NATIONAL ECONOMICS UNIVERSITY NEU BUSINESS SCHOOL PHAN LE HOANG LINH Business strategic direction for raw tobacco of Ngan Son Joint Stock Company to 2025 Hanoi 2018 NATIONAL ECONOMICS UNIVERSITY N[.]
INTRODUCTION
Rationale
Tobacco is one of the four raw crops used in the industry (along with cotton, paper and oil crops) As a short-term industrial crop, raw tobacco is a unique commodity, bringing high economic efficiency and many benefits to society, especially in hunger elimination and poverty reduction However, when it comes to the tobacco industry, including cigarette production and the development of raw material areas, it refers to a highly sensitive economic and technical sector that does not encourage strong development.
Smoking is bad for health and tobacco is not necessity However, smoking in living is a long-term consumption habit and tobacco is still a consumer goods with great demand for many classes of people in our country Today, due to high taxes, the tobacco industry is still considered an important manufacturing industry in many countries around the world, especially in developing countries It brings huge profits to many businesses, generates large revenues for the state budget and solves a significant number of jobs for the society.
At present, the general trend of the society is not encouraging tobacco consumption, and the government also has many policies and regulations to limit production and reduce the demand for tobacco In addition, the general trend of the tobacco industry in the world (and the Vietnam tobacco industry in the future) is to gradually replace traditional tobacco products with new generation tobacco products with advanced technology, less toxic for the health of users Therefore, tobacco business enterprises must have appropriate business strategic direction in order to ensure the development and suitability of social requirements.
Ngan Son Joint Stock Company is a multidisciplinary business enterprise,including agriculture, industry and service, logistic activities However, the main occupation of the company is to invest in growing tobacco and processing raw tobacco to supply to tobacco companies Facing up with the objective reality of the existence of the tobacco industry, in order to balance economic and social conflicts,between corporate profit and public health, the development strategic direction for the company is extremely necessary.
Research objectives
The general research objective of the thesis is to evaluate the overall situation of production and business activities of Ngan Son Joint Stock Company, to find advantages, weaknesses, opportunities and threats, then develop strategic direction for the company's development by 2025. b) Specific objectives
- To review relevant literature and theories related to business strategy.
- To analyze and evaluate internal and external environmental factors affecting the production and business activities of raw tobacco of Ngan Son Joint Stock Company.
- To direct the strategy for raw tobacco of Ngan Son JSC from 2019 to 2025.
- To propose strategic solutions to develop production and business activities for raw tobacco of the company to 2025.
Research questions
To solve the problems of the thesis, the following research questions will be asked:
- What is business strategy? What factors affecting the selection of business strategy? What is the role of choosing, planning business strategy for business?
- How is the current production and business situation for raw tobacco of Ngan Son Joint Stock Company? How do internal and external environmental factors influence the production and business activities of the company?
- From the assessment of the factors affecting the production and business activities of the company, how to direct the business strategy and solutions to develop the production and business activities for raw tobacco of Ngan Son JointStock Company?
Research object and scope
- Research object: Investment in planting tobacco crops and processing raw tobacco (supply of tobacco) of Ngan Son Joint Stock Company.
- Research scope: The operation of Ngan Son Joint Stock Company’s raw tobacco with being compared and reconciled in relation to the tobacco industry and vision to 2025 in the business strategy of the company.
Research methodology
1.5.2 Data collection and processing a) Data collection
- Primary data: As the thesis's objective is to study the company's strategy, it will conduct in-depth interviews with senior leaders of the company and experts on its strategic direction.
- Secondary data: From production and business reports of the company and of the tobacco industry (as the tobacco industry is a specialized sector controlling
Studying theoretical frameworks, research models
- Data from in-depth interviews with company leaders and experts
- Data from industrial reports and Vinataba’s reports
Analyzing and evaluating external and internal environment factors affecting business and production activities of the company
Direct business strategy and solutions suitable for the company the quantity of products) related to internal and external factors affecting the business and production performance of the company. b) Data processing
- Analyze and synthesize the results and identify opportunities, threats, strengths and weaknesses in the company's operations.
- Synthesis to provide strategic solutions to develop company operations.
Research structure
The research structure consists of four chapters:
- Chapter 2: Theoretical background on business strategy
- Chapter 3: Analysis of factors affecting business strategy for raw tobacco of Ngan Son JSC.
