Dealing with revenue reduction at intertek company

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Nguyen Son Tung DEALING WITH REVENUE REDUCTION AT INTERTEK COMPANY MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: ASSOC PROF TRAN HA MINH QUAN Ho Chi Minh City – Year 2018 Table of Contents EXECUTIVE SUMMARY CHAPTER 1: INTRODUCTION Introduction about The Company Research objectives Research Methods Questionnaire design Limitation CHAPTER 2: PROBLEM IDENTIFICATION Market Demand 1.1 Domestic market 1.2 Export Market 1.3 Competitors Problem identification 10 2.1 Symtoms of the company 10 2.2 Unskilled employees 12 2.3 Poor support among company employees 15 2.4 Not enough support from Intertek 17 CHAPTER 3: DESIGN SOLUTION AND SUGGESTION 20 Improves recruitment process 20 Life balance 21 Culture set 22 Training Program 23 Performance Management 24 CHAPTER 4: ACTION PLAN 26 1 Recruitment process 26 Motivation Program 27 Training Program 28 CONCLUSION 30 REFERENCE 31 APPENDIX 35 SWOT 35 Market Assessment 36 Market Share 38 Customer expectations 39 Significant relationships 41 Vietnamese Free Trade Agreements 43 Intertek – Market Growth Driver 44 Vietnamese Competitive Footprint across Market 45 Priority Areas for Growth 46 Major Competitor Updates 47 Intertek Differentiators 48 Customer Learning 49 Important Regulation during 2014-2016 50 IT Strategy 52 EXECUTIVE SUMMARY The increase of human’s living standard leads to the requirement on using the quality products Based on Choon7, over 78% of supermarket or shops or malls tend to require their supplier to provide the certificate of quality from trusted Quality Assurance Company This directly supports the article’s claim that some assurance company has many development opportunities because of reaching the demand of customers One of the leading quality assurance companies in the world and even in Vietnam is Intertek that found in 1880 by Thomas Edison and had developed in Vietnam in 1998 According to Intertek Group Plc - Annual Report11, the company runs their business into using their techniques to test, inspect and measure the product’s quality and evaluate the factory’s environment However, Intertek is faced with complicated issues in attracting consumers because of the limited in marketing planning and high competition in the quality assurance providers This specific organization was chosen because the researcher would to apply their knowledge and skills that are learned in Economic University in Ho Chi Minh City This paper will firstly provide the background of quality assurance companies in Vietnam before analyzing the Intertek’s problem that company is suffering Some recommendation on the company’s issue will definitely be mentioned CHAPTER 1: INTRODUCTION Introduction about The Company Intertek is a total assurance quality company that conducts business in checking product quality, reorganizing the factory’s risk and evaluating the employee’s working condition According to Nguyen-Viet, Tran, Unger, Dang-Xuan & Grace31, the business had established by Thomas Edison from combination between most modern assurance quality labs in London, Hong Kong and US in 1880 During 140 developing years, Intertek has identified as an international enterprise where 45,000 employees work over 140 countries Owing to the hard-working of all employees and good management skills of high-level staff, Intertek is known as one of the most trusted leaders in Total Assurance Quality Industry In Vietnam, Intertek was built in 1998 from Intertek France’s investment and currently has official offices throughout Vietnamese cities and provinces: Ho Chi Minh City, Da Nang, Ha Noi City, Nha Trang, Can Tho and Hai Phong According to Intertek Group Plc - Annual Report11, the main business portfolios of Intertek Vietnam are Cargo, Softlines, Certification Service, Hardlines, Business Assurance, Governmental Trade Service, Electric and Agriculture According to Pham32, Vietnam is the leader of rice and garment exports, Intertek Vietnam focuses on building the innovative labs to conduct test that relates to agricultures and softlines services It is worth pointing out that these departments currently become the profitable ones that contribute 46% monthly revenue of Intertek Vietnam Research objectives In order to solve the business problems, the research needs to understand clearly into business’s current situation and the suggestion will be identified Research Methods In order to be successful in this paper, primary and secondary research will be used