Analyzing product strategy of saigon tobacco company limited in 2009 2012

Analyzing the situation of product strategy of Saigon Tobacco CompanyLimited from 2009 to 2012 is the purpose of this study.. The final chapter analyzes clearly the product strategy ofSa

: KM0901

Starting from my sincere heart, I wish to thank to my sweet advisor - Ms HoaiAnh Nguyen Duc - PhD With her enthusiastic supports for knowledge andencouragement, she has accompanied with me to final step in order to build mypassionate ideal - the completion of thesis I am grateful to her for everythingshe gave me

Besides that, I would like to express my deep gratitude to Mr Ngoc HuanNguyen - Dean and Ms Tuy Nga - Deputy Dean They has awakened myconfidence and created the good opportunity so that I can reach the mostimportant milestone of university student at HUFLIT

To contribute the whole of my thesis, I will not forget the enthusiasm of staff inMarket Department of Saigon Tobacco Company Limited They are willing toshare their experiences and supply necessary materials to me during last threemonths for my internship

More than ever, my beloved family, parent, friends, and close relative who are

encouragement When I am getting discouraged, they are always beside me andraise me up to continue this challenge

I would like to thank all!

July, 2013

ADVISOR'S ASSESSMENT

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Product strategy is the partial strategy which contributes to success of theoverall competitive strategy Product strategy defines the product structure toimprove business efficiency and increase the competitiveness among businessactivities Therefore, most of domestic enterprises and foreign enterprises arevery interested in the role of product strategy, including Saigon TobaccoCompany Limited

Analyzing the situation of product strategy of Saigon Tobacco CompanyLimited from 2009 to 2012 is the purpose of this study The content of thisstudy consists of three parts The first chapter is the summary of theory forproduct strategy The next chapter is the overview of Saigon TobaccoCompany Limited The final chapter analyzes clearly the product strategy ofSaigon Tobacco Company Limited from 2009 to 2012 and proposes somespecific recommendations in order to improve the product strategy Toinvestigate this study, the author used the analyzing method to dissect thespecific situation In addition, aggregating method and comparing method wereapplied to sum up information and explain figures

The information of this study clearly indicated the advantages anddisadvantages of the product strategy at Saigon Tobacco Company Limited.Moreover, recommendations in this study will help audience catch the maindirections of product strategy of this company in the next years Through thisstudy, the author applied the related theory to analysis the business reality.However, this study still has restrictions because the author does not havemany practical experiences and limitation of researching time

Ackn0wIed gem ent - - - - - - - - i

Ad visor's Assessment - ii

Allstract -iii

Con ten t - - - - - - - - iv

TallIes, Pictures and Graphs - viii

INTRODUCTION Rational e - - - - - - - - - 1

Research aims - - - - - - - 2

Researc h scope - - - - - - - - 2

Researc h meth od - - - - - 2

Research des ign - - - - - - - - - 3

CHAPTER 1: FOUNDATION OF THE RESEARCH 1.1 Product concepts - 5

1.1.1 The overview - 5

1.1.2 The classification of product - 7

1.1 3 Product Life Cycle - 8

1.2 Product strategy concepts - 9

1.2.1 Definition of product strategy - 9

1.2.2 Content of product strategy - 10

1.2.3 Classification of product strategy - 13

1.3 Factors affect product strategy - 14

1.3.1 Internal factors - 14

1.3.2 External factors - 15

1.4 Roles of product strategy - 15

CHAPTER 2: OVERVIEW OF SAIGON TOBACCO COMPANY LIMITED 2.1 Introduction about Saigon Tobacco Company Limited - 18

2.1.1 Progress of establishment and development - 19

2.1.2 Function, Authority, Mission and Vision - 21

2.1.2.1 Function - 21

2.1.2.2 Authority - 21

2.1.2.3 Mission - 22

2.1.2.4 Vision - 22

2.1.3 Achievement - 23

2.2 Com pan y str uct ure - 24

2.2.1 Chart of organization - 24

2.2.2 Function of departments - 26

2.3 Capacity of the company - 28

2.3 1 Facil ities - 28

2.3.2 Human resource - 29

2.3.3 Capital - 30

2.4 The result of business activity in 2009 - 2012 - 30

2.4 1 Outpu t - 30

2.4.2 Revenue - 33

CHAPTER 3: ANALYZING PRODUCT STRATEGY OF SAIGON TOBACCO COMPANY LIMITED IN REALITY 3.1 Analyzing factors affect the product strategy - 36

