Building development strategy for Vital mineral water product of Vital Joint Stock Company year 2010-2015

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GLOBAL ADVANCED

MASTER OF INTERNATIONAL BUSINESS ADMINISTRATION

GRIGGS UNIVERSITY

CAPSTONE PROJECT REPORT

BUILDING DEVELOPMENT STRATEGY FOR VITAL MINERAL WATER PRODUCT OF VITAL JOINT STOCK

COMPANY YEAR 2010 - 2015

Group 15 — GaMBA.01.M06 Le Thanh Chung Vu Thi Thoa Le Anh Thu

Nguyen Thi Khanh Ly

Hanoi — 03/2010

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Griccd Capstone Project Report

Group 15 GaMBA.01.M06

ACKNOWLEDGEMENT

First of all, we would like to send our gratitude to the board of directors, all lecturers and professors of Center for Education Technology & Career Development, Vietnam

National University Hanoi and Griggs University - USA for creating best conditions for us to study during the MBA course and to complete this capstone project report

We also would like to thank all other members of Global Advanced, especially the department of class assistants Without their help, we could not receive positive results

from studying

In addition, we would like to express my deep and sincere gratitude to managers and officers of Binh Minh Corporation and Vital Joint Stock Company They supported us so much by providing valuable information and data to complete this report

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TABLE OF CONTENTS

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CHAPTER 1: LITERATURE REVIEW OF STRATEGY AND STRATEGIC

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2.2 Situation of production and business of Vital mineral water Company in the period Of 2005 — 2009 88h -a 43

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2.3.2.3 Research & DeveÌOp€TI - L1 111v 1S T11 11v ng na 39 2.3.2.4 Finance and Iinvestmen TH 9 111K TS ghế 60 2.3.2.5 Internal factor evaluation matrIx IEE - C CS HS S SE vxrkkkẻ 61 2.4 Analysis on the status of creating and performing strategy for Vital mineral water product of Vital Joint Stock Company scsscssnmmnssans n.ccssvennawacens 904 08109485 308080 ỗngRuga8i0000808800008 62

2.4.1 Market expanding strategy 0.0 ccc cceccecescceeecesseeeeeesecenseceecneseaeeeseeeeteseeseees 62 2.4.2 The strategy of 1investing In Infrastructure development .- -‹ + 64 su 3» Ƒ E0(UGE (đleve@lopiiiETil SÍEHIGHT tásesdzaeaesecnn lngatraasuiit ngợi vEg800Lãsidb5i 408300) 6ssau/aga Sb 65

2.4.4 Marketing Strategy la yBạìáấốẺ 67

2.4.5 Strategy of developing human Tr€SOUTC€S .- 5-22 S2 2 2S 32 se 69 2.5 General review on practical results of performing strat€gy -.- ‹©- 69

CHAPTER 3: SOME SOLUTIONS TO BUILD DEVELOPMENT STRATEGY FOR VITAL JOINT STOCK COMPANY ooo eccccececesesseeseeeseceseeeeesseceseeseenecseeessaeeneesseennes 72

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Griccd Capstone Project Report Group 15 G€A€MBA.01.M06

TINCT GIN tec emma cra ner 2c eas ne SRS eno, Res norma 87 LIST OF REFERENCES - L1 122211 111112111 112 11T nh TH ng TH TH HH nu 88

[50908 0n h ĂŸ444ÃÄÀÀ ii šẰš 89

Vital natural mineral water factory proJect in Dong Nàai 2 ccScssekes 89

LIST OF FIGURES

Figure l.I Five-force model of M POT€T - c c1 vn TH ng rệh 24 Figube 2.1 SUCCIOe GIỈ Y HƯỢI, DROIUOÍ suassssssnontonnssngtopitt.Si4NB01S8100001G101A.01/4083H8801848.506.G6003G/G00 300/86 4I Figure 2.2 Personnel Structure of Vital Joint Stock Companyy ccscc+<ccsexss 42 Figure 2.3 Marketing department S†TUCfUTC St 11 vn ng HH nghệ 43 Figure 2.4 Turnover growth of Vital in Hanol, 2009 auseeseennnsennunnansasranigtiissniasardraa 46

Figure 2.5 Turnover of Vital mineral water in term of regions (2009) 47

Figure 2.6 Market shares of various brands in Vietnam market (2009) 47 Figure 2.7 GDP growth Of YI€lIIgIi OVGT WGBTS suaenuaasausesbipuoaagisrdlugitias bay mero 49 Figure 2.8 The income growth in Vietnamese rural and urban area .- -‹- 50 Figure 2.9 Changes in consumption belief of Vietnamese . - se 51

Figure 2.12 Percentage ofindirect sales channel (in percentag€) .-‹-c< c2 63

Figure 2.13 Volume of direct sales chann€lÌ . - + + 33211311 EEkresrkervee 64 Fe 2,14 New †ackating 0Í VHHL ( DUỦÌ causessaannatie siitngetsinttanieb81898960100101009.4010360086.3960006 66

LIST OF TABLES

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Grid Capstone Project Report Group 1S GaMBA.01.M0ĩ ABBREVIATIONS

