Luận văn business strategy of clean rice for the 2016 2020 period

That way, the author built the business strategy for clean rice products of the center using SWOT matrix, QSPM and found out the opportunities and challenges such as the strong dovelopm

Hà Nội — 2017

DAT HOC QUOC GIA HA NOT

KHOA QUAN TRI VA KINH DOANH

NGUYEN THANH PHUONG

BUSINESS STRATEGY OF CLEAN RICE

FOR THE 2016-2020 PERIOD:

TUE CASE OF VIETNAMESE RICE RESEARCII CENTER-

VINAFOODI

CHIẾN LƯỢC KINH DOANH GAO SẠCH

GIAI DOẠN 2016-2020:

TRƯỜNG HỢP TRUNG TÂM NGIIÊN CỨU GẠO VIỆT — VINAFOODL

Chuyên ngành: Quản trị kinh doanh

Ma sé: 6034 01 02 LUAN VAN TIIAC Si QUAN TRI KINIT DOANIL

NGƯỜI HƯỚNG DẪN KIIOA HỌC: TS NGÔ VI DŨNG

DECLARATION

‘The author confirms that the research outcome mm the thesis is the result of author's independent work during study and research period and it is not yet published in other’s research and article

The other’s rescarch result and documentation (cxtzaction, table, figure, formula,and other document) used in the thesis are cited properly and the permission Gf required) is given,

The author is responsible in fiont of the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws for above-mentioned declaration

Hanoi, October 291h, 2017

ACKNOWLEDGEMENT

Thave gained huge knowledge, skill and insights ttom my MBA course The course raises my capacity of administration and management up to the next level J am now very confident in my position of management T would like ta extend my sinccres! Unariks and appreciation to all those who have made this Thesis to be possible

I woud like to express my great gratitude to my supervisor,Assist.Prof.Dr Ngo Vi

Ding, for hirw usefut comments, remarks and engagement during my process af doing this master thesis 1 would also like to thank the leaders and staff of Vietnam Rice Research and Development Center — Vinafood 1 who enthusiastically participated in the survey and provided me wilh valuable advice and comments during my thesis carnpletion

Sincere thanks are extended to the Faculty of International Training - Vietnam National University, Hanoi for equipping me with hmge knowledge and skills through various interesting and practical subjcets T also would like to thanks my classmates for their ftiendship and reciprocal encouragement to make our class time to be unforgettable

ume

Lastly, I would like to give my great thanks to my wife, my kids, and my family who always standby me during the past two years and encourages me to keep moving from the beginning of my study

Tlanoi, Octaber 29h, 2017

Student

TNguyễn Thành Phương.

Business Strategy for Clean Rice in the stage of 2016-2020: The Case of Vietuam

Rice Research and Development Center — Vinafood 1

1 Summary of the results

‘The thesis has systematized theories and studies on business strategy for rice prodnets from related studies and proposed the process of developing strategies for developing clean rice products at Victnam Rice Rescarch and Development Conter - Vinafood 1 including identifying objectives, analyzing intemal, external and sectorial environment, setting up Internal Factor Tvalualion and Fxtemal Faclor Rvalualion That way, the author built the business strategy for clean rice products of the center using

SWOT matrix, QSPM and found out the opportunities and challenges such as the strong

dovelopmont of toolmology of clan tive production in the world, strong current competitors with advantages in capital, technology, human resources and experience in the

market which created many challenges and threats for the business activities of the cent:

or the strengths and weaknesses such as the ensurance of quality management standards, failure to mect customer necds of rctail stores This helped scloct the optimal strategy for clean tice trading ot ‘the center, helping Vietnam Rice Research and Development Center -

‘Vinafood 1 improve its business efficiency and maximize its the profits

2 Applicability in practice

“The strategies proposed in the study will have a high applicability in practice since they were drawn from specific strengths and weaknesses of the enterprise and results of the survey with oxports and managers Morcover, the opportunities and challenges wore also analyzed in line with the market situation and technology development of the economy in the country and in the world, In addition, the basis for proposing strategies was stable with

4 fult process of building contents,

3, Fuather rescarch orientations

In order to complete this study, it is possible to add important elements in the process

of building the intemal and extemal matrix of the cnterprise in order to increase the possibility of developing and proposing strategies

1.1.3 Possible business stutegies for clean rice - cea

L.2 Process of building business strategy for clean tice 23

1.3.3 Expcrienee lesson for Vinafbod .c-eecsscee -.21 CHAPTER 2: RESEARCH METHODS cceneeeirrirarrisieieoooe 28

2.3 Dafa analysis mefllods c cover „28

CHAPTER 3: STRATEGIC ANALYSES OF CLEAN RICE TRADING OF VIETNAM RICE RESEARCH AND DEVELOPMENT CENTER — VINAFOOD 1 " 3.1 Introduction of Vietnam Rice Research and Development Center Vinafoodl 30 3.1.1 Llistory of foundation and development of Vietnam Rice Research and Development

Center — Vinafood T - - 3Ũ

3.1.2 Organizational siructure of the geter 30

E=) eneseesestesnesissnienieessenieseesesesieesiaenieesiene wee 30, 3.1.4 Amual rice sales of the center - - 31

3.2 Analysis of clean rice business environment of Vietnam Rice Research and

CIIAPTER 4: BUILDING BUSINESS STRATEGY FOR CLEAN RICE FOR THE VIETNAM RICE RESEARCH AND DEVELOPMENT CENTER - VNFI TO 2020 55 4.1 Vision, mission, duties and strategic objectives of Vietnam Rice Research and

