Analysis of SWOT model as part of marketing mix vietnam dairy products joint stock company (VINAMILK)

Analysis of SWOT model as part of Marketing Mix Vietnam Dairy Products Joint Stock Company (VINAMILK) Introduction Vinamilk is the abbreviation of Vietnam Dairy Products Joint Stock Company which operates the production and business of milk and milk products as well as relevant equipments in Viet Nam According to the statistics of the United Nations Development Program, VINAMILK ranked the 15th in the scope of business in Viet Nam in 2007 Security Trading Code on Ho Chi Minh City Stock Exchange is VNM The Company is the leading enterprise in the milk production industry, counting for 75% market share of milk in Viet Nam In addition to the huge domestic distribution with network of 183 distributors and almost 94.000 sale points spread on 64 cities and provinces, Vinamilk products have been exported to countries such as USA, France, Canada, Poland, Germany, Middle East, South East Asia For 30 years being introduced to the consumers, up to now, Vinamilk has built factories, 01 enterprise and have been constructing more factories, with the diversity of products Vinamilk currently has more than 200 sterile milk and milk products APPICATION OF SWOT MODEL IN EVALUATING THE BUSINESS ENVIRONMENT A Concretization of effecting elements to the strength, weakness, opportunity and threat Trương Xuân Quý – B03 Page I Strength of Vinamilk Company Diversity of product category Currently, Vinamilk Company has more than 200 milk kinds and milk products, providing the market products, flavor and package with the most choices Vinamilk products has their diversity in the category: Vinamilk products Vinamilk DIELAC Vfresh Vinamilk café Sữa đặc Among them, the trade mark has been leading the market include: Vinamilk sweet milk, condensed milk, Dielac milk powder, V-Fresh Juice, Vinamilk Café, etc Dairy farm systems with large scale help Vinamilk take the initiative to establish the stable and sustainable resource of sweet milk material Currently, Vinamilk Company possesses dairy farm in Nghe An, Tuyen Quang, Lam Dong and Thanh Hoa provinces These are locations of favorable conditions for developing dairy farms with large scale due to the large land fund, productive soil and favorable weather Particularly, Nghe An Dairy Farm – opened on 25 September 2009 is one of the most modern dairy farms in Viet Nam and the South East Asia with investment capital of more than 100 billion Viet Nam Dong This Farm has its scale with 3000 dairy cattle, supplying 30 tons of milk/day for milk production factory of Vinamilk at Nghe An Application of modern technology to the production Trương Xuân Quý – B03 Page 3.1.The modern and automatic milking system Each dairy cattle shall take electric chip to examine the milk quantity Through electric chip, the dairy cattle shall monitored by Alpro system provided by Delaval company The dairy cattle are fed by TMR method (Total Mixed Ration) and distributed by exclusive equipments In addition, the farms are equipped of the modern waste treatment system to protect environment The entire solid waste of the farms shall be collected to produce fertilizer for grassland Sewage shall be biologically treated by deposited paste and used to irrigating the grassland 3.2 Applying the cross-breeds technology Vinamilk is the first company in Viet Nam applying this technology and the first heifers in Viet Nam were born in Phu Lam farm, Tuyen Quang 3.3 In addition, the dairy farms apply other modern technologies such as mattress system and automatic sanitation system Dairy cattle resting on the mattress The automatic sanitation system Vinamilk products have high quality with food security and free of Melamine In order to avoid all risks and ensure the faith of the consumers, Vinamilk has tested the Melamine with all imported milk powder materials (from New Zealand, USA and Europe) Trương Xuân Quý – B03 Page and sweet milk purchased from farmers in Center of Anality Services and Experimentation, Department of Sciences and Technology of Ho Chi Minh City Results of all material samples illustrate the ingredients are free of Melamine The consumers shall be ensured the usage of Vinamilk products The Company has dominated the big market share in the domestic market and has been exporting Currently, Vinamilk has dominated almost 75% market of nationwide milk products and has been one of the biggest capitalization companies in the market (7%) Aiming to expanding market to overseas, since 1998, Vinamilk has exported its products to the USA, Australia, India, the Middle East, Africa, Poland, Germany, China and ASEAN countries with export turnover of 649,1 million USD The Steering Committee are active and creative in business Vinamilk is not only famous for product quality but also for gifted leader: Ms Mai Kieu Lien – President of Board of Management cum General Director of the Company She is the leader for the production of yogurt, sterile sweet milk, nutritious milk powder for kids in Viet Nam; is founder and co-founder of 90% dairy in the market Domestic market share counted for 50-90% depending on the category; the master capital has increased for 10 times; value of Vinamilk trademark reached around billion USD; average income of the labor increased of 28% (5,5 