LV Thạc sỹ_Business strategy direction for vietnam singapore feeder service of vinalines container shipping company

i ACKNOWLEDGEMENT In oder to finish this thesis and EMBA course also, I have received a lot of supporting from many people I would like to take this opportunity to thank all those who in many ways have helped me complete the Master program Associate Prof PhD… is teacher who taught international management object and also supervise me to conduct this thesis I admire his knowledge and devotion for me I would like to thank all my professor of EMBA course, who have trained and help me to improve my knowledge on business management And in fact is that I have applied it for my work effectively I also have received supporting from experts, interviewees, coworkers, and class – mates I would like to express to heartfelt thanks them who have worked hard with me in during last time to finish this thesis Finally, I want to save deeply thanks for my family It is impossible for me to finish this thesis without supports of them My husband has helped me to solve all of housework just only his Especially is my daughter who creates motivation for me to overcome difficulties to solve well my family, work, and study at the same time ii TABLE OF CONTENT CHAPTER 31 STRATEGY ANALYSIS FOR VCSC .31 CHAPTER 71 STRATEGY FOR OPTIONS VIETNAM- SINGAPORE SERVICE BY VINALINES CONTAINER SHIPPING COMPANY 71 LIST OF REFERENCES 84 ABBREVIATION WTO World trade organization APEC Asia – Pacific Economic Co-operation ASEM Asia – Europe Meeting GDP Gross Domestic Product SBU Strategic business Unit PEST political, Economic, Society, Technology SWOT Strength, Weakness, Opportunity, Threat BCG Boston Consultant Group PLC Product life cycle IT Information system R&D Research & Development VCSC Vinalines Container Shipping Company VINALINES Vietnam National Shipping Company TEUS Twenty – foot equivalent units HPH Hai Phong HCM Ho Chi Minh HAN Ha Noi HKG Hongkong SIN Singapore LIST OF FIGURE CHAPTER 31 STRATEGY ANALYSIS FOR VCSC .31 CHAPTER 71 STRATEGY FOR OPTIONS VIETNAM- SINGAPORE SERVICE BY VINALINES CONTAINER SHIPPING COMPANY 71 LIST OF REFERENCES 84 LIST OF TABLE CHAPTER 31 STRATEGY ANALYSIS FOR VCSC .31 CHAPTER 71 STRATEGY FOR OPTIONS VIETNAM- SINGAPORE SERVICE BY VINALINES CONTAINER SHIPPING COMPANY 71 LIST OF REFERENCES 84 CHAPTER 1: INTRODUCTION 1.1 Rationales Vinalines Container Shipping Company (VCSC) is a branch of Vietnam National Shipping Lines (Vinalines) – one of top state- owned general companies This company is established to specialize in container shipping field and to develop as one of Vinalines’ top strengths At present, VCSC owns eight container vessels in three main business fields: chartering, domestic service and Hong Kong-Vietnam service Opening VietnamSingapore service is a big business project which VCSC studying It has not deployed in last years because this service is strongly competitive while VCSC is not well prepared for business and administration experiences as well as advanced technology to join this service The situation has changed at the current time, this project may be feasible and have chance to deploy for the following reasons: -Government grants a priority and support for developing maritime industry in accordance with strategy to develop coastal economy set in the CPV 10 th party congress -This project meets the Development Plan of Vietnam National Shipping Lines (VINALINES) for the period of time 2010 - 2015 that set the mission to develop container fleet and logistic network - It is an important step so that VCSC can achieve the mission to expand feeder network and become main line operator with worldwide network in the future -Vinalines/VCSC has some preparation in last few years such as budget accumulation, close relationship with many Singapore Agents, building up relationship with some Main Line Operators (MLOs) via Hong Kong- Vietnam service as potential customers in the new service, training employees, opening a Vinalines’ Singapore representative office -The opportunity brings back from economic crisis at the end of 2008 The crisis caused to give up the service from many competitors It enables Vinalines/VCSC to join this service and find a stable stand when the world economy may bounce back in about 2010 However, how to launch this feeder service efficiently depends much on strategy for this project A suitable business strategy choice which meet to business enviroment in new period, VCSC will suffer loss in the first period and optimize potential profit in the future It will also help VCSC to achieve a this goal as well as survive and develop in this competitive market in the difficult condition of economic crisis It is reason why I choose the thesis “Bussiness strategy Direction for Vietnam Singapore feeder service of Vinalines Container Shipping Company” I believe that the study will contribute considerably to possibility of this business plan and make it deploy in the near future 1.2 Research objectives In order to solve the problem which was identified above, author focused on the follonging subjectives: -Summaryizing