XÂY DỰNG CHIẾN lược KINH DOANH CHĂN GA gối điệm của CÔNG TY cổ PHẦN EVERPIA VIỆT NAM e

SongHong: The Song Hong Garment Joint Stock CompanyB/D: Bedding P/D: Padding Q/T: Quilting EPS: Earning per share ROA: Return on Assets ROE: Return on Equity ROS: Return on Sales HoSE: T

LU N VĂN TH C SĨ ẬN VĂN THẠC SĨ ẠC SĨ XÂY D NG CHI N L ỰNG CHIẾN LƯỢC KINH ẾN LƯỢC KINH ƯỢC KINH C KINH DOANH CHĂN GA G I ĐI M C A ỐI ĐIỆM CỦA ỆM CỦA ỦA CÔNG TY C PH N EVERPIA VI T Ổ PHẦN EVERPIA VIỆT ẦN EVERPIA VIỆT ỆM CỦA

NAMDEVELOP BUSINESS STRATEGY FOR EVERPIA VIETNAM

JOINT STOCK COMPANY

LIST OF TABLES vii

LIST OF FIGURES viii

1.1 Significance of the research 1

1.2 Objective and scope of research 2

1.3 Purpose 2

1.4 Research method 2

1.5 Analysis method 2

1.6 Structure of the research 2

CHAPTER 1: THEORETICAL BACKGROUND FOR

1.1 The concept of business strategy3

1.1.1 Definitions 3

1.1.2 Levels of strategy 4

1.2 Roles of Business strategy5

1.3.1 Mission and objectives 6

1.4 Strategies for “market leaders” 17

1.4.1 Expand total market demand 17

1.4.2 Defend market share 17

1.4.3 Expand market share 18

CHAPTER 2: BUSINESS SITUATION AND BUSINESS STRATEGY ANALYSIS OF EVERPIA VIETNAM 20

2.1 Overview on EVERPIA Viet Nam 20

2.2 External environment analysis 29

2.2.1 Macro environment (PEST model) 29

2.2.2 Analysis of industry 39

2.2.3 Competitive Profile Matrix (CPM) 45

2.2.4 Opportunities and threats of Everpia 46

2.2.5 External Factor Evaluation matrix 47

2.3 Internal environment analysis 48

2.3.1 Resource based view 48

2.3.2 Synthesis of strengths and weaknesses 60

2.3.3 Internal Factors Evaluation (IFE) matrix 61

CHAPTER 3: BUSINESS STRATEGY SELECTION AND IMPLEMENTATION FOR EVERPIA IN 2014-2018 63 3.1 Long-term objectives 63

3.2 Business strategy selection 63

3.3 Solutions on expanding market to low-end segment and Southern Market 71

3.3.2 Solutions on financing and accounting 71

3.3.2 Solutions on marketing 71

3.3.3 Solution on human resources 75

3.3.4 Strategy implementation plan 76

CONCLUSION 78

BIBLIOGRAPHY

ANNEXURE

Everpia: The Everpia Vietnam Joint Stock Company

Hanvico: The Han Viet Co., Ltd

SongHong: The Song Hong Garment Joint Stock CompanyB/D: Bedding

P/D: Padding

Q/T: Quilting

EPS: Earning per share

ROA: Return on Assets

ROE: Return on Equity

ROS: Return on Sales

HoSE: The Hochiminh Stock Exchange

CPI: Consumer Price Index

GDP: Gross Domestic Product

AG: Exclusive agent in Hanoi and Hochiminh city

DB: Distributor in provinces

GDB: General Distributor in provinces

EFE: External Factor Evaluation

IFE: Internal Factor Evaluation

CPM: Competitive Profile Matrix

SWOT: Strengths, Weaknesses, Opportunities, ThreatsQSPM: The Quantitative Strategic Planning Matrix