million Vietnamese Dong/ month) The capital has been increasing In 2005, she was rewarded of the best of Creation by the WIPO in 2004 and Heroic Labour Decoration award (in 2005), first labour medal (2006) Vinamilk has the good engineers specializing in dairy and has investment policy for high knowledgeable human resources Trương Xuân Quý – B03 Page With the development strategy of dairy nowadays, Vinamilk Company has defined that the “human” element shall decide the success or failure of the enterprise Aiming to build the labor forces of the company in the future, in 1993, Vinamilk signed long-term contract with Applied Biological Technology University of Moscow of Russian Federation in order to send juniors of officials and workers to study in the fields of: dairy technology and milk products; automatic technology and production; equipments for food production; management in the dairy industry In addition to the support juniors in their industry, Vinamilk also recruited excellent graduated students in universities in Ho Chi Minh City for studying abroad Owing to these sound policies, Vinamilk has trained high quality engineer force Effective strategy of promotion Vinamilk has been implementing its effective strategy of promotion: With the successful strategy of promotion, funding, community development establishment, Vinamilk has established its good and impressive image to the consumers, partners, distributors, providers as well as the society as a whole Furthermore, Vinamilk has been implementing program of raising community awareness in the milk drinking to the children, warning the malnutrition children in Viet Nam This is one of the element encouraging the demand of milk for children in Viet Nam’s market Products of Vinamilk has been promoted widely in the media such as Television, newspaper, etc providing information and image of Vinamilk products to the consumers regularly and frequently The biggest distribution system in Viet Nam Since its beginning of operation in 1976, the Company has built its biggest distribution system in Viet Nam which helps introduce new products such as juice, soya bean milk and coffee for the market Currently, the Company has possessed its wholesale system of 220 distributors at 64 cities and provinces Trương Xuân Quý – B03 Page 10 Vinamilk has posted its share in the stock market Vinamilk has posted in the stock market in Ho Chi Minh City on 19 January 2006 At that time, capital of the State Capital and Investment Corporation counted for 50.01% chartered capital of the Company This post of Vinamilk on the stock market created more favourable conditions for mobilization of capital from the community Moreover, on 12 November 2008, Vinamilk has also posted on the stock market of Singapore SGX-ST The Company was permitted to issue and post 8763784 new common shares on the official stock exchange of SGX – ST In addition to the goal of internationalization of Vinamilk trademark, this post has also created favourable conditions for the mobilization of capital from the international financial market and development strategy of the Company 11 Vinamilk has established its famous trademark Most of products of the Company provided to the market in the trademark of “Vinamilk” This trademark was selected as one of “famous trademark” and one of 100 strongest trademarks selected by Ministry of Trade and Industry in 2006 Vinamilk was also ranked in group “Top 10 high quality Vietnamese Goods” from 1995 to 2007 II Weakness Attractive promotion but the implementation resulting in controversial problems: The implementation of promotion was not managed strictly, resulting the complain on the award Although it is small matter, it causes damage to the image and business plan of Vinamilk High cost due to importing materials Trương Xuân Quý – B03 Page As the big demand, Vinamilk has to seek prestigious providers who are able to stably provide quantity as well as quality Those are New Zealand, Europe and the USA – developed countries exporting milk materials with international standard In addition to the high cost of foreign milk materials, Vinamilk was imposed of import tax and transport expense, storage, so that the high cost results in the high price causing Vinamilk products to reduce the competitiveness in the market The competitiveness of Vinamilk is not high in the domestic market In these few years, milk is one of the goods having the most rapid growth in the packaging food industry in Viet Nam The annual growth in 2005, 2006 and 2007, respectively, was 43,2%, 26,4% and 25,6% Sweet milk and sterile milk, yogurt which are fields with large proportion, have strong and stable growth However, in the context of high price of foreign milk, Vinamilk has its advantage of price in comparison with imported milk, in fact Vinamilk products have higher price than other domestic products with same kind such as Moc Chau sweet milk, etc The main reason for the consumers to buy Vinamilk is the promotion and strong trademark, but in fact category of Vinamilk is not as diversified as other companies Furthermore, Vinamilk has not utilized the strength of milk products such as cheese or butter, etc Let’s take a question, if we change only style of package and attractive promotion, whether with the same product, Vinamilk could be able