Improving the profitability by focusing on developing gold jewelry strategy the case of kim hoan saigon

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business LÊTHÚY VI IMPROVING THE PROFITABILITYBY FOCUSING ON DEVELOPING GOLD JEWELRY STRATEGY THE CASE OF KIM HOAN SAIGON MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City –2020 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business LÊTHÚY VI IMPROVING THE PROFITABILITY BY FOCUSING ON DEVELOPING GOLD JEWELRY STRATEGY THE CASE OF KIM HOAN SAIGON MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: DR.LÝTHỊ MINH CHÂU Ho Chi Minh City – Year 2020 Contents METHODOLOGY Error! Bookmark not defined Company Overview 1.1Saigon Gold JewelryCompany 1.2 Overview of Kim Hoan Saigon 1.2 Marketing and Sales Department Symptoms 10 Problem Identification 11 3.1 Potential Problems 11 3.1.1 High Costs of Goods sold 13 3.1.2 Lack of focus on developing of Gold jewelry Products 14 3.1.3 Underperformance of Marketing and Sales Department 16 3.2 Validating Main problems and consequences 18 Cause validation 19 4.1 Potential causes 19 4.1.1 Traditional brand reputation 20 4.1.2 High Inventory on Gold bar 20 4.1.3 Lack of position in charge of developing Gold jewelry product 21 4.2 Validating Causes 22 4.2.1 Traditional Brand Reputation Affect 22 4.2.2 High inventory on Gold bullion Product 24 4.2.3 Lack of position in charge of developing Gold jewelry Product 25 Alternative Solutions 28 5.2 Increase the competitiveness of KHSG SJC 32 5.3 Set up R&D Department Error! Bookmark not defined Action Plan in Organization 33 6.1 Establish R&D team in Technical department 35 6.2 Outsourcing R&D Error! Bookmark not defined Supporting Information 39 In-depth interview script: 39 In-depth interview script: 40 In-depth Interview script: 43 References 46 Appendix 49 List of Abbreviation SJC Saigon Jewelry Company PNJ PhuNhuanGold jewelry Company KHSG Kim Hoan Saigon Company SR Sales Revenue GP Gross Profit OPEX Operating Expense OC Operating Cost IC Inventory Cost R&D Research and Development EXECUTIVE SUMMARY (1) Strategy is a systematic approach to solve a problem Having endured continuously decrease in profit, Kim Hoan Sai Gon SJC is facing a complicated problem of lacking ability to compete in gold jewelry industry in Vietnam In this paper, the author outlined the significantly symptom as a decrease in revenue and profitability By realizing the symptom as decreasing profitability, the author found out that the main problem is the lack of focus on developing Gold jewelry product By conducting the second in-depth interview, the author could define the underlying root cause that lead to the main problem is lack of position in charge of developing Gold jewelry product.Combining the information collected from the previous interviews and the literature review, the author suggested two potential alternative solutions to solve the main problem: set up an R&D department or training the current Marketing staff to be capable to develop the Gold jewelry product ranges Finally, based on the capability of company and the cost-benefit analysis, the author came with the most potential action plan by focusing on developing Gold jewelry strategy Company Overview 1.1Saigon Gold JewelryCompany Established in 1988, SJC has been operating for 22 years (to 2010) under the name Saigon Gemstone Gold jewelry Company (SJC), astate-owned enterprise under the People's Committee of Ho Chi Minh City After September 16, 2010, Saigon Gemstone Gold jewelry Company changed to the new name Saigon Gold jewelry Company Limited - SJC and has become a leading economic group in Vietnam within the next few years, developing gold bullion and gold jewelry business with the foundation of a national brand to become an international brand The company consists of a head-quarter, 23 branches, subsidiaries and associates, and 13 invested enterprises Distribution network includes more than 200 stores, 43 official agents and over 3,000 retail stores across the country Besides, SJC also has a concentrated gold jewelry factory, producing more than 500,000 products a year SJC continues to reap many other awards and titles: First-Class Labor Medal, for the fourth time in a row on the list of Top 500 Leading Retailers in Asia-Pacific, the prestigious title issued by Top Retail Publishing Magazine (Singapore).In October 2011, SJC changed the new Hologram packaging for gold bullion bullions with high anticounterfeiting technique to ensure consumer rights and brand reputation In addition, SJC was ranked the fourth in the country The 500 largest enterprises in Vietnam 1.2 