relevant theories on strategy to implicate for Vietnam Shipping market analysis -Analyzing internal and external business environment to identify strengths, weaknesses, oppotunites, threats of VCSC -Proposing business strategies for Vietnam - Singapore feeder service of Vinalines Container Shipping Company -Proposing some main solutions to implement business strategy for Vietnam -Singapore feeder service of Vinalines Container Shipping Company 1.3 Scope and Limitation VCSC is doing business in various services such as domestic service, logistics, chartering, many kinds of routes HPH – DN, HPH – HCM, HPH – HongKong, HPH – China Howerver, within the scope of this study, thus the author would like to focus on Vietnam – Singapore feeder service which requires careful study in all respects such as marketing, human resources, administration, finance etc… -Focus on shipping line industry -Forcus on the Vietnam – Singapore feeder service, included VN – SIN and SIN – VN 1.4 Research Methodology 1.4.1 General methods of the research In this research, the author uses two main methods consisting of comparative and analysis methods to analyze internal and external business environment to identify strengths, weaknesses, oppotunites, threats of VCSC; proposal business strategies for Vietnam - Singapore feeder service of Vinalines Container Shipping Company and some main solutions to implement business strategy for Vietnam -Singapore feeder service of VCSC Therefore, the research used both primary and secondary data, information provided by VCSC Overall, the author refers to the following methods: - Method of statistical analysis: Following the data analysis, restate the research questions, then present the findings and conclusions - Method of analysis overall assessment and comparison: The author uses the complex mathematical equations, involving in-depth statistical data 1.4.2 Methods of collecting data and development of research instrument 1.4.2.1 Collecting primary data a Interviewing The interview method of this research involves a face-to-face meeting which researchers (interviewers) make interview with the director of VCSC, others leader in competitors (02 persons), future customer (2 persons) to ask a series of questions as following steps - Prepare survey questions in advance - Choosing people to be interviewed - Conducting the survey in 15 minutes for each people - Recording and take notes the dialogue b Questionnaires The author has applied questionaiers to collected main external information which are people’s feedbacks includes information about company’s service, price, distribution, promotion and business policy, and about comparing with competitors Because of the time limitation, the author will conducte questionaires with 60 persons c Sample collection Primary data in 2010 and 2011 was collected from 12 departments of VCSC (Accounting-Finance department, Marketing department, Administrative department, Human resourses department,…) In each department, the author selected two officers and interviewed them about the strategy in the company and its influence on the business result as well as the Vietnam-Singapoor feeder service 1.4.2.2 Collecting secondary data - Secondary Data was collected mainly from the company’report, collected from newspaper, internet, magazine, etc, to support and develop arguments: -External sources: containership chartering market reports from shipbrokers; transportation theory, agency -Internal sources: Chartering report, market reports, financial, others data of VCSC Some information which includes figures relating to Foreign direct investment (FDI,) Import and export statistics wasere collected from formal publication of Vietnam General Statistic Office 1.4.3 Data analyzing methods - Using some analysis menthods consisting of staticical analysis, comparison, figures, tables, charts,… to treat the data and propose comments as well as conclusions - Using Microsoft Excel 2007 software to analyze the data 1.4.4 Summary Figure 1.1 illustrates the process of research methodology which was used in this research Observation Interview Sample Collecting VCSC data Other researches, magazines,… Collecting secondary data Collecting primary data Statistical Analysis Comparison Proposing comments, conclusions Source: Made by the author Figure 1.1: Research Methodology 1.5 Structure outline The structure of the thesis includes three main parts as follows: Chapter 1: Introduction Chapter 2: Summary of relevent theories which used to analyze enviroment and formulate strategies for VCSC Charter 3: Strategy analysis for VCSC Charter 4: Strategy for options Vietnam- Singapore service by Vinalines Container Shipping Company 73 -To ensure profitability indicates return on asset (ROA): 20-30%, return on equity (ROE): 35%-45% -To improve and consolidate loyalty of the customer for VCSC brand - To apply modern and new technologies to shipping services with high quality services -To invest in training and human resource development to meet long-term strategic objectives of company -To create professional working environment with applying modern