VINAMILK CASE 76248 - Risk

VINAMILK CASE Name: Nguyễn Thảo Uyên Student ID: 76248 Class: IBL0802 A.The Panorama of VINAMILK Logo of VINAMILK Introduction of VINAMILK - Type: Joint Stock Company - Industry: Milk and milk products - Founded: August 20, 1976 - Head office: 10 Tan Trao, Tan Phu Ward, District 7, TP Ho Chi Minh City, Vietnam - Area of activity: Vietnam, Asia-Pacific, Europe, Middle East, Africa, North America - - - - - Revenue: VND 46,965 billion (2016) Business profit: VND 9,364 billion (2016) Number of employees: 6000 (2016) HOSE: VNM Vietnam Dairy Products Joint Stock Company (VINAMILK) is a company producing and trading milk and milk products as well as related equipment and machines in Vietnam According to the United Nations Development Program, this is the 15th largest company in Vietnam in 2007 The company is the leading enterprise in the dairy processing industry, currently occupying 54.5% market share of liquid milk, 40.6% market share of powdered milk, 33.9% market share of drinking yogurt, 84.5% market share for yogurt and 79.7% market share for condensed milk nationwide In addition to strong domestic distribution with a network of more than 220,000 sales points covering 63 provinces and cities, VINAMILK products are also exported to 43 countries around the world such as the US, France, Canada, Poland, Germany and the Southeast Asia After more than 40 years of launching consumers, VINAMILK has built 14 production plants, logistics factories, sales offices, a dairy factory in Cambodia (Angkormilk) and an office representative in Thailand History - In 1976, when it was newly established, Vietnam Dairy Company (VINAMILK) was named Southern Milk - Coffee Company, under the Southern General Department of Food Industry - In 1982, the Southern Milk - Coffee Company was transferred to the Ministry of Food Industry and changed its name to the Milk - Coffee Confectionery Enterprise - In March 1992, the Union of Milk - Coffee Confectionery Enterprise officially changed its name to Vietnam Dairy Company (VINAMILK) under the Ministry of Light Industry, specializing in producing and processing milk and milk products - In 1994, Vietnam Dairy Company (VINAMILK) built another dairy factory in Hanoi to develop the market in the North, bringing the total number of affiliated factories to The construction of the plant is part of the strategy of expanding, developing and meeting the needs of the Northern Vietnam market - 1996: Joint venture with Quy Nhon Frozen Joint Stock Company to establish Binh Dinh Dairy Joint Venture Enterprise This joint venture creates favorable conditions for the Company to successfully penetrate into Central Vietnam market - 2000: Can Tho Dairy Factory was built in Tra Noc Industrial Park, Can Tho City, in order to better meet the needs of consumers in the Mekong Delta - 2003: The company was transformed into Vietnam Dairy Products Joint Stock Company The ticker on the stock exchange is VNM Also in 2003, the company inaugurated a dairy factory in Binh Dinh and Ho Chi Minh City Ho Chi Minh - 2004: Acquired Saigon Dairy Joint Stock Company Increasing the charter capital of the Company to VND 1,590 billion - 2009: Developed 135,000 distribution agents, factories and many dairy farms in Nghe An and Tuyen Quang - 2016: Inauguration of Angkormilk Dairy Factory in Cambodia - 2017: Inauguration of VINAMILK Organic Dalat Farm, the first organic dairy farm in Vietnam - 2018: Inaugurated the No Farm of VINAMILK Thanh Hoa High-Tech Dairy Cow Farm Complex Products of VINAMILK The products of VINAMILK - VINAMILK offers more than 250 product categories with the following main categories: - Liquid milk: 100% fresh milk, pasteurized milk fortified with milk, pasteurized milk, organic milk, barley cocoa drink with brands ADM GOLD, Flex, Super SuSu - Yogurt: Edible yogurt, drinking yogurt with brands SuSu, Probi, ProBeauty - Powdered milk: Dielac baby formula, Alpha, Pedia, Grow Plus, Optimum Gold, Ridielac nutrition powder, adult milk powder like Diecerna special for diabetes, SurePrevent, CanxiPro, Mama Gold - Condensed milk: Southern Star and Ong Tho - Ice cream and cheese: Subo yogurt ice cream, Delight ice cream, Twin Cows, Little Ice Cream, Little Ice Cream Ozé, Bows Cheese - Soy milk - beverage: Vfresh juice, Icy bottled water, GoldSoy soy milk The problems that VINAMILK is facing - There are many large domestic and foreign competitors (NutiFood, Moc Chau, TH True Milk, Dutch Lady, Friso, ) - VINAMILK products have problems with food hygiene and safety For example: in 2012, Mr Nguyen Van Dung - who bought and used Vinamilk's black mold milk products, denounced VINAMILK company to sell products that are not safe and hygienic - VINAMILK has difficulties in exporting At the annual general meeting of shareholders in 2018, Ms Mai Kieu Lien - Vinamilk's General Director said that Vinamilk's exports had decreased in 2017 and continued to decrease in the first quarter of 2018 - Vietnamese people are inclined to use foreign milk due to lack of trust in domestic repair products (in terms of quality, consumer health, organic milk, ) B.PEST and SWOT Analysis of VINAMILK PEST Analysis a Political and Legal factors - Requirements on food hygiene and safety and environmental protection are very strict - Political and social stability  Consistent with the business issue of the company - The Government has issued preferential policies (approving VND 2,000 billion for dairy development projects up to 2020)  Opportunities to develop the company as well as its products b Economic factors - The economy of our country is growing rapidly, with a significant impact on domestic purchasing power - Joining WTO puts competitive pressure on the company - Import tax on dairy products is reduced  Create products that are beneficial to imported dairy