ATL _| Above the line

BTL Below the line

CEO Chief Executive Officer

FAO Food and Agriculture Organization SBU Strategic Business Unit

UNIDO United Nations Industrial Development Organization

Vital JSC Vital Joint Stock Company

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INTRODUCTION

I Background

Vietnam has approached the market economy for over 20 years This duration is not too long as well as too short for Vietnamese enterprises to apply management methods of the market economy procedure Strategic management has been considered as one of the most useful business theories which can help enterprises to achieve successes in a long — term The way they are using these theories, however, should be re-considered in almost

all organizations in Vietnam

In 1996, with the approval of Thai Binh People Committee, Vital Joint Stock Company was established and started to build the most modern natural mineral water production factory in Vietnam by a technology chain from Italy All equipments of the factory are

also controlled and checked by experts from FDT — Italy Through many years of

developments, Vital natural mineral water - its main product - has achieved a certain position step by step in the market as well as in consumers’ mind

In comparison with other products in the bottled market, however, the awareness of Vital natural mineral water is not really clear If consumers know about Aquafina as one of the most quality pure water products or Lavie as an absolute part of life, they still confuse about Vital’s image due to its dull position and scattered appearance in

communication vehicles Moreover, the company often encounters with the situation of

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Gricos) Capstone Project Report

Therefore, we decided to choose the topic “Building development strategy for Vital mineral water of Vital Joint Stock Company 2010- 2015” for our capstone project This topic does not only apply knowledge of strategic management but also contributes significant practical recommendations for the development of Vital JSC as well as Vital brand

II Purposes of the research

The research focused on following issues:

Fundamental theories of strategy and strategic management

Useful models to analyze the process of establishing and choosing strategy The real situation in which Vital JSC has been implementing its strategy

Analyze factors of the external and internal environment which affect on

company’s strategy

Appropriate solutions to build the development strategy for Vital natural mineral

water brand of Vital Joint Stock Company

III Objective, scale and methodology

Objective and scale: The research focuses on current strategic management activities of Vital JSC and provides some solutions for the period of 2010-2015 Methodology: The research used two kinds of information sources: Primary and secondary information The secondary information came from various sources However, a major percentage of them were from reports about current business Situations of Vital natural mineral water brand which were provided by Bitexco and Vital JSC Besides, they were also gathered from many opened sources such

as internet and books In addition, the research took uses of information from

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C3RIGG UNIVERSITY

Group 15 GaMBA.01.M06 reports of market researches of famous international research companies such as AC Nielsen or TNS

IV Structure of the report

Hoa

Introduction

Chapter |: Literature review of strategy and strategic management

No A

Chapte 2: The real situation of production-business activities of Vital Joint Stock Company

Chapter 3 Some solutions to build development strategy tor Vital Joint Stock Company from 2010

to 2301 S

Conclusion

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CHAPTER 1: LITERATURE REVIEW OF STRATEGY AND STRATEGIC MANAGEMENT

1.1 Overview of strategy and strategic management

1.1.1 Fundamental definitions 1.1.1.1 Definition of strategy

“Strategy” is the term which has been widely and long standing used in many fields

“Strategy” was firstly used in military then in political field From 1950s to 1960s of XX century, the concept of “strategy” was used in economic and social field Generally, “strategy” was understood as trend and method to resolve long term and overview mission According to UNIDO definition: “Generally, a development strategy can be described as an outline of developing process to reach intended targets for a period from 10 to 20 years, it instruct strategic managers in attracting and allocating resources It can be said that, strategy provides a vision for development process and the consistence for implement solutions Strategy also can be basics for overview developing plan in long term and short term or can be general awareness of related people about prospects and willingness and challenges in a specific period”

There are many definition of “strategy” To Fred R David (2003), strategy includes numbers of method to reach long term target To Michael E Porter (1996), strategy is the creation of special and valuable positions include variable activities

In general, there are some differences in expression of concepts and definitions of strategy They still have some common content:

se Define company’s short term and long term targets

e Bring out solutions and methods to choose these solutions

¢ Deploy and allocate resource to implement these targets

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1.1.1.2 Definition of strategic management

Besides understanding concept of strategy managers of company also need to know the way to manage these strategies and make right decisions to reach company’s target, this process is called strategic management I can be generally said that: “Strategic management is defined as a set of decisions and actions expressed via results of planning, implement and evaluating strategies, created to reach corporation’s long-run targets”

Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives It involves the systematic identification of specifying the firm's objectives, nurturing policies and strategies to achieve these objectives, and acquiring and making available these resources to implement the policies and strategies to achieve the firm's objectives Strategic management, therefore, integrates the activities of the various

functional sectors of a business, such as marketing, sales, production etc., to achieve

organizational goals It is generally the highest level of managerial activity, usually initiated by the board of directors and executed by the firm's Chief Executive Officer (CEO) and executive team Strategic management hopes to provide overall direction to the company has ties to the field of organization studies

Strategic management includes these following specific steps: e Strategic planning

e Strategic implement

e Strategic checking and evaluation 1.1.2 Roles of strategic management

Characteristics of business environment have a big affect to existence and development of company They can create new opportunities and challenges for corporation And the

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GRIGG Capstone Project Report

UNIVERSITY

Group 15 GaMBA.01.M06 company which wants to exist has to find out a new management method, it is exactly

“strategic management” - strategy is the basis of this management method In model

business environment, strategy becomes more and more important to existence of company These roles are:

Strategy is the tool that generally shows the long-term goals of the organization

or enterprise Enterprise’s goals are special targets which it wants to reach during its operation process Specialization and making documents these targets via strategies will help members of enterprise or organizations when finding the targets which they want to reach so, they will know what they have to do It will help the enterprise easier in reaching its goals