management method, increasing productivity -To improve company image and brand prestige 4.2 Business strategic directions for VCSC 4.2.1 TOWS matrix analyse OPPORTUNITIES Table 4.1 Combination of TOWS matrix for VCSC STRENGTHS SO Strategies WEAKNESSES WO Strategies SO1 Increase investment & growth to WO: Cost leadership strategy based expand market share (S1, S3, S4, S5, on standard service quality (O1, O2, S6, S7, S8, S9, S10, S11 & O1, O5, O6, W2, W3) O6, O7) SO2 Improving quality and good services to develop brand image (S5, THREATS S6, S7, S8, S10, S11 & O1, O2, O4, O6) ST Strategies ST1 Build WT Strategies comprehensive WT1 Strengthen connection with organization structure, consolidate all local, main lines operator and foreign departments, train & develop human partners (W1, W2, W4, W6, W7 & T1, resources (S2, S7, S8, S9 & T1, T2, T6, T7) T3) Source: Research, 2011 74 4.2.2 Main business strategy directions for VCSC Based on the result of combining TOWS matrix as above mentioned, the main strategic direction for VCSC can be described bellows - SO1 Increase investment & growth to expand market share (S1, S3, S4, S5, S6, S7, S8, S9, S10, S11 & O1, O5, O6, O7) The orientations for development of feeder services, company needs to grab the market situation, strategy and policies of the major carriers to maintain the support of other carriers as well as offering measures to enhance trade, swap space to have the flexibility to cope with the changes, the market's volatility Company should continue to enhance service quality to maintain the support of customers, adjusting schedules match transport demand to maximize the consolidation and the ability to search for alternative sources of group goods tend to reduce output based on competitive pricing strategy For the first time, when VCSC starts implementing this transport route, the company should calculate the exploting of a company's vessel After the accessing and operating become smooth, gaining credibility and developing new customers, the company should continue investing and developing transport capacity by linking with the MLOs to implement Joint service cooperation , or add a new investment vessel to expand and exploit market development SO2 Improving quality and good services to develop brand image (S5, S6, S7, S8, S10, S11 & O1, O2, O4, O6) Ensuring quality of service according to commitments with customers is an important factor to keep customers looking for traditional and new customers Nowsaday, the company is focusing on customer service by segment, retail customers, clients or customers strategic tradition and potential customers All customers on companies using the price and its own policy preferences on the basis of price competition, but they always ensure services to all customers at the best rate Orientation for developing the brand strategy of the company also demonstrated the first goal is to best serve our customers and that's the way to the fastest developing brands To make the issue beyond the efforts of all divisions within the company, to ensure proper travel schedules, delivery, VCSC also must focus on approaching and logistics 75 services to customers Each customer will be assigned to each specific monitoring professionals, often find out about the needs of customers from which to reflect on the company and adjust pricing and timely service quality WO: Cost leadership strategy based on standard service quality (O1, O2, O6, W2, W3) To make cost-competitive strategy firm focused on the following issues Since fuel costs account for 48-50% of total costs, so companies control costs from the selection of suppliers to supply fuel for the fleet, there is a comparison and search providers domestic and foreign levels, and the payment priority schedule for this debt in order to avoid interest expenses as overdue fines, and may put pressure on suppliers to reduce prices for next time Basing on the level of fuel consumption for ships company exploited, conducted office supplies management monitoring to ensure the level of fuel consumption through the monitoring of operating hours ships, to take action when handling incorrect consumption norms Purchasing Division officials also regularly ship directly from the measurement, check the actual amount of fuel conservation, monitoring the delivery of fuel at HPH and HCM For feeder services, ensuring that schedules and schedule stability is one of the factors to attract customers, reduce costs due to incorrect delivery schedule To accomplish this, companies have to always rely on commodity demand of customers for each shipment, each calendar week to adjust accordingly, this calendar is calculated and the company planned for each month and flexible activities from time to time.Ensuring schedules attached schedule activities to ensure security and safety fleet In addition to monitoring the technical fleet daily, weekly, the company has the engineering department, management department safety inspection to the preservation and maintenance of the crew members on board, to detect defects and remedial measures in time, ensuring the fleet is always