as a main material of making consumptions of Intertek Vietnam’s situation When it comes to primary elements, interviews had been conducted with Finance Country Manager of Intertek Vietnam –Ms Lena Tran, Food Services General Manager – Mr Khoi Nguyen that supports the researcher to identify the business’s troubles while the result of surveys can draw a general picture of organization’s performance For secondary research, the researcher conducted some online research at reliable resources in order to collect the market demand of Assurance Quality industry in Vietnam and business opportunity of Intertek Vietnam in Vietnamese market From material collected, the business’ problem will be obviously recognized and supported to project’s recommendation Questionnaire design The question in interview is created to attempt collecting information of account department that supports the research to solve the business’s problem These questions will relate to the working task and department’s duties and difficulties in working process The answer of these survey questions will be analyzed in following step as a main resource of recommendation Limitation The project requires the significant number of relevant resources that need to be researched and analyzed in several months It follows that the project will not be able to cover all the theories from courses as well as all the business’s situation due to limitation of time and written words CHAPTER 2: PROBLEM IDENTIFICATION Market Demand 1.1 Domestic market The living standard in Vietnam still is low due to low monthly earnings, so most of Vietnamese citizens are willing to purchase low quality goods with cheap prices According to Tran & Jeppesen40, around 81% of food in Vietnamese market was at low quality while the people have to eat dirty food daily The author also mentioned that many customers not have basic knowledge that presents the unsafe good directly brings bad influences to people’s health In particular, dirty food is purchased in Vietnamese market and it includes poisonous chemicals insight goods According to Asia News Monitor1, 63% of the Vietnamese customer answered that public quality assurance companies not support much in finding out unsafe goods and low quality products because these companies are not invested much into labs, machines and employees From this element mentioned, customers not know how to evaluate what the quality product is and keep buying the goods in market while Ministries of Health noticed that 92% clothes or toys in Vietnamese market has ingredient that directly causes serious illnesses, as cancers to the customers 1.2 Export Market Key Trading Partners in 2016 (US$bn) 50 38 32 24 22 17 ASEAN 34 15 China 15 Japan Exports (US$bn) 11 11 Korea EU US Imports (US$bn) According to Pham32, people in developed countries has high living standard while the government of these nations also register strict rule on the quality of exported products that plans to export into their markets According to Tran & Jeppesen40, the main possible exported markets of Vietnam are Japan, EU and United State (find chart 1) that requires the quality product certification when products are delivered into their market To demonstrate, some main products are textile & garments, accessories of electrical and computer equipment, agricultural products and foods are checked strictly in US market while China has begun adapting more stringent rules on reviewing the quality of rice that makes from Vietnam As a result, it requires the growth of trusted Quality Assurance Company in Vietnamese market that can give trusted certification to these partners accept Vietnamese products enter into their market (Pham 2010) It follows that partner of Vietnamese exported company requires their vendor to conduct good’s quality test in international assurance company that already has brand name in international market and satisfy their market’s requirements on quality of products 1.3 Competitors According to Fairclough13, existing players adapt the intense prices and increase their investment in Vietnamese Branch labs while many entrants have start setting up their offices in Vietnamese market To demonstrate, the competitors of BV and SGS has lower price compared to Intertek Vietnam at 40% while these competitors has expanded their organization in North of Vietnam quickly In additional, these two key competitors have some potential customers at exported market as US and EU It follows that Intertek’s market share might be decrease at Vietnamese market Estimated