementing

• Step 4: Determine the Attractiveness Scores (AS) defined as numerical

values that indicate the relative attractiveness of each strategy in a given

set of alternatives (range for AS from 1 to 4)

• Step 5: Compute the Total Attractiveness Scores (TAS) TAS are defined

as the product of multiplying the weights (Step 2) by the AS (Step 4) in

each row

• Step 6: Compute the Sum Total Attractiveness Scores (STAS) Add TAS

in each strategy colume of the QSPM The STAS reveal which strategy is

most attractive in each set of alternatives

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CHAPTER 2 : BUILDING UP THE BUSINESS STRATEGY FOR YAMAHA MOTOR VIETNAM BY 2015

2.1 General information about Vietnam motorcycle market

2.1.1 Southeast Asian motorcycle market

Asia is the region that produces the most motorcycles in the world and also the biggest consumption market, accounting for more than 80% of total registered units in worldwide Currently the leading motorcycle manufacturing country is China, holding nearly 50% of total Asian outputs, about over 17 million units per year Some other countries also having quite high output are Indonesia, India with over 5 million units per year

Particularly in Southeast Asian area, five countries with the highest motorcycles yields are: Indonesia, Vietnam, Thailand, Philippines and Malaysia, accounting for nearly 30% of total Asian production In these five ASEAN countries, the motorcycle market has continuously developed in both quantity and quality Overall motorcycle demand in 2010 in this region grew 21% from the previous year, to 13.5 million units Honda is still the manufacturer occupying the largest market share Especially, in Thailand, Honda takes the dominant position when its market share reaches 72%; this figure in Vietnam is 54% Despite of that, Yamaha Motor Corporation (YMC) views these markets as important and strategic regions in Asia; thus in recent years, YMC has bolstered its lineup with the introduction of new products and carried out proactive sales activities in each market This results in the considerable growth rate in the Yamaha market share Currently, the largest market in ASEAN is Indonesia where the market share of Yamaha reaches 46%

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Resource: Yamaha Motor Corporation - Annual Report 2010

Figure 2.1: Market share of motorcycle makers in main ASEAN markets

In 2010, Yamaha unit sales in these five major markets grew 26%, to 5,023,000 units, far outpacing the increasing in overall demand (21%)

Resource: Yamaha Motor Corporation - Annual Report 2010

Figure 2.2: Yamaha Motor unit sales by country in main ASEAN markets

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With the aim to raise the target of increasing the unit sales in the ASEAN to roughly 6 million units by fiscal 2012, YMC has strived to research and organize manufacturing structure and now have completed production capacity of 3,6 million units in Indonesia and 1,0 million units in Vietnam YMC has also begun to further increase their production capacity in Indonesia, to establish a structure that will be able

to produce 4,0 million units in fiscal 2012 It can be said that in the time to come, South East Asia will still be the region having a great growth rate and a remarkable motorcycle demand globally

2.1.2 Vietnam motorcycle market

2.1.2.1 Current situation of Vietnam motorcycle market

Together with the achievement in the renovation of the country, the life of people is improved clearly, the demand for travelling is also paid attention to; therefore many means of traffic have been researched, produced and put into use In Vietnam two decades ago, motorcycles were just the minority, being considered as an asset rather than means of commuting; however, motorcycles are now more and more popular and become the majority means of transportation across the country, accounting for about 61% total vehicles

From 1995-1999, FDI motorcycle manufacturers have initially invested in assembly, on the basis of importing the components from oversea and then gradually increased the localization ratio to produce motorcycles localizationly In the period from 2000 to 2003, many local enterprises involving in trading, assembling motorcycles with components originated from China had mushroomed nationwide

In 2003, the Chinese motorcycle products accounted for 65-70% of the domestic market The low quality products at low sales prices could meet the demands of majority people with low incomes, thus it quickly dominated the consumption market However, from 2005, FDI enterprises adjusted their business strategies by changing new models, reducing production costs, concentrating on the basic moped motorcycles

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to increase their market share As the result, the sales of Chinese motorcycle were dropped remarkably and instead of that were the product of prestigious joint-venture companies such as: Honda, YMVN, Suzuki, SYM, Piaggio…

