Solutions to improve distributors system of Holcim Vietnam

In order to build and maintain that position, Holcim Vietnam target to develop distributors system which mainly deliver over 95% sales volume of Holcim to the southern market form Nha Tr

HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BUSINESS SCHOOL

Tutor: Tr n Xuân Kiêm, DBA

Ho Chi Minh City

2007

WARRANT STATEMENT

This is my original work Any data result or quote in the work is clearly identified

Ph m V n Trí

Secondly, I would like to say thank you sales team of Holcim Vietnam who have given me invaluable assistance during my research Special thanks must go to Mr Suhard Amid – Special Project Manager - for his value advices and considerable assistance Likewise, thanks are also extended to my customers from their kindly cooperation to participate in the interview and shared their opinion and perceptions Finally, there is an important acknowledgment and gratitude to my family They are the foundation of my professional career and my life

TABLE OF CONTENTS

WARRANT STATEMENT i

ACKNOWLEDGMENTS ii

THE TUTOR EVALUATION ii

TABLE OF CONTENT iv

CHAPTER 1: INTRODUCTION 1

1.1 Background of project 1

1.2 Project objectives 1

1.3 Research methods 2

CHAPTER 2: HOLCIM VIETNAM OVERVIEW 3

1.1 Holcim Vietnam introduction: 3

1.2 Product 4

1.3 Price 4

1.4 Place 4

1.5 Promoting 5

1.6 People 5

1.7 Sales performance of Holcim Vietnam 5

CHAPTER 3: RESEARCH RESULTS 7

1.1 Finding from ODs 7

1.2 Findings from Holcim sales team 14

CHAPTER 4: SOLUTIONS & IMLEMENTATION PLAN 15

1.1 SWOT analysis 15

1.2 Strategies suggestion & evaluation of experts 16

1.3 Solution for implementation 16

1.4 Implementation plan 21

1.5 Self evaluation about project 21

EXECUTIVE SUMMARY 22

REFERENCES 26

LIST OF APPENDICES AND ABBREVIATES 27

5 years, and promising for such high rate for the coming years

Holcim Vietnam has positioned itself as market leader in Vietnam cement market In order to build and maintain that position, Holcim Vietnam target to develop distributors system which mainly deliver over 95% sales volume of Holcim to the southern market (form Nha Trang to Ca Mau) to be professional company in term of cement suppliers, services, resources… By studying

”Solutions to improve distributor’s system of Holcim Vietnam” I want to understand the current situations of OD system and explore the opportunities to propose solutions to improve it and strategy to develop this system to be professional one in market

1.3 Research methods

̇ Research method: qualitative research - exploratory research on the relationship between Holcim and its OD including individual dept interviews (OD) and 02 focus group (Sales team)

̇ The research objective defined as below:

6 To understand key challenges that ODs are facing in their business including internal challenges and challenges come out due to Holcim policy

6 To explore the opportunities for the Holcim to extend their help to ODs: what sectors that Holcim needs to provide support and what sectors that Holcim needs to amend its current support or policy

6 To gauge the satisfaction of authorized dealers and Holcim in term of what they are satisfied or unsatisfied, strengths and weaknesses and points to maintain or area to improve

6 To understand Holcim sales staff in dealing with these authorized dealers

6 To identify potential value propositions

̇ Sample size: 42 ODs is chosen as sample for the research from 58 ODS of Holcim Vietnam (the chosen criteria are distributor attractiveness, potential evaluation, loyalty assessment and sales performance, SCCC format is used as a system for choosing sample (Pls see in the list of appendices)

CHAPTER 2

HOLCIM VIETNAM OVERVIEW

1.1 Holcim Vietnam introduction:

Name: Holcim Vietnam Ltd

Holcim is one of the world largest cement group found in 1912 in Switzerland It has presented in more than 70 countries with more than 50,000 employees

Ha Tien 1 is a state own company established 40 years ago with strong brand in South