Overview of Kim Hoan Saigon Kim Hoan Saigon Organization Chart Administrative Manager Financial Manager Director Vice Director Sales & MarketingManager Technique Manager KIM HOAN SAIGON is a subsidiary of SJC, operating under the model of a parent company - a subsidiary as a multi-sector business group in which gold bullion and gold jewelry production and trading is the main business, besides real estate, financial investment and services KIM HOAN SAIGONbrand has come into the mind of customers as the product of trusting, prestige and quality Deserving the title of National brand, Kim Hoan Saigon’ products are diverse with many categories from common to high-end, divided into two types of product: SJC gold jewelry products and SJC Diamond gold jewelry products The popular SJC gold jewelry products have many unique andup-to-date fashion trends from world-widecasting technology, punching, connecting, engraving machines Especially this type of products are be sold under affordable price, which is suitable for many customers and meeting the needs of dealer stores in the provinces throughout the country SJC gold bullion high-end gold jewelry type came to market in late 2012, meeting the needs and tastes of the high-end segment The products are handmade, exquisite combination between natural gemstones, diamonds, rubies, sapphire and gold bullion In this gold jewelry segment, SJC divides products into categories: Gold jewelry and DiaGold bullion Jewelry Diamonds are carefully selected according to 4C standards and tested according to international standards Natural gemstones are refined by superior color, transparency and sharpening, creating unique products that show a classy and captivating style This paper will use term Gold jewelry referred as whole jewelry segment of SJC in general Vision:Kim Hoan Saigon gold jewelry products meet the standards required by Circular 22 on the measurement management in gold bullion trading and the quality management of gold jewelry and fine art gold bullion circulated on the market with the ability to meet Bulk applications and fast Customers when purchasing SJC gold jewelry products are absolutely assured of the prestige and product quality, plus good after-sales regime.During 32 years of operation and development, SJC has been awarded with many valuable awards and highly preferablein the country and in the region 1.2 Marketing and Sales Department Structure of the Marketing and Sales Department Manager of Marketing and Sales Department person Vice Manager of Marketing and Sales Department person Marketing staff person Media staff Head of the store person head stores of each branch Sales staff sales staffs per branch Source: Structure chart of SJC Symptoms Revenue and Gross profit decrease At first, this paper gives a brief portrait of the company Then, the author found that one of the noticeable symptoms that the organization facing is the Revenue and Gross Profit of company is decreasing in the two recent years Monetary unit: Billion VND Fiscal Year 2016 2017 2018 Revenue 23,043 22,950 20,871 Gross Profit 188 173 151 Gross Margin 1% 1% 1% Table Sales Revenue and Gross Profit of SJC from 2016 to 2018 Source: KIM HOAN SAIGON Financial Report 2016–2018 According to the financial report of SJC, the sales revenue of Kim Hoan Sai Gon SJC continuously declined 9% in 2018 and 5.6% until 9/2019 Moreover, not only the decrease in sales revenue butthe gross profit also declined 65% in 2018 and 28% until 2019 In order to observe the symptoms clearer, the author also took an exploration into financial report in 2018 of SJC’s main rivals: PhuNhuanGold jewelry (PNJ) and Doji From 2016 – 2018, both PNJ and Doji still have an increase value in both revenue and gross profit The decreasing sales revenue is significantly alert when compared to the average sales revenue of Gold jewelry products some main rivals in the same gold jewelry sector such as PNJ and Doji 10 References Michael, J (2004) Problem Solving and Decision Making: 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OF ECONOMICS HO CHI MINH CITY International School of Business LÊTHÚY VI IMPROVING THE PROFITABILITY BY FOCUSING ON DEVELOPING GOLD JEWELRY STRATEGY THE CASE OF KIM HOAN SAIGON. .. line From the lack of things on the main reason that is determined to be the lack of the development of the gold jewelry product line because if focusing on developing the SJC gold jewelry product... link connection between the lack of developing the Gold jewelry product strategy and the decrease in profitability (10) According to Gold jewelry pricing-formula and Report of World Gold bullion