4.2 Formation and selection of business strategy for clcan rice at Vietam Rice Rescarcli and Development Center — Vinafood1 56

4.3.1 Fomnaliơn of strategy through the analysis of SWOT Matrix 56

4.2.2 Sclzction of efcan viec trading strulegizs for Vietnam Rice Research and

4.3.1 Solutions fo implement the forward integration strategy 69 4.3.2 Solution to implement prođuet đifferentiation strafegy «sec 7L 4.3.3 Solutions to implement the market development strategy 15 4.3.4 Solutions to implement the backward integration siralcgy - -«.-c TẾ

41.4.2 To the Minisuy of Agriculture and Rural Development 80

Appendix 2: Outline of group discussion - .84

Appendix 03: Questionnaire

Phụ lục 02: Dan bai tháo luận nhỏm si

iti

Table 3.2: Some policies to support rice trading in VietWAM cee 36

‘rable 3.3: Quantity of rice sales of competitors in Hanoi 38

Table 3.5: Survey results on customers’ habits of buying rice 4L

‘rable 3.6 External Factor Bvaluation Matrix (EEE) - 4 Table 3.7: Human reources at Vietnam Rice Rosoarch and Developmen Contor—Vinafood 1 46 Table 3.8: Structure of human resources in terms of level 0Ÿ eđưcation 47 Table 3.9: Average salary of the employees a† the center 48 Table 3.10 Internal Factor Evaluation Matrix (IPE) - - _- Tablc4.1: 8ynthesis of SWOT matiix sntneerrereirrroeooooe ST

LIST OF FICURES AND CHARTS

Chart 3.1: Organizational structure of Vietnam Rice Research and Development Center —

+igure 3.3: GDP and per capita income in the stage of 2012 -2016 .33

Figure 33: Area in contrac and area of rice fields in the raw material regions of the

.34 Chart 3.2: Process of produetion and operation of clean riea at Vietnam Rice Research and

Figure 3.4; System of facilities and business locations SL

Figaro 4.1: Distribution chanel of Victuam Rice Reso arch and Development Conter —

ABBREVIATION

NO ABBREVIATION ORIGINAL

1 VNEI 'Vinafoadl — Vietnam Xorthern Food Corporation

7 SWOT Strengths, weaknesses, opportunitics and threats

8 USD United States dolar

9 HACGP 1lazard Analysis and Critical Control Point System

vi

INTRODUCTION

1 Rationale of the study

Nowadays, the strong growth of the economy has contributed to the improvementpeople’s lives When the lives are improved, the demand for using high quality products is also raised (Ngoc Anh, 2015) In addition, food safety is one of the topical issucs in the Victnamesc markct đực to the lack of stiict standard control from the authorities as well as the problem of ethics in production and trading activities of part of enlrprises This makes consumers anxious and worried when they usedaily products such

as food and drinks As a result, the consumers’ demand for using high quality and safe

products is urgently necessary (Nguyen Trong Khanh and Nguyen Van Hoan, 2015)

Like other food iloms, the rice in our country is facing "barriers" in quality This significantly influences the sales of tice offnterprises in the domestic as well as export market According to the Vietnam Food Association (2016), our country currently ranked third in the world in rice export tumover with annual export target of 6.5 million tons However, the cxport market of our country mainly includes countrics such as Indonesia, the Philippines, and Attican countries, so our rice does not have a good price, Therefore, the issne of improving the quality of rice and developing clean rice is a basic requirement

to increase export tumover as well as scrve the domestic market, Morcover, it is also necessary to create a premise for our rice to be present in the fastidious markets such as Japan and Buropean countries,

Tn addition, according to the smrvoy rosults of Nguyen Trong Khanh snd Xguyen Van Hoan (2015), the cmrent demand and mazket potential of clean and high quality rice products was increasing This was evidenced by the fact that all supermarkets in Llanoi, Hai Phong, Nam Dinh, Hai Duong, Thai Binh, Rac Ninh, cfc were mainly selling clean and high quality rice such asTam Thom Hai Han, Nang Xuan and BT7 At the same time,

when surveying customers using rice in Hanci, the authors found out that more than 90%

of consumers did nol care about the size of the rice grain or white or silverbelly, What they priotitized when choosing rice was that the rice must be clean, flexible and fragrant This indicated that the demand for clean and high quality tice was increasing and consumers increasingly tended to buy rice from reputable brands lo ensure quality standards of the rive

Facing that situation, Northem Food Corporation - ons of the leading rice exporters

with a lol of cxpericnce im the world’s rice market - has pionwored in looking for the

development directions for in Vietnamese rice over the yearswith the research and

1

production of clean rice with the Corporation’s brand, which meets the increasing demand

of people Being concerned and assigned byThe Ministry of Agriculture and Rural Development, especially after the scheme on building the Vietnamese rice brand name was

approved by the Prime Minister, the Northern Food Corporation decided to set up a

specialized unit calledViemam Rice Research and Development Center The center was established on 19 Soptember, 2014 with the task of rescarching and orpanizing the production of rice products under a chain of phases from researching seeds, cultivating to processing ad disiribuling products with Ihe aim locreals good quatity rice products and ensure food hygiene and safety and gradually build an excellent brand name for

Vietnamese rice products However, this center just focused on production but was not

‡nlzroslod in building business stralogy for the development of clean tics As a rasnlt, although the business strategy had been built, the implementation efficiency was not igh

‘The annual rice consumption did not corespand to the size and potentials of the center,

Being aware of the reality, as an employee working at Agro Processing and Market Development Avthorityunder The Ministry of Agricultwe and Rural Development and being responsible for seeking the consumption markets for agricultural products (including tice) and exporting high quality agricultural products to fastidions markets, the author decided to sclect the topic "Business Strategy forCican Rive in the stage of 2016-2020: The

