Improving the competitiveness by marketing and sale personnel management strategy (A case of protective and marine coating products in Sigma Yung Chi Coating C.,ltd)

Improving the competitiveness by marketing and sale personnel management strategy A case of protective and marine coating products in Sigma Yung Chi Coatings Co., Ltd MASTER PROJECT MA

Improving the competitiveness by marketing and

sale personnel management strategy (A case of protective and marine coating products in

Sigma Yung Chi Coatings Co., Ltd)

MASTER PROJECT MASTER IN BUSINESS ADMINISTRATION

(PART-TIME)

Ho Chi Minh City

(2011)

Once more, I would affirm the truthfulness of my promise

First and foremost, I would like to send my heartfelt gratitude towards my supervisor

PhD Hoang Thi Phuong Thao for her constructive and timely feedbacks as well as her

constant and unfailing support which were decisive factors to the completion of the study Additionally, I would like to show my deepest gratitude towards my colleagues as well the Mantor Mr Nguyen Duy Chinh, Regional Sales Manager of Sigma Yung Chi Coatings Co., Ldt for his valuable information, advice and guide in the methodology of the research

Furthermore, I would also like to say the sincerest thanks to my classmates

On a personal note, I express my truly gratitude to my family and friends who emotionally and spiritually comforted me through the challenging time of conducting the research The study could not have been completed without their continual encouragement

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION 1

1.1 Background 1

1.2 Rational of study 3

1.2.1 Asia industrial coating market overview 3

1.2.2 Major markets in Asia 4

1.2.3 Vietnam industrial coating market overview 5

1.2.3.1 General information 5

1.2.3.2 Some well-know industrial paint companies in Vietnam market 6

1.3 Research problem and research objective 6

1.3.1 Research Problem 6

1.3.2 Research Objective 7

1.4 Methodology of study 7

1.5 Structure of study 9

CHAPTER 2: LITERATURE REVIEW 10

2.1 Concept of competition and competitive advantage 10

2.1.1 Competition 10

2.1.2 Competitiveness 10

2.1.3 Competitive advantage 10

2.2 M Porter model analysis 11

2.3 SWOT model analysis 13

2.4 Factor effecting to competitiveness of enterprise: 14

2.4.1 Macro factors 14

2.4.2 Micro- factors 16

2.5 Marketing mixed and HR strategy to improve the competitiveness 18

2.5.1 Marketing mix 18

2.5.2 HR strategies 19

2.6 Chapter Summary 19

CHAPTER 3: ANALYSIS OF THE COMPETITIVE ENVIRONMENT AND COMPETITIVENESS ABILITY OF SIGMA YUNG CHI COATINGS CO., LTD 20

3.1 General introduction about PPG Corporation and Sigma Yung Chi Coatings

Co., Ltd 20

3.1.1 PPG Corporation 20

3.1.2 Sigma Yung Chi Coatings Company Limited 21

3.2 Competitive business environment analysis of Sigma Yung Chi Coatings Co., Ltd-Protective and Marine Coating products 25

3.2.1 Macro environment 25

3.2.2 Micro environment 28

3.2.3 Porter competitive Analysis 29

3.2.4 Products 31

3.2.5 Prices 32

3.2.6 Sales personnel 33

3.2.7 General comparison of Sigma Yung Chi with other competitors 35

3.3 SWOT analysis of the competitiveness advantage of Sigma Yung Chi 38

3.4 Conclusion 40

CHAPTER 4: STRATEGY OF IMPROVEMENT OF COMPETITIVENESS OF PROTECTIVE AND MARINE PRODUCTS- FOCUS ON MAKETING MIX AND SALE PERSONNEL 41

4.1 The company recommended development objectives 41

4.1.1 Sales and marketing objectives 41

4.1.2 Personnel management objectives 41

4.2 Strategic solution of marketing mix and sales personnel for the company to be able to achieve these objectives 42

4.2.1 Marketing mix strategy recommendation 42

4.2.1.1 Product 42

4.2.1.2 Price 42

4.2.1.3 Distribution 43

4.2.1.4 Promotion 46

4.2.2 Personnel strategy 46

4.2.2.1 Technical and sales staff recruitment process 46

4.2.2.2 Technical staff training process 47

4.2.2.3 Motivation of technical and sales staff in the firms 48

4.2.2.4 Role of line manager in training and developing the people in the

organization 50

4.2.2.5 Being the Best Team in the marine and protective segments in comparison with competitors 51

4.2.2.6 Customer relationship 52

4.3 Conclusion 53

REFERENCE LISTS 55

APPENDIX 57

FROSIO : The Norwegian Professional Council for Education and

Certification of Inspectors

NACE : The National Association of Corrosion Engineers

PTSC : Petro Vietnam Technical Service Corporation

SSPC : The Society for Protective Coatings

SWOT : Strengths, Weaknesses, Opportunities and Threats

Vinashin : Vietnam Shipbuilding Industry Corporation

VPIA : Viet Nam Paint and Printing Ink Association

LIST OF FIGURE

Figure 1: Five forces model of M.Porter 11

Figure 2: The SWOT Matrix 13

Figure 3: Vietnam GDP growth rate 26

Figure 4: FDI Commitment and Implementation 27

Figure 5: Competitive price in the market of industrial products of Sigma 33

Figure 6: Factors to improve technical staff’s skills and knowledge 34

Figure 7: Limited distribution channel 37

Figure 8: Recommended distribution network of Sigma Yung Chi in Vietnam 45  

LIST OF TABLE

Table 1: Market size of countries in 2009 and 2014 4

Table 2: General Information of Survey feedback 9

Table 3: The tables of comparison among coating company in term of market share

23

Table 4: Comparison of the market shares in field of protective coatings from 2009 to 2012 23

