Business strategy formation for Saigon purified water limited company (Sapuwa) for the period 2013 to 2018

CAPSTONE PROJECT REPORT BUSINESS STRATEGY FORMATION FOR SAIGON PURIFIED WATER LIMITED COMPANY SAPUWA FOR THE PERIOD 2013 TO 2018... GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS

CAPSTONE PROJECT REPORT

BUSINESS STRATEGY FORMATION FOR SAIGON PURIFIED WATER LIMITED COMPANY (SAPUWA)

FOR THE PERIOD 2013 TO 2018

Group No.01

Class: GaMBA01.C0311

Ho Chi Minh City, 2013

GRIGGS UNIVERSITY

GLOBAL ADVANCED MASTER

OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

BUSINESS STRATEGY FORMATION FOR SAIGON PURIFIED WATER LIMITED COMPANY (SAPUWA)

FOR THE PERIOD 2013 TO 2018

Group No.01

1 LUONG THI MINH THUY(Leader)

2 PHAN THI KIEU GIANG

3 TRAN VAN BINH

4 DO VAN NGHIA

Class: GaMBA01.C0311

Ho Chi Minh City, 2013

THANKS

Firstly, we’d like to thanks The Board of Directors of Center for Educational Technology and Career Development – Vietnam National University, Hanoiand Griggs University,USA, has provided education in Vietnam with conditions for us to to study and complete Global Advanced Master Of Business Administration Program

We’d like to thank sincerely and profoundly to the lecturers who teach enthusiastically, wholeheartedly to impart knowledge and enthusiastically guide our group to complete this capstone project report, enabling us to complete this course

as well

Our group would like to give the deep thank our colleagues, the Director Board of SAPUWA company, class management board and GaMBA01.C0311 class’s members have helped, encouraged and supported for our group to complete well the study program and this capstone project report