Unit: Thousand units

Source: Statistic data of YMVN

Figure 2.3: Demand for motorcycles in Vietnam from 1995-2010

Currently, Vietnam has become the fourth largest motorcycle market in the world, only after China, India and Indonesia The domestic demand is more varied In the period from 1996 to 2002, the major demand was basic moped motorcycles whose engine capacity was from 50cc to 100cc, but from 2003 to 2008 the demand for motorcycles was more diversified and there was the appearance of scooter models Since only accounting about 8% market share in 2006, the demand for scooters has been increasing rapidly and attained about 30% total domestic demand for motorcycles

by later 2010 However, the basic moped motorcycle demand is still an attractive piece

of cake that enterprises should not ignore

GaMBA.X0409 – Group 3

Source: Statistic data of YMVN

Figure 2.4: Motorcycles demand in Vietnam 2006-2010, with a prediction to 2015

According to the survey results of the Marketing department of YMVN, the demand for motorcycles in Vietnam will have drastic transition by 2015, as the customers will shift to use scooters more, estimated to reach 50% of the total domestic demand by the year 2015 and 70% by the year 2020

2.1.2.1 Master plan for the development of Vietnam’s motorcycle industry by

2015, with a vision to 2020

Vietnamese motorcycle market is expected to continue growing in near future It

is estimated that by 2015, total registered motorcycles across the country will be about

31 million units, increasing about 2 million units yearly By 2020, total number of motorcycles in the country will attains about 35 million units, increasing on average 1.8 motorcycles annually from 2016 to 2020 about According to the Decision No 002/2007/QD-BCT of Ministry of Industry and Trade to formulate the “Master Plan for the Development of Vietnam’s Motorcycle Industry in the period of 2006-2015, with a vision to 2020”, Vietnam determines: By 2015, Vietnam will become a center for designing, manufacturing and assembling motorcycles in a large scale, have competition capability in the region, and integrate fully in regional and international markets Specific targets include:

• Supporting industries of motorcycle industry will have international competitiveness, take part in production and supply chains of international motorcycle groups; export revenues of motorcycles and components will reach about 400 million US dollar

• Supporting industries of motorcycle industry will meet demand on parts and components of other assembly industries, such as electric equipments, electronics, automobile, and consuming industries…

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2.2 General introduction about Yamaha Motor Vietnam Co., Ltd

2.2.1 The process of establishment and organization structure

2.2.1.1 The process of establishment

Yamaha Motor Vietnam Co., Ltd (YMVN), which was established on Jan 24th

1998 according to the investment certificate No 2029/GP, is located in Trung Gia Commune, Soc Son Dist., Hanoi The company is a joint-venture of Yamaha Motor Co., Ltd (YMC – 46%), Vietnam Forest Corporation (VINAFOR – 30%) and Hong Leong Industries Berhad (24%)

YMVN specializes in researching, manufacturing and selling Yamaha motorcycles with engine capacity within the range from 100cc to 175cc Yamaha motorcycles are totally assembled on modern production lines which were technically transferred from YMC The products not only meet global standards of Yamaha, but also simultaneously satisfy the safety and quality standards of Vietnam Besides supplying motorcycles to customers through the wide dealer network nationwide, YMVN also deals with the after sales service and spare parts business

More than anyone, although being an enterprise that came later, YMVN has accounted for quite a firm position in Vietnam motorcycle market Their products are favored by many people, especially young people YMVN launched into the market many kinds of products from basic moped to scooter with very young styles and various colors

Table 2.1: YMVN product categories

Categories Models Price level

Basic moped Taurus, Sirius Under 20 million

Sporty moped Jupiter, Exciter From 30 to 40 million VND

Utility scooters Luvias-125cc From 27-37 million VND

Sporty scooters Nouvo-135cc 36.2 million VND

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Currently YMVN is having three factories in Hanoi, six branches placed in big cities and over 500 3S dealers available in all provinces nationwide YMVN is one of the leading motorcycle firms, gaining a lot of credibility of customers thanks to correct and reasonable strategies