Strategy connects short term targets closely in long run conditions In model business situation, every enterprise has to flexibly move to adapt to changing of environment Sometimes this movement will make the enterprise be separated

from its long term goals In this case, strategy with strategic goals will help

managers of enterprise a long run direction So, resolving short term matters in long run conditions can bring enterprise a stable development Long run goals also are basics for short term goals

Strategy helps to ensure unification and make plans for enterprise’s activities In existence and development process, strategy provides a comprehensive and logical point of view in resolving problems which arises in business performance Strategy also helps to associate different sections in a company and orient them to reach to a unit goal, it is enterprise’s goal

Strategy helps enterprises and organizations to catch up with market opportunities and create comparative position in the market Strategy unifies the enterprise’s operation process in order to reach to enterprise’s strategic goals It means that

enterprise will have to use its resource in most efficient way So, enterprises have

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to choose fastest way to catch up with market opportunities and deploy its available abilities to create new comparative advantages

From below analysis we can see very important roles of strategy in enterprise’s performance so; strategic management becomes one of the most necessary keys which help enterprise open the door to advance toward success Strategic management brings theses following advantages:

More efficient in making plans by using more reasonable and logical approach method

when choosing strategies

e Widely take care of related beneficiaries of enterprises (stock holders)

e Connect short term development in long term development e Take care of both efficiency and effectiveness

1.1.3 Levels of strategic management

In most (large) corporations there are several levels of management Strategic management is the highest of these levels in the sense that it is the broadest - applying to all parts of the firm - while also incorporating the longest time horizon It gives direction to corporate values, corporate culture, corporate goals, and corporate missions Under this broad corporate strategy there are typically business-level competitive strategies and functional unit strategies

Corporate strategy

Corporate strategy refers to the overarching strategy of the diversified firm Such a corporate strategy answers the questions of "which businesses should we be in?" and "how does being in these businesses create synergy and/or add to the competitive advantage of the corporation as a whole?"

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Business Strategy

Business strategy refers to the aggregated strategies of single business firm or a strategic business unit (SBU) in a diversified corporation According to Michael Porter, a firm must formulate a business strategy that incorporates cost leadership, differentiation or focus in order to achieve a sustainable competitive advantage and long-term success in its chosen areas or industries Alternatively, according to W Chan Kim and Renée Mauborgne, an organization can achieve high growth and profits by creating a Blue

Ocean Strategy that breaks the previous value-cost tradeoff by simultaneously pursuing both differentiation and low cost

Functional Strategy

Functional strategies include marketing strategies, new product development strategies,

human resource strategies, financial strategies, legal strategies, supply-chain strategies,

and information technology management strategies The emphasis is on short and

medium term plans and is limited to the domain of each department’s functional responsibility Each functional department attempts to do its part in meeting overall Corporate objectives, and hence to some extent their strategies are derived from broader corporate strategies

1.2 Strategic management process

We are now going to analyze more deeply about the process of strategic management in

an organization from the perspective of general model of strategic management 1.2.1 Defining mission & objectives

A strategic plan starts with a business mission which has been defined clearly Mintzberg defined a mission as “A mission describes the organization’s basic function

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Group 15 GaMBA.01.M06 in society, in terms of the products and services it produces for its customers” A clear

business mission needs to include following factors: e Objective

Why does the business exist? Is it to create wealth for shareholders? Does it exist to satisfy the needs of all stakeholders (including employees, and society at large?)

e A Strategy and Strategic Scope

A mission statement provides the commercial logic for the business and so defines two

things:

- The products or services it offers (and therefore its competitive position)

- The competences through which it tries to succeed and its method of competing A business’ strategic scope defines the boundaries of its operations These are set by

management For example, these boundaries may be set in terms of geography, market,

business method, product etc The decisions management make about strategic scope

define the nature of the business

e Policies and Standards of Behavior

A mission needs to be translated into everyday actions For example, if the business mission includes delivering “outstanding customer service”, then policies and standards should be created and monitored that test delivery

These might include monitoring the speed with which telephone calls are answered in

the sales call centre, the number of complaints received from customers, or the extent of

Positive customer feedback via questionnaires e Values and Culture

The values of a business are the basic, often un-stated, beliefs of the people who work in the business These would include:

- Business principles (e.g social policy, commitments to customers)

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Group 15 GaMBA.01.M06 - Loyalty and commitment (e.g are employees inspired to sacrifice their personal goals for the good of the business as a whole? And does the business demonstrate

a high level of commitment and loyalty to its staff?)

- Guidance on expected behavior — a strong sense of mission helps create a work environment where there is a common purpose

In practice, a strong mission statement can help in three main ways:

- It provides an outline of how the marketing plan should seek to fulfill the mission

- It provides a means of evaluating and screening the marketing plan; are marketing decisions consistent with the mission?

