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Product Marketing Strategies of the Northern Branch 1 of Vietnam Pesticides JSC (Vipesco) Formation and development process of the Northern Branch Vietnam Pesticides JSC (Vipesco) The Northern Branch 1 Vipesco was established under the Decision No 95/QĐTCTHC dated Jan. 31st, 1990 issued by Vietnam National Chemical Group (Vinachem) In January 1991, Research Center for Science & Agricultural Drug production belonging to Chemical Industry Institute merged into the Branch, and in December 1997, Material Company of Plant Protection located in Nam Dinh city also merged into the Branch. At present, the Branch headquartered at No. 2 Trieu Quoc Dat St. Hoan Kiem Ward, Hanoi. In addition, it has manufacturing facilities in Duc Giang Agricultural Drug Factory, stores in Xuan Phuong, Tu Liem, Hanoi, and showrooms in Loc Hoa, Nam Dinh city and in Vinh city, Nghe An Province. The branch is a subsidiary, being responsible for production and business, supplying weed pesticides used in agriculture, production of household antiseptics, disinfectants and construction investment in offices and apartments, warehouses for rent. Business areas assigned are the North from Ha Tinh. Since the North Branch 1set up, it has got great progress. Instead of being small factory with on site – product sold professional departments The branch has a large scale which is as equivalent as its of mediumsized company with full of professional departments and distribution system covering the northern provinces from Ha Tinh Especially, because of increased revenue and profit, it ensures to create employment and quality of life of staffs. The organisational structure of the Northern Branch Vietnam Pesticides JSC Functions and duties of the Northern Branch 1 • Functions: Produce and supply fully and in time weed pesticides for agricultural development in the northern Besides, it produces and sells household products such as flies and mosquitoes, cockroaches, ants, fleas, termites, disinfection. It also invests in offices and apartments construction for rent, and rent warehouse in the assigned area • Duties: Business registered sectors in assigned areas; produce standard products which are registered in the list of the Ministry of Agriculture and Rural Development The Branch creates employment revenue of staffs by itselt Also, it is responsible for the results of its business activities Implement strictly professional management on property, accounting, investment, capital preservation and other regulations which are controlled by the Company, Vietnam National Chemical Group and the State Implement taxpayment obligations and other obligations to contribute under the provisions Strictly comply with the provisions of the Labor Code to ensure the rights of workers Implement strictly sanitation, wastewater, and waste gas to ensure environmental standards such as licensed, PCCN Constantly expand the scope of business to meet the development requirements of the Company and the Vietnam National Chemical Group Functions and duties of Staffs Administrative and Organisation Department: Plan, manage, arrange workforce, implement staff training and policies for employees Finance and Accounting Department: Plan, organise, monitor, guide reporting implementation and account under the provisions Engineering Plan Department: Develop plans for ensuring adequate timely supply for materials and production packaging Manage technical and economic norms, product quality, give the Director advice about technics and technical innovation to enhance productivity, improve working conditions Sales Department: Plan, consultation, professional management, and implementation of the business activities such as strategic construction, business planning, advertising, and customer care, promotion or discount policies of the branch to dealers and timely assessment to evolution of the market about customer information, products, epidemics in assigned areas The network of stores: + Duc Giang showrooms and stores in Long Bien District, Hanoi + Cau Dien showrooms and stores in Tu Liem District, Hanoi + Nam Dinh showrooms and stores in Nam Dinh + Vinh showrooms and stores in Vinh city, Nghe An province Vinh store distributes to maximum of 7 retailers and wholesalers in Ha Tinh, Nghe An, Thanh Hoa. Nam Dinh store distributes to Ninh Binh, Nam Dinh, Ha Nam, Thai Binh Cau Dien stores specialise retailing and introducing products Duc Giang store invoices, this invoices is issued by Sale Department The network of dealers in the provinces Order Country/District number The number of Note Dealers Sơn la 04 Điện biên 02 Lai châu 01 Hà giang 01 Lào cai 01 Yên bái 03 Tuyên Quang 01 Cao Bắc cạn 01 10 Thái nguyên 03 11 Lạng sơn 03 12 Quảng ninh 01 13 Hải phòng 03 14 Hải dương 05 15 Hưng yên 05 16 Hà nội 05 17 Hồ bình 01 18 Bắc ninh 03 19 Bắc giang 03 20 Vĩnh phúc 02 21 Phú thọ 01 22 Thái bình 05 23 Hà nam 03 24 Nam định 05 02 25 Ninh Bình 03 26 Thanh hố 03 27 Nghệ an 05 28 Hà tĩnh 03 Total 78 Led by the Party, our country is increasingly developed, performance of both the countryside and the city are changing day by day, and per capita income in 2010 exceeded 1100 USD Together with that development, Agriculture industry grows constantly Instead of importing foods due to ,property, Vietnam agriculture can not only supply fully for domestic market, but also export, ranking 2nd in the world That achieved is because of Vipesco’s large contribution. In terms of Legislation: The State highly appreciates plant protection Sector, and encourages to produce and business highly