THỰC TRẠNG QUẢN TRỊ KÊNH PHÂN PHỐI của CÔNG TY TNHH NATSTEELVINA và ỨNG DỤNG mô HÌNH “QUẢN lý GIÁ TRỊ bán lẻ”

Thesis structure...6 CHAPTER 1: BASIC RATIONALE OF THE TOPIC “APPLICATION OF MODEL RETAIL VALUE MANAGEMENT IN DISTRIBUTION CHANNEL MANAGEMENT OF NATSTEELVINA CO., LTD...13 1.1General iss

LUẬN VĂN THẠC SĨ

THỰC TRẠNG QUẢN TRỊ KÊNH PHÂN PHỐI CỦA CÔNG

TY TNHH NATSTEELVINA VÀ ỨNG DỤNG MÔ HÌNH

“QUẢN LÝ GIÁ TRỊ BÁN LẺ”

OLUTIONS TO COMPLETE MODEL RVM IN

NATSTEELVINA CO., LTD’S DISTRIBUTION CHANNEL

MANAGEMENT

TABLE OF CONTENT

1 The imperativeness of the topic 1

2 Research overview 2

3 Research objective 4

4 Questions proposed in the topic research 4

5 Objects and scope of the research 5

6 Research methods 5

7 Thesis structure 6

CHAPTER 1: BASIC RATIONALE OF THE TOPIC “APPLICATION OF MODEL RETAIL VALUE MANAGEMENT IN DISTRIBUTION CHANNEL MANAGEMENT OF NATSTEELVINA CO., LTD 13

1.1General issues 13

1.1.1 Definition of distribution channel and distribution channel management 13

1.1.2 Construction steels and its market 14

1.1.2 Factors that constitute construction steel distribution channel system 17

1.1.3 Characteristics of construction steel distribution channel system 19

1.1.4 Factors that dominate steel distribution channel of the company 20

1.1.5 Content and fundamental characteristics of managing construction steel distribution channel 28 1.2 Basic content of model “Retail value management” (RVM) 30

1.3 Effects of RVM in distribution channel 33

CHAPTER 2 REAL SITUATION OF DISTRIBUTION CHANNEL MANAGEMENT IN NATSTEELVINA CO., LTD AND APPLICATION OF “RETAIL VALUE MANAGEMENT” 36

2.1 About NatSteel Holdings and NatSteelVina Co., Ltd 36

2.1.1 About NatSteel Holdings 36

2.1.2 About NatSteelVina Co., Ltd ( Việt- Sing) 38

2.2 Factors affect NatSteelVina’s distribution channel 41

2.2.1 Macro environment 41

2.2.2 Micro environment 46

2.2.3 Internal environment 48

2.3 Application of RVM in NatSteelVina’s distribution channel management in Vietnam in reality 49

2.3.1 Common objectives of model RVM executed in NatSteelVina Co., Ltd’s distribution channel management in Vietnam 49

2.3.2 Execute the application of RVM in NatSteelVina Co., Ltd’s distribution channel management in Vietnam 50

2.3.2.1 Implementation activities in NatSteelVina - Phase 1: Set up indicators to assess the work performance during the year 50

2.4 Assessment of the application of model RVM in NatSteelVina Co., Ltd’s distribution channel management in Vietnam 71

2.4.1 General assessment of activities in NatSteelVinaCo., Ltd 71

2.4.2 Marketing activities of NatSteelVinaCo., Ltd 74

2.4.3 Assessment of the application of RVM in NatSteelVina Co., Ltd’s distribution channel management in Vietnam 77

CHAPTER 3 SOLUTIONS TO COMPLETE MODEL RVM IN NATSTEELVINA CO., LTD’S DISTRIBUTION CHANNEL MANAGEMENT 100

3.1 General forecast of the development of construction steel industry in the North till 2015 and 2020 100

3.1.1 Development orientation of steel industry till 2015 and vision 2020 100

3.1.2 Development orientation of NatSteelVina Co., Ltd 101

3.2 Proposal to complete model RVM in NatSteelVina’s distribution channel management 101

3.2.1 Viewpoint and strategic direction of organisation and manangement of distribution channel in retail market 101

3.2.2 Solutions to complete RVM in NatSteelVina Co., Ltd’s distribution channel 103

TNHH: Trách nhiệm hữu hạn ( limited)

NSV :NatSteelVina - Thép Việt Sing

GDP :Gross Domestic Product Tổng sản phẩm quốc nội

LTD : Limited- trách nhiệm hữu hạn

FDI :Foreign Direct Investment - Đầu tư trực tiếp nước ngoài

WTO : World Trade Organization- Tổ chức Thương mại Thế giới

AFTA: ASEAN Free Trade Area - Khu vực Mậu dịch Tự do Đông Nam Á RVM : Retail Value Management

VLXD : Vật Liệu Xây dựng ( Construction material)

LIST OF TABLES AND GRAPHS

Table 2.1 Inflation rate in 2011, 2012, 2013 42

Table 2.2 Contribution structure to GDP of industries over years 42

Table 2.3 Steel sales volumes in IHB market 51

Table 2.4 Sales volumes of NatSteelVina Co., Ltd 71

Table 2.5: Revenue of NatSteelVina Co., Ltd 72

Table 2.6: Marketing budget of NatsteelVina Co., Ltd 75

Graph 2.7 Important factors when purchasing steel 80

Graph 2.8 Three most important factors customers concern when purchasing NSV products 83