3.1.1 Population - 36

3.1.2 Policies of the State - 37

3.1.3 The situation of illicit cigarettes - 38

3.1.4 Competitors - 39

3.1.4.1 The internal competitors - 39

3.1.4.2 The external competitors - 40

3.2 Product strategy of Saigon Tobacco Company Limited - 40

3.2.1 Product structure - 40

3.2.2 Material resource - 42

3.2 3 Available markets - 43

3.2.4 Objectives of product strategy - 43

3.2.5 Deploying and implementing the product strategy - 44

3.2.5.1: Market expansion - 44

3.2.5.2: Market development - 45

3.2.5.3: Market defense - 46

3.2.6 The result of product strategy activities in 2009 - 2012 - 46

3.2.7 Limitations on product strategy - 50

3.3 S.W.O T Analysis - 51

Rec 0 ill ill end ati 0 n - 54

Con c Ius ion - 63

APpe n d i x - 64

Re fere nee s - 70

TABLES, PICTURES AND GRAPHS

LIST OF TABLES

• Table 2.1 Output of Saigon Tobacco Company Limited in 2009 - 2012 31

• Table 2.2 Result for business activities in 2009 - 2012 - 33

• Table 3.1 Total cigarette output for domestic consumption of Saigon Tobacco Company Limited and entire tobacco industry in 2009 - 2012 - 47

• Table 3.2 Comparative table of customer's perception - 49

• Table 3.3 S.W.O.T Analysis - 51

LIST OF PICTURES • Picture 1.1 Five product levels - 5

• Picture 1.2 Product Life Cycle - 8

• Picture 1.3 Classification of product strategy - 13

LIST OF GRAPHS • Graph 2.1 Chart of organization - 25

• Graph 2.2 Labor structure - 29

• Graph 2.3 Output performance in 2009 - 2012 - 32

• Graph 2.4 Output performance in 2009 - 2012 - 34

• Graph 2.5 Revenue performance in 2009 - 2012 - 34

• Graph 3.1 Growth ofYietnam's population in 2009 - 2012 - 36

• Graph 3.2 Percentage of total output - 39

• Graph 3.3 Total cigarette output for domestic consumption of company and the others in 2009 - 20 12 - 48

of its business activities.

According to the government policies, the tobacco industry always suffered,from heavy pressure by strict controlling because it is the product withexceptional characteristics The strict management of the government isexpressed through 65% tax increasing for cigarette consumption On the otherhand, some tobacco business such as Vinh Hoi Tobacco Company, ThangLong Tobacco Company, and Dien Bien Tobacco Company have to cut backthe scale of production and the labor force due to the influence from theremnants of economic crisis Furthermore, the races in technology and thechange of customer's trends are causing intense competition in all sectors ofindustries

In fact, Saigon Tobacco Company Limited desperately needs the specificresearch to make contributions to the improvement of company's productstrategy For this reason, the author has carried out the study with title -

"Analyzing Product Strategy Of Saigon Tobacco Company Limited In 2006 2012." This is considered as the extremely necessary and feasible study for

-reality of the company

Research aims

Defining the importance of research and analyze the product strategy forcompany's business activity, this study is aimed at three following objectives:_ ~ding-.Sur.\'ey for product strategy of Saigon Tob~cco Company Limited._ ~yzing and researching rol~ ansi factors that affect the construction anddevelopment of product strategy at Saigon Tobacco Company Limited

_ Combining the collected information and the theoretical framework ofproduct strategy to suggest some appropriate solutions to the improvement

of product strategy at Saigon Tobacco Company Limited

Research scope

The study focuses on product strategy of Saigon Tobacco Company from 2009

to 2012 and proposes some recommendations for improving the productstrategy in the next year

Research method

In order to research this study thoroughly, the author has used analyticalmethod to dissect the specific situation Moreover, aggregating method andcomparative method are applied to sum up and explain data All documents andinformation that were directly collected from Saigon Tobacco CompanyLimited

Sources o[in(ormation:

- Website and internal documents from the company

_ Figures from managers and staff in Market Department of the company

- Relevant websites

- Directly surveyed and collected information

Research design

The research paper is designed by all three chapters (except Introduction andConclusion):

- Chapter I is "Foundation Of The Research " This is the brief1iterature review

of product and product strategy Based on this first chapter, the authorsummarized the theory contents and displayed the way how to apply them topractical environment The concepts in this chapter are entirely relevant tocontent of the two others

- Chapter 2 is "An Overview Of Saigon Tobacco Company Limited" This is the

general picture drawn up so that the reader can visualize the overallenvironment which study is being researched