Ho Chi Minh City, April 2013

Group 1 – C0311

TABLE OF CONTENT

INTRODUCTION 1

1.The purpose of the research 1

2 The targets of the research 1

3 Research areas 2

4 Research methodology and data source 2

4.1 Research method 2

4.2 Data source 2

5 The aims of the research 3

6 Structure of the research 3

CHAPTER 1: THEORIES ON BUSINESS STRATEGIES FORMATION 4

1.1 Definition of a strategy 4

1.2 Roles of a strategy 4

1.3 Classification of strategy 5

1.3.1 Classification by management involvement 5

1.3.2 Strategies classification on functions 6

1.4 Strategies management process 6

1.5 Business strategy formation methodology 8

1.5.1 Vision, mission, strategic goals of a company 8

1.5.2 External environment analysis 8

1.5.3 Internal environment 11

1.5.3.1 Human resource 11

1.5.3.2 Financial ability 11

1.5.3.3 Marketing and selling operations 12

1.5.3.4 Management activities 12

1.5.3.5 Technology: 13

1.6 Toolkit for strategy formulation 13

1.6.1 External factor evaluation matrix (EFE Matrix) 13

1.6.2 Internal factor evaluation matrix (IFE Matrix) 14

1.6.3 Competitive picture matrix (CPM) 14

1.6.4 SWOT matrix 15

1.6.5 QSPM (Quantitative Strategic Planning Matrix) 16

SUMMARY OF CHAPTER 1 18

CHAPTER 2: ANALYSIS AND ASSESSMENT BUSINESS PERFORMANCE AND ENVIRONMENT OF SAIGON PURIFIED WATER CO., LTD (SAPUWA) 19

2.1 Background Information of SAIGON PURE WATER Ltd Company (SAPUWA) 19

2.1.1 History and Development 19

2.1.2 Business Philosophy of SAPUWA: 4 “Cleans” 20

2.1.3 Slogan of SAPUWA : “The Endless Purity” 20

2.1.4 Organization of SAPUWA 20

2.1.5 Market and Market Share of SAPUWA 22

2.1.5.1 Market 22

2.1.5.2 Market Share 22

2.1.6 Business Results of SAPUWA in 3 years (2010-2012) 22

2.2 Environmental Factors Affected SAPUWA’s Business Operation 24

2.2.1 Analysis of External Environment 24

2.2.1.1 Macro Environment 24

2.2.1.2 Micro Environment 26

2.2.1.3 External Factor Evaluation Matrix 28

2.2.1.4 Competitive Profile Matrix (CPM) 30

2.2.2 Analysis of Internal Environment 31

2.2.2.1 Structure, Organization Chart and Management Board of SAPUWA 31

2.2.2.2 Human Resources 31

2.2.2.3 Financial Capacity 31

2.2.2.4 Workshop, Machinery and Technology 38

2.2.2.5 Manufacturing Process of SAPUWA’s Bottled Water (Appendix VI) 39

2.2.2.6 Information System 39

2.2.2.7 Intellectual Property and Copyright 39

2.2.2.8 Possibility in Research and Product Development 39

2.2.2.9 Marketing 39

2.2.2.10 Internal Factor Evaluation Matrix (IFE) 49

2.2.3 SWOT of SAPUWA 51

SUMMARY OF CHAPTER 2 52

CHAPTER 3: BUSINESS STRATEGIC PLAN FOR SAIGON PURIFED WATER Ltd COMPANY BY 2018 53

3.1 Mission, Orientation and Development Objectives of SAPUWA by 2018 53

3.1.1 Mission 53

3.1.2 Orientation 53

3.1.3 The developmental goals of Sapuwa by 2018 54

3.2 Formulating and Selecting Business Strategies For SAPUWA by 2018 55

3.2.1 Formulating Strategies For SWOT Matrix Analysis 55

3.2.2 Selecting Strategies via QSPM matrix 60

3.3 Recommendation of Business Strategy For SAPUWA by 2018 65

3.3.1 Solutions for Finance and Accounting 65

3.3.2 Solutions for Management 65

3.3.3 Solutions for Human Resource 65

3.3.5 Solutions for Organization 66

3.3.5.1 Mission of Marketing Division 66

3.3.5.2 Mission of Marketing Division’s Departments 67

3.3.6 Solutions for Market and Market Research Organization 68

3.3.6.1 Solutions for Marketing 68

3.3.6.2 Market Research Organization 68

3.3.7 Building, Consolidating and Developing Customers Relationship 69

3.3.8 Completing Customers’ Complaint-Taking Service 70

3.4 Recommendations 70

3.4.1 Recommendation for Government 70

3.4.2 Recommendation for SAPUWA 71

SUMMARY OF CHAPTER 3 71

CONCLUSION 72

REFERENCES 73

LIST OF APPENDIX i

LIST OF TABLE AND FIGURE

Table 1-1 : Model of global strategic management

Table 1-2 : 5 Forces of M.Porter

Table 1-3 : External Environment Matrix – EFE

Table 1-4 : Infernal Environment Matrix – IFE

Table 1-5 : CPM matrix

Table 1-6 : SWOT matrix

Table 1-7 : QSPM matrix

Table 2.1 : Financial annual report of SAPUWA from 2010 to 2012

Table 2.2 : Customers Development through the years (2008 – 2012)

Table 2.3 : External Factors Evaluation Matrix

Table 2.4 : Competitive Profile Matrix

Table 2.5 : Basic Financial Targets in the last 3 years (2010-2012)

Table 2.6 : Financial targets

Table 2.7 : Product Parttern of Consumption in 2010 - 2012

Table 2.8 : SAPUWA’s Price List

Table 2.9 : Price List of Accompanying Products

Table 2.10 : EX Works (EXW) of same products of competitors

Table 2.11 : Distributing Channels of SAPUWA

Table 2.12 : Internal Factor Evaluation Matrix

Table 2.13 : SWOT Analysis of SAPUWA

Table 3.1 : The SWOT Matrix of SAPUWA

Table 3.2 : QSPM Matrix for the group S-O

Table 3.3 : The QSPM Matrix for the group S-T

Table 3.4 : The Marketing Division

ABBREVIATION LIST

EPI : Earth Policy Institute

PET : Polyethylene Terephthalate

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INTRODUCTION

1.The purpose of the research

Vietnam market of bottled mineral and drinking water has enjoyed exciting growth, with average annual growth of 26%, and stood at 22% of the total beverage

market The attractiveness of the market has drawn interest and participation of various

economic forces, both domestic and international, which drove the market to a fiercer

competition (Source: AC Nielsen)

Being one of the leaders in Vietnam bottled drinking water industry, Saigon Purified Water Company Limited (SAPUWA) has been a major player in the Vietnam market for bottled mineral and drinking water since 1992, and has gained various significant encouraging achievements However, as the market has turned to be very fierce competitive environment, and as a response to the strong move of global integration, SAPUWA is forced

to face the business environment with continuous changing, more sophisticated with more unforeseen risk factors In response to the escalating competitive pressure, in order to sustain and grow, Vietnam businesses in general and Saigon Purified Water Company Limited (SAPUWA) in particular are required to form their own suitable, appropriate and efficient business strategies

As required by the need found from the current market situation, and with the desire to contribute to the development of a business in the bottled mineral and drinking

water industry, the Group One selected to conduct a research on the theme: “Business

Strategy Formation for Saigon Purified Water Company Limited (Sapuwa) for the period 2013 to 2018”

2 The targets of the research

The primary targets of this research include to figure out the market position of SAPUWA products, with special attention driven on analyzing and assessing the impacts

to the company’s business performance of different business factors of both internal and external environments, from which, to define the company’s strengths weaknesses, opportunities and threats Further, basing on findings, the Group One will form a set of business strategies for SAPUWA for the period of 2013 – 2018 with solutions proposed

to efficiently implement those business strategies discussed to assure the highest business performance of the company

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3 Research areas

 Geographical areas of the research: the research is focused to the market of bottled mineral and drinking water in Ho Chi Minh City areas, and is within the boundary of studying the operation of SAPUWA in Ho Chi Minh City

 Time span of the research: historical and projection data employed in this research

is for the period of 2010 – 2018

4 Research methodology and data source

4.1 Research method

There are some research methods such as synthesis, analysis methods the amounts

of Sapuwa in the past and present as well as comparison targets, business performance metrics of Sapuwa with other competitors in bottled mineral and drinking water industry

In addition, research also consults of experts Sapuwa on the assessment and classification scores of attractions in the process of analyzing matrix QSPM

4.2 Data source

Information collected is of primary and secondary sources

Primary information: collected from site surveys on pricings, brandings,

packaging designs, presentations, qualities of products on circulation at supermarkets, retailer shops, distribution agencies and so forth in Ho Chi Minh City and Ha Noi Our survey team also conducted direct interviews with 400 consumers in HCMC and Ha Noi ( HCMC: 250 people, Ha noi: 150 people) with a set of designed questionnaire to evaluate consumers’ perception, preferences, tastes, consuming and buying habits in conditions of today’s life and in the future Data collected are screened, adjusted, filtered and treated on SPSS to support our analysis