Addressable Market Share (2016) Market Share BL Market share (%) Market Position (#) Softlines 30 BA Hardlines Food Agri 18 25 22 17 CAA 23 E&W 2 Services provided / Comments • Two Chemical Labs in HCMC & Hanoi • Strong customer services, fast TAT, qualified trainer & in-house lab auditor, technical support • Further strengthen leadership position by capitalizing on the demand for quality services • Key segments include textile, electrical and electronics, furniture and seafood • Employee expertize with high qualified auditors and multi-qualifications • Value added services through seminar/ training • Low buyer nomination and 80% is local sales • Product portfolio: Toys (US, EU, Japan, domestic mkt), children’s products, kitchen wares, candles, packaging, furniture (indoor & outdoor) • Early mover advantage - Good relationships with local customers • Strong focus on food safety testing on aquaculture - seafood products • Cross-selling, provide total solutions (ATIC) for Food producers • Focus on rice, tapioca, wheat, cashew nut, soybean meal, feedstuffs, fertilizers, cotton, oil, foodstuff • Also provide Fumigation services • One in three international inspection company in Vietnam • First and only lab & inspection service at outbound warehouse for fuels at Van Phong Bay • Industries focus: Lighting, appliances & electronics, industrial equipment • Services: ASTA, Certification Mark Service (i.e ETL, CE, etc.) and Inspections 1 38 Customer expectations Drivers / Developments 2012-16 Lower TAT, higher accuracy, access to sample status Offer reasonable/ competitive price To be the trusted partner through employee expertise, commitment and integrity Swifter response to customer feedback Quicker Response Time on Operational Issues Impact on Business • Shorten TAT from 3.0 days to 2.5 days (SL) and also deliver results within working hour • Deliver reliable result • Countrywide, 24/7, flexible schedule • Tracking sample pick-up service • Combine product/ service for full package (Assurance, Testing, Inspection and Certification) • Premium price for key/ loyalty clients (Promoters) • Differentiate through TAT and Service • Operational excellence and Best-in-Class initiatives to maintain margins • Effectively deliver advisory and assurance services • Provide training and share updates of new methods / regulation with clients • Deliver Best-in-Class customer service • Continuous engagement • Defined timelines for closure of open issues • Leverage and implement NPS learning • Institutionalize customer coordination process 39 Portfolio Performance 40 Significant relationships Name • Petrolimex deputy general manager • PVOil director • Petroleum product import/export team General Director of STAMEQ ( Directorate for Standard & Quality) Influence Importance to strategy QCVN 01-2015/BKHCN: National technical regulation on gasolines, diesel fuel oils and biofuels CAA provides QCVN 01 service to petroleum Import/ Export Customers Intertek is a leader in the field of oil analysis / Government Compliance Assessment for imported Oil & Gas QCVN 03-2009/BKHCN: National technical regulation on safety of toys of Vietnam The lab was appointed by the Directorate for Standard, Metrology and Quality (STAMEQ) for testing children toys in accordance with National technical regulation on safety of toys QCVN 03-2009/BKHCN Only Intertek provides Toys certification under Vietnam regulation Accreditation from MHLW for Japan Food Sanitation Law (JFSL) testing for Toys and food Intertek is the largest player in the toys testing industry Role Ministry of Health, Labour Welfare (MHLW) and Japan Toy association (JTA) - No: JTA 007 : The Japan Food Sanitation Act, commonly known as the Japan Food Sanitation Law, or JFSL, and The Safety Toy Standard, also known as the ST Standard, in association with 41 Name Role Influence Importance to strategy Toys lab has been approved by the German Federal States ( ZLS) - GS for Furniture & Toys Intertek provides fast GS Mark Certification the ST Mark, managed and operated by the Japan Toy Association (JTA) ZSL (GS Mark) - Certification No : ZLS-GS-59/13-115: The GS Mark is recognized throughout Germany and EU countries as symbol of safety 42 Vietnamese Free Trade Agreements 43 Intertek – Market Growth Driver 44 Vietnamese Competitive Footprint across Market 45 Priority Areas for Growth 46 Major Competitor Updates  BV enjoys several exclusive nomination from big customers specially US clients  SGS has good nominations for jewelry products from big customers  Geographic expansion