Table 5: Sales of Marine and Protective Coatings 25

Table 6: Main PVN’s projects from 2009-2020 29

Table 7: Frequency of product usage 32

Table 8: Competitors and SWOT 36

Table 9: The drawback of Sigma Yung Chi Coatings Co., Ltd in Vietnam Market 36

Table 10: Promotion activity 38

Table 11: SWOT of Sigma Yung Chi Coatings 39

Table 12: Recommended strategy on product and price 43

Table 13: Summary of sales and technical staff motivation strategy 49

Table 14: OBP recommended strategy 53 

CHAPTER 1: INTRODUCTION 1.1 Background

According to research and study of paint and coating manufacturer, with refer to one

of the biggest coating company in the world report (Akzo Nobel’s inaugural Global Coatings Report, 2006), following pictures that could describe generally information about coating industry

Put simply, a coating is a film forming substance which protects a substrate (i.e a surface or material) against potentially damaging elements in its environment, as well as enhancing its appearance But this is just basic definition, because if you study deeper, you’ll find that there’s a countless of complexity and invention just waiting to be discovered Coatings, you see, are totally different when it comes to their production, application and functionality What the very general definition of coatings fails to do is acknowledge that the conventional functions of protection and aesthetics are often complemented and enhanced to meet additional, more specific demands

The coatings market is typically divided into three major categories: architectural and decorative coatings; industrial coatings and special purpose coatings Within these groupings there is an enormous range and variety, not only in terms of the properties that the coatings themselves possess, but also the particular purposes they serve, the technology behind them and the methods used to apply them

ARCHITECTURAL COATINGS OR DECORATIVE COATINGS

When talking about coatings it is usually referring to architectural or decorative coatings Principally, this means paints, but it also includes all kinds of lacquers and varnishes that are used to protect and decorate surfaces such as internal and external walls, doors, window frames, and so on The market for architectural or decorative coatings includes both the do-it-yourself enthusiast and the professional or trade sector (Akzo Nobel’s inaugural Global Coatings Report, 2006)

INDUSTRIAL COATINGS

Of course, it’s not just houses that get painted Virtually all consumer durable products, as well as all types of industrial equipment, have to be coated in some way or another New cars arrive “coated.” Anything made from wood—be it home or office furniture, kitchen and bathroom cabinetry, flooring, windows and doors, or various other

factory-finished building products—will be coated to enhance its appearance and provide it with protection Everything from computers to fridges and freezers, washing machines to DVD players and mobile phones, are coated to extend their lifespan and enhance their aesthetic appeal (Akzo Nobel’s inaugural Global Coatings Report, 2006)

SPECIAL PURPOSE COATINGS

That coatings are ubiquitous in our society can be seen from the fact that the third category is simply known as special purpose coatings Research-driven innovation has enabled us to produce coatings that have very special properties to meet entirely specific needs There are main two kinds of special purpose coating name Protective Coating and Marine Coating

Protective Coating: as their name suggests, protective coatings are applied on various

steel and concrete structures to preserve long-term strength and integrity They need to be effective in a variety of situations and must be able to withstand adverse conditions resulting from, for example, atmospheric exposure or contact with corrosive chemicals The type of coatings used depends on the specific end use, because they can be adapted to suit different environments, such as the demands of the oil and gas industry, the chemical industry, power and water utilities, the food and paper industries, bridges and roads, as well as railways These coatings have to be particularly strong, because even the slightest weakness in a coating can quickly become the focus for degradation and corrosion of the structure beneath They are special for oil and gas industry both onshore and offshore, petrochemical plants, power plants… for example

Marine Coating: The marine environment is very severe Salt water is particularly

corrosive and a wide range of specialty coatings have been developed to protect the superstructure and hulls of ships from its impact Organic matter, such as barnacles and seaweed, also builds up quickly on vessels, damaging the hull and undermining speed and energy efficiency Special products—known as anti-fouling or foul release coatings—have been developed for marine vessels which act as a salt water barrier and also minimize the build-up of this organic matter These products are used on all marine vessels, including commercial tankers, ferries, and leisure craft ranging from the smallest dingy to the most luxurious super yacht (Akzo Nobel’s inaugural Global Coatings Report, 2006)

With the development of paint and coatings industry, there has been a large quantity of leading brands in the world coming into beings However, this industry is stuck into the

problems of balancing between the pressure from costs of energy, materials, being pursuant to the regulations on environment protection issued by the government and the issue of demands in the market for high quality and reasonable products The solutions to this problem would open many chances for the paint industry in the world to research and deploy technological solutions, new materials and products, which also leave positive impact on the further development of this industry Hence, to survive in such an environment with steadily increasing demand, the challenges for the managers is how to develop and achieve a good position for their brand or their products by restructuring their business strategies and methods to fit the market and also the features of their products1

At present, many strategies have been applied by the paint companies in Viet Nam market particularly to gain their position and market share, especially in Protective and Marine Coating products (Special purpose segment) Previous studies have shown that there are most of projects are related to marketing management strategy in order to improving the competitiveness of the company For more understand which major factors affecting on competitive capacity of the firms in marine and protective coatings market, the applicable marketing mix and sales personnel strategy should be studied more deeply and applying them in particularly paint product segment (Protective and Marine Coating) And

a well implement of this strategy could help the company (hereinafter Sigma Yung Chi Coatings Co., Ltd) increasing its competitiveness against competitors as well revenue

1.2 Rational of study

This research is based on the general review of Asia Industrial Coating in which Vietnam market is one of them In the other hand, there is in deep study about Vietnam Coating Market, especially Protective and Marine segment

1.2.1 Asia industrial coating market overview

The market niche of Asia-Pacific, with 11 major economies mentioned in the table below, has calculated to be 13.9 billion tons in 2009 and is also forecasted to make it growth of about 7.9% annually from now to the year of 2014 – the time the market reach the number of over 20 million tons

1 http://oct.vn , 2010

Number Country Market Size in 2009 (tons) Forecasted Market Size

Table 1: Market size of countries in 2009 and 2014

(Source: Asian Paint and Coating Forum, Ho Chi Minh City – 2009)

