Constructing business development strategy by 2015 and vision by 2020 for Ha Noi Beer – Alcohol – Beverage Joint stock corporation

And how to make an enterprise maintain stable business activities and growth rate in the strong competitive market impacted by many external factors that are hard to be controlled with a

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GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION

PROGRAM

CAPSTONS PROJECT REPORT

CONSTRUCTING BUSINESS DEVELOPMENT STRATEGY BY 2015 AND VISION BY 2020 FOR HA NOI BEER – ALCOHOL – BEVERAGE

JOINT STOCK CORPORATION

Group 3

1 Nguyen Van Thao (Leader)

2 Bui Anh Linh

3 Nguyen The Than

4 Nguyen Thi Thanh Nga

NGHE AN 2012

1.2.2 Analysis of internal and external environment 18 1.2.3 Techniques of analysis and strategy selection 20

CHAPTER II: GENERAL INTRODUCTION AND BUSINESS

ENVIRONMENTAL ANALYSIS OF HABECO

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2.1.1 Establishment process, function, duty and organizational structure 27 2.1.2 Reality and results of business and production within the period of

2.3.2 Analysis of sector environment and competition 36

CHAPTER III: BUSINESS STRATEGY FOR HABECO BY 2015 AND VISION 58

3

BY 2020

3.2 Selection of strategic solutions for HABECO within the period of

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LIST OF ABBREVIATION

HABECO Ha noi beer, alcohol, beverage joint

stock corporation

Tổng công ty Bia- rượu- Nước giải khát Hà Nội

SABECO Sai Gon beer, alcohol, beverage

joint stock corporation

Tổng công ty Bia- rượu- Nước giải khát Sài Gòn

VBL Vietnam Brewery Limited Công ty trách nhiệm hữu hạn

Nhà máy bia Việt Nam

VBA Association of Beer - Alcohol -

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LIST OF FIGURES

Figure 1.2 Process of constructing strategy of the enterprise 17

Figure 2.1 Beer consumption level per capita in Viet Nam 35 Figure 2.2 Vietnamese beer quantity from 2005 to 2011 37 Figure 2.3 Market share in 2011 of beers base on geographical location 38 Figure 2.4 Growth rate of quantity of beer producers from 2008 to 2011 39 Figure 2.5 Structure of Vietnamese beer market 40 Figure 2.6 Five competitive force model of Michael Porter for beer sector 45

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LIST OF TABLES

Table 2.1 Budget payment of the whole sector in 2011 31 Table 2.2 Prediction the consumption of beer, wine within the allowed age

(15+) in Viet Nam

34

Table 2.3 Some financial norms of HABECO (2009 – 2011) 47

Table 2.5: Competitive advantages of three biggest beer producers in Viet Nam 52

Table 3.2 Concrete targets of growth rate by 2015 and 2020 69

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PREFACE

1 The need of the topic study

Achievement of the twentieth century has marked a new development step

of the industrial production which bring the global economy to a high development step Coping with such strong growth rate, on the half decade of 21st century, a series of big enterprises in the world have declared bankruptcy especially since

2008 with the collapse of American property market and banks and currently public debt in Europe to deeply impact on global economy together with political instability in some nations In Viet Nam, integration into WTO and globalization have deep influence on business activities of each enterprise

And how to make an enterprise maintain stable business activities and growth rate in the strong competitive market impacted by many external factors that are hard to be controlled with a defined source and how to maintain stability and development in long term? We want to apply the learned knowledge to analyze, evaluate influences on business activities of an enterprise including objective and subjective factors, external and internal factors of the enterprise, then define opportunities, threats, strengths and weaknesses of enterprise (HABECO)

HABECO is one of the state-owned enterprises with strong transferring when it transfers from state-ownership to the form of joint stock corporation in 2008; its average growth rate in recent years is 20%, average revenue annually increases 30%, state-owned budget payment annually increases 20%, average profit annually increases 12% HABECO is the enterprise with the distinctive product of

Ha Noi city named Ha Noi beer; in the economic integration, deep globalization then to maintain stable business activities and sustainable development then enterprise must have long term strategy to cope with external influences and strong economic competition

Via learned knowledge and the time of research and approaching business reality of HABECO, we have applied from the theories to reality to create the business strategies with some detailed proposals for HABECO to be in ready position to stabilize growth rate in the long term to become one of the leading

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enterprises of beverage in Viet Nam and the region

2 The targets and application of the topic

The main purpose of this research is to select a strategy for the long term development of HABECO based on environmental analysis and evaluation, internal and external prospects of the sector of beer, alcohol and beverage by 2015 and 2020 The targets of research are as follows:

 Reconsider the best model of development strategy of beer, alcohol, beverage

in the nation

 Define strengths, weaknesses, opportunities and threats of HABECO

 Evaluate present situation of HABECO to develop competitive program

 Construct business strategy by 2015 and 2020 for HABECO

3 Study object and scope:

This report will study the business strategy of HABECO which is one of the three leading enterprises of the sector of manufacturing beer - alcohol - beverage of Viet Nam

The study scope of this topic includes activities of production, trading and external environmental factors impacting on the activities of the company This topic

is studied and analyzed within 6 working weeks (05/08/2012 – 19/09/2012) The data

in the report has been collected since 2006

Analyze and evaluate current business strategy of HABECO; propose ideas and solutions to improve business strategy of HABECO within the period of 2012-