in a state of safety and proper running technique to exploit the speed of the ship, when the speed boat operators will save fuel consumption 76 ST1 Build comprehensive organization structure, consolidate all departments, train & develop human resources (S2, S7, S8, S9 & T1, T2, T3) For the cost of other management companies have specific norms and perform the contracting with any individual, department, based on the performance of each position to assess and salaries Thus encouraged staff to work in the company and promoting creativity to enhance business performance of companies The coordination between departments, between departments direct and indirect processes are established specifically to ensure that mining operations and customer service are the best Accordingly the application and software upgrades to support and manage a comprehensive system of management has always been focused company Thanks to the system management software this year the company can quickly get the information from the agents in foreign countries, to ensure smooth business operations VCSC will recruit high-qualified and rich experience experts to establish a team to manage the feeders independently and effectively By this way, VCSC will improve its competitive advantages and minimize weaknesses about lack of stableness of input, avoid increasing bunker price and decreasing discount of distribution In addition, these objects can become VCSC’s partners to against effectively penetration of competitors This strategy aims at exploiting opportunities to mitigate VCSC weaknesses VCSC should concentrate on building completely the organization structure, functional departments, recruitment and training, development, compensation system of human resources in order to have thorough knowledge of local common operations and price on providing service for business people demanding high standard VCSC highlytrained staffs will make great contribution to VCSC success and future development WT1 Strengthen connection with local, main lines operator and foreign partners (W1, W2, W4, W6, W7 & T1, T6, T7) For mining operations at major ports in Vietnam, the company has representative offices to coordinate with the port and the client in coordinating activities of the mining fleet and freight safely, timely time To minimize repair costs, for items that repair crews can repair, the company has issued regulations on self-repair crews, including the 77 cost of milk by 40% outsourced So just for the company to reduce costs and increase income for the crew For international transport routes, the company has established relationships with major MLOs as NYK Line, Maerk, K'line to cooperate and learn from experience and develop management brand Simultaneously the company also established close relationships with agents in countries where the company opened online services In Kaoshung, VCSC is working with Fomosa agents, agents in Hong Kong Whilhemsem Similar to international transportation routes above, when implementing feeder routes Vietnam- Singapore, the company will have to set up and develop the with the MLOs as well as agents in Singapore, to change the company made goods at the port operators as well as develop the sources of good from Singapore to Vietnam 4.3 Main business strategy direction for VCSC Based on the result of combining TOWS matrix as above mentioned, the main strategic direction for VCSC can be described bellows: To become successful, VCSC not only has to define an appropriate strategy to obtain its objectives but it also needs to implement this strategy effectively Therefore, VCSC is recommended to concentrate on assessing its goals and progress to achieve them through financial perspective, customer service perspective, business processes, human resource perspectives and corporate image perspectives 4.3.1 The solution to achieve financial perspectives  Establishing financial management standards and build plan of capital budget and expenditure quarterly, monthly, weekly in order to manage and use effectively sources of finance;  Establishing the accounting management systems to assess the effectiveness of each feeder, each vessel Analyzing the causes and results of each stage, from which trips to adjust the speed and control each cost incurred to ensure the effectiveness of route at the highest level  Implement effective management and control policies on expenses to increase competitive capability; 78  Selecting the vessels which have suitable volume and speed of the company or outsourced Vinalines has three vessels at the size of 500 teus They are Me Linh, Van Xuan and Vinalines Pioneer At present, the vessel Me Linh and Van Xuan are operated in domestic service (Hai Phong- Ho Chi Minh) and the vessel Vinalines Pioneer is timechartered out To find out the best vessel in all, we should consider some factors which affect service: - Average service speed - Bunker consumption - Capacity Below is summary of technical condition of three vessels Table 4.2 Technical condition of three vessels Vessels DWT (Tons) Me Linh 11,235 Van Xuan 11,235 Vinalines Pioneer 9,088 Max