Case of Vietnam Rice Research and Development Center — Vinafood]" for his graduation

thesis as well as for serving his current work

2, Rexearch overview

+ Bao Yen (2015) conducted a study on "Stiategy of building clean rice brand name

for Ninh Binh Seed Plants and Livestock Joint Stock Corporation" In this study the author

analyzed the company’s stralegy for cooperating with farmers to implement the closed rice production process with the motto of focusing on breeding, reducing losses and assuring quality under standards With this direction, the company was leading in the development ofa brand name for clean andhigh quality ricz in Nink Binh and gradually changing the methods of producing low-grade rice of farmers in previous years, Besides, the author also mentioned the difficulties in building a clean rice brand name for Vietnam in general and Ninh Binh in particular It was a fact thai, Vietrmmese exported rice had nat been standardized For example, the rice exported to international market was not homogeneous

in breed and had three or even a dozen diffrent kinds of rice in one bag.in fact, the branded rice must meet specific and light standards of a gran of tice with high stability in length, chameter, clarity, gloss, moisture, imputities, content of substances, odor,

2

etc Therefore, the research made a great contribution tobuilding the brand name for clean rice in Ninh Binh, However, the author had nat analyred the SWOT matrix and did not combine the strengths, weaknesses, opportunities and threats to buildtthe business strategy for developing clean rice brand name suitable for Ninh Binh province

Trinh Thi Tharh Thuy (2008) carried out a research articte entitled “Studying and proposing, solutions to develop clean food trading when Victnam is a member of the World

‘Trade Organization" In the study, the author specified the theoretical framework on the development of clean food products when Vietnam is a member of the WTO inchaditys the concepts, role of clean food and meaning of developing clean food, factors affecting production, processing and circulation of clean food, legal provisions for the production, processing and circulating clean food, and pointed oul experience in developing clean food

in foreign countries, In addition, the author also mentioned the reality of trading clean food

in Vietnam from 2002 to 2007 including: the reality of food production and processing, reality of food circulation and legal provisions related to the production, processing

andfood circulation in the country and food import and cxport Finally, theauthor proposed solutions to develop trading in clean food in Vietnam by 2015 and orientation to 2020 including sohitions œn clean food production and processing, solutions on transporting prescrving and distributing inland foodstuffs, solutions on importing and exporting clean food, solutions on finalizing legal bases related to domestic production, processing and circulation and import and export of clean food producls, solutions on raising awareness of tho whole socicly ofthe production, processing, distribution and consumption of clean food However, sincethe author focused on building strategy for clean food including, clean vegetables, clean rice, clean seafood, and so on, the research problem was quite broad and

goneral, the results of this r

proposcd a policy of developing clean food to reduce the incidence of foodhome dis

in third world cities The author’s research built a development model towards people's

3

health and social infrastmctue in Indonesia ‘he author’s model of clean food development cin be applicd in Vietnam becanse aur country also used ta be a third world country and our economic conditions were relatively similar to Indonesia However, the

results in Peter Durman's study did not have an update on time At the same time, the

research issue was on general clean food but not specifically on clean rice

~ Another rescarch was conducted by the United States Department of Agriculture

(2005) entitled "Guidance for School Food Authorities: Developing a School Food Safety Programs Based on the Process Approach to IFACCP Principles" The author researched the

development of school food safety program based on HACCP principles with such contents as the purpose of the school food safety program, the requirements of the school food safsly program and Ibe development of the schoot food safety program with the following steps: (1) Preparingdocuments in writing, and implementing operational procedures, (2) Making documentation of all food safety items in accordance wath the HACCP Compliance Process, (3) Identifying control documents and measures, (4) Establishing monitoring procedures, (5) Establishing comcctive actions, (6) Keoping records, (7) Reviewing and revising the overall food safety program periodically This research coniritmted significantly to the development af clean food in schools in the United States, However, the study was only conducted on.a school scale but not widely applied In addition, the author conductedthe research on the development of clean food in general but had nol gone deep into researching clean rice products

To sum up, there arc many sludics on business slralcgics for the development of clean food in general and high quality rice products in particular, However, each author approached their study in a different direction, so the results of each study were different Besidss, no authors conducted a comprehensive rescarch on hasiness strategy for clown rice Therefore, to supplement the documentation for business strategy of clean and high quality rice, the author decided to carry out therescarch and selected Vietnam Rice Rescarch and Development Center ~ Vinafood 1 (VRRDIC) as the ease study

3, Rescarch objectives

3.1 Overall objective

‘The purpose of the study was to contribuls lo improving the business

VNFI to become the leading producer and tiader ingood and clean rice(sate tood) in

Vietnam

3.2 Speciiic objectives

alegy for

- Systematizing the theoretical ftamework on building and developing businass strategies in Ihe agricuttural scetor im general and elcan riee in particular

- Applying strategictools tobuild and develop business strategies for VRRDC

- Suggesting solutions to improve the business strategy for clean rice products of

secondary data and from 11°" May, 2017 to 30" May, 2017 for primary data

- Contents: Based on the theory of business development in the ficld of agriculture and agneultural productsin general and rice in particular,the author builtthe business strategy for clean rice at Vietnam Rice Research and Development Center — Vinafood 1 and proposed solutions and recommendations to perform the business strategy for clean

tice at the corporation

6 Thesis structure

Apart from the introduction and conclusion, the thesis consisted of 4 chapters

CHAPTER 1: Rationale of the study

CILAPTER 2: Research Methodology

CHAPTER 3: Reality of clean rice trading of Vietnam Rice Rescarch and

Development Center Vinafood 1

CILAPTER 4: Building business strategy forclean nice of Vietnam Rice Research and

