Building business strategy for Son Kim Ha Tinh tourism and mineral water joint stock company from 2011 to 2015

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM BUILDING BUSINESS STRATEGY FOR SON KIM HA TINH TOURISM AND MINERAL WATER JOINT STOCK COMPANY FROM 2011 TO 2015 Group: 10 - Class: GeMBA 01.V02 Võ Văn Hiệp - Leader Nguyễn Xuân Hải - Member Phan Thanh Hải - Member Nguyễn Mẫu Lương - Member HA NOI, 2010 Building Business Strategy for Son Kim Ha Tinh Toursim and Mineral Water Joint Stock Company from 2011 to 2015 PREFACE The necessity for research Soft drinks business and bottled water industry in Vietnam has undergone a process of formation and development from the late nineteenth century to the present The beverage industry is important, associated with the increasing demands of society Soft drinks business and bottled water industry has an important role in the national economy In 2007, industrial production value of mineral water accounted for 12.66% of beverage industry production value and 2.69% of export value of the whole industry The sector contributed 2.3% to the government budget, attracted over 14 thousand employees Soft drink bottling industry has 1,013 enterprises with production capacity of 2,129 million liters per year Especially from 2007 to now, the industry maintains high growth speed, averaging over 14% per year [1] According to general assessment, the recent market shows a clear shift in the bottled water industry While carbonated soft drinks fell by 5% market share, the industry is derived from natural and instant drink increased by 12% Improvement of living standard is premise to Vietnamese customers to care much more about the health issues Instead of "fully eat", today's consumers are towards "fine dining, food safety” so health criteria placed on top of the food choices Therefore, consumers are now more aware of this convenient drink The contribution of the soft drink business and bottling industry to production and added value is increasing However, the current stage of development of the soft drink and bottling industry in Vietnam reveals problems, such as generally low product quality, lack of competition, and inadequate development plans Besides, there are still many small-scale beverages companies, patchwork investment, lack of uniformity at many locals , resulting in no guarantee of quality, food hygiene and [1 ] Nguyen, Q (2010, June 3) Soft drinks business Saigon Business , 52, 14 Building Business Strategy for Son Kim Ha Tinh Toursim and Mineral Water Joint Stock Company from 2011 to 2015 safety, state counterfeiting, unauthorized copying also cause damages to many businesses and consumers During the integration process, the pressures that beverage business and bottling industry face are very large Under WTO commitments, the support from the State sector will be reduced Protection policy with abolished quotas, tariffs will be reduced according to the schedule to make the beverage products from the oversea to appear more in the domestic market and fiercely compete with domestic products This really is a big challenge because the domestic market is the major consumption market of beverage business and bottling industry in Vietnam Not only having trouble in the "home market", the products when exported to other countries might also be impeded by trade barriers such as regulations on technical standards, quality, food hygiene and safety These criteria is now rigorously required while product quality by domestic manufactures is low, which leads to the difficulties in consumption It is said that the integration is open to a large market for the industry, but to penetrate into these markets is not easy, especially in the market with high requirements Contribution to the growth of drinks business and manufacturing industry, mineral water is a typical product which the consumer is increasingly interested The serious competition within the industry affects to the competition of mineral water’s bottlers For each business enterprise fast and sustainable development in the market requires every business must have a business strategy in the right direction Son Kim Ha Tinh Tourism and Mineral Water Joint Stock Company (SOKIMIWACO) is an enterprise producing natural mineral water with a capacity of 5,000,000 liters per year, is a business and bottling company of mineral water have a relatively large capacity in the areas of central provinces However, in recent years SOKIMIWACO activities may not actually realize its full performance advantage of the business with precious natural resources Building Business Strategy for Son Kim Ha Tinh Toursim and Mineral Water Joint Stock Company from 2011 to 2015 It is the fact that, SOKIMWACO has many restrictions and other factors interfere - Firstly, in term of market, SOKIMIWACO faces severe competition from bottlers of beverage and mineral water in Nghe An and Ha Tinh provinces - Secondly, SOKIMIWACO has not built any strategies, vision, and mission yet In other words, the company does not have any specific operation objectives - Thirdly, products of the company in the past years still lacked