USDA: The United States Department of Agriculture

SBV: The State Bank of Vietnam

LIST OF TABLES

Table 1.1: SWOT matrix 13

Table 2.1: Subsidiary 23

Table 2.2: Everpia shareholders structure, 06/08/2013 24

Table 2.3: Financial statement in brief of EVERPIA in the period 2009-2012 24

Table 2.4: Revenue structure of Everpia 25

Table 2.5: Unemployment rate in the first six months of 2012 38

Table 2.6: Main suppliers of Everpia 43

Table 2.7: Summary of Five competitive forces of Everpia 44

Table 2.8: CPM 45

Table 2.9: EEE matrix of Everpia 47

Table 2.10: Distribution network of Everpia 50

Table 2.11: Comparison on distribution channel 50

Table 2.12: Contracted Balance sheet of Everpia 51

Table 2.13: Main financial ratios of Everpia 53

Table 2.14: List of factories 55

Table 2.15: List of main equipments - 2012 56

Table 2.16: Labor structure in 2012 58

Table 2.17: IFE matrix 61

Table 3.1: SWOT matrix of Everpia 63

Table 3.2: Overview of world mattress market in 7 major industrial countries 66

Table 3.3: QSPM matrix for Everpia 69

Table 3.4: Targets for market development plan 76

LIST OF FIGURES

Figure 2.1: Revenue structure of Everpia 26

Figure 2.2: Sales by geographical area in 2012 26

Figure 2.3: Bedding sales by brands 27

Figure 2.4: Padding sales 28

Figure 2.5: Padding sales structure 28

Figure 2.6: Industrial Production Index in same periods (%) 33

Figure 2.7: Industrial Inventory Index in same periods (%) 33

Figure 2.8: Exchange rate of USD/VND 34

Figure 2.9: Non-Performing loans rate 36

Figure 2.10: CPI growth rate 37

Figure 2.11: Vietnam’s employment growth in the period 2006-2011 38

Figure 2.12: High-end bedding market share 41

Figure 2.13: Middle-end bedding market share 41

Figure 2.14: Padding market share 41

Figure 2.15: Asset structure in 2011 52

Figure 2.16: Resources structure in 2011 52

Figure 2.17: Profitability ratios of Everpia 54

Figure 3.1: Annual growth of mattress and foundation shipments 65

Figure 3.2: Bedding market segment 68

LIST OF DIAGRAM

Diagram 1.1: Process of strategy 4

Diagram 1.2: Strategic management process 6

Diagram 1.3: Porter's Five Forces model 8

Diagram 1.4: The Strategy-Formulation Analytical Framework 11

Diagram 2.1: Organization structure of EVERPIA Vietnam 23

Diagram 3.1: Distribution network in big cities 74

Diagram 3.2: Distribution network in rural area 75

ABSTRACT1.1 Significance of the research

In the context of the global economy is growing strongly, the business must have agood strategy for their business in each stage Many companies have beensuccessful and have great performance thank to their right business strategyhowever many fail to do so

In Vietnam, the garment industry has many advantages for the development ofstrong exports to the world market For Vietnam's garment industry, thedevelopment of infrastructure investment, equipment and machinery modernization

is essential In recent years, Vietnam is an attractive destination for investors, thanks

to some strong point such as support from Government, low labor costs …

Since its establishment in 1993 as the first 100% Korean invested enterprise inVietnam, Everpia Vietnam JSC is currently the leading company in the Beddingbusiness field with three main brand names: EVERON, ARTEMIS and EDELIN;and Padding business field with well-known brands such as Thermolite andDEXFIL The company has factories in Hanoi, Hung Yen and Dong Nai

In the process of manufacturing and business operations in Vietnam, Everpia hascontinuously invested in design and technology in order to produce the high qualityproducts to meet the growing demand of the market This has confirmed on the rightstep in the business activities of the company, which reflected in the tremendousgrowth in recent years As a result, Everpia has grown as a representative in theBedding and Padding business filed in Vietnam

Recently, fierce market competition is rising by a wide range of other brands whichforces Everpia to take steps to ensure their business to avoid being adverselyaffected by the severity of the market

Everpia understand that: The competition is not just only the price of the product,

but also the designs, quality products, the promotion, after-sales service, andconsumer health issues

1.2 Objective and scope of research

Objective: All business activities of Everpia Vietnam JSC

Scope: All the products and services of Everpia Vietnam JSC

1.3 Purpose

To exploit business opportunities, and to improve competitive advantages, Everpia

Vietnam has to “Develop Business strategy for Everpia Vietnam Joint Stock Company in the period of 2014-2018”.

1.4 Research method

This research uses some tools for analysis such as External Factors Evaluationmatrix, PEST model, Porter’s five force model, Internal Factor Evaluation matrix.Our group also applies the SWOT matrix and QSPM matrix to select the beststrategy for Everpia Vietnam

1.5 Analysis method

This research mainly relays on the secondary data type Secondary data consists of company reports, books, journals, published articles The data that are used for analyze in this study are derived major from official website (refers to bibliography section)

1.6 Structure of the research

Chapter 1: Theoretical background for formulation of business strategy

Chapter 2: Analysis on Business situation and Business strategy of Everpia VietnamJoint Stock Company

Chapter 3: Strategy selection and Solutions to implement selected strategy for Everpia during the period of 2014-2018

CHAPTER 1: THEORETICAL BACKGROUND FOR FORMULATION OF

There are a lot of definitions of "strategy" According to Fred R David, strategy isconsidered as means to achieve long-term goals Alfred Chadler defines strategy asdefining basic and long-term goals of enterprises and means outlining a course ofaction and allocation of necessary resources to carry out that goals In general,although there is difference in strategy definitions, they still covers the content of:being the study of current and future market, planning of business goals,establishing, implementing and supervising the implementation of decisions inorder to achieve that goals in current and future environment

Strategic management

Strategic management is a broader term than strategy and is a process that includestop management’s analysis of the environment in which the organization operatesprior to formulating a strategy, as well as the plan for implementation and control ofthe strategy The difference between a strategy and the strategic managementprocess is that the latter includes considering what must be done before a strategy isformulated through assessing the success of an implemented strategy

Strategic management is the organized development of the resources of thefunctional areas: financial, manufacturing, marketing, technological, manpower etc.,

in the pursuit of its objectives

Diagram 1.1: Process of strategy

1.1.2 Levels of strategy

Most academics classify strategies into three levels:

Corporate-level strategy: what business(es) the firm should be in?