Development Center — Vinafoud | in the stage uf 2016 — 2020

CHAPTER 1: THEORETICAL FRAMEWORK

1.1 Basic concepts

1.1.1 Concept of clean rice

Rice is a food prodnel Rice is « popular food for pouple and is the main source of income for farmers all over the world (Le Xuan Tao, 2013)

Derived from the above concept of rice, there are many concepts of clean rice, namely;

Clean rice refers to the safety that this kind of rice brings to the health of people

'whoeatif (Nguyen Chỉ Trung, 2007)

Clemn tiec is ä kinđ of fsod thal is grown in the right procedise end looked after according to the proposed quality standard with no preservatives This kind of ricemust beconsumed in a period of time should not be stockedfor too long since the quality can be

jnfluenced (Huynh Van Thon, 2014)

Clean rive is a kind of rice which is produced in accordance with standards in a system of food inspection and supervision ftom the stage of cultivation +0 harvesting, processing and storage For example, the soil should be cleaned: the safety of the water souree must be ensured: the rive scedsmustbe discase fice becausc if the sccds arc unsafe, they will affect the productivity and quality of the rice; the fertilizers and plant protection mgs mast also be in the list allowedincluding organic medicines which are safe for users (Nguyen Cong Thanh, 2011)

1.1.2 Concept of business strategy for clean rice

‘The author approached the concepl of business strategy for clean rice through the concepis of strategy and business stralogy as follows:

According to Alfred Chandler (2013), strategy is the fixation of long-demm fundamental goals of an organization, the chaice of methods or courses ofactions and allocation of e

should be defined as a general business plan that directs the organization to the desired

dial natural resourees to accomplish these goals A busine:

accomplished

Business strategy 13 a general action program aiming at achieving the goals of the cnlzrprisc The strategy is ol intended to find autprecisely how to achicve these goats because it is the task of numerous support programs and functional strategies Business strategies only provide frameworks to guide thoughts in the direction of business and

action (Tluynh Thi Thien Chung, 2009)

According to Nguycn Ngoe Dc (2012), business strategy of an enterprise is that in the context of market economy, based on objective and subjective conditions and rasaurces,the enlerprise can determine the achemes,ways, tneasures to ensure the survival, stable andlong-term development according to the development objectives set by the

Business strategy for clean rice is a general and comprehensive plan which is set up based on obicctive and subjective conditions and internal resourees of enterprises to cnsure the implementation of revenue and profit targets in the trading of clean rice

1.1.3 Possible business strategies for clean rice

~ Company-level strategy: According to Fred David (2006), the stratcgics that can

Markel penciration: refers lo increasing market share for existing products or

services in existing markets with greater marketing efforts

Market development: involves bringing existing products or services into new geographic areas

Product development: involves increasing revenue by improving or modifying

existing products or services

- Stralogies for expanding operations in practice:

Concentrated diversification: Add mew products or services that ar interrelated.

Jtorizontal diversification: Add new products or services that are not interrelated for

exisling customers

Mixed diversification: Add new produets or services which are not interrelated

Business-level strategy: According to Michael Porter (1996), there are the

following types af business-level strategy:

~ Cost leadership

‘The cost leadership strategy is an overall of actions to provide clean tice products

with characlerislics accepled by customers at the lowest cost im relation lo competitors,

The goal of an enterprise pursuing a cost leadership strategy is to outperform competitors by dang everything possible to produce goods or services at a lower cost than its competitors, This stralogy has two tusic advantages:

First, the cost leader can offer a lower price than its competitors but still get the same profit margin due to lower costs If enterprises in the same mdustry offer a similar price for their produets, the cost leader will still have better profit

Sceond, the cost leader can stay stronger than its competitors, When the mumber of

competitors in the industry increases, enterprises are forced to compete on prices

‘rherefore, the prodnets are valued on the basis of what the market will tolerate

- Focus

Focus strategy is the third business development strategy that clean rice trading enterprises can choose The main difference from the two strategies above is that it directly aims al the needs of the group or the Timiled customer segment, A focus strategy will base

on the gaps of a specific maket to determine the geographic aspect, kinds of customer, or

product segmentation

‘When an sntorprise has chosan a market sogmant, iL will pursi

a focus strategy (hal

‘uses a differentiated approach or a low cost approach Basically, a focused enterprise is a

8

specialized difference maker or or a cost leader If an enterprise uses a focused cost leadership approach, il will compels with the cost leader irr the market segments thal this person is disadvantaged

If an enterprise uses a differentiation approach, it will use all the differentiation methods for different competitors The competitive point with differentiation makers is only in onc or some scgments of the market Moreover, the focus on a small range of products sometimes allows a person to develop faster than a differentiation maker

Focused enlerprises oflen aim at creating market share on just one segment If it is successful, it can start serving more and more segments and gradually decrease the advantages of differentiation makers

Some blue oveans are created outside the boundaries of the industry but most of them are created from within the red oceans by extending the current houndanies of the industry

1.2 Process of building business strategy for clean rice

Building a business strategy for clean rice is a thinking process that aims to create a strategy based on the research and forecast of basic information, ensuring the long-ierm

implementation of important largels of the enterprise

‘The steps for building the business strategy for clean rice include:

i Analyzing external environmental factors

fi, Analysing internal cnviromnental factors

iii, Building strategic options/altematives

iv Selecting strategies

y, Organizing conditions for strategy cxcoution and revision

‘The following sections will detail the tools and requirements of those sf|

1.2.1Selecting and building strategic targets

‘The ultimate goal of the enlerprise is its sustainable development in the market However, there may be different specific levels andpriority orders depending on the conditions and in each period In general, the business strategy for clean rice includes the following clemnants