- Chapter 4: Business strategy direction for raw tobacco by 2025 of NganSon JSC.
THEORETICAL BACKGROUND ON BUSINESS STRATEGY
Definition of business strategy
In the Harvard Business Essentials, strategy is a military term derived from Greece that refers to the plan of arraying and distributing forces to achieve war objectives Today, strategy is used in many areas of society, especially in the economic sector According to Fred R David (2016), Strategic Management: A
Competitive Advantage Approach, Concepts and Cases, Pearson, 17 th Edition, South Carolina, strategy is the means to achieve long-term goals.
In short, strategy is to plan the direction and the way to achieve objectives. Business strategy: According to Bruce Henderson, strategist and founder of Boston Consulting Group, “business strategy is a careful search for an action plan to develop and combine competitive advantages of the organization The differences between you and your competitors are the basis for your advantages” Harvard Business School professor Alfred Chandler (2013), Strategy and Structure:
Chapters in the History of the Industrial Enterprise, Martino Fine Books,Massachusetts, defines: “Business strategy is the process of defining the long-term fundamental goals of the business, the choice of direction and allocation of resources to implement those goals”.
In today's competitive environment, business strategy can be defined as determining business objectives, planning and allocating resources to create competitive advantages to achieve business objectives in the most effective manner.
Relationship between business strategy and other strategies
A company strategy is usually discussed in three aspects: company strategy, business strategy (competitive strategy), and function strategy.
A corporate strategy identifies a business sector (or business sectors) the company is or will be undertaking, how each sector in which the company is expected to operate (for example, cooperating with other affiliates of the company or to do business independently, or acquire or invest, which industry to be continued, what industry to be eliminated, what new industry to be involved) and how about its relationship to the society In other words, corporate strategy is the selection of business sectors Accordingly, the corporate strategy must set the direction for the development of single-sector and multi-sector businesses Single- sector businesses limit their activity in one major industry or business, but for multi- sector business units (operating in two or more sectors), they meet more complicated tasks than deciding on whether to continue the current business sector, to evaluate the capabilities of the new sector, etc For example, corporate strategy needs to determine among 20 current domestic under crisis situation, which branch should be kept, which branch should be closed, which new business sector should be established, which new contract should be signed, which target should be pursued In other words, company strategy is the identification of financial and non- financial values and goals of the company It focuses on identifying and building or acquiring the resources and potentials needed to make decisions about the business sectors in which the company will compete and how business activities should be connected Corporate strategy will determine how the resources are allocated to the business activities of the company and therefore it determines what the company should do and should not do.
A business strategy is the determination of how a company competes in a predetermined industry or a specific sector For a sustainable development in a certain area the company must establish a competitive advantage over the other competitors so business strategy is also considered as competitive strategy The competitive strategy of a company is how the company creates a valuable position in the industry This includes a foresight (literally and figuratively) about which customers the company will serve and how the company brings value to them But a competitive strategy is not just a vision; it is a combination of specific activities and processes throughout the company, helping it create unique value for their customers Thus, the strategy also leads to the harmonization of the company’s activities so that persistent efforts throughout the company will unite to enhance the potential advantage in the company's competitive position.
Business-level strategy identifies how each company can fulfill its mandate (and thus contribute to the completion of a company strategy) in its field Business- level strategies are equally important for individual business units and individual companies in a multi-sector business unit.
Function strategy focuses on support for corporate strategy and business strategy For the single-sector business units and each business unit in the multi- sector business units, function strategy is similar These function strategies provide the basis for other strategies such as marketing strategies, financial strategies,research strategies, and operational strategies that strengthen the company's competitive strategy and identify the processes and procedures which the company can benefit from its competitive edge Linking and analyzing function strategies determines how each of the functions of the business fits into the competitive strategy while focusing on the linkage and coordination of functions.
Process to direct the business strategy
In the Harvard Business Essentials, the business strategic planning process is illustrated in the figure below
Figure 2.1: Business strategic planning process
2.3.1 Identify the mission of the business
Every business has a mission, all activities of the business must be directed to this mission Therefore, the business strategy must also originate from the mission of the business, the mission is the basis for business strategy and the purpose of the strategy is also to fulfill the mission of the business.
Therefore, the first step in the strategic planning process is to determine what the mission of the business is.
