G1 00259 CHIẾN LƯỢC PHÁT TRIỂN SẢN PHẨM GIÁ TRỊ GIA TỪ CÁ TRA - CHIẾM THĂM THỊ TRƯỜNG NỘI ĐỊA CỦA CÔNG TY TNHH ATLANTIC GIAI ĐOẠN 2011-2016 STRATEGIES FOR DEVELOPMENT OF VALUE ADDED PRODUCTS FROM PANGASIUS - THE LOCAL MARKET PENETRATION OF THE ATLANTIC CO

G1 00259 CHIẾN LƯỢC PHÁT TRIỂN SẢN PHẨM GIÁ TRỊ GIA TỪ CÁ TRA - CHIẾM THĂM THỊ TRƯỜNG NỘI ĐỊA CỦA CÔNG TY TNHH ATLANTIC GIAI ĐOẠN 2011-2016 STRATEGIES FOR DEVELOPMENT OF VALUE ADDED PRODUCTS FROM PANGASIUS - THE LOCAL MARKET PENETRATION OF THE ATLANTIC COMPANY LIMITED FOR THE PERIOD 2011-2016

1 Tran Ngoc Hien

2 Duong Thanh Hieu

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CHAPTER 2: PRODUCT CONSUMPTION MARKET ANALYSIS 24

2.1 Analyzing the impact of macro enviromen( co Ằ- 24

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4.6 Estimated cost and effectiveness of strafegies .c 64

4.6.1 Estimated cost and reVenu€ .- cccc kg HH ng rệt 64

4.6.2 Human resources support and distrIbutIOn «sec 65

CHAPTER 5: PROPSAL OF SOLUTIONS AND CONCLUSION 66

5.1 Proposal for solution for strategies implementafion 66

Š.I.1 Domestic market pen€tratiOn c1 2S 2v S9 vn negkn 66

5.1.2 Growth straft€gØI€s VIa CO-OD€TAfIOTI c0 122 1 vn ng nhào 68

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LISTS OF APPENDICES, .- < Ă Si ng 08 06 71

Appendix 1: Survey of belief of staffF on company_ c.cc cà 71

Appendix 2: List of inventory which is difficult for exporting of Atlantic 72

Appendix 3: Lists of value added products ÍrompangasIus .- - 73

LISTS OF PICTURES AND CHARTS ssessisssunsssvessasasssesnascscsscenananaenemcecansesnns Graph 1.1: Model the impact of external environment factOrs . 12

Graph 1.2: Model of Š5 competitive pressure of M.Porter- 13

Graph 1.3: General competitIV€ S†rat€ØI€S 2ĂcS c2 se cay 18 Graph 1.4: Internal - External Matrix model . 5+5 +55s++<xc<escsss2 19 Graph 1.5: SPACE matrix model . c6 5c 3223 S23 *t St sexceeeeeeeeeea 20 Graph 1.6: SWOT matrix model . ¿c3 322332331213 vverrxeerrecrs 22 Graph 2: Assessment chart of industrial attraction - - 34

Graph 3: Company organizational structur€ - c<<<<<sccsscces 38 Graph 4.1: Operational matrix of Company co se sevey 54 Graph 4.2: Internal and external matrix evaluation (IE) . - 55

Graph 4.3: SPACE matrix expresses strategies of Company 57

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Table 1: List of targets to be analyzed in the SPACE matrix 21

Table 2.1: External factor evaluation matrix .cccccccccsecssceseeseesseeseeseeeeseeeseeees 29 Table 2.2: Summary of assessment on power of buyer- -.- 30

Table 2.3: Assessment of supplier impacts 0 ccccccescsscescesseeseeeecseeseeessseeseeses 31 Table 2.4: 5 biggest pangasius export companies in Vietnam in 2010 — VASEP 34

Table 2.5: Comparison table of significant criteria of some pangasius processing 3002/05 e- 39

Table 2.6: Competition matrix for Atlantic .ccccccccecccssccessceessecesseeeeesseesenses 36 Table 3.1: Profit and Loss of Company for the period of 2007 — 2010 39

Table 3.2: Changes in profit and loss of companv via Vears 39

Table 3.3: Main financial indices of company OV€r V€aFS 40

Table 3.4: Situation of current capital of Atlantic -5 525 4]

Table 3.5: Some kinds of inventory difficult to export of Company 44

Table 3.6: Comparison of basic facility factors of company to competitors 45

Table 3.7: Human resources use analysis in Company - -s 49

fable 3.8 : Labor forces of some competitors within industry in 2010 50

Table 3.9: Internal factors evaluation of Company .::cccccccccssesscseeseeseeeeeeees 52