1.2.2 Major markets in Asia

It can be seen that China and India are the key areas of developing in paint demand

with the annual growing rate of more than 10% in the coming period

It can be also seen from the table that there are three regions holding paint demand

exceeding the level of one million tones: China with the demand of approximately 7.5

million tones, India of 1.8 million tones, and Japan of 1.4 million tones

However, Japanese paint market, in the contrast to the two countries in this group of

demand, has been fought against the backdrop of transitional expectations for a long time

and also the reluctance to use a proportion of waterborne paint regularly

In addition, there are some of the small economies in the region also showing the

prospect of promising coatings industry in either coming or longer term in the future

(VPIA ACC HCM, 2009)2

Singapore, on the other hand, remains to hold the position of a strong market and one

of the greatest consumers of paint per capita with the quantity of 47 kg/head Some of the

2 VPIA ACC: Viet Nam Paint & Printing Ink Association- Asia Coating Congress

market segments such as architectural, marine and protective coatings are expected to continue growing in the future

1.2.3 Vietnam industrial coating market overview

1.2.3.1 General information

In 1986, the Vietnamese economy engaged into the period of reforming with the nature

of market economy, however, positive steps in paint industry just started in the beginning

of 1990s to integrate into the region and international scale and gradually continue to develop to the current time The period from 2000 to present time marks the a great development in the paint industry of Vietnam with great improvement in demand and also

a variety of paints in which decoration coatings take up a large proportion with average annual growth rate of 25%, marine coatings, protective coatings and industrial coatings developing more and more according to the demands of the market

Vietnam is potential market for all paint companies Regarding to global investors in manufacturing, it is considered one of the top destinations with rich resources and has a large and affordable workforce Foreign Direct Investment (FDI) Law of Vietnam is continuously amending and improving by Government to lead the economy into a more open and attractive one for foreign investors Ho Chi Minh, Hanoi, Da Nang, Vung Tau City and Binh Duong are the key provinces of investment

In 2007, foreign-based firms started to penetrate into the market of Vietnam under the form of 100% foreign investment or in outsourcing contracts with Vietnam paint and coating companies Besides, a large number of Vietnamese paint and coating firms (in form of joint stock, private) also expand their business by building more factories, investing in technology and machineries to improve the quality of products according to the demand of consumers It can be said that the fast development and quality improvement did create an impressive picture on the paint industry of Vietnam in this period The improvement in the market helps to build up a healthy environment of paint firms regardless of being domestic or foreign-based ones (VPIA ACC 2007, 2009)

Despite the global economic as well regional downturn in recent years up to present, over the last few years Vietnam's paint industry has continued to experience growth 234,000t of paint was produced between January and November 2010, according to Vietnam's General Statistics Office In the same period last year production was at 181,200t Sales increase too – the Vietnam Paint & Printing Ink Association (VPIA)

predicts the country will see a 15-20% growth rate by value and a 12% growth rate by volume in the paint and coatings market during 2010 and 2011 (Vietnam Paint & Printing Ink Association)

Vietnam is also showing active growth in the shipbuilding and petrochemical industry According to the Vietnam Shipbuilding Industry Corporation, there is a three-phase plan from 2001-2015 to upgrade and improve the shipyards in order to have technology equal to the ASEAN shipbuilding industry There are also many big projects owned or funded by Petro Vietnam Corporation which need the huge quantity of coating to protect the steel structures These plans will clearly see a steady growth in the marine and protective

coatings industry demands in this country (Frost & Sullivan report collated)

We will study more detail and deeply about Vietnam Protective and Marine coatings market in to next chapters in this project

1.2.3.2 Some well-know industrial paint companies in Vietnam market

Decoration paints: 4 Oranges, Akzo (ICI) Decorative, Nippon, Jotun Paints, Kova , Bach Tuyet Tison and synthetic paints etc

Marine and protective coatings: Sigma Yung Chi Coatings, Akzo Nobel with brand International Paints, Hai Phong Paint, A Dong Paint, Jotun Pains, Hempel, Chugoku

Furniture coatings: Akzo Industry coatings, Dai Hung, Valspa Sherwin willams, Dai Kieu, etc

Other types of coatings: OEM car coating, floor coatings, line coatings, can and plastic coatings and brands such as; Hanoi synthetic paint, Nippon, PPG, KOVA, Hai Phong paint

1.3 Research problem and research objective

It is not an easy task to survive in a potential but saturated market of brand these days

As mentioned in the section above, in the market of Vietnam, domestic paint firms, in spite

of possess products with high quality, find hard to compete with foreign ones

The market segment of protective coating (PC) and marine coating (MC) in Vietnam are currently driven by leading foreign-based companies In comparison with the market of Southeast Asian market as well as Asia region, the market niche of PC and MC in Vietnam

is quite small Nevertheless, a variety of leading paint firms in the world penetrates this market for the potential in the future In details, paint firms holding their foot in PC and

MC market of Vietnam are PPG VN (Sigma Yu Chi Coatings), Akzo Nobel (International Paint), Jotun, Hempel, Chugoku, Nippon The competitive advantages of foreign-based ones are of financial resources; hence, they have vivid marketing campaign, attractive promotion and impression on customers about their brands

Each company mentioned above holds their own strength in their market share Due to the small scale of the market, the competition among them becomes tougher and tougher The question arose is that how PPG Vietnam (Sigma Yu Chi Coatings) could stand strong

in their traditional market niche and gradually gain more and more market shares to become the leading supplier of PC and MC in Vietnam?