efficient pesticides as well as environment – friendly products The most important document is Ordinance on the Protection and Quarantine. In addition, there are Decrees and Circulars guiding detail implementations as well as Regulations on manufacturing, bottling, packaging, waste disposal, toxic emissions, and toxic transportation. The regulations on hazardous waste management and toxic disposal, including pesticides are controlled strictly from collection to transportation which we have to use specialised and globally positioned vehicles. This is barrier of new companies to enter into the market. However, the North Branch 1 Vietnam Pesticides JSC is enough such conditions as production, circulation and distribution of goods, environmental standards under the provisions the State issued. In terms of sociocultural, in conditions of globalisation along with the rushing development of the internet, full and timely updates contribute to improve sociocultural life, not only transmit environmental information, but promote plant protection pesticides At present, advertising channels the Branch is applying are diversity, including TV and radio in each local. Technology: Pesticides are harmful goods. Therefore, the State manages very strictly. Every year, toxic drugs gradually are excluded from the list of drugs registered for usage in Vietnam At the same time, the government allows to register new products which are effective, advanced and environment – friendly. So the investment in new technology based on the scientific and technical progress is necessary requirement for manufacturers in Vietnam. Recently, Vietnam pesticide JSC has led in the study of modern machinery and equipment to produce high quality products which are less toxic to the environment. Whereas other companies couldn’t do anything, the North Branch 1 has applied technics for producing granular, highly soluble and low order pesticides, etc. Economic: Economic development makes the people’s life and income improved. Because of enhanced standard of living, the people think about not only delicious foods, nice cloting, but fresh foods as well (fresh vegetables, fresh food without pesticides). That impacts strongly pesticide production to provide such less toxic and environmentfriendly products as ones derived from plant and microbiology. It also facilitates for the Branch to develop those biological products, for example, ViBT is biological pesticides for vegetable, not only efficient but nontoxic; fungicide, Vivadamy, and other ones. Natural environment: Increasingly, the environment is seriously polluted One of the reasons is to excessively use toxic substances, regardless allowance, causing natural environment pollution. So it is needed to manage strictly pesticide importing operations, check periodically and irregularly production facilities, sale and transportation, warehouse and storage. Pesticide products derived from petrochemicals, while oil reserves are scarce. As a result, increase of products price requires companies to have alternative products from other sources such as herbs, microbial which is like Vipesco doing now. 3. Business Environment Analysis Weeds pesticides for agricultural are harmful goods. The State regulates business conditions of items, the object to serve farmers with low standard of living and low awareness in society. Pesticide industry is affected by the macro environment as above analyzed; in addition, it is greatly influenced by elements of the business environment Traditionally, in the Subsidy Mechanism, there is only the Center for Agricultural Research & pharmaceutical production and Vipesco, producing this item After that, the Center merged with the Company to become VIPESCO, and it is responsible for researching weed pesticides manufacturing and business. After eliminating the Subsidy Mechanism, series of smallsized enterprises launched There are now nearly 300 enterprises dealing in weeds pesticides across the country. In addition, worldwide famous firms doing business in Vietnam cause intense competition in this area Production of weed pesticides depends on many factors. The first factor is the exchange rate; the next is the world price, this price is affected by oil prices. In recent times, due to rising world oil prices, price of pesticides also fluctuates. At some time, world price rises quickly, but also goes down as fast as in 2008, causing great demage for most companies, especially largesized companies. Output price of pesticides not only depends on abovementioned factors, but also is influenced by price of agricultural products, product quality and reputation of the brand. The price split into the following segments: Firstly, price of high quality is of worldwide famous pesticide companies in such many countries as Japan, America, Germany, Switzerland, etc The 2nd segment is such large companies as Vipesco which is the top of domestic companies with product quality and brand reputation. The remaining segment is the product of small enterprises and private firms Due to increasing environmental pollution, people's enhanced awareness, the companies in this area have to change business of environment friendly products and microbial products. This is main business way of the Branch. 