̇ Catlai Terminal: District 2, HCMC with dispatch capacity of 1.76 million/years started operation 1998 supply for HCMC, and East

̇ Thivai Grinding Plant: Phu My IP, Ba Ria Vung Tau province with the first stage capacity of 1.3 million tons/year, first product was launched in November 2004 will share the workload for Catlai terminal by taking a part of East region

1.2 Product

Holcim Vietnam is the first Cement Company has different products for different application However, the main product of Holcim is Holcim Top Standard It takes 87% sales volume every year

Product Portfolio of Holcim Vietnam

Product band Application

1 Holcim Ready Flow Ready mix concrete

2 Holcim Quick Cast Precast concrete product

3 Holcim Extra Durable Concrete exposed to corrosive environment

4 Holcim Mass Pour Mass structure

5 Holcim Solid Road Concrete road, runway

6 Holcim Stable Soil Soft soil stabilization, soil improvement

7 Holcim Top Standard For concrete of small and medium projects

8 Holcim Easy Wall Plastering and rendering

1.3 Price:

The objectives of Holcim Vietnam are becoming the price leader in the market In order to achieve the target, Holcim Vietnam has invested in facilities and people to add value added services to make sure customers receive a high quality product and good services with best price

1.4 Place

Holcim Vietnam has two distributions channel which shows in the char below:

Distribution channel of Holcim Vietnam

1.7 Sales performance of Holcim Vietnam

Having seven years in business, Holcim Vietnam has developed rapidly The overall growth maintain above 12%

Sales performance of Holcim Vietnam

Source: Sales report – Holcim Vietnam 2006

̇ Facilities for customer service: labs, web sales, technical support…

̇ Owning of good practices and large networking

Weaknesses

̇ Good sales force but not enough motivation

̇ Customers are not perceived by the value provided by Holcim Vietnam (product positioning is not quite clear)

Company Vision: As part of one of the world largest cement company, Holcim Vietnam vision is to provide the foundation for Vietnam society’s future

Company Mission: to be Vietnam most respected and attractive company, creating values for our stakeholder

Sales performance of OD: OD system plays a key role in distribution channel of Holcim Vietnam It accounts for 95% sales volume of Holcim Vietnam Currently,

K tons

200

400 1,000

1,600 1,900

2,400

2,630

3,100 2,730

OD system includes 58 ODs located in all provinces from Nha Trang to Ca Mau (See

the distribution channel above)

Almost OD concern on two key issues that have been significantly influence

their business plan:

Q'ty of OD say Key issues of market impact to OD

More brands, more choice to make

̇ According to OD, in general, the demand in the construction industry is

growing (but currently restricted by some governmental policies) due to

some following reasons:

̇ High urbanization potential

̇ Higher living standard generates higher need of house construction/

renovation

6 High expectation of more investors coming to Vietnam after we become a

member of WTO like office building, factories, civil projects

̇ Regarding to cement brands, OD has comments that more and more brands are coming into the market This is a greater choice for developing their business, OD has more opportunities to make money and do not need

to depend their business on any specific brand They recognized their role

in pushing products into the market become more important, so manufacturers are expected to offer favorable policies to win their empathy Whereas, manufacturers will face hasher situation due to higher and higher competition among brands

1.1.2 Key challengers:

When asking about the challenges ODs are facing with, almost OD concern about competition among ODs, internal problems such as credit management, human resource management…

̇ Credit to retailers and contractors are a constant headache:

6 Persisting debt (even bad debt for some) and sometimes in huge sum of money (at least 1 billion VND) This impacts their cash flow and limits their re-investment opportunities and decrease significantly the profits (for bad debt)

6 Higher risk with contractors than retailers: most of the time, big debt equals 5-10 billions Contractors always on the go, so it is quite difficult to catch up

Key challegers ODs are facing

with them and unable to follow up tightly in fear of losing opportunities to recollect the money and ruining the long-term relationship, even in some of the civil construction projects, contractors don’t fully control their own finance because they have to wait for sponsorship from government

