Improvement in service quality of duc viet cargoteam forward to the international intergration trend

1 STATEMENT OF AUTHENTICATION We declare that all materials presented to Solvay Brussels School of Economics and Management are our own work, gathered, and utilized especially to fulfill the purposes and objectives of this study and specifically acknowledged wherever adapted from other sources We understand that if at any time it is shown that we have significantly misrepresented materials presented to Solvay Brussels School of Economics and Management, any degree or credit awarded to us on the basis of that material may be revoked Academic Tutor : Asso Professor NGUYEN MINH HA Practicing tutor : Mr HUYNH MINH NHUT Class : MMCoM9 Students : DANG THU LIEN BUI TRINH THAO NGUYEN ACKNOWLEDGEMENTS Firstly, we would like to use this opportunity to send our sincere thanks to all of our Professors from Solvay Brussels School Economics and Management who teach us very dedicatedly and enthusiastically during the time we study in MMCoM9 Secondly, we would like to express our deep gratitude to our advisor - Professor MARIANNE CLAES, the Academic Tutor – Asso Professor NGUYEN MINH HA and the Practicing Tutor - Mr HUYNH MINH NHUT for their conscientious guidance and very detailed instruction We also would like to show our gratefulness to the Board of Director, colleagues and staffs in DUC VIET CARGOTEAM who assist and allow us to use all materials, documents, data, statistics, images and information of the company for this project We are especially thankful to our families for their great support us from the beginning to the end of the course Finally, thanks a lot for the kind contributions from all of the administration people in Solvay Ho Chi Minh, the MMCoM9 classmates and friends who discuss and share the valuable ideas with us as well as encourage us to finish this project Once again, thank you very much for all your nice assistance, we always keep all in our heart DANG THU LIEN BUI TRINH THAO NGUYEN EXECUTIVE SUMMARY The economy of Viet Nam now is integrated internationally Particularly for logistics industry, this trend creates opportunities for businesses to export and import goods with low barriers to entry However, this leads to the establishment of new freight forwarders and foreign companies enter Viet Nam’s market easily Therefore, the market competition becomes fiercer and Cargoteam has to improve the service quality forward to the international integration trend to win the market This project will investigate the problems that Cargoteam is facing internally and externally by evaluating the primary data and the secondary data, PEST analysis, SWOT analysis and Servuction system On the other hand, five dimensions of Servqual model will be emphasized during the project to measure the difference between customers’ expectation and their perception after using service Basing on the analysis of these details, there are some problems as followings: - High competition in the market: customers have various choices in service - Employee performance: employee’s knowledge does not meet customers’ expectation - Customer turnover: the number of customers left Cargoteam was high - Mistakes occurred in working process According to the stated problems, the project points out two main solutions and a recommendation to improve the service quality for Cargoteam: - Improve employee performance internally and externally: open training courses, create KPI and quarterly examination to track employee’s knowledge - Apply high technology (management software): avoid manual mistakes and make the working process more accurate and faster - Establish an additional service: the consultancy service, specializing in EVFTA/TPP These solutions may take a certain period to come to practical actions because Cargoteam does need the specific time for training staffs and Cargoteam has to build the KPI carefully Moreover, the management software will require the creators having excellent understanding about the working process of Cargoteam TABLE OF CONTENTS STATEMENT OF AUTHENTICATION ACKNOWLEDGEMENTS EXECUTIVE SUMMARY TABLE OF CONTENTS CHAPTER 1: INTRODUCTION COMPANY OVERVIEW I Cargoteam’s background information Mission, Objective and Goal Milestone Services availability Market Share Cargoteam’s competitor analysis Financial analysis II PROJECT FOR THE IMPROVEMENT IN SERVICE QUALITY OF CARGOTEAM FORWARD TO INTERNATIONAL INTEGRATION TREND 10 Reasons for Proposing the Project 10 Project Objective 10 Research methodology 11 Project limitation 11 Project structure 11 CHAPTER 2: LITERATURE REVIEW 12 I SERVICE QUALITY DEFINITIONS 12 II SERVQUAL MODEL 12 III ANALYTICAL METHODS 14 PEST Analysis 14 SWOT Analysis 14 Consumer Decision Making Process 15 CHAPTER 3: ANALYSE THE SERVICE QUALITY OF CARGOTEAM 17 RESEARCH METHODOLOGY 17 I II Secondary Data 17 Primary Data 17 PEST ANALYSIS 23 Political 23 Economic 24 Social 24 Technology 25 III SWOT ANALYSIS 25 Strengths 25 Weaknesses 27 Opportunities 28 Threats 28 IV SERVUCTION SYSTEM 