Graph 2.9 Factors affect buying decisions of customers when choosing NSV products 85

Graph 2.10 Comparision of competitive factors between NatSteelVina Co., Ltd and steel indusy 86

Graph 2.11 Comparision of competitive factors between NatSteelVina Co., Ltd and steel indusy

(detailed questions) 88

Graph 2.12 : Comparision of competitive factors between NatSteelVina Co., Ltd and steel industry given average level equals to 0 93

Graph 2.13 Risks sharing level with distributors 95

Graph 2.14 Distributors support retailers doing business in the market 96

Biểu đồ 2.15 Situation of distributors in a certain market selling NSV to other market 97

LIST OF DIAGRAMS

Diagram 1.1 : Structure of steel distribution channel 17

Diagram 1.2 : Types of steel distribution channel 18

Diagram 2.1 Organisation structure NatSteelVina Co., Ltd 40

Diagram 2.2 Distributor selection process 64

1 IMPERATIVENESS OF THE TOPIC :

According to Vietnam Steel Association (VSA), construction steel manufacturingindustry (rebars) has more than 200 companies producing steel Among them, there are

60 major steel producers with capacity from 50 thousands tons per year and more.Plants spread across 3 regions but the biggest number of plants gather in NorthVietnam with 40 producers With the total steel producers above, supply has exceededdemand considerably Most steel manufacturing companies operates in moderation ofabout 40%-60% their capacity With two main segments are project and residentialsegment to guarantee the sales volumes of finished products Building an effectivebusiness strategy for two segments above is what steel producers are targeting Theproject market includes infrastructure projects, apartments, high buildings, industrialzones accounting for about 70% total sales volumes with fierce competition in everybusiness aspects like price, discount, commercial support and hide many risks In thissegment, standards of products types and volumes are quite obvious, hence, it is easyfor build production plan Hence, most steel manufacturing companies focus on thismarket with majority of producers penetrating deeply into project market that causesfiercer competition into project markets, even producers are willing to bid under theirprice to sign the contract or support credit terms which hide potential risks leading tolow effectiveness of business In addition, the project market has a considerableinstability which depends on the situation of economic development in each area andthe overall economic situation of the country Besides that residential segment is whichcustomers are households purchasing steel to repair their private home This segmentaccounts for a small proportion of about 30%, but have stable and long-term marketwhich increase gradually year by year, safety and high profits if building successfulbrand and capture consumption habit of customers in regions However, the product

must be eye-catching form to create immediate impression on purchaser Costs for

branding for residential market are high and need long time to create brand perception

in consumer's mind

Therefore, building retail strategy for IHB market segment is a critical need forcompanies with long-term strategy and desire to have their own market That is thereason why I choose the topic “Applying the “Retail value management” program fordistribution channel management of NatSteelVina Co.,Ltd”

2 Research overview

Distribution channel and distribution channel management theory in the business ofmanufacturing enterprises is mentioned in many documents, research projects in manycountries around the world as well as in Vietnam

In marketing management textbooks, there are contents for distribution channelmanagement For example, Philip Kotler, who is considered the father of modernmarketing believed that distribution channel is one of four marketing mix variables thatbusinesses need to build and deploy marketing efforts to target markets Thedevelopment of distribution channel network helps businesses build and sustaincompetitive advantage in the long term Distribution channel is a set of externalrelations between independent enterprises in business Creation and development ofchannels require more time, effort and wisdom so other businesses is not easy tofollow

In domestic, there are also books writing about distribution channel management Forexample, in the "Distribution Management" by Dr Truong Dinh Chien (Editor),Published by the National Economics University, Hanoi, 2010 mentioned a systematiccontent of distribution channel management from the point of view that business is theupstream of the flow in the channel Ideas and content in this book is identical withPhillip Kotler's view and approach about distribution channel management and that can

be considered as a guideline in establishing and managing distribution channel system

of manufacturing enterprises in Vietnam Hence, the topic "Applying the “Retail valuemanagement” program for distribution channel management of NatSteelVina Co.,Ltd”will take the ideas, views of modern marketing and theory of modern distributionchannel management distribution as a theoretical basis, a theoretical framework for thestudy of practices research of steel distribution channel management in NatSteelVinaCo., Ltd in recent times

In Vietnam, in recent years there also have been some studies on the distributionchannel of some typical products in the distribution channel of steel, which is the topic:Topic "Distribution channel management of construction steel of steel producers inVietnam," Ph.D dissertation, National Economics University, Hanoi, 2010 by authorNguyen Hoai Nam In this thesis, the author mentions distribution channel of steelindustry in general, mainly is current situation of organising and managing distributionchannels and evaluating activities of the members in the distribution channel ingeneral The theis does not mention other activities in channel management such asmember recruitment, member motivation so that solutions given for macro level Topic "Solution to stabilize steel market in Vietnam," Ph.D dissertation, University ofCommerce, Hanoi, 1995 by author Nguyen Hong Nguyen In the thesis, the authormainly studied issues of steel price in the market (steel pipe, construction steel andshaped steel), a detailed analysis of the factors governing price decision of steelmakingbusiness in Vietnam, not mention other factors such as media, products, distributionchannels and thereby devise solutions to stabilize steel prices through market prices However, with studied scientific work, many theoretical issues about the channelmanagement in reality has been analyzed and interpreted depending on the purpose,object and scope of each project themselves To date no published scientific worksfocus on the research of activities of “Application of model retail value management"

in NatSteelVina Co., Ltd’s distribution channel management So this thesis does notcoincide with published scientific works and is the first independent study about

“Application of model retail value management in NatSteelVina Co, Ltd’s distributionchannel management”

3 Research objective

- Systemize some fundamental rationale about steel distribution

Channel Research model “Retail value management” in distribution channelmanagement.