The next step in the process of business strategic planning is to determine the goals of the business The main goal is the result or target that a business will aim for, which is the first and most important basis for building a business strategy.
The mission of the business is general, and the goal is to specify the mission of the business, for example, the mission of a bank is to mobilize capital and loans, then the goal to specialize the mission is to answer the question that how much the mobilization and lending is, how long it is, the number and type of customer, etc.
The goal is built based on the mission of the business and the internal and external environmental factors The goal must be consistent with both objective and subjective conditions that is to be considered and adjusted on the basis of environmental factors both inside and outside the business.
2.3.3 Analyze internal and external environment
A business or business sector is always put into a certain environment, including subjective factors (internal environment) and objective factors (external environment) For the analysis of internal and external environmental factors, we can use available data or research surveys from inside and outside the business.
Figure 2.2: Operating environment of the business
The internal environmental factors are the subjective factors affecting the production and business activities of the business, including factors that have positive and negative impacts Positive factors are the strengths of the business, such as good and professional staff; modern production lines; abundant financial resources, well-known and prestigious brand, etc.; negative factors are the weaknesses of the business, such as: backward production line; limited financial resources, etc.
It can be said that the analysis of internal environmental factors is the analysis of strengths and weaknesses of the business.
To analyze the strengths, we combine all the advantages of the business, analyze, compare with competitors and assess the level of creating business advantage for each factor, at the same time point out the factors that bring the most advantages for the company which need to be taken advantage of, etc.
For analyzing the weaknesses, we aggregate all the factors that are the weaknesses of the business, analyze them, compare them with our competitors, and evaluate how bad each of them affects the company’s business process, at the same time, point out the factors that have the worst impact on the business which need to be addressed immediately, etc.
The basic internal environmental factors are:
- Human resources and organization: Including the following factors: Human resources quality, human resources structure, human resources maintenance and development policy, etc.
- Financial resources: Including the following factors: Financial capacity, financial management, accounting system, etc.
- Production capacity: Including the following factors: Production technology line, production scale, product quality, production cost, etc.
- Management capacity: Including the following factors: Capacities of production management, quality management, business management, human resources management, materials management, etc.
- Marketing and sales: Including the following factors: Market development research, distribution channels, after-sales service, etc.
The external environment factors are the factors that affect the production and business activities of enterprises, including factors that have positive and negative impact Factors that have positive impacts are opportunities for enterprises, such as increased market demand, state support policies, macroeconomic regulations of the State, etc Negative factors are threats to the business, such as: Demand market decline; more new competitors; increased material price, etc.
It can be said, analysis of external environmental factors is the analysis of opportunities and threats of the business.
To analyze opportunities, we gather all the factors from the external environment that can provide opportunities for the business, analyze and evaluate the opportunities provided by those factors, and point out which one that the organization should grasp right at that time, etc.
To analyze threats, we collect all the factors from the external environment of the business, analyze and evaluate the degree of negative impact on the business process of each of them, at the same time point out which factors that have the worst impact on the business and should be avoided immediately, etc.
The external environment can be divided into two types, macro environment and micro environment.
Macro-environment factors: The macro environment affects business and production situation of the enterprise It includes factors such as economics,politics, science and technology or social – culture It can be measured by PEST analysis:
Political factors ã Issues of ecological environment ã Current and future legal environment ã International legal environment ã Management agency and work process ã Government policies ã Term of government and changes ã Commercial policies
Economic factors ã Economic situation in the country and in the world ã Economic trends in the country and in the world ã General and specific taxation issues for products/services ã Weather and season factors ã Market cycle ã Economic sector factors ã Distribution trends ã Factors affecting customers, end users ã Interest rates, exchange rates ã Monetary issues
Socio-cultural factors ã Trends in lifestyle changes ã Demography ã Attitudes and opinions of customers ã Mass media ã Legal changes that affect the society ã Brand image of the company ã Trends in shopping ã Events and impact ã Ethics issues
Technological factors ã Technology independent or dependent ã Funding for R&D ã Solution to replace technology ã Sophistication level of technological advancements ã Sophistication level and production capacity ã Information and communication ã Technology related to purchase ã Legislation related to technology ã Potential for technological innovation ã Intellectual property protection
Source: Strategic Management Textbook – National Economics University
Micro-environment factors: Mainly competitive pressure, in the market economy, enterprises often face up with competitive pressures A very effective tool for analyzing competitive pressures is Porter's five-force model.