- Chapter 3 is "Analyzing Product Strategy Of Saigon Tobacco Company Limited In 2009 -2012 " Here, the author provides data and information about

the product strategy of the company in order to analyze strengths,weaknesses, opportunities and challenges that company is facing Moreover,this chapter also highlights factors affecting the product strategy and givessome feasible and convincing recommendations for improving the productstrategy of company

FOUNDATION OF THE RESEARCH

1.1 Product concepts

1 1.1 The overview

As we know, products are goods, services, objects, people, places,organizations, etc They bring certain attributes and specific utilities They aremade by the manufacturers for the purpose of launching on the market in order

to attract the attention, behaviour, and purchase of the target customers Inaddition, the product is defined as anything for the customer needs and isregarded as a business tool of enterprises

Thus, the products generally imply both tangible and intangible goods, ~90dsand services A tangible good also encompasses elements of tangible andintangible one

Product is structured by 5 levels This is a fundamental matter thatmanufacturers need to specially consider when producing the product

1 Core benefit: The basic use of the product that customer wants to buy For

example, the core benefit of tobacco is recognized as one of thecommunication means or the product which helps people to relieve stress

2 Basic product: The product is the basic and precise format of its essence.

That means they are performed by factors such as quality, packaging, design,brand, etc Take tobacco product for example, the basic product is generallyshaped in packages and labels such as 555, VINATABA, DUNHILL, etc

3 Expected product: The product is prepared by manufacturer through using

collection way This way assembles all characteristics and attributes of productthat customer usually expects before deciding to buy it For example, the goodaroma, appropriate flavor, high bum, design, low nicotine's concentration oftobacco product are the major elements that customer has considered beforethey buy it Enterprise must know the expected product and base on it toproduce the finished - goods which can effectively response what customerdesires

4 Augmented product: The product brings the competitive factors At this

level, the business must add value to services and appropriate benefits thattheir products are different in comparison with competitors For example ofSaigon Tobacco Company Limited, providing many kinds of diversifiedtobacco with special taste, attractive designs beside the promotion or discountmodes is also to build the competitive advantages In other words, thecompetitive level is depended on the augmented product level

tPotential prod~t: lhe product has completion at the present time and will

be driven both the development and change in the future For example ofSaigon Tobacco Company Limited, potential product is considered as theintroduction of many new labels in later years

I I 2 The classification of product

For researching, economists usually divide products into two levels They canbase on the basic of durability or basic of use

Durability - based classifying

• Durable goods: Goods are used in the long term These goods have verylong shelf life and durability as well as ability to use frequently Forexample, air conditioning, television, clothes, etc

• Non - durable goods: Goods are used in the short term These goods havevery short shelf life and non - durability as well as only once or a fewtimes for using frequency

• Services: These are a type of business activity with intangible goods andthey are sold under form of objects of operation, benefit or satisfaction.Services are not the specific goods as a commodity For example, the postoffice, taxi, karaoke, hair salon, and so on

Use - based classifying

Depend on the using purpose of customers that goods are divided into twocategories:

• Consumer goods: These goods are used for consumption purposes.Consumer goods are divided into several small types such asconvenience goods, shopping goods, buy specialty goods, and unsoughtgoods This division is based on the buying habits of consumers

• Industrial goods: Products are used for producing the finished - product

or manufacturing the other products Industrial goods are also dividedinto many divisions such as materials, attached parts, equipments,supplies and business supportive services The division is based ontheir relative values and involvement in the producing process

I.I 3 The Product Life Cvcle

Product life Cycll(jsth~ period which changes over time from that produc

Introduction stage: This stage is the most expensive cost and risky profit

rrl'because the product is starting to enter the market Product in this period has

~ not a lot of evidence for consumption, so the promotion activities were created

t;stimul~k market demand and empiliisize the introduction of products on

-customer awareness Therefore, there are no many competitors in thisintroduction stage As a result, the failure rate of business is high and the profit

is very low at this stage

Growtlt Stage: In this stage, the product has been accepted by the market

through the signs of customer consumption It explains why the big product

competitors are gradually appearing and fully participating in this profitablemarket if it is a potential market of the increasing trend in future.