- Study and analyze the real operation of NatSteelVina’s distribution channel afterbuilding and deploying of model “Retail value management” Thereby assessthe successes and limitations of the organization and development ofdistribution systems, the ability to operate and control the system of distributionchannels Co NatSteelVina in the market in recent years Since then offersolutions for the improvement of NatSteelVina’s distribution channel throughadjusted solutions for the application of model "Retail value management"

4 Questions proposed in the topic research

- What is the model “Retail value management” (RVM)?

- Why apply model “Retail value management” (RVM) for companies

- Real situation of the application of model RVM in implementation, operationand control of distribution channel management in NatSteelVina Co., Ltd Studyadvantages and disadvantage of applying RVM Find out subjective andobjective causes Since then determine the orientation to improve thedistribution channel

5 Objects and scope of research

* Objects

Studying about distribuiton channel management, especially the applicaiton ofmodel RVM in NatSteelVina Co., Ltd for the retail segment of construction steelmarket

* Scope

Research scope: distribution channel of construction steel in NatSteelVina Co.,Ltd

- Spatial extent: Distribution channel of NSV products in the North Vietnam

- Time range: This study used data collected about the operation ofNatSteelVina’s business system in the North from 2010 to the end of quarter IV 2013

6 Research methods

* Methods of collecting, processing and research results of secondary data

Collect data and information from secondary source: analysize and summarisecompany’s reports combined with references from books, newspapers and internet

* Methods of collecting, processing and research results of primary data

To determine the approach in distribution channel management, capturing theirneeds and level of customer satisfaction is the key issue Therefore, in the study ofconducting sample selection there is questionnaires to measure customer satisfactionand factors that affect that satisfaction level

Total samples are 100 including 34 distributors and 66 customers

Carry investigation and deliver questionnaire to objects and collect data

Data processing by methods including listings, statistics, description,comparison and forecast

7 Thesis structure

Besides Introduction, Thesis includes 3 chapters:

Chapter 1: Fundamental rationale of the topic “Application of model Retail Value Management in NatSteelVina’s distribution channel management”

Chapter 2: Research method and results from real situation analysis of “Retail Value Management” in NatSteelVina’s distribution channel

Chapter 3: Solutions to complete model RVM in NatSteelVina Co., Ltd’s distribution channel management

CHAPTER 1: FUNDAMENTAL RATIONALE OF THE TOPIC “APPLICATION OFMODEL RETAIL VALUE MANAGEMENT IN NATSTEELVINA CO., LTD’SDISTRIBUTION CHANNEL MANAGEMENT

1.1 General issues

1.1.1 Definition of distribution channels and distribution channel management

1.1.1.1 The concept of distribution channels

From marketing concept (Page374- Marketing Management- Dr Truong Dinh Chien) "Distribution channel is a collection of businesses and independent individuals anddependently involved in the process of bringing goods from producer to the endconsumer"

From viewpoint of management in business (Page7-Distribution channelManagement- Dr Truong Dinh Chien )

"A systematic organization of external relationships with businesses and individuals tomanage distribution and consumption activities to implement objectives in the market

of business"

From Stern and El Ansary’s view (page592- Marketing management - Philip Kotler)

"The marketing channel can be viewed as sets of organizations depending on each eachother and involved in the process of creating current products or services available foruse or consumption

1.1.1.2 The concept of distribution channel management

From viewpoint of management in business (page236- Distribution channelmanagement-Dr Truong Dinh Chien)

"Channel management is understood as the whole management and operation of thechannel system to ensure the cooperation between selected channel members therebyfulfilling the distribution goals of the enterprise"

Distribution channel management includes the main following activities:

- Selection of channel members

- Motivation of channel members

- Evaluation of channel members

- Adjustment of the channel agreements

1.1.2 Construction steels and its market

1.1.2.1 Construction steels

The appearance of steel metal has contributed greatly to the development of themankind Steel has gradually replaced materials like stone, wood…by theircharacteristics like solid and easy molding Steel appeared more and more inconstructing bridges, roads, factories, transportation, shipping, civil works to servemanufacture and demand of people To realize the importance of steel industry, mostcountries put preferential policies to develop this industry Steel is considered as corematerial for other industries and backbone of the economy in the process of nationalmodernization

* Features of construction steels

- Construction steel including rebar, wire rods and shaped steel, with differenttypes, sizes is important input for the construction industry Now in addition toconstruction steel there are other steel used in industries such as tooled steel applied forcutting metal such as drilling, turning, milling, razor blades and many applications formaterials requiring high hardness

- Construction steel is heavy and bulky so shipping and loading charges arehigh That’s why when it is consumed in distant markets will increase the cost due tohigh transportation charges

- Quality of construction steel products is reflected in its mechanical, physicaland chemical properties Vietnam has applied many quality standards, prevalently are:Russia, Japan, USA, ISO In fact, construction steel is rolled by modern technologyoften have the technical characteristics in accordance with the prescribed qualitystandards However, steel product with attractive appearance and a stronger brandname will be evaluated as better quality and chosen more by customers