4. SWOT analysis Strength: VIPESCO brand appears in the market for a long time, farmers across the country are known. Dealer network of the Branch spread across all provinces in the northern area, but now due to fierce competition and many other reasons, its market share is only about 20% in the region Because of dominance of Vietnam National Chemical Group, along with aims of business, the Branch is also responsible for adequate insecticide supply when epidemics occur. Besides, it complies with regulations on the business management, tax and other regulations for state enterprises. As the Branch is a unit of Vietnam Pesticides JSC, this company directly supports it in raw materials, technology, capital, marketing, promotion policies, etc, particularly in technics. Because the company is the only unit in the industry, having room to check the quality of national standards, quality testing of the company is in high validity all over the country. Relied on that, the quality control of inputs and outputs is more convenient than its other companies which have no condition to check the quality during and after the sale of products to market. The branch operates in a large area, including large Red river Delta to plant rice, vegetables, midland and highland to plant highly valued crops, industrial plants such as corn, sugarcane, tea, rubber, coffee, orange, longan, litchi, etc This facilitates to product diversity of the Branch It has experienced and skilled staffs who meet the requirements of complex technical tasks. It also has a modern factory which accommodates lotions and powders, meeting all requirements of processing, as well as completed environment treatment systems, gas handling system for competent Currently, there is no branch meeting these standards. Most established dealers have based on cooperation with its branches for development, so they are very loyal to their branchs. VIPESCO has very strong potential of modern infrastructure and machinery equipment which no sector has. More important thing is that staffs are highly qualified, experienced That is foundation for the development of new products and high quality products With more than 100 high quality, prestigious products in the market which are enough form such as liquid, powder, dispersal seed, spreader seed, etc Especially, in the North, product lines derived from biology are preferred and encouraged by the State. The Branch is also believed and approved by agencies such as the Department of Plant Protection from the state to local and local dealers Weakness: After equitizing, management apparatus is cumbersome; efficiency of using labor force is low. The cost of a product unit is high due to nonproduction costs remain high Other reasons are that production of harmful goods is sensitive to high environmental costs and administrative costs several. Promotion and Marketing Department is still weak and less effective Discount, commissions, sale promotion are low because profits are not high leading the low sale quantity of the agent distribution channel. Governed by stateowned enterprises, price mechanisms isn’t as flexible as those of the competitors Specially, the general price mechanism is sometimes counterproductive when large dealers in the southern sell large amounts with cheap prices in order to conducting commodity exchange between the North and the South, causing price interference in the market Compared with average standard of society, standard of living of employees is still low. Therefore, they are not interested in devoting most of their ability, even change their job Due to inconsistencies in assigning operation area, some stores can’t obtain revenue as planned. That is responsibility of store, but not individual’s. In short, based on the analysis of macro environment factors, industrial environment we can realize that the Branch has modern equipment, skilled and long experienced staff, engineers and workers in manufacturing and business, Besides, it is the branch of Vipesco – the leading organization, so it has very basic strengths for the future development. Opportunity A part from above – analyzed factors, strict managerment of the government with demanding regulations on environmental protection also strongly affects to small enterprises. Because these small enterprises don’t have enough condition such as production sites, warehouses and capital to meet the requirements of environmental protection, they are compelled to 10 change their way of business or dissolve. The fact is that this is opportunity for development of the Branch. Moreover, under the direction of the Prime Minister on the opening day of Vietnam National Chemical Group or VIPESCO in 2009, VIPESCO has to build the sector strategy in 2020, The strategy is about production of petrochemical originated pesticides, replacing current imports that Vietnam is closely dependent on foreign countries, especially Chinese. This really is a good opportunity for the Branch Currently, the Company starts to build the sector strategy, submitting the authority Threats The foreign pesticide production enterprise gradually expanding their operations in Vietnam are the biggest threat to the company. The quality of those companies’ products is very high and effective and their marketing strategies are professional. Attractive incentives really threaten to domestic companies Famers’ awareness and qualification are limited and habital. Therefore, they are abused because competitors prefer selling profitable products to selling good products with higher price but less profit Pesticides are made from petrochemical; however, oil reserves aren’t unlimited. That strongly threatens to this sector. 