Limited distribution channel a study from ladofoods in the southern region

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UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business PHAN THI MINH NGOC Limited distribution channel: A study from Ladofoods in the Southern region MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2021 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business PHAN THI MINH NGOC Limited distribution channel: A study from Ladofoods in the Southern region MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: Assoc Prof Dr NGUYEN THI MAI TRANG Ho Chi Minh City – Year 2021 CONTENTS LIST OF TABLES v LIST OF FIGURES v COMPANY OVERVIEW 1.1 History 1.2 Strategic vision 1.3 Organizational chart PROBLEM IDENTIFICATION 2.1 Problem context 2.1.1 Economic factors affecting the wine industry 2.1.2 Social factors influencing the wine industry 2.1.3 Customers’ analysis 2.1.4 E-commerce channel supporting the wine industry 2.2 Symptom 11 2.3 Potential problems 12 2.3.1 The first potential problem: Wine frauds 13 2.3.2 The second potential problem: Limited distribution channel 15 2.3.3 The third potential problem: Low brand value 17 2.4 Main problem validation 21 2.4.1 Eliminating pressure in wine frauds and low brand value 21 2.4.2 Illuminating limited distribution channel as the main problem 22 2.5 Potential causes 25 2.5.1 Traditional channel 26 2.5.2 Conflict within the channel 29 2.6 Cause Validation 30 ALTERNATIVE SOLUTION 33 3.1 Alternative solution 1: recruiting human resources to develop other sales channels 33 3.2 Alternative solution 2: Built an e-commerce channel 35 3.3 Solution justification 37 3.4 Action plan 38 EXECUTIVE SUMMARY 41 SUPPORTING INFORMATION 42 5.1 Secondary data 42 5.2 Primary data 42 APPENDIX 1: QUALITATIVE RESEARCH 46 APPENDIX 2: QUANTITATIVE RESEARCH 54 REFERENCES 61 LIST OF TABLES Table 1: Average population by residence in Ho Chi Minh city 23 Table 2: Estimated cost of recruiting human resources 34 Table 3: Estimated cost of creative an e-commerce channel 36 Table 4: Action plan 39 Table 5: Qualitative: Initial Understanding 43 Table 6: Qualitative: Problems 43 Table 7: Quantitative: Problems 44 Table 8: Qualitative: Causes 44 Table 9: Qualitative: Solution 44 LIST OF FIGURES Figure 1: Chateau Dalat Figure 2: Organization chart of Ladofoods Figure 3: Annual International Wine Imports in Vietnam (4) Figure 4: Percentage contribution to revenue by customer type between 2017 – 2019 Figure 5: The market share of online B2C segment in Vietnam is growing in the period 2014-2020 10 Figure 6: Sales revenue of Ladofoods 11 Figure 7: Vietnamese imports of wine by country 12 Figure 8: Recognized the right brand of Chateau Dalat 14 Figure 9: Where customers by Chateau Dalat 16 Figure 10: Gender of respondents 18 Figure 11: Age of respondents 18 Figure 12: Occupations 19 Figure 13: Cause-and-Effect map 21 Figure 14: Chinese distribution channel system 24 Figure 15: Fish bone diagram of main problem and potential causes 26 Figure 16: Ladofoods product portfolio does not support e-commerce purchases 27 Figure 17: Product flow diagram of Ladofoods distribution channel 29 Figure 18: cause-and-effect map 32 COMPANY OVERVIEW 1.1 History Lam Dong Joint Stock Company inherits the know-how and experience in making wineries on the basis of the French Lafaro winery built in 1933 which has developed continuously (1) In 1999, Vang Dalat, the first official wine product of Vietnam, was launched Since then, the brand name Vang Dalat has been popular with wine lovers Ladofoods has officially established LADORA WINERY – Vietnam’s first professional winery in early 2015 (1) At the same time, Ladofoods Trading Service One Member Co., Ltd was headquartered at 8th floor, KICOTRANS building - 46 Bach Dang, Ward 2, Tan Binh District, Ho Chi Minh City and Representative Office in Hanoi Especially, Ladora Farm Ninh Thuan Company (Ladora Winery vineyard) was located at Phu Thuan village My Son - Ninh Son - Ninh Thuan Ladofoods has made efforts to research and bring back to Vietnam the varieties most suitable to the soil characteristics of Vietnam were found in cooperation with European experts in 2008 The Ladofoods wines are perfectly combined by grape growing techniques, wine fermentation process, among other