Maturity Stage: This is the stage which has a long time for survival in the

product life cycle During the beginning of this period, products are sold withhigh quantity but in decreasing speed The cause of this deceleration is anexplosion of fierce competition on pricing, models, designs, quality, andpromotional activities from competitors

Decline stage: It is considered as the special stage of decreasing volume from

customer's consumption Some competitors are pulled out of the marketbecause consumer's demand is strongly reducing In this stage, the activitiesfor cost controlling are very important It explains that why almost promotionprograms were cut down Developing a new product for replacement is the key

of solution in this final stage

1.2 Product strategy concepts

1.2.1 Definition of product strategy

As analyzed above, in marketing terms, a product is anything that can beoffered to a market to satisfy a want or need of customers A product can be aphysical object or a service and may refer to a single item or unit, a group ofequivalent products or a group of goods or services

So, when an organization introduces a product into a market, they must askthemselves a number of questions such as:

- Who is the product aimed at?

- What benefit will customers expect?

- How does the firm plan to position the product within the market?

_ What differential advantage will the product offer over their competitors?

To answer these questions, product strategy will be an important task that themarkers should be concerned the first Product strategy is a business tool thatwas built by satisfaction and tastes of customers Product strategy includesidentifying the main objectives and offering right solutions for productionactivities in each specific business's period Moreover, the product strategy isalso seen as a clever combination between resources and business ability tocreate the long-term competition.

1.2.2 Content o[product strategy

- Determining the product mix's dimension

Product mix is a list of all kinds of products in variety, design, style, etc.Product mix is usually described by four dimensions:

• Width: The width of product mix describes what categories of product are

sold by business

• Length: The length of product mix expresses how ~ny the:quantities ofitems in each category of the width In other words, the length means theassemblage of products which have different brands but the use purpose isthe same

• Depth: The depth of product mix represents the various models is found in

also extend the current products to become a strong business with many types

of diverse products Moreover, they can also add various items for each kind

of product to increase the product mix depth

- Improving the product~ttributesl

• Quality: Creating products with different quality levels for increasing

product's durability and customer's reliability

• Packaging: Enhancing the product's aesthetic by changing the color,structure, label, or model, etc

• Design: Expanding many special products with different sizes for adding

differentiation and contributing opportunities in order to make customershave more choices

• Feature: Adding the value to the product.

- Developing the new product

Along with the development of technological science, today's market tends to

On the other hand, each product has a certain life cycle During the declinestage, the new products are developed for replacing the old products andensuring uniformity of the production's process in business activities of theenterprise The foIlowing are 8 stages of developing the new products:

• Idea generation: The development of new products started from the idea

arousing These ideas can be found from the related people such ascustomers, scientists, market researchers, competitors, employees,distributors, leadership, etc However, the main basis for forming the idea

of the new product development is stiIl customer demand

• Idea screening: This step emphasizes to pick up the feasible ideas andexcludes the poor ideas In addition, idea screening also means the carefulevaluation for the ideas under the level of the new product's development.Besides, this step is very important for the specific predicting about targetmarket, market share, prices, production costs, break - even point,competition or risk assessment.

• Concept development and testing: Before buying products, consumersneed to know its concept Concepts of the product imply to color, taste,function or expected price Consumers do not buy a product in their mind

-b1.!.tthey buy the product in their~) awareness Thus, the conceptdevelopment and testing is the indispensable step in assessing the buyingfrequency and satisfying level of customer behaviour

• Marketing strategy: This is an important stage to define the main goalsand the implemental methods when business want to develop their newproduct and introduce them into target market Marketing strategyactivities consist of identifying the specific objectives and designing otherssuch as supply chain strategy, pricing strategy, and promotion strategy

• Business analysis: Business analysis stage describes the data identificationfor revenue, sale volume, or financial provision Specifically, this stageneed to answer an expected question like that: "Do the development of newproduct affect the existing product? " In addition, forecast for marketopportunities is very essential activity that businesses need to focus on

• Product development: At this stage, the idea for the new productdevelopment will be transformed into tangible products by carrying outand building brand in reality Moreover, this stage emphasizes thecoordination between R&D and Marketing Department

• Test marketing: Business must consider to reaction rate from a market ontheir new product In limited scale, the stimulated test marketing and

controlled test marketing are two popular ways of this stage So, this is thespecial stage which pays a lot of business expenditure.

• Commercialization: The business should select locations and suitabletime to launch their new product Moreover, it also needs to strictlymanage the directly related department such as customer care, distribution,sale, etc

1.2.3 Classification of product strategy

Base on the types of product and market opportunities, there are 4 types ofproduct strategy as:

Market Penetration

Market Development

Product Development

Diversification

Picture 1.3: Classification a/product strategy

(Source: Philip Kotler Marketing Management The Millennium Edition,

Prentice Hall, 1994.)