Secondary information: in our research, we also employed data of various official

secondary sources from Statistic Bureau, Tourist Board, Ministry of Planning and Investment, Vietnam Alcohol and Beverage Corporation, survey data and reports of market research agencies and consultants, reports, presentations and data of site surveys

by other companies in the industry, and other sources in the internet

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5 The aims of the research

The aims of the research are essentially practical in assisting SAPUWA an overview for its growth path in the future (period of 2013 – 2018), an understanding on market information precisely, which allow the company to take and maximize opportunities when they come, while minimize the risks exposed, to gain the best performance On another hand, the research results are also helpful reference resources for other businesses operating in the industry of bottled mineral and drinking water having their products sold in the areas of Ho Chi Minh City in defining their business strategies

6 Structure of the research

Other than the Forewords, Reference, Appendixes, the research is composed into three chapters as detailed below:

CHAPTER 1: THEORIES ON BUSINESS STRATEGIES FORMATION

CHAPTER 2: ANALYSIS AND ASSESSMENT BUSINESS PERFORMANCE AND

ENVIRONMENT OF SAIGON PURIFIED WATER CO., LTD (SAPUWA)

CHAPTER 3: BUSINESS STRATEGIES FORMATION FOR SAIGON PURIFIED

WATER CO., LTD TILL 2018

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CHAPTER 1 THEORIES ON BUSINESS STRATEGIES FORMATION

1.1 Definition of a strategy

A strategy is a general action plan to reach a particular goal When addressing a strategy of an organization, we think about how the organization defines goals, how to reach the goals, and how to assure resources to reach these goals

Alfred Chandler's definition: "determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals."

Ferd R, David stated in “Strategy management concept”: a strategy is a set of means to reach long-term goals Business strategies may include geographical expansion, diversification of operation, ownership, product development, market penetration, cost cutting, liquidation and joint venture

A strategy may be seen as a set of goals, plans and policies in order to achieve the goals, and explaining a business is conducting what business activities, and a business is

or will be in operation in what industry of sector

1.2 Roles of a strategy

Roles in planning: a business strategy helps a business to define goals and

courses of actions to reach the goals It shows to a business management to consider and define a path on which the business will follow and when the goals are reached with expected results

Roles in forecasting: in a continuous changing environment, there come always

opportunities and threats Strategy planning helps management in analyzing the business environment and forecasting and setting appropriate actions Therefore, management can better seize opportunities and minimize risks exposed in a particular environment

Roles in controlling: a business strategy helps management utilize and allocate

resources available in the best match, as well as synchronize efficiently functional areas within the organization with the aim to reach the set goals

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1.3 Classification of strategy

1.3.1 Classification by management involvement

By the management involvement, strategies are classified into three groups as follow:

Corporate strategies: are strategies clearly define goals and targets of a company,

business activities for which a company strive, make policies and basic plans to reach the goals, allocate resources among different business functional areas Corporate strategies are applied for the entire business

Business strategies: are strategies that are formed to define what products or what

market segments for a business operation within a company In business strategies, specific plans are defined for each business unit upon completion of which, the unit contributes to completion of company overall goals

Functional area strategies: competitive advantages come from capability in

reaching an outstanding efficiency, quality, innovation, and responsibility to customers Functional area strategies have focus on roles and ways to improve efficiency of each operational unit within a company, such as marketing, raw material management, product development, production management, customer service

On the strong move of globalization, competition has become fiercer On another hand, to cope with two sources of pressure on competition and cost reduction while maintain market expansion, more and more companies want to enter into international market competition, which bring the level 4th strategies: global strategies

To enter and compete in a global environment, companies can employ four basic strategies as following:

- Multidomestic strategies,

- International strategies,

- Global strategies,

- Transnational strategies

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1.3.2 Strategies classification on functions

 Integration strategies group:

1.4 Strategies management process

Strategies management process includes three main closely related and complementing stages:

Strategy planning stage: is the first stage forming the foundation and playing an

important role in overall strategy management process It is necessary to define vision, mission statement and strategic goals of the organization in this stage At this stage, business strategies, industries in which a company does business and so forth are clearly defined At this stage, company focuses on analyzing factors of internal and external environments, precisely defines opportunities, threats, strengths, and weaknesses, which all help to form appropriate strategies Strategy formation stage is composed of three basic activities: conducting studies, combining observation and analysis, and decision making

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Strategy implementing stage: is the stage in which strategy is transformed into actions

to achieve defined goals This stage is important in overall strategy management process, because if a strategy is finely and scientifically defined in the first stage will become nonsense if it is not appropriately implemented This stage requires mobilizing all the company resources to implement the defined strategies Strategy implementing stage is composed of three basic activities: annual target setting; policy making; and resources allocating

Strategy assessing stage: is the final stage of the strategy management process The

stage include activities such as results evaluation, results monitoring, solutions sought to adjust defined strategy to changing environment Monitoring strategy implementation in every stage, timely reviewing of appropriateness of the strategy to adjust to condition faced,

or predicting events that may arise having influence on the implementation of the strategy, which help a company to adjust its planning in the future to seize opportunities, cope with challenges, or event turn challenges into opportunities Monitoring works are carried regularly, continuously, which include activities as follow: monitoring factors which cores for the current strategy; measuring achievements; conducting adjustments