Figure 2.3: Porter’s five-force model
Factors affecting business strategy
These are the factors within the business, including positive factors (strengths) and negative factors (weaknesses), such as financial resources, human resources, geographic location or technology, etc.
- Strengths: These are the strengths of enterprises in production and business,such as: high quality human resources, strong business capital, advanced technology, well-known brand, etc To promote their strengths, enterprises need to list the strengths then evaluate their strengths or core competencies.
Core competencies are the foundation for new strategic planning or modification, which refer to a company's expertise or skills in the major areas of its business operations This means that the company has its own competitive advantages over its competitors, which is highly appreciated by customers. According to David Collis and Cynthia Montgomery, core competencies are valued in the following areas:
+ Being difficult to be imitated or copied by competitors
+ It is really competitive compared to other competitors
- Weaknesses: Besides the strengths, enterprises always have weaknesses. These are weaknesses that reduce the competitiveness of the business compared to other competitors, such as backward technology, poor management, or limited capital As well as strengths, we need to list and assess each weakness to determine which is the weakest, which causes the most disadvantage for the business, then proposing some recommendations.
They are objective factors from the outside of the business environment that can negatively or positively affect the business, which poses threats and opportunities for the business.
- OPPORTUNITIES: These are favorable factors from the external environment that businesses can take advantage of for development, such as increasing demands, new policies of the State, scientific and technical advances, etc.
- THREATS: These are factors from the external environment that can threaten the development of enterprises, such as increased competition, changes in government policies, fluctuating raw material prices, etc.
Strategies from the SWOT matrix:
S – O STRATEGY: Promote strengths to take advantage of opportunities
S – T STRATEGY: Promote strengths to avoid threats
W – O STRATEGY: Overcome weaknesses to take advantage of opportunities
W – T STRATEGY: Overcoming weaknesses to avoid threats
Matrices and how to choose a business strategy
2.5.1 External Factor Evaluation (EFE) matrix
External factor evaluation matrix is a matrix that evaluates external factors that affect the company's operations, including the opportunities and threats to the company.
Listing of Key External Factors (10-20):
All those factors which can affect External Factor Evaluation matrix are listed in this step Two points should be kept in mind while listing these key external factors which are the treats & opportunities.
Assigning of Weight to Each (0 to 1.0):
In the second step of preparation of External Factor Evaluation matrix, all the identified factors are arranged on the basis of their weight age which is according to their importance intensity This weight age should be represented in percentage term But the main point of consideration in this step is that all the sum of all the factors must be equal to one.
Assigning of 1-4 rating to each factor:
Each factor in this step should be assigned some rating which ranges from 1 to 4 These rating are based on the responses of organization to the factors under consideration.
Multiplication of Weight of Each Factor by its Rating:
In this step the weight assigned to each factor is multiplied to it’s the rating assigned to it This generates a weighted score.
Summing up of the Weighted Score of Each Factor:
In the last step of External Factor Evaluation matrix the weighted score of each factor is summed up in order to ascertain the total weighted score for the entire organization The organization that has highest possible score is 4.0 & the lowest possible score is 1.0 while average possible score is 2.5.
In case that the total score is 4, the company is best at capturing opportunities and controlling external threats If the total score is 1, the company does not capture the opportunities and cannot control the threats from the external environment.
Table 2.2: External factor evaluation matrix External environment factors Weight Rating Weighted score
2.5.2 Internal Factor Evaluation (IFE) matrix
Internal factor evaluation matrix is a matrix that assesses the internal factors that affect the company's operations, including the strengths and weaknesses of the company.
Similar to EFE matrix, IFE matrix can be developed in five steps:
List the key internal factors as identified in the internal audit process, including both strengths and weaknesses.
Assign to each factor a weight that ranges from 0.0 (not important) to 1.0(very important) The weight indicates the relative importance of that factor to being successful in the firm’s industry Opportunities often receive a higher weight than threats The sum of all weighs assigned to the factors must equal 1.0
Assign a rating between 1 and 4 to each key internal factor to indicate how effectively the firm’s current strategies respond to the factor, where 4 = the response is superior, 3 = the response is above average, 2 = the response is average,
Multiply each factor’s weight by it rating to determine a weighted score.