2.2.1.2 Organization Structure

YMVN has built the traditional model of organizational structure characterized

by high job specialization, functional departments It is a pyramidal structure with General Director at the top, a small number of Deputy General Director or Senior Managers under the General Director and several layers of management below this The jobs in the structure are grouped by function into departments such as accounting, sales, human resources, and so and it is noticed that the top of each department is Vietnamese

Figure 2.5: YMVN Organization Structure

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The organizational mechanism of the company has tight relations with each other and is specialized with high sense of responsibility, certain rights in order to sufficiently implement the managerial functions and achieve general targets

2.2.2 Situation and Business performance from 2006 to 2010

In 2007, the motorcycles sales of YMVN reached a record level of 500,000 units, marking a new milestone of unceasingly development of the company The sales result, since then, has always been increasing high, achieved 29% of market share by the year 2010, and YMVN is reaching for the target of over 1 million motorcycles sales each year YMVN has found its strength and is step by step affirming a strong position

in Vietnam motorcycle market

Unit: Thousand units

Source: Statistic data of YMVN

Figure 2.6: The sales results and market share of YMVN period 2006-2010

Source: Statistic data of YMVN

From the table of business operation results from 2006 to 2010, we can easily see revenue increased over twice (from 395.798.000 USD increasing to 826.070.000 USD) and after-tax profit also increased more than twice (from 35.257.000 USD increasing to 76.138.000 USD) In fact, the total revenue and after-tax profit of year

2008 was lower than that of 2007 was due to the effect of the global economic crisis (started from the US by 12/2007 to European countries then spread out to Japan and Asia area) However, the results of business operation of YMVN still achieved very good records with 46.967.000 USD of after-tax profit Total revenue and After-tax profit was reduced slightly compared with that in 2007

2.3 Building up the business strategy for YMVN by 2015

2.3.1 Analyzing factors affecting the business strategy of YMVN

2.3.1.1 External factor evaluation matrix (EFE)

GENERAL ENVIRONMENT

 Economic factors

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Gross Domestic Products: In the background of post financial crisis and global economic depression, Vietnam economy has step by step recovered and is growing at quite a fast pace After attaining GDP growth rate of 5.3% in 2009, Vietnam economy reached growth rate of 6.78% in 2010 According to statistics of General Department

of Statistics, GDP per capita in 2010 was 1168 USD, doubled compared with that in

2006 Together with the higher personal income level, the demand for personal means

of commuting also increase, that facilitates YMVN and other motorcycle makers in Vietnam to continue investment and production development

Inflation: Inflation of Vietnam tends to increase high in recent years Since the middle of quarter III/2010, inflation has shown the signs of acceleration and reflects the effect of high credit growth in previous years Entering the beginning of 2011, the increasing trend of inflation was more marked when prices of many raw materials, fuels which were inputs for production such as electricity, coal, and petrol increased simultaneously therefore it continues to put pressure on the commodity price in general The price escalation increased the input costs and reduced the production efficiency and competitive strength of the enterprise Thus the enterprise should be more prudent in its investment decisions

Exchange rate: In 2010, it was witnessed with the devaluation of Vietnam dongs against the US dollars The instability of exchange rate caused many great losses to motorcycle manufacturers in Vietnam As the supporting industries are still weak, the manufacturers have to import quite many components from Japan, Thailand, Indonesia and China therefore the risks of instable exchange rate are their concerns towards deploying the medium and long-term plans

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Vietnam was approximately 86 million people, in which there were nearly 25.5 million people living in urban areas (accounting nearly 30%) This is indeed a potential market

for manufacturing and trading of motorcycles in general and for YMVN in particular

Geographical distribution: In recent years, a large proportion of population

migrated to big cities for business and studying purposes According to statistics data, the population of urban area was 25,436,896 people, accounting for 29.6% of total national population, whereas the rural population was 60,410,101 people, accounting for 70.4% The average growth rate of population in urban areas was 3.4% each year, meanwhile in rural area it was only 0.4% This has boosted the demand for purchasing personal vehicles for daily commuting purposes in cities, where the motorcycles are considered as the most popular means thanks to its economy and mobility