2015 an strategic vision by 2020

4 Study methods:

- Methods of approaching: the report has used the approaching methods such as particular approaching method; historic approaching method, qualitative and quantitative approaching methods

- The method of data analysis and processing: the report has used the methods

of statistical description, analysis, synthesis when evaluating business results of HABECO; EFE matrix, IFE matrix, SWOT matrix, IE matrix

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- Information sources: the report has use secondary information from papers, books, internet and reports of HABECO, commercial and industrial ministry

5 Structure of the report

This report includes 3 chapters

Preface

Chapter 1: Theory and reality of constructing strategy for HABECO

Chapter 2: general introduction and analysis of business environment of HABECO Chapter 3: selection of development strategy for HABECO by 2015 and vision by

2020

Recommendations and conclusions

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CHAPTER 1 THEORY AND REALITY OF STRATEGY CONSTRUCTION FOR HABECO

1.1 Business strategy

1.1.1 Definition of business strategy

“strategy” is the terminology originated from the Greece word “Strategos” to

be used in the army; modern military theorist Clawzevit supposes that: military strategy is the steering art in favorable position According to Larous Coi dictionary: strategy is the art to steer media to reach success

In 1962, Chandler has defined strategy as “the task of defining basic long term targets and purposes of the enterprise and the applying a series of action as well as allocation of necessary resources to implement this target” (Chandler,

A.1962 Strategy and Structure Cambridge, Massachusetts MIT Press)

By 1980s, Quinn has given a more general definition “strategy is the model

or plan to gather the main targets, policies and a serial action into a strongly consolidated organization” (Quinn, J., B 1980 Strategies for Change: Logical

Incrementalism Homewood, Illinois, Irwin)

Then, Johnson and Scholes have defined the strategy in the quickly changed

environmental conditions: “Strategy is the long term orientation and the scope of

an organization to occupy competitive advantages for the organization via defining its resources in a changed environment to meet market demand and satisfy the expectation of stakeholders” (Johnson,G., Scholes, K.1999 Exploring Corporate

Strategy, 5th Ed Prentice Hall Europe)

Brace Henderson, the strategist and the founder of Boston consultancy

corporation has defined that “strategy is to carefully search for an action plan to develop and connect competitive advantages of the organization The differences between you and the competitive opponents are the advantages for you”

Michael Proter also agrees with the opinions of Henderson: “competitive strategy is related to the difference This is to select carefully a serial activities to

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create a distinctive value collection”

In spite of any approaching method then the nature of business strategy is to draft the future image of the enterprise in the operational sector and exploitation capacity According to this understanding, business strategy is used according to 3 most popular significances:

- Define long term targets of the enterprise

- Create general action plan

- Select action plan; allocate resources to implement such targets

Current popular viewpoint is that: “business strategy is the art to coordinate activities and control them to reach the long term targets of the enterprise” It

considers business strategy as a management process leading to the enterprise management by strategic thought with the following viewpoint: a good strategy is not enough but it must include the good implementation capacity to ensure success Enterprise management is the strategic duty which is the currently popular viewpoint of strategic management

(Source: Ngô Kim Thanh.2011 National economic university – manual book

of strategic management)

1.1.2 The role of business strategy

Business strategy has a really important role for the formation, existence, development of the enterprise Business strategy is considered as the guideline for the activities of the enterprise which is the important factor to create the success for the enterprise; the role of business strategy is shown as follows:

Business strategy will help the enterprise to define the purposes, orientation of the enterprise which is the basis and guideline for all business activities of the enterprise Without strategy, enterprise will not define its own targets and orientation

in the operational process then it cannot mobilize the human resource, materials to promote the advantages of the enterprise

Business strategy will help the enterprise grasping and making use of business opportunities then having the methods to overcome the threats in the competition process of the enterprise Thanks to the business strategy, enterprise can create

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solutions to get success in the strong competition especially in the integrated market economy Via business strategy, it will help enterprises making use of resources to get high results to reach the given target which can help the enterprise to define the way and orientation to create the competitive advantages compared to the opponents

Business strategy will contribute to raise the effect of using resources, increase the competitive position of the enterprise, ensure sustainable development of the enterprise Via business strategy, it will help the enterprises making use of resources

of the finance, personnel, infrastructure, informatics technology, brand name via strategies of finance, human resource development, informatics technology all of such factors will be promoted and used effectively to reach given targets

Business strategy will create the firm basis for proposing policies and decisions of business and production to be suitable to the market changes A changed business environment will create the opportunities and threats in the future; business strategy will help the enterprises making use of opportunities and reducing threats, helping enterprises to better prepare to cope with and control the market changes

Business strategy will also help the enterprise reducing risks and increasing capacity of enterprises in making use of the business strategy when they appear

Business strategy plays the center role in developing the product distinction, helps raising the position of enterprise and increasing the credibility from customers and partner

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Figure 1.1 The duty of strategic management

1.1.3 Types of business strategy

1.1.3.1 Concentrated growth strategy

Concentrated growth strategy is the strategy to orient to serve the demand of the limited group or customers’ segmentation including three following main

strategies:

Market penetration is the strategy to exploit current market and existing

customers of the enterprise via the forms to increase the number of sale employees,

increase advertisement and promotion cost,… Strategy of market penetration is

aimed to increase the market share of existing products and services at a defined

existing market Such strategy is used when current market is not breakeven which

still has the development potentials for products and services of the enterprise;

market share of competitive opponents is reduced but the sale revenue of the whole

sector increases

Market development: it is the strategy related to the launching an existing

product or services into a new geographical area Such strategy is used when the

enterprise has the capacity of market research and penetration especially foreign

Construction

of strategies

to reach the targets

Implementat ion and management

of selected strategies

Evaluation, implementati

on, monitoring, adjustment

Improvement/changing If necessary

Recovery 1,2,3,4

If necessary

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markets; enterprise also has good production capacity and the distribution channel in the new market is reliable with suitable cost and high quality

Product development: via investment in research and development,

enterprise can launch to the market the improved and adjusted products from existing products Such strategies are used when the products of the enterprise are breakeven

or prepared to be breakeven (the product is in the last phase of product cycle); the enterprise is operating in the sector with high growth rate, the high rate of technological improvement and application and strong competition

1.1.3.2 Basic competitive strategies

a Leading cost strategy

Leading cost strategy is the strategy to provide products and services to be accepted by customers with the lowest cost in the relation with all competitive opponents The purposes of the follower of leading cost strategy are to better implement than competitive opponents, provide products and services with the lowest cost which can compete with competitive opponents

b Differentiation strategy

Differentiation strategy is the strategy to create competitive advantage of the company by creating products (products or services) with difference compared to competitive opponents; this differentiation is to best meet demand of customers that competitive opponents cannot have With such strategy, the company must launch distinctive products with high value to consumers; such differentiation has not been known by opponents The products of the company must have outstanding quality then customers can readily accept the higher price compared to the opponents due to the differentiation of company’s products

c Concentration strategy

Concentration strategy is the generally third competitive strategy Its difference compared to two above strategies is that it orients to serve the demand of the limited customer segmentation A concentration strategy will orient to the vacancy of a concrete market that can be defined based on geographical location, kind of customers or product segmentation For instance, a geographical hole can be

a Leading unit of the market

- Strategy to expand total market demand: look for a new geographical location

to sell products, look for new customers, develop the new tools, encourage to use more products

- Defending strategy: it will help the business unit leading the market and maintaining its own position within the current market The leading business units will be threatened by other opponents especially the units with the challenged position in the market Then the business unit must defend constantly to cope with the attacks of competitive opponents

- Strategy of expanding market share: by acquisition or franchising of business units of the small competitive opponents; attacking to occupy market share of the weak opponents

b Business unit to challenge with the market:

Attach the leading business unit and other opponents to increase the market share or do trading parallely with competitive opponents without collision with the competitive opponents that stand behind it To implement the strategy of attacking, business units must implement the following steps:

- Define competitive opponents to attack and the targets of attacking strategy

- Select the suitable attacking strategy: forward attack, covered attack, attack to the side …

c Business unit behind the market:

Those are the business units not to cope with the leading opponents or challenge the market because of not enough resources, fearing for damages, waste of

- Emulate some core contents in the marketing mixed of the leading opponents and keep some differences of packing, price, advertisement, sale network …

- Emulate to adapt to the market based on marketing mixed of the opponents to improve the private distinction for marketing mix to adapt to the demand and expectation of the target market

d Business units lurked in the market

Such units will search for one or some lurked segmentation with profitability

To get success within a narrow market, they will implement specialized strategies:

- Specialized based on the last consumer: depending on the market then the business unit will choose customers with demand of using products or services

- Specialize the phase in the process of production and product distribution: business units will choose the details, elements of a complete products, a supplemented product for the main product …

- Specialized based on customers: choose customers according to demographic standards to serve such as customers with high income, medium or low income, customers of all ages …

- Specialized based on sale area: select a geographical location to serve such as domestic market, international market …

- Specialized based on product distinction: high quality, average quality or luxurious quality

- Specialized based on the products in each sector: according to one or some products in the big sector

- Specialized based on selected business services that competitive opponents do not supply

1.2 Process of constructing business strategy

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Business strategy of the enterprise must ensure the distinctive existence and development which is constructed based on the comparative advantage to show the relation between enterprise and the environment then prove the development of the enterprise The process of constructing business strategy is the beginning period in strategic management The process of constructing strategy will include the following contents:

Figure 1.2: Process of strategy construction in the enterprise

1.2.1 Define mission and targets

All enterprises must define mission and operational targets Or in other words enterprise must clarify the purpose of existence A good business target must be constructed via a good working process by collecting the opinions of the whole

Internal analysis (Find out capable resources and the core capacity)

Business strategyGlobal strategyCompany’s strategy

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enterprise Business mission of an organization is its own purposes of business activities, which is the reason for the appearance, existence and development of an organization Business mission of an organization will answer the question: for what does the organization appear and exist? Targets are concrete results that the organization wants to reach in a defined time

1.2.2 External and internal factors evaluation

1.2.2.1 External factors evaluation

To make business strategy feasible, after defining business targets, enterprise must analyze and evaluate the influences of external environmental factors to implement the business strategy

The process of external environmental factors will include macro and micro analysis

in which macro analysis, so-called PEST analysis including: analysis of political and legal factors, economic factors, social factors, technological factors, natural factors