29 Front stage 30 Back stage 30 SUMMARY OF PROBLEMS THE COMPANY IS FACING 31 V CHAPTER 4: SOLUTIONS TO IMPROVE SERVICE QUALITY OF CARGOTEAM 33 I EMPLOYEE PERFORMANCE IMPROVEMENT 33 II INFORMATION TECHNOLOGY ADAPTATION 34 III OPEN THE CONSULTANCY SERVICE 34 Strategy to run consultancy service for Cargoteam 35 Key Performance Indicator 36 Business Model Canvas for Consultant Service of Cargoteam 37 Key HRM Strategies 38 CHAPTER 5: CONCLUSION 39 APPENDIX 40 Appendix A Survey questionnaire 40 Appendix B The survey’s results 42 Appendix C Income Statements of Cargoteam 2012 - 2014 44 Appendix D Information about EVFTA AND TPP 46 REFERENCE 52 CHAPTER 1: INTRODUCTION I COMPANY OVERVIEW Cargoteam’s background information Cargoteam was founded in 1994, being one of the first private Freight Forwarding companies in Viet Nam by Mr Paul Guilhem who is French but, was born in Viet Nam This year 2016, Cargoteam is honor to hold the 22 Years of Service Figure Photo of Mr Paul Guilhem and Cargoteam’s logo - Company name: DUC VIET FREIGHT FORWARDING SERVICE AND TRADING LIMITED COMPANY / Trading name: DUC VIET CARGOTEAM - Abbreviation name: CARGOTEAM - Business field: Forwarding and Logistics - Head office: Lot E6, Road K1, Cat Lai Industrial Zone II, Thanh My Loi ward, district 2, Ho Chi Minh city - Telephone: +84 3742 3777 - Fax: +84 3742 5048 - Email: info@cargoteamvn.com / Website: http://www.cargoteamvn.com - Other offices in: Ho Chi Minh airport, Ha Noi, Da Nang, Laos and Cambodia Figure 2: Head-office building in Cat Lai, Ho Chi Minh and Map of Cargoteam’s offices Mission, Objective and Goal Mission Objective Goal •Bringing proffessional and dedicated services to customers •Being a reliable forwarder in Viet Nam and a responsible agent/partner in the world •Always upgrade and study to serve customers better day by day •Being a profitable leader of the logistics and forwarding industry in South-East Asia in 2020 Figure 3: Mission, objective and goal of Cargoteam Milestone 1999 Gained IATA licence, began to handle DG 1994 Founded 1996 Opened Branch in Ha Noi, joined in LINK 2008 Finished Building and Warehous e in HCM 2000 Opened Office in Da Nang 2010 Open Office in Laos 2009 Opened more Office in Ho Chi Minh airport 2012 Open Branch in Cambodia Figure 4: Milestone of Cargoteam Services availability - Air freight - Sea freight - Sea-air combination - Inland trucking - Dangerous goods - Project cargo - Custom brokerage - Warehousing Figure 5: Helicopter project for the movie King Kong: Skull Island  Cargoteam provides various range of service to fullfil the needs of customers The most highlighted service is handling dangerous goods, in which there are few freight forwarders have the legal license to process  In general, the services that freight forwarders are providing are similar Therefore, to raise the attention from customers, the company has to focus on improving service quality In details, improving the performance of sales personal is the most important Because they are the persons communicating directly to customers Customers’ satisfactions are related to personal performance Market Share Market Share of Cargoteam Handling 15% 10% 5% 25% 45% South America Oceania, Africa Asia Europe USA Figure 6: The market share of Cargoteam handling The most profitable markets of Cargoteam are export goods to Europe and USA while import goods from Asia When EVFTA and TPP are applied, the barriers to entry will be reduced Therefore, the market opportunities of these markets will be more essential Cargoteam’s competitor analysis Logistic services in Viet Nam have developed from the decade 1990 starting from the Freight Forwarding Services and Warehousing Nowadays, the number of companies that provide Logistics services is very huge They are classified into many different categories as following: Number Category company Quantity Logistics – Services 295 Transport Agents 2,252 Freight Forwarding Services 1,895 Customs - Services 378 Express Services 278 Warehouses - Public 138 Stevedoring Contractors (Machine) 125 TOTAL: 5,361 Table 1: Total number of companies in transportation (Source: Vietnam Yellow Pages) Besides the state-owned enterprises to be equitized, the scale of most Logistics companies are small and medium-sized with the average charter capital about 4-6 billion and the human resources that are trained with the specialize knowledge in the logistic area is still very low, only approximately 5-7% Cargoteam is a medium-sized company but during 22 years from the first day to run the business, Cargoteam has increased the charter capital into 22 billion VND since 2015 with much progress: - Offices: (Ho Chi Minh: 2, Ha Noi: 1, Da Nang: 1, Laos: 1, Cambodia: 1) - Private building: 2,500 m2 and Private warehouse: 2,500 m2 private Financial analysis The performance of Cargoteam is presented based on the Income Statements Revenue and COGS 2012-2014 of Cargoteam 54,608,144,717 24,305,554,102 100,000,000,000 50,000,000,000 37,870,307,330 2014 9,136,320,303 20,439,903,468 2013 109,872,000 Revenue