- Market share of the enterprise,

Strategy analysis is the analysis of business environment of rice enterprises in order

to create the basis for building strategies Business environment is the whole institution,

factors and pressures that can have direct or indirect impacts on the clean rice trading of

enterprises Business environment analysis allows strategy managers to identify business

opportunities or threats for business operations Business environment consists of macro

environment and micro environment

1.2.2.1 Analyzing external environmental factors

Macro environment - PEST model

Based on the PEST model, four affective factors can be identified including political-

legal environment, economic environment, socio-cultural environment and technological

environment (Thomas L Wheelen and J David H., 2002)

Figurel.1: PEST model

Economic environment

Source: Thomas L Wheelen and J David H 2002

- Economic environment Economic development, economic recession, changes in

the inflation rate, prices, unemployment, income, resources, credit policies all affect the

10

operations of companies in general and clean rice trading companies in particular ‘here arc many tice companies that effectively do the plarming bul fail daz to nat anlicrpating or ignoting the changes of domestic and global economic conditions

- Fechnological environment It can be seen that technology is the basis of competition in the market Technology has a great impact on the prodnets in the market Technology also decides the production of elcan rive of enterprises

- Political-legal environment Politics and law are two sides of a problem ‘They are very closely relaled The companies in the markel are direclly influenced hy these factors Political factors at all levels of local goverment affact the operations of companics

However,the prominent factor is the role of the central government Political institutions

have a ¢ on & country's poliviss and guidetines on iss and society, and hence the rice trading companies are also affected In addition, legal factors are consideredthe standard for the performance of companies in general and rice companies in particular These factors have daily and hourly impacis and companies need

to pay close attention to them

- Socio-cultural environment Clean rice enterprises need to comprehensivelyanalyze the social factors in order to identify the opportunities and risks that may occur Tlowever, social factors (such as anthropological trends, entertainment preferences, cthical standards, and viewpoints of living standards) offen change or develop slowly, so they are often difficull lo be recognized When analyving the influence of sociat factors on the strategy

planning of enterp

is nocessary lo analyze the following factors Life quality of people, entertainment preferences of social classes

Standards of ethicsand lifestyle

Situation of lutnan resources such as fernals labor fores, lahor reserve

Level of education and occupation of people and workers

Cultural traditions and social customs

Religions and the role of religions in social life, religious coullivts

Demographic situation: population growth rate, population structure

Micro environment - 5 contpetitive pressure model

Micro-environment includes seclorial faclors and external factors for clean rice trađing enterprises, deciding the nature and level of competition in the industry of rice production and trading According te M.Poter, there are five basic elements including

competitors, customers, supplicrs, potential new competitors and alternative products

These factors have interrelationship and the general impact of these factors is often a fact

1L

acceptable to all enterprises In order to devise a successful strategy, it is necessary to

analyze each of these key factors Understanding about these factors helps enterprises recognize their strengths and weaknesses in relation to the opportunities and threats that

the clean rice trading industry may face

Figure 1.2: Model of five competitive pressures

Current competitors are enterprises that are operating in the same riceindustry as

thecompany, who are now looking for ways to increase sales and profits by policies and

measures that create disadvantages for the company Due to the limited market size, enterprises "compete" for market share by offering discounts, advertising, promotion, persuading customer, improving product quality, creating the difference in the supply of rice products and creating value for customers

Potential competitors

In the market of clean rice supply, there will be new competitors in the near

possibility.These competitors appear late, but often have abundant and experienced resources Once they appear, they will compete with the companyin three aspects:

- Win the clean rice consumption market by various tricks

- Collecting materials with flexible andmore attractive policies

- Attract qualified and skilled workforce with attractive incentive policies

Suppliers

Companies that provide production toolsfor ctean rice enterprises such as machinery equipment, spare parls and transportation scrvices can also crcale press

nes on price, methods of supply and methods of payment in business negotiation, which threaten the interests of the enterprises Ilowevsr,fhis also creates good business opportunities for the

enterprises Creating competitive advantages in the supply process, creating strategic

alliances and crcating supply contracts are solutions to reduce the pressurcsfrom this environmental factor

Alternative products

A product or service which satisfies a customer's needs in the marketis not unique

and keeps that position forever but will bereplaced by another product someday Clean tice

products are also tke that Other manufacturers can meet the current needs of customcrs

who are using clean rice products of the enterprise, Often, these new products will betier satisfy customers’ demand thanks to theapplication of innovations and new achievements

in science and technology and cheaper prices

The pressure from new altcrnative products limits the ability to make profitsof existing clean rice products and narrows the market share of enterprises To Limit the impact of this threat, enterprises must also invest stronglyin research and development

Customers:

Customers are the buyers of clean tice products and are an important factor in the business activities Clean rice trading enterprises must ensure the benefits of customers and fine! all measures to meal the highost satistaetion of customers toward the quafity of the products

In addition, in order to achieve the highest efficiency ofusiness strategy for clean

rive, apart fiom paying atiention fo the quality of rice (plasticity, whilencss, gloss, cic),

meeting customers’ tastes and needs is extremely important To study the tastes and needs

of customers, enterprises should consider the following issues

- The kind of rice customers often choosc{bascd on traditional channels, buying loose

tice, being able to select and weight directly)

- The habit of using rice af customers (suitable for the taste and the budget)