Allocation of resources

Redetermining the business target

Analysis of internal factor Identifying strengths, weaknesses

Selection of strategies to

be performed Bringing

forward the policies

Table 1-1: Model of global strategic management

From: Fred F.David, Concepts of Strategy, p.27

Strategy planning Strategy performance evaluation

ment and

Measure-evaluation of the strategic

performan-ce

Long term target setting

up

Annual target setting up

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1.5 Business strategy formation methodology

1.5.1 Vision, mission, strategic goals of a company

The first step of a strategy management process is to define mission and strategic goals of an organization Mission and strategic goals of an organization form the circumstance in which strategies are formulated

A mission states “the reasons for being” of an organization, and tells what the organization is doing For instance, mission statement of national airlines is “able to meet high-speed transportation demand of passengers at reasonable prices.”

Strategic goals are to specify what an organization expects to do in middle to long term Most organizations specify missions for profit, outstanding capability to gain the first leading place Other secondary missions are stated to express what a company consider necessary to be outstanding

1.5.2 External environment analysis

External environment includes macro and micro environments

1.5.2.1 Macro environment – pest (or also so called general environment)

Economic factors: having direct influence on the potential attractiveness of different

strategies are different Influential economic factors include economic growth, inflation, economic cycles, banking interest movements, stock price fluctuation, foreign exchange, taxation and so forth

Political and legal factors: having increasing influence on a business operation In the

legal aspect, factors such as political trend, policies, laws and regulations, remunerations, administrative procedures, administrative institutions In some countries, it is necessary to consider the political stability and or sustainability of the government Laws, regulations, and state administrative institutions together with pressuring forces are having influence on

a business operation

Social and cultural factors: a business has to have a thorough analysis of social

factors to define its potential opportunities Some of social factors to consider include roles

of women in the society, anthropological and demographic matters, population changes, life style, moral values, traditions, habits, local practice, education background and so forth Changes in geographic, demographic, cultural and social conditions are having significant influence to almost all decisions on products, services, market segments, and consumers of a business

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Demographic factors: The size of population influences significantly to almost all

products, services, market size, and consumers Those businesses with many years in the market are experienced in incorporating impacts of the surrounding natural condition into their decision making process The major factors include the size of population, age structure, geographic location, ethnic diversification, income disparity, pollution, energy shortage, wasteful exploration of natural resources, and increasing need of natural resources

Technology factors: to a business, technology factors such as R&D, patency,

automation trend, technology transfer… are both opportunities and challenges, and these factors have to have adequate consideration when formulating a strategy The sooner a technology is developed, the shorter a product life New technologies bring in life new technological process which allows significant cost cutting in production cost With the pace of technology development, new technology is more competitive than those currently available

Globalization factors: globalization, economic integration, and economic

liberation are today’s matters of the world economy Laws and regulations of European Union, the World Bank, the World Trade Organization (WTO), regional and international free trade agreements, world summits on economic issues … enhanced cross dependency of nations in the world, and global common markets are formed, which require common sets of standards of quality, environmental pollution, monopoly limitation laws, laws on dumping price …Strategy makers are required to consider to maximize the benefits of globalization and world economic integration, while at the same time mitigate the risks of international market, which is fiercer competition with foreign competitors, whose products are more price and quality competitive

1.5.2.2 Micro environment analysis (or so called industry environment/competition with an industry)

In the theory of 5 competitive forces by Michael Porter

Michael Porter (Harvard Business School) proposed the theory of 5 competitive forces within an industry as follow:

Existing competitors: The second competitive forces in Michael Porter model are

those of the same industry, having been in solid positions in the market The fiercer is the competitiveness, the lower the price, which leads to a lower profitability There are three key factors influencing intensity of the competition among competitors in an industry: competitive structure, demand for the subject product in the market, and exit barrier An important part of external environment management is to identify all competitors with full understanding of strengths, weaknesses, capabilities, opportunities, threats, targets, and strategies of each of them

Customers: The third force in Michael Porter model of competitive forces is the

bargaining power of the customers Customers always bargain for lower prices, better qualities, or more inclusive services These all lead to high operating costs and bring more threats on pricing competition

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Suppliers: The fourth force in the model is the bargaining power of suppliers to a

business Suppliers include not only those who supply raw materials, equipment and machineries, labor force, but also consultancy companies, advertisement agencies, logistic service providers and so forth, who, in a general word, supply inputs to a manufacturing process In order to lessen the bargaining power or pressure from the suppliers, a business should establish a mutual benefit sharing relation, along with effort

in diversifying supplying sources

Substitutes: The final force in the five forces in Michael Porter competitive model

is substitute products Substitute products are products of competitors in the same industry or products of other industries meeting the need or similar needs of customers

In order to minimize pressure from this threat, the management should carefully examine pricing trend and other forecasts of substitute products

Besides evaluating of the five competitive forces in Michael Porter as abovementioned, during external environment analysis, the management should pay adequate attention to other factors such as distributors, community, labor union, and the

so forth to define opportunities and threats in the company business operation

1.5.3 Internal environment

1.5.3.1 Human resource

Human resource is the most important resource of an organization Human resources management activities are generally understood to include recruitment, placement, training, and allocating human resource The aim of a human resource strategy is to develop a plan for human resource to meet strategic needs of a company, both in long term and short term