to compete with other milk brands having new products satisfying demand of the consumers? Let’s compare the price of similar products of Vinamilk Company and Moc Chau Company, we can see the clear difference: VINAMILK Weight Market - Goods Fine 100% Sweet milk Trương Xuân Quý – B03 180 g MOC CHAU price - Goods 3.800 đ Sterile sweet milk Weight Market price 180 g 3.000 đ – bag type Page Calcium-rich Milk FLEX Sterile milkplus- 180 g 18.000 180 g đ/ bottle sweet milk 3.986 đ Sterile sweet milk vinamilk 11.000 (strawberry taste, đ/ sugar-free, sugar, vfresh Low-fat Sterile sweetened (Longevity condenser 300 g about strawberry, orange) Pure Condensed milk 180 g đ/bottle 3.000 đ box chocolate, coconut, condensed 15.500 (sugar free, sugar, chocolate) 300 g 900 g 11.000- honey, 16.000đ milk 10.000 /box đ/box milk, southern star) To be continued Cocoa To be continued Fresh butter 200 g 200-500 g To be continued To be continued Cream Cheese 200 g 200-500 g Vinamilk has not have impressive and effective promotion message and good marketing strategy The weakness of Vinamilk is, although having good products, even the strong trademark, the weak marketing resulting in the ineffective message for promotion to the consumer on the strength of the Company As Vinamilk has not utilized its trademark, although the sweet milk counts for 70% - 99% in the products, established the effective message for the consumer understand the difference between the sweet milk and sterile milk Being active in the material resources, price purchasing higher than other enterprises, good reefer system, modern production chain are the preponderant advantages of Vinamilk However, all of these strength has not been transmitted to the consumers In the Trương Xuân Quý – B03 Page future, Vinamilk shall promptly re-organize the marketing division, short-term and longterm marketing strategy with particular criteria and establishing the strong trademark is the first duty, said Mr Minh Mr P.N.C, Deputy General Director of dairy company having factories in both the Northern and Southern stated that: “In comparison with potential of Vinamilk, the promotion of trademark and marketing program of this company led by Mr Tran Bao Minh in past years are not suitable for a national dairy company as well as the expense More important, Vinamilk is considered as leading in the dairy industry in Viet Nam, but programs of Vinamilk have not been cooperated with domestic enterprises, has not established its position leading other small sized dairy companies.” Ineffective management results in accidents, waste which cause the negative effects to its prestige - The allegation of moisture resistant in the ingredients: the number of isolated products is 6.928 box and 30 tons of semi-products The reason is a moisture resistant bag 30 gram used for 01 bag 5kg DHA (used for 900 kg finished product) was torn According to the ISO process, the Company remained 30 tons of semi-products for examination, and sealed 6.928 boxes at the factory - The allegation of scratch of the head of machine resulting in the iron filings: the number of isolated products was 10.872 boxes in suspect ion - Or recently, the consumers commented on the strange matters of Vinamilk products such as: moudy, crumbling, sour, deformation of the box III Opportunities: After investigating and analysing market factors, the enterprise shall evaluate, collect factors directing to analysing the environment The opportunities are the external factors of the enterprise, change of the business environment in way of creating benefit for the enterprise The enterprises have to catch promptly the opportunities to utilize advantages, creating benefit and conditions for the development Trương Xuân Quý – B03 Page According to analysis of experts as well as comment of consumers, dairy market of Viet Nam has so much potential for development That potential, partly established from new regulation of the state on the production and business of milk, other established from the consumption, demand of milk and trend to change in consumption of the consumers This is the opportunity for all enterprises operating in milk products in general and Vinamilk company in particular The event that Viet Nam became an official member of the WTO is not only prestigious opportunity for the country, but also the opportunity for each civil, enterprise To the enterprise, both large or small sized shall have competition with enterprises of members of the WTO Vinamilk is a trademark ranked in Top 10 strong Vietnamese trademarks Making use of this opportunity, Vinamilk has been improved its technology, invested in infrastructure, diversified products in order to be well-prepared for a new journey Furthermore, integration also creates conditions for Vinamilk to approach to tough markets in the world such as: the USA, Thailand, Cambodia, Laos, China, the Middle East, etc And this is also the purpose can be reached by Vinamilk in the next time Ministry of Trade and Industry approved the master plan for dairy and milk sector of Viet Nam until 2010 and toward 2020 The master plan raises the goal to gradually build and develop the dairy and milk sector in uniform way from material to final production, meet the demand of domestic consumption with average of 10 kg/person/p.a in 2010 and 