- It provides an incentive to implement the marketing plan 1.2.2 External environment analysis

No organization can exist in a vacuum; each 1s set in a particular country and region to which it is inextricably linked This setting provides multiple contexts that influence

how the organization operates and how and what it produces Thus, the concept of "external environment" is an important consideration for organizations as it attempts to understand the research institutions it supports An analysis of the external environment is an attempt to understand the forces outside organizational boundaries that are helping to shape the organization

Forces outside the institution's walls clearly have considerable bearing on that which transpires within The external environment can provide both facilitating and inhibiting influences on organizational performance Multiple influences in the immediate or proximal environment form the boundaries within which an organization is able to function; these influences likewise shape how the organization defines itself and how it articulates what is good and appropriate to achieve

External environment is divided into 2 following perspectives: Macro and Micro

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1.2.2.1 Macro-environment

Political environment

This is the factor which has affection to all industries in a country, factors like:

regulations and legal system can affect to every industries When doing business in administrative unit, enterprise has to follow its legal system

- Stability: when study the political factor of enterprise we will take care of stability of conflict political factors with legal systems The country which has high stability in political condition will give a better environment for enterprise to expand its activities On the contrary, instability in political conditions will give bad affection to enterprise’s performance

- Related law: investment law, enterprise law, labor law, anti monopoly and

dumping

- Regulations: Government’s regulations also can create favorability or challenges for enterprises These regulations are: commercial regulations, industry development regulations, tax, tariff, adjusting competition regulations, consumer protection regulations, etc

Legal environment

The administrative and legal environment in a country provides a framework within which an organization operates In some countries this environment is very restrictive and has significant impact on all aspects of the organization; in other countries the administrative/legal context is more permissive Understanding the administrative/legal environment is essential to determining if organizational change can take place The administrative context within which the organization operates may be shaped by a unique combination of forces, including international, governmental, nongovernmental policy, legislative, regulatory, and legal frameworks An organization is affected by the

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Group 15 GAMBA.01.M06 policy or regulatory context that gave rise to it This includes specific laws and

regulations that support or inhibit the institution's development

Economic factor

Enterprise needs to take care of economic factors both in short term and long term It

also has to take care of intervention of Government into economy In general, enterprise will base on economic factor to decide which industry or section to invest in

- Economic situation: Any economy also has different cycles; in a specific period

of a cycle enterprise will have different decisions for its development - Factors which affect to economy: Interest rate, inflation

- Economic regulators of Government: Basic salary law, Government’s economic development strategy, favorable regulation for a specific industry, increase tax or

subsidiary, etc

- Orientation of economy: Growth rate, GDP growth, GDP per capital

Social-culture

Any country or region has its own specific characteristics These characteristics affect to

consumer’s opinion here Valuable traditions can make a basic for a society and support for development of this society So, tradition factors are strictly protected, especially moral cultures However, we cannot deny that there is interfering in culture between counties This interfering will change life style, psychology and create development

prospect for industry Besides culture, social factors and social characteristics also attract

enterprise when making market research Social characteristics device society into many groups each group has different income, psychology characteristics Other social

characters like:

- Average longevity, health situation

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Group 15 GaMBA.01.M06 - Average income, income allocation

- Life style, life psychology, knowledge level - Living conditions

Natural environment

Natural condition is one of the most important factors in human life and it also provide raw materials for many industries Recently, natural condition is much changed because of human destruction It also can affect to development trend of enterprises

Technology

Recently, the whole world is still in technological revolution, list of model technologies are implied and they are integrated into goods and services Thirty years ago, computer is only a tool used for calculation, now it is a tool with full functions and can work as a person Especially, in information technology section, model communication helps us to shorten geographical distance

1.2.2.2 Micro- environment

To analyze the micro-environment, organizations often use five-force model of M

Porter — Father of competitive theories Michael Porter provided a framework that models an industry as being influenced by five forces The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates

Potential entrants

It is not only incumbent rivals that pose a threat to firms in an industry; the possibility that new firms may enter the industry also affects competition In theory, any firm should be able to enter and exit a market, and if free entry and exit exists, then profits

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Group 15 GaMBA.01.M06 always should be nominal In reality, however, industries possess characteristics that protect the high profit levels of firms in the market and inhibit additional rivals from entering the market

Buyer power

The power of buyers is the impact that customers have on a producing industry In

general, when buyer power is strong, the relationship to the producing industry is near to

what an economist terms a monopoly - a market in which there are many suppliers and

one buyer Under such market conditions, the buyer sets the price In reality few pure

monopolies exist, but frequently there is some asymmetry between a producing industry

and buyers

Buyers are powerful if:

- Buyers are concentrated - there are a few buyers with significant market share - Buyers purchase a significant proportion of output - distribution of purchases or if

the product is standardized

- Buyers possess a credible backward integration threat - can threaten to buy producing firm or rival

Supplier power

A producing industry requires raw materials - labor, components, and other supplies This requirement leads to buyer-supplier relationships between the industry and the firms that provide it the raw materials used to create products Suppliers, if powerful, can exert an influence on the producing industry, such as selling raw materials at a high price to capture some of the industry's profits The following tables outline some factors that determine supplier power

Suppliers are powerful if:

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e Credible forward integration threat by suppliers e Suppliers concentrated

e Significant cost to switch suppliers e Customers Powerful

Threat of substitutes

In Porter's model, substitute products refer to products in other industries To the eccnomist, a threat of substitutes exists when a product's demand is affected by the price change of a substitute product A product's price elasticity is affected by substitute

products - as more substitutes become available, the demand becomes more elastic since

cusomers have more alternatives A close substitute product constrains the ability of firms in an industry to raise prices The competition engendered by a Threat of Sutstitute comes from products outside the industry The price of aluminum beverage Cans is constrained by the price of glass bottles, steel cans, and plastic containers These Containers are substitutes, yet they are not rivals in the aluminum can industry To the

manufacturer of automobile tires, tire retreads are a substitute Today, new tires are not