quality, revenue and profits were low, even in recent years remained unprofitable - Fourthly, input factors for production of company are impacted by subjective factors (material, fuel, plastic) - Finally, mobilized funds for the production of SOKIMIWACO are still difficulties, outdated technology and low labor productivity, management level is still weak To assert competitive advantages and to help the company have long term development direction, to build brand, a suitable business strategy for the Company must be required With the above reasons, our group researched and recommended to build business strategy for SOKIMIWACO during the period of time from 2011 to 2015 Objectives and application of research The main purpose of this study is to select a long-term development strategy for the product of Son Kim natural mineral water based on assessment and environmental analysis, the internal and external prospects of soft drink bottling industry during the next five years The specific objectives of the study are: - Review the best model on development strategy of drinking water sector - Identify strengths, weaknesses, SOKIMIWACO opportunities, and threats of Building Business Strategy for Son Kim Ha Tinh Toursim and Mineral Water Joint Stock Company from 2011 to 2015 - Review the current situation of SOKIMIWACO to develop competitive programs - Build development strategy from 2010 to 2015 for SOKIMIWACO Objects and scope of research 3.1 Objects The object of study is the company, SOKIMIWACO This is a joint stock company that consists of two major shareholders: one is the economic corporation company and People's Committee of Ha Tinh and the other shareholders are employees of the Company 3.2 Scope The research scope of this topic is the production activities, current business activities, and external environmental factors affecting the operation of the Company This topic was studied and analyzed within weeks (from 01/8/2010 to 15/9/2010) The data used in the subject were collected from 2007 to present Research methodology Three basic methods to build long term development strategy of SOKIMIWACO are: 4.1 Research methods to the dossier: Information for this study came from several sources including annual reports of SOKIMIWACO and other figures of the mineral water industry 4.2 Interview method: The authors of this theme have directly interviewed a number of SOKIMIWACO key staff, chief of the sales branch, marketing staff, as well as workers The authors also discuss with the leaders of the company about the current situation and the development orientation of SOKIMIWACO next years In addition, customer questionnaires and evaluation statistics were also used at the same time Building Business Strategy for Son Kim Ha Tinh Toursim and Mineral Water Joint Stock Company from 2011 to 2015 4.3 Methods of applying the theoretical model: Analysis of external factors includes analysis of PEST model, Five Competitive Forces of M Porter, analysis of internal factors, EFE, IFE, and SWOT matrixes Research structure This research includes three main parts Part 1: Preface Part 2: Content - Chapter 1: Theoretical foundation and the fact of building business strategy for SOKIMIWACO from 2010 to 2015 - Chapter 2: Overview and analysis of the business environment of SOKIMIWACO - Chapter 3: Selection of development strategy for SOKIMIWACO Part3: Conclusion and recommendations Building Business Strategy for Son Kim Ha Tinh Toursim and Mineral Water Joint Stock Company from 2011 to 2015 CHAPTER THEORETICAL FOUNDATION AND THE FACT OF BUILDING BUSINESS STRATEGY FOR HA TINH SON KIM TOURISM AND MINERAL WATER JOINT STOCK COMPANY FROM 2011 TO 2015 The theoretical foundation discussed in this chapter includes:  Definition of strategy, business strategy  Analysis of PEST model and forces of M Porter  Analysis of functional-based internal factors  Internal and external factor combination matrix  Selecting the suitable strategy from the SWOT analysis 1.1 Definition of strategy Business strategy has long been studied with many theories and concepts There are many views on the concept of strategy: First point: Business Strategy is an art using tactics to succeed over the competitors This school of thought is common Second point: The school of thought said that strategy is the art of creating competitive advantage Michael Porter of the Harvard Business School said, "Strategy is the art of building a solid competitive advantage to the defense" Schools of thought of France said that "Strategy is the art that companies use to combat competing for victory" Third point: strategy is both plan and art; a good strategy going with good structure will bring to success This is an approach method of strategic management [2], and we also have different definition on strategy such as: In 1962 Chandler considered strategy as “The determination of the objectives, basic long-term goals of the enterprise and the application of a sequence of actions as well as the allocation of necessary resources to carry out this goal.” [3] [2] Three points of view ( 2010, June) Strategy Administration MBA course p 12 Building Business Strategy for Son Kim Ha Tinh Toursim and Mineral Water Joint Stock Company from 2011 to 2015 Quinn came in 1980 with the more general definition: "Strategy is the pattern or plan to integrate the major objectives, policies, and action sequences into a rigorously cohesive whole" Later, Johnson and Schole redefined strategy in environmental conditions having a lot of rapid changes: "Strategy is the long term direction and scope of an organization to gain competitive advantage for organizations through the format of its resources in a changing environment, to meet market demand and satisfy the expectations of our stakeholders" Strategy is divided into levels: Corporate level strategy: Addressing what businesses the organization will operate? Business level strategy: Addressing how to compete? Functional level strategy: Addressing how important to implement function? (for example: human resource, marketing strategy) Today the strategy is commonly used as a factor to increase the possibility of success while minimizing the possibility of failure In summary, although there are many viewpoints and different definitions of strategy, this study's authors believe that this topic "business strategy is a series of complicated activities, to mobilize source of organization to achieve a specific purpose.” 1.2 PEST analysis and five competitive forces model of Michael Porter 1.2.1 PEST analysis: PEST analysis and five competitive forces model of Porter is to analyze the external factors acting on the enterprise and consider the impact on business production operations of enterprises, to analyze the opportunities, threats [3] Chandler, A (1962) Strategy and Structure Massachusetts: MIT Press [4 ] Strategy definition (2010, June) Strategy management MBA course p 20 Building Business Strategy for Son Kim Ha Tinh Toursim and Mineral Water Joint Stock Company from 2011 to 2015 for the existence and development of the business PEST includes political, economic, sociocultural, technological, and natural elements [5] The basic elements of the external environment are shown in the picture below EXTERNAL FACTORS Political elements INTERNA L FACTORS Economic elements Sociocultural elements Technological elements Environmental elements FIGURE 1.1 External factors of the enterprise [5] PEST analysis and five competitive forces model of Michael Porter (2010) Marketing and strategy management documents MBA course Building Business Strategy for Son Kim Ha Tinh Toursim and Mineral Water Joint Stock Company from 2011 to 2015 Economic factors: The factors that play an important role in the factors affecting the business activities of enterprises It includes the following elements: The economic growth, inflation, economic crisis, and personal income, and the gap between the rich and the poor in society High economic growth, high personal income, and low inflation create opportunities for businesses to invest Conversely, low economic growth, low personal income will be challenges for enterprises Political factor: This factor covers political institutions, and the legal system Stable politics, the advantage of legal environment will be favorable conditions for development business Conversely, unstable political factors such as frequent occurrence of war or internal disputes, restricted law will be challenges to corporations Concerning policy, Vietnam in recent years has been rated as a country with political stability and has attracted foreign and domestic investors In contrast, neighboring Thailand in recent year often suffers internal disputes that cause difficulties in economic development for Thai enterprises, especially in tourism business Sociocultural factors: Social and cultural factors (tradition, habits, food & drink culture, shopping culture) impact on market’s demand and this is an opportunity for business to invest and develop Technological factors: Today this factor plays more important role, determining the business environment of the business The world is in the evolution of technology, a range of nascent technologies and applications It relates and impact on manufacturing companies, service, banking (payment cards, ATMs ) Environmental factors: The factors such as climate, soil, and mineral elements have impact on our business and production process Environment with moderate climate and country with many mineral resources brings opportunities for business development while environments with severe climate and few mineral resources create obstacles to business development 10 ... TOURISM AND MINERAL WATER JOINT STOCK COMPANY 2.1 Overview of Son Kim Ha Tinh Tourism and Mineral Water Joint Stock Company Son Kim Ha Tinh Tourism and Mineral Water Joint Stock Company (SOKIMIWACO)... 19 Building Business Strategy for Son Kim Ha Tinh Toursim and Mineral Water Joint Stock Company from 2011 to 2015 CHAPTER OVERVIEW AND ANALYSIS OF BUSINESS ENVIRONMENT OF SON KIM HA TINH TOURISM. .. development strategy for SOKIMIWACO Part3: Conclusion and recommendations Building Business Strategy for Son Kim Ha Tinh Toursim and Mineral Water Joint Stock Company from 2011 to 2015 CHAPTER THEORETICAL