of competitors, particularly in Central and North  New entrants and labs (Eurofin, MTS, Fiti, Kotiti, UL, CIC)  Intense price competition from established players (BV, SGS) as well as new entrants (sometimes 40-50% discounting)  Non-addressable market - Services provided by competition and not by Intertek: o Flame retardants TB117 and Formaldehyde ASTM D6007 under US regulation (SGS) o Testing for Polymer material (SGS) o Services for FSC, ASC, ISO 15378 (BV) o BAP & ASC certification and testing (BV & SGS) o Full range of Food Contact Testing and Certification (SGS and TUV-R) 47 Intertek Differentiators • Diversified service portfolio • Geographic footprint • State-of-the-art labs of HCM physical Lab for Textiles, Hardline HCM Lab for Toys, Chemical HCM Lab and Food Lab testing service • Operational Excellence: Good TAT, Consistency in delivery • People: Dynamic and committed team with strong technical talent, Sales Engineering, Technical advisory for local suppliers / buyers, expert auditors with multi-qualifications • Program exclusivity: QCVN 03-2009/BKHCN - Only Intertek provides Toys certification under Vietnam regulation / Oil & Gas certification & Testing QCVN -01 48 Customer Learning 49 Important Regulation during 2014-2016 Developments Impact on Business The government has removed the Circular No 37/2015/TT-BCT causing the statutory bottlenecks for the enterprise’s development Until the new replacement would be issued, Softlines would lose revenue from the Circular 37 Published Circular No 35/2015/TT-BYT limits the migration level of lead & cadmium in glass, ceramic, porcelain & enameled food contact products, effective from May 2016 Opportunities for Hardlines to expand testing services in Vietnam market The FDA Food Safety Modernization Act (FSMA) rule on Sanitary Transportation of Human and Animal Food is being fully implemented from Sep 2016 Big opportunities for our ATIC services (Food, Agri, BA, etc) as Vietnam firms must comply with FSMA rule ASTM International published a revised version of the US Toy Standard ASTM F963-16, Standard Consumer Safety Specification for Toy Safety on 20 October 2016 The new standard is a revision to the existing ASTM F963-11 version of the standard Potential increase in demand for Toys testing services China has started applying more stringent regulation to ensure the safety of rice imports from Vietnam Vietnam rice exporters must meet Chinese requirement (fumigation, inspection and testing); or else, they would be temporarily or permanently suspended The European Union (EU) has recently implemented measures to regulate bisphenol A (BPA) in thermal paper under Annex XVII of REACH The new law will become effective on January 2, 2020 Opportunities for Hardlines, Softlines for testing service Japan will adopt the new care labelling standard JIS L0001-2014 under the Household Products Quality Labelling Law with an effective date of December 1, 2016 Opportunities for Hardlines, Softlines for testing and inspection service On June 1, 2016, the Restriction of Hazardous Substances (RoHS) for six categories of Opportunities for Electrical & Wireless for testing service Page | 50 Developments Impact on Business electrical and electronic equipment (EEE) in Singapore was gazetted under the Environmental Protection and Management Act (Amendment of Second Schedule) Order 2016, by the Ministry for the Environment and Water Resources (MEWR) It will come into operation on June 1, 2017 In May 2015, the World Trade Organization (WTO) circulated a communication from the European Union (EU) announcing significant changes to Regulation (EU) 10/2011 on ‘Food Contact Plastics’ On August 25, 2016, the EU published Regulation (EU) 2016/1416 amending the ‘Food Contact Plastics’ Regulation This piece of comprehensive amendment contains a number of important changes to Regulation (EU) 10/2011 Development new business opportunities for Hardlines 51 IT Strategy 52 ... analyzing the Intertek s problem that company is suffering Some recommendation on the company s issue will definitely be mentioned CHAPTER 1: INTRODUCTION Introduction about The Company Intertek is... that partner of Vietnamese exported company requires their vendor to conduct good’s quality test in international assurance company that already has brand name in international market and satisfy... employees said that some training courses have been repeated many times with same materials that make them feel bored In particular, training courses not have a lesson that relates to their working