- Construction steel has high value, so that manufacturers need to have highamount of capital This leads steel producers often use steel distributors which havegreat financial ability to perform the function of reserve or deferred sales

1.1.2.2 Construction steel market

* Characteristics of the market

+ Steel producers have economic efficiency based on their large scale, whichmeans the larger scale production is, the increasingly lower the cost However, whenproducing in large scale in one location will lead to an increase of the distribution costbecause demand for steel spreads towards geographical area The supply ofconstruction steel in the market consists of many manufacturing companies andimporters with diversified business scales and different forms of ownership Steelsupply is less inelasticity in the short term, but elasticity in the long term When thesteel producers invest to construct new plants will lead to an oversupply situation in themarket The most influence on supply is the planned development of domesticconstruction steel producers and import-export policy

+ Steel demand is the amount of construction steel that customers (individual,organization and government) can purchase and are willing to buy at a specific price at

a certain time The number of customers of the construction steel market is alsodiversified about demand scale and purchase mode Demand of construction steel isaffected by different factors, and the most important ones include the growth of the realestate market, traffic and rate of economic growth, especially the growth rate of theconstruction industry Demand for construction steel spreads according to geographicalarea associated with the need for the IHB and industry or transportation

+ Demand for construction steel is highly seasonal depending on the constructionseason In rainy season demand is lower than the dry season; hence, it will dominatethe production and storage of products steel market

* Market segments of construction steels

a Project segment

Project market includes the construction project of infrastructure, buildings, newurban areas, industrial zones, processing zones accounting for about 70% of totalproduction In this segment there is an intense competition in all aspects of business

such as price, discounts, trade support and promotion…besides that there are manyrisks but this segment has the largest consumption, and volumes and types are easilyidentified Production and quality planning is only controlled through the testing roomLas or Vilas and at site, regardless of the form of products, they only care about price,lower marketing costs and can increase sales volumes quickly

b IHB segment

IHB segment is the segment that households buy steel for the construction,remodeling their homes serving their own needs This segment accounts for a smallproportion of about 30%, but has a stable and long-term market with steady growthyearly, safe and highly profitable for business if the company can build brand andcapture consumer habits in each region Satisfying the demand for quality, products aswell as preferential policy for customers in this segment will not only help businessesincrease annual profits but also will grow a considerable number of loyal customers.Moreover, now in steel industry most companies put efforts to project segment ratherthan IHB segment This is the opportunity for other businesses to attack and confirmtheir position in Vietnam Steel market

1.1.2 Factors that constitute construction steel distribution channel system

Operation of construction steel distribution channel is similar to activitiesthrough the channel flows The flow connects members together, each flow is a set offunctions undertaken regularly by the channel members, it is the flow of material flow,information flow, accounting, financial and negotiation flows

Construction steel distribution system includes members

* Members within channel

Direct connection Indirect connection

Wholes aler Distributor

References

Sales force

Consumer

Diagram 1.1: Structure of steel distribution channel

Manufacturer: Produce steel and supply to the market to satisfy demand of themarket and bring profits for them

Commercial intermediaries:

- Wholesalers: are commercial enterprises who own goods, reserve and manageproducts in large amount and resell products in small quantities to retailers, industrialproduction, commercial, professional organizations or to other wholesalers

- Agents, brokers and wholesalers earning commission: They are independentintermediaries, responsible for all or most of their business; they do not own the goodsthey distribute

- Branches and representative of producers: They are owners and managed byproducers but separating in organization and material from the factory

- Retailers include businesses selling merchandise for personal or householdconsumption and rent services additional to the sale of goods

- End users can be project or IHB consumers

- Projects: Project market involves constructing infrastructure, buildings, new urbanareas and industrial zones

- IHB: Customers are households buying steel for building and repairing their

houses

* Popular types of distribution channel

Dir ect channel

Retailer

Diagram 1.2 : Types of steel distribution channel

- Percentage of distribution through small direct channels increases the costs ofinventory and loading

- One-level channel: is not applied popularly, commercial intermediaries in thischannel structure are mainly retailers with small scale and highly fragmented density.The application of this channel structure consumes a lot of resources of distributors

- Two-level channel: is commonly applied in steel producers Works ofdistributors divided for members are unreasonable The distribution of the second-level distributors is decided by wholesale distributors Producers cannot dominate steelretailers The works of the second-level distributors are affected by the first-leveldistributors

1.1.3 Characteristics of construction steel distribution channel system

Distribution is one of the four variables of marketing mix that steel producers mustdevelop to sell products to the target market While the variables of product, price andpromotion mix are easily imitate by competitors, the distribution channel is a variablewhich can provide a long-term competitive advantage in the market that rivals cannoteasily copy

Distribution, marketing and business strategies of enterprises have an intimaterelationship with each other Distribution strategy always adhere to the goals of thestrategic-oriented marketing and business strategy of the enterprise, or businessstrategy and marketing strategy always dominates distribution channel such as:

+ The strategic objectives of companies are covered the market or increase marketshare, it needs to develop a wide and long distribution channel

+ The strategic objectives of the enterprise is to put production plants in several places,the distribution channel is built towards short and narrow direction

Construction steel distribution channel construction is mainly operated throughthe flows within channel These flows connect channel members together and eachflow is a set of functions carried out regularly by the channel members The mainflows include: Transfer flow of ownership; negotiations; movement of the material;

flow of information and promotion Due to the difference between production andconsumption of steel in time, space and quantity distribution of construction steelhas many characteristics:

+ Require large amount of capital to ensure high inventory in a long time

+ Face with the imbalance of supply and demand in the market

+ Ensure high distribution costs as the distance between production location and todistant markets

+ Manufacturer cannot dominate the market, mainly commercial intermediariesdominate

+ Considerably depend on environmental factors such as technology, geography + Greatly request for logistics system

+ Construction steel is highly standardized and suitable for mass production andreserve

1.1.4 Factors that dominate steel distribution channel of the company

1.1.4.1 Macro-marketing environment

The construction steel distribution channel of steel producers is formed andoperated diversely, depending on the elements of macro-marketing environment.Obviously distribution cannot exist independently but operate and develop in complexand continuously changing environment Changes of environmental forces interactwith distribution channels and may influence the decision on channel in the short andlong term

The environmental factors affecting the distribution channel in the way it affects allmembers of the channel Administrators of construction steel distribution channel mustanalyze the impact of macro-environmental factors not only on businesses and ultimatetarget market but to all the channel members

Environment includes all external factors which cannot be controlled the impact on theactivities of the channel and the different influence includes: the economicenvironment, competition, cultural, social, legal technical and sector environment

*Economic environment.

Economics can be an environmental factor that affects all members of the constructionsteel distribution channel of steel producers All members of the channel are affected

by what is happening in the economy, especially the following basic elements:

- Inflation: Inflation has a strong influence on the behavior of the members within thedistribution channel Reaction to wholesale and retail members with high inflation rates

is to adjust price on a regular basis to fake real loss The distribution administrator ofsteel producers should consider how changes in buying behavior influence on themembers of the channel and channel strategy

- Recession: Economic slowdown occurs when GDP drops or increases very slowly,reflecting the decline of the economy In a recession period, expenditure of consumersand government sector reduces significantly, sometimes reduces severely All members

of construction steel distribution channel can see the effects of the recession in theform of reduced sales volume and profit Steel producers with high inventories can bemore affected, even go to bankruptcy

- Supply shortage: The short-term supply shortages may adversely affect all members

of the channel The retail distributors are complained by consumers because they thinkretailers should have direct responsibility for the shortage The wholesale distributorsalso suffer the impact of shortages because they cannot provide the full amount of theproduct in the short term and trying to divide limited amount of products among theircustomers

The proposed problem is that how the channel manager must solve deficiencies and inwhich way to minimize disadvantages of the channel members and in the long termmay have serious negative consequences

Higher interest rates can also affect all members of the distribution channel becausethey have to borrow loan from bank to do business

 Cultural Social Environment

Social and cultural environment also affects the construction steel distributionchannel and members of distribution channels as well as channel management Thechange in population between regions will change the density of the market indifferent areas and make changes in structure of distribution channel, by then the speed

of urbanization and demand for building houses of residents and public works will bemore preferred, and obviously the demand for construction steel is also increasing

 Technological environment

Technology is changing constantly and quickly, especially in the industrializationsociety People can see many technical advances appearing around life Facing with therapid change of technology, the manager of construction steel channel of steelproducers must point out that how those developments related to business anddistribution channel members and then determine how changes affect the participants

of the channel to achieve high efficiency

These technological advances have created a new world in the wholesale and retail ofsteel It can not only reduce the amount of labor and documents relating to storage butalso provide a lot of valuable information in time to make better distribution decisions

 The political and legal environment

Political and laws are the foundation for economic development as well as the legalbasis for the creation of the lobby for companies do business in the market Clear lawsand stable politics are favorable environment to ensure equality for companiescompeting fairly and efficiently Political stability brings healthy society; a stable lawleads to an opened lobby for competition among enterprises, creating an equitableenvironment for companies to operate and impulse the economy

The government builds a complete legal system to regulate business activities in thesteel market These laws create a legal framework for its members and channel systems

to work most effectively, while also limiting the monopolistic behavior, smuggling, taxevasion, creating a healthy competitive environment

1.1.4.2 Micro marketing environment

 Structure of sector competition

Enterprises need to analyze the structure of competition in sector, specifically analysis

of determinants of business structure According to Vietnam Steel Association (VSA),construction steel manufacturing (rebars) has more than 200 enterprises engaged in theproduction of steel It includes 60 major steel producers which capacity is from 50thousand tons /year The number of manufacturers providing products is high andidentical so the competitive environment of steel is perfectly competitive

• Analyze 5 competitive forces of steel producers :

Source website: marketingbox.vn For companies doing business in the market will see five competitive forces that arepotential competitors; power of customers; substitutes; bargaining power of suppliersand finally the competitors in the industry today Business enterprises, steelmakingproducers will face with 5 above competitive forces when operating in the market

The potential competitors: The ability to join the steel industry of potential rivals are

high due to policies to attract investment by the State and lack of laws of Vietnam Thereceipt of investment projects implemented by local is unable to evaluate the inherentcapacity and capital and there is no clear rules about technology and commitment aboutproject environment This increases the number of firms in the industry, increasing thevolume of products and the competitiveness of the industry The businesses joined latercan compete with previous business on price and quality due to advantages of highcapital and technology

The power of customers: Enterprise customers often have more information on

pricing, product quality, so the ability to negotiate prices is higher, as well as theselection and change providers easily Large volume of orders and signed long-termsupply contracts with our customers bring more benefits to the business

In fact, the construction steel consumers in the market include the following types:

- IHB customers: Individuals, households buy steel to build their houses servingits own needs This group generally buys small quantities and unrepeated with largenumbers scattered across all regions of the country These customers rarely buydirectly from the manufacturer, most of them purchase from retailers or wholesalers

- Customers are investors: they directly buy steel for project in big volume andoften purchase repeatedly These customers are geographically dispersed and havecertain power

- Other customers are construction companies, contractors and investors Theyoften buy products from wholesalers and manufacturers Due to huge purchasing

volumes these customers often require sellers to support a certain number of creditsand longer time of payment because settlement often lasts longer.