Age structure: The population structure by age also has changes in a positive direction The proportion of the population under 15 years old decreased from 33.1% in

1999 to 24.5% in 2009 Reversely, the proportion of the population within the age group from 15 to 64 years old which is the key labor workforce, increased from 61.1%

to 69.1% Vietnam is in its golden age population, not scarce in young labor workforce This is not a small workforce bringing about an ease for enterprises in recruitment The young population structure is an opportunity for YMVN to focus on developing new models for young customer segment

 Political, legal factors

Thanks to the unity in objectives and principles, Vietnam always has the political stability despite the unstable movement in the region and in the world Specific signs are: the stable people’s life, the peace and stability of the country, the good relationship with in neighboring countries in region area and in the world, high economic growth and recognition by the international community This is the basis for FDI enterprises to continue their business and to pledge the long-term operations in Vietnam

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Besides that, due to the requirements of objective practice and the pressure when joining WTO, the legal environment, through 20 years of “Doi moi”, has remarkable advancement The state has been carrying out reforms such as the compact administrative apparatus; qualification of officers; transparency of expenditures; improvement of the legal system in the trend of simplification In fact that the consolidation of legal system has created the favorable conditions for business activities and minimized the hassle

 Social-cultural factors

Personality, personal concept: In the past, Vietnamese families was family- orientated nature, which means the sense of personal ambition, self-respect and personal decision was considerably influenced from parents Even when the buyers no longer staying in the same house with their parents, the effect of parents towards the decision of the buyers is still very great However, the trend of globalization, stormy development of mass media, and the speedy approach of the outer world has effected

on Personality, Personal Orientation, Lifestyle of young generation Besides, with higher qualification and independent in economy, the youth has more affirmation on the demand of being respected in their personal value, independent living, doing as per hobby The personal demand was shown in some ways of consumption of their favorite products, even when those products are not recommended by their families

Lifestyle: Vigorous socio-economic changes in Vietnam are exerting a major impact on the lifestyle In general, Vietnamese lifestyles are in the transitional period from a traditional to an advanced model The lifestyle of the youth has been far changed towards the higher level of vision and diverse tastes of the industrial society With such changes of lifestyle, especially with the fashion-oriented trend of the youth, it’s the opportunity for YMVN to develop new motorcycles with more fashionable, stylish and eye-catching styles The demand for high quality products which is not

According to Ministry of Transport, from 1/1/2014, two-wheel motorcycles should apply Euro-3 standard, instead of the current Euro-2 level To cope with the new regulations on emission, YMVN has equipped advanced technology machines for emissions control under EU2 standard, and plan to adopt EU3 standard by year 2012

 Technological factors

The qualification of science-technology in Vietnam is backward compared with many countries in the region and the world because almost of enterprises are using out-of-date technology with 2 or 3 generations lagged behind the latest one There are only 2% of enterprises in Vietnam applying the advanced technology meanwhile that figure

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of Thailand is 31%, Singapore 73%, Malaysia 51% (according to the criteria to reach the qualification of industrialized, modernized countries, it should be over 60%) The backward technology has prevented the expanding of the supporting industry, especially in the field of motorcycle manufacturing

INDUSTRIAL COMPETITION

Source: Fred R David, Strategic Management Concepts and Cases, Figure 3-3, P.118

Figure 2.7: The five-forces model of competition

 Internal industry competition

In motorcycle trading and manufacturing industry, the number of competitors is big enough to make very fierce competitions Within the period from 1999 to 2004, the major manufacturers focused on dealing with the invasion of cheap motorcycles from China but now the competition is just within 5 FDI makers (Honda, YMVN, SYM, Piaggio and Suzuki)

Honda Vietnam (HVN): Thanks to the advantage of brand-name that deeply rooted in mind of Vietnamese since the year 1970s of previous century, the establishment of HVN in Vietnam was quickly welcomed by customers, and from which they always lead the market with above 55% share of total demand By applying

Customers/

Distributors

Suppliers Internal industry competition

Rivalry among competing in the industry

Potential development

Substitute products

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the cost-leadership policy, HVN always has very strong competitiveness in nationwide The authorized dealer network of HVN (HEAD) currently covered intensively from urban to rural area, is the advantage against their rivals