• Product strategy for current product in the current market

This strategy is implemented according to objective defining - marketpenetration This means business need to enhance promotion activities such asdiscounts, promotions to attract and fight over customers from competitors

• Product strategy for current product in the new market

This is the stage where the business wants to expand the market and increaseconsumption by focusing towards a new segment Because of this goal,company need to carefully analyze the fundamental characteristics of the newsegments such as age, income, consumer behavior and then business also need

to incorporate these elements into their product strategy

• Product strategy for new product in the current market

For strengthening the business position and improving competitive advantage

in existing markets, developing new product is an extremely important strategy.Activities of new product strategy include such as improving product, addingservices, diversifying many kinds, designs, styles, beautiful models

• Product strategy for new product in the new market

This strategy stimulates a new demand from customers by offering a totallybrand new product into new market where customers have no idea about them

In other words, the strategy is the adventurous strategy for first - mover

1.3 Fac~rs affect_product strategy pk 1) ~

1.3.1 1nternal (actors

Objectives: These are seen as a magnet for all business strategies in long-term

directions The company's objectives are expressed through the parameters:

• Sales, market share, profitability, or return on investment (RGI)

• Indicators of financial and human resources, rates of humandevelopment or reduction

Capacity: The company's capacity includes facility and human resources They

are considered as very important factors for business operation anddevelopment because the company cannot meet a big product volume for amass market if company does not have enough their capabilities Therefore,company need to realize the strengths and weaknesses of their resources whenthey would like to plan for product strategy

Competitor: This is an inevitable factor that exists in the business environment.

The competitive levels directly impact the survival of business in the currenteconomy Therefore, building for an effective product strategy depends on notonly the competitive levels but also the particular business strategy of eachbusiness

1.3.2 External (actors

Economy: Economic growths, GDP (Gross Domestic Product), unemployment

rates, balance of transaction, monetary policy and so on are economic factorsthat directly affect the business activities

Culture - Social: People live in a society with particular cultures This factor

established their basic perception Thus, the culture - society factor totallydominate in decisions for the strategic product planning

Politic: The regulations of government are a big impact to potentialenterprise's prospect Research and analysis of political factors will helpcompany predict limitation for offering the appropriate strategies

Technology: Development of technology creates the innovation in productionprocess and resource changing Furthermore, this factor contributes to enhancecompetitive advantage, product quality and price That is the reason whybusiness must timely update to the technological innovation for application intheir manufacturing process

1.4 Roles of product strategy

Product strategy is a solid mainstay in the business strategy In other words, itplays a vital role for the business survival on competitive market Productstrategy is expressed by the following:

• Ensuring business activities is fluently carried out with the objectivesthat set out

• Ensuring production is being developed with the right product, rightprocess and the right time.

• Making sure for increasing amount of consumed products and bringingnew products to appropriate market

• Strongly supporting for other strategies m satisfying completion,particularly in the Marketing Mix

• Enhancing the customer satisfaction through the producing good whichbased on customer needs

• Building the competitive advantage for enterprise

CHAPTER 2

OVERVIEW OF SAIGON TOBACCO

COMPANY LIMITED

2.1 Introduction about Saigon Tobacco Company Limited

On 06/12/2005, Saigon Tobacco Limited Company was established according

to the 319/2005/QD- TTg decree from the Prime Minister This decisiontransferred Saigon Tobacco Factory of Vietnam National Tobacco Corporation

to Saigon Tobacco Company Limited

- Official name: SAIGON TOBACCO LIMITED LIABILITY COMPANY

- Abbreviation: SAl GON VINAT ABA

- Logo:

uinataba

S I GON

- Business code: 03100602679

- Business type: Limited Liability Company

- Business description: Manufacturing and trading of cigarettes

- Legal representative: Mr Duy Khanh Nguyen - Director

_ Head office: Plot of C45 / I - C50 / I, C58 / I - C63 / I,C65 / I - C70 / I,

NO.7 Road, Vinh Loc Industrial Zone, Vinh Loc A Ward, Binh ChanhDistrict, Ho Chi Minh City, Vietnam

- Phone: (08) 37657878 - (08) 3765778

- Fax: (08) 37656345

- Email: saigonscf@saigontabac.com.vn

- Website: http://www.saigontabac.com.vn/vn/Home.aspx

2.1.1 Progress o(establishment and development

Over 80 years of establishment and developing process, the history of SaigonTobacco Company Limited is summarized as two main stages:

• In 1929-1980: The established process associated Vietnam historicalevents

In the early months of 1929, a company that specialized in the production andtrading of cigarettes were born This company was named Trung Hue because

it was established by Chinese people from who contributed capital in theinvestment