Besides that, in steel distribution channel, there are trade intermediaries which arecustomers of companies

The following considers some kind of typical trade intermediaries:

* Wholesale trade intermediaries

Wholesale trade intermediaries include companies purchasing steel for resale toothers (such as retailers and other wholesalers) They also involve companies operating

as agents or brokers to buy or sell goods to customers Wholesalers are divided intothree types as follows:

- Wholesalers owning goods: are commercial enterprises or businesspurchasing, owning steel, construction companies, or for other wholesalers They existunder different names: wholesaler, industrial distributors, importers and exporters

- Agents, Brokers and steel wholesalers earning commission: are independentintermediaries undertaking all or most of steel business They do not possess goodsduring distribution process but really related to the function of negotiations inpurchasing activities on behalf of their clients They often receive income in the form

of commissions on sales or certain fee Some types of activities under the name ofproducers, wholesalers earning commission, broker, dealer wholesalers and import andexport agents

- Branches and representative of producers mainly wholesale and in fact cancum retail Steel producers can establish branch for the first purpose of distributingproducts from producer to wholesalers and retailers in each market Some perform thefunction of storage in places need inventory reserves, while others are simplyrepresentative Some branches and representatives of steel producers also act aswholesaler and offer is ordered goods to the customer

* Types of retail trade intermediaries

Steel construction retailers include a variety of forms and scale of business Retailersoften trade other building materials Distribution function by retailers can co-ordinate

in various ways to create new forms of retail

Retail shop can provide services for customers with different levels from less to more.They can ship to customers’ homes and give customers deferred payment

Retail shops can be independent, chain of coordinated retail groups and franchiseagents Independent store owned by an individual with self-management Chain ofgroups usually consists of many retail stores under the same ownership, selling similaritems and purchases are controlled concentratively Retail cooperative organizationconsists of a number of independent retailers that is linked together and establish apurchase organization focusing on the operation of the sales and consistent advertising.Franchise agents are contractual links between the sovereign (manufacturers,wholesalers) and the franchisee (retailers) who wants to buy copyright and businessrights

Retail stores often have locations gathered into building materials centre, buildingmaterial street in the region and small building material stores

 Substitute: steel is considered as necessity of every industrial sector Now there

is not any resource or materials which can replace steel in construction,industrial and defense machine manufacture Thus pressure on substitute forsteel industry is very low

 Competitors in the sector: Together with the characteristics of steel industry is

growing number of companies; particularly companies with large-scale capacityare established Besides that steel industry has high fixed costs, so that theenterprise can increase advantage based on scale Large-scale enterprises willreduce fixed costs/products, lower prices, creating competitive advantagecompared to other competitors And finally barrier out of the sector is high due

to the liquidation of machines in this industry does not bring much economicvalue This forces many companies to continue operation even though not aseffective as before which leads to increase competition in the sector Therefore,the internal competition within sector of construction steel producers becomefiercer

 Bargaining power of suppliers: Suppliers of steel and raw materials for the

steel industry are located in many countries around the world so the

concentration of suppliers is low Moreover, there is no exclusive enterprise inthis area so there is not a monopoly situation Steel and raw materials for thesteel industry is not the special goods so buyers can select one or more suppliersfor their material inputs However, with 50% billet imported, the ability ofnegotiation of Vietnam companies are low, almost suffer from volatility ofworld prices So it could be seen that pressure from suppliers to the steelproducers in Vietnam is average

1.1.4.3 Internal environment

Strategy, policy, development orientation of steel producers

Organization and leadership ability of executive board in steel business

Activities management of functional departments in term of marketing, finance…andcoordination of activities of those departments

Resources can be mobilized from outside through outsourcing transportation or hiringwarehouses to store goods

1.1.5 Content and fundamental characteristics of construction steel distribution channel management

* Characteristics of distribution channel management

After organizing the steel distribution in the market, distribution channelmanager must build management mechanisms and policy and distribution process.Scope of distribution channel management of steel producers covers the entireactivities of the channel, involving all participants in the distribution channel, fromsteel producers to consumers Construction steel distribution channel is conceived as acomplete system from the manufacturer to the end user System management isunified, not only during product circulation

* Content of distribution channel management

The purpose of channel management is to guarantee the cooperation of channelmembers but not passive Enterprises need to use active measures, have plans toensure cooperation Channel management must also target predetermined distributionobjective

Activities of distribution channel management of construction steel

Channel members selection: For the steel companies, distribution channels

play an important role in the steel business Products from manufacturers are delivered

to final users through trade intermediaries and vice versa payment flows from the endconsumer to the manufacturer should be through the channel members This indicatesthe importance of the channel members to maintain and develop the channel systemand business activities of enterprises

Channel members motivation: To ensure channels members cooperate closely

in product consumption in the long-term, channel manager of the enterprise mustencourage members in their distribution channel High results from encouragement ofmembers of steel distribution channel come from an understanding of the needs anddesires of each member in the channel Base on their needs and wants, businesses willhave suitable assistance to meet their requirements Enterprises must recognize theneed of encouraging activities of channel members through understanding the existingproblems and difficulties in the enterprise since then using clever power to solveproblems