̇ The construction industry is temporarily frozen while there are more distributors doing business in the same territory Moreover, more and more new brands come into the market with very good offers in term of allowances, price, promotion… Thus there is a highly competition among ODs

̇ Most of ODs (mainly in provinces) mange their business with family style, so their business management is not professional and still have a lot

of shortcomings in finance and resource management For example they are:

6 Unaware of book keeping is conducted in a manual manner (mostly handwritten record) So they meet difficulties to track and follow up their finance and credit record such as missing the deadline of a debt, do not know exactly how much money they can earn by monthly

6 Facing with difficulties in human resource management Their staffs have unclear job description; a staff can handle different tasks at the same time This leads to low productivity, lack of tools to measure performance of staffs and do not know how to develop their staffs

Tool to manage accounting system

Tool to manage HR 37

5 0

10 20 30 40

Family style Professional tool

1.1.3 Relationship and long term commitment:

̇ In general, Holcim still have some values that ODs consider as a strategic partner

6 International company: according to them, the most appreciate working with

an international cement manufacturer who has extensive experience globally This is a good opportunities to be exposed to a professional working environment and to learn, apply within their capability to improve their business effectiveness such as web sales (Online purchase order), workshops/ meeting abroad…

6 Product supplying capacity: Holcim perceived to have high product supplying capacity, stock shortage rarely experienced

6 Product’s quality: Holcim is listed amongst the top 3 quality cement brands (together with Ha Tien 1and2 and Nghi Son)

6 Sales staff: Holcim sales team are considered helpful and outstanding from competitors

Characteristic HVL sales HT sales NS sales

Pro

ducts

Capty

Multinat

ional

Custo er rientn

Fair in relationship among distributors X X X X X X

In time feedback from concerns and

suggestions

Consult distributors plan to expand their

business/ to gain assign output

Understand distributors’ business X X X X X

6 Brand building activities: in comparing with other competitors, Holcim have

a lot of event to build its image in the market like mason festival, Boat racing festival, charity program…

̇ However, some years ago, the relationship between ODs and Holcim is generally not as good as it before There are some major concerns to impact directly:

6 Price policy: The pricing policy of Holcim raises a lot of concerns among ODs across cities/ provinces The key issue of this concern is unstable pricing structure of Holcim It reflected significantly in:

- Continuous increase in price while other cement keeps price unchanged

- Big gap between the previous price and the new increased price

- Price change not informed to ODs in advanced

- ODs do not have enough time to adjust their strategy

6 Sales’ authority: Holcim sales are not sufficiently empowered with authority

to make decision So they have to wait for management’s approval Moreover, complaint solving process of Holcim quite slow due to too complicated feedback process from sales rep to top managers Thus OD disappoint to unfair attitudes of Holcim toward their concern or complaint

6 Instable policy demotivates ODs for a long-term commitment: managing board keeps changing, each new managing director have his own policy Thus

ODs fell unpleasant when cooperating with Holcim; they really do not know to

be terminated

6 Promotion program/customer support program: Holcim did not get ODs involved into process of rolling out promotion OD fell passive in term of selling plan, resource assignment, and implementation

6 Credit policy: Holcim should consider credit policy and make sure that policy rolled – out to be fair with all ODs

6 Territory assignment for retailers should be maintain but should be more flexible for contractors

1.1.4 Sales and distribution:

There are two things Holcim need support ODs to develop sales and distribution system in their market

̇ Their sales team does have enough capabilities to manage the business like manage retailers and contractors, follow up orders, credit of customer, time management So training support from Holcim is quite important

̇ To increase Holcim sales volume in the market, Holcim should support them more salesman This team will support OD to mange Holcim customer, to find down new customers; and represent for OD and Holcim

in the market assigned in term of sales and distribution

1.1.5 Brand and product management

̇ Selling many brands:

currently, almost ODs

sell four to five cement

9

Avg.=5

0 2 4 6 8 10 12 14 16

OD can make much money when selling many brands Moreover, their role increased significantly when cooperating with many cement suppliers