1.5.3.2 Financial ability

Financial condition is often seen as methods to evaluate the best competitive position of the company and is the most attractive conditions for investors To form effective strategies to identify the financial strengths and weaknesses of the organization Financial factors often change the current strategy and the implementation plan The financial functions including: The ability to raise capital; Financial Risk Management; earning ability

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1.5.3.3 Marketing and selling operations

Marketing and selling operations: activities of this type are of four major issues: products, pricing, supports, and distribution channels They include activities such as customers analysis, product/service planning, price policy, distribution policy, market research, advertisement and promotion activities, dealers and distributors and retailers support activities, and other activities by sales force

1.5.3.4 Management activities

There are 5 major management activities, as follow:

Planning activities include all activities in preparation for the future The specific

tasks include predicting, setting goals, building strategies, and developing policies

Personnel planning activities includes all activities to create a structure in which

clear definitions, rights and responsibilities of each position and relationships between one to another are established The specific tasks include designing specific reporting structure, providing detailed job analysis and job descriptions, installing efficient internal information transmission system which can generate timely

Motivation activities include efforts to provide guidance for all personnel position

to perform to generate a desired outputs; in a more specific way that management and team leaders consider to improve or change the operational hierarchy, authorize and delegate power to stimulate higher quality performance and higher job engagement while maintaining positive feeling in all staff force

Human resource activities have a special focus on personnel and human resource,

from recruitment, payroll and remuneration scheme , labor safety, equal employment opportunities, relations with labor unions, labor policies, inquiry or petition procedures, and other public relations activities

Control activities are those activities to ensure that the actual business results are

consistent with business plan, and include quality control, financial control, sales monitoring, inventory control, reception and analysis of the market changes

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1.5.3.5 Technology:

Includes activities related to research and product development / production processes, process improvements, required machinery and equipment, design software development and so forth

Further, in order to be able to assess fully and accurately the internal environment

of a business, we should also consider other five factors: financial analysis (cash-flow, leverage position, operational profit and sales growth), culture, leadership, legitimacy and reputation of the business

1.6 Toolkit for strategy formulation

1.6.1 External factor evaluation matrix (EFE Matrix)

Forming a matrix for external factor evaluation will help us in summarizing and quantifying influences of external factors to operation of a business, and help management project a roadmap to respond to each opportunity or challenge, deliver a judgment of external environment if favorable or unfavorable to a business

In order to form the matrix, we list all external factors having influence to a business’s operation; evaluating importance of each factor by giving each a weigh, with total weight of all factors equals 1 The classification shows a relative importance of each factor to the success of a company in the industry

Classification of each factor importance is to rate the factor in the scale of 1 to 4

In which, level 4 is the level that a company has best responsiveness; level 3 is above average; level 2 is average, and level 1 is the lowest These levels are based on the effectiveness of a company’s strategies The following steps to determine the weight of each factor importance by multiplying the importance index with the relevant classification After that, summing up of all importance points of each factor to arrive a total importance point of a company, with highest level is 4 and lowest level is 1, and an average 2,5 point

If the total importance point is 4, it is to express that the company has been best maximizing external opportunities and well controlling or minimizing external threats to the company If the total importance point is 1, it is to say the company has not taken opportunity and has not minimized the threats from external environment

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Table 1-3: External Environment Matrix – EFE

1.6.2 Internal factor evaluation matrix (IFE Matrix)

The construction of internal factors matrix elements will help us to summarize, evaluate the strengths and weaknesses of the important functions of the business It affects the business activities of enterprises Similar to external environment matrix, we

conduct a similar evaluation:

Table 1-4: Infernal Environnent Matrix – IFE

1.6.3 Competitive picture matrix (CPM)

Competition profile matrix compares the company with main competitors, based

on the factors affecting the competitiveness of the companies in the industry Competition profile matrix help managers identify the main competitors, their advantages and disadvantages, and evaluate the company's advantages and disadvantages

in comparison Competition profile matrix is an extension of the EFE matrix in respect

of importance factors, classification system and the total number of critical points However, unlike EFE matrix, managers can put into this matrix the major elements of the internal environment factors that influence on the development of businesses such as financial stability, the effectiveness of marketing activities, and appropriate investment for R&D activities

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List all factors

 Strengths-Opportunities strategy (SO)

 Weaknesses-Opportunities strategy (WO)

 Strengths-Threats strategy (ST)

 Weaknesses-Threats strategy (WT)

A chart presenting SWOT matrix is composed of 9 cells with 4 cells containing important factors (S, W, O, T), 4 cells of strategies (SO, ST, WO, WT), 1 cell always empty is the top left

- minimize the weaknesses

to seize the opportunities

(2+3)

WT strategies

- minimize weaknesses to mitigate the threats

(2+4)

Table 1-6: SWOT matrix

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1.6.5 QSPM (Quantitative Strategic Planning Matrix)

After employing SWOT matrix to formulate appropriate strategies, management will list all feasible strategies that the company can implement in the near future At this stage, a tool helping to select strategies is Quantitative Strategic Planning Matrix – QSPM

QSPM employs inputs resulted in analysis forming IFE and EFE matrixes to aid strategy makers in objective decision making A strategy among strategies which has highest interchangeability is the most attractive one and worth for the company to implement to reach the set goals A process to formulate a QSPM composes six steps:

Step 1: List all significant external opportunities/threats and significant internal

opportunities/threats into the column (1) of the matrix These factors are imported directly from EFE and IFE matrixes

Step 2: In the column (2) of the matrix, fill the relevant figures of each factor in the

classification columns from EFE and IFE matrixes

Step 3: Study SWOT matrix and define interchangeable strategies worth

consideration to implement, write these strategies into top row of QSPM Strategies are placed into different groups (if any)

Step 4: Determining the attractiveness point: very least attractive = 1, less

attractive = 2, attractive = 3, fairly attractive = 3, very attractive = 4 The values tell us about relative attractiveness of each strategy to others of the same group of interchangeable strategies

Step 5: Calculate the attractiveness point of each strategy considering each

important success factor as listed in the column (1) by multiplying classification point to attractiveness point within a row

Step 6: Sum all attractiveness points to arrive a total attractiveness point of each

strategy (with consideration to all relevant internal and external environments having influence to strategic decisions) The higher the total sum point, the higher the appropriateness of the strategy and worth selection

Key factors

(1)

Classification (2)

Interchangeable strategies

Attractiveness point base

2018 at Chapter 3

2.1.1 History and Development

In the early of the 90s, when M-BW market was completely ignored, famous foreign brands dominated and controlled the market with very high price Always being concerned about BW problems, with the desire to improving food demand and technology, which can meet the needs of drinking fresh water, health guarantee for domestic consumption, and saving foreign currency for the country, a forceful investment has been set, and SAIGON PURIFIED WATER Limited Company has been founded by Mr Le Nhu Ai after many years of research

 Establishment license: No 17/GP-UB by the People’s Committee of HCMC

on 13th January 1992

 Capital: 38.000.000.000 VND (Thirty-eight billions Vietnam Dong)

 Headquarter: No.683 Quang Trung Street, Ward 11, Go Vap District, HCMC

 Telephone - Tax : (84.8) 894 1466 - (84.8) 894 0060

 Emai : info@sapuwa.com.vn

 Website : www.sapuwa.vn

 Business Operation: Specialized in manufacturing and selling PET BW with a

capacity of 0.33L., 0.5L., 1.5L., 5L and 18.9L (5 gallons) In addition, SAPUWA also does business in equipment of drinking water industry such as water heaters, water bottle stand, porcelain vases, hand pumps and others food products and food technology

SAPUWA has paved the way for developing the BW Industry in Vietnam, and becomes the first ever business in Vietnam using advanced technology in the world which is known as using Ozone (O3) in pasteurization system for production

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Besides, SAPUWA has been also the first business that used hot and cold water machine as well as PET bottles with a capacity of 18.9L into Vietnamese market SAPUWA has soon successfully applied and achieved the certificate of Quality Management System ISO 9001:2000 and International Standards “Food - Quality – Safety” (SQF 2000/HACCP)

However, in very first years, the company had many difficulties because of directly competing against the same imported type of goods, and most imported raw materials could not be able to produce Therefore, production costs were high; products had not yet got into the domestic market; brands had not been popular to the customers; and the competition against imported products was very fierce For those reasons, in many consecutive years, the business had suffered a loss and difficulties for production But, with many attempts, the Management Board and all staff members had helped the business got a lot of success SAPUWA has kept confirming its position in the market with the market share which accounts for over 10% in domestic BW market Nowadays, the yearly turn-over has reached higher and higher The products have kept enhancing theirs quality and design; the skills of all staff members have been improved After 21 years of existing and developing, SAPUWA has achieved many honors, precious encouraging certificates, which have been voted by many domestic and foreign

organizations and the customers (Appendix III)

2.1.2 Business Philosophy of SAPUWA: 4 “Cleans”

 Clean people: aspiring, creative, energetic, professional and clean in thinking, and

clean in activities

 Clean manufacturing: modern advanced techniques and technology, clear, clean

and convenient environmental workplace

 Clean Product: caring for and advancing human-beings health problems

 Clean Profit: compliance with Government policies and regulations, caring for the

life of each staffs and sharing with the community

2.1.3 Slogan of SAPUWA : “The Endless Purity”

2.1.4 Organization of SAPUWA

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Ria, Binh Duong, My Tho, Can Tho These are very potential markets, which have high

demand of BW products of SAPUWA However, the main market is still HCMC, which

accounts for up to 75% of total sales volume of SAPUWA Nowadays, SAPUWA keeps

concentrating on the present market and expanding its market to the Southwestern,

Southeasten and the Central provinces with any marketing effort by its own

2.1.5.2 Market Share

According to the report of SAPUWA’s Sales Department, the national market share that SAPUWA is holding at this time is 10% In details, the market share in

HCMC accounts for 75%, Hà Nội is 10% and 15% in the Central, the Northern province

and the Southeastern province

2.1.6 Business Results of SAPUWA in 3 years (2010-2012)

Table 2.1 Financial annual report of SAPUWA from 2010 to 2012

Unit: Million VND

Increase/

Decrease (2012/2011)

Increase/

Decrease (2012/2011)

Value/ Revenue

4 Cost of goods sold 415,794 368,760 489,964 121,204 32.87% 2524.03%

5 Gross profit from sales and

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Based on data above, group 1 has comments as follow:

- Total net revenue of selling products and services in 2012 increased 135,218 million VND, compared with 2011- 29.11% in correspondence Revenue of selling

products and services increased because of improving packaging, diversifying products,

strengthening marketing policy, expanding market as well supporting deduction of

commission for agents

- The growth rate of cost of good sold in 2012 ( increased 32.87%, 121,204 million VND in correspondence) was smaller than the growth rate of net revenue of

selling products and services, so the gross profit of selling and services of the business in