SO expensive that car owners give much consideration to retreading old tires But in the trucking industry new tires are expensive and tires must be replaced often In the truck tire market, retreading remains a viable substitute industry In the disposable diaper industry, cloth diapers are a substitute and their prices constrain the price of disposables

Conpetitive Rivalry

Anc last but not least, this describes the intensity of competition between existing firms in a1 industry Highly competitive industries generally earn low returns because the cost of competition is high A highly competitive market might result from:

+ Many players of about the same size, no dominant firm

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Group 15 GAMBA.01.M06 ¢ Little differentiation between competitor’s products and services

e A mature industry with very little growth

e Companies can only grow by stealing customers away from competitors

Potential Entrants : Threat of new entrants Bargaining power of suppliers Industry

Suppliers Competitors max Buyers

Rivalry among Existing firms Bargaining power of tae

Buyers Threat of

substitute products

Or services

Substitutes

Figure 1.1 Five-force model of M Porter

Source: Comparative advantage theory, M Porter (1990) 1.2.2.3 External Factor Evaluation EFE

External Factor Evaluation (EFE) matrix method is a strategic-management tool often used for assessment of current business conditions The EFE matrix is a good tool to visualize and prioritize the opportunities and threats that a business is facing Five steps

to create EFE matrix:

e Step 1: The first step is to gather a list of external factors Divide factors into two groups: opportunities and threats

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e Step 2: Assign a weight to each factor The value of each weight should be between 0 and | (or alternatively between 10 and 100 1f you use the 10 to 100 scale) Zero means the factor is not important One or hundred means that the factor is the most influential and critical one The total value of all weights together should equal | or 100

e Step 3: Assign a rating to each factor Rating should be between | and 4 Rating indicates how effective the firm’s current strategies respond to the factor 1 = the response is poor 2 = the response is below average 3 = above average 4 = superior Weights are industry-specific Ratings are company-specific

e Step 4: Multiply each factor weight with its rating This will calculate the weighted score for each factor

e Step 5: Add all weighted scores for each factor This will calculate the total weighted score for the company

The sum of all weighted score is equal to the total weighted score; final value of total weighted score should be between ranges from 1.0 (low) to 4.0(high) The average weighted score for EFE matrix is 2.5 any company total weighted score fall below 2.5 consider as weak The company total weighted score higher then 2.5 is consider as strong in position

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Table 1.1 An example of External Factor Evaluation

Opportunities | Weight | Rating | Weighted Score

1 Industry Consolidation 11% 4 0.44 2 Increase in air travel in Mexico 12 % 3 0.36

3 Privatization in CE countries 10 % 2 0.20

4 Growth of low-cost sector 8% 4 0.32 5 Increased demand In Chiana 16 % 3 0.48

Threats _ a

1, Declining margins 10 % 1 0.10

2, Government oversight 5 % 3 0.15

3 Climbing prices of key inputs 8% 2 0.16

4, New security tax 5% 2 0.10

5 Economic downturn 15 % 1 0.15

poor (Li, below average (2), above average (Q), superior (4)

TOTAL WEIGHTED SCORE } 100 % | 2.46

al weighted score of 2.46 indicates that the business has slightly less than average ability to respond to external factors

Source: External factor evaluation, Maxi-Pedia Directory, 2008

1.2.3 Internal environment analysis

The organization not only needs to be aware of the social, political and economic environment in which it is operating, but also its internal environment % its own strengths and weaknesses For example, does a port have financial resources such as cash reserves and access to cheap financing from the government? Does it have human resources with the technological skill, motivation and productivity to bring about a radical change of direction for the port if necessary? Does it have facilities that are up- to-date technologically and/or with excess capacity? Does the port have a commitment to on-going research and development?

The organization’s resources, its capabilities and competencies make up the internal environment of the organization The internal environment plays a crucial role in the strategic management process of the organization It is a direct reflection of what the

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organization can do in the event of a business-related exigency The organization’s core

competencies help sustain it in the long run in the face of competition

1.2.3.1 Resource evaluation

Resources of an enterprise include human resource, asset and visible resources These are factors that play decisive roles of the success of the enterprise in the market In there,

human resource is considered as the most important factor In each period, each resource

has its own strength and weakness in comparison with competitors Managers have to evaluate precisely the organization’s resource in order to compete with their competitors

Human resource

Human resource is a term used to describe the individuals who comprise the workforce

of an organization, although it is also applied in labor economics to, for example,

business sectors or even whole nations Human resource is also the name of the function within an organization charged with the overall responsibility for implementing strategies and policies relating to the management of individuals

The objective of an organization's human resource management strategy is to maximize

the return on investment from the organization's human capital and minimize financial risk Human Resources seeks to achieve this by aligning the supply of skilled and

qualified individuals, and the capabilities of the current workforce, with the ongoing and future business plans and requirements of the organization in order to maximise return

on investment and seeks to secure the future survival and success of the entity Human

resource includes managers and followers

Assets

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Griccd) Capstone Project Report

Group 1Š GaMBA.01.M06 Assets of organization contain capitals, factories, equipments, materials and business information Each organization has its own features of assets, including strengths and

weaknesses in comparison with competitors The asset evaluation is really useful for any

company This is a basic for them to know exactly how strong they really are and

whether they have to borrow assets from outside

Visible resources

Besides above resources, every enterprise has another resource which cannot be seen by eyes and is called visible resources This resource might originate from efforts of all members of the organization in the operation process It is expressed in many different types that only senior managers can realize and understand the importance of this resource They are vision, mission, value and many more