- To develop and recommendation the sales and technical personnel management strategy to support the firm achieving the efficiency personnel management

1.4 Methodology of study

To achieve the intended result of the research, the study fully employed the methods of qualitative research and dialectic to list, analyze sources of data to draw conclusion on the

issue of research These methods help to provide comprehensive data on the nature of covering coating market in general also protective and marine coating in particular Basing

on the data collecting from survey questionnaires, interview, analysis the actual market (primary data) and gathering all information about the coating industry, company operation, market trend… from internet, annual reports, news papers, professional article, magazines, business books and principles (secondary data)…the strengths and weakness in competitive advantages of Sigma Yung Chi Coatings would be presented to propose solutions to the issue in order to create surplus value to the company The research would also be carried out under the principle of objectivity and logic

To research improvement of the competitiveness of Sigma Yung Chi Coatings in the market niche of protective coatings, the flexible adopting strategies are very importance

To achieve that, the author of this thesis carried out survey the demand of the market to evaluate current competitiveness in Vietnam marine and protective coating market between Sigma Yung Chi Coatings and other competitors This qualitative survey could provide information about the Company’s customer opinions with regarding to products, distribution, services, competitiveness ability and sales personnel of the Company (See detail of Questionnaires in Appendix enclosed)

The survey was conducted on two main groups of participants:

• Group 1: Managers and heads of sales and technical department

• Group 2: Professional designers and consultants

Group 1 is management and first line managers of these Companies whose are the EPC construction contractors, contractors, sub contractors for power, petrochemical plants as well oil and gas industry The survey also is covered to some shipyard building companies The Group 2 is the management of some design, consultant Companies whose are doing the Engineering for related projects

It uses two most common qualitative methods: in-depth interviews and focus groups Each method is particularly suited for obtaining a specific type of data The population for the survey would be selected 100 for both groups And it is expected that at least 35% of survey questionnaires will be returned with the answers for both groups

Among 100 questionnaire sets administered to 20 Designing and Consultancy Company for participants of group 2 and 80 to project contractors for ones of group 1, the initial results are reflected in the table below:

Table 2: General Information of Survey feedback

(Source: Author’s Survey, 2011)

It can be seen from the results of market survey that among 100 questionnaires delivered, the collecting ration made up to 60% actually This is the result reflected the real market response to the products of Sigma Yung Chi Coatings company This result also serves as the foundation so that the company could orient and introduce suitable policies to compete and better competitiveness in the market

1.5 Structure of study

The study is conducted in the structure of 4 chapters as below:

Chapter 1: Introduction

Chapter 2: Literature review

Chapter 3: Analysis of the competitive environment and competitive ability of

Sigma Yung Chi Coatings Company Chapter 4: Strategy of improvement of competitiveness of protective and

marine coating products- Focus on marketing mix and Sale personnel

CHAPTER 2: LITERATURE REVIEW 2.1 Concept of competition and competitive advantage

2.1.1 Competition

Competition is defines as to try to get the better and to win among the individuals and organizations who enjoy the similar chances (Vietnamese Dictionary, Institution of linguistics, 1998; Da Nang Publication) Hence, competition is a powerful tool and a dispensable element to the economic development of businesses, industries and countries According to Adam Smith in the Wealth of Nation “Competition is perceived as the process of taking over each other to gain the market shares and customers” To make it clearer, in marketing, this concept is defined as “a momentum reflects and quantifies all the elements of power, position, intense, dynamics of business activities of a company in the relationship with direct competitors in the same targeted market and also in the same

reference of time.”

In general, most the viewpoints present the natures and aims of competition as

“competition among business is a fight for customers or market shares in order to sell as much goods as possible and gain the highest level profits.” (Dimian, G.S and Danciu, A

,2011; National and Regional Competitiveness in the Crisis Context Successful Examples,

Theoretical & Applied Economics Vol 18 Issue 11)

2.1.2 Competitiveness

The concept of competitiveness is often used to refer features enabling one companies

to compete effectively with others thank to low cost and advance in technology in

international comparison (Alan V.Deardoff, Economist )

“sustainable competitive advantage” meaning the process of providing a special value in the market by an enterprise while none of its competitors can do that (Wang Wen-Cheng,

Lin Chien-Hung and Chu Ying-Chien, 2011; Types of Competitive Advantage and

Analysis, International Journal of Business & Management; Vol 6 Issue 5)

2.2 M Porter model analysis

According to Michael Porter, the intense of competition in the market in any industry is under the effect of five competitive forces as following:

Figure 1: Five forces model of M.Porter

(Competitive Strategy- M.Porter, 2001)

a Strengths of the suppliers are shown through

- The level of density of suppliers

- The importance of product quantity to the suppliers;

- The differences among suppliers;

- The impact of input materials on the cost or the differentiation of products;

- The expense of shifting of businesses in the field

- The existence of substitute suppliers;

- The threat of increasing merging of suppliers;

- The supplying cost over total income of the industry

b Substituting threat is reflected as

- The cost of shifting the products;

- The trend of using substitute of customers;

- The relation between the price and quality of substitute goods;

c Barriers of penetrating the market of new entrants are reflected as

- The advantages of absolute cost;

- Understanding on fluctuation cycle of the market;

- The capacity of approaching input materials;

- Government policies

- Economies of scale;

- Requirements of capital

- The typical features of good brands;

- The cost of shifting business field;

- The capacity of approaching distribution channels;

- The possibility of being retaliated;

- Exclusive products

d Power of customers is reflected as

- Bargaining position;

- The number of buyers;

- Information buyers get;

- Typical features of good brands;

- Price sensitivity;

- Product differentiation;

- The density of customers in the industry;

- The availability of substitute products;

- Motives of customers;

e Competition of competitors in the field is reflected as

- The barriers in case of getting out of the industry

- The density of the industry;

- Fixed cost/ added value;

- Growth condition of the industry;

- The state of productivity surplus;

- Differences among products;

2.3 SWOT model analysis

SWOT model is an effective tool in perceiving and making decision in every situation

in any business units SWOT stands for Strengths, Weaknesses, Opportunities and Threats SWOT provides a strategic analyzing tool in reviewing, positioning and orientating of a company or a business project, SWOT is suitable to group work and applicable in planning business activities, strategy building, competitor evaluation, marketing and promoting

products and services (Hendry, L.C., 2010; Product customization: an empirical study of

competitive and repeat business); (International Journal of Production Research, 2010; Vol

48 Issue 13)

Strengths and Weaknesses are the ones of internal factors while Opportunities and Threats of external ones SWOT enables the company to analyze other factors which have relative impact on the competitiveness of the company SWOT is often used in the combination with (Political, Economic, Social, Technological analysis), the model of analyzing the market and valuing the potentials through external factors in the aspects of politics, society and technology Analyzing according to SWOT model means evaluating data organized as the structure of SWOT in a logical way to help readers understand as well as present and discuss to facilitate the process of making decision