COGS Figure 7: Revenue and COGS 2012-2014 (see Appendix C) 2012 10 The revenue in 2014 was higher 20 billion VND than the one in 2013 However, there was a variance between the revenue and the net profit In details, the net profit in 2014 was only billion VND This was caused by high Cost of Goods Sold (COGS) with 15 billion VND exceeded  Overall, the profit margin of Cargoteam was not as high as expected and the market becomes more competitive even though Cargoteam service is good and has long commitment with customers There is a necessity to innovate the service quality forward to the international integration trend II PROJECT FOR THE IMPROVEMENT IN SERVICE QUALITY OF CARGOTEAM FORWARD TO INTERNATIONAL INTEGRATION TREND Reasons for Proposing the Project The competition in Logistics industry in Viet Nam is increasing rapidly recently, especially when many free trade agreements are established The appearance of new freight forwarders in Vietnam and foreign cargo companies create more competitive pressure on the development of Cargoteam Moreover, the financial status of Cargoteam was not good in which the profit was not as high as expectation This is caused by the tough market competition Therefore, Cargoteam has to focus on improving the service quality forward to global integration trend in order to compete with other competitors in operation, keep the relationship with current customers and attract new customers Project Objective - Figure out the problems Cargoteam is facing in the integrated economy according to five dimensions of Servqual model - Analyze external and internal factors affecting to the development of Cargoteam through PEST analysis, SWOT analysis and Servuction system - Investigate customer satisfaction according to the survey’s result - Suggest solutions to improve the service quality of Cargoteam 38 Key HRM Strategies - Make sure that all staffs to understand EVFTA/TPP, let them put the questions What, How, Why? - Choose and train 10 best staffs to consultancy in the first trial period months - Leadership style is democratic, encourage sharing ideas and creativity - Clear job description, goal setting - Define Weaknesses / Strengths of employees, put right people in right position - Must have coaching and development plan (objective, checklist, agenda) 4.1 How to measure organizational success? - Create key success measures that track outcomes instrumental to sustained organizational high performance including Planning, Goal setting, Communications, Feedback, Development - Financial indicator: Revenue, Profit, Expenses, Cash flows, Growing rate, Commission, Bonus - Marketing: Brand value, Reputation, Loyal customers 4.2 How to measure staffs success? - Enable to try a new service with joy at work - Develop acknowledge and skills for staffs - Offer the better Income, keep employees’ satisfaction and loyalty - Create collaboration, sharing, open communications - Encourage effective and creative 39 CHAPTER 5: CONCLUSION The economy is integrated internationally with the appearance of free trade agreement Therefore, the market competition becomes harsher with the establishment of new freight forwarders Moreover, the profits margin was not as the company’s expectation and the number of customer turnover was high Although Cargoteam has good facilities and take care of the customers very well, there is an urgent necessity to improve the service quality of Cargoteam Basing on mentioned problems, the project proposes two main solutions: - Training employee: open training sessions to enhance the knowledge of staffs and adapt to the trend in the industry Conduct quarterly examination to track the skills and knowledge of the staffs - Use high technology management software to speed and accurate the process and give free consultancy service or related information to customers Besides the solution for service improvement, the consultancy service about EVFTA and TPP will be established to respond to the needs for understanding from customers Cargoteam will train a group of 10 employees for this service supplement Although, Cargoteam has to spend a certain cost for this training, it will help Cargoteam able to be differentiated from other competitors and draw new customers Additionally, this service will build a good image for Cargoteam and enhance the relationship with customers Basing on the survey, customers are concerned in new consultancy service and willing to use it when published We believe this project can be successful if it is carried out with proposed solutions and all of Cargoteam staffs are willing to improve the service quality more professionally 40 APPENDIX Appendix A Survey questionnaire SERVICE QUALITY SURVEYS FOR DUC VIET CARGOTEAM How satisfied are you with Duc Viet Cargoteam’s services experience that you received from us? A Dissatisfied B Neutral C Somewhat Satisfied D Very Satisfied How you consider the ability of Duc Viet Cargoteam to perform the promised service dependably and accurately?  