Political and legal environment: including the stability of political institution; legal improvement; attitude of the state toward the competitive opponent, monopoly and economic sectors, the relation of the state and enterprise …; the economic environment will include: features and targets; socio-economic development orientation; GDP and GDP per capita, inflate rate, income of population, interest rate….; social and cultural environment including the changes in realizing cultural value, the changes of living style, education and medical healthcare, income allocation, the change in social geography, the change of quantity and structure of households; technological environment; natural and global environment

Micro environment includes: analysis of competitive opponents including strategy of the opponents, targets of the opponents, evaluation of strengths and weaknesses of competitive opponents; analysis of customer including the features of customers, development trend of the customers, group of customers, scale of customers, demand of customers, orientation of customers

We will use the five force model of Michael Porter; enterprise is trading in a sector environment and how will such factors impact on the enterprise? what are opportunities and threats?

Analysis of external environment will allow enterprise realizing opportunities, threats that enterprises will cope with then help the enterprise creating orientations, suitable solutions to make use of opportunities and overcome threats Researchers will create EFE matrix to evaluate external factors

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Figure 1.3: External environment

1.2.2.2 Analysis of internal environment

Internal analysis is the next step of constructing strategy to find out strengths,

weaknesses of the organization then find out strategies to reach competitive

advantages, and make use of the power of the enterprise, power of resources and

capacity to create and maintain the sustainable competitive advantage for the

enterprise

Internal analysis will focus on evaluating, analyzing the following contents:

financial situation; human resource, management and control, organizational

structure, marketing, research and development, informatics technology, internal

control

Internal analysis will allow realizing strengths and weaknesses of the

enterprise then construct strategy to promote strengths and weaknesses of the

Competition among existing companies

Negotiating capacity of buyer

Political and legal factors

Natural

environment

Economic environment

Global

environment

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After defining targets and mission, analyze internal and external factors of the enterprise, to construct business strategy, enterprise will analyze and select strategy, this process will use the following tools:

1.2.3.1 External factors evaluation (EFE)

To evaluate external factors, we will use matrix for evaluating external factors; this matrix will be constructed via the following steps: enterprise will list external factors which plays decisive role on the success of the enterprise Such factors will be the conclusion of analyzing economic factors then synthesizing to be put into the table of factors with the most importance; depending on enterprises then quantity of factors can be 10 or more factors

Defining the importance of such factors in the sector will be done by classifying from 0,00 (unimportant) to 1,00 (the most important) for each factor Total classification level must be equal to 1,00

To evaluate the reaction capacity of enterprise for each factor is to follow the scoring from 1 to 4 out of which 4 points show the very good reaction capacity and 1 point will show the slow reaction capacity; importance level will be multiplied by its evaluation point to define organizational point

Summing up all the points for each factor will define the total important point

of the enterprise Maximum total important point is 4,00 and the lowest total important point is 1,00 Average total important point is 2,50 Total important point lower than 2,50 shows that enterprise has badly reacted to the changes from external environment and on the contrary, total important point higher than 2,50 shows that the company is rather sensitive with business environment

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Table 1.1 External factors evaluation matrix

No External factors

1.2.3.2 Internal factors evaluation (IFE)

The matrix is constructed to define strengths and weaknesses of the enterprise The process of setting up IFE matrix is like the process to setting up EFE matrix but

it replaces evaluated factors by strengths and weaknesses of the enterprise

Using IFE matrix is to summarize the analysis, evaluate strengths, weaknesses

of the factors to impact on internal activities of the enterprise The development process of IFE matrix is similar to EFE matrix, then list factors impacting on internal activities of the enterprise with the weight from 0,00 (unimportant) to 1,00 (the most important) for each factor Total defined classification level for such factors must be equal to 1,00 Evaluation point will be classified from 1 to 4, out of which 1 point is the biggest weakness, 2 point is the smallest weakness,3 point is the smallest strength and 4 point is the biggest strength

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Table 1.2 Synthesis table of internal factors

No Internal factors Weight Evaluation point Total point

1 Capacity of leading cadre

2 Qualification and duty of cadre

1.2.3.3 Matrix to evaluate competitive opponents

In all events and environmental trend to impact on the formation of enterprise’s strategy then competition’s influences will be considered to be the most important Matrix of competitive image is used to realize the main competitive opponents together with their own strengths and weaknesses

1.2.3.4 Internal – External Matrix

IE Matrix (Internal – External Matrix) puts the different capacities of one business entity in one table divided into 9 squares This figure constructed bases on 2 main aspects:

- Sum of important mark of IFE is indicated in X axis

- Sum of important mark of EFE Matrix is indicated in Y axis

- The company has to construct IFE and EFE Matrix which is the foundation to establish its own IE Matrix

- X axis show the importance of IFE Matrix

 If Mark is from 1.0 – 1.99, means: The internal factors are weak

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 If Mark is from 2.0 – 2.99, means: Average

 If Mark is from 3.0 – 4.0, means: Strong

 -Y axis show the importance of EFE Matrix

 If Mark is from 1.0 – 1.99, means: weak

 If Mark is from 2.0 – 2.99, means: Average

 If Mark is from 3.0 – 4.0, means: Strong

Figure 1.4: Importance Mark in IE Matrix

Weak 1.0 – 1.99

 If the company capacity is allocated in squares I, II, IV: should be developed and constructed