- The awareness of cusiomers in using clean and safe rics

External Factor EvaluationMatrix (EFEj

‘The EFE Matrix is a model used to evaluate extemal factors, synthesize and

suminarize the major opportunities and threats of the external crviromment that affect the

operation of clean rice trading enterprises, This helps business administrators assess the

13

responses of enterprises toward the opportunities and threats and decide if the external Faclors are favorable or difficull for the cnterprises, The stops ta develop FFE Matrixers presented in the following table:

Table 1.1: Summary of EFE Matrix

significance Factor Ï

Paclor 2

Factor 1

Source: Nguyen Thi Lien Diep (2006)

- Listing the major factors of opportunities and threats that are expected to affect the success of the enterprise

- Classifying the significance on a scale fiom 0 (unimportant) to 1 (very important)

~ Summing the scores of all clements to get the score of the matrix

The higher the total score is, the better the company responds to the opportunities and threats

1.3.2.2 Analyzing internal environmental factors

‘The analysis of intemal factors is to find out the strengths and weaknesses of clean rice enterprises through the assessment of key factors of the snterprises such as marketing

, production and the relationship sruơng th From the strengths and weaknesses, enterprises will set up a goal combined with external opportunities and threats to take advantage of strengths and overcome weaknesses in the

enterprises helps them find ways to promote its strengths and minimize weaknesses in

order tocrcalz its competitive advantages

VRIN/VRIO tools

- Human resources: [luman resources are an important factor that plays a special role

in all activities of any enterprises When analyzing human resomrces, it is necessary to

consider the eriteria such ascducation level, flexibility, creativity and level of satisfaction,

with the current job

- Production - operation: Production is the function of creating clean tice from the

production andstorage to packing, That is a combination of input materials to createclean

rice products, ‘he content of production - operation analysis is to analyze the rationality of

the highest quality of rice

- Financial and accounting activities: Financial situation reflects quite exactly the

s, capacily and labor quality to serve the production pro

operations of the enterprise The determination offinancial strengths ar weaknesses of the

cutzrprisc is essential in developing the business strategy for clean rice The analysis

contents of financial and accounting activities include investment decisions, financial dscisionsand decisions on dividend distribution to sharzholders

- Research and development: Rescarch and development activitics of the enterprise

are the function of creating changes in tice products or changes in the process of production int order to incrzase the quality of clean rice in terms of plasticily, gloss, and

safety and deerease prices with the ais of increasing cornpelitivencss and yoingdecper into

‘the fastidiousmarket The contents of research and development include the external and

internal analysis of the organization It is the review of the funding sources and specific tasks of research and development such as the sciling up goals, building and irmplememing

the research and development strategies and policies

- Marketing activities: Marketing activities are described as the process of

identifying, forecasting, sclting and satisfying the desired needs of custurncrs Loward clean,

tice products of the enterprise The analysis of marketing activities should focus on analyzingpolicies on rice products, prices, distribution and communication of the enterprise

- Organizational discipline: The corporate culture is a comibination of experience,

personality and working style to form the regulations ormanners of the enterprise Poor or good organizational discipline will negatively or positively affect the process of

implementing business strategies of the enterprises

Internal Hactor Hvaluation Matrix (tH)

Tntermal factors are very important factors affecting the building of business strategies for clean rice of the enterprise The problem is how strategy planners can accurately evatuate the strengths, weaknesses and the response of internal factors toward changes 1FRMatrix is often used to solve this problem The formation steps of the matrix arc as follows:

‘Table 1.2: Summary of [FE Matrix

significance Factor 1

Factor 2

Factor ni

Source: Nguyen Thi Lien Diep, 2006

es thal affect the

- Determining the weight af each factor from 1 to

~ Multiplying the significance of cach factor by its weight to determine the score of each factor

- Summing the scotes of alll the factors to determine the total score of the matrix

‘The higher the score of thơ mmlri

responding to the threats

1.2.3 Building strategic options

ANer cvaluating and analyzing the above factors, the next slep was to develop strategic plans In order to build suntablestrategic plans for the organization, the SWOT model is often used to analyze strengths, weaknesses, opportunities and threats of the

the grualer the possibility of internal factors

organization

Strengths: Strength is an activity that the company can do well or a competitive characteristic of the company including

- Valuable competence, secrets,

- Valunble as

- Valuable human resources;

- Low cosisthanks to own production secrets,

~ lasy access to high quality natural resources,

- Easy acecss to distribution networks,

Weaknesses: ‘Ihe absence of strengths is considered a weakness ‘The following characteristics may be considsred weaknesses

- Lack of brand name, secret, expatience or capacity;

- Being thought by customersas having a bad reputation;

- High costs lor operation;

- Little access to natural resources,

- Little access to key distribution channels

Opportunities: An analysis of the extemal environment can reveal new opportunitics for crcating profitability and development, namely:

- Customer needs are not fully met;

- The emergence of new technology:

~ Loose regulations,

- The removal of international trade barriers,

Threats: Changes in external circurnstances and environment can pose a (hreat to the

rise, namely

- Customers movetheir interest in other products;

- ‘The appearance of alternative products;

- Rew legal provisions;

- The infemational trade barriers are tighter

Table 1.3: SWOT Matrix SWOT Matrix (O: Listing the key opportunities [I- Listing the key threats

Source: Daa Duy Tuan (2015)

SWOT matrix is an important tool helpingadministrators develop four types of business strategy for elean rice including: + Stiengths - Opportunities, Weaknesses - Opportunities; Strengths - Threats, Weaknesses - ‘Threats