products  Many major competitors - Inflation increased - Gasoline prices increased - Prices of breeding cows and cattle raising costs increase  Product price increases  More or less affect consumption c Socio – Cultural factors - The living standard of Vietnamese people is getting higher and higher - The need to improve health and beauty also increased sharply - The percentage of malnourished children is still high  Promote product consumption - Most Vietnamese not have the habit of drinking milk everyday d Technological factors - Technology for fast sterilization of high temperatures - Developing technology of powdered milk philosophy - New modern equipment in the field of product packaging diversification - Technology for managing product quality up to ISO standards  Thanks to a combination of factors: advanced processing technology, UHT sterilization technology and aseptic filling technology, the product can keep its fresh taste for months without preservatives - The production line operates according to German standards SWOT Analysis a Strengths - VINAMILK is a familiar brand and trusted by Vietnamese consumers for more than 34 years - This brand was voted a "well-known brand" and was one of a group of 100 strong brands voted by the Ministry of Industry and Trade in 2006 - It was also voted by consumers in the "Top 10 High Quality Vietnamese Products" group from 1995 2009 - Highly effective marketing: Advertising programs, PR, Marketing bring high efficiency - VINAMILK has a strong, experienced and ambitious team of leaders proven by sustainable business profits - Diversified product portfolio, high quality products but lower prices than imported products of the same type and the largest market share in Vietnam among suppliers of the same products - Extensive distribution network, combining many modern and traditional distribution channels - Extensive distribution network, combining many modern and traditional distribution channels b Weaknesses - Not being able to control the source of raw materials: The source of raw materials has not been proactive, heavily dependent on imported materials (60%)  Therefore, input costs are strongly influenced by world milk prices and exchange rate fluctuations c Opportunities - Supplying raw materials is receiving support from the government, imported raw materials have reduced tax rates:  The Prime Minister's Decision No 10/2008 / QDTT sets out the dairy industry development target, with a target that by 2010 Vietnam's dairy industry will produce 380000 tons, 2015 to 700,000 tons and 2020 to million tons With the above policy, the issue of raw materials for the company is no longer a burden so it helps the company control costs and input materials  The import tax of milk materials is lower as committed to the WTO, this is an opportunity to reduce production costs while the imported raw milk powder accounts for 75% - The dairy industry is in a growth phase, so VINAMILK has great potential for development Moreover, the demand for dairy products in Vietnam has been growing steadily With the development of the economy, consumers are more concerned about health and use more dairy products - Vietnam has a young population structure (children account for 36% of the population) and the population growth is over 1% per year, this is a very attractive market - Per capita income increases over 6% / year d Threats - The dairy market competes fiercely with many companies participating, especially the big dairy companies in the world such as Nestle, Dutchlady, Abbott, Enfa, Anline, Mead Johnson, - The current dairy industry in Vietnam is dominated by households (95%) Total fresh milk production can only meet 20-25% of the consumed milk, the rest must be imported  Challenges to stability of raw material sources - Dairy farmers have virtually no profit, while being forced to buy raw materials by buyers  It is possible to make the domestic raw milk source decrease, pushing VINAMILK into a competitive buying position with other milk purchasing enterprises - The export market is risky and psychologically fond of using foreign goods of customers  More than 90% of export earnings come from the Iraqi market - this is a market with many political and economic risks Therefore, profit from exports of VINAMILK is still not solid  Sensitive business, directly affecting consumers' health, requiring businesses to ensure product quality Food safety issues can make consumers more afraid and more cautious when using milk products  The psychology of using foreign goods of Vietnamese people is a big challenge for VINAMILK and other businesses in the domestic market C.The Mid – Term Test Disease risk and safety for dairy cows - The safety quality of milk depends largely on the situation of dairy cows When an epidemic occurs, if there is no timely treatment, it may affect the supply, quality and price of fresh milk of the business - Unfavourable climatic conditions, natural disasters, epidemics, may affect the production of feed for cows (green maize grass, mixed feed, ) - Level of risk: This is a risk easy happen, and when it happens, it will greatly affect VINAMILK's supply chain and affect product quality - Solution:  Building a milk factory in areas with suitable natural conditions  Regularly vaccinating vaccines for cows and conducting periodic examinations to detect and promptly treat epidemics from dairy cows, avoiding spreading to the whole cow herd Large competitors appear - Vietnam's milk market is growing day by day as the demand for users is higher and higher Joining WTO and opening up the integration make foreign dairy industries want to enter the domestic market (Dutch Lady, Friso, ) Besides, the domestic market also does not lack big-name competitors (Moc Chau, TH True Milk, NutiFood )  This puts great pressure on