 If the company capacity is located in squares III, V, VII: Should be maintained

 If the company capacity is located in squares VI, VIII, and IX: Should be harvested or rejected

From EFE matrix and IFE matrix, we will have IE, then we can synthesize into matrix table such as EFE is 3,2 and IFE is 2,7; we can define the center of the round and define the round to reflect scale; if the center is green lamp then it is growth area; if the center is yellow lamp then it is stable area; if the center is red lamp then it is dangerous area; we must choose suitable strategy depending on the position of the enterprise This matrix will show us the strategic position of the enterprise

1.2.3.5 Analysis of SWOT matrix

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Analysis of SWOT matrix is to analyze the opportunities, threats, strengths and weaknesses From external factors analysis then we can synthesize opportunities and threats then analyze the enterprise which will help us realizing the strengths and weaknesses, analyzing the portfolio and the core capacity to show the competitiveness and the core capacity, advantage and dominant advantage

Defining opportunities and threats via the analyzing the data of environmental changes in terms of economy, finance, politics, law, society, competition in the markets where enterprise is operating or intends to access into Opportunities can include the potential market development, market vacancy, near the material resource

or cheap labor force with good professional skills The threats for enterprise can be narrowed market, strong competition, the changes of policies, political instability in the main markets or the development of new technology to make the production line

of enterprise outdated

In analysis of internal environmental of the enterprise, the strengths of the enterprise can be skills, resources and advantages of the enterprise in front of competitive opponents (the core capacity of the enterprise) such as talented managers, outstanding technology, famous brand name, available cash, good image

in the eyes of people or big market share in the main markets Weaknesses of enterprise can be the mistakes, limitations and skills, resources or the factors to limit competitiveness of the enterprise That can be ineffective distribution network, lack

of experienced managers, outdated products compared to competitive opponents …

Results of SWOT analysis must ensure the detailed, accurate, realistic and feasible quality because the enterprise will use such results to implement the next steps such as strategic formation, strategic targets and the control of internal and external power as well as avoiding the external threats, limiting or overcoming weaknesses of the enterprise

Process of SWOT analysis is as follows:

– List all opportunities and threats from external environment as well as define strengths and weaknesses of the enterprise

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– Combine the internal strengths with external opportunities to form SO

strategy Combine internal weaknesses with external opportunities to form WO strategy Combine internal strengths with external threats to form ST strategy

Combine internal weaknesses with external threats to form WT strategy

Figure 1.5: SWOT matrix

SWOT MATRIX

Internal factors Strengths (S)

1

2 List strengths 3…

…

Weaknesses (W)

1

2 List strengths 3…

…

External

factors

Opportunities (O)

WO strategy: overcome

weaknesses of the enterprise by making use of favorable opportunities

WT strategy: reduce the

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To choose and decide the business strategy that may be used in QSPM matrix, this matrix uses information obtained from the input stage to assess the feasibility of the strategy has raised in the period case The steps required to form the QSPM matrix including

 Listing external opportunities / threats and the strengths / weaknesses of the enterprise Evaluate the importance of each factor listed on a certain scale (1

to 4) or in other words, determine the weight of assessing the importance of each factors of the enterprise

 Selecting prominent strategy outlined in the combination phase Evaluating each strategy based on factors of opportunity / threats / strengths / weaknesses were listed on a scale of 1 to 4

 Calculating the total score of each strategy by calculating the sum of the product between the score of importance level of each factor and score of each strategy Strategic comparison, evaluation and selection based on the total score of each strategy, the strategy with the highest total score is the preferred strategy to use

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CHAPTER 2 GENERAL INTRODUCTION AND ANALYSIS OF BUSINESS

ENVIRONMENT OF HABECO

2.1 General introduction of the corporation

2.1.1 The process of formation, function, duty and organizational structure

Ha Noi beer - alcohol - beverage corporation has the main location at No 183 Hoang Hoa Tham street, Ba Dinh district, Ha Noi city which was established on 16/5/2003 pursuant to Decision No 75/2003/QĐ - BCN of the minister of industrial ministry (currently commercial and industrial ministry) based on rearranging Ha Noi beer company and member units; officially transferring to the organization and operation pursuant to the model of parent company - subsidiary based on Decision

No 36/2004/QĐ-BCN dated 11/05/2004 of minister of industrial ministry

Trading sectors: trading beer, alcohol, beverages; materials, equipments, spare parts related to beer, alcohol and beverage; aromatizers, mash liquor to produce beer, alcohol, beverage; services of consulting training, researching, technological transfer; design, construct equipments and projects in the sector of beer, alcohol and beverages; property trading, hotel trading, leasing office and accommodations, restaurant services and other trading sectors with enough conditions pursuant to legal regulations

The forerunner of HABECO is Hommel beer factory with the scale 30 labors established by a French named Hommel in 1890 with the purpose of serving French foreign Legion In 1954, the North had been completely liberated, foreign Legion had withdrawn, then removed all machines of the Hommel beer factory In 1957, Hommel beer factory is recovered pursuant to the policy of economic recovery of the Government then changed the name into Ha Noi beer factory

On 1/5/ 1958, the first batch of beer was successfully done by Mr Vũ Văn Bộc - a skilled workers of the former Hommel beer factory combined with the help from Czechoslovakia beer experts On 15/8/ 1958, the first beer bottle of Viet Nam