It is relates to the future formula and structure of the company, and affects therationale of the company and the business in which it intends to compete

Competitive or business-level strategy: how each business attempts to achieve itsmission within its chosen area of activity

This level of strategy is about which products or services should be developed andoffered to which markets and the extend to which the customer needs are met whilstachieving the objectives of the organization A term that is often used in relation tobusiness strategy is SBU, or strategic business unit, SBU means a unit within theoverall corporate entity for which there is an external market for its goods andservices, which is distinct from that of another SBU

Operational or functional-level strategies: how the different functions of thebusiness support the corporate and business strategies They are concerned withhow the various functions of the organization contribute to the achievement ofstrategy

It examines how the different functions of the business (marketing, production,finance, etc.) support the corporate and business strategies Such corporate planning

at the operational level is means oriented and most activities are concerned onlywith the ability to undertake directions

Strategy Deployment of resources Desired objectives

However, the boundaries between the three categories are very indistinct and muchdepends upon the circumstances prevailing and the kind of organization Overall,coporate planning is concerned with the scope of an organization’s activities and thematching of these to the organization’s environment, its resource capabilities andthe values and expectations of its various stakeholders.

1.2 Roles of Business strategy

 Allows the enterprise to determine its own purposes and orientation in thefuture, as well as to plan its activities

 Helps the enterprises to take opportunities, as well as to have sound plans tocounter risks and threats from the market

 Helps the enterprises to make more efficient use of resources, to strengthen itsposition, and ensures the uninterrupted and sustainable growth of theenterprise

 Provides sound bases for the enterprise to make decisions that take intoaccount changes in the market It is also the foundation for research anddevelopment activities, human resource training, market expansion and thedevelopment of new products

Strategic management Process

The Strategic management Process can be summarized as follow:

Diagram 1.2: Strategic management process

(Source: Strategic management, Fred R David)

1.3.1 Mission and objectives

The first phase in strategic planning is to identify the organization’s mission andmajor objectives This is a crucial step in the process of strategic planning Majorobjectives determine the organization’s long and medium expectations

1.3.2 External analysis

The External analysis analyzes the opportunities and theats or constraints that exist

in the organization’s external environment

There are two parts or levels: Environmental analysis of the “far” or “macro”environment affecting the firms, and the industry analysis of the “near” or “micros”environment which is much more specific

Mission and Objectives

Internal Analysis (Identifying fundamental resources, capabilities, and potentials

Business Strategy Global Strategy Corporate Strategy

Altering Strategy

Harmonizing strategy, organizational design, and control system

Harmonizing strategy, organizational design, and control system

Functional Strategy

The “far” or Macro-environment

The macro-environment represents forces that affect all firms across all industries.There are various suggestions as to how to define parts of an environment so as tounderstand them in depth There are common issues such as the Political,Economic, Social and Technologies influences, the PEST factors

Political: we refer to political factors we are including legislation arising frompolitical activity as a key influence Political factors act at three levels: (1)supranational (eg the EU, ASEAN), (2) National, (3) sub-national or local level

Government active areas include:

 Policies on healthcare, unemployment, exchange rates, inflation, economicgrowth

 Government employment and the public sector generally

 Fiscal policies on taxation

 Government agents regulating competition pollution and industrial relations

 Law of various kinds such as those relating to protection of the environment

or the safety of employees in the work place or those relating to Customerprotection

Economic factors: refers to all the key economic variables oftern related to Political

action such as:

 Growth

 Inflation

 Central Bank lending rates

 Currency exchange rates

 Fiscal policy (tax on corporations and individuals)

 Regional issues like land process and labour rates

 Distribution of economic rewards in society

 Freedom to move monies

 Stock exchange and money markets

Social factors refer to:

 Attitudes, values, and beliefs tastes of held by people including ethnicminorities

 Culture: attiture to work, savings and investment, ethics, etc

 Demography: size and structure of the workforce, population shifts, aging

 Social structure: class ans segmentation of the market

Technological factors: these can be internal and external Organizations use

technology – not hardware but software too such as Quality control – and produceproducts and services of varying complexity They includes:

 Goods and services

 Production processes

 Information and communications

 Transport and distribution

 Information technology, computing and associated implications forproduction

 Biotechnology and new industries

The “near” environment

This is the “industry or competitive environment analysis” of Porter The Five Forces’ model of the competitive environment is as follows:

Diagram 1.3: Porter's Five Forces model

(i) The threats of substitute products

Threat of substitute products means how easily your customer can switch to yourcompetitors products The threat of substitute is high when:

 There are many substitute products available

 Customer can easily find the product or service that you’re offering at thesame or less price