VINAMILK, if it cannot be solved, waiting for VINAMILK is losing market, losing loyal customers, reducing consumption - Level of risk: easy to occur, great impact - Solution:  Promote market research and customer needs  Diversify products and continuously innovate  Taking advantage of the Internet, mass media, to reach customers more easily  Joining or organizing charity programs, study encouragement, to promote and attract consumers Product quality problems occur - Products that are sold to consumers are assessed to have problems of violating food safety and hygiene: strange objects appearing in the products, expired products showing signs of damage, - Product risks can occur at a certain stage in the production and supply process - Level of risk: easy to occur but a large degree of influence due to losing the trust of customers - Solution:  Application of advanced science and technology (such as centrifugal separation technology) to almost eliminate bacteria, providing the best milk quality and the highest yield  Building a system of transfer stations evenly and widely spread to ensure the purchased milk will be stored and cooled in the shortest time, ensuring the quality of milk input and strict requirements on hygiene and safety Products  Establishing a system of product traceability measures to ensure that product recall and handling are carried out quickly, promptly and minimize adverse impacts on consumers in the event of any incident try There are ways to handle and avoid problems in the future Rumour risks - Appear on the market some information causing loss Maybe it was launched by a competitor, - Food drink business is under great pressure from rumours of food safety When there is bad information about product quality, especially related to food for children, consumers may overreact before the official information is confirmed  Customers denounce poor quality products may affect the reputation of the business - Level of risk: easy to occur and the level of impact is small - Solution:  Instantly find out the source and take strong measures to handle the audience and the rumour source  Make detailed, specific announcements about the market and its customers  Bring new products to market as soon as possible Human resource risks - Currently, VINAMILK is developing and expanding the market by opening more branches and shops in some big cities such as Hai Phong, Hanoi, But the opening of more branches and stores made the company lack of coordinators and experienced staff in the areas of supply, marketing, sales, - Because experienced staff on the company are not enough to bring enough employees to new branches and shops - Level of risk: easy to occur and small impact - Solution:  Recruiting more experienced staff in the fields of management, sales,  There are good remuneration policies and attract talents (competitive salaries, bonuses, pay attention to the lives of employees to encourage them to work better, )  Having a long-term plan of arrangement and training to prepare the contingent management team, to build a contingent of competent technical staff  Regularly organize short-term, long-term or intensive training courses at home or abroad for employees, refresher courses, programs to help employees develop and achieve career goals  Building a friendly, professional and open working environment so that each individual can freely develop himself, promote creativity, unleash the potential of each person D.The Final Test The quality of life of Vietnamese people is getting better and better, so they are more concerned about and care about daily food and health issues Therefore, VINAMILK as one of Vietnam's biggest dairy brands is the first choice of everyone This makes demand and requirements for product quality of VINAMILK products also increase accordingly a Scenario: The demand of customers increased sharply, making the raw material (cow's milk) unable to supply for the production - The Acception: Continuing to maintain a shortage of raw materials for production  Assessing the scenario: this will make the situation worse When the company is unable to meet the needs of consumers, it will disappoint them and switch to another company The long term will cause loss of market and loyal customers  Solution: o Concentrating all remaining materials to produce a quantity of products to bring to market o Quickly find ways to overcome the supply of raw materials: find other suppliers, - The Worse: Pausing the introduction of products related to cow's milk to the market Due to insufficient supply of cow's milk from the farm, long-term use also runs out Finding other sources of supply is not acceptable because each domestic milk brand has its own supply  Assessing the scenario: this happens to be a lever for competitors' brands to develop the market and entice customers And VINAMILK will lose loyal customers and reduce its position in the market  Solution: o Focus on developing other products of the company o Launched innovative versions of other products to entice customers o Research launches plant milk products that can temporarily replace cow milk products, avoiding losing customers and losing markets - The Best: Continuing to offer cow's milk products, even innovative or special editions Because we have found another supplier, we can ensure the source of raw materials to produce to meet consumer needs  Assessing the scenario: continuing to maintain or even a step to bring the reputation of the brand further More loyal customers support the product Upgraded versions of the product receive the welcome of both new customers VINAMILK will maintain its position in the market, increase its competitiveness  Solution: o Multiple - sources should be used to maintain the supply of raw materials and maintain production o Understanding