Figure 2: The SWOT Matrix

SWOT model often gives out 4 basic strategies:

(1) SO (Strengths - Opportunities): Strategies basing on the strengths of the company

to take advantages of chances in the market

(2) WO (Weaknesses - Opportunities): Strategies basing on the capacity of overcoming weaknesses to make use of market opportunities

(3) ST (Strengths - Threats): Strategies basing on the advantages of the companies to avoid threats of the market

(4) WT (Weaknesses - Threats): Strategies basing on the capacity of overcoming or absolutely minimizing weaknesses of the company to avoid the threats of the market

2.4 Factor effecting to competitiveness of enterprise:

Any business of any field and any form also has it success or failure affected by many factors including macro factors and also micro factors These factors vary according to business field of the company and forms of the business (R.E Caves and M.E Porter, 2001)

2.4.1 Macro factors

In the context of fast changing globalization these days, macro factors are always of

“uncontrollable ones” This requires the business always keeps alert and finds the solutions

to survive and develop

a GDP

GDP has an important impact on business condition of enterprises In the domestic market, GDP leaves great influence on the market and buying power of consumers, structure, and behaviors of consumers Although, the economy of Vietnam is enjoying development and living standard of people is improved more and more, the difference in buying power among social classes is unavoidable Therefore, finding ways to match different levels of buying power in the society is the key to improve competitiveness of the business

b Financial market

In any country, financial market is the core element, which directly affect the development of businesse, a strong financial condition would help the business to improve competitiveness and develop more high quality products and create great prestige to customers Through financial market, activities such as investing, saving and inter-trading among enterprises would get more effect Enterprises should buy more machines and equipment in a strong finanicial market condition enough to supply loans to business and

by contrast, enterprises would save more in spending and investing in a tied financial market

c Government policies

The policies ruled by the government in the framwork of politics and law leave great effect on consumption activities of the business, and then affect competitiveness of the enterprise In recent years, Vietnam is always valued by international economic experts as

a country with stable political and economic environment And the gorvernment oftens applies favorable regulations on business activities This creates much favorable condition foe domestic enterprises to set up and develop

d Technology

These days, the revolution on scienece, technical and technology lay a meaningful foundation on the basic factors of a business’s competitiveness namely quality and price Moreover, business competitiveness also depends on the process of collecting, processing

an communicating in a fast and exact way thank to advance in science, technology

e Investment and saving

Investing and saving are the two issues of marco economy A favorable investment process encourages the business to expand its scale and develop the brand of the quality A business with favorable condition is the one holding strong condition of finance and aslo bright record of revenue Besides, saving also plays an important role in activates of small and medium businesses in such a hard situation these days Businesses have to cut down spending, maintenance the current market shares, save and wait for the chances of investment and development

d Trading

Commerce also means trading and business exchanging This activities hold high liquidation position also means an effective business outcome of enterprises Macro environment facilitate the development of trading and businesses have chance to join a fair and healthy competition in their market

e Geography

Natural factors such as natural resources of the country, geographical location and geographical distribution business units, etc both create initial chances and challenges for business process of an enterprise In case of fruitful resources and favorable geographical location, competition capacity of the company would be improved thank to saving in cost

g Society

Social factors are always evaluated as leaving strong effect on behavior of consumers This is the first basic element to turn natural needs of human beings into desire – the one

the consumers try to satisfy when buying and spending money in the market, which is reflected in maintaining and developing relationships, success in negotiation, promoting, consumption and marketing campaign, etc The understanding about targeted environment would help the enterprises give out wrong signs and information on products and other marketing activities to their targeted customers

2.4.2 Micro- factors

a New entrants

New entrants penetrating the field might be the factor to reduce the revenues of existing companies for they exploit new production capacity in order to gain certain market shares and these are often strong capacity The prices might reduce or expenses of previously established company could increase causing the matter of declining profit Companies diversifying their business activities by penetrating into a new market often use their resources to restructuring the market Penetrating into a new field, with the aims of building up a strategic position in the market in that way might be considered as the getting-in of a new entrant in spite of no new entity being created

b Existed competitors

In the market economy these days, competition is unavoidable for the reason for buyers; the “trial products” they used to evaluate the products of a firm are firstly competitive products and brands

The process of production and consumption of a business could not succeed if the effect of existing competitors is not referred It is hard to sell a product if customers know that there is a similar one sold at a lower price However, competition these days is not simply of price but also of quality and services Only by competing each other, businesses could confirm their position in the market to assert the quality of products and prestige Competition forces businesses to always research and create to make products with suitable models and packages to the taste of customers, continually improve technology and management quality to reduce the cost, and then reduce prices and at the same time to improve competitive capacity and gain higher level of profit

c Substitutes

Substitutes are ones provided by existing competitors in the same fields or different ones sharing the same functions of meeting same consumption demands of customers That the more diversified existence of substitutes caused the threat of remarkably reducing

profits of companies in the same field To minimize the pressure from this threat, businesses have to consider carefully the trend of price of substitutes in the future Most new substitutes are the result of improvement or booming in technology applied in the business strategies in a general view and at the same time combine in research and development strategies from the perspective of functioning

d Suppliers

Suppliers are firms which provide input materials to serve the production process of enterprises These firms play important roles, which ensure the stable and smooth operation of business as scheduled for the reason that if input materials provided do not meet the standards of quality and quantity and requirements stated in the contracts, production process of the company would suffer from bad influence and be interrupted Then, the contracts signed with their partners could not be fulfilled and the quality of products might also be affected Consequently, reputation of the company would also get bad impact

Basing on these, businesses choose suitable suppliers to their standards and also ensure that “they do not totally depend on the only suppliers to make the optimal choice, guarantee input materials and increase the changes of price negotiating This affects production cost and product quality and then the competitive capacity of businesses

e Customers

In the context of market economy these days – when customers are honored to become the “kings”, all business activities of business have to depend on consumption profile and tastes of consumers To meet the demands of customers, businesses have to self-solve three basic matters of a business unit: What to produce? How to produce? And to whom to produce?