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with Truc Bach label had been produced which marked a new turning point in the industry of producing beer in Viet Nam Since then, the date of August,15th has become the traditional date of HABECO

In 1993, Ha Noi beer factory transferred the operational model, then changed the name into Ha Noi beer company and promoted the process of innovating equipments to raise capacity to 50 million liters/year By 2001, the company has implemented the project to raise the capacity to 100 million liters/year

After transferring into state-owned corporation in 2003, the event that marked the turning point in expanding international cooperative relation is the fact that the corporation signed on strategic cooperation with Carlsberg group in 2007

On16/6/2008, HABECO has officially transferred the operational model the form of joint stock cooperation with the official name of Ha Noi beer -alcohol - beverage joint stock corporation (HABECO) After equalization, HABECO is capital representative of the State at Hanoi alcohol Joint Stock Company, the Corporation does not interfere in the business activities of Hanoi alcohol Joint Stock Company, so HABECO only focus on the manufacturing sector of the beer

In 2010, with the completion of the project to construct beer factory with capacity of 200 million liters/year in Me Linh, Ha Noi equipped with the most modern equipment of the South East Asia which enables the company to reach the capacity of nearly 400 million liters/years HABECO has become one of two biggest corporation of producing beer in Viet Nam

Major beer products of HABECO:

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Beer has distinctive flavor, is extracted in a brown glass bottle with a capacity of 450

ml, plastic closed box, convenient for transport

• Hanoi Beer Premium is the new bottled beer with 330ml and having distinctive flavor

• Hanoi Draught beer has high and stable quality, pure fragrance flavor, and price is suitable with income of the majority of consumers Currently, Hanoi Draught beer is extracted barrel (keg) on the closed and automated production lines in Germany, ensure food hygiene and create for drinker the opportunity to enjoy the quality and flavor as in the fermentation cold basement of HABECO

• Truc Bach beer: Truc Bach beer only uses TBY yeast This is type of yeast that was studied and grown by engineers of Habeco and Czechoslovakia The beer that cooked in modern industrial processes are often short-term fermentation product thus when drinking may not feel "soft" TBY yeast is fermented longer that is twice, three times in comparison with normal fermentation of other types of beer So Truc Bach beer is very smooth and charming, which gives a unique taste of beer lovers that cannot forget

Currently, the corporation has 25 member companies with the main products

of Ha Noi draught beer, red labeled Ha Noi bottled beer of 450ml, HANOI BEER Premium, green labeled Ha Noi bottled beer of 450ml, canned Ha Noi beer, Truc Bach beer …

Average growth rate in recent years is 20% Annual average revenue is 30% State’s budget income increases more than 20% on average Profit increases annually 12% on average

2.1.2 Reality and results of business activities within the period of 2009 ÷

2011

From the year 2006, after implementing the task of arrangement, innovation of the enterprise, until now, business and production results of member companies as well as the whole corporation are high Within the period of 2006 - 2011, Average growth rate is:

+ Industrial production value increases 21,8%/year;

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+ Industrial revenue increases 26,4%/year;

+ Beer of all kinds increase 14,1%/year;

+ Alcohol of all kinds increase 18,5%/year

+ Pretax profit increases 22,1%/year;

+ Budget income increases 22,6%/year;

+ average income increases 11,3%/year

In 2011, in spite of economic difficulties and increased price, business and production results of HABECO in 2011 still increased rather high; industrial production value has reached 5.016 billion dong, to increase 4,2% compared to the same term; Revenue of industrial production has reached 8.206,5 billion dong, to increase 15,3%; production quantity of all kinds of beer has reached 580 million liters to increase 1,7% compared to the same term, out of which the beer with Ha Noi brand name has reached 449 million liters to increase 6% compared to the same term; post tax profit has reached 984,3 billion dong, to increase 2,2%; budget income has reached 3060 billion dong, to increase 18,5% compared to the same term

Total sale quantity of HABECO has reached 410 million liters Its growth rate

on average has reached the general sector’s growth rate, however it is not comprehensive among the years: 2009-2010: 32.4%; 2010-2011: 2.56%; within the period of 2011-2012: it is expected to reach 9.08% The growth rate is due to the development of Northern market Central market just reaches the growth rate of 17%

2.2 Analysis of business environment to impact on activities of HABECO

2.2.1 External environmental analysis

2.2.1.1 Political and legal factors

Vietnamese politics in recent years is table together with gradually improved and supplemented legal system, to create comprehensively legal corridor then create the favorable environment to promote enterprises to develop which is shown via the growth rate of attracting FDI into Viet Nam According to the data of foreign investment agency (ministry of planning and investment), FDI has increased from 6,25 billion USD at the end of July to 7,28 billion USD by the end of 20/08/2012 This disbursement level is equivalent to the same term of last year (equal to 99,7%)

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The disbursement of more than 1 billion USD within 1 month is evaluated to be rather high compared to the level from the beginning year until current time In July and August, 2011, quantity of disbursement has reached approximately 1 billion USD

Then foreign owned enterprises will have more opportunities to access into Vietnamese market; processing industry including beverage sector is not an exception which is also a threat for HABECO while foreign owner enterprises have advanced technology, strong financial capacity and management experiences However the integration has created good conditions for Vietnamese enterprises as well as HABECO to approach the new technology, learn the method of enterprise management in a more effective and professional way