Table 4.1: Variables form the axes ofthe matrix SPACE 57

Table 4.2: SWOT matrix of Companyy .- 5 c5 2c S311 vs 58

Table 4.3 : QSPM matrix of Company — S-O strategies of important factors 61

Table 4.4: QSPM matrix of Company — S-T strategies of important factors 62

Table 4.5: Fixed cost and fixed assets estimated .cccccccceesceescesseeseeseeeeees 64

LISTS OF ABBREVIATIONS GG 00950895 8958858855655 555

BCG : Boston Consulting Group

CA : Competitive Advantages

SMART : Specific Measurable Attainable Relevant Time-bound

EFE : External facors environment matrix

IE : Internal — External matrix

IFE : Internal facors environment matrix

IS : Internal Strenghts

QSPM : Quantitative strategic planing matrix

ROA : Return On Assets

ROE : Return On Equity

: Strategic Position and Action Evaluation : Strengths - Weaknesses - Opportunities -Threatens matrix : United States of America

: United States dollar : Vietnam Association of Seafood Exporters and Producers

: World Trade Organization

1 Bases for thesis establishment

After more than 25 years of economic reform and development, Vietnam aquaculture has made the significant contribution to foreign turnovers back to

Vietnam, which contributes to economic development and people living standard,

especially in Mekong River Delta In 2009, due to the impact of economic crisis in

2008 global and Vietnam economy cought a plenty of difficuties; however, Vietnam aquatic export still gained 1,22 million tons with 4,25 billion USD in value ranking sixth within 06 global aquatic export countries, in which pangasius

accounts for 31% of export value.''! However, in recent years, it is pangasius that

makes pisciculturist afflicted and delay of some manufactures due to the unstable market and shortage of input

Being a pangasius processing manufactures for nearly 7 years with the large market more 80 countries over the world, Atlantic Company Limited can not escape from ups and downs of pangasius market, especially after the economic crisis in

2008 Most of countries in general and companies in particular which import pangasius from Vietnam create commercial, technical barriers, etc to protect

domestic manufacture

Pisciculturist Association of catfish in U.S has sued Vietnam businesses for

dumping catfish products in the U.S market, which begins the barriers to pangasius export After fighting for a long time from 2002 to 2006, Vietnam businesses have been imposed with high anti-dumping tariff by US Department of Commerce

Especially, Atlantic Company Limited is imposed with anti-dumping rate at 53.68%

For Russia, this is a big and attractive market for Vietnam pangasius

exporting businesses However they were banned on 8" May 2007"! and limited at

favorable condition for Russian prodution after a short time integration Atlantic

Company Limited own the Russian side was coinpletely banned from exporting to this market

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“ôn gg ẩn”

European markets, although they did not erect trade barriers but they always create technical barriers to prevent pangasius products from Vietnam Vietnam enterprises are always alerted and "cut" Code for any shipments which violate food hygiene and safety according to their standards While their standards are constantly changing and Vietnam businesses are required to follow In the period from 2007 to

2010 Atlantic Company Limited was warned three times in total PÌ

In addition to three major markets mentioned above, the Vietnam businesses also actively expand its market to Africa, South America, Asia and the Middle East but the situation is not encouraging when governments have sought to give the protection measures for their domestic production On the other hands, the domestic firms fiercely compete, which reduces quality as well as quality in order for export purpose That made the pangasius trade brand vulnerable and precarious over the world markets than ever before

While export markets tend to be always uncertain, the domestic market proves stable and tends to grow well and is still being left open Currently there are

about 10 new businesses of total more than 100 production enterprises engaging in the markets with over 50 types of value-added products from pangasius of Agifish,

Kisimex, Agrimex Saigon, Cholimex, Afiex, which is chosen in Vietnam family

meals According to census results in 2009, Vietnam has over 85.8 million people whose income levels increase day by day As stated by World Economic Forum, the income of Vietnamese people reaches $ 1,050 in 2009 and is estimated to $1,200 in

2010 "! The domestic consumers are positive, there is a trend to save time in meals, change habits of using frozen products and prepared foodstuffs Furthermore, in more than 10 years, Vietnam and the world are facing major outbreaks of livestock - poultry, and always at risk of relapse, which has created advantages for aquaculture And consumers are tending to choose aquatic products for fear of diseases and problems of health and safety

Because of the instability of export markets, plus some stock situation of the company's products which are not eligible for export (but may be processed into a

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JNIVERSITY

number of value-added products in line with domestic market) and a good trend of the domestic market we uniformly select group of research subjects: "Strategy for development of value added products from pangasius - the local market penetration of the Atlantic Company Limited for the period 2011 - 2016"

2 Research purposes

Reviewing the demands of the domestic market, since expanding value- added products chain to penetrate the domestic market;

Analyzing core capabilities of the company, from which developing value-

added products to increase revenues on the domestic market, preventing risks in

case of market instability;

Building a trade mark on the domestic market and then expanding to

overseas markets;

3 Research content

In order to complete the research purposes, we shall consider the content as

follows:

Theoretical basis: Presentation of the views, the tools needed in management

acting as guidance for analysis in the report

Analyze existing products market in the country: From which identifying opportunities and challenges affecting the operation of the enterprise when the enterprise participates in the market Finally advising if enterprises should

participate in the market or not?