speed (KT) 13 13 15 Bunker cons FO 16 16 18 Capacity Technical Homo condition DO Nominal 14T 2.2 594 460 Average 2.2 594 460 Average 588 410 Good Source: Research, 2011 As analysis above, to maintain the stable schedule, the speed of the vessel should be over 15KT and the vessel is in good technical condition As above, the vessel Me Linh and Van Xuan is old (built in 1983 and 1984), their current service speed is about 13KT and their technical condition is at average level Therefore, the risk for technical troubles of the vessel Me Linh and Van Xuan will be higher than the vessel Vinalines Pioneer This will be serious because it will affect the vessel’s feeder schedule Another reason for choosing the vessel Vinalines Pioneer is its name Only the name of this vessel includes the name of company “Vinalines” The regular appearance of the vessel at port and repeat of the vessel’s name in conversation with the customer make customers to easily remember the company’s name It is a useful way to introduce the company when it firstly enters a new market 79 Comparing the chartering costs with the cost in the market in October, 2011, the cost for similar size vessels are ships Pioneer VNL at a cost of $ 5,200 / day While running cost (fix cost) to vessel Pioneer VNL present time is $ 4,800 / day Item Running cost (per day)/ Time charter rate (per day) (USD) Vinalines Pioneer 4,800 Time charter's Vessel 5,200 Difference -400 From the above reasons, the vessel Vinalines Pioneer is the best choice in Vinalines’ fleet 4.3.2 The solution to achieve customer perspectives One of the most important objectives of VCSC is improvement brand and consolidation customer loyalty In order to achieve this objectives, the firm should implement three programs that are develop new lines, invest new containers and vessels with modern technology to produce high quality service, and conduct customer management system In fact, currently VCSC’s competition is harder and harder because of integration process and open door of economy In addition, customer need change fast thus if VCSC has not strategic programs to improve and consolidate customer loyalty, threats of declining trust and market share are easy to happen The objective about obtaining competitive pricing which are related to vertical integration and concentric deversification should be implemented parallelly with improvement quality of service Generally, VCSC’s service has high quality and the lowest price in the market also The price is low and competitive, so customer can accept easily The competitive pricing in this sistuation are understood that is level of price customers will decide to buy because they are satified about quality of VCSC’s service comparing with similar service of competitors In addition, the concentric diversification for freight services will help the firm focus on core competitors which 80 can decrease cost of service sold thus it will help the firm to keep competitive and low pricing The ensuring customer satisfaction objective will be conducted by customer management program Along with other programs which were concerned above, customer management is program the firm should implement as soon as possible because this is a weakness of VCSC If its competitors know this weakness, they will exploit this as their big opportunity Additionally, VCSC in particular and VINALINES in general are big state owned company in Vietnam with well-known brand but lack of a good customer management system are big problem To succeed in satisfying the customer requirements, VCSC must combine of factors in the best way such as below 81 VESSEL AND EQUIPMENTT TTTTT) New & high speed container vessel High quality container High quality of& container yard warehouse Online tracking Convenient booking place Employee's dress RELIABILITY RESPONSIVENESS Ship's schedule in time as announcement Perform service right at the first time Delivery cargo in time Keep other commitments Customer satisfaction ASSURANCE Feel safety when sending cargo via VCSC's vessel Accuracy in billing Shipping knowledge Quickest respond and take promptly action when cargo delayed/damaged Care much about customer's inquiries/complaints Willingness to help customers Always ready to get cargo booking from customer at the first time Care about changing of customer's needs Always adjust the price to be appropriate with market trend Good skill of foreign language of employees Employee's enthusiasm EMPATHY Available to contact at anytime Listen to customer Efficient recommendation Deeply sympathize with delayed cargo, damaged Figure 4.1 Customer satisfaction (Source: research 2011) 4.3.3 The solution to achieve internal perspectives The cost leadership strategy will hepl the firm to achieve objective about applying modern management and exploiting distribution system The company will 82 apply modern management system such as: ISO, MBO (Management By Objective), TQM (Total Quality Management), Value chain,etc… In addition, buy back, coordinate will make opportunity to use strength each other’s about management system Feeder management is one of modern management