20/person/p.a in 2020 Dairy and milk sector strives to increase quantity of milk of the entire sector with average of 5-6% in period 2006-2010, also export abroad Total capital investing in Trương Xuân Quý – B03 Page 10 developing dairy and milk sector in 2010 would be approximately 2.200 billion Vietnamese Dong Supported from countries in the regions on dairy cattle breeding and dairy quality control The average consumption of milk in Viet Nam currently is so high The statistics disclosed in the Workshop “Promotion of the attachment of dairy and milk sector of Viet Nam to the world” held in Ha Noi recently stated that, children in Ho Chi Minh City and Ha Noi consume 78% milk products in Viet Nam The average consumption is kg/person/p.a – increase of 14,1%/p.a, meanwhile in Thailand is 25 kg, France is 130 kg, Australia is 320 kg This shows that of dairy market in Viet Nam has not been utilized with its potential in the past  Creating the opportunity to expand market, direct consumption, diversify the product category of the enterprise to maximize the benefit Price of milk imported to Viet Nam market is highest in the world The average price of milk in Viet Nam is as 1.5 times as Malaysia and twice as Thailand Particularly, since 2007, the milk price in Viet Nam kept increasing, with average speed of 20-3-%/p.a the reason for the high price of milk in Viet Nam is excess profit companies, not because of distribution channels  The competitiveness on the price of domestic milk is higher than imported milk, creating the new trend to favor Vietnamese goods Consumption trend of domestic milk by the consumer With the diversified products, styles, competitive, domestic dairy enterprises expand its share and affirm their trademarks as well as the quality in the domestic market in the context of imported dairy in the past Vietnamese economy has been recovering from the crisis Trương Xuân Quý – B03 Page 11 While the domestic dairy enterprises has not recovered theirs business, the market has so many places creating favourable conditions for Vinamilk to take over Moreover, with the increasing investment to Viet Nam, whether this is the big opportunity for expanding business and share for Vinamilk or not? It depends on capacity to utilize the opportunity and recovering of the enterprise IV Threat The competitors have huge financial capacity, prestige and stable trademarks in the market Dutch Lady is prestigious for trademark, effective promotion, strong distribution, favored products not only because of its taste is suitable for the consumers but also high convenience It is the substantive product with high competitiveness in comparison with Vinamilk product Generally, Dutch Lady is the biggest competitor of Vinamilk Regarding yogurt, the main competitors of Vinamilk are Dutch Lady and Nestle Regarding milk powder, the main competitors of Vinamilk are Abbott, Mead Johnson and Ductch Lady Capacity to access markets of new competitors: The event that Viet Nam joined WTO shall create favourable conditions for foreign companies to enter into domestic market in creasing the competition among the companies in the sector In addition, the reduction of export tax to milk products shall create favorable conditions for imported milk products Especially, tax of import milk powder shall reduce from 200% to 18%, tax of condensed milk from 30% to 25% Risk from unstable exporting market: More than 90 % revenue of export of the Company is Iraq However, the unstable politics and economics of this country cause negative effects to the revenue of export of Trương Xuân Quý – B03 Page 12 Vinamilk Therefore, the Company has been expanding exporting market to the USA, Australia, Canada, Thailand and other countries Challenge from current projects and future projects In addition to the risks above-mentioned, revenue of Vinamilk may be affected by the success or failure of the existing and future projects With expectation to become the leading company in the sector, Vinamilk has developed new products including beer, coffee and other s Vinamilk is in joint venture with SAB Miller Company to produce beer Moreover, the Company has been implementing other projects such as construction and expansion of the dairy factories and established dairy cattle breeding farms These projects are potentially benefit and effective However, as these are the long-term projects, it will take number of years for the completion and creating benefit for the Company B Strategic guidelines under SWOT Model I Combining SO : Strategy of maximization of the existing opportunities Utilization of the event Viet Nam becomes member of WTO, promote preponderant of price in comparison with the foreign dairy in order to access and gradually take place the world market (expand market to overseas) The fact that Viet Nam is member of the WTO creates much favourable conditions for Vietnamese exporters in general as well as Vinamilk in particular It is because when exporting dairy to the members of the WTO, Vinamilk shall enjoy the very low tax, that creates conditions for Vinamilk to promote its advantages on its price in comparison with the products of domestic companies With strength of category, quality, Vinamilk shall enjoy the big opportunities to access the potential markets in the world, helping expand its