Excellent  Good enough  Normal  Bad Which characteristic that you recognize when you use Duc Viet Cargoteam’ services? A Professional and devoted B Dynamic and speed C Normal D Amateur If there’s any problem during operation with your shipment, how quickly Duc Viet Cargoteam solves and gives you the feedback? A Immediately B Reasonable time frame C The problem still exists 41 When you need something from Duc Viet Cargoteam’s services, you find suitable information to help your business? A Disappointed B Acceptable C Quick and useful Are you willing to recommend Duc Viet Cargoteam’s services to your colleagues, friends, partners or clients? A Yes, I will B Ok, let me see C No, I not want If we open the Consulting service for Import-Export-Logistics about the impacts of TPP and EVFTA on Viet Nam: you think it's necessary and helpful for your current business? D Yes, you should it immediately E What are TPP and EVFTA? F I not care What should we to serve you better in future? (please show your specific request or suggestion) A ………………………………………………………………………………………………………… ……………………… B ………………………………………………………………………………………………………… ……………………… C ………………………………………………………………………………………………………… ……………………… Your company name : Field : Address : Tel/fax/email : Your full name and Title : Place and Date : 42 Appendix B The survey’s results 43 44 Appendix C Income Statements of Cargoteam 2012 - 2014 45 46 Appendix D Information about EVFTA AND TPP EVFTA 1.1 Overview European-Viet Nam Free Trade Agreement (EVFTA) is the comprehensive and ambitious trade and investment agreement between the European and Viet Nam that was agreed to sign on Aug 04, 2015 after two and a half years of intense negotiations This agreement will allow EU exporters and investors to access a fast-growing market of 90 million people and to consolidate their presence in one of the most dynamic regions in the world It will remove nearly all tariffs on goods traded between the two economies 1.2 Content of EVFTA: - Eliminating customs duties - Reducing non-tariff barriers to European exports - Protecting European Geographical Indications - Allowing EU companies to bid for Vietnamese public contracts - Creating a level playing field for EU companies and innovative products - Opening the Vietnamese market for EU services operators - Promoting and protecting investment - Establishing an efficient mechanism to resolve future disagreements - Safeguarding social and environmental protection standards - Promoting democracy and respect for human rights 47 1.3 EVFTA - Opportunities and Challenges: Opportunities: The European is one of the leading economic, trade and investment partners of Vietnam According to the General Statistics Office (GSO), in 2012, it emerged as the largest importer of Vietnamese products with total value of US$20.3 billion, a year on-year increase of 22.5 per cent, accounting for 17.7 per cent of the country's total exports EVFTA is expected to bring many benefits to Vietnam: - Reduce at least 90 per cent of tariff lines on Vietnam's exports to the EU to zero and increase EU capital sources for Vietnam - Open up many new opportunities for Vietnamese businesses to penetrate deeper into the EU market and force them to move closer to international standards - Be an important boost for Vietnam's exports With 501 million consumers and over US$17,000 billion of GDP, the EU is the dream market At present, Vietnam's exports to the EU account for 0.75 per cent of the bloc’s total imports Only 40 per cent of imports are tax free while the remaining 60 per cent are subjected to different tax rates Drop Import duties with the EU # Exporting of Vietnam will have a great opportunity to penetrate and increase their market share in this market - Help improve the business environment in Vietnam in the direction of increased openness and easiness with increased transparency and facilitation, thus bolstering business activities and direct investment from the EU and other countries to Vietnam With the EU’s investment size and potential, Vietnam will have a chance to become a bridge connecting the EU’s trade and investment with the ASEAN region This will actively support Vietnam’s economic restructuring growth model Diversify export markets and therefore diminish dependence on certain markets, will give a chance for Vietnam to balance its export market structure Challenges: 48 - Vietnam must bring most of its own import tariffs to zero, open more service markets than WTO commitments, and not rule out the possibility of opening up the public procurement market As a result, competitive pressures will be definitely intensified and increased - Wider opening of service markets, and increased transparency of business and investment management regulations - The ending of tariffs on at least 90 per cent of exports to the EU market will be the key to promote Vietnam's exports but, Vietnam's exports will still face many barriers  Textiles and footwear will see more difficulties in EU requirements for origin of commodities  Wooden products must satisfy Regulation 995/2010 of the European Parliament or the