Therefore, positively researching the market, exactly determining market demands and

of businesses themselves to give out the optimal decisions and deploying necessary marketing strategies to introduce products and services as well as attract customers, well organize consumption process and providing best services of sales, etc all leave effect on competitive capacity of this business

2.5 Marketing mixed and HR strategy to improve the competitiveness

2.5.1 Marketing mix

These days, marketing is determined as a linking stage and holds the functions of coordinate with others to fulfill the objectives Marketing mix coming into existence is the mix of tools to ensure improving business performance3

Marketing mix strategies include four main ones4:

a Product strategies:

According to the viewpoints of marketing, products are both of existing and continuing

to coming out in a changeable state of needs, customs, tastes and habits of buying products Products consist of two main elements: material and non-material Products, in the light is marketing, are for buyers to use The changes and development in needs of human being are various and diversified Products are the tools to approach and exploit the market

b Price strategies:

Price policies to the products of businesses are the determination on the prices applied for end customers or intermediary entities The price policies should not fixed when providing products but is reconsidered through the cycle of product life and changes in company’s goals, the changes in prices and expenses of a business partially depend on those of competitors Price is one of powerful tool in competition, and used as a tool to approach and exploit the market The high intense of competition and demand changes often reduce the prices and increase cost for promoting

c Distribution strategies:

Distribution in marketing is to determine the ways to deliver products to distribution channels, approach and best exploit the demand of the market to deliver goods from production place to end customers in the fastest and most effective way A proper distribution policy could ensure a safe business process and increase competitive capacity and open new demands

The result of business activities could remarkably increase when applying methods of communicating and promoting even though businesses have to spend a large amount of expenses to these activities Communication and promotion facilitates consumption process and the process of placing products in distribution channels Promotion mix includes:

2.5.2 HR strategies

Human resources are creative labor force of the company All the labor force of the company including management staff, research and technical staff hold the key to the success of the company

Due to the importance of human resources, businesses need to always pay attention to first, quantity and then quality of human resource in the structure of three main levels: senior management staff, intermediary management staff and skillful production staff Besides, businesses have to ensure conditions of material and technical equipment and organize the labor force so that they could promote their best contribution

2.6 Chapter Summary

Competition is a natural part of the market, and the businesses, in order to survive in the condition of economy these days are force to join the battle and gain advantages over the competitors Competition is a natural and objective principle of market economy condition and does not depend on the decisions of any individual for freedom is the root of competition and competition is the motivation of cycling products Particularly, in the context of integration these days, competition no longer means the opposite to monopoly and completive market is no more just simply opposite to monopoly one Each business, which knows how to make use of their advantages and suitable competitive tools, especially in marketing mix and HR strategy, would hold the position of leading in the market

CHAPTER 3: ANALYSIS OF THE COMPETITIVE ENVIRONMENT AND COMPETITIVENESS ABILITY OF SIGMA YUNG CHI

COATINGS CO., LTD 3.1 General introduction about PPG Corporation and Sigma Yung Chi Coatings Co., Ltd

The main streams of business of the group can be listed as follow:

Aerospace: World’s leading supplier of sealants, coatings, aircraft maintenance chemicals, transparent armor, transparencies, and application systems, serving original equipment manufacturers and maintenance providers for the commercial, military, regional jet and general aviation industries Services include chemicals management

Architectural Coatings Americas and Asia/Pacific: Under the PPG Pittsburgh Paints, Olympic, PPG Porter, Monarch, and Lucite brands, this unit produces

paints, stains and specialty coatings for commercial, maintenance and residential markets

Automotive Refinish: Produces and markets a full line of coatings products and

related services for automotive repair and refurbishing, light industrial coatings and

specialty coatings for signs Also created and manages Certified First, PPG’s premier

collision-shop alliance

Protective and Marine Coatings: Leading global supplier of corrosion-resistant,

appearance-enhancing coatings for the marine, infrastructure, chemical processing, oil and gas, and power industries

5 PPG: Pittsburgh Plate Glass

6 http://www.ppg.com  

Automotive OEM Coatings: Global supplier of automotive coatings and services to

auto and light truck manufacturers Products include electro coats, primer surfaces, base coats, clear coats, pretreatment chemicals, adhesives and sealants

Industrial Coatings: Produces a wide range of value-added coatings for appliances,

agricultural and construction equipment, consumer products, electronics, heavy-duty trucks, automotive parts and accessories, residential and commercial construction, wood flooring, kitchen cabinets and other finished products

Packaging Coatings: Global supplier of coatings, inks, compounds, pretreatment

chemicals and lubricants for metal and plastic containers for the beverage, food, general line and specialty packaging industries

Architectural Coatings - EMEA (Europe, Middle East, and Africa): Producer

of Sigma, Seigneurie, Johnstone’s and other brands of residential and commercial paints

for Europe, the Middle East, Africa and French Overseas

3.1.2 Sigma Yung Chi Coatings Company Limited

As illustrated on the official operation representation from the company, Sigma Yung Chi Coatings Company Ltd is a division of the Sigma Kalon Group7 based in Amsterdam, Holland- a subsidiary of PPG Industrial It is a worldwide in Marine, Protective, Industrial

Paints and Decorative The company made its official commencement in operation in June

2006 through an acquisition over a paint manufacturing plant located in the Industrial zone

of Bien Hoa – Dong Nai

The plant has annual production capacity of about ten million and capable of producing paint and coating products in terms of marine and protective coating production The marketing strategies of the company are carried out in local and also foreign market under the renewed brand of “Sigma Yung Chi Coatings’’ The operation of production and business activities in Vietnam is managed and monitored by experienced and qualified personnel from SigmaKalon Group (General Manager, Finance, Quality Control and Technical Service) with high dedication to the customers

The firm business objectives:

7 http://www.sigmacoatings.com

The main business objectives of the company lie in the fundamentals of achieving success within the company’s ability and to seek and implement initiatives to give out solutions to the problems, and gain operational excellence and maintain the lowest cost position in the supply chain of production

• Gain the position of top-ranked supplier in the market;

• Achieve annual growth in earning per share of 10%

• Gain an average return on capital (ROC) of 15%

• Obtain 30% of sales from products of being 4 years old or less

• Improve the output per employee by at least 5% per year

The company’s visions:

• To continue the leading position in coatings and specialty production section

• Keep faithful to the values and ethics in business

• To develop by applying integrated and market oriented strategy

• Attain consistence in sales and earnings

• To provide superior shareholder returns

Company’s Values

Fundamental to whom we are an unwavering commitment to high ethical standards and integrity We implement our strategies across all levels of the organization in an uncompromising ethical manner

The core values of the company lie in the politician of the company and also remaining unwavering commitment to high ethical standards and integrity The strategies implemented by the company across all the levels and in uncompromising ethical manner

Company’s business Strategies

Business strategies of the company are carried out in with a global perspective and the

engagement of skills and diversify of all Sigma Yung Chi Coatings staffs

3.1.2.1 Market Share

After a period of penetrating into the market of Vietnam, the product of protective and marine coatings by Sigma Yung Chi Coatings gradually gains the position in the market In detail, in the period from 2009 to the present, market share of marine coatings by the company has been occupying the top position in the market This is considered the

strongest point of Sigma Yung Chi for the reason that the market niche of marine coatings always contribute to large quantity of revenues

2010

$MM

Market Share

2011

$MM

Market Share

2012

$MM

Market Share

Table 3: The tables of comparison among coating company in term of market share

(Source: Annual report of Sigma Yung Chi Co Ltd)

In addition, the products of protective coatings do not hold the top position in the market as marine coatings, this type of products by Sigma Yung Chi gradually prove the advantages in the group of top 3 companies in field of PC in Vietnam The market shares have stably and sustainably developed over years, as the matter of fact, this increase from 5% of 2009 to 11% in 2012

PC Market

2009

$MM

Market Share

2010

$MM

Market Share

2011

$MM

Market Share

2012

$MM

Market Share

It can be said with the reasonable development policies adopted in the last years, the market shares of Sigma coatings of PPG have been the powerful ones in the market of protective and marine coating in Vietnam

PPG Protective & Marine Coatings have products that aim to protect customers’ assets

in the worlds in the most demanding conditions and environments The company’s exceptional heritage has resulted in a range of brands that are tried and trusted to deliver consistent performance in their given markets In the world wide also Vietnam markets, Sigma Yung Chi Coatings is a high quality products and services with reasonable price

3.1.2.3 Operation

Sigma Coatings is a brand of PPG, with various types of high quality coatings and paint are sold These can be used for decorating, marine, protective and industrial purposes Sigma Coatings is a strong brand in the architectural, shipping, protective and industrial application of paint and coatings worldwide

The Company officially commenced operations in June 2006 through a fixed assets acquisition of an ongoing paints manufacturing plant in the Industrial Area Bien Hoa – Dong Nai The plant has the total capacity 20 million tons per annum, Sigma Yung Chi Plant’s capacity is 3 million tons per annum, and has the capability to produce Marine, Protective products Marketing under the renewed brand names of “Sigma Yung Chi Coatings” for Marine, Protective Coatings to cater for both domestic and overseas markets Global support: Account managers and customer service are organized to serve all their customers, wherever they operate worldwide Professionals can be assigned to provide technical advice and onsite support during application on any project

3.1.2.4 Sales

The market shares of those produced by Sigma Yung Chi Viet Nam gradually expands

in the market, which leaves great impact on the profit level of the company Revenues

gained in types of marine coatings increase annually from $M 4,480 in 2010 and are forecasted to reach the amount of $M 6,100 in 2012 PC product revenue increases from

$M 2,550 to $M 4,100 in 2011 and are forecasted to $M 5,500 in 2012 This stable development to some extents proves the spirit of the slogan of PPG group for these two protective coatings products “PPG Protective and Marine Coatings is a world leader in protective and marine coatings”

Table 5: Sales of Marine and Protective Coatings

(Source: Sigma Yung Chi Company)

3.2 Competitive business environment analysis of Sigma Yung Chi Coatings Co., Protective and Marine Coating products

Ltd-3.2.1 Macro environment

3.2.1.1 Legal and political factor

Vietnam’s macroeconomic situation has followed a predictable pattern in the last few years The government has chosen to protect the country’s rapid growth rate when faced with external shocks even it could get higher levels of macroeconomic instability That means overheating growth still slowdowns and frequently faces with overheating again

It is a fact that in the past few months in 2011 the government has succeeded in returning significant level of macroeconomic stability Subsequent to the successful completion of the XIth Party Congress in January 2011, the authorities moved swiftly to address the macroeconomic problems facing the country The dong was devalued by 9.3 percent against the US dollar on February 11, 2011, and Resolution 11 was approved which contains a wide range of consistent monetary and fiscal policy targets and commits

By this Resolution government can undertake several structural measures including reform

of the state-owned enterprises (SOEs), improving communication with the market…from

future episodes of macroeconomic instability (An Update on Vietnam’s Recent Economic Developments; 2011 Work Bank)

3.2.1.2 Demographic factor

Vietnam belongs to the region of tropical climate, which causes the problems of faster corrosion of things and the demand of suitable protective coating to anti-rusting, anti-absorbent and also anti-fungus Buildings and things in coastal areas have to use special protective to anti – chemical, salt, and humid environment This is the opportunity for the coating manufactures as well the challenge for product innovation to suit with regional environment and conditions

3.2.1.3 Technological factor

These days, with the achievements of the technology revolutions, there are more and more machines and materials invented Thus, to produce the quality products that meet the demand of the customers, technological achievements also play an important part in business activities of coating companies There are more and more new kinds of coating products with special functions being produced The company researches, utilizes and makes use of available technologies and buy more technological assemblies from foreign countries to improve productivity