 Quality of the competitors’product is better

 Substitute product is by a company earning high profits so can reduce prices

to the lowest level

(ii) Threats of new entrants

The threat of new entry depends upon entry and exit barriers Threat of new entry ishigh when:

 Capital requirements to start the business are less

 Few economies of scale are in place

 Customers can easily switch (low switching cost)

 Your key technology is not hard to acquire or isn’t protected well

 Your product is not differentiated

(iii) Industry rivalry

Industry rivalry means the intensity of competition among the existing competitors

in the market Intensity of rivalry depends on the number of competitors and theircapabilities Industry rivalry is high when:

 There are number of small or equal competitors and less when there’s a clearmarket leader

 Customers have low switching costs

 Industry is growing

 Exit barriers are high and rivals stay and compete

 Fixed cost are high resulting hugh production and reduction in prices

(iiii) Bargaining power of suppliers

Bargaining power of supplier means how strong is the position of a seller Howmuch your suppliers have control over increasing the Price of supplies Suppliersare more powerful when:

 Suppliers are concentrated and well organized

 A few substitutes available to supplies

 Their product is more effective or unique

 Switching cost, from one suppliers to another, is high

 You are not an important customer to supplier

(iiiii) Bargaining power of buyers

Bargaining power of buyers means how much control the buyers have to drivedown your products price, can they work together in ordering large volumes.Buyers have more bargaining power when:

 Few buyers chasing too many goods

 Buyer purchases in bulk quantities

 Product is not differentiated

 Buyer’s cost of switching to a competitors’product is low

 Shopping cost is low

 Buyers are price sensitive

 Credible threat of integration

1.3.3 Internal analysis

The internal analysis analyzes the organization’s strengths and weaknesses in itsinternal environment Consider the appropriateness of its mission There is a tool toanalyze the internal environment of the company by Resource-base View (RBV).The RBV emphasizes the internal capabilities of the organization in formulatingstrategy to achieve a sustainable competitive advantage in its markets andindustries The internal capabilities determine the strategic choices it makes incompeting in its external environment

The RBV of competition draws upon the resources and capabilities that residewithin an organization, or that an organization might want to develop, in order toachieve a sustainable competitive advantage

Resources can be thought of as inputs that enable organization to carry out itsactivities Where organizations in the same industry have similar resources butdiffering performance we might deduce that they vary in the extent to which theyutilize their resources Resources can be categorized as tangible and intangible

 Tangible resources: refer to the physical assets that an organization possessesand can be categorized as physical resources, financial resources, and humanresources

 Intangible resources: comprise intellectual/ technological resources andreputation Technological resources include an organization’s ability toinnovate and the speed with which innovation occurs Intellectual resourcesinclude patents and copyrights which themselves may derive from theorganization’s technological resources

1.3.4 Choosing and building strategy

STAGE 1: THE INPUT STAGE

External Factor

Evaluation (EFE) Matrix

Competitive ProfileMatrix (CPM)

Internal FactorEvaluation (IFE) Matrix

STAGE 2: THE MATCHING STAGE

matrix

Strategymatrix

STAGE 3: THE DECISION STAGE

Quantitative Strategic Planning Matrix (QSPM)

Diagram 1.4: The Strategy-Formulation Analytical Framework

(Source: Strategic management, Fred R David)

The Input stage

The External Factor Evaluation (EFE) matrix

EFE matrix method is a strategic-management tool often used for assessment ofcurrent business conditions The EFE matrix is a good tool to visualize andprioritize the opportunities and threats that a business is facing.

Developing an EFE matrix is an intuitive process which works conceptually verymuch the same way like creating the IFE matrix The EFE matrix process uses thesame five steps as the IFE matrix

List factors: The first step is to gather a list of external factors Divide factors into

two groups: opportunities and threats

Assign weights: Assign a weight to each factor The value of each weight should be

between 0 and 1 (or alternatively between 10 and 100 if you use the 10 to 100scale) 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 togethershould equal 1 or 100

Rate factors: Assign a rating to each factor Rating should be between 1 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

Multiply weights by ratings: Multiply each factor weight with its rating This

will calculate the weighted score for each factor

Total all weighted scores: Add all weighted scores for each factor This will calculate the total weighted score for the company.

The Competitive Profile Matrix (CPM)

Competitive profile matrix is an essential strategic management tool to compare thefirm with the major players of the industry Competitive profile matrix shows theclear picture to the firm about their strong points and weak points relative to theircompetitors The CPM score is measured on basis of critical success factors, eachfactor is measured in same scale mean the weight remain same for every firm onlyrating varies The best thing about CPM that it includes your firm and alsofacilitates to add other competitors make easier the comparative analysis

The Internal Factor Evaluation (IFE) matrix

IFE matrix is a strategic management tool for auditing or evaluating major strengthsand weaknesses in functional areas of a business

The IFE matrix is very similar to the EFE matrix The major difference between theIFE matrix and the EFE matrix is the type of factors that are included in the model.While the EFE matrix deals with external factors, the IFE matrix is concernedsolely with internal factors