At the time, Trung Hue Company is located at the uninhabited land which waslocated in the middle of Cho Lon area In May of 1929, Trung Hue Companywas merged into the M.LC (Manufactures Indochinoises de Cigarettes)Company which is established by the French because it had limitations incapital, worker's qualification and technology for production in the beginningstage

In 1932, the joint venture between M.LC and B.A.T (British AmericanTobacco Company Limited) was signed and that was the milestone for thedevelopment future of MIC Specifically, B.A.T is the multinational companythat came in with a huge investment, modem technology, a history in marketexperience, and strong organizational methods as well as human resource.Therefore, this joint venture helped the M.LC Companies could reach powerfulbusiness advantages

During 1940 - 1945, it was the time for Japanese to seize the good opportunity

to take possession of M.LC Company quickly because the Vietnam's history(became a colonial country) was very under the cruel rule of the Japanese andFrench that spread over Indochina

From 1946 to 1954, the Japanese had lost heavily, and the French occupiedSaigon again, recovered what was lost and started the restoring plan for M.LCCompany after the ravages of war.

In 1955 -1975, American jumped into the Vietnam's war and usurped themanagement to M.LC Company For these 20 years, M.LC Company wasoperated under strictly controlling of the capitalism regime

In April of 1975, Vietnamese gained their independence and freedom Onemonth later, the representative of M.LC Company ran away, leaving hisbusiness behind

In June of 1975, the Government of Vietnam appointed Ms Mai Lan - theformer deputy director of Thang Long Tobacco Factory - Hanoi capital) asdirector ofM.LC Company

On 28th, December of 1977, M.LC Company was officially renamed into

"Saigon Tobacco Factory" Thus, the formation of Saigon Tobacco Factoryalways associated with the transformation of Vietnam historical events

• In 1981 - at present: The development innovation

At this stage, Vietnamese government has set many new goals towards thedevelopment of Saigon Tobacco Factory Specifically, Saigon Tobacco Factorywas steady in changing market structure and escaped from the mechanism ofsubsidized economy during the period from 1981 to 1999

In the early months of 2002, building and carrying out ISO - 9001:2000(International Organization for Standardization) offered the product of SaigonTobacco Company Limited has many special opportunities to enter andintegrate into the new market economy

From 6th December of 2005 to present, Saigon Tobacco Factory of VietnamNational Tobacco Corporation has been separated and converted into SaigonTobacco Company Limited

2.1.2 Function Authority, Mission and Vision

- Building the developing plans, keeping the long relationship with agents

as well as controlling the business activities on each market every month,quarter and year for the purpose of expanding market

- Making sure to meet consumer need and export product to foreignmarkets

- Enhancing the development of new product to meet consumer tastes

- Designing the right price that suits business situation of the company andmarket structure

- Maximizing profits and effectively using the resources for the company'sdevelopment

_ Executing the managing and financing policies as well as fully payingtaxes

- To be legally responsible for the product, manufacturing methods, as well

as result of business activities

- To get permission to participate in all conferences where export contractsare signed and associate with foreign tobacco companies under theprovisions of the Government

2.1.2.3 Mission

- Saigon Tobacco Company Limited believes that the most importantmission is their responsibility to their consumers - those who use tobaccoproduct of the company

- Saigon Tobacco Company Limited also focus on ensuring the health oftheir consumer through manufacturing and trading of high qualityproducts, creating more value and efficiency to meet their customer'sneeds

_ Saigon Tobacco Company Limited expressed that their production andbusiness are appropriate completely to market demand, economicobjectives and environmental protection

_ Saigon Tobacco Company Limited has also taken their responsibilities fordeveloping domestic market as well as stepping up the export to foreignmarkets

_ Saigon Tobacco Company Limited has consider seriously to recruitment,motivation and reward for the best employees as well as willing to createthe favorable working environment and prospect opportunities for them.2.1.2.4 Vision

_ Under the leadership of the Vietnam National Tobacco Company and thesupport of the member companies, Saigon Tobacco Company Limitedalways strive for keeping its position as the top company in domestictobacco industry

- Besides that, the vision of the company is to reach to the market shareleader in order to become the largest tobacco producer In the future,Saigon Tobacco Company Limited will become the tobacco productioncompany which has the biggest scale over Vietnam and throughoutSoutheast Asia.