The products of beer and alcohol are not encouraged to use by the state The government has promulgated many policies to impact on the sector of beer, alcohol and beverage to ensure harmonized social development

Then, commercial and industrial ministry have promulgated Decision No 435/QĐ- BCT dated 21/05/2009 approving master plan of developing beer, alcohol, beverage by 2015 and vision by 2025; then the development target is to construct the sector of beer, alcohol, beverage to become an important economic sector, produce many products to meet domestic consumption and export demand, contribute to stat’s budget; products of beer, alcohol and beverage are produced with high quality, high prestige to ensure foodstuff safety hygiene, diversify the samples with the brand name of products and competitiveness in integration process in the region and the world

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Table 2.1: Budget payment of the whole sector in 2011

Budget payment (billion dong) Density (%)

The sector of beer, alcohol,

beverage

13.662,379 2,6%

Budget payment (billion dong) Density (%)

The sector of beer, alcohol,

beverage

13.662,379 3,58%

Budget payment (billion dong) Density (%)

The sector of beer, alcohol,

(Source: ministry of industry and trade)

Currently the government is collecting opinions of the draft on national policies to prevent the harms of overusing beer, alcohol, especially the task of traffic safety … At the same time, the policy of special consumption tax for beer products in currently difficult economic period also impacts on business activities of the enterprise

Some policies applied into reality are overlapped; beer is the product to bear the special income tax, at the same time the main used materials are imported therefore tax policy is not comprehensive and timely with slow reaction with the economic changes then the beer production sector has coped with the threats from this tax policy The policies of import tax, special consumption tax have been implemented in recent time such as reducing import tax which is the big threat for Vietnamese enterprises with regard to the products of imported beer

2.2.1.2 Economic factors

When the world and the Europe are in economic crisis from the middle of the year 2010 until now, it has put Viet Nam into the storm with complex economic changes, economic difficulties such as increased price, unstable financial currency area, frozen property market … In front of such situation, the government has

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implemented a series of comprehensive solutions with the policies to support enterprise, reconstruct banking sector, reduce interest rate to hinder inflate rate, stabilize macro economy

Consuming price index (CPI) of July has been reduced 0,29% compared to June and increased 5,35% compared to July of 2011 Generally in July, 2012, CPI of the whole nation has increased 2,22% compared to 12/2011 GDP per capita in 2011 reached 1.300 USD/ person/year, increasing 132 USD/ person/year compared to

2010

When the economic income as well as income of people have been reduced, then buying quantity will be reduced which will impact directly on revenue of the enterprise At that time, the opportunity for the enterprise is to remove competitive opponents with limited financial potential, network scale and unclear strategy to cope with economic crisis And the threat for HABECO is how to maintain stable growth rate in business when the consumption reduces

In 2010 and 2011, global economy has gradually stepped out of crisis with slow recovery rate together with difficult years of complex economic situations in and out of the nation Public debt crisis in Greece and Spain, political crisis in some Middle Eastern and African nations; consequences from natural calamity in Japan, threat of crisis in case of war….all impact negatively on global economy

The economy has opened the door and innovated for ¼ century, Viet Nam has transferred from the group of nation with low income to the group of nation with average income according to the standards of international bank; however in recent years the economy has shown many hidden risks of the sustainability of growth process

In the difficult economy, each enterprise must cope with more threats

2.2.1.3 Socio-cultural factors

Viet Nam originated from the culture of water rice, then alcohol has been the product to be produced and used in Vietnamese village community for a long time which has become the culture, especially in the ceremonies then people have the saying “without alcohol, without ceremonies ”

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The time passes by, when the society develops, science and technology have created many attractive beverages In the modern life, instead of drinking alcohol, people will use beer to meet human demand and now beer has become an indispensable beverage in parties With regard to current cuisine culture, in spite of being the product with many obligations by state’s policies, the sector of beer, alcohol, beverages is stilled maintain and its products are indispensable in the cuisine culture of Vietnamese people

There is one more social factor which is the increased trend of the youth to select the sectors of finance, banking, tourism, diplomacy, law; and other training sectors such as biology, chemistry, foodstuffs, processing industry…are not cared then it has no attraction to the youth; current universities of Viet Nam have not met the demand of human resource for producing beer, alcohol, beverage which is a difficulty for long term development of the sector

Table 2.2: Predict the consumption of beer, alcohol in the allowed age (15+)

in Viet Nam

Population of 15+ Million people 72.86 79.01 84.96

Total beer and alcohol Liter/person 5.16 6.31 7.45

Conversion

Strong alcohol million liters 472.58 608.84 758.01 Light alcohol million liters 42.44 59.49 78.41

(Source: institute of policy research of ministry of industry and trade)

2.2.1.4 Natural factors

Vietnamese population is nearly 90 million people with young population

is very hot; the South Central and the South has permanently hot weather then the demand of beverages is high with high beer consumption quantity in the hot seasons According to the report of commercial and industrial ministry then beer quantity of all kinds in 7/2012 has increased 6,3% compared to June, 2012, to increase 8,3% compared to July, 2011 Within 7 months of the year 2012, beer quantity has reached nearly 1.547,5 million liters to increase 6,4% compared to the same term