The matching stage

The SWOT matrix

Table 1.1: SWOT matrix

Lists the most significant

opportunities from the

EFE matrix

SO strategies

Using the company’sstrengths to make use ofopportunities from theexternal environment

WO strategies

Using the externalopportunities to address thecompany’s internalweaknesses

Threats (T)

Lists the most significant

threats from the EFE

matrix

ST strategies

Using the company’sstrengths to counter threatsfrom the externalenvironment

WT strategies

Strategies of defensivenature, aimed at addressinginternal weaknesses andreducing threats from theexternal environment

(Source: Strategic management, Fred R David)

A SWOT matrix can be used to measure an organization’s competencies andidentify pportunities to taken by business management in the future

The IE matrix

The Internal-External (IE) matrix is another strategic management tool used to

analyze working conditions and strategic position of a business The IE matrix isbased on an analysis of internal and external business factors which are combinedinto one suggestive mode

The SPACE matrix

SPACE matrix is a management tool used to analyze a company It is used todetermine what type of a strategy a company should undertake The SPACE matrix

is broken down to four quadrants where each quadrant suggests a different type or anature of a strategy: Aggressive, Conservative, Defensive, or Competitive

The SPACE Matrix analysis functions upon two internal and two external strategicdimensions in order to determine the organization's strategic posture in theindustry The SPACE matrix is based on four areas of analysis Internal strategicdimensions: Financial strength (FS), Competitive advantage (CA; External strategicdimensions: Environmental stability (ES); Industry strength (IS)

The Boston Consulting Group (BCG) matrix

BCG suggests you look at two factors - market share and growth - to determinewhich products you should keep in your product portfolio and which you shoulddrop

The Grand Strategy matrix

The Grand Strategy matrix is based on two evaluative dimensions: competitiveposition and market (industry) growth

The decision stage

Other than ranking strategies to achieve the prioritized list, there is only oneanalytical technique in the literature designed to determine the relativeattractiveness of feasible alternative actions – the Quantitative Strategic PlanningMatrix (QSPM)

QSPM is a high-level strategic management approach for evaluating possiblestrategies QSPM provides an analytical method for comparing feasible alternativeactions

1.3.5 Strategy implementation

Implementation is the fifth stage in strategic planning This is a crucial step as itdetermines the success of the whole process of strategic planning The Strategicimplementation process includes:

It is also the basis for identifying priorities in the strategic implementation processAdjusting organizational structure to implement the strategy

In implementing the strategy, the company often needs to reconsider itsorganizational structure and make adjustments, if necessary The success of theimplementation process depends on the way the organization is divided, organized,and coordinated Two main ways to adjust a company’s organizational structure are:developing a new organizational structure suitable with the strategy; or maintainingthe core of the current structure, with necessary adjustments to suit the chosenstrategy

Resource allocation

Resource allocation is one of the most important aspects in implementing thestrategy Sound resource allocation is one of the prerequisites to effectivelyimplement strategic goals The major bases for resource allocation include strategic

goals and production plans and/or short-term plans Resources allocation is mainlyconcerned with resource assessment; resource adjustment and resource allocationDeveloping Business policy

Marketing policy: Including six major policies: product policy, price policy,

marketing and promotion policy, distribution policy, payment policy and customercare policy

Human resource policy: Including recruitment policy, training and skill

development policy; welfare policy; assessment and penalty monitoring policy

Research and Development policy: Is concerned with developing new products

following strategic market orientation; technological development; adjustingproducts so as to make them suit customer’s special requirements

Production and operation: Policy is concerned with the process of production and

services in order to implement the predefined goals

1.3.6 Strategy evaluation

Identifying the content of monitoring, assessment, and adjustment: The content

of monitoring business strategy and monitoring and assessing implementation planfor business strategy include:

 Monitoring the business environment (external and internal environment),identifying changes, if any

 Monitoring the goals of business strategy including general goals and thegoals of individual business units

 Building criteria for monitoring and assessment:

 Qualitative criteria: Are those not being measured physically or financially.Qualitative criteria must be built with consistency, suitability, and feasibility

 Qualitative criteria: The factors, goals, and targets to be assessed can reflecteither quantity or quality The assessment of these factors requiresidentifying the margin of error allowed for each factor, goal, and target

1.4 Strategies for “market leaders”

Leading companies must act according to three directions to get their target of beingleader in the market:

1.4.1 Expand total market demand

New users: Each type of products has potential of attracting customers who have

never known or never bought the product because of its price or lacking a certaincharacteristic Producers can find new consumers from three groups For example, acosmetics producer can try to convince women who do not use cosmetics to use it(market integration strategy) or convince men to use perfume (new market strategy)

or sell perfume to other countries (market expand strategy)

New uses: Discover and advertise new uses of the product can expand the market More usage: Convince consumers to use more products

1.4.2 Defend market share

While trying to expand market scale, the leading company must defense theirbusiness from competition of competitors

Position defense: The most basic idea of defence is building strong fort around our

own area However, position or product defense is simply short sighted form inmarketing The sort sight of Henry Ford about his Model-T brings a rich companywith the reservation of 1 billion USD in cash that whoever desire for become theedge of bankruptcy

Flanking defense: Market leaders must not only guard their own area but also build

outposts to protect vital front or to be springboard to attack However, flankingdefense need to be set seriously Mistakes of General and Ford when they designed

by halves Vega and Pinto style cars few years ago to overpower the car attackconducted by Japanese and European car manufacturers American cars aremanufactured badly and they can not stop the sale of foreign cars It is necessary toevaluate seriously all potential threats and if there is a good reason, it is a need toinvest in flanking defense

Preventive defense: A defensive tactic which is more positive than organizing to

attack the competitors before they attack the company Preventive defense is apolicy of prevention which is better than cure Sometime, preventive defense iscarried out by psychology The market leader will send desuadative signal to theircompetitors A major pharmaceutical company in the United States is a leader in allcertain drugs Sometimes the company comes up with the information that it isconsidering cutting drug prices and building a factory which has deterrent effect onthe competitors who make decision to do business in this field Meanwhile theleader did not intend to cut their prices or build another factory Of course, this trickonly works a few times

Preemptive defense: Most of the market leaders will counter attack The leaders

can not maintain a passive attitude before cutting price, promotions, productimprovement or market invasion of the competitors The leader can choose face-to-face or rib attack strategy

Counter-offensive defense: is more used for the leaders who pursue active

strategies to protect their territory In counter-offensive defense, the leaders mustextend their field into new territories that later may become defensive and offensivecenter The market expand strategy must not degenerate or violate two basicprinciples: (1) The principle of goals (pursue a clear goal and can be achieved); (2)the principle of concentration (focus power on enemy's weaknesses)

Contraction defense: Sometimes, big companies find that they can not protect all

their territory Their forces have been stretched and the competitors are graduallyencroaching on a number of routes Meanwhile, it seems that the best course ofaction is planned contraction (strategic withdrawal) The planned contraction is notabandoning market, but eliminating weak areas and move resources to strongerareas Planed contraction is a move to strengthen the competitiveness in the marketand focus forces on key positions

1.4.3 Expand market share

Many companies pursue expanding market share and take it as a goal because it notonly creates more interest, but also generates greater profitability (return oninvestment) However, it is not every expanding market share, the default willincrease profitability This also depends on your strategy to increase market share.The cost of creating a larger market share may far exceed its income value.Companies need to consider three factors before pursuing blindly expanding marketshare.

Ability to cause antitrust actions: the indignant competitors will likely use monopoly" law Therefore, the increase in risk may reduce the attractiveness of theexcessive gain market share

"anti-Economic efficiency: Profitability can be declined when market share exceeds acertain level In this case, the optimal market share of the company is 50% and ifthe company is pursuing a larger market share, this can lead to expensive costs forprofitability Basically, the cost to gain more market share may exceed its value.The companies may pursue wrong marketing strategy when trying to increasemarket share and thus they cannot increase profit Greater market share will tend togenerate more profit with two conditions:

The cost of the unit down when the market share increases: Unit cost reduces as theleader can save cost due to operating larger factories

The companies offer superior quality products and higher pricing to cover the cost

of creating higher quality

CHAPTER 2: BUSINESS SITUATION AND BUSINESS STRATEGY

ANALYSIS OF EVERPIA VIETNAM

2.1 Overview on EVERPIA Viet Nam

2.1.1 General information

Vietnamese name : CÔNG TY CÔ PHẦN EVERPIA VIỆT NAM

English name : Everpia Vietnam Joint Stock Company

Abbreviation : Everpia VN

Chartered capital : 280 billion VND

Address : Duong Xa, Gia Lam, Ha Noi

Website : http://www.everonvn.com

2.1.2 History of establishment and development

Everpia Vietnam was established in 1993, and specialized in producing materialsfor garment export companies After nearly 20 years of operation, the Company hassuccessfully built its own nationwide brand and distribution networks

 1993 : Establishment

 2005 : Established Ho Chi Minh City Branch

 2007 : Converted to a joint stock Company

 2010 : Established Hung Yen Branch

 2010 : Listed on HOSE (Stock code: EVE)

 2011 : Established Dong Nai Branch

 Consult and transfer technology in the non-weaved fabric, boling fabric,woolen, bedding, mattress, sleeping-bag, rucksack, bag, underwear and othergarments production and business

Major business activities of Everpia Vietnam from its establishment (1993-2013)are padding and other products of bedding – mattress production and distribution.The Company own Everon brand – one of the most famous brands of bedding–mattress in Vietnam with more than 600 franchisees nationwide

2.1.4 Vision and mission

Vision: To become the world’s leading Company

Mission: Optimize customers’needs, create values, and develop markets

Management policy: Transparency, creative thinking, maintain core value

General Assembly of Shareholders has the highest authority, holding annual meetingonce a year to approve the most important decisions of the company such as: annualaudited financial statements, report of audit committee, report of the board ofmanagement, profit distribution plan, financial plan, annual production, list of board

of management’s members, audit committee, etc

Board of management guides to implement business activities and other jobs of theCompany; implements fully authorities on behalf of the Company, except authoritiesbelonging to General Assembly of Shareholders such as: monitoring CEO, managers

of the Company; decides business and production development plan and annualbudget; defines operating targets based on strategic target approved by GeneralAssembly of Shareholders; decides organization structure of the Company, etc