̇ Selling one brand, besides there is an appreciation such as bring them greater favorable support from manufacturers e.g credit term and limit is extended, store decoration, ODs think that they certainly meet some problems:

6 High risk of going bankrupt: If their partner manufacturer encounters business crisis, they will get stuck too as they don’t have any back-up brand to sell Moreover, it’s is a fear of being terminated in case that they have any unavoidable conflicts with manufacturer

6 Limited business scope: If their customers support their exclusive brand, they will lose their business to others (not only cement but other construction

bank r up Limit r elat ions hip wit h

ot her c ement s upllier s

Positives with many brands

40 38

20 42

20

42

0 5 10 15 20 25 30 35 40 45

material as well) Toward Holcim products, they are willing to choose Holcim

as the largest proportion of their business turnover in comparing with others

6 Limited relationship with other manufacturers: for ODs, when they go with exclusive brand, they will have low opportunities to be updated with market information; higher risk of losing their competitiveness; less flexible in responding to market changes (i.e historically, each period of time witness one strong brand and they don’t want to be missed out of the game)

1.2 Findings from Holcim sales team:

1.2.1 One brand or many brands:

In general, Holcim sales team considers “one brand distribution” a good concept, however, not appropriate at the current time with similar perceived disadvantages as mentioned by ODs In addition, from their own perspective Holcim has yet to be the strongest brand to assure ODs of its competitiveness over other brands (which directly influence their turnover as well as share on the market)

1.2.2 Relationship and commitments – key challenges:

̇ Holcim sales staffs currently encounter quite many challenges The most irritated concern from Holcim sales staff is that they have not been empowered enough to be more proactive in job They are unable to make decision in the managed territory, don’t have a budget to be proactive in dealing with market changes and unable to provide timely feedback on concerns (as mentioned above, they have to wait for instruction or decision from higher managers)

̇ Like ODs, unstable and unclear policy and unstable price also causes lots of obstacles to them such as pushing sales volume to OD, sales performance…

̇ There are some concerns on the content of the employee care and benefit policy like no award scheme for big sales volume Not well equipped with market analysis skill, customer psychology skill and negotiation skill.

S4. Facilities for customer services

S5. Networking of Holcim global

S6. Stable quality product and supply

O1. The demand in the construction industry is growing, more investors coming to Vietnam after we become a member of WTO

O2. Higher living standard generates higher need of house construction/

05. OD: Good relationship with local government, contractors and project

W1. The belief of OD on Holcim

reduced vs last years

W2. Slow feed back to market (slow

decision making)

W3. Not enough motivation for

employees’ loyalty

W4. Sales team have not been

empowered enough to be more

T2 Business environment nowadays is more difficulty with competition law, bankrupt law…

T3. OD staffs are not well trained

W5. Unstable and unclear policy

W5. Territory management still is a big

problem

T4. OD lack of information about cement market å slow action with the change of the market

T5. CRM of OD is still a strange concept

T6. OD manage their business by family style

T7. OD’s management capacity is overload due to the fast growth of cement business and market

1.2 Strategies suggestion and evaluation of experts (author and Sales and Marketing team):

S1, S5, W1, W5, T1 åST1 Long-term service

agreement

9

S1, S5, W2, W3, W4 åST2.Sales Staff Empowerment

and Resource Development

Basing on above evaluation, there are four strategies we need to implement to

improve OD system of Holcim Vietnam: ST1, ST2, ST3, ST5

1.3 Solution for implementation:

1.3.1 Long term service agreement: to gain the trust and belief of OD toward Holcim, beside the 01 year contract as usual we sign a long-term agreement with

05 year period and 03 year service agreement

̇ O3 years service agreement to be reviewed annually such as Marketing Operations activities, Retailer Investments, Contractor Promotions, Work Shops, All Other Tactical Promotions