advanced technologies transferred from leading companies and experts from the cradles of wine in Europe The goods are also inspired by the love for wine and the desire to mark Vietnam as a wine destination on the global map (1) Nowadays, millions of bottles of Ladofoods wines are consumed yearly in Vietnam and exported to foreign markets In which, Vang Dalat and Chateau Dalat have consolidated the position of an internationally standard brand that is widely preferred by both domestic and international wine lovers In more detail, Vang Dalat is the first wine brand in Vietnam whereas Chateau Dalat is a fine wine brand with a class that can rival international wines Figure 1: Chateau Dalat (Source: image of Chateau Dalat) Milestones: 1999: Vang Dalat was the first official wine product of Vietnam 2006: Vang Dalat was chosen by the Government to serve at APEC 2006 2016: Chateau Dalat Signature Shiraz, which is a product of Ladofoods, won the Cathay Pacific International Wine & Spirit Competition 2016 There was the first time that Vietnamese wine had been listed on the wine world map 2017: Chateau Dalat was elected by the Government to serve Heads of States at APEC 2017 2018: Chateau Dalat and Vang Dalat were accepted as National Brands 2018 2019: Dalat Wine Cellar which was the largest underground wine cellar and the first European-standardized wine cellar in Vietnam was inaugurated The property represented continuous efforts of Ladofoods to affirm its position as Vietnam’s No Winemaker 1.2 Strategic vision Vision “To build, develop and remain the position of Ladofoods as the No brand in domestic wines and products made from vines in Vietnam, expanding to regional as well as global markets” (2) Core values Quality: Ladofoods has always put the top priority on "Wine meeting international standards" The wine of Ladofoods is beautiful blend fermented by the souls and skillful hands of Vietnamese people With the definite passion for wine, Ladofoods is committed to provide customers with wines and related products that meet international standards and are safe for health At the same time, Ladofoods is gradually building up the winery culture in the community, contributing to the enrichment of Vietnamese culinary culture Innovation and creativity: Ladofoods considers innovation and creativity as the foundation for sustainable development, the leverage of innovation, and the distinction that creates the pioneering strength of the company To keep pace with market growth, Ladofoods encourages the spirit of continuous innovation and creativity, advanced application in science and engineering, and technology of production and management in order to improve quality of products and services Human Resource: Defining people as the foundation of the company's success, Ladofoods always strives to build a professional and dynamic working environment Moreover, we appreciate the cohesion so that employers always try their best and achieve their goals Strategic orientation To develop and maintain the pioneering and leading position of Vietnamese wine brands To constantly innovate, revolute, practice, and create values to deserve the position as the first official and leading Vietnamese wine brand To protect and develop brand reputation; build and continuously enhance the cultural identity of the company as well as the wine brand; encourage creativity to maintain diversity; ensure high competitiveness; and always adapt to business environment and sustainable development To always focus on customers’ satisfaction; cooperate closely with partners in the sense of trust, respect, and equality for common success To actively contribute to the overall development of society to build a good and civilized community, thereby promoting local and national socio-economic development 1.3 Organizational chart The Board of Directors consists of 09 members, the Supervisory Board includes 05 members, the Directors 03 people, the Chairman and Board members mostly hold key positions in the company, from the Head of Operations Department and equivalent above The company has professional offices, representative offices in Ho Chi Minh City and Hanoi The company's organizational apparatus operates on a functional organizational structure Average number of employees in 2019 was around 3.962 people, of which women accounted for nearly 80%, college-secondary level and technical workers accounted for 12%, the rest 88% of workers with low education, of which 42% workers with skilled workers level or higher Average income of employees increased from 10% to 20% per year SECOND INTERVIEW Interview Duration: around 15 - 20 minutes Date: 25/01/2021 Address: 8th floor, KICOTRANS building - 46 Bach Dang, Ward 2, Tan Binh District, Ho Chi Minh City Method: Face-to-face Interviewer: Phan Thi Minh Ngoc Interviewee: Mrs Phi Nga – one of the Production Director has worked at Ladofoods since 2012, used to work as a marketer for 10 years Ngọc: As a production director, what you think is the difficult problem that Ladofoods has? Mrs Phi Nga: This is a plant variety Our system of supplying raw materials and fruits for production is mainly grown in Ninh Thuan and Binh Thuan areas However, we need invest in depth and improve product quality, investment in raw material areas is a big problem that requires a lot of time and money The current variety of grapes used for wine production are fruit grapes of unstable quality, depending on the weather In recent years, new varieties of wine grapes such as Shiraz, Sauvignon and NH02 37 have been experimentally planted but this showed limited results in terms of quality and yield because this is a new variety Therefore, farmers' experience is limited Ngọc: So, what about external difficulties? Mrs Phi Nga: Actually, the research centers have not come up with a formal planting and care process As a result, farmers not want to invest because of concerns about productivity risks, quality as well as the consumer market Furthermore, we also have to compete fiercely with traditional wine countries like France, Italy and Chile, in addition to other countries 49 Ngọc: Does the company have a solution for this problem? Mrs Phi Nga: the company is importing French grape varieties, so it is expected that it will be favorable The soil in Ninh Thuan and Binh Thuan is also highly appreciated by foreign experts for wine growing Vietnamese Ngọc: As far as I can see, there is no e-commerce development on the company's website at present Why don't we develop more about this distribution channel? Mrs Phi Nga: it is very difficult to develop e-commerce because if you put the purchasing power into the website, it can be prone to errors Moreover, the company's staff are not specialized in the website, so adjusting is quite complicated In addition, if we use external partners, it will cost an arm and a leg Generally, traditional retail channels are still more popular in Vietnam The company just wants to focus on here, thereby, the company does not want to develop e-commerce Ngọc: During interviewed, I found that the company has problems with internal conflicts within the channel Do you think this is a company problem? Mrs Phi Nga: There are many types of conflict within the channel, but the majority of situations the company encounters are positive conflicts, meaning that it brings benefits and revenue to the company Ngọc: These are the two solutions to solve the company's current problem, in your opinion which is more feasible? Mrs Phi Nga: For the second solution, this seems to be effective for the company when it comes to improving the user experience and supporting purchases for customers, but presenting it to customers is a challenge Although the company also invests in digital, in order to grow strongly and improve the user experience, the company is still limited Ngọc: Thanks for your cooperation! 50 THIRD INTERVIEW Interview Duration: around 15 - 20 minutes Date: 20/01/2021 Address: 8th floor, KICOTRANS building - 46 Bach Dang, Ward 2, Tan Binh District, Ho Chi Minh City Method: Face-to-face Interviewer: Phan Thi Minh Ngoc Interviewee: Mr Quoc Bao – leader of Business department southern region has worked at Ladofoods nearly years, used to work as branding specialist at SCB around years Ngọc: As a leader of Business department southern region, what you think is the difficult problem that Ladofoods has? Mr Quoc Bao: Firstly, the company's marketing is not strong and has not built an overall Marketing strategy which orient the marketing activities follow to modern trends in order to have higher efficiency Secondly, the sales policy has not stimulated distributors due to low profits compared to other competitive products Currently, there is an internal competition between agencies of Ladofoods with each other Ngọc: in your opinion, where is the cause of that issue? Mr Quoc Bao: Marketing and sales activities are mainly based on existing distribution systems, implementing competitive pricing strategies and organizing major promotions to stimulate sales agents The participation in fairs internal and external still carries heavy formality This is just attracting attention which has not significantly stimulated the consumption of products for businesses Ngọc: Thanks for your cooperation! 51 FOURTH INTERVIEW Interview Duration: around 15 - 20 minutes Date: 20/01/2021 Address: 8th floor, KICOTRANS building - 46 Bach Dang, Ward 2, Tan Binh District, Ho Chi Minh City Method: Face-to-face Interviewer: Phan Thi Minh Ngoc Interviewee: Ms Anh Thu - Marketing specialist has worked at Ladofoods for years, Founder at Tap Hoa Co An, used to worked as Marketing executive at Mia Fruit in years Ngọc: As a marketing specialist, what you think is the difficult problem that Ladofoods has? Ms Anh Thu: the coordination with intermediate customers like general agents and retail stores which develop markets and expand the sales network of new products is not harmonious with interests These intermediaries often claim more interests in support of after-sales policies, marketing advertising, product display and so on Conflict within the channel occurs at all levels and within each channel also occurs mainly in terms of price and distribution area For instance, the supermarket sales channel in Big C requires a commission of up to 40% for a displayed item Ngọc: in your opinion, where is the cause of that issue? Ms Anh Thu: In the last years 2015 and 2016, the company paid too much money to promote Chateau Dalat, so they had cut staff a lot Consequently, young employees leave and retain extremely longtime employees who not have knowledge of e-commerce system Ngọc: How you think about the first solution? 52 Ms Anh Thu: Recruiting new people with many years of experience in the field of recruitment and especially social networking will help Ladofoods a lot in the early stages of implementing the e-commerce system Ngọc: Thanks for your cooperation! FIFTH INTERVIEW Interview Duration: around minutes Date: 17/03/2021 Address: 781/C5-C7 Le Hong Phong, Ward 12, District 10, Ho Chi Minh City Method: Face-to-face Interviewer: Phan Thi Minh Ngoc Interviewee: Ms Hoang Trinh – PG of Ladofoods at Dong Doi restaurant Ngọc: As far as I know, Dong Doi restaurant is the place with the highest revenue among all PG restaurants So, in your opinion, what are the difficulties that PGs often encounter? Ms Hoang Trinh: Sales volume also depends on the point of sale In this restaurant, some of the wine drinkers are foreigners who want to discover more about Vietnamese cuisine, but that number is very small Most of the products sold are invited by PG and it is also very difficult due to the prejudice of customers about domestic products and Vang Dalat products in the past Ngọc: Thanks for your cooperation! 53 APPENDIX 2: QUANTITATIVE RESEARCH Dear Mr/Ms I am a student from the Institute of International Education (ISB) - University of Economics Ho Chi Minh City Currently, I am conducting research on " Enhancing the brand value of Ladofoods" The success of this research depends very much on your support By answering the survey below, we are committed to protecting all information that you have provided I reserve ONE GIFT for you after doing the survey! Thank you very much Part 1: Personal information Please tell me in which province / city are you living? What is your gender? o Male o Female o Others What is your age? o 18-24 o 25-35 o 36-50 o Over 50 What is your job? o Officer 54 o Student o Individual business o Farmer o Housewife o Others Have you used Chateau Dalat? o Yes o Not yet Part 2: If you did not use to experience in using Chateau Dalat: Which wine are you using? o Foreign wine o Others brand of Ladofoods o Thang Long o Ha Long Part 3: Main part – If you are using Chateau Dalat Using 5-points Likert scale to evaluate the Chateau Dalat products and services, with the convention: = Strongly disagree, = Disagree, = Neutral, = Agree, = Strongly agree STATEMENT M1 QUALITY Quality_1 Chateau Dalat is very tasty and delicious Quality _2 The color and taste of Chateau Dalat is very appealing 55 Quality _3 Chateau Dalat is very convenient to use? Quality _4 Drinking Chateau Dalat regularly helps improve health? Quality _5 The packaging and labels of Chateau Dalat are very beautiful and luxurious Quality _6 The quality of Chateau Dalat was worth the money I spent M2 LOYALTY Loyalty_1 I am a loyal customer of Chateau 5 Dalat? Loyalty _2 Chateau Dalat is my first choice? Loyalty _3 I would not buy any other wine if Chateau Dalat is available in the store? Loyalty _4 I always look for Chateau Dalat, not other wines? M3 BRAND LUST Lust_1 I prefer to choose Chateau Dalat as a gift over other brands Lust _2 I like to drink Chateau Dalat more than other brands Lust _3 Chateau Dalat is worth the money than other brands Local _2 I can easily buy Chateau Dalat at any store 56 Local _4 When buying wine, I will choose Chateau Dalat M4 BRAND VALUE VALUE_1 I recognize the brand name Chateau Dalat VALUE _2 I got to know Chateau Dalat in wines sold together? VALUE _3 I recognize Chateau Dalat in fake wines? VALUE _4 I can remember the logo of Chateau Dalat? Part 4: Support information How often I use wine o Daily o Several times a week o Several times a month o Several times a year Regularly use wine on any occasion (You can choose from more than one answer) Family meals Holidays Parties Used as gifts Receive guests Others 57 I usually drink at (You can choose from more than one answer) Home with family or friends Restaurants Workplace when having parties Karaoke, Bar, etc Others The reason for me to buy (You can choose from more than one answer) High quality product Competitive price Easy to buy Eye-catching impressive designs Famous brand Promotion Others When mentioning Chateau Dalat, I think about (You can choose from more than one answer) A specialty of Dalat City Famous Vietnamese wine brand High-quality products Impressive design Wines that I am proud to drink For successful people Health Others Which products with the following brand names are those of Chateau Dalat (You can choose from more than one answer) 58 Chateau Dalat Lafaro Dalat Beco Dalat Sparrow Dalat Langbiang Dalat Vinh Tien Mimosa Dalat Where I can easy to buy Chateau Dalat (You can choose from more than one answer) Showroom Supermarket Mini mart THANK YOU FOR YOUR COOPERATION! 59 Descriptive Statistics Source: SPSS’s result 60 REFERENCES History begins – Ladofoods Ladofoods.vn 2020 Available from: 2020 Available from: https://ladofoods.vn/en/lado-group/history-begin Strategic vision - Ladofoods Ladofoods.vn https://ladofoods.vn/en/lado-group/strategic-vision-2 Vietnam: Vietnam's GDP expands 7.02 percent in 2019 Asia News Monitor 2020 Jan 02 Vietnam Food & Drink Report - 2019 Fitch Solutions Country Industry Reports 2019 Fourth:1-80 Đức HM Pháp luật đại lý thuế Việt Nam Trường Đại học Kinh tế Tp Hồ Chí Minh; 2020 Urbanization, and child mental health and life functioning in Vietnam: implications for global health disparities Social Psychiatry and Psychiatric Epidemiology 2020 Vietnam Tourism Report - 2019 Fitch Solutions Country Industry Reports 2019 Fourth:1-28 Levine J An Insider’s Guide to Counterfeiting Wine 2012 Mustacich S How big is Vietnam’s counterfeit‐wine problem? 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The challenges and opportunities of social media Business horizons 2010; 53(1): 59-68 32 Kehoe CM, Pitkow J Emerging Trends in the WWW User Population’ Communications of the ACM 1996;39(6) 63 ... domestic and international wine lovers In more detail, Vang Dalat is the first wine brand in Vietnam whereas Chateau Dalat is a fine wine brand with a class that can rival international wines Figure... secondary data and primary data are combined to formulate a detailed and critical analysis The following part will provide further clarification regarding the used data In the early stages of... see that this essay has two main causes for the company to be limited in distribution channels However, as each cause affects the problem in one way or another, finding the main cause plays an important
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