Board of management is responsible for and appoints CEO CEO of the Company hasrights and tasks as: implementing decisions of Board of Management and GeneralAssembly of Shareholders, production plan, investment plan approved by Board ofManagement and General Assembly of Shareholders; on behalf of the Company tosign in financial and commercial contracts; organizing and operating daily businessactivities of the Company, etc

Directors, managers of factories and mangers of functional departments will directlydeal with production and out coming problems at factories of the company

Organization structure of the Company is shown in detail in the following diagram:

Diagram 2.1: Organization structure of EVERPIA Vietnam

Address Rate of owning of

Everpia until 30/06/2013

Mattpia

Joint Stock

Company

Springmattress

Commune, VanLam, Hung Yen

Hochiminh Branch

Dong Nai Branch

Hung Yen Branch

After being listed on stock market in Vietnam, with quite modest trading volume,the total current number of shareholders of the Company is just 296 shareholders.

Of thoses, institutional investors hold 33.23 % of the total shares, with most of thembeing foreign organizations such as Red River Holding, Vietnam-Japan Fund, andFrontaura Global; the others are domestic professional investment companies such

as FPT Cap, Bao Viet Securities Company BVSC), and EVN Finance

Table 2.2: Everpia shareholders structure, 06/08/2013

Local investors 9,977,989 42.6% 1,914,727 8.2% 11,892,716 50.8%Foreign

investors 5,647,885 24.1% 5,861,385 25.1% 11,509,270 49.2%

Total 15,625,874 66.8% 7,776,112 33.2% 23,401,986 100.0%

(Source: Everpia)

2.1.6 Business performance of Everpia in the period 2009-2012

Financial statement in brief of Everpia in the period 2009-2012

Table 2.3: Financial statement in brief of EVERPIA in the period 2009-2012

5 Net profit from business activities 98,479 190,950 127,685 109,587

6 Total profit before tax 107,965 191,126 129,803 109,259

7 Consolidated net profit after tax 82,967 150,773 102,219 85,594

(Source: Everpia)

Total consolidated net revenue of Everpia Vietnam reduced 117.4 billion VND in

2012, decreased by 14.7% While, cost of goods sold only reduced by 8.27% which

is lower than the decreasing rate of revenue that makes gross profit of the Companydecrease by 24.4% from 317.6 billion (FY2011) to 240.0 billion (FY2012) Themain reason for this reduction is increasing pressure from material price

Business performance analysis

Table 2.4: Revenue structure of Everpia

Weight

Value (Millio

n VND)

Weight

Value (Billion VND)

2 Padding 146.356 33.10% 213,11

5

26.66% 137,19

324.33%

100.00

%

563,52 4

Figure 2.1: Revenue structure of Everpia

(Source: Everpia)

Bedding business

In general, the bedding business had positive result (VND 485.6 bil of sales).However, during the first half of 2012, growth in bedding revenue decreased 19.3%,which, in the first quarter was affected by the absence of winter weather conditions.Aiming at expansion of Artemis and Edelin products, Everpia Vietnam built upstrategy to prepare for the high season Driven by these strong strategy andpromotion, Artemis and Edelin ended 2012 with a more than 143.4% increase(VND 55.3 bil.) in revenue as compared to last year.The Company’s direct marketing call center and E-Commerce website providenational sales coverage, including markets not yet served by one of the Companyagents, and accounted for 7.9% (VND 53.6 bil.) of the total net sales in 2012

Figure 2.2: Sales by geographical area in 2012

(Source Everpia)

Although Artemis (high-end market) and Edelin (low-end market) has beenestablished recently, they contributed to company’s total revenue by 16.2 billionVND and 7.4 billion VND respectively in 2012

Figure 2.3: Bedding sales by brands

(Source: Everpia)

Padding business

The Padding business started in March, reaches its peak in June, and ends at the end

of August Revenue from Padding business of Everpia Vietnam during its season wasVND 157.0 bil., occupied 74.4% of the total padding sales of the year 2012

In term of product structure, Dexil (Low Denier) and Normal Padding kept steadydemand by customers and accounted high sales in the Padding revenue structure The increase of competition in the padding sector, coupled with demand reducingand economic crisis as 70% of Ho Chi Minh enterprise are operating with loss, hurtsales in South Everpia Vietnam therefore would take steps to cut costs.Trends weremuch more positive in the North, where, customer confidence remained relativelyhigh Combination with selling price increase (in average of 18.6% highercompared to price in 2011) and effect of USD/VND exchange rate, revenue fromPadding Business of Everpia Vietnam in 2012 was VND 195.2 bil., achieved103.3% target, a slight decrease of 26.4% as compared to 2011