1.3.2 Sales Staff Empowerment and Resource Development

1.3.2.1 Regional budget: giving budget for each region and giving sales team the right to decide what marketing activities they want to invest to their region However, all marketing activities should be approved by upper line manager and complied with objectives of the project (see the attached bellows)

1.3.2.2 Market Intelligence and Information Management: business information is quite important to OD, some information like market share, market growth, new project, customer, cement suppliers, cement demand… is

Sales and Marketing Budget

MKS

Regional

Budget

MKN Regional Budget

East Regional Budget

HCMC Regional Budget

Marketing Operations Plan

Provincial

Territory

Plan

Provincial Territory Plan

Provincial Territory Plan

Provincial Territory Plan

ASE Territory Plan

ASE Territory Plan

Marketing Branding Guide lines

ASE Budget

ASE Budget

ASE Budget

6 Drive Ownership Bottom up/ Empower Field staff

6 Activities recommended to be approved at Monthly review

really necessary for OD to have right decision in business Thus by monthly, quarterly market intelligence department of Holcim will share above information

to them Moreover, Holcim suggests solutions and tactical promotion to help OD have more choice to react with market with many changes, attractive program of competitors

1.3.2.3 Distributor Involvement in Activity Planning:

̇ Holcim get OD involved in planning marketing activities by giving them the opportunity to contribute their ideas that Holcim can win in their market

̇ OD also attend monthly, quarterly, yearly meeting with Holcim Together with Holcim, they can evaluate all activities Holcim have done

in their market and solutions or action log for improvement

1.3.2.4 Succession Planning: to make sure the business of OD develop sustainable, Holcim has an inter-ship program to support OD’s daughters or sons

or relatives who want to help OD to continue maintain their business after retirement This is an on job training program, OD’s daughter/son they can learn directly practical experience from cement business of Holcim in some main fields such as sales and marketing, finance, HR…

1.3.3 Holcim consultancy unit, training and development for key business expertise:

1.3.3.1 Training and development:

̇ Training need analysis: work with OD to find down the gap they need

to improve through training in some main fields such as human resource, finance, logistic…

̇ Training: prioritize all training needs, schedule training plan and conduct the training with internal trainer and outsource trainer

1.3.3.2 Holcim Consultancy Unit: a Holcim connect team is established as a bridge connecting Holcim and OD The responsibility of this team is to do the gap analysis of OD so that team can suggest consultancy model and find down suitable consultant for them

1.3.4 DSR Work force and Effective Market Focus

1.3.4.1 DSR works force

As the results of research, OD can not be exclusive to Holcim or any other

cement supplier in the market We have to provide our customers what they want

in order to compete and earn more margins To better control customer system of

OD and to develop Holcim share in retail shop, Holcim will establish a Holcim sales unit (including 01 retail sales, 01 technical sales)

This unit belongs to OD, is controlled by ASE of Holcim, is well trained sales and technical skills and a part of their salary is be paid by Holcim (50%) Regarding to their tasks, they are responsible for managing retailer and contractor in the market assigned, pushing Holcim sales volume to retailer and contractor segment, and implementing merchandizing at retail shop Moreover, they have to monthly report to ASE about market, competitor by using template set

MKS Connect

Driver

Marketing Operation

Connect Team

East Connect Driver

MKN Connect Driver

HCMC Connect Driver

Activity Calendar

Organization chart of Holcim Connect Team

1.3.4.2 Retail Market investments: Aiming to “getting closer to retailers”,

Holcim set system with standards to classify retailer system The objectives of doing this are:

̇ To better control retailer system of OD

̇ Basing on results of classification, Holcim sales staffs and Holcim sales unit of OD know well what retailers they pay much attention in term

of frequency of sales visit, pushing Holcim sales and having a special customer care for these retailers

̇ When Holcim or OD launch promotion program, they will focus on what retailers really to impact to the promotion

̇ This system can help OD to better control credit of retailer and to have effective credit policy for each retailers

Marketing Operations Plan

The Holcim Unit

ASE

Distributor’s Sales Representative

Regional Superintendent Distributor

Market assigned

Logistic