To sum up, resources of an organization are really plentiful Depending on specific conditions of each organization, they can evaluate their resource in order to determine their strength and weakness

1.2.3.2 Evaluation of functional departments

Depending on the company’s allocation, each functional department has a specific function and mission Typical departments in an organization are: Marketing, Human Resource,

Finance, R&D, production Marketing department:

The term marketing has changed and evolved over a period of time, today marketing is based around providing continual benefits to the customer, these benefits will be provided and a transactional exchange will take place The Chartered Institute of Marketing defines marketing as 'The management process responsible for identifying, anticipating and satisfying customer requirements profitably' If we look at this

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UNIVERSITY

Group 15 GAMBA.01.M06 definition in more detail Marketing is a management responsibility and should not be solely left to junior members of staff Marketing requires co-ordination, planning, implementation of campaigns and a competent manager(s) with the appropriate skills to

ensure success

Marketing activities include:

e Market research: This aims to study marketing environment to determine opportunities, goals, and market position and consumer insight as well

e Marketing strategy planning: The area of marketing planning involves forging a plan for a firm's marketing activities A marketing plan can also pertain to a specific product, as well as to an organization's overall marketing strategy

Generally speaking, an organization’s marketing planning process is derived from its

overall business strategy Thus, when top management is devising the firm's strategic

direction or mission, the intended marketing activities are incorporated into this plan There are several levels of marketing objectives within an organization The senior management of a firm would formulate a general business strategy for a firm However, this general business strategy would be interpreted and implemented in different contexts throughout the firm

HR department:

Human resource management (HRM) is the strategic and coherent approach to the

management of an organization's most valued assets - the people working there who individually and collectively contribute to the achievement of the objectives of the business The terms "human resource management" and "human resources" (HR) have largely replaced the term "personnel management" as a description of the processes involved in managing people in organizations In simple sense, HRM means employing

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ject Rep

people, developing their capacities, utilizing, maintaining and compensating their Services in tune with the job and organizational requirement

An HRM strategy pertains to the means as to how to implement the specific functions of HRM An organization’s HR function may possess recruitment and selection policies, disciplinary procedures, reward/recognition policies, an HR plan, or learning and development policies; however all of these functional areas of HRM need to be aligned

and correlated, in order to correspond with the overall business strategy An HRM

Strategy thus is an overall plan, concerning the implementation of specific HRM

functional areas

Financial & accounting department

This part of the organization relates to resource allocations in each period of stratety implementation Its function determines the effect of strategy implementation and then organization’s development Role of accounts department in a corporation is:

e Financial accounting: financial and fixed asset reporting; payroll; accounts

payable

e Accounting function: maintain the general and subsidiary ledgers; process and record all revenues and prepare general purpose financial statements in compliance with IFRSs

e Accounting oversight and guidance to other internal departments to ensure the gaap, legal requirements, policies and procedures - all consistently applied to maintain the integrity of the financial records

e Management accounting - budgeting, performance evaluation, cost management,

asset management

R&D department

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Research and development, often called R&D, is a phrase that means different things in

different applications In the world of business, research and development is the phase in

a product's life that might be considered the product's 'conception' That is, basic science must exist to support the product's viability, and if the science is lacking, it must be discovered - this is considered the research phase If the science exists, then turning it into a useful product is the development phase

Research and development is an investment in a company's future - companies that do not spend sufficiently in R&D are often said to be ‘eating the seed corn’; that is, when their current product lines become outdated and overtaken by their competitors, they will not have viable successors in the pipeline So how much is reasonable to spend on research and development? That is highly dependent both on the technology area and how fast the market is moving Two percent of company revenue, not profit, might be enough in a fairly sedate market, but to keep up in rapidly changing markets, companies should expect to spend fifteen percent or more in research and development just to keep up with the rest of the pack

Management information system of the enterprise

A management information system (MIS) is a subset of the overall internal controls of a business covering the application of people, documents, technologies, and procedures by

management accountants to solve business problems such as costing a product, service

or a business-wide strategy Management information systems are distinct from regular information systems in that they are used to analyze other information systems applied in operational activities in the organization This system plays an important role in management It helps the organization to control and manage all activities and keep a

contact with their customers

1.2.3.3 Internal Factor Evaluation IFE

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Griccs) Capstone Project Report Group 15 GAMBA.01.M06

Internal Factor Evaluation (I[FE) matrix is a strategic management tool for auditing or evaluating major strengths and weaknesses in functional areas of a business IFE matrix

also provides a basis for identifying and evaluating relationships among those areas The Internal Factor Evaluation matrix or short IFE matrix is used in strategy formulation This matrix is built through 5 following steps:

e Step |: Conduct internal audit and identify both strengths and weaknesses in all

your business areas It is suggested you identify 10 to 20 internal factors, but the more you can provide for the IFE matrix, the better

e Step 2: Having identified strengths and weaknesses, the core of the IFE matrix, assign a weight that ranges from 0.00 to 1.00 to each factor The weight assigned to a given factor indicates the relative importance of the factor Zero means not

important One indicates very important

e Step 3: Assign al to X rating to each factor Your rating scale can be per your preference Practitioners usually use rating on the scale from 1 to 4