Figure 2.4: Padding sales

(Source: Everpia)

Although Korean customers still accounted for the majority of sales, the growth rate

of sales to other foreign customers reached 69% compared to 34% for Korean andVietnamese customers

In terms of product structure, Dexfil (Low Denier) and Thermolite (Invista) werekept steady demand by customers, but Normal padding at lower production cost wasincreased steeply in 2011

Figure 2.5: Padding sales structure

(Source: Everpia)

2.2 External environment analysis

2.2.1 Macro environment (PEST model)

Politic, legal environment

In 2008, Minister of Finance Ministry issued Decision No 21/2008/QD-BTC dated

on 05/05/2008 promulgating special preferential import tariff of Vietnam toimplement ASEAN-Korea free trade area Accordingly, the import tax for raw fiberfrom Korea decreased from 5% to 0%, the raw fabric reduced from 40% to 12%.Ministry of Finance released for public comment, in parallel with the process thatGovernment considered the draft of enterprise income tax law amendments toreduce from current proportion of 25% to 23% The reduction of enterprise incometax is consistent with the general trend of the countries in the region as well as tomeet investment needs After falling by 23%, the tax rate in Vietnam will becompetitive compared with that of other economies (go level with Thailand, lowerthan China, Indonesia, Malaysia, Philippines, etc.)

On 20/11/2012, 100% of the present delegates voted for approval, the NationalAssembly adopted the Law amending and supplementing a number of articles ofTax Administration Law This Law takes effect from the date of 1/7/2013.Accordingly, at Article 1, paragraph 11 of the Law on amendment and supplement,Article 42 of the current Tax Administration Law keeps the regulation of 275 daysdeadline for goods which are raw materials, imported materials to produce exportgoods Any enterprise wants to apply this regulation must meet four conditions:

 Have export goods production factories in Vietnam

 Have import and export activities at least two consecutive years up to theregistering date of customs declaration without commercial fraud, taxevasion, overdue tax debt, late payment, fine

 Comply with accounting and statistic law

 Pay via bank under the provisions of law

In case of not meet the above conditions but being guaranteed by credit institutions

on the amount of payable tax, the deadline for tax payment under the guarantee

period will not exceed 275 days from the date of registration of the customsdeclaration and not pay for late payment in the guarantee period In case of not meetthe above conditions or not being guaranteed by credit institutions, tax must be paidbefore clearance or release of goods.

Monetary policy

State Bank of Vietnam issued Circular 19/2012/TT-NHNN dated on 06/08/2012,took effect from 11/06/2012, in which the maximum interest rate applied for lessthan one month deposit and non-term deposit is 2% per year; the maximum interestrates applied for one month to 12 months term deposit is 9% per year

The new interest rate policy with reducing adjustment of interest rate has broughtabout some following major positive effects:

 Help most of enterprises to reduce capital cost to improve production andbusiness in the circumstance of lacking investment capital

 Support for restructuring financial market to help the enterprises to mobilizecapital on stock market that will reduce liability for banking system ( whenmobilizing interest rate is 9% per year, the enterprises who have profit ratio

of about 13% can mobilize capital by issuing bonds and stocks)

 Promote state owned enterprises restructuring process, promote equitization

 Reducing interest rate may affect on inflation due to loosing of monetarypolicy However, moderate level of monetary policy and lower interest rateswill not put strong pressure on inflation

Economic Environment

Environment of global economy

Trade relation with South Korea

In 2011, South Korea is the 4th largest trading partner of Vietnam and Vietnam isthe 8th largest export market of South Korea Feature of trade relation betweenVietnam and South Korea is supplementary and directly uncompetitive structure ofimport and export Goods from Korea are mainly raw material as input forinvestment and production, which partially serve export production enterprise ofVietnam Vietnam emerges as an important destination for Korean investors As ofthe end of October 2012, Korea is the second biggest foreign investors in Vietnamwith 3134 projects, registered capital of more than 24.5 billion USD, andimplemented capital of over 8.4 billion USD Direct investment activities of Koreaninvestors perform in 18 different areas; mainly in the processing, manufacturing andreal estate business More than 2,500 South Korean companies in Vietnam employabout 400,000 employees in large-scale production facilities, such as electronicsand steel field

On August 6th 2012, Minister of Industry and Trade, Vu Huy Hoang and Minister ofTrade, Foreign Affairs and Trade of Korea, Bark Tae-ho has announced officiallythe launch of free trade agreement negotiations between Vietnam and Korea tomake commitment of two countries’ senior leaders It is expected that thisAgreement will play an important role in promoting the political, economic, trade,industry and investment relation between two countries

European Union (EU):

Generalized System of Preferences (GSP) for developing countries, includingVietnam was announced by European Union on October 31st 2012 and takes effectfrom January 1st 2014 European Parliament and European Council by generalconsent approved of adjusted GSP program with special tariff preferences in order

to reduce or set import duties to 0% and with favorable import standards fordeveloping countries Vietnamese goods will enjoy more benefit in export activities