customers' needs, predicting consumption in stages to ensure raw materials and goods sources o There are often product innovations to attract customers o Building close relationships with suppliers for a stable source of materials, quality and good prices b Scenario: The quality requirements of products are increasingly high, making the manufacturing and packaging machinery of VINAMILK backward - The Acception: Maintaining use of available technology machines  Assessing the scenario: the product does not have innovation, there will be only those loyal customers, the existing market that cannot attract new customers or expand the market  Solution: o Find investors and provide equipment and machinery in line with the trend of modernization o Invest in modern technology for the stages of pasteurization, flavouring, packaging, o Continuous updating and warranty of new and modern equipment - The Worse: Continuing to operate such technology due to insufficient capital to invest in more modern equipment and no suitable supplier of machinery and equipment  Contextual assessment: outdated machinery makes the product produced are not appreciated (tastes not as good as other brands, colors are not as good as competitors' or customers are too boring with a version there is no innovation) This will gradually lead to customers leaving VINAMILK in search of a better brand and things are getting worse  Solution: o Collaborate with local and foreign credit and financial institutions to take advantage of financial support o Control the use of capital effectively and for the right purposes, ensuring proactive capital for production and business - The Best: Invested by the government (the Government has issued preferential policies (approving VND 2,000 billion for dairy development projects up to 2020) in order to improve and upgrade the machines and equipment following German technology and they have learned, successfully negotiated a German supplier of machinery  Assessing the scenario: this is a good sign for product innovation and market development With modern machinery will create high quality products, packaging is beautifully packaged and often renovated This will help VINAMILK to attract customers, increase consumption and expand markets, increase competitiveness  Solution: o Should use multiple - sources to quickly update the equipment and modern machinery to improve the quality of products o Building an overseas material processing plant to take advantage of their high quality raw material and modern machinery Scenario: With the strong development of the dairy market in Vietnam, VINAMILK has received more and more major competitors in both domestic and foreign markets In the country, there are major competitors: Nutifood Vietnam Nutrition Food Joint Stock Company, TH True Milk Joint Stock Company, Hanoi Milk Joint Stock Company, and Cow Milk Breeding Joint Stock Company Moc Chau… In foreign markets, many big dairy brands have brought their products to Vietnam: Friesland Campina Vietnam (Dutch Lady, Friso), New Zealand businesses Fonterra and Deosan (Anlene, Anmum and Anchor), Nestle nutrition business, International Dairy Joint Stock Company (IDP), Abbott-USA - The Acception: maintaining a balance between competitors, no move before the appearance of competitors  Assessing the scenario: continues with the company's products, the market still owns, the existing number of customers, all without any change This easily leads to gradually losing the  o o -   o o o - existing position, the future is not positive for VINAMILK Solution: Learn about competitors There is a solution and competition suitable to each competitor (market competition, product competition, imitation, ) The Worse: Competitors surpassed by competitors due to no changes or slow changes have been surpassed by competitors in terms of revenue and consumption Even lost the market and lost loyal customers This resulted in gradually losing the position and reputation that VINAMILK has Assessing the scenario: If this risk happens, it will seriously affect brand and company Solution: Research carefully the market Must differentiate and diversify products of brands to increase consumption (increase product usability, increase use value for customers, design eyecatching packaging designs, be more efficient,…) Reinforce processes from production to distribution and sales to consumers The Best: There is a change in the product, innovating the packaging version, improving product quality,… All the responses to competitors   o o o have good results New products and new releases attract large numbers of customers Assessing the scenario: promoting sales of VINAMILK products and helping VINAMILK to gain a competitive advantage, maintain its leading position and expand the market Solution: Having an agile marketing strategy, promoting products widely to consumers through media such as television, magazines, internet, posters,… Frequently changing advertising content, implementing promotions Attracting and sponsoring community activities, television programs, provide nutrition counselling services for people of all ages, increase marketing staff to access and diversify distribution channels (agents, supermarkets, schools, hospitals,…)  .. .- - - - - Revenue: VND 46,965 billion (2016) Business profit: VND 9,364 billion (2016) Number of employees: 6000 (2016) HOSE: VNM Vietnam Dairy Products Joint Stock Company (VINAMILK) ... Thanh Hoa High-Tech Dairy Cow Farm Complex Products of VINAMILK The products of VINAMILK - VINAMILK offers more than 250 product categories with the following main categories: - Liquid milk:... Quang - 2016: Inauguration of Angkormilk Dairy Factory in Cambodia - 2017: Inauguration of VINAMILK Organic Dalat Farm, the first organic dairy farm in Vietnam - 2018: Inaugurated the No Farm of VINAMILK