Figure 2.1: beer consumption quantity per capital in Viet Nam

Consumption level (million liters) (Source: statistical agency and ministry of industry and trade)

Looking on above data we can realize that beer consumption quantity has increased within the five years of 2007-2011 with the rate of 8.3% but the consumption per capita is still lower than that of Japan, China, Thailand and European nations

Vietnamese population has been predicted to reach 100 million people by

2023 and stabilize at the level of 120 million people Within 15 years more, with

2.2.1.5 Factors of scientific and technological developments

In reality, enterprises of Vietnamese beer sector are in the race of investing in new equipments and technology to increase competitiveness

From furnace, boiler, water treatment systems, cultured yeast, fermentation tank outdoor automatic filtration system, cold and especially waste water treatment system …are improved and upgraded The new furnace has high capacity which is completely automatic to reduce cost This new technology has private Cleaning in Place; modern water supply and filtering with automatic control….new technology has raised product quality, reduced noise, the heat, ensure hygiene, reduce production cost… …but the level of using invested capital, technology and technical equipments of the enterprises in the sector is different Some enterprises invest vertically; some enterprises horizontally

2.2.2 Analysis of sector environment and competition

2.2.2.1 Analysis of current competitive opponents

According to Reuster, beer quantity in 2011 of the world has increased 2,7% compared to the year 2010, to reach more than 190 billion liters, out of which developing nations have strongly developed 4 “big corporations” AB InBev, Sabmiller, Heineken and Carslberg occupy ½ market share of global market

According to experts, the struggle on Vietnamese beer market is a strong competition because it is still a rich market which is not wrong when having so many big corporations to join in this struggle

15 years before, Vietnamese beer sector was only the playground of two big state-owned enterprises: HABECO and SABECO Currently beer market has appeared many big corporations from the nations with developed beer sector such as: Heineken (Holland), Tiger (Singapore), APB (Singapore), Carlsberg (Denmark), SABMiler (UK), Scottish&Newcaste (UK), San Miguel

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(Philippines)…In additions, imported beer also join in Vietnamese market such as: Warsteinner, Kumbacher (Germany); Leffe, Stella artois (Belgium); Lucky beer (Australia)…

To some extent, it has brought more choices to customers With regard to producers, to have the position within the market with so many competitive opponents is not easy In this race, many “horse riders” with many experiences have fallen from the horse in painful way such as BGI (France), Fosters beer (Fosters), or the failure of the first bottled fresh beer in Viet Nam (Tan Hiep Phap group)

According to the statistical results of Euromonitor - provider of market information and the co-founder of the prize for 500 leading retailers of the Pacific Asia, then Viet Nam currently has more than 350 enterprises of producing beer nationwide which has been increased in term of quantity

Figure 2.2 : Vietnamese beer quantity from 2005 to 2011

Production quantity (million liters) (Source: ministry of industry and trade)

According to ministry of commerce and industry, beer quantity in 2011 is 1,8 times higher than 2005, average growth rate reaches 13,24% within the period of 2005-2011

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According to the report of Euromonitor International within the period of 2010-2011, Vietnamese beer market has formed the tripodal position with three biggest companies: SABECO, HABECO and VBL Both of three enterprises occupy 95% market share of the whole nation in which SABECO ranked the first (47,5%), VBL ranked the second (18,2%) and HABECO ranked the third (17,2%) In term of geographical location then total market share in the Northern market just occupies 23% national market share, ranked after the Central 33% and the South 45 % In case

of segmentation, SABECO is leading in popular beer flow to occupy 35% sale quantity while VBL holds 70% market of high ranking segmentation with Heineken

Figure 2.3: market share in 2011 of beers base on geographical location

+The North: 23%;+The South (44%); + the Central area (33%)

(Source: Euromonitor International)

In spite of a clear tripodal position, enterprises still worry about the strong appearance of imported beers Currently, special consumption tax on this product is 45% but quantity of imported beers is rather high

Customs branch of Sai Gon port border gate region no I announces that from the beginning of the year 2012 till now, import quota via Cat Lai port has reached 282.661 USD

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With about 33.842 beer tanks and 40.140 beer bottles to be via customs clearance, compared to the same term of last year, beer export quota has increased nearly 55,2% Beers have been imported to the port originated from Mexico, Belgium, Germany, Holland,…with the brand names of Corona, Budweiser, Bit Burger, Leffe Brown, MOA, Bavaria, Lucky Beer… In spite of having two times higher price than domestic beers, imported beers are still the favorite beers in the hotels and restaurant because it has brought a new wind to Vietnamese beer market with distinctive and strange tastes In spite of low import density, according to the evaluation of many experts imported beers will be also the strong opponents for domestic beer producers in the future And then, the competition on market share will

be stronger in the coming time

Figure 2.4: Growth rate of quantity of beer producers from 2008 to 2011

(Source: Ministry of industry and trade)

Via above figure we can realize that SABECO has the reduction trend on production quantity while other enterprises have promoted production to occupy the market; average production growth rate within 5 recent years of other enterprises is 20%, of SABECO is 7,2 % and of HABECO is 16,4% which are higher than mean production level of the sector with 15%, then it means that production of HABECO has been gradually increased and SABECO decreased With regard to the quantity of other enterprises, it tends to increase strongly which can show that beer market is