Enterprises situation analysis: to examine the strong and weak points, core

competencies of the enterprises From which determining whether an enterprise can afford to participate in the market or not if the market opportunity is available;

Building and choosing strategies: Through the above analysis we draw out the key strategies and then analyze them in real conditions of business to consider the feasibility

Conclusions and recommendations: Based on the feasibility consideration

We suggest whether we implement the solutions or not, what we gain and we loss

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4 Research methods

In order to complete the research thesis, we have applied a combination of

research methods:

- Method of primary data collection: direct interviews of a number of staff

and board of director of companies

- Method of secondary data collection: by scientific research reports, statistics, company financial reports, market analysis, etc

- Statistical and descriptive methods:

- Analysis and comparison methods:

5 Research object and scope;

Research object: Atlantic Company Limited; consumers, the competitors, and other products on the domestic market;

Scope of research: the field of processing and distributing value-added

pangasius in Vietnam's market of the Atlantic Company Limited and other competitors

GRIGGS

INI

CHAPTER 1: THEORETIC BASIS

In this chapter, the authors presented a summary of some of the theoretical basis

on strategic management and a marketing tool to serve the research thesis

1.1 Concept of strategic management

The term "Strategic Management" is very common in the business and universities/ colleges today It appears in the historical war of the countries and is prevailing in the business So what is Strategic Management?

Strategic Management can be defined as an art and establishment science;

implementation and evaluation of decisions related functions allow an organization

to achieve those goals

1.2 Strategic management process

This process consists of three basic stages: strategy plan, strategy implementation and strategy evaluation;

1.2.1 Strategy plan

Strategy plan is to analyze the context of the internal and external elements

of enterprises and then plan a strategy for the company consistent with the context analysis This process will help the company to decide to participate / not to

participate in the field of business / geographic area, or the distribution of resources;

expand / narrow operation; link / not link to partners or competitors

1.2.1.1 Strategic objectives identification

Identifying strategic objectives or vision - mission of a business, we literally

have to point out our mission in business What we need to achieve in the future 1.2.1.2 External environment analysis

Analysis of external factors at the macro level shall allow the company to

know the opportunities and challenges of the external environment impacting

business strategy External analysis also includes consideration of operational

environment as the basis for our strategic choices accordingly

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The threat of substitutive products

Competitive intensity

Graph 1.1: Model the impact of external environment factors

This plays important part in strategic plan We can not control external environment factors; however, understanding to avoid or minimize their impact on

us will help determine the success or failure in business

** Macro environment analysis:

Macro environment has great impact to the operation of each enterprise; it includes economic, cultural - social, political — legal items, technology issues, demographic and global globalization, etc This analysis shall allow us to identify Opportunities and challenges as well as other legal binding for us to mitigate or cope with the challenges or take all advantages of opportunities created by the environment to conduct business objectives

**Operational environment analysis:

Operational environment is the business that the company and its competitors are active in the field Its scope includes customers, competitors, substitutes, suppliers and potential competitors The analysis is to capture these factors directly affecting our business operations and be the key to plan our strategy successfully

M Porter - a leading strategist in the business sector has launched five competitive models to analyze the operational environment of the industry as follows:

Negotiating | Competition between | Negotiating L

market

Graph 1.2: Model of 5 competitive pressure of M.Porter

~ Customers: including distributors, retailers, direct consumers and persons affecting the purchase/ use products They are powerful in negotiation to put pressure on prices, demand better quality or multiple services together, etc; thereby

making corporate profits declined Learning to know the clients to understand more

their position in business exchange

% Suppliers: including suppliers of raw materials, supplies, services, etc for the production and business They are powerful in negotiation to increase prices or decrease quality, change payment method, etc, which leads to the pressures in our business

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* Potential competitors: are competitors in the future that they will join the industry and direct competition to exploit our market, divide the market and share our profitability We identified:

- Who can they be? How are their potential and power?

- What level of integration barriers if they penetrate?

- Respond ability from competitors by blocking price or cooperation of

competitors?