Strengths - Opportunities strategies (SO): These strategies usc the internal strengths

of the enterprise to take advantage of extemal opportunities

‘Weaknesses - Opportunities strategies (WO): These strategies aim to improve internal weaknesses by taking advantage of opportunities from the external environment

Strengths - ‘Threats strategies (SI): These strategies use the strengths of the enlerprist lo avoid or reducs the impact of external threats

‘Wealnesses- Threat strategies (WT): These are defensive strategies that reduce intemal weaknesses and avoid threats from external environment

1.2.4 Selecting strategies

There are many tools used ta choose the optitual strategy for the onterprisa The Quantitative Strategie Planning Matix (QSPM) is a modem strategic management approach for evaluating and selecting the optimal strategy ‘The QSPM matrix provides an analytical approach to (ind our altemnative (easible plans The QSPM matrix uscs input data from the analysis in the previous steps to help strategists determine which of the developedalternative strategies is the most attractive and is worth pursuing to achieve their goals successfully

There are six steps to develop a QSPM matrix:

(1) The first step in the development of QSPM matrix is to identify key strategic faclors, list key exlermal opportunities and threats, and internal strengths und weaknesses

‘These factors ate taken direetly from EEE and IFE matrices

(2) With available data, the determination and selection of optimal strategies will be

considered These strat

are displayed at the tap of the lable

(3) Studying SWOT matrices and identifying alternative strategies that the enterprise should consider to implement, writing these strategies in the Lop raw of the QSPM matrix The strategies are grouped separately

(A) Determine the attractiveness score of each strategy Only strategies in the same group can be compared The altractiveness scoresare classified as follows: 1 = not attractive, 2 — less attractive, 3 — quite attractive, 4 — very attractive These values represent the relative attractiveness of each strategy compared to other strategies in the

same sel of alternative strategies

(5) Calculating the total attractiveness score, which is the resultsfrom multiplying the classification score (step 2) by the attractiveness score (step 4)

Table 1.4: Summary of OSPM Matrix

Source: Nguyen Thi Lien Diep (2006)

1.2.5 Organizing conditions for strategy execution

After identifying the optimal strategies for developing clean rice trading of the cnlrprise, managers necd to creale favorable conditions and carry out measures to implement the strategy successfully

‘The conditions for successful strategy implementation inctude

- Organization (personnel, struchirs, budget, process, mechanism, policy)

In the devetopment of the rice business strategy, Vinh Long Hood attaches great

importance to product strategy Accordingly, the company's product strategy is presented

as follows:

- Regarding rice variety: The company promotes the research and application of many new rice varieties for high productivity, good quality and good resistance to weather conditions, natural disasters, pests such as IR 9729, IR 64, IR 59606, OM 132, and OM 997-6, C70, C7L, CR 203, Q5, IR1832

~ Regarding post-harvest lechnology: Afler buying from the rice growing areas, the company will process the rice so that it can meet the export standards right at the mills

“rhese mills are equipped with modem machinery which produces a variety of high quality rice, ‘The company’s types of export rice include all types of export rice that the country can produce Export rice mainly inclutes long grain rice with good quality, which is produced mostly fiom the Mekong Delta, short grain rice and specialty rice

- Regarding packaging ‘There are two popular types of packaging used by the company including PP bags or jute bags However, due lo many oulstanding features, PP bags are now more widely used, Export rice packaging is used depending on the requirements of foreign customers They can provide samples or want to see samples to choose from Export rice is noumally packed in bags of 50 kilos or 25 kilos while bags of

10 kilos and 3 kilos are only packed when customers request, These customers will import the company’s rice and keep the packaging to deliver to the consumers ‘The ability to

20

produce the packaging according to customers’ requirements is one of the strengths of the Ticc trading companies

1.3.2 Experience of An Giang Import-Export Company (Angimex)

Currently, Angimex is trading the following types of rive: 5%, 10%, 15%, 16%,

35%, 55%, Jasmine tice, broken tice and sticky tice Thms, the company has used the product diversification strategy combining the “differentiation” strategy of each product, Thal is, the product created by the company will have beller quality, be affordable for customers, bring profits to the company, and benefit the majority of customers The packaging is different in characteristics compared to the same products in the market, easy

to attract buyers and nol casity imilaled by compotitors,

~ In the purchasing phase: The company always ensures the comect and sufficient quantity by building its own material areas or signing contracts with cooperatives in the aaea, namcly

- Cho Moi District: Phu Quoi Cooperative, Tan Quoi Cooperative

- Thoai Sơn District: Vinh Thang Cooperative, Binh Thanh Cooperative, Nui Troc

Cooperative, Tay Son Cooperative, Production associations of Trang Son Ilamlet

- Chau Thanh District; Production associations 1 - $ in Vinh Loi Commune - Phu

‘Tan District: Hoa Phat Cooperative, Hoa Lac Cooperative

- Cooperatives in the company system: Son Toa, Truong Thanh

The strategy of the company when signing the contract is applying adjustable contracts, ic the price in the contract is the floor price; when the price is down, the floor price is used for the transaction; when the price is up, the oor price is adjusted by hve sides Al the same time, the company always builds ¢lose relationships with supplicis by selling shares to suppliers (after equitation); ofan organize programs to support farmers; pay attention to reliable suppliers, sell seeds on credit to farmers without interest to ensure the quality of rice

‘When packing the products, the company pays special attention to three issues: different characteristics, good impression and easy to attract buyers and difficult for competitors to replicate, Accordingly, the company’s packaging and logistics factories

have invested more machines to produce PP and PE plastic bags to pack products into

small bags of 2 to 5 kilos On the packaging, there is the company name, company logo, product slogan, woight and quality indicators