Sum the weighted scores for each variable to determine the total weighted score for the firm.
In case that the total score is 4, the company has many strengths and can overcome the weaknesses If the total score is 1, it shows that the company has no strengths and cannot overcome its weaknesses.
Table 2.3: Internal factor evaluation matrix Internal environment factors Weight Rating Weighted score
SWOT matrix is a tool that brings together internal and external environmental factors and integrates those factors into business strategies as follows:
Source: Management Textbook – National Economics University
The Quantitative Strategic Planning Matrix (QSPM) is a quantifiable quantitative tool It expresses the attractiveness of the strategy which can be a choice and thus provides an objective basis for choosing particular strategies.
The QSPM matrix uses the information derived from EFE, IFE matrix, SWOT matrix, etc to objectively evaluate alternative strategies The strategies selected for inclusion in the QSPM matrix are not all strategies identified in Phase 2.
To build QSPM matrix, it is necessary to perform 6 steps:
Step 1: List the major external threats/threats and important internal weaknesses in the left column of the QSPM matrix This information should be taken directly from the EFE and IFE matrix The QSPM matrix should include a minimum of 10 important external success factors and 10 important internal success factors.
Internal factors of the IFE matrix Taken from the EFE and IFE matrix
From 1 to 4 From 1 to 4 From 1 to 4
External factors of the EFE matrix
Step 2: Classify each key success factor inside and outside.
Step 3: Study the matrixes in phase 2 (combined) and identify alternative strategies that the company should consider to implement.
Step 4: Determine AS (AT - Attractiveness Scores) for each factor: Rated from 1 to 4 The scores are from 1 = not attractive, 2 = somewhat attractive, 3 reasonably attractive, 4 = highly attractive.
Step 5: Determine total attractiveness scores (TAS) for each row by multiplying weights in step 2 by scores in step 4.
Step 6: Calculate total attractiveness score of each strategy This is the sum of all attractiveness scores in the strategic column of QSPM matrix The total attractiveness score represents the most attractive strategy in each selective strategy group In terms of all important internal and external success factors that may influence strategic decisions, the higher the score, the more attractive the strategy is.
Some experiences in building business strategy
Business strategy is a vital factor for business organizations, but building a business strategy is not easy because it depends on a lot of factors in both past and present, as well as future forecasts and characteristics of the business sector to take appropriate approach.
We can draw on the experience for developing a suitable business strategy as follows:
First of all, it is necessary to have a process to develop an appropriate business strategy
The goal set out should be in line with the situation of the unit and its external environment factors, avoiding unrealistic or inadequate goals.
Collect and analyze information to find the strengths of the unit to exploit as well as the weaknesses to overcome.
Accurately assess the opportunities and threats in the market.
Because the resources of the business are limited, focus only on the most effective strategies and ensure the consistency of strategies and solutions.
ANALYSIS OF FACTORS AFFECTING BUSINESS
Overview of Ngan Son Joint Stock Company
3.1.1 History of establishing, construction and development
Bac Tobacco Material Company, the precursor of Ngan Son Joint Stock Company, was established in 1993 on the basis of merging some parts of material production of the factories: Thang Long Tobacco Factory, Bac Son Tobacco Factory and Ha Nam Ninh Tobacco Material Enterprise The company mainly operated in the field of tobacco production, processing, trading and export The company made management and investment in small tobacco growing areas as in
Ba Vi, Ha Tay, Soc Son, Hanoi City, Huu Lung, Lang Son Province and Tam Dao, Vinh Phu Province with an area of investment, planting at only 336 hectares. Having implemented the policy of focused unified management and specialization in the field of tobacco raw material production and processing in the North from
1999 to 2004, the company merged with the raw material factory of Thanh Hoa Tobacco Factory and Lang Son Tobacco Company In 2000, Vietnam Tobacco Corporation approved the investment project of 2T/h processing line in Bac Ninh on the basis of handing over the processing line from Nam Tobacco Material Company (now Hoa Viet Joint Stock Company), in July 2004, the line went into operation On May 13, 2005, the Minister of Industry signed Decision No 1738/QD-TCCB and on July 4, 2005, signed Decision No 2203/QD-TCCB amending Clause 4, Article 1 of Decision No 1738/QD-TCCB on approving the plan and transferring Bac Tobacco Material Company into Ngan Son Joint Stock Company.
Ngan Son Joint Stock Company was granted business registration certificate
No 0103009019 issued by Hanoi Department of Planning and Investment for the first time on 31st August 2005, 8th September 2006 with chartered capital of VND27.9 billion On 29th December 2006, the company was officially listed on Hanoi
Stock Exchange Ngan Son Joint Stock Company has a head office and a processing factory located in Tien Son Industrial Park, Bac Ninh Province and has 6 branches under management, investment and purchase of tobacco leaves in the Northern provinces such as Lang Son, Bac Kan, Bac Giang, Thai Nguyen with nearly 400 employees (currently, Huu Lung Branch is temporarily closed and assigned to Bac Giang Branch) Ngan Son Joint Stock Company has chartered capital of VND 27.9 billion As of January 2017, the charter capital was VND 112.02 billion Ngan Son Joint Stock was owned by Vietnam Tobacco Corporation (Vinataba) with 55.7% of charter capital, 21.7% owned by Vinataba members, and the remaining 22.6% belongs to other shareholders In September 2012, Ngan Son Joint Stock Company has put into operation a production line following European standard to manufacture tobacco material with a capacity of 5.3 tons per hour (24,000 tons/year).
3.1.2 Role of Ngan Son Joint Stock Company in the tobacco industry of Vietnam
Since becoming a public company, listed on the stock market, Ngan Son Joint Stock Company has recorded important and significant position in the field of producing and trading tobacco raw materials in Vietnam The company has 6 branches under management, investment and purchase of materials located in Northern provinces such as Lang Son, Huu Lung, Bac Son, Bac Kan, Bac Giang, Thai Nguyen and one enterprise in charge of processing tobacco raw materials in Bac Ninh Those branches of the company have promoted the support of farmers to invest in cultivating tobacco on an area of about 6,000 hectares with an annual yield of about 10,000 tons of dried leaf material The company has created stable jobs for over 20,000 agricultural workers in these localities, helping to shift the crop structure and bring about high efficiency in poverty reduction, contributing partially to bring programs and policies of the resolution issued by the 7th CentralCommittee Session 10 to the life in the field of development of tobacco raw materials The company has always placed “social responsibility” in the tobacco plantation area as a mission to find its own interests This has been demonstrated in nearly a quarter of the last century of construction and development, Ngan Son Joint Stock Company has always linked the implementation of social responsibility into practice by practical tasks such as: support in building canals, traffic, afforestation, support for social education and social security in the area of raw materials with the value of tens of billion For the purpose of environmental protection and biodiversity in agricultural production in tobacco growing areas, in recent years the company has provided support to farmers in tobacco growing areas on 6.3 million seedlings valued at VND2.2 billion from the company's welfare fund and BAT – VINATABA Tobacco Joint Venture Company In 2014, the company developed and applied ISO 14000 as environmental management standards to better support production and business operation in accordance with green, clean and beautiful criteria In addition to step by step modernizing the production line of tobacco processing equipment, the company has also applied advanced science and technology into agriculture, opening new prospects for stabilization and development, increasing the value of commodities, supplying all tobacco products to farmers, ensuring the benefits to contribute to the reduction of poverty, towards sustainable development.
The organizational structure of Ngan Son Joint Stock Company is described in detail in Figure 3.1.
The organizational structure of the company is arranged in an online – functional format including: General Assembly of Shareholders, Board of Directors, Board of Supervisors, Director and Deputy Directors, 08 professional departments,
01 material processing factory and 06 affiliated branches The company's activities,apart from its formal organizational structure, are also organized by the Party and mass organizations (Trade Union, Youth Union) which operate in all units and the whole company For employees, the company issued the Collective Labor Agreement, which has been applied since 1997, amended and supplemented annually to suit the actual production and business activities of the company.
Figure 3.1: Structure of Ngan Son Joint Stock Company
Source: Ngan Son Joint Stock Company
Director and deputy directors are appointed by the Board of Directors to manage all activities of the company, according to the resolution of the Board of Directors Assisting the Director and the Deputy Directors, there have specialized functional departments and boards, direct production units in specialized fields: agricultural production; industrial production; business and trade In management decentralization, to give initiative and responsibility to heads of units to mobilize resources in possible conditions, to efficiently deploy production and business tasks.
Organizational structure of the company:
General Assembly of Shareholders: The highest authority of the company, decides issues related to the long-term development strategy of the company. Matters decided by the General Assembly of Shareholders are usually made through voting The resolution is passed when more than 51% of the votes in the General Meeting of Shareholders are agree The General Meeting of Shareholders elects the Board of Directors and the Board of Supervisors.
The Board of Directors: The management body of the company, headed by the Chairman of the Board of Directors The Board of Directors operates in accordance with the Law on Enterprises and the Charter of the company.
The Board of Supervisors: The Board of Supervisors is elected by the
General Meeting of Shareholders, headed by the Chief of the Board of Supervisors.
Director and deputy directors: To run the company's operations.
Professional departments: There are 8 departments
1 Planning and Material Department: Advising, consulting and managing the following areas: Building and directing the implementation of the plan; Reporting on the production and business situation; Regulation of industrial production; Supplying materials for investment and production; Management of Tien Son Warehouse; Management of investment in capital construction, regular repair work.
2 Finance - Accounting Department: Advising, consulting and managing the following fields: Finance - accounting; Financial management; Cost and price management; Statistical and analytical works related to finance and accounting; Construction development and investment; Inspection; Preparation of financial statements and accounting vouchers.
3 Organization and Human Resources Department: Consulting, advising and managing fields: Human resources management and organization; Recruitment and training; Labor protection; Labor, wage and policy; Emulation, commendation and discipline.
4 Administration Department: Advising, consulting and managing the following areas: Office administration; Administration management; Internal protection.
5 Engineering Department: Advising, consulting, managing the following areas: Planting area development planning; Technical management and investment in production of raw tobacco materials in the planting area.
6 Sales Department: Advising, consulting and managing the following areas: Business consumption of products, import-export work; Marketing; Market.
7 Department of Product Quality Control: Quality inspection of products, equipment, materials, tools; Quality management system.
8 Research and Development Department: Researching and developing new products, improving existing products owned by the company; Evaluating the process of producing products, quality of finished products on the processing line and formulating the formula for each type of product.
9 Subsidiaries: 01 processing factory and 06 branches
- Processing factory: Planning and managing the production process of preliminary processing of raw tobacco leaves into finished tobacco raw materials for domestic production and export according to the production and business plan of the company; management of machinery, equipment and processing line;
- Branches: Planning and managing the investment, planting, purchasing,decentralizing of bales of tobacco raw materials; storage of goods at satellite warehouses.
Working with customer Investing in planting Putting into warehouse
3.1.4 Process of technology, main products of the company
3.1.4.1 Main products and services of the company
- Material tobacco leaves: Grown in raw material areas such as Bac Kan,
Lang Son, Bac Giang and Thai Nguyen The above products are of suitable quality and meet the production demands of domestic and foreign tobacco companies.
Business analysis
3.2.1.1 Analysis of macro-environmental factors (PEST)
In the years of the first decade of the 21st century, Vietnam has made a deep and broad economic integration into the world economy, many of Vietnam's market opening policies create momentum for goods to be circulated more conveniently, including tobaccos.
Unlike other industries, however, the tobacco industry faces increasing pressures from the social environment, public opinion on tobacco harms to human health After Viet Nam entered into and ratified the General Covenant on Tobacco Control in December 2004, the Government of Viet Nam would be responsible for a continuous and robust reduction of tobacco use for limiting its harmful effects.
The Government of Vietnam has implemented some solution to improve the legal framework, study and amend the relevant legal provisions on the principle of ensuring the competitiveness of Vietnam's tobacco industry, the State can control to produce and consume tobaccos and fulfill Vietnam's commitments in the process of international economic integration.
In order to restrict the use of tobaccos, the State amended its tax policy (bringing in a special consumption tax rate): Special consumption tax on tobaccos had three levels: 25% - 45% and 65% % based on the percentage of imported materials used to produce tobaccos In 2006, special consumption tax rate was revised to a level of 55% In 2008, the tax rate was raised to 65%, applicable to all tobaccos.
Directive No 12/2007/CT-TTg dated May 10, 2007 on strengthening tobacco control activities has added more specific and rigorous regulations to strengthen enforcement of smoking ban at workplaces and public areas, increased activities for tobacco business control, issued more regulations on banning tobacco advertising, promoting, marketing and supporting.
In addition, for the investments in tobacco industry, the Government issued Decree No 67/2013/ND-CP on tobacco production and trading in replacement of Decree No 119/2007/ND-CP, creating the legal framework for the investment and trading of tobaccos in the context of international economic integration If Decree No/ 119/2007/ND-CP had initially allowed new investment, establishment of foreign joint ventures in the field of tobacco, opening many opportunities of investment with strict conditions, still ensure the management of the State and the national tobacco control policy in the field of tobacco, Decree No 67/2013/ND-CP is a barrier to the development of tobacco cultivation and business when giving more specifically detailed provisions on a number of articles and measures to implement the law on tobacco harm prevention and combat After 4 years of implementation of Decree No 67/2013/ND-CP, there were many complaints. Therefore, on September 14, 2017, the Government issued Decree No. 106/2017/ND-CP for amending and supplementing a number of articles of Decree
Investment in production of tobacco products must be in line with the approved strategy and master plan of the tobacco industry; not investing in new construction, expanding the scale and raising the capacity of tobacco product- producing establishments for domestic consumption in excess of the total production capacity of tobacco products already determined by the Ministry of Industry and Trade However, in the implementation process in the localities, this has not been done thoroughly.
The continued implementation of Vietnam's commitments for trade agreements, including the opening up of the tobacco market, the removal of tariffs and non-tariff barriers with political and economical instability in some countries has a direct impact on domestic as well as export tobacco consumption market In addition, tobacco products are required to print a warning image on their packs fromDecember 2013 and tobacco prohibited to be in advertising on the media has led in reducing the consumption of tobaccos, thereby negatively affecting the consumption of tobacco raw materials.
The State's policy on the import of agricultural products under Decree No. 114/ND-CP dated 27th November 2013 directly affects the import of tobacco raw materials for the production line Medium-priced tobaccos imported from China into Vietnam are always competitive with those of domestic tobacco raw material processing companies.
Vietnam's GDP in the last 5 years has always maintained at a growth rate of less than 6%, decreased as compared to the increase in the previous decade. However, the income of the people has also improved significantly.
The financial crisis of 2008 in the world has strongly affected not only GDP growth of Vietnam but also for many other countries Due to natural disasters and environmental incidents in 2016, the agro-forestry-fisheries sector is most affected with negative growth in the first 6 months.
Year quarter 1 Year quarter 2 Year quarter 3 Year quarter 4 Whole year
Figure 3.3: Vietnam's average GDP for the period of 2015 - 2016
Fortunately, according to the General Statistics Office, although the growth rate in 2016 was still lower than the 6.68% increase in 2015 and did not meet the target of 6.7% growth, but in the difficult context of both global and domestic economy, the rate of growth was a success.
According to the General Statistics Office, the consumer price index (CPI) in
2016 is 4.74%, average monthly increase of about 0.4% It can be estimated that the average CPI in 2016 will increase by 2.66% over the average in 2015, but much lower than the average CPI of some recent years.
GDP per capita is forecast at $2,200 Vietnam is a country with low average income but the economy is relatively diversified and flexible.
Over the past 14 years, although GDP growth was not so high and the dong depreciated significantly against the US dollar, per capita income was still growing.
In the period of 2015 - 2018, average GDP per capita is forecasted to grow at an average of 8.49% per year while average inflation is 5.00% per year, indicating that purchasing power will continue to improve.
In 2016, FDI inflows to Vietnam reached US$ 20.9 billion, decreased by 8%; disbursed capital was $15.8 billion, increased by 9% over 2015’s, reaching the highest disbursement ever.
Vietnam is a tropical country with lowlands, hills, many plateaus with dense forests.
The climate of the Northern Mountains is characterized by tropical monsoon,with cold winters, and is strongly influenced by mountainous terrain The North-Eastern terrain is not high, but it is the most strongly affected by the northeast monsoon, the area has the coldest winter in our country The Northwest, despite affected by the northeast monsoon in a much weaker manner, but due to its high terrain, the winter is still cold Therefore, the Northern Midlands and Mountains have a special strength to develop subtropical and temperate industrial crops With the high day and night temperature difference in the northern mountains, tobaccos planted here have a distinct flavor compared to other regions.
Vietnam is ranked 13th in the world with nearly 92.5 million people By