which VCSC should implement It will help the firm to overcome two weaknesses are supplying material management and last it will help the firm to improve management When the firm becomes bigger and operates in many business fields Feeder management will not only help to supply material but also help declining cost of service sold for company 4.3.4 The solution to achieve learning and growth perspectives Two major programs to achieve learning and growth perspectives are recruiting and training With yearly growth has been over 35% - 40%, change fast of business environment, strategic objectives and business strategy of the firm has changed the current organization structure can not meet requirements of that change According to business strategy which proposed above, the organization structure is organized by two directions First is feeder direction consisting of Vietnam-Singapore, VietnamHongkong, Vietnam-Thailand,…Every feeder has a leader who has responsibility to run and implement business strategy of that line Second is functional direction which is divided into functional departments such as: Finance and Accounting, Marketing, Logistic,…These functional departments have reponsibility to conduct business strategy following its function The Excutive Management Committee includes senior managers of company having reponsibility to give final important decision Second is recruiting and training, in order to have high quality human resource with and professional working environment objectives, the firm should implement well recuiting and training In addition, improving compensation policy for employee also is very important to overcome current weaknesses are unstableness and imbalance among worker, staffs and manager level The objective about contribution society activities is looked like corporate culture Beside business activities, the firm should attend to society activities which not only create corporate culture but also improve company image for comsumer and whole society 83 CONCLUSION Openning Vietnam – Singapore service will meet much competition, which requires VCSC to consider carefully many aspects One of them is the vessel’s option The above analysis shows that the different vessel’s option leads to different business results The project gave some useful recommendations for VCSC to get high profit as well as achieve the company vision and mission in the recent future On the other hand, setting strategies for an organization is full of complexities and these complexities arise from the ambiguous and non-routine processes This is because strategy development is about the future and this future is unknown Being a company which operates in shipping area in Vietnam, VCSC wants to become a leading company, a MLO and provide to its clients high quality services As a senior manager of the company, the author has researched, collected information and applied knowledge to formulate a suitable business strategy helping the company create competitive advantages by exploiting well opportunities, avoiding threats, salvaging strengths and overcoming weaknesses In order to implement this thesis successfully, the author has applied many method and models which are important tools for formulating a good business strategy to find out and choose suitable strategies; and balanced scorecard to proposal some main solutions to implement strategies for the company Due to the time constraint, the thesis has not solved some opening issues: - In reality, many risks which may occur to the vessel during the operating such as technical troubles, crew matter, act of God, sea accidents, and detention or arrest which much affect to vessel’s schedule or cargo operation What are the risks VCSC may face for this feeder service and measures to protect and restrict risks happened - At present, in Vietnam- Singapore service, most of competitors have about two sailings per week As a new comer, VCSC can not canvass full cargoes for two vessels in the first years 84 LIST OF REFERENCES Anderson, E., Sullivan, M.W., 1993 The antecedents and consequences of customer satisfaction for firms Marketing Science 12 (2), 125–143 A Parasuraman, L.L Berry, V.A Zeithaml, SERVQUAL: a multiple-item scale for measuring consumer perceptions of service, Journal of Retailing 64 (1), 1988, pp 12– 40 A 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Journal of Marketing 60, 31–46 53 Monthly report of Operation Department, VCSC, Dec 2010 54 Monthly report of Marketing Department, VCSC, Jan 2011 ... strategies for Vietnam - Singapore feeder service of Vinalines Container Shipping Company -Proposing some main solutions to implement business strategy for Vietnam -Singapore feeder service of Vinalines. .. for Vietnam - Singapore feeder service of Vinalines Container Shipping Company and some main solutions to implement business strategy for Vietnam -Singapore feeder service of VCSC Therefore, the... 3: Strategy analysis for VCSC Charter 4: Strategy for options Vietnam- Singapore service by Vinalines Container Shipping Company CHAPTER THE THEORETICAL BACKGROUND FOR STRATEGIC DIRECTION 2.1 Formulating