Channel members evaluation: used by steel producers to collect data to examine how

channel member received marketing programs of manufacturers, how the howdepartments work, where the relationship is sustainable or poor, what manufacturersmust do in order to ensure relationships are best and sustainable

Channel agreements modification: In addition to the design of a good distribution

system and put into operation, producers must periodically modify the system to suitwith changes in business market Modification is necessary when consumers change,market expansion, emerging competition and new distribution channels, innovationsappear in the market

1.2.2 Implementation the application of model “Retail value management” (RVM) in distribution channel management

* Objective: To improve the efficiency of operation and try the best to achievethe highest standards for product quality and service companies bring to the market.Besides building long-term relationships based on the basis of trust, respect and caringthrough the retail system in the market

The impact of model RVM changes the following elements:

 Value : Besides material value that steel provides, it will also offer

added value to customers

 Awareness : Raising awareness by building a strong brand

 Long-term relationship : Building long-term and sustainable relationship on

the basis of trust from distributors to end-users

 Absolute trust: Build trust through product quality and services and people

 Training : Ensuring stakeholders are doing RVM together

The implementation process includes 6 parts equivalent to 6 phases of the model

Part 1: Implementation in companies - Phase 1: Set up Key Performance Index(KPI) to evaluate work performance during the year

Objectives:

- Reinforce objectives set out by RVM

- Establish teams to carry out the chain of RVM activities

Action:

- Review KPI

- Review business plan and estimate Marketing budget

- Build a database of distributors, retailers, agents and construction projects

- Develop a marketing plan for businesses

Part 2: Distribution channel management - Phase 2: Training new distributors Objectives:

- Organize and train distribution channel members to achieve the goals of RVM

- Develop and build relationships with distributors

Action:

- Assess distributors of existing RVM program

- Set up distributors of new RVM program

- Conduct training those distributors

- Use suitable marketing program to promote activities of distributors

Part 3: Consumers - Phase 3: Develop a database of customers

Objectives:

- Build consumer network

- Develop and build relationships with customers/consumers

Action:

- Build a database of consumers

- Hold customer meeting

- Implement marketing policy for consumers

Part 4: Agency departments - Phase 4: Develop a database of reference group Objective: To build and develop relationships with reference group

Action:

- Develop database of builder

- Develop database of designers

- Organize builders meeting

- Hold meetings with designers

- Apply specific marketing method for customers who are agency departmentsSection 5: Impact on Retailers - Phase 5: Develop appointment program ofretail package

Objectives

- Develop and train retail network

- Build and develop relationships with retailers

Action:

- Organize retailers meeting

- Build a database of retailers

- Identify and select retailers for the appointment programs of retail package

- Continuously implement marketing policies for retailers

Part 6: Customers’ projects - Phase 6: Approaching projects

Objective: Record projects of customers to forecast steel demand in the market

Action:

- Develop forecast database for projects

- Identify and select project phases to approach

- Develop strategies for project components

1.3 Effects of RVM on distribution channel

- Building sustainable relationships based on the principles of sustainabledevelopment among channel members The nature of retail value management is tobuild a retail management method which instructs managers as well as members ofcompanies have action orientation according to standards of building strong externaland internal relationships, not only is the relationship between customer and seller buttrade friends Connection, sharing, and interaction for mutual benefit of channelmembers will be the foundation for RVM implemented in the enterprise

- Building distribution channel strategy for businesses to achieve objectives inretail market When applying model RVM – Retail value management, it meansbusinesses have been implementing tools and methods to improve marketing activities

in retail market or more exactly IHB market

- Design distribution channels to suit characteristics of enterprises, customers,products, competitors, surrounding environment, intermediate members

- Channel management and motivating activities of channel members Along withthe channel structure designed to suit business, in accordance with IHB market,enterprises must implement measures for channel management, flow management inchannel distribution and encouraging channel members involved in the managementprocess to ensure the circulation of flows in the channel

- Distribution of material goods The basic purpose of the physical flow indistribution channel in general and steel products for IHB market in particular is thesupply of goods in time, correct location and operations of support services The goal

of model RVM is to add value to IHB customers so the distribution of material goods

plays an important role in the implementation of model RVM in steel distributionchannel management

- Use marketing mix in distribution channel management IHB market is themarket in which customers are households buying products to serve their needs ofbuilding and repairing houses, decorating of civil works so that psychology as well asactions of customers has some differences with the customer in project markets, so thatthe marketing mix activities in managment are also different Distribution channelmanager must have skill in the application of marketing mix to create favorableconditions for the control of channel activities

CHAPTER 2 REAL SITUATION OF DISTRIBUTION CHANNEL MANAGEMENT IN NATSTEELVINA CO., LTD AND APPLICATION OF

“RETAIL VALUE MANAGEMENT”

2.1 About NatSteel Holdings and NatSteelVina Co., Ltd

2.1.1 About TATA and NatSteel Holdings

TATA is one of the largest conglomerates in India with income in 2005-2006was 967.229 million rupees ($ 21.9 billion) equivalent to 2.8% of India's GDP andcapital markets around 57.6 billion dollars (only 28 of the 96 companies in the Tatagroup listed securities) The Group has operations in more than 40 countries on 6continents, exporting products and services of the company to over 140 countries.Group founder named Jamshedji TATA that, he was president and led the companysince 1991 the Group has 96 operating companies in seven business sectors 65.8%ownership of Tata Group is due to be trusted members of TaTa