Forest Law Enforcement, Governance and Trade Action Plan of the European Union (FLEGT) for legal logging  Agricultural products will confront competitive pressures from new EU member countries - EU applies specific, flexible nontariff barriers on Vietnam’s goods, while the bloc necessarily recognizes Vietnam as a market economy in applying anti-dumping policies - EU provisions need to have a roadmap for Vietnam on a number of areas like small and medium enterprises, agriculture and labor KNOWLEDGE OF TPP Overview of TPP The Trans-Pacific Partnership (TPP) is one of the most ambitious free trade agreements ever signed TPP will create a free-trade zone and unleash new economic growth among 12 countries geographically located around the Pacific Rim, making it the world’s largest: Brunei, Chile, New Zealand, Singapore, Australia, Malaysia, Peru, USA, Canada, Viet Nam, Japan and Mexico 49 The countries within its scope account for 40% of the world’s economic output It took years to negotiate and would become a nuclear to form an FTA for the whole Asia-Pacific region The pact aims: - Deepen economic ties - Slash tariffs - Foster trade to boost growth - Overhaul trade, investment rules and intellectual property rights - Improve labor standards for the 21st century Key Features in TPP - Comprehensive market access - Regional approach to commitments - Addressing new trade challenges - Inclusive trade - Platform for regional integration Impact of TPP and Future of Viet Nam Viet Nam would be the largest beneficiary on the TPP with the factors explains this result as following: 50 - Strong trade with the US - High protection abroad against apparel and footwear, which are Vietnam’s principal exports - Strong competitive positions in these and other manufacturing industries where China’s comparative advantage is fading - High initial domestic protection - Powerful scale effects in Viet Nam’s principal production clusters Future of Viet Nam - Vietnam's GDP may increase more than 30% within 10 years after joining TPP - TPP will enable Vietnam to integrate into global supply chains and allow the country to be ranked among the leading economies in the Asia-Pacific region - Trade between Vietnam and the U.S was worth only US$450 million 20 years ago, but has since skyrocketed to $40 billion, up more than 100 times in two decades Therefore, trade between the two countries will surely grow rapidly if the trade pact is completed - The U.S wants to promote the trade agreement is ASEAN including Malaysia, Indonesia, Thailand, the Philippines, Vietnam, Singapore, Laos, Cambodia, Myanmar, and Brunei 51 LIST OF ENJOYED GOODS Middle & longterm Benefit Immediate Benefit Garment, footwear, wood processing, seafood, agricultural Seaport, logistics, supporting industry and contraction - LIST OF SUFFERED GOODS Immediate Impact Car manufacturing Little Impact Property, pharmaceutical and oil industry High Impact Insurance, banking, stock business, retail delivery and consuming goods Middle & longterm Impact Animal husbandry & sugar cane farming Figure 24: List of Enjoyed and Suffered goods from impact of TPP on Viet Nam 52 REFERENCE Lehtinen, U and Lehtinen, J.R., 1991 Two approaches to service quality dimensions Service Industries Journal, 11(3), pp.287-303 Lovelock C., Wirtz J and Chew P., 2009 Essential of Service Marketing, 1st edn, Prentice Hall, Pearson Education South East Asia Pte Ltd, Singapore MIC 2012, ‘Co cau dan so va luc luong lao dong tai Viet Nam’, homepage, Bo Thong Tin va Truyen Thong, viewed 1st March 2016, Mot The Gioi 2015, ’30 Noi dung chinh cua hiep dinh TPP ma Viet Nam vua gia nhap’, homepage, nguyentandung.org, viewed 28th February 2016, Narayanan V and Fahey L., 1994, Macro-environment analysis: understanding the environment outside the industry, 2nd edn, p.198-214, New York: Wiley Parasuraman A., Zeithaml V.A and Bery L.L, 1980, ‘SERVQUAL: A multiple-item scale of measuring consumer perception of service quality’, Journal of Marketing, Vol.44, The American Marketing Association Tan Si and Trung Hung 2015, ‘Bao cao nganh Logistics’, Journal, FPT Security, viewed 27th February 2016, Thien Thuat 2016, ‘Tập trung nâng cao lực quản lý nhà nước ngành Giao thông vận tải’, posted 4th January 2016, viewed 27 February 2016, Zeithaml, V.A., Parasuraman, A and Malhotra, A., 2000 E-service quality: Definition, dimensions and conceptual model Marketing Science Institute, Cambridge, MA, working paper ... with customers There is a necessity to innovate the service quality forward to the international integration trend II PROJECT FOR THE IMPROVEMENT IN SERVICE QUALITY OF CARGOTEAM FORWARD TO INTERNATIONAL. .. daily booking around to tons per shipment  This shows that the service quality of Cargoteam meets the expectation of the customers then they trust in the reputation of Cargoteam and definitely... service quality forward to the international integration trend to win the market This project will investigate the problems that Cargoteam is facing internally and externally by evaluating the primary