5. Analysis of business environment and competition Plant protection drugs, specificly pesticides are a highly profittable industry Because of the government demanding requirements of environmental protection, the establishment of new pesticides enterprises is now very difficult. That is in fact a big obstacle to enter into the sector In the 2000s, there were a few suppliers, so the Branch sold their products on site or in accordance with letters of recomemdation from the People's Committees of 11 provinces and districts. Nowaday, with nearly 300 production enterprises, the Branch have to use effective marketing strategy, attractive discounts and incentives and delivering services so that it can be easy to sell. However, due to its reputation and brand, rate of sale and profit of the Branch have increased steadily for the years. Pesticide suppliers now are from China, India, America, Japan and Britain Germany, Switzerland, Korea, etc. Chinese suppliers account for nearly 50% of the total value of imported goods. Products of Western Europe and Japan, the U.S. have high quality but high price; so customers’ choice is Chinese products with acceptable price in spite of low quality Therefore, Chinese firms often have more opportunities to control market price which is good for them. Since the majority of imported goods is made in China, the fluctuations in this country affects the import price of raw materials and products of domestic companies For example, in 2008, when China held the Olympics, it has restricted chemical production to protect environment for helding of the Olympic As a result, for Glyfosat 480DD products, import price was increased from 2 USD / kg to $ 6.2 USD / kg in Oct 2008. Also, in 2008, the companies importing a large amount of these items lost nearly 100 billion because the price decrease by 2 USD / kg compared with average one. For long time, substitues or reducing the amount of pesticides in agriculture depend on the program of fresh vegetable, the IPM programs, chương trình 3 giảm 3 tăng, and nonpesticide program in agriculture. The current competitors in the north are foreign firms. The price of their product is very expensive, influencing their quantity. Cheap price product segment of the private companies in the longterm will be difficult to smaintain because of the short product life cycle, low 12 repuptation They just take some main dealer into care with after sale service In this segment, tax evasion occurs regularly, leading to unfair business and unfair. So if the government strictly manages, the development will be difficult Such wellknown companies as Plant Protection JSC 1, NICOTEX, Application Develpoment JSC, HAI, An Giang Plant Protection JSC, and Viet Thang company, Sai Gon Plant Protection JSC, etc. have been using many forms of promotion, customer care. Especially for agents and dealers, they have many benefits and trips to the U.S, France, and Australia. Therefore, there are increasingly intense competitions which firms want to gain market share for their own Customers of the Branch 1 are northern farmers. They have been familiar with it for a lone time. So the brand of VIPESCO with hexagonal logo, which has 3 green leaves on brown ground, has become a familiar symbol of every famer from the delta and midland to the mountains around the northern mountainous provinces Branch products still keep reputation and market share, but relatively modest. It has currently distributed through direct sales channels in its stores in the Northern provinces Products are diverse, espsecially ViDOC including medicines Fujione, Vimonyl, pesticides is Vibasa, vimatox, etc 6. The business result of the Branch The business result in 2007, 2008, 2009 Unit: 1000 dong ON Indicators 2007 2008 2009 Yield (ton) 300 350 400 Revenue (billion) 25 27 30 13 Total cost (billion) 24 25,7 28,5 Profit (billion) 1,3 1,5 State budget (billion) 2,3 2,7 The number of 60 65 70 3,5 4,5 employees (people) Per capita income (tr/ng) The sale result through products Unit: 1000 dong Products 2007 Revenue 2008 Ratio 2009 Revenue Ratio Revenue Ratio Pesticides 10 40,00 10 37,00 11 36,60 Fungicides 11 44,00 12 44,40 13 43,40 Weed 12,00 14,80 4,5 15,00 Gia dụng 4,00 3,80 1,5 5,00 Total 25 pesticides 100,00 27 100,00 30 100,00 The sale result through dealers Unit: 1000 dong ON Area 2007 2008 2009 Sơn la 0.6 0.7 0.8 14 Điện biên 0.4 0.4 0.4 Lai châu 0.3 0.4 0.4 Hà giang 0.2 0.3 0.3 Lào cai 0.2 0.3 0.4 Yên bái 0.2 0.5 0.3 Tuyên Quang 0.3 0.5 0.4 Cao Bắc cạn 0.2 0.3 0.3 10 Thái nguyên 0.7 1 11 Lạng sơn 0.6 1 12 Quảng ninh 0.2 0.3 0.4 13 Hải phòng 1 1.2 14 Hải dương 1 1.4 15 Hưng yên 1 1.2 16 Hà nội 2.5 3.5 17 Hồ bình 0.5 0.5 0.5 18 Bắc ninh 1 19 Bắc giang 1.5 1.5 1.6 20 Vĩnh phúc 1 21 Phú thọ 1 22 Thái bình 3 3.2 23 Hà nam 1 24 Nam định 1.5 2 25 Ninh Bình 1 26 Thanh hố 1 27 Nghệ an 1.5 2.2 28 Hà tĩnh 0.5 0.5 0.6 0.1 0.3 0.4 15 29 Khác 0.5 0.5 Total 25 27 30 For 3 years, the branch has developed steadily, its revenue, profit and state budget has increased over years As a result, employments and standard of living of employees have been enhanced. It is important that the market has expanded and promotions, client conferences, awards for sales have been clearly effective. Yet development is not met with the potential of the branch, requiring appropriate marketing strategies in new development stage In addition to the environmental problems within the enterprises such as improving the organisation of working, arranging workforce k, investment research and investing in equipment and modern techniques to produce productoriented, quality products, it is needed to build suitable product marketing strategies, basing on market segments of highcost products in the country The reason to choose this segment is that its products are high quality ones, being commensurate with the market