Rating captures whether the factor represents a major weakness (rating = 1), a minor weakness (rating = 2), a minor strength (rating = 3), or a major strength (rating = 4) If you use the rating scale 1 to 4, then strengths must receive a 4 or 3 rating and weaknesses must receive a | or 2 rating

e Step 4: Multiply each factor's weight by its rating This will give a weighted score for each factor

e Step 5: The last step in constructing the IFE matrix is to sum the weighted scores for each factor This provides the total weighted score

Total weighted scores well below 2.5 point to internally weak business Scores significantly above 2.5 indicate a strong internal position

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Table 1.2 An example of IFE matrix

Internal Strengths | Weight | Rating | Weighted Score

1 Largest manufacturer in the market 10 % 4 0.40

2, Supplies major airlines 12 % 4 0.48

3 Good reputation and image 4% 3 0.12

4 Close proximity to the airport 8 % 4 0.32

5, Strong management team 4% 3 0.12

6 Increasing cash flow 5% 3 0.15

7 Loyal employees 4% 3 0.12

8 Access to cheap and reliable financing 3% + 0.12

9 History of minimal service complaints 4% 3 0.12

10 Finanaal ratios 5 % 4 0.20

Internal Weaknesses |

1 Saturated market 10 % 1 0.10

2 Sensitive to oil prices 15 % 2 0.30

3 Little diversification 8% 2 0.16

4 Absence of strategic partner 4% 1 0.04

S Limited access to international markets 4% 1 0.04

major weakness (1), minor weakness (2), minor stren gth {3}, major strength (4)

TOTAL WEIGHTED SCORE 7] 100 % L 2.79

Source: Internal factor evaluation, Maxi-Pedia Directory, 2008 1.2.4 Strategy formulation

1.2.4.1 Strategy formulation process

Strategy formulation is the process of determining appropriate courses of action for achieving organizational objectives and thereby accomplishing organizational purpose The strategy the company formulates should reflect environmental analysis, lead to fulfillment of organizational vision, and result in reaching organizational objectives Special tools the company can use to assist it in formulating strategies include critical question analysis, SWOT analysis, business portfolio analysis, Porter's model for industry analysis, and resource-based model These five strategy development tools are

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Griccd) Capstone Project Report

Group 15 GAMBA.01.M06 related but distinct The company should use the tool or combination of tools that is most appropriate for the company and business environment

1.2.4.2 SWOT Matrix

SWOT matrix is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture It involves specifying the objective of the business venture or project and identifying the

internal and external factors that are favorable and unfavorable to achieving that

objective The technique is credited to Albert Humphrey, who led a convention at

Stanford University in the 1960s and 1970s using data from Fortune 500 companies SWOT matrix usually gives out four basic strategies: (1) SO (strength — opportunity):

Strategies which base on company’s strengths to deploy market’s opportunities (2) WO

(weaknesses - opportunities): strategies which base on ability of getting through

company’s weaknesses to deploy market’s opportunities (3) ST (strengths - threats): company’s strategies to avoid market’s threats (4) WT (weaknesses- threats): company’s strategies to get through weaknesses and avoid market’s threats

Strengths(S) Weaknesses (W) SWOT MATRIX - - Opportunities (O) SO wo

- Using strong points to | Getting through weakness

- deploy market’s | by deploying

| - opportunities opportunities

Threats (T) ST WT

- Using strong points to | Minimize weaknesses to - avoid threats avoid threats

Source: Management strategy, Garth Saloner (2007)

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Group 15 GaMBA.01.M06 To implement SWOT analysis we usually make some following question:

Strengths: Two factors contribute to strengths: ability and resources available Ability is evaluated on 3 counts:

- Versatility: your ability to adapt to an ever changing environment

- Growth: your ability to maintain a continuing growth

- Markets: your ability to penetrate or create new markets The strength of resources has three dimensions:

- Availability: your ability to obtain the resources needed

- Quality: the quality and up-to-dataness of the resources employed

- Allocation: your ability to distribute resources both effectively and efficiently Weaknesses: A company’s weaknesses are determined through failures, defeats, losses and inability to match up with the dynamic situation and rapid change The weaknesses may be rooted inlack of managerial skills, insufficient quality, technological

backwardness, inadequate systems or processes, slow deliveries, or shortage of

resources

Opportunities: Opportunities are abundant You must develop a formula which will help you define what comes within the ambit of an opportunity to focus on those areas and pursue those opportunities where effectiveness is possible The formula must define product/service, target market, capabilities required and resources to be employed, returns expected and the level of risk allowed

Threats: External threats arise from political, economic, social, technological forces

Technological developments may make your offerings obsolete Market changes may

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result from the changes in the customer needs, competitors’ moves, or demographic shifts The political situation determines government policy and taxation structure 1.2.5 Strategy implementation

Strategy implementation is "the process of allocating resources to support the chosen

Strategies" This process includes the various management activities that are necessary to

put strategy in motion, institute strategic controls that monitor progress, and ultimately achieve organizational goals For example, according to Steiner, "the implementation

process covers the entire managerial activities including such matters as motivation,

compensation, management appraisal, and control processes"

As Higgins has pointed out, "almost all the management functions -planning, controlling, organizing, motivating, leading, directing, integrating, communicating, and innovation -are in some degree applied in the implementation process"

Pierce and Robinson say that "to effectively direct and control the use of the firm's

resources, mechanisms such as organizational structure, information systems, leadership

Styles, assignment of key managers, budgeting, rewards, and control systems are essential strategy implementation ingredients"