SYM: SYM was formerly VMEP Company, established earliest since 1995

Although its brand name is not quite strong, thanks to the low price policy, SYM has gained some certain market share in rural areas in the early time Since the year 2000, when HVN concentrated on cost-leadership strategy to compete with Chinese products, SYM was also subject to intensive competitive pressure ever As the disadvantages in technology and production scale, its’ market share of basic mopeds was losing into the hand of it competitors Currently SYM gained only about 6% of market share and its’ dealer network coverage is very narrow

Suzuki Vietnam (SVN): is quite famous brand name of young and sporty image therefore it could quickly dominate the market After that, because of its slow in renovating models, product quality, distribution channels, SVN lost its second position into YMVN from 2003 From 1998-2002 SVN accounted for about 20% market share then so far it only maintains about 1.5% market share

Piaggio Vietnam (PVN): Although obtaining the manufacturing license in

Vietnam lastly, PVN have boldly invested in 2 modern factories with their capacity of 300,000 units per year Piaggio is a well-known brand-name here since the year 1975 with its product named Vespa Even penetrating the market late, but the scooter products under the prestige and style of an Italian brand name, were quickly welcomed

by high income customers Even its products has some quality limitations but PVN has still gained about 2% market share after three years of striving for investment, dealer’s network expansion and cost reduction

Table 2.3: Comparison of motorcycle manufacturers in Vietnam

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Company Strengths Weaknesses Position in the

market HVN - Brand name deeply

rooted in the consumers’

mind - “Motorcycles is called Honda”

- Modulization for leadership strategy Honda uses one kind of engine for various types of products and sells them all over ASEAN markets thus reducing cost remarkably

cost Fuel efficient

- Strong power over the suppliers and distribution network

- Very fast in R&D activity

- Financial strength

- Many Chinese models have similar styles and designs

- Many fake spare parts thus it is difficult to

customers

The leading manufacturer with the biggest market share

PVN -Design of European

fashionable style

- Modern production technology of the late comer

- Colors are always updated as per the latest

- Product quality is not suitable to South East Asia climate

- Weak service and spare parts supply compared with competitors

Good image in fashionable and luxury scooter category Holds

4th position

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trend of the world

- Brand name of fashion

- Limited market area

- Lack of experience in Vietnam market

- No strength over the suppliers

- Low investment cost

- Technology for low cost scooter manufacturing

Image of cheap Scooter brand Hold the 3rdposition in the market

joint-Image of the follower 5rdposition in market

YMVN

Styling for Youth

-Advanced colors and graphic

-Powerful Engine with 5 years of guarantee

compared with Honda

-Time for R&D is longer than HVN

-Cost of production is

-Occupied the 2ndposition in market

-Brand name of Young and Genuine Sporty Image

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-DiAsil Technology -Component Parts Factory

is a core competency

customers though ttrong out-door activities

still higher than HVN

 Potential entry of new competitors

Vietnam motorcycle market is becoming more attractive than ever with annual demand growth rate of 20% since the year 2007 to date With the huge demand for motorcycles with engine capacity under 175cc, the world leading motorcycle makers which are Honda, Yamaha, Sanyoung, Piaggio and Suzuki have established their plants

in Vietnam These companies in the past few years have continuously been investing in production scale, R&D and higher localization ratio to enhance the competitive strength, thus withholding over 93% market share

It is because of the strength of the above-said enterprises and limited capacity of suppliers, the entry of new opponents is difficult According to prediction, in the time

to come, world famous motorbike makers such as Harley Davison, Aprilia and Ducati will also establish their distribution system in Vietnam; however, this is not worrisome

as this motorbike category is totally different As their prices are very high, traffic conditions are not suitable, most demand only accounts for about 1% of market share

so there will be very little chance for the new entry

 Bargaining power of customers or distributors

Customers: The motorcycles’ demand tends to increase rapidly, not only the demand of beginners but also including the demand for replacement of over 12 million Chinese motorcycles sold in Vietnam since the year 2,000 From the year 2009 up to