The goal of the TATA:

Leadership at its best achieved through business in the areas where we are active,promoting the entire value and integrity to improve the quality of life of thecommunities we serve

TATA Group logo

geographical coverage and put the company in the Fortune 500

 Tata Steel is one of the ten leading steel producer in the world with an annual capacity of the existing crude steel production of 30 million tons / year

(MTPA)

 Proposed three Greenfield steel projects in the states of Jharkhand, Orissa andChhattisgarh in India with a capacity of 23 MTPA and a Greenfield project inVietnam

 Through investments in Corus, Millennium Steel (renamed Tata SteelThailand) and NatSteel Holdings, Singapore, Tata Steel has created a network

of production and marketing in Europe, Southeast Asia and the South Pacificcountries

 NatSteel Holdings produces about 3 MTPA of steel products across itsregional operations in 7 countries

 About NatSteel Holdings Corporation Singapore

August 12, 1961, the national iron and steel Ltd (NISM) was incorporated tomanufacture steel and steel products to Singapore Malaysia and the region

In 1990, NISM renamed "NatSteel" And the beginning of the 21st century,NatSteel was established with strategic footprint in emerging economies ofAsia Pacific as well as building a branch network branded NatSteel day byoffering a wide level of quality products and highly specialized

In 2004, NatSteel Asia (Singapore) Pte Ltd was incorporated It is a steeltrading business in Singapore and renamed the name of NatSteel Asia PteNatSteel Ltd

On August 1, 2008, all businesses NatSteel Asia Pte Ltd was transferred to NatSteel Holdings Pte Ltd is part of the steel company Tata Steel to system structure

NatSteel Holdings Pte Ltd's Logo

2.1.2 About NatSteelVina ( Việt- Sing)

Founded in 1993, Steel Vietnam-Singapore is a joint venture between NatSteel Holdings Corporation and the Vietnam Steel Corporation (VNSteel) NatSteel

Holdings Corporation is a leading steel company Asia, is a member of the Tata Steel group, and VNSteel is the largest steel manufacturer in Vietnam The competitive advantage of Vietnam-Sing steel comes from the management level and strong production capacity brought by the joint venture

Vision

Steel Vietnam-Singapore aims to become a leading steel company in the steel market

in northern Vietnam and expect the benchmark company in creating value and social responsibility

Core Values

Integrity - Commitment: We exchanged openly, sincerely and build long-term

relationships on the basis of trust, respect and caring

Guide to the perfect: We are constantly improving the efficiency and try our best to achieve the highest standards for product quality and service we bring to market Always Innovation: We encourage and support creativity and ideas, innovations and constantly investing in advanced technology to bring the best products to customers Teamwork: We work together effectively to achieve common goals of the company while encouraging contributions enthusiasm and sense of responsibility of each individual in the group

Enterprise with social responsibility: We bring workplace safety and environmental protection around Not only that, we also build community by engaging in volunteer activities and financial support for education and other social

* Diagram the organizational structure of the company

Chin Kong Tad

Phó Tổng giám đốc thứ nhất Trương Đình Việt

TP Sản xuất Tăng Minh Sơn

TP Nhân Sự Nguyễn Tú Lan

TP Điện

Lê Khắc Giang

TP Hành chính Bùi Xuân Khải

An toàn và môi trường

Bảo vệ

Hành chính

Vận hành hệ thống điện

Điện bảo dưỡng và sửa chữa

Cơ bảo dưỡng và sửa chữa

Công nghệ sản xuất

Kinh doanh và Tiếp thị

Quản lý chất lượng Gia công cơ khí

Kho và nhà cân

Lái xe nâng cẩu

Sửa chữa xe nâng , cẩu

Chính sách, Đào tạo và tuyển dụng

* Address

Headquarters NatSteelVina Co Ltd

Location: Cam Gia Ward, Thai Nguyen

Company representative office NatSteelVina

Address: Floor 14, attracting 10 buildings, extended Le Van Luong Street, Tu Liem, Ha Noi

Phone: 04 35,430,872 Fax: 04 35,430,873

Logo of NatSteelVina Co., Ltd.

2.2 The factors affecting to distribution netwofk of NatSteelVina

2.2.1 The macr economic situation

The economic environment :

Inflation :

In the last 3 years, due to tight monetary policy of the government, the inflationrate continued to decline, Vietnam's economy has improved and relatively stable

Table 2.1 The inflation rate for 2011, 2012, 2013

Source: General Statistical Office (GSO)

Inflation fell from number 2 in 2011 (18.13%) to $ 1 figure (6.81% and 6.04% 20122013) When inflation affects the behavior of all participants in the economy.Especially to the members of the distribution channel As inflation fell, the price of rawmaterials has essentially reduced, which helps manufacturers can reduce the cost ofsteel and sold in the market For commercial intermediaries, the lower price of steelproducts, the price of the bundled services such as transportation, storage, and they willfall under the hoarding would have thought more goods to serve your needs goods

Economic Growth and economic recession

The average for 3 years, GDP increased by 5.6% / year Thus the growth rate of theeconomy slowing down and gradually stabilized, this makes the steel trading businessbuilding relatively more confident and optimistic in a developing economy stable

Table 2.2 Contribution to GDP structure of the industry through the years

Year 2011

Year2012

Year2013