Strategy implementation includes:

- Finalize your strategic plan after obtaining input from all invested parties - Align your budget to annual goals based on your financial assessment - Produce the various versions of your plan for each group

- Establish your scorecard system for tracking and monitoring your plan - Establish your performance management and reward system

- Roll out your plan to the whole organization

- Build all department annual plans around the corporate plan

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- Set up monthly strategy meetings with established reporting to monitor your

progress

- Set up annual strategic review dates, including new assessments and a large group meeting for an annual plan review

1.2.6 Strategy evaluation and control

Evaluation and control is the process in which corporate activities and performance can

be compared with desired performance Managers at all levels use the clear, prompt, unbiased information from the people below the corporation's hierarchy to take

corrective action and resolve problems It can also pinpoint weaknesses in previously

implemented strategic plans and this stimulates the control of performance The evaluation and the control of performance complete the strategic management model

Based on the performance results, management may need to make adjustments in its strategy formulation or implementation or both

In conclusion, a strategic decision making process involves the following steps:

- Evaluate current performance results in terms of return on investment, profitability in the light of current mission, objectives and policies

- Scan and assess the external environment to determine the strategic factors that pose opportunities and threats

- Scan and assess the internal corporate environment to determine the strategic factors that are strengths and weaknesses

- Analyze strategic factors to pinpoint a) problem areas and b) review and revise the corporate missions and objectives as necessary

- Generate, evaluate and select the best alternate strategy in light of the analysis conducted in step 4

- Implement selected strategies via programs, budgets, and procedures

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Group 15 GaMBA.01.M06 - Evaluate implemented strategies via feedback systems and the control of

activities to ensure their minimum deviation from plans

CHAPTER II: THE REAL SITUATION OF PRODUCTION- BUSINESS ACTIVITIES OF VITAL JOINT STOCK COMPANY

2.1 General information of Vital Joint Stock Company

2.1 History and development

Im 1997, with the approval of Thai Binh People Committee, Bitexco decided to build the

most modern natural mineral water factory in Vietnam This product is called Vital which is the combination of Vietnam and Italy Vital factory was constructed in Dong Co village, Tien Hai town, Thai Binh province where has the most quality natural

naineral water resources in Vietnam

Bitexco is an organization which is operating in many sectors; therefore, it is better and more effective for its subsidiaries being allowed to operate separately With this point of view, Vital Joint Stock Company was established in 07/04/2006 after working in the niatural mineral water production and business sector for a long time

Wital Joint Stock Company is operated according to the business registration No 0 103011698 which is granted by Hanoi Authority for Planning and Investment The

company is an independent financial unit and has its own seal based on regulations of

the government

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Gnioo

Group L5 GaMBA.01.M06 Company’s main product is natural mineral water with the brand name — Vital The

product is produced at Dong Co — Tien Hai — Thai Binh with a modern technology chain

under the close control and instruction of experienced experts from Italy Therefore, it

contains an adequate amount of mineral and is good for health The quality of the product is also verified by FTD — Minalo — Italy

With over 10 years operating in the market, Vital products become popular in many economic, social and political events as well as to each Vietnamese people In recent years, Vital brand is a sponsor for many big sport & cultural events VITAL mineral water has become the first Vietnamese sponsor to sign an exclusive agreement with the organizers of SEA Games Bitexco, the producers of Vital, has won the right to be the sole supplier of water for all athletes and officials at the games for many years It had beaten off in the process several well-known rivals National Sports Committee vice head Luong Quoc Dung said Vital was selected as it had a proven track-record in

sponsoring regional sports meets Moreover, Vital was the first Vietnamese mineral

water-maker to get into sponsorship of regional football events like the Tiger Cup and

Asian U-16 In addition, Vital often appears in important conference of government and

national assembly, in almost big restaurants and hotels Vital is also a close partner of customers in domestic and international fights Furthermore, Vital is also a close friend of many people in offices, schools, banks, hospitals, sport areas, households

From this point of view, we can see that Vital is a quality brand which has achieved a certain reputation in the market With the upward trend in the bottled water market, Vital Joint Stock Company always efforts to innovate their products to serve customers better

2.1.2 Operation sectors

Vital Joint Stock Company is an independent financial unit and has its own seal based on regulations of the government Their main business sectors are:

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Gricd Capstone Project Report

e Carbonate and non-carbonate natural mineral water production and business

e Soft drink

e Equipment trading

® Investment and production of natural mineral water

e Import-export: Carbonate and non-carbonate natural water

Besides, the company also operates in other business sectors such as real estate sector, travel agent, flight ticket booking agent However, Vital natural mineral water business and production is the main sector that the company is following and has achieved many

successes for over 10 years

Vital water with the natural mineral ingredient is controlled closely and good for health corresponding to requirements of food safety Currently, Vital Joint Stock Company is investing in their equipments in order to meet the requirements of following certificates

GMP, HACCP and ISO 9000:2002 in 2010 Till now, products of Vital Joint Stock

Company have two types carbonated and non-carbonated bottled mineral water To meet demands of customers, the company produces various types of products including:

e 350ml! Vital bottle e 500 ml Vital bottle e 1.51 Vital bottle e 19.51 Vital decanter

Coming with the expansion of the current factory in Thai Binh, the company is planning to build another one in Dong Nai Moreover, the company also intends to launch new products decanter of 61 & 121 in order to satisfy various demand of the market

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