market and increase benefit Trương Xuân Quý – B03 Page 13 To reach these goals, Vinamilk has to focus on the research of business environment, utilize its knowledgeable human resources to promote the research on new products which are suitable with hobbies, life practice of the people of each country, so that formulate the sound promotion strategy to encourage and increase the number of consumed products Utilization of its inherent advantages to increase product quantity to meet the increasing milk demand in Viet Nam and expand its market share The increase in the demand of domestic dairy is the big opportunity for Vinamilk to attract its consumers, increase revenue and benefit in the domestic market To reach this goal, Vinamilk has to apply simultaneously the measures as follows:  Mobilizing capital through stock market to meet the demand of production expansion;  Applying modern technology of dairy cattle breeding and cross-breeds in the farms to expand the scale of dairy cattle, increase the quantity as well as quality of sweet milk providing for the production;  Utilizing the huge distribution system to take its products to the consumers nationwide;  Monitoring the quality policy of the Company to keep its prestige to the consumers and build its good image in the consumer’s mind Utilizing prestige and image of the Company to attract the foreign investment capital Vietnam’ economy has been recovering strongly With the favorable environment such as stable politics, big population, etc the foreign investment capital has been increased With its established prestige and image in the market, Vinamilk completely can attract the foreign direct investment to expand its production Furthermore, with the advantage of share post in the stock exchange, Vinamilk can also attract foreign investment through issuing additional bond or share and other securities to increase its capital Trương Xuân Quý – B03 Page 14 Learning experiences from other countries to improve dairy quality and limit diseases for dairy cattle Through workshops held in the regions, Viet Nam has learnt so much experience on the dairy cattle breeding of other countries This is very big opportunity for Vinamilk to improve its process of dairy cattle breeding in order to improve milk quality, increase input materials and reduce production cost for the Company II Combining ST : Strategy of using inherent strength of the enterprise to get over threats - Developing the material to ensure the stable and high-quality sweet milk resource with competitive price and avoiding monopoly; - Market accessing; - Expanding and developing the active and effective distribution system Improving distribution system and quality in order to take over the markets where Viet Nam has not have big share; - Completely investment in strong trademark, development of new trademark; developing Vinamilk as the nutrition trademark of the most prestige and reliability to the people of Viet Nam through strategy of study on the particular nutrition demand of Vietnamese people to create the best product for the consumers III Combining WO : Strategy of utilizing opportunities to improve its competitiveness - Expanding the current and new markets: boosting the promotion for the consumers to know the advantages and quality, value of the products, improving trademark of Vinamilk - Utilizing the domestic material resources, developing the material resources to ensure the stable and reliable supply resources of sweet milk; improving the product quality and supply system management Trương Xuân Quý – B03 Page 15 - Developing new products to satisfy the various demand of the consumers VI Combining WT : Strategy of defense to remain in the market - Improving the planning to define the trademark of the Company to strengthen its competitiveness to each market - Training and recruiting knowledgeable, cost saving, price reducing, domestic exploiting, utilizing and developing the domestic stable supply resources Conclusion Analysing SWOT is one of steps to establish strategy of production and business of an enterprise; including: establishing guideline of the enterprise, analysing SWOT, defining strategic purpose, formulating strategic purpose and plan, defining the strategic monitoring mechenism SWOT includes abbreviations of Strengths, Weaknesses, Opportunities and Threats – a famous model in business analysis of the enterprise By example of Vinamilk, the anlysis of SWOT model in the interprise is an integral part of studying and developing Marketing Mix Plan in order to collect marketing equiptments including: Product, Price, Distribution and Promotion – 4P to reach the marketing focus in the targeted market Trương Xuân Quý – B03 Page 16 ... Vinamilk has established its famous trademark Most of products of the Company provided to the market in the trademark of “Vinamilk” This trademark was selected as one of “famous trademark” and one of. .. According to analysis of experts as well as comment of consumers, dairy market of Viet Nam has so much potential for development That potential, partly established from new regulation of the state... billion USD; average income of the labor increased of 28% (5,5 million Vietnamese Dong/ month) The capital has been increasing In 2005, she was rewarded of the best of Creation by the WIPO in