1.2.1.3 Company internal environmental analysis

Internal analysis is to identify the strengths/ weaknesses of the company and, with external environmental analysis, to propose the most appropriate strategy; at the same time, to determine the core competencies of the company in competition with partners, consider the enterprise’s capacity to fully utilize the opportunities from the external environment In the internal analysis, we shall consider the matters: the financial and accounting operations, inventory status, marketing

activities, facilities, etc in comparison with industry competitors or industry average

1.2.1.4 Strategy plan and selection

% Identifying strategic objectives

The strategic objectives are our achivements in the future Our objectives shall

be qualified SMART criteria

%* Strategy plan and selection

Strategy plan and selection shall include 03 steps:

Input stage: Summarizing and inputing analyzed information on environment to IFE, EFE matrices and Competitive Matrix Photos

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SPACE, SWOT, etc

Decision stage: QSPM matrix shall be used to evaluate the strategic plan

outlined in Step 2 This matrix is a reasonable basis for strategic choices decision-

making

1.2.2 Strategy implementation

When strategies have been chosen, business shall implement by building programs for defined objectives, organizing and implementing these programs Enterprises shall mobilize and allocate human resources, plan budget and policy, oganizational structure and business culture for successful strategy implementation

1.2.3 Strategy control, evaluation and modification

During the strategy implementation, the enterprises shall control, assess

progress and results of strategic objectives implementation When necessary, the strategies can be modified to be suitable for circumstances and objectives defined

Benefits of control, evaluation and modification are to orient employees to the good results they can get so they can identify themselves and make effort for work Besides, the control and assessment provide useful information and experience for the strategic planning of the company

1.3 Strategy selecting and planning tools

As mentioned above, strategy selecting and planning tools shall include evaluation matrix set-up under the order as follows:

1.3.1 Input stage

% /nternal factor evaluation matrix (IFE)

To perform IFE Matrix 5 following steps shall be implemented:

¢ Step 1: Making lists of 10 - 20 core elements depending on the size and

complexity of the operating environment of the company, including strengths and weakness affecting the business and its defined objectives

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e Step 2: Significance classification (importances) from 0.0 (not important)

to 1.0 (very important) for each element The importance of these factors depends on the influence of these factors, the success of businesses in the industry: in case of being difficult in determining the importance, strategies planning team can discuss and agree The total score for the importance of all factors must equal 1.0

« Step 3: How enterprises capacity is defined for each staff identified? Scores

for each factor from 1 to 4, in which 4 is the ability for strong reaction, 3 is

quite strong, 2 is pretty weak | is very weak

¢ Step 4: Determination of importance for each factor by multiplying (x) the importance of each factor with its weight to determine the number of elements

e Step 5: Determination of the competitiveness of enterprises by plus (+)

cumulative score of all factors, to determine the total number of IFE matrix

Comparison and evaluation: The total score of matrix ranging point 1 to point 4

which do not depend on a number of important elements in the matrix

- If the total score is less than 2.5 points, company internal factors are weak

- If the total score is over 2.5 points, company internal factors are strong; + Competitive matrix images: being similar to IFE matrix set-up, several major

competitors of the sample company shall be added to compare their competitive ability

% External factors evaluation matrix (EFE)

For EFE matriz, 5 similar steps shall be as follows:

e Step 1: Making a list of 10 - 20 chance factors and major risk which can

impact business success in industry/ business field

e Step 2: Classifying the importance on a scale from 0.0 (not important) to 1.0 (very important) for each element The importance of each factor

depends on the influence of such faciors to the sector / industry that your

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e Step 5: Determinating total core of company respond capacity with its external environment by plus (+) score of all factors to determine a total score of the matrix

Comparison and evaluation: The total score of the matrix shall not depend on the number of elements in the matrix, 4 shall rank first, 2.5 average and 1 lowest

« If your total score is 4, the company is well responding to the opportunities and risks

¢ If your total score is, companies are weakly responding to these

opportunities and threats

1.3.2 Combination stage

This process includes two steps: planning company-level strategies and business corporate-level strategies

1.3.2.1 Company-level strategy planning

Company-level strategy planning is to build an appropriate portfolio, based

on which, company can make a sustainable development in the long term The tools needed for this step include: Boston Consulting Group Matrix (BCG), net business

strategy General Electric (GE) and Charles Hofer matrix However, for this thesis, the authors just go into research-level strategic business unit of cominodity in the domestic market so it will not address theory building BCG matrix GE,

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1.3.2.2 Business corporate-level strategy planning

Including 2 small steps: general and specific strategy planning:

* General strategy planning

The tools used include operations scope matrix and competitive advantage and internal factor evaluation matrix (IE)

Operation scope matrix & Competitive advantages (Michael E Porter) According to M Porter competitive advantage shall be expressed in two basic types: low-cost and differentiation Combining two competitive advantage forms and the scope of business activities, four general competive strategies at for business corporate-level as follows:

Competitive advantages

TT Narrow Focus on low cost Focus on differentiation

Graph 1.3: General competitive strategies

Internal — External Matrix (IE)

IE Matrix (Internal - External Matrix) set the SBU (Statergy Business Unit - Strategic business unit or different business activities of enterprises) on 01 table including 09 cells This matrix is based on 02 key aspects:

- Total number of critical points of the IFE matrix shall be shown on the X axis;

- Total number of critical points of the matrix EFE shall be shown on the axis

¥,

- Each SBU shall establish IFE and EFE matrix thereby establishing the company's IE matrix

- X axis represents the total number of critical points of IFE matrix

v Ifthe total cores range from 1.0 — 1.99: being weak at internal structure

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v If the total cores range from 2.0 — 2.99: being average at internal

structure

v If the total cores range from 3.0 —4.0: being strong at internal structure

- Y axis represents the total number of critical points of the EFE matrix in which:

v If the total cores range from 1.0 — 1.99: being weak at internal structure

v If the total cores range from 2.0 — 2.99: being average at internal

structure

v Ifthe total cores range from 3.0 —4.0: being strong at internal structure

Total number of critical points in the IFE Matrix

Graph 1.4: Internal — External Matrix models

+ If SBU is in in the boxes II, II, IV: developing and constructing

+ If SBU is in in the boxes III, V,VII : keeping and maintaining;

+ If SBU is in in the boxes VI, VIII,IX : collecting or canceling

~ Specific strategy planning

The tools used shall include SWOT, SPACE matrix The matrix uses the

information in the input stage to combine the external opportunities and threats with the internal strengths and weaknesses, thereby forming the strategic plan feasible for implementation

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- FS : (Financial Strengths) Financial strength of enterprise

- CA : (Competitive Advantage) — Competitive advantages of enterprises

- ES : (Enviroment Stability) - Enviroment Stability

- IS : Uaternals Strenghts) - Internal Strenghts

FS

+3 +2

+]

-2 -3

Graph 1.5: SPACE matrix model

In order to set a SPACE matrix, several steps shall be perfomed as follows:

e Step_1: Selecting a group of factors that show financial strength (FS), competitive advantage (CA), environmental stability (ES), and the industrial

strength (IS) Here are some criteria to be used on the axis of the matrix

Changes in demand Price of competitive products

Barriers for market integration The price elasticity of demand

Easy integration to market

Using productivity and power

e Step 2: Assigning a value +1 (Worst) to +6 (best) for each element of FSva

IS, assigning the value -1 (best) to - 6 (Worst) for each element of the ES and CA

¢ Step 3: The average score for FS shall be calculated by adding the values assigned to the elements, and dividing by the number of elements selected in

the FS Similar calculations shall be applied for IS, ES and CA

¢ Step 4: Marking average score for FS, IS, ES and CA on the appropriate axis

of the matrix SPACE

e Step 5: Plusing score on the X axis and marking the results on the X axis, making similar to Y axis and then identifying the intersection point of two new points on the XY axis

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¢ Step 6: Drawing directional vector from the original point of the SPACE Matrix through the new intersection This vector offers strategies for business: attacking, competing, defensing or cautioning?

** SWOT matrix

SWOT matrix allows us to assess the strengths and weaknesses of the company estimate opportunities and risks of the external business environment to establish the combination between company and external environment This matrix helps us to develop four types of strategies

Strength — Opportunity strategies (S-O)

Weakness — Opportunity strategies (W-O)

Strength — Threats strategies (S-T)

Weakness — Threats strategies (W-T)

Opportunities (O) Threats ( T)

SWOT Matrix Listing the opportunities | Listing the risks under

under the order (Oj, Oy, | the order (T), To, .) .)

Listing the strengths | Using strengths to exploit | Using strengths to avoid

.)

Listing the weakness | Limiting/ Improving | Minimizing risk and

Graph 1.6: SWOT matrix model

1.3.3 Strategies selection decision

This step shall use matrix QSPM to evaluate strategic methods outlined in Step 2 This matrix indicates the relative attractiveness of the strategic methods thus providing a reasonable basis for the strategies selection

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**OSPM matrix (Quantitative strategy planning matrix)

QSPM matrix is to evaluate and rank the feasible strategic methods: thereby

we can select the best strategy This matrix uses input information from all matrices constructed (IFE, EFE, IE, SWOT, SPACE .) To develop a matrix QSPM, we should go through 6 steps:

Step]: Listing the external important opportunities/ threats and internal strengths / weaknesses of the company, Matrix includes about 10 external and

internal critical success factors

Step 2: Classifying the importance for each important success factor

Step 3: Listing strategic methods that company considers to implement Collecting the strategies into separate groups if possible;

Step 4: Determinating attraction points of each strategy; we only compare the

Strategies in the same group together Number of attraction points shall be distributed as follows: 1 = absolutely not attractive, 2 = less attractive, 3 = relatively attractive, 4 = very attractive

If success factors do not affect strategy selection, it shall not be marked (probably completely out of the matrix type)