3.2.1.4 Economic factor

GDP

Figure 3: Vietnam GDP growth rate

(Source: General Statistics Office, 2011)

As economy continues to recover rapidly from the global economic crisis, aided by strong growth in public investment and rapid growth in domestic credit Real Vietnam GDP grew at 6.8 percent in 2010 (Work Bank Report, 2011) However the expansionary policy could not be sustained, as it would lead a new wave of inflation and forced a visible tightening of monetary policy in early 2011 The growth figure in Quarter 1 of 2011 decreased to 5.4 percent, lower than the expected line Initial reports indicate that first-half growth may be around 5.6 percent and 5.8-6.0 percent for the whole year 2011 (Work Bank Report, 2011) In fact this is not good year for any company as well Sigma Yung Chi Coatings and the country

Investment: thanks for public investment especially, and private consumption remain the major drivers of aggregate demand in the post-crisis period recently In the other hand, sharing of private (non-state) domestic investments in total investment decline recently, (Work Bank Report, 2011) it may lead to decrease the demand of coating in private invested projects

FDI

Figure 4: FDI Commitment and Implementation

(Source: General Statistics Office, 2011) Committed foreign direct investment in trend of declining is also the big problem of the country It is not high level of FDI in comparison with in the past and the recent decline has been higher than expected In the first five months of 2011, US$4.7 billion FDI was committed to Vietnam relative to US$9 billion during the same period of 2010 (Work

Bank Report, 2011) So the commitment of FDI is decreasing gradually foreseeing that

would be a lot difficult for years ahead for the company

3.2.1.5 Cultural and Social environment

The different in geographical region and cultures leads to the demand in different kind

of sales, services and personnel management All these factors also leave effect on the

business activities of the company and require the company meet the needs of customers in

terms of sales, after sales service especially in Marine and Protective segments

3.2.2 Micro environment

In this section, there is just general information about these major customers of the

Sigma Yung Chi Coating Vietnam only Other factors will be analyzed in following

sections The biggest customers of the company will be Petro Vietnam (PVN) and its

subsidiaries definitely Two main PVN’s subsidiaries are Petro Vietnam Technical Service

Corporation (PTSC) and Petro Viet Nam Construction Corporation (PVC)

PTSC and PVC have a mission that they will carry out most of major projects owned or

invested by PVN as the EPC (Engineering Procurement and Construction) contractor

Following table will be described more detail about main coming projects from 2009 up to

2020 which has total investment values 35 billion US$ (PVN)

(US$M)

Estimated Schedule

1 Chim Sao, Lan Do, Dimond, Hai Su Den/Hai

Su Trang, Te Giac Trang

2011

3 Su Tu Nau, Thang Long, Kim Long, Ca Voi,

Ac Quy

2013

9 Nghi Son refinery 6,000 2009-2014

Table 6: Main PVN’s projects from 2009-2020

(Source: PVN) There is recognized that all mentioned above project need the huge quantity of Protective and Marine Coating products And this is the major market for both segments for any coating company as well Sigma Yung Chi Coatings for years ahead

Besides, the ship building industry in which Vinashin Corporation (Vietnam Shipping Industry) is reformed after the serious crisis also is a big market for both products

3.2.3 Porter competitive Analysis

According to Michael Porter, the competitive intense of the market in any field of industry suffer the impact of 5 competitive forces, thus, the competitive environment of the products of protective and marine coatings of Sigma Yung chi is illustrated clearly in five factors:

3.2.3.1 The power of suppliers

The density of suppliers: the suppliers to the coating brands are of input materials These days, the companies providing imported materials to product plastic coating – Acrylic and color pigments in the market are of large quantity However, the dependence

on these materials put a quite big pressure on coating companies The risks in partnership, risks of scarce materials also leave negative effect on the progress of industrial coatings The importance of product quantity to the suppliers: protective and marine coatings are the products used in the industry, which is considered a potential market especially the field of marine coating In Vietnam, the marine industry is always considered the strong point of the country, therefore, there are many plans implemented to develop this segment

of industry This potential market is would help the company of protective coatings develop to prove their positions in the market

The threat of merging among suppliers: in the period of economic crisis these days, there are many coating firms merging to create greater competitive power especially in the group of domestic firms for the reason that in term of competitive capacity, domestic companies are weaker than foreign-based ones

3.2.3.2 Substitute threats

The threat of substitute occurs when there are different products having the capacity of substituting this kind of product However, in case of industrial coating, the pressure from substitute products is not so high for the coating products are currently the best products in the market Besides that, the substitute threat comes from decoration items in construction such as lime, wall paper, etc which are much cheaper than coatings

3.2.3.3 Barriers of penetrating of new entrants

The threat of new entrants always exists when the products have a potential market Apart from available advantages such as absolute cost, and the capacity of approaching the input materials, understanding cycles of coating products, new entrants have certain foundation to develop their products, which put quite big pressure on the existing firms The risks of reducing in market shares and distribution channels in which the new entrants give out better policies to attract the customers are all the pressure of new entrants on the enterprises, which leave negative effect on the competitiveness of Sigma brand

3.2.3.4 The power of customers

Pressure from customers is also a big one for the company Customers are always the wise consumers; they are all sensitive to the products of their needs: price, quality, and the differentiation of different products by various companies Thus, to hold the market share, the important thing is that the company has to have a voice to customers, so that they would be attracted by the products and contented with the selling policies that enterprise introduces Coating products are diversified and each supplier has its own strong points Therefore, the enterprise building up the strategies on the needs of customers would worry

little about the pressure from customers

3.2.3.5 The competitiveness of existing competitors:

The density of existing competitors in the industry: currently, in the market there are many direct competitors to Sigma in the field of protective coatings namely International paint, Jotun, Nippon, and Hempel These competitors all have their own strong points and market shares

Besides that, each brand has the typical characteristics in brand and differentiation among coating products, which create a fierce competition among enterprises in occupying the market shares