2012 increased 14,014 million VND, about 14.45% in correspondence, compared with

2011

- The target needed to concerned is financial revenue: In 2012, this target decreased to 63.85%, 9,573 million VND in correspondence This is the result of

effective investment in stock market / non-specialized industries of the business, partly

because the stock market went down in 2012

8 Sales expense 39,043 46,193 40,653 -5,540 -11.99% 209.42%

9 Management cost of overhead 19,529 24,587 26,681 2,094 8.52% 137.45%

10 Net profit from business

15 Valid business tax expense 4,381 3,300 7,793 4,493 136.15% 40.15%

17 Profit after tax (60 = 50 – 51 -

Source: Accounting department of Sapuwa

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- In 2012, the prominence was the decrease of sales costs (went down 5,540 million VND, 12% respectively) because the business reduced costs in the current tough economic conditions, and brought down the retail system, and improve the distributing system This showed that the business was in the saving costs periods, and was adapting the tough conditions of the whole economy

- Profit after tax of the business in 2012 outstandingly increased, compared with

2011 (14,151 million VND, respectively 142.94%), thanks to effective selling policy and marketing strategy in 2012

2.2 Environmental Factors Affected SAPUWA’s Business Operation

2.2.1 Analysis of External Environment

2.2.1.1 Macro Environment

Economic Factors: Vietnam’s economy in the recent years has a stable average

growth rate at 5.5 to 8% per year According to the Government’s report, GDP in 2012 grew 5.2%, which helped the scale of economy reach 136 billion USD with an income per capita of about 1,540 USD/person/year Apart from other regions, the speed of economic growth in HCMC reached 9.2% in 2012 The average consumption price index

in 2012, which compared to the average price in 2011, increased 7.74% In 2012, it is estimated that the total investment in the area increased 217.073 billion VND and 9.1 %, compared with the same period in 2011 Since the beginning of the year to 14/12/2012, the city had 401 projects with foreign investment, which had registration certificate with

a total registered capital of 541 million USD, equal to 21.7% in 2011 It is predicted that

2013 is the year of the process of restructuring the market Macroeconomic policies in

2013 will be much more stable; the trust will be firmly confirmed Economic developing helps to increase income and to improve people’s lives The consumers now tend to use prestige, and high-qualified BW with guarantee of FHS On the other hand, directly investments and foreign visitors to Vietnam in recent years have significantly increased That increase has a positive effect, and brings very good opportunities to SAPUWA in

consuming and expanding market share

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Legal and Politic Factors: Vietnamese Government in the recent years has issued

and continued improving laws such as Foreign Investment Law, Commercial Law, Corporate Income Tax Law, etc to accelerate the process of economic reform and meet the requirements of the WTO The clear economic policy has created a favorable and healthy business environment and stabilized developing economic sectors In general, the legal system in Vietnam has been improved and more coherent However, there are still many inconsistent, or changeable and not synchronous points in implementation between the competent authorities and the locals As a result, these points have no small influence

in effective operation of the business In contrast, Vietnam is evaluated as a country that has a stable politic environment, and this has made convenient conditions for the business’s development in Vietnam as well as making foreign investors feel assured when sinking money to Vietnam

Environmental Technology Factors: The advancement of Science – Technique –

Technology in the recent years has brought many practical effects and had an influence

on every all business operation of the enterprise The equipment of manufacturing with modern and advanced technology has given the enterprise a hand in increasing labor productivity, reducing costs, and lowering prices of products, and gradually improved completely automation in production to manufacture products with high quality, HFS guarantee, international standards, and met the high demands of consumption inside and outside the country In addition, the rapid development of the Internet has also created

conditions for the enterprise and consumers in exchanging and trading goods online

Social Factors and Population: Vietnamese culture with Asian Cultural

background gradually tends to change into the direction of combining tradition with modernity, maintaining national identity with the trend of industrial civilization According to the General Population and Family Planning, it is estimated that the Vietnamese population in 2013 will reach 90 million people, approximately increasing a million people compared with 2012 Large population and water resources are limited which will make demands of consuming MW-BW products probably increase This is a

potential market for Producing and Selling MW-BW Products Enterprise

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Environment Factors: Recently, environment has been heavily contaminated, and

the unpredictable climate change has affected seriously the groundwater The ground water in Vietnam in general and in HCMC in particular has been contaminated seriously due to untreated waste water from industrial districts and large residential areas The groundwater exploitation of Producing and Selling MW-BW Products Enterprise has

been struck

2.2.1.2 Micro Environment

 Pressure from Potential Entrances Rivals: MW-BW market in Vietnam is

relatively high in recent years; and the average annual growth is of 26% per year This is

a potential market with simple production technology, abundant rawmaterials so that the hidden rivals of this kind of industry are very big On the other hand, investment environment in Vietnam becomes more and more attractive after integrating WTO As a result, many giant Incorporated possibly participate in manufacturing beverage industry, including MW-BW products, by directly investing or having joint-venture with domestic companies This is a challenge and a big threat to SAPUWA