1.3.3 Experience lesson far Vi

2L

‘Through the experience in rice trading of some Vietnamese rice export companies,

the author drew the lesson far Vinafpod 1 as follows:

- Pay special attention to the product quality

- Diversify products to meet the needs of customers

~ Make a difference in the products offered

~ Packaging design must be attractive and contain full information about the product

as well as the weight, product standards

+ Set up a close relation with suppliers to =

CHAPTER 2: RESEARCH METHODS

Identifying research objectives and process of building strategies

|

Proposing

2.2 Data collection methods

+ Scoondary data: The data sourees included business tosull statements, balance sheet, financial statements, final reports of the center in the stage of 2013-2016,and other related documents from joumals and statistics on the country's socio-economic situation announced by the General Statistics Office

~ Primary Data; The collection of primary data was condueted in three basic steps

- Step 1: Develop a preliminary seale including factors affecting the business strategy forctean rice, consisting af two groups of internal and external factors The eriteria wers duit based on the previous researches, materials, and textbooksrelated to strategic management and business strategy development

od with the thr

~ Stop 2: The preliminary eriteria were discus sadors of the cantor

The results of group discussion aimed at adjusting the criteria so that they were consistent with the business practices and clean rice products The contents of group discussion were

presented in Appendix 2 of the thesis where the criteria were presented in retnm for

comments of the center's leaders Specifically, for the criteria of the 2xtemal factors, the

discussion group added some criteria including The demand for using safe and high quality rice products is increasing, and Consumers have not had the habit of choosing products

based on clean and sufe criteria, and revised the contents of two criteria including The

status of the center has been gradually recognised in the hearts of consumers into

Consumers are increasingly interested in prestige and brand name of the enterprise and

The center has not completely controlled the quality of input materials inlolt is difficult to

control the quality of invut materials The extemal consisted of 14 caiteria

Jn terms of internal factors, the discussion group has revised the criteriadhe

investment in expansion of distribution sysiem ilo The increase, expansion of disivibution

system of clean rice products through agents and retail stores For the convenience and

comprehensibility of the respondents, a total of 2 I criteria of internal factors were discussed

by the group

‘Table 2.1 Group discussion results

‘Agreed factors after

No | Expected external factors Reference

group discussion Note External factors

¡ | toss National Product GDP Gross National Product

and per capita income inercase GDP and per capita Agreed3/3

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rapidly income increase rapidly

2 | the implementation of the “four

3 | materials offered under

The strong development of

development of clean

technology in the world | 3/3 The investing budget

The investing budget for

for applying technology

producing and trading high

trading high quitity rice | Agreed quality rice is very large

€ stitors are strong

advanlags in capilal,

technology, human resources,

human resources, Agreed

experience, etc

‘The State has ismed

‘The Stalz has issued many mumy policies to

7 | policies to support and promote support and promote

A lot of alternative

A lot of alternative products

products have been

8 | have been produced and

produced and supplied supplied in thts tmarkel

in the market Agreed 3/3

25

Rice is primary and

Consumers are

The slalus of the conler has been

increasingly interastod

11 | gradually recognized in the

in prestige and brand hhearts of consumers

name of the enterprise | Revised

‘The center has not completely Ttis dificult to control

12 | controlled the quality of input the quality of input

The demand for using

quality of human resources

Professionalism in Professionalism in recruitment recruitment with the

Level of hmman resources,

mumber of trained workers

26

‘The increase in the The increase in the

4 | senmmeration for cmployces at remuneration for | Agreed,

the center employees at the center | 3/3

7 production according to | Agreed

according to HACCP standard

ILACCP standard 3⁄3

The conlibuion of

g | The contribution of roscarch ane rescarch and

development of clean rice development of clean | Agreed

rice 3⁄3 Establish a specialized

Establish a specialized unit

unit responsible for

9 | responsible for rescarch and

research and | Agreed development

development 3⁄3

‘The increase, expansion

| of distribution system The investment in expansion of

19 of clean rice products

" demand of the retail | Agreed

of the retail chain of the center

chain of the center 3⁄8

Source: Synthesized by the author

- Step 3: The official survey was conducted aor the content of the criteria had been revised, The survey was conducted with 20 experts including leaders, managers, deputy managers of functional departments, specialists in product research and development ‘The

purpose of the survey was to gel (he experis’ assessment on the intemal and extemal

factors affecting the strategy of the company in terms of the importance of factors The

survey was conducted from 11 May, 2017 to 30 May, 2017 in the form of direct interaction

27

between the author and each expert in the meeting room of the center (Appendixl of list of cxperls interviewed)

2.3 Data analysis methods

Appropriate analytical methods will be used for specific as follows

Cantent 1: Analyzing and evaluating the business results of the center in the period

performance of the center

+ Comparing with competitors in the same industry in terms of some indicators reflecting the business zesults, market share, and substitute products

Content 2: Analyzing the business environment of the center including macro

cuvironment, micro environment and intemal environment

Analysis of macro environment:

The analysis of the macto environment will show the impact of macro environment

factors on the production and trading activitics of cntcrpriscs The analysis of macro

environment will be conducted through the analysis of the following contents:

Reonone environment

~ Political-legal environment

+ Socio-cultural environment

‘Technological environment This mcthad was implemented in cornbination of comparison methad and synthetic and analytical method The elements of the macro environment were synthesized and analyzed to show its impact on business operations of the center

Analysis of micro environment

The analysis of micro environment was conducted to find out the pressures that the center was facing:

Pressure from compelitors

~ Pressure from suppliers

~ Pressure from customers

+ Pressure from potculiat competitors

~ Pressure from altemative produets

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