Step 5: Calculating the total number of attraction points, it shall be the result

of multiplying the number of classification (Step 2) with some interesting points (Step 4) in each row

Step 6: Caculating the total attraction points for each strategy That is the

sum of total attraction points in the strategy column The higher score indicates

more attractive strategy is

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Program

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CHAPTER 2: PRODUCT CONSUMPTION MARKET ANALYSIS

In this chapter the authors shall analyze the impact of general environment

to fishery industry in general and Atlantic in particular Thereby, determining what are the chances that companies can take advantage of and what are the challenges that companies need to overcome Next we shall make deep analysis of the affecting factors of the operational environment (industry environment) to activities of companies, especially 5 competitive pressures in model mentioned by M Porter

Finally the groups will analyze company’s competitors to consider the company's strengths / weakness, goal, their strategy on the domestic market, thereby build matrix related to the external environmental impact

2.1 Analyzing the impact of macro environment

In the context of volatile changes of global economy, especially after economic crisis at the end of 2008, all countries over the world shall protect their domestic production; limit the export by technical and commercial tools All the tools have caused difficulties for producers, especially the aquaculture export business — the key export sectors of Vietnam

Several advantages and difficulties affecting aquaculture operation production in Vietnam shall be as follows:

2.1.1 Opportunities from macro factors:

- The domestic market may also be left open because businesses are focusing

On exports, not much paying attention to the domestic market For more than 100 Pangasius processing enterprises, only a few are distributing domestically, only

Agifish workshops specialized in manufacturing - processing for domestic goods

Other firms are mostly exploring the market without proper investment for potential

of the market This is a good opportunity for enterprises to participate in the domestic make trade mark when others are in ignorance

- Trend of using aquatic products in the daily meals of Vietnamese has been increasing dramatically in recent years, which is estimated to keep at high levels in the near future According to the Vietnam Institute of Fisheries Economics and

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Planning domestic aquatic product consumption in 10 years will increase 30 - 40%

in comparison with today, reaching about 22 kg per person per year, the value of processed domestic aquatic production consumption will increase an average 5.37% per year Domestic consumption in 2015 is estimated to be 790,000 tons, 940,000

tons by 2020 In which, frozen aquatic products shall account for over 30%, the rest

is the value-added products such as sausage, glutinous rice chupatty , dried noodles, fish, member, braised fish, fish paste, spring rolls, etc Vietnamese consumption habits in general will also change over time, raw seafood consumption, purchasing

habits of fresh seafood in the traditional markets of the population will decrease,

instead and consumption of frozen aquatic products, processed aquatic products, forestry products, will increase

- Cooking tends to be saved in time, which makes the demand of prepared foods from pangasius increases day by day Vietnam processed food market rises 20% - 40% per year Simultaneously, purchase in the supermarket channel, selective stores, specialized stores tends increased at a rate of 150% per year and shall continue to increase as the urbanization process, people's income increases and awareness safety and hygiene of the people increases!*!, Food prepared from pangasius are sold in supermarkets, consumers are increasingly popular because of trade promotion activities of Supermarket

- Positive economic growth: GDP in 2010 reached 6.78%, 6.5% exceeded the target of government:

- Pangasius images are increasingly better known through the mass media

from domestic and foreign events such as Pangasius was listed as red, anti-dumping lawsuits from the U.S.; Russian import Pangasius market closed, etc

- The government has paid more attention to the pangasius industry In recent years, leaders at all levels have organized several conferences aiming at orientation for pangasius development in the country and exports promotion in the medium and long term We can mention "Conference on the fishery capacity and impact of the WTO" on 20/8/2009 at Vinh Phuc discussing the plan for aquaculture, combining

CG Global Advanced Master of Business Administration 25

Progratr

in the Mekong River Delta by 2020 with an investment of 1.340 billion dong

Office of Government decided to consider Pangasius as national strategic product

group for the preferential policies; sustainable development and brand set up on the international It can be said that opportunities for fishery enterprises have been supported from the government

- The government has implemented policies to support export businesses such as tax (business shall be reduced 15% of tax), concessional loans, foreign exchange to increase exports

- Incentive natural conditions: with the advantage of the lower position, Mekong River has considerable rivers, mild flow, which creates the favorable environment for good development of pangasius These are advantages for

businesses in the region because only the Mekong Delta covers good quality and

best conditions for the pangasius to grow

The fishery products are considered to be safe while substitutive products are faced with the disease The campaign "Vietnamese uses Vietnam products" which

has been launched for 2 years has got positive responses from customers Foods imported from other countries, especially China, most do not guarantee safety in use Also, in recent years, the disease in cattle and poultry are common for foods, consumers tend to choose fish meals foods from clear origin, high quality for family meals in addition to selected other tastes, etc

- As a result of the general population survey, to the date of 2009, Vietnam's

population was approximately 85.8 million people In which, the population at working age shall account for approximately 60% Food demand for this market which is the potential market for exploitation is very high

2.1.2 The difficulties and challenges from the macro factors:

- Fresh products use habit of Vietnam is still very deep, especially in areas far trom major cities where traditional markets is still the main distribution channels

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of goods Aquatic food sold in traditional markets mostly in raw form, unprocessed

or semi-processed with less value added products Therefore, changes in purchasing and value added products many rural areas and some smaller cities are still difficult

- Material resources are not stable The rapid growth of the pangasius industry in recent years has caused non-planning aquaculture to meet speed processing and exporting speed The farmers mostly raised pangasius, which leads

to material redundancy crisis It is the crisis that make unstable in price, most fish farmers suffered heavy losses without being able to bank debt and unable to re- raise When raw material prices are encouraging to farmers, they are not able to re- raise, which caused the serious shortage of material especially at the end of 2010 and early 2011

-Due to lacking of labor force, during past time, many aquatic processing

enterprises shall refuse many export orders due to lacking of skilled workers raw materials This suggests that, although the market is still open, the business still face

up with many difficulties and challenges

- Although the economy grows at 6.5% and is estimated to be higher for many next years, businesses still face difficulties due to the instability of the

economy Inflation in Vietnam in 2011 is estimated from 12% to 13.5% (according

to research by Dragon Capital) and more instable despite government has made efforts to stabilize the macro economy '°!, Consumers tend to save expenses and be

more sensitive to prices of goods This shall reduce consumption demand and use

substitutive products, which leads the decrease in revenue of Company

- Bank interest rate rises this year, the average is estimated from 18% - 20%

per year, plus electricity costs, freight, packaging, labor which all increased, which makes increase in input cost This shall lead to low cost competition and reduce the revenue of Company: the profit in the period also falls due to high inflation

- Climate change in Vietnam in recent years is an obstacle to fishing and

aquaculture In recent years the water level in the Mekong basin comes to be low

and saline water intrusion has seriously impacted the development of fish farming

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in this area Specifically this effect can narrow area of farming and rise costs for environmental remediation during rising

- In terms of concern about safety of food, the Government has promulgated regulations to strictly control food products for domestic consumption and export

- Substitutive products are various, which shall be the risks for decrease in revenue of Company in the future

Table 2.1: External factor evaluation matrix:

1 Preferential policies to develop the 0.07 1 0.07

fisheries sector of Government

4 Lack of highly skilled labor forces 0.07 4 0.28

5 Government increasingly tightened

| regulations on food safety

| product quality

From external factors matrix, the level of the company's response to factors

is quite good In other words, the strategy of the company can take advantage of

good opportunities and avoid threats from the external environment

According to the research team, external environmental conditions in the

future will tend to grow well, very convenient for market integration strategies

2.2 Analysis of operational environment

In analyzing operational environment, (industry environment) the authors shall analyze deeply the business activities of Company A variety of factors affecting directly to the company's activities shall be considered: the power of

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buyers (customers); power of sellers (suppliers); substitutive products: competition

in the industry, the threat from potential competitors

2.2.1 Power of buyer (Customers)

To assess the strength of the buyers, authors groups have investigated directly the existing distribution system of businesses being in trade Research results show that the current chain of value-added products processed from pangasius are being sold in Vietnam market through four channels: mainly restaurants, collective kitchens (industrial parks, schools, workers); shops, retail outlets, supermarkets Within 4 distribution channels mentioned above, the

Supermarket is the most popular distribution channel, and then shops, optional

stores and specialized stores However, the introduction of products in supermarkets

is covering some difficulties; manufacturers shall allow discount for supermarkets

at high rate of 15% for each product sold This has reduced the profits of

manufacturers In addition, the supermarket only receives 5-6 products from the

company

For shops and retail outlets, to persuade them to distribute goods of

companies, suppliers shall grant them credit in the form of deferred payment or

support cold storage, frozen storage system and other necessary equipments

As assessed by the authors, the power of the buyer on the domestic market for fish products in at average

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“Propam

revenues of sellers?

F4 Penetration ability of buyer to

Due to the weakness of regional material planning as well as

spontaneousness by the growers, businesses are gradually controlling material

regions and aquatic feed ingredients to ensure the stability of production For

example, in An Giang Province, 10 export enterprises self-supplied 40% of raw materials and contracted with traditional customers with 42%, some enterprises have self-supplied 80% inputs such as Sea Company (Tra Noc Industrial Zone, Can Tho) Besides that, although the material is concentrated in the deltas of the

Mekong, there is low connection between farmers, which makes raw materials

prices of Pangasius unstable and most businesses were forced prices It can be seen

in the profit distribution chain from pangasius, farmers only received very little, processors get about 25% of the selling price while the distributor gets more than 70% |"! However, in some certain time, due to shortages of raw materials, farmers also create pressure to increase prices when business needs material to meet requirements from customers

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suppliers

5 Transfer capacity of product High X

From the above table, assessment group considers the supplier’s power as at

average level

2.2.3 Impacts of substitutive products

The company's products are essential products which are very sensitive to prices and easy to be replaced On the market today, the replacement products are diversified, for example, value-added products are made from animals - birds in the country or imported, shrimp or other fish High-income customers in urban areas

tend to choose brands like Vissan, Cau Tre, Cholimex, Agrimex Saigon, Agifish,

Besides that, the substitutive foods are imported from other ASEAN countries, USA, is increasing in the domestic market Therefore any changes in price or quality can also lead to large changes in pangasius product selection behavior Therefore, substitutive products are evaluated at high level

2.2.4 Risks from potential competitors

Potential competitors are able to join the industry In other words, there is low penetration barrier at aquaculture, especially pangasius processing industry If

we consider the specific aspects we can see that:

Advantages on scope: Because the industry mostly uses common labor forces,

the process is mainly in manual, the transfer cost accounts for more than 80% of selling price Thus, the advantage of scope does not create barriers for businesses in

joining process

amas

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a

to differentiate the product On the other hand, the loyalty of customers for products

is low Customers are willing to buy an alternative product if the price fluctuations

or other problems related to quality and food safety happen

There are not any considerable difficulties in joining process for enterprises

according to Government’s policies Businesses only build the premises under the industrial standard and apply for liciense to put into operation

The approach to distribution channel is relatively easy

Training and recruiting labor forces do not meet many difficulties Businesses shall spend only 2 months for recruiting — training staff, the expenses for this

activity is not high

One disadvantage on other expenses related to operational scope such as location for factory, which can be the only barrier for penetration of businesses Due

to the characteristics of material, the factory shall be near the river for receiving raw

material by best way

It is above factor mentioned above that make the barrier to fishery industry in general and pangasius processing industry low In the fact, in 1998 — 2000 only a

few businesses operated in this field After 10 years, a number of pangasius

processing businesses have been reached to 100 without countering commercial companies on this field '*! This is the reasons for the high competitive idensity

2.2.5 Competition within the industry

As survey conducted by assessment team, the competition within industry is very fierce due to:

Low penetration barrier, the businesses are easy in join the industry Currently, businesses are relatively strong on finance, market share Thus, any businesses can not adjust the market: the competition between them is strong

Pangasius processing industry is in saturation, the profit generated is low

with depreciation is high Thus, the competition is increasingly fierce

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The inventory cost is high; the duration of goods use is limited The businesses try to sell quickly to recover the capital, avoid overdue goods and quality decrease In the fact pangasius export does not increase, even decreases during recent year |”! This also increases the competition level in the industry

Products are relatively common, thus it is difficult to create differentiation and transfer costs between products are very low Businesses only need to change or adjust the operation of technical processes, which can create new product Thus, products are quickly imitated, which pushes up competition to higher level

Summary: From the above analysis we can generalize 5 pressure levels in the pangasius fishery in the chart below:

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— ae

2.3 Analysis of competition in industry

Currently, there are more than 100 large and small pangasius processing enterprises at Mekong River Delta, mainly at Dong Thap, An Giang, Can Tho, Kien

Giang, Tien Giang Atlantic, Hung Vuong, Agifish, Nam Viet, Vinh Hoan, Binh An,

Viet An are the outstanding companies at pangasius export in 2010

Table 2.4: 5 biggest pangasius export companies in Vietnam in 2010 - VASEP

In the thesis, authors group has chosen the competitors of Atlantic, they are Hung Vuong Agrfish, Vinh Hoan Thereby, each competitor shall be analyzed on

CF Global Advanced Master of Business Administration 34

~proprain

| 3 Raising area (ha) 0 140 250

4 Control ability of production cost Good Good Rather good

From above table, we can see that Hung Vuong is a very strong competitor with chartered capital up to 599.999 million dong, processing productivity at 1.400

tons/day, raising area to 250ha This has been expressed clearly in recent years; Hung

Vuong has ranked first on revenue and export quantity Agifish is a company with

considerable experience in production and domestic consumption in many years

Currently, Agifish owes a production factory that supplies foods for domestic market with distribution channel expanded by supermarket system This enhances the inherent strength of Hung Vuong, by distribution channel of Agifish, Hung Vuong — Agifish alliance is easy in penetrate the domestic market rather any competitors

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BN

Table 2.6: Competition matrix for Atlantic

Important

No Internal factors eel Classificat | Important | Classific =m eae nạ

lon score ation Sg0NE an SeDES

analyzed strengths/ weaknesses of competitors and build competitive matrix for

planning in the future

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