2.1.3 Achievement

After the war, Saigon Tobacco Company faced many problems in term ofconstruction and manufacturing management because of remnants However,the outstanding efforts helped the company reach great achievements andremarkable breakthroughs:

- In 11/1980, the Saigon Tobacco Company Limited only produced89,121,719 packs of cigarettes Meanwhile, quantitative norm set out inthat year (from January / 1980 - December /1980) was 150 million bags.This means that the company only completed 59.33% of the quantitativenorm for 11 months The other percentages are waiting for completion ofthe company in only one month (within December) shortly

- On 11/30/1980, the "31 million cigarettes in December" Campaign isurgently conducted under the controlling of the Mr Vo Van Kiet (Cityparty committee secretary) This campaign ended on 30th December,

1980 and the result is that company produced 63,574,619 packs ofcigarettes within one month - over fulfill quantitative norm is 1:05%.During the time of economic crisis after the war, this was considered themost remarkable achievement because it has opened up a bright future forthe company

- In the 21st century, Saigon Tobacco Company Limited is always willing

to accept market competition from the economic integration In 2002, thiscompany researched and produced five new tobacco labels to export to the

Middle East market At the same time, tobacco product with "STARSSAXO" label also launched for exploring the United State market.

- In 2003, many new tobacco products are entered into Czech Republic,Saudi Arabia, Malaysia, Cambodia market such as: CAPITAL LIGHT,

ERA FULL FLAVOR, etc

- On 29th January, 2004, Saigon Tobacco Company Limited is certifiedofficially ISO 9001 :2000 certification by BVQI Organization

- In late 2004, Saigon Tobacco Company Limited exported 250 millionpacks of cigarettes to Middle East, Eastern Europe and Africa market.Keep up to now, the company has always boosted the export andpromoted Vietnamese product brand worldwide

- According to a report at the end of 2009, product quantity of SaigonTobacco Company Limited reached 1,683,909 million of packs ofcigarettes accounted for 55% of total product quantity of Vietnam tobaccoindustry

With 80 years in tobacco business, Saigon Tobacco Company Limited is thestrong business for all categories such as business performance, scale, level oftechniques, and development rate Up to the present time, Saigon TobaccoCompany Limited has contributed over 2 billion (VND) into the Government'sbudget and this company holds the top position with 60% of the total budget ofVietnam tobacco industry

2.2 Company structure

2.2.1 Chart of Organization

Graph 2.1: Chart of Organization

5 Sale Department

6 Market Department

7 Technology - MechanicDepartment

8 Technology - ChemicalDepartment

9 Research and DevelopmentDepartment

10 Quality Control Department

11 Raw Material TestingDepartment

12 Construction - InvestmentDepartment

13 Import - Export Department

1 Materialinventory

2 Equipmentinventory

3 Mechanicalinventory

4 Finished productinventory

(Source: http://www.saigontabac.com.vn/vn/newwindow aspx?n=5)

2.2.2 Function o(departments

• Administrative Department: The department has responsibilitiesfor document managing, data storing, key information archiving inorder to support business activities management

• Personnel Department: The department plays the roles inorganizing human resource structure, training courses, motivatingpolicies, or salary agreement for employees

• Financial Department: This department is responsible for cashmanagement, debt collection, product pricing, costs paying, andcontrolling of the statistical units

• Planning - Material Department: This department has importantfunctions for deciding strategic planning and supply planning

• Sale Department: This department plays role in sale planning foreach area and agent in month, quarter or year Furthermore, thedepartment must also closely consider the product consumption onthe current market

• Market Department: The department focuses on controlling ofmarket activities such as collecting and analyzing marketinformation, creating and keeping the relationship to agents andclients

• Technology - Mechanic Department: This department plays role

in managing for the effective using of machinery and equipment inorder to support for the entire production process

important functions for controlling the fiber producing process,setting out the recipe ingredients as well as testing chemical andphysical indexes of flavor and taste Besides that, Technology -Chemical Department is also involved in environmental protectionand technician training

• Research and Development Department: The department plays aimportant role in the strategy of developing new product throughresearching and designing In addition, Research and DevelopmentDepartment has responsibility for upgrading and innovatingproduction system by the modem technology.