 Pressure form Competitive Rivals: Through practical surveys, SAPUWA’s

rivals at the present are Lavie, Aquafina, Vinh Hao, Dasani (Appendix IV) Among

them, Lavie is the strongest Next are Aquafina and Vinh Hao These are very strong competitors, who have a big impact on the market and the market share of SAPUWA In addition, there are hundreds of small-scale BW manufacturers with productivity of hundred thousand liters per year, who supply for the customers with low income

 Pressure from Buyers

Table 2.2: Customers Development through the years (2008 – 2012)

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Current customers SAPUWA are mostly corporate clients, including:

 Airlines: Pacific Airline, Singapore Airline, Japan Airline, etc

 Oil and Gases Companies: VietsovPetro, Shell, Caltex, Castrol, etc

 Domestic and Foreign Banks: Hong Kong Bank, City Bank, Bangkok Bank, Asia Commercial Bank, etc

 Hospitals, Schools, Households, Industrial Districts, Amusement Parks and Supermarkets, etc

 International Entertainment Companies, Saigon Coop

In recent years, the number of customers has continued to increase rapidly in details In 2008, total customers was 5,500, but in 2012 was 12,050, increased 6,550 This is proved that customers have trusted in SAPUWA’s products with prestige, good quality and FHS guarantee On the contrary, SAPUWA has a good relationship with customers They have a separate staff members who undertake the responsibility for caring customers, listening to customers’ practical comments to correct the weaknesses

in time to maximize the satisfaction of the customers as well as to accumulate the loyalty

of the customers to SAPUWA brand

 Pressure from Suppliers

SAPUWA raw materials have been supplied by these following providers:

 The main materials are from exploiting the groundwater in the depth of 106m

 Minh Hung Industry and Trade Ltd Co., providing PET bottles

 Việt Pet Stock Co., providing PET bottles

 Hoang Nhat Thinh Packaging Ltd Co., providing shrink films for bottles

 Yuen Foong Yu Dong Nai Ltd Co., providing carton

 Duc Thinh Privare Business, providing PET bottles, and cap fittings and hoses

 Tien Tan Ltd Co., providing PET bottles

 Nguyen Cat Ltd Co., providing 5 gallon mark

Generally, SAPUWA has good relationship with the suppliers in accordance with a motto: “quality first, mutual benefit”, so the raw materials for manufacturing are in assurance

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 Pressure from Substitutes Products

Main alternative products of MW-BW products in the market now are soft drinks, juices, drinks containing protein such as tonic drinks, soya milk, yogurt, and other traditional drinks like boiled water and sugar cane juice On the study of AsiaPanel Vietnam, consumers tend to consume products derived from nature, and being healthy, for example, milk, juices, smoothies, etc Thus, the demands of these alternative products are very high This is the threat to SAPUWA in developing and consuming products

2.2.1.3 External Factor Evaluation Matrix

Through the analysis and evaluation of external environmental factors of SAPUWA, Group 1 has identified opportunities as well as challenges in the market On this basis, Group 1 has built up External Factor Evaluation Matrix of SAPUWA as follow:

Table 2.3: External Factors Evaluation Matrix

No External Factors

Importance

in the industry

Reaction of the business

Total number of important points Opportunity

Directly foreign investment in

Vietnam keeps increasing

Demand of using high-quality

people So, the trend of using

BW products instead of

tap-water will keep growing

Threaten

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2 Raw materials prices are

Copied products, counterfeit

products, low-quality products of

small-scale manufacturers in the

industry will affect brand’s

prestige

6

The state of unfair competition,

and the dumping of

manufacturers in internal

industry

7

The licensing and business

registrations are too easy, and

widespread that makes

small-scale manufacturers have

low-quality products in the field of

operation such as potentialities in big market, stable politic environment

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2.2.1.4 Competitive Profile Matrix (CPM)

Table 2.4: Competitive Profile Matrix

No Successful Factors Importa

nt Point

Sapuwa Lavie Vinh Hao Aqu afina

Catego rical Point

Critical Point

Catego rical Point

Critica

l Point

Catego rical Point

Critica

l Point

Catego rical Point

Critic

al Point

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2.2.2 Analysis of Internal Environment

2.2.2.1 Structure, Organization Chart and Management Board of SAPUWA

To organize the operating system effectively, and meet the demands in business

sales of the market, SAPUWA should consider the reasonableness of the relationships,

coordinating between departments, divisions, directly under parts, and adjusting through

hierarchical rules, working regulations Each department has the separate

responsibilities, missions and rights, which are not overlapped To promote cooperation,

the needs of close coordination while working together are greatly recommended, not

only departments such as Sales Department, Accounting Department, etc., but also ISO

Committee for monitoring and maintaining the quality system in business operation of

the enterprise

2.2.2.2 Human Resources

SAPUWA’s staff members consist of 243 members, including 137 direct labors,

106 indirect labors under 8 departments and divisions Mostly, members are at the level

of higher education Generally, staff members are young, dynamic and creative

However, marketing staff members have only a few, and the marketing experience is

limited when comparing with other rivals Currently, the minimum average salary of

SAPUWA’s staff is 3,500,000 VND/ month In addition to the basic salary, the business

is based on the scoring table to emulate the head monthly to review awards for

outstanding individual achievements

2.2.2.3 Financial Capacity

Financial capacity of SAPUWA is relatively fair Annual profit of the company is

extracted to reinvest manufacturing equipment and workshops

Table 2.5: Basic Financial Targets in the last 3 years (2010-2012)

% Increase/

decrease (2012/2011)

Value /Total assets

2012