price. Otherwise, its brand and reputation have been confirmed Recommendation Product strategies Derived from competitive advantage in the market, pesticides are named VIDOC 30BHN by preferred branches. At present, Viet Thang Company and My Duc Company all produce these items, but their quality isn’t steadyband 16 not attending the goals Therefore, need of these products is increasingly grown up. The production should be focused on supporting to winter crops. It will be potential if the production is oriented to supporting to fruit trees. Nevertheless, producing requires techniques and specialised equiptments Currently, the biggest difficulty of the Branch is that product drying process depends very much on the weather when it is rainy, windy and not sunny in the winter to sale. Therefore, to be active in production and keep necessary stability, it has to build proper kilns or firewood using kilns, which are available and cheap, as Vietnam Chemical Industry Institute established before. The products originated from biology are encouraged and preferred by the government such as BT Vi 16000, Vimatox, ViBamec, etc Yet it is neccessary to improve the quality of packaging and workshop promotion and a number of other policies to boost sales Because area is wide and subjects are farmers, who live in the delta, midland and mountain, the branch has to build massive distribution system to be convenient for farmers Currently, the Company is engaging the major agents in the provinces by forms of care, huge postservices. But for the long term strategy, the decision is in product quality and reputation of new brand In short, recommendations focus on the following thing: Enhance product promotion by setting up provincial workshops in the key provinces of rice and industrial plants. These workshops have representatives of the local plant protection and agriculture sector and authorities and agricultural organizations and other agents in the areas, promote products and help local units to sell The next one is the conference on the fields. The Branch must choose some main cooperatives to introduce and try to use products immediately in the 17 field of farmers so that farmers can master the technical characteristics of the drug as well as their usage. In addition, the aim is to answer the questions of famers. It is also workshop for that the famers to see the results of product performance. For agents, the Branch should have suitable policies. Benefits accompany with responsibilities, also, the number of sales attaches discount, promotion such as, product promotion, cash discount (be minus 5%), and lateseason discounts, sales bonus, and travel Pricing strategy The objective is to orient to the market, then determine the price based on the market. Flexible price policy depends on location and time, but is applied in a high price segment of the domestic enterprises. At present, the market price is often difficult to identify accurately; however, because of being import unit and production, the Branch can also determine the reasonable price Besides, it always check and review carefully to manage inputs, reduce product price to facilitate the business Distribution strategy Building and expanding distribution channels across the province but not competing, it must study regions. The direct sale is at the branch, if the price mechanism is not considered carefully, it will cause bad influence in the area So there must be proper attention. Wholesale price is common price of all northern areas (except monopoly distribution) Service strategy The objective of service strategy is to create favorable conditions for customers, so the Branch needs to be responsible for transportation of goods to everywhere. 18 Provide timely brochures, especially new product poster, technical documentation, chemical agricultural handbooks. Marketing communication Marketing communication must be particularly emphasized. Athough the Branch is prestigious and branded, it has to advertise and introduce products regularly because of fierce competitions Advertisement on TV can be transfered to all regions. In addition, it can use advertisements in local media Workshop at all levels of provinces, districts, communes and field seminars are also concerned, but cost of these types is about 57% of product sales In order to get information directly from customers, the Branch has opened four stores for selling directly to users This is very important information channel and also basis of sale adjustment. Promotion policies are applied to products which are difficult to sell in order to stimulate customers to buy large quantities. For example, for ViBT 16.000 promotion rate can reach to nearly 30% Conclusion: Marketing strategies the Branch has used are very effective They facilitate the Branch’s development, including steady revenue and profit, employments, improved life of employees, increased state budget. 19 ... standard of living of employees have been enhanced. It is important that the market has expanded and promotions, client conferences, awards for sales have been clearly effective. Yet development is not met with the potential of... between the North and the South, causing price interference in the market Compared with average standard of society, standard of living of employees is still low. Therefore, they are not interested in devoting most of their ability, even change their job... are effective, advanced and environment – friendly. So the investment in new technology based on the scientific and technical progress is necessary requirement for manufacturers in Vietnam.