• Quality Control Department: This department is responsible formonitoring strictly product quality in each stage of implementation

• Raw Material Testing Department: This department plays animportant role in testing the quality of input before storing; ensuringthat the input source is match safety standards

• Construction - Investment Department: This department hasimportant functions for planning investment, constructing andmaintaining of buildings Construction - Investment Departmentalso coordinates activities of other departments in order to prepareinvestment plans

• Import - Export Department: The department has responsibilityfor researching and updating the import and export policies or thetax which was enacted by Government in order to the company canimplement seriously

• Factories: Saigon Tobacco Company Limited consists of 6factories Each factory has different tasks in the production process:

• The first factory: Processing the tobacco fiber

• The second factory: Producing cigarettes in soft packaging

• The third factory: Producing cigarettes in hard packaging

• The fourth factory: Producing 555 brand cigarettes

• The fifth factory: Producing Marlboro brand cigarettes

• The sixth factory: Machining parts and fixing technical problems as well

as installing of machinery and equipment

• Inventories: Saigon Tobacco Company Limited consists of 4inventories:

• Material Inventory: Managing tobacco leaf, tobacco fiber

• Equipment Inventory: Managing all equipments is used for cigarette

production

• Finished Product Inventory: Management of finished cigarettes

• Mechanical Inventory: Managing the mechanical and electrical parts and

a number of other types of goods

2.3 Capacity of the company

2.3.1 Facilities

Saigon Tobacco Company Limited currently has 140,000 m2 of land includingoffice, warehouse and plant areas This company is located at C45 / I - C50 / I,C58 / I - C63 / I, C65 / I - C70 / I Plots, No.07 Road, Vinh Loc Industrial part,Vinh Loc A Ward, Binh Chanh District, Ho Chi Minh City, Vietnam.Generally, the company has a large business premises, airy buildings, cleanenvironment, and Vinh Loc Industrial Zone which has the convenienttransportation structure for supporting to manufacture and businesstransactions

Moreover, the company has rearranged gradually their layout and expandedarea for production:

• Building two filter - tipped cigarette plants

• Rearranging and extending some fiber - tobacco plants

• Improving and expanding the central air compressors

• Expanding the raw material storage system, semi-finished and finishedproduct inventories

Besides that, the company also spent 42, 4 billion VND for equipment andmodem machines investing Typically:

- Building 6 plants and 4 warehouses

- Importing:

• 18 MARK8 machines (non filter- tipped cigarette rolling machines)

• 21 MARK8 - MAX4 machines (filter - tipped cigarette rollingmachines)

• 4 production line systems for packing cigarette in hard packaging

• 9 production line systems for packing cigarette in soft packaging

• 125 equipment types of new line system are provided by ITM Company(Netherlands)

In 2011, productivity of company for production line has increased 6 times.This proves that the investment in facilities and equipment perfectly suited tomeet the manufacturing needs

2.3.2 Human resource

Total number of officers and employees of the company are currently 3,244people including 1,533 female employees and 1,711 male employees (47.3%women and 52.7% men) Human resource characteristics are describedspecifically in the following chart:

Until the present time, Saigon Tobacco Company Limited has had employeeswith degree levels such as:

* Master: 14 employees make up O 5% of total labor force

* Bachelor: 299 employees make up 9.3% of total labor force

* Intermediated worker: 102 employees make up 3.6% of total labor force

* Technical worker: 766 employees make up 23 7% of total labor force

* Factory worker: 2,063 employees make up 62 8% of total labor forceThe number of master and bachelor are 313 employees and make upapproximately 8.9% of the total workforce So, the company has a potentiallabor force for the development of scientific team

In addition, the personnel policy of the company has also focused on openingthe useful training courses to develop qualifications and skills for theiremployees Therefore, the company has a team of young officers, skilled andtechnical workers who have the strong loyalty and job responsibilities

2.3.3 Capital

The company has enough ability to compete with the domestic tobacco others.This capital source may reserve a plentiful fund for 6 months or one year Withthe fund is deducted from profit rising in every year, this capital source cansolve flexibly for some urgent requirements

2.4 The results of business activity in 2009 -2012

2.4.1 Output

With the effective investment policies on the right time, Saigon TobaccoCompany Limited has innovated machines and equipments for increasing theproduction capacity and ensuring the product quality That is the reason whySaigon Tobacco Company Limited has a great factory with more modemtechnical systems and large-scale in Vietnam

The import and export of Saigon Tobacco Company Limited are conductedthrough Import and Export Tobacco Company - a member of the VietnamNational Tobacco Corporation Import and Export Tobacco Company is theplace where export the tobacco products of Saigon Tobacco Company Limited

to foreign markets, especially in countries of Eastern Europe, the Middle Eastand Europe areas The following is a table of data and graphs which describesoutput situation of Saigon Tobacco Company Limited in 2009 - 2012:

Table 2.1 Output of Saigon Tobacco Company Limited in 2009 - 2012

(Source: Sale Department - Saigon Tobacco Company Limited)

Base on the above figures table, we can establish an accurate graph forsupporting to analyze data smoothly and easily: