Building business strategy for southern Ha Tinh seafood import-export joint stock company by 2015

CAPSTONE PROJECT REPORT BUILDING BUSINESS STRATEGY FOR SOUTHERN HA TINH SEAFOOD IMPORT-EXPORT JOINT STOCK COMPANY BY 2015... ANALYSIS OF BUSINESS ENVIRONMENT AND REALITY IN SOUTHERN HA

CAPSTONE PROJECT REPORT

BUILDING BUSINESS STRATEGY FOR SOUTHERN HA TINH SEAFOOD IMPORT-EXPORT

JOINT STOCK COMPANY BY 2015

Testimonial of Southern Ha Tinh Seafood Import-export Joint Stock Company ii

List of symbols and abbreviation iii

List of tables, diagrams, figures iv

INTRODUCTION 1

1 Reason for topic choice 1

2 Study targets 1

3 Study scope 1

4 Study method 2

CHAPTER I 3

THEORY BASIS FOR BUILDING BUSINESS STRATEGY 3

1.1 Basic problems of business strategy 3

1.1.1 Definition of business strategy 3

1.1.2 The role of business strategy 4

1.1.3 Administration process of business strategy 4

1.2 Related definitions 5

1.2.1 Vision 5

1.2.2 Mission 6

1.2.3 Targets 6

1.3 Study external environment of enterprise 6

1.3.1 Macro-environment 6

1.3.2 Micro-environment 8

1.4 Study internal environment of enterprise 12

1.5 Strategy definition 13

1.5.1 Steps for strategy definition 14

1.5.2 Analysis tools 14

1.6 Methods to implement strategies 16

CHAPTER II ANALYSIS OF BUSINESS ENVIRONMENT AND REALITY IN SOUTHERN HA TINH SEAFOOD IMPORT-EXPORT JOINT STOCK COMPANY 17

2.1 General introduction of Southern Ha Tinh Seafood Joint stock company .17

2.1.1 General information 17

2.1.2 Development history 17

2.1.3 Trading sectors: 18

2.2 Analysis of external environment of the enterprise .18

2.2.1 Macro environment - PESTE 18

2.2.2 Micro-environment – sector competition 24

2.3 Analysis of internal environment of Shatico: 32

2.3.1 Analyze human resource and management capacity 32

2.3.2 Financial analysis of company 35

2.3.3 Analysis of company’s infrastructure 38

2.3.4 Export form and products 39

3.1.1 Vision 45

3.1.2 Mission 45

3.1.3 Essential values 45

3.1.4 Define strategic targets 45

3.2 Analysis and choice of business strategy 46

3.2.1 Analysis of strategic position: 46

3.2.2 Analysis of SWOT model to suggest for functional strategies: 49

3.2.3 Choice of business strategy 55

3.2.4 Analysis of strategic alternatives: 55

3.3 Solutions to implement strategy 56

3.3.1 Management task 56

3.3.2 Solutions of human resource 59

3.3.3 Solutions of infrastructure, equipments and machines 60

3.3.4 Solutions of material sources 60

3.3.5 Financial solutions 61

3.3.6 Solutions of marketing and sale .62

3.3.7 Solution of study and development 63

3.3.8 Solutions of informatics technology 64

3.4 Implementation of solutions 64

3.4.1 Implementation route of solutions .64

3.4.2 Budget and expected results 64

CHAPTER IV CONCLUSION AND RECOMMENDATION 77

4.1 Conclusion 77

4.2 Recommendation 77

REFERENCES 78

APPENDIX 79

The topic “building business strategies for Southern Ha Tinh Seafood Import-export Joint Stock Company” is studied and built up by Group 3 of GaMBA01.V02 Class based on collected information in the company and other related publicized materials as well as based on learned theories of analysis tools and methods in Global Advanced Master of Business Administration (GaMBA) organized by Griggs University of the US (GU) coordinated with Centre for technology and Career System – Ha Noi National University (ETC-VNU) We have tried our best

to apply learned knowledge into reality of company in a flexible way

Due to limited time and large study scope, then Group’s topic can have some mistakes in implementation process; we are looking forward to receiving suggestions from the program, lecturers, leaders and employees of Southern Ha Tinh Seafood Import-export Joint Stock Company to supplement and improve this strategy and apply into reality to make company developed

We would like to show our gratitude to teachers and leading board of Southern Ha Tinh Seafood Import-export Joint Stock Company who have created good condition for us to fulfill this topic

Nghe An, 10/2010

Group 3 – Class: GaMBA01.V02

SOUTHERN HA TINH SEAFOOD IMPORT EXPORT JOINT STOCK COMPANY

- Working awareness of the group

During working time at the company, we have realized that the group has earnest and serious working awareness; apart from main activities of the group including collecting data, visiting, considering production process…the group also gets consultancy from leader, cadres, workers of the company on activities in management, material collection, production and sale, after-sale policies, training, payment policy, especially expectation and ideas of each individual to construct and develop company

Finally, we want to show our gratitude to the group which has recommended solutions for business development of the company We will study such solutions to apply into reality of production and business activities We also wish to show our gratitude to the course on Global Executive Master of Business administration organized by Griggs University coordinated with Centre for Technology and Career System – Ha Noi National University that has equipped learners with knowledge to support company in finding out such realistic and useful solutions

Best regards./

Ha Tinh, 08/10/2010

DIRECTOR

Nguyễn Mạnh Tường

- CA: Competitive Advantage of enterprise

- EU: Europe Union

- ES: Environment Stability)

- FS: Financials Strengths

- GDP: Gross Domestic Product

- HACCP: Hazard Analysis and Critical Control Point System

- ISO: International Organization For Standardization

- IS: Internal Strengths

- QC: Quality Control

- R: Revenue

- UBND: People’s Committee

- VASEP: (Vietnam Association of Seafood exporters and producers)

- WTO (World Trade Organization)

No Tables, diagrams, figures Page

4 Table 1.4: Table of strengths and weaknesses of enterprise (SW) 13

7 Table 2.1: Table of opportunities and threats (OT) for Shatico 30

12 Table 2.6: Compare some norms with Vietnamese seafood sector 36

16 Table 2.10: Table of strengths and weaknesses (ST) of Shatico 43

INTRODUCTION

1 Reason for topic choice

In the background of Vietnamese economic integration into global economy, any enterprise which expects to exist and develop then must build up a suitable business strategy

Exporting seafood is one of Vietnamese advantages; In 2009, seafood export

of the whole country has brought Viet Nam more than 4 billion USD which make Viet Nam be in one of ten leading nations of seafood export in the world; Vietnamese seafood has been in 130 nations of the world including choosy markets such as the US, EU and Japan

Southern Ha tinh Seafood import export Joint Stock Company (Shatico) is one of enterprises of exporting seafood in the Central of Viet Nam; with the expectation to build up a sustainable business strategy for Shatico, together with learned knowledge in Global Master Executive of Business Administration of Griggs University, Group 3 of MBA01.V02 Class has chose the following

graduated topic: “Build up business strategies for Southern Ha Tinh Seafood import-export Joint Stock Company by 2015”

2 Study targets

With study and assessment on situation of Vietnamese seafood import export market, studies and analysis of internal and external factors, we can build up business strategy for Shatico to support sustainable development of the company as well as raise position of company in the seafood export market which contributes to raise export turnover of Viet Nam

3 Study scope

This report will study information and data on operational situation of Ha tinh Seafood import export Joint Stock Company in domestic and foreign business environment to make proposals of development strategies for enterprise during 2010-2015

4 Study method

We have used qualitative study methods based on analysis and synthesis of secondary and primary data from many different resources, via interview with experts and group discussion Specific:

- The approaches: The capstone uses integrated approaches such as the particular approach, historical approach and qualitative approach

- Method of data analysis: the capstone uses statistical methods of description, analysis and synthesis to evaluate business performance of Shatico

- Analysis tool: we use EFE , IFE, IE, SPACE, SWOT matrix to analysis

- Sources of information: we use secondary information from newspapers, the Internet and reports from Shatico

Topic structure: this topic including the following main parts:

- CHAPTER I THEORY BASIS FOR BUILDING BUSINESS STRATEGY

- CHAPTER II ANALYSIS OF BUSINESS ENVIRONMENT AND REALITY IN SOUTHERN HA TINH SEAFOOD IMPORT-EXPORT JOINT STOCK COMPANY

- CHAPTER III SUGGESTIONS FOR BUSINESS STRATEGIES

- CHAPTER IV CONCLUSION AND RECOMMENDATION

CHAPTER I

THEORY BASIS FOR BUILDING BUSINESS STRATEGY

1.1 Basic problems of business strategy

1.1.1 Definition of business strategy

There are many viewpoints on business strategy according to different groups of viewpoints; there is the viewpoint to consider business strategy as an art including Alain Threlart and Micheal Porter Alain Threlart supposed that “Strategy

is the art that enterprise uses to be against competition and win”; and M.Porter considered “Strategy is the art to build up competitive advantage for defense”

There are also viewpoints which consider strategy as a form of plan, including scholars: G.Arlleret, D.Bizrell, Gluecl G.Arlleret supposed that:

“Strategy is the definition of methods and medium to reach defined targets via policies” D.Bizrell and author group have defined: “strategy is general plan to lead

or orient for enterprise to go to expected targets; it is also the basis for defining policies and operational tasks” Gluecl supposed that: “Strategy is the consistent, comprehensive and general plan which is designed to ensure that enterprise’s targets will be implemented”

Apart from above viewpoints, there are also viewpoints of connecting consistency “business strategy is the art to coordinate with activities and control them to reach long term targets of enterprise” Chandler considered strategy as including defining long term targets of enterprise and choosing methods or process for action then allocating necessary resources and organizing implementation of such targets”

Then we can understand in the most common way, “strategy is to collect basic long term targets which are defined to be suitable to vision, mission of organization and methods, medium to reach such targets in the best way then it can promote strengths, weaknesses of organizations, receive opportunities and avoid or reduce damages from threats of external environment”

1.1.2 The role of business strategy

The role of business strategy in enterprise is as follows:

- Business strategy can help enterprise to define clearly purposes, orientation

in each period

- Business strategy can help enterprise to grasp and make use of trading opportunities, promote strengths and have active adjustment for weaknesses, avoid

or reduce damages from threats in external environment

- Business strategy can raise using effect of resources, increase position of enterprise which can ensure enterprise to develop constantly

- Business strategy can create solid basis for enterprise to find out suitable decision with the change of market; it can create solid basis for study and implementation, human resource development and training, expansion of market activities and product development

The reason for failure and success depends on one of important factors which are the business strategies of enterprise

Strategic process is a complex process including: defining strategy, implement strategy and assessments which must be done constantly

1.1.3 Administration process of business strategy

Process of strategy administration including 3 periods:

Diagram 1.1: Comprehensive process of strategy administration

(Sources: Fred R.David, strategic management concepts and case, page 27)

Within this report, we just mention period for strategy definition and implementation of Southern Ha Tinh Seafood import export joint stock company

Function, duty and strategic targets

ts

ủa d anh

iệp

Internal environment analysis (S, W)

External environment analysis (O, T)

Strategy choice

Strategy implementation

Results checking and assessment

Feedbacks

According to James Collins and Jerry Porran (1960), structure of a vision declaration often includes two parts: essential thought and imagination of future

1.2.2 Mission

Mission or duty is a long term valuable declaration of purpose which distinguishes this company with that company; such declarations can be called trading philosophy, trading principles and trusts of company

Mission declaration can indicate the reason for enterprise’s existence; according to Drucker, mission declaration can answer the question: “what are our business activities?”; “What and how should we do to reach vision declaration?”

1.2.3 Targets

Targets can be understood as defined achievement that enterprise tries to reach when following its own mission; right definition of targets can have very important significances for organizational success because targets can help us to indicate development orientation, assessment of achieved results which can indicate preferential resource allocation, development cooperation, basis provision to make plan effectively to be the basis for organization, effect assessment…

A target is considered to be good if it has enough factors: realistic, measurable, classified, centre, threats and feasible, time-bound…

1.3 Study external environment of enterprise

Study external environment of enterprise with many factors is aimed to reach purpose which is to realize opportunities as well as threats impacting on activities of enterprise; external environment includes macro-environment (general environment) and micro-environment (sector environment or competitive environment)

1.3.1 Macro-environment

This report has used PESTE analysis tool (Politics; Economics; Social; Technology and Environment) to assess and analyze macro-environment of enterprise, as follows:

- Political and legal environment

Enterprise is economic cell; all enterprise’s decisions can bear strong influence by political factors; analysis of political and level environment is an indispensable activity to define business strategy

Political environment includes State, Law and management activities of the State; political environment including system of viewpoints, policy of Government, current legal system, political and diplomatic trends of Government and political happenings in the nation, region and the world

- Economic environment

Economic environment can indicate the essence, growth rate and development orientation of economy

Analysis of economic environment can have important significance because

it includes factors impacting on buying and consumption structure; factors in economic environment always impact on business strategy of enterprise, especially factors of economic growth rate, interest rate, exchange rate, inflate rate…

- Social and cultural environment

Social and cultural environment can be understood as language, value, attitude, behaviors and customers, materuaks, aesthetic, education, factors of population including scale, population density, age, race, gender, career…

The change of social and cultural environment is the consequence of long term impact of other macro factors then it often happens slower than other factors; However, it can have longer term impact than other factors Therefore, environmental study of social and cultural environment is an indispensable content

in studying macro-environment

- Technological environment

Technological environment – is the forces to create new technology and market fortune; necessary factors when studying technological market including: appearance of new technology, invention rate and appliance of new technology, encouragement and supporting from Government for study and development; law of

intelligence ownership, copyright, author, law on technological transfer, pressure and cost for development and transfer of new technology

Technological change can allow to create a lot of new products with outstanding facility, quality in a short term but it is also such technological change which can make tangible products outdated, sacked after a short time; Then technological change can include creation and destroying which can bring opportunities and threats

- Natural environment

Natural environment includes factors such as geographical position, climate, natural landscape, land, river, mineral, purification of water and air…which can ensure necessary input factors and operational environment for enterprises

In the background of natural resources, polluted environment, the loss of ecological balance… business strategy of enterprise must meet the following demands:

+ Priority for sustainable development

+ Awareness of effective using of natural resources

+ Promote study, development of production technology to produce clean products, protect environment and reduce impacts from pollution of production activities

1.3.2 Micro-environment

Michael E Porter, the famous professor of business strategy of Harvard has given the model of five competitive forces which can help enterprises to analyze macro-environment, realize opportunities and threats from this environment

Figure 1.2 Five-competitive force model of M.Porter

(Sources: M.E Porter, Competitive Strategy (New York: Free, Press, 1980))

- Competitive pressure from potential opponents

Potential opponents are competitive opponents that can join in market of sector in the future; when competitive opponents appear they will exploit new production capacity, occupying market share, increasing competitive pressure of sector and reducing profit of enterprise

Appearance of competitive opponents will impact on business strategy of enterprise then we must analyze such potential opponents, to assess the risks that they can create for enterprise

The risk of penetrating into sector depends much on penetration barriers (limit methods) which are indicated via reactions of competitive opponents that new opponents can predict If barriers are high or new opponents can predict violent reactions of enterprise in the sector then capacity for penetration of opponents will

be low and vice versa

Threats of replaced products and services

Capacity to create pressure

of customers

Capacity to create

pressure of providers

threats of new competitive opponents

Competitive opponents in

the sector

Competition among existing enterprises in the

sector Potential opponents

Replaced products

Customers Providers

According to Michael E Porter, there are six main penetration barriers: + scale-based economic advantages

+ Difference of products

+ Requirements of capital

+ Change cost

+ Approach capacity with distribution channels

+ Cost disadvantages not related to scale

Besides, there is one important barrier when studying which is Governmental policy

- Competitive pressure of providers:

Providers are individuals or organizations which provide resources (products, services, materials and fuels, machines, equipments, human recourse…) for activities of enterprise

Providers can create opportunities for enterprise when reducing sale price, increasing product quality and service quality….On the contrary, it can create risks for enterprise when increasing sale price, reducing product quality, not ensuring quantity and time of provision…

Advantages of providers appear when:

+ Market has a few providers

+ Products have difference or replaced products are unavailable

+ Change cost for providers is high

+ Difficult to combine vertically to provider input factors

+ Providers have high self-control capacity…

- Competitive pressure from customers

Customers are objects to serve enterprise which is the factor to create market; Therefore, to get success, enterprise must study carefully its own customers

Pressure from buyers can exist mainly in two forms: bargain to reduce price

or increase quality of products and services of enterprises; This can make competitive opponents to be against each other and reduce profit of sector

Pressure from buyers can exist when:

+ Market just has a few buyers

+ When buyers buy a high quantity of products or buyers make exclusive sales for the products of sellers

+ Products of enterprise have not high difference which is basic product, easy

to buy in the market or replaced by other products;

+ Products of enterprise do not hold important role which cannot decide product quality of buyers

- Competitive pressure from replaced products

Replaced products are products which can be different in names, elements and forms…but it can bring consumers functions, profits like products of enterprise; appearance of replaced products can lead to the risk of reducing sale price or profit

of enterprise; Therefore, enterprise must predict and analyze development trend of replaced products to realize all risks which are created by replaced products

Replaced products are mainly results of innovation or the burning of new technology; enterprises expect to reach development strategy or focus on study and development strategies of products

- Competitive pressure from internal sector

Current competitive opponents are opponents that are trading same products and services as enterprise Competitive opponents will share market share with enterprise which can climb to higher competitive position; competitive quality in the sector can increase or reduce depending on market scale, sector’s growth and competitive level of opponents

When analyzing competitive opponents, we must implement the following tasks:

+ Realize, classify, assess and list competitive opponents according to market

+ Collect and assess information of competitive opponents

+ Predict reactions of competitive opponents

+ Choose suitable strategies (attack, avoid or cooperate) to cope with competitive opponents

We can summarize opportunities and threats via following table:

Table 1.3 – Table of opportunities and threats (OT)

Opportunities of investment and trading

of enterprise

Threats, risks for enterprise

1.4 Study internal environment of enterprise

To exist and develop, all enterprises must implement administration activities

of finance, personnel, production, trading, study, develop, marketing…and information system, management system and functional divisions; in each activities, each enterprise can have private strengths and weaknesses which can help it to choose suitable development strategy

There are many methods to analyze internal environment of enterprise, out of which there is analysis method of enterprise’s resources, as follows:

- Human resources

Human resource is the valuable asset of enterprise; if we know how to attract, recruit and keep talented people, enterprise can have big advantage to win competitive opponents; human resource of enterprise can be divided into 3 levels: high level, medium level and low level; human resource assessment is a general task including many factors such as assessment of personnel management machine, policy to attract, use and train labors, assess quantity, quality of labors…

- Financial resources

Financial resource is one of indispensable factor for enterprise to operate; when analyzing financial resource, we can use financial tools, groups of assessment norms such as payment capacity of enterprise, effect of using capital, profit index…

- Infrastructure, equipments and machine

Infrastructure of enterprise can include construction projects, factory, store, machine, equipments, medium for delivery, materials…which serve management and production process of enterprise

- Technology and techniques

Technology and technique is a knowledge system of process and technique to process products or services; technological development including activities related

to study and development of production process, improving machine and equipments, development of management software, controlling and producing products, improvement of information system Enterprise which wants to have competitive advantage in the market must care for activities for technological development

We can summarize strengths, weaknesses via following table:

Table 1.4 – table of strengths and weaknesses of enterprise (SW)

in the period, we must define vision, mission and strategic targets of enterprise; based on that, we can set up strategies, trading policy, decision of new sector to join and to withdraw, expand or narrow down trading activities…In this period, we must focus on analysis of external and internal factors, defining opportunities, threated, strengths and weaknesses then combining and choosing suitable strategies

1.5.1 Steps for strategy definition

To build up a good strategy, we must well implement steps of analysis, assessment, study and synthesis of all information, related factors to enterprise; strategy definition including:

- Analysis of external environment of enterprise, including macro and micro environment Then we can define opportunities and threats for enterprise

- Analysis of internal environment of enterprise, then define strengths and weaknesses of enterprise

- Combine strengths and weaknesses and opportunities and threats to define alternatives and strategies for enterprise

- Use analysis tools to compare and define the best strategies

- Decision to choose business strategy for enterprise

1.5.2 Analysis tools

- EFE matrix is the one to assess external factors; this matrix will synthesize, summarize and assess main opportunities and threats of external environment EFE matrix will help administrators to assess reaction of enterprise with opportunities and threats then it can give recognition with external environment which can create good or bad condition for enterprise

- IFE matrix is the one to assess internal factors; this matrix will synthesize, summarize and assess main opportunities and threats of enterprises This matrix will show strengths that enterprise should promote and weaknesses to improve then raise competitive position of enterprise

- IE matrix: IE matrix is built base on two main aspects, the total important marks of the IFE on the horizontal axis and the total important marks of the EFE on the vertical axis

- SPACE matrix: SPACE matrix is the one to define strategic position and assess activities; this is an important combination tool to help enterprise to choose attacking strategy, which can be cautious, attack, defense or competition

Figure 1.5 – Matrix for strategic position of enterprise

(Sources: H.Rowe, R.Mason, and K.Dickel, Strategic Management and Business Policy: A Methodological (Reading, Massachusets: Addison – Wesley Pulishing Co.Inc, 1982), p 155)

- SWOT matrix

SWOT is the collection of English abbreviations which are Strengths, Weaknesses , Opportunities and Threats This is a very useful tool which can help

us to learn to know problem or make decision in organization, management as well

as business In other words, SWOT is theory frame based on which we can consider strategies, define position as well as orientation of an organization, company;

-1 -2 -3 -4 -5 -6

+6 +5 +4 +3 +2 +1

analyze business proposals or any idea related to rights of enterprise; appliance of SWOT in constructing business plan, strategy definition, opponent assessment, market survey, product development and study report…is chosen by enterprises

Table 1.6: SWOT matrix

WT strategies

Adjust weaknesses to avoid threats

1.6 Methods to implement strategies

To make strategies of enterprise well implemented, company must find out solutions to implement strategies; based on chosen strategy group, we must build up suitable solutions with strengths, weaknesses of enterprise and opportunities and threats of business environment

Solutions must focus on solving problems of management, human resource, infrastructure, production technology, material, financial source, production, study and development…

CHAPTER II ANALYSIS OF BUSINESS ENVIRONMENT AND REALITY IN SOUTHERN HA TINH SEAFOOD IMPORT-EXPORT JOINT STOCK COMPANY

2.1 General introduction of Southern Ha Tinh Seafood Joint stock company

2.1.1 General information

Name: Southern Ha Tinh Seafood Joint stock company

Abbreviated name: Shatico

English name: Southern Ha Tinh sea product import-export joint stock company

Address: Vung Ang economic zone – Ky Anh district – Ha Tinh province Tel: 0393.868333/868309 Fax: 0393.868308

Email: shaticof.45@gmail.com Website: http://www.shatico.vn

2.1.2 Development history

Southern Ha Tinh sea product import-export joint stock company is established according to Decision No.196/QĐ-UB on 20/6/1993 of Ha Tinh Provincial People’s Committee with the name of Southern Ha Tinh sea product import-export joint stock company, with main institution in Ky Anh town, Ha Tinh province; After establishment, company is lent by Ha Tinh Viet Nam Development Bank with preferential capital to invest in seafood export processing with capacity

of 550 tons/year After 5 years of operation, together with common development of the market, company has continued upgrading factory to 900 ton/year and change into Southern Ha Tinh sea product import-export joint stock company

After establishing Vung Ang industrial zone, company has been allowed by

Ha Tinh PPC to transfer into industrial zone and invest in new processing factory with capacity of 1.500 tons/year, which can meet the demand of export to American and EU market

Well implement privatization of State’s enterprise, company has organized, assessed and defined values of enterprise which has been approved by Ha Tinh Provincial People’s Committee according to Decision No 1105/QĐ-UBND on 04/7/2005

From 01/01/2006, company has officially gone into operation under the form

of joint stock company with the name of Southern Ha Tinh sea product export joint stock company (Shatico)

import-Charter capital: 5.800 million dong; Face value of 1 stock: 10.000 dong Structure of firstly issued stocks

Total shares: 580.000 stocks, out of which:

- State’s owner shares: 0 (the State does not hold stock in enterprise)

- Shares sold to labors in enterprise: 452.400 shares, occupying 78%

- Share for public auction: 127.600 shares, occupying 22%

2.1.3 Trading sectors:

Southern Ha Tinh sea product import-export joint stock company has operated in term of buying, processing and consuming sea foods

Main products of company:

- Cuttle-fish: instant cuttle-fish, shusidane, skinned cuttle-fish…

- Shrimp: prawn, sugpo prawn

- Fish: anchovy, butchered fish…

2.2 Analysis of external environment of the enterprise

2.2.1 Macro environment - PESTE

- Political and legal environment:

In current violent globalization, regional and international happenings can create global influence Vietnam is not an exception which cannot avoid global economic trends because Viet Nam is a nation of deep economic integration into global commercial system However, Viet Nam is stilled assessed as one of nations

of stable political and social environment; Viet Nam Government expects to “be

friend with all nations in the world” which is also a good condition for enterprise to operate However, legal document of Government has limitations, not follow economic developments

To build up a stable economy, Viet Nam Government has policies, decisions

to support, encourage development for production, as follows:

+ Decision No 224/1999/QĐ-TTg of Prime Minister on developing seafood raising; besides localities also have private policy to encourage development of seafood raising which is the premise for developing seafood raising areas and create good condition for providing materials to enterprises Such programs will support to build up seafood raising infrastructure such as dyke, drain, electric line, traffic in area of raising seafood, support models of coaching, processing techniques of epidemic diseases…Until 2009, it has supported to build up areas of raising seafood with scale of more than 1.000 ha in districts of Nghi Xuan, Loc Ha, Thach Ha, Cam Xuyen, Ky Anh

+ Decision No 288/2005/QĐ-TTg of Prime Minister on approving master plan for constructing area of storm hiding for fish - boats by 2020, the program of Eastern Sea island, out of which it will support to build fish ports to ensure infrastructure of fishing for people to exploit seafood and it is also good condition for exploiting and ensuring input materials for enterprise; until now, Ha Tinh province has built and finished Cua Sot, Cua Nhuong parking areas for fish-boats, besides, Border gate parking area is begun to be implemented

+ Policy of testing safety quality of areas for raising seafood: implemented annually by agency for managing quality of agriculture, forestry and seafood directly under Ministry of Agriculture and Rural development, which is the favorable condition for company to have input materials and ensure foodstuffs safety hygiene

However, apart from such advantages, company also get some limitations such as related procedures of paying tax, paying VAT which can impact on common activities; For instance, when importing some additional spices from

abroad, there is no consistency between company and Customs agency on estimating import tax

With poor condition of local people in which they have no capital to invest, produce in false process, then it can make productivity and quality of seafood raising low Besides, procedures to grant land for raising seafood are incomprehensive such as not grant land for a long time then enterprises and individuals cannot be bold to invest in right raising process; such factor has made material supply from raising seafood for company limited

Currently, the unit for testing and management quality of exported seafood product is agency for quality management of agricultural, forestry and aquacultural products in region I (Nafiqad I) located in Hai Phong city Testing products for export of company can take much time (it can take from 10 to 14 days)

VASEP is Vietnam Association of Seafood exporters and producers which has created business environment for enterprises, created bridge for enterprises to exchange with each other, however it cannot become the effective protector for enterprises, especially in lawsuits with foreign partners

- Economic environment

Viet Nam is one of stable developed economy in the recent long time; according to data of Statistical agency, Vietnamese average growth rate of GDP during 2001-2007 reached 7,5% Although global economy has been in financial crisis and economic recession, but GDP of Viet Nam in 2008 had still increased 6,2%; With many difficulties and threats but in 2009 growth rate also reached 5,3% Especially, economic growth rate of Ha Tinh province in recent years has reached above 7,5% This is one of favorable economic conditions for enterprises within the area

Currently, in Viet Nam the quantity of commercial bank has increased rather higher than previously; lending mechanism is more favorable which is good condition for enterprises to borrow capital for trading activities; However, lending

interest is rather high, within 12-14%/year, which is one barrier for enterprises to borrow capital for trading activities

In exchange rate, VN Dong often loses value compared to USD which is one

of favorable condition for export enterprise but it can make enterprise limit import

of machines, equipments to raise and innovate production line

In recent time, Viet nam Government has promulgated many stable policies and promoted economy; in such policy, there are some related policies to the development of enterprise such as policy for encouragement of seafood economy, policy for encouraging export or currency policy of the State…which are good condition for company in trading activities

For instance: in 2004, company must borrow preferential capital from Development Bank 24 billion dong for investment to construct factory in Vung Ang economic zone; in 2009, company will be supported interest rate (more than 360 million VNdong) by demand stimulus package of Government

Viet Nam has integrated into WTO then the company will enjoy preferential treatments of export tax in member nation of WTO When exporting seafood products into market of member nation of WTO, instead of bearing tax level of 15%

as before, now company just bears tax level of 5%

Besides, enterprise is located in Vung Ang economic zone will enjoy some defined preferential treatments such as “exemption of corporate income tax for 4 years, from having tax income and reducing 50% paid tax for 09 coming years; enjoy preferential treaments of tax applied to areas of difficultly economic-social conditions as defined by Law on Investment, other tax policy and other preferential

treaments according to international treaties that Viet Nam is member” (extracted article 1, provision 14, page 9, operational regulation of Vung Ang economic zone

of Ha Tinh province, promulgated together with Decision No:72/2006/QĐ-TTg on03/4/ 2006 of Prime Minister)

- Social and cultural environment

Vietnamese economy has been developed; industrial zone and processing zones have been appeared Vung Ang is one of economic zones of Ha Tinh province with private advantages that local authority has created good condition for development

Labor resources in the locality is very plentiful, with industriouness tradition; besides, according to customers of local people, female labors must go for a far way

to work, they want to work near their houses which are favorable condition for company to recruit popular labors, especially labors according to season; available hard working labors not only helps company to have advantages of labor force but also make profit for sectors such as: raising, exploiting, processing, buying and collecting

However, labor quality is limited; most of them are not trained which can impact on production process of company;

One favorable condition for company is consumption demand of seafood products; According to FAO, growth of population, together with appearance of diseases in cattle, poultry and tend to transfer to seafood consumption is increased; seafood consumption per capita will increase about 17-19kg/person/year, which can make the demand of seafood increase from 121 million tons in 2010 to 130 million tons in 2020 Markets of EU, America, Japan and Korea… always have the high demand and tend for consumption On the other hand, some nations have reduced exploiting quantity such as EU, China which make demand of seafood in big market increased; on other hands, big markets will increase density of importing processed products or added value Besides, Vietnamese market with more than 80 million people is one attractive and potential market; however, to occupy domestic market then price is a threat for company because Vietnamese people has low income Recent economic crisis has impacted on consumption capacity of company’s products

- Technological environment

Currently, production technology has been developed; the rate of new technological appearance is high which is one good condition for enterprise to invest and upgrade, expand production line; However it is also a threat which make enterprise constantly innovate, invest in modern technology to avoid being outdated

Government will encourage employees to invest in new machines and equipments, improve production methods via policy to encourage industry, science and technology….In 2009, company was supported by national industrial stimulation to invest in vacuum extractor with supporting level of 30% investment value

- Environment

Ha Tinh seafood sector is considered as provincial economic advantage; with coastline of 137 km, with many sea foods with high economic value, annual exploited quantity of about 22.000 tons, quantity of raising of 16.000 tons sea foods which is condition for company to buy input materials; especially, cuttle fish in Ha Tinh sea is appreciated to have good quality; However, materials are not stable; sometimes so much, sometimes so few; and there are time that lack of materials then trading activities of company are badly impacted; natural seafood resources are exhausted which is also a threat for companies of processing seafood

Besides, company is built up in Vung Ang Economic Zone which has other favorable conditions such as favorable traffic system including both of seaway (Vung Ang is deep seaport with for ships of 50.000 tons to shelter) and roadway (near 1A National Road); Climate, water resource is clean and unpolluted; stable power (currently Vung Ang economic zone is building 3 thermo-electric plants with total capacity of 3.720 MW), which can meet enough demand for enterprise’s production

However, within the area, the company is the only one to operate in seafood processing and exporting then it does not have enough condition to connect with other enterprises to produce with high quantity for constant export

2.2.2 Micro-environment – sector competition

- Competitive pressure from providers

Viet Nam is assessed to be one of nations with rich seafood resource within the region and the world; growth rate of seafood sector is the fastest which ranks the fourth in production quantity and export scale of seafood (after Thailand, Indonesia and Malaysia)

Market to buy materials of company spreads from Quang Tri province to Thanh Hoa province; with a large material market, effective agency system, it has contributed to make material buying and collecting favorable currently, company can buy directly from producers about 60-65%, the remaining are from agencies of buying and collecting; However, processed materials are seasonal, scattered; preservation qualification after harvesting is limited which can impact on quality of input materials;

Materials from raising can develop stronger in the coming time due to not exploiting seafood raising which is good condition to expand production; However, natural materials are more and more exhausted which makes competitive pressure from providers of materials is more violent

Due to developing economy, improved living standards of people, plentiful demand of seafood, domestic consumption of seafood is more and more increased which make competitive pressure of buying processes materials more violent

Material providers of company are mostly private households then company can be difficult to build up long term connection

The State has got policy for importing seafood material for processing and exporting which is good condition for buying materials of company; However, from 01/9/2010, Ministry of Agriculture and Rural development has forced enterprises to check origin of quality for imported seafood (Circular no 25/2010/TT-BNNPTNT), which can create difficulties in importing because no exporters agree to issue quality certificate and clarify material origin

- Competitive pressure from customers

Seafood export turnover of Viet Nam has constantly increased, on average 18%/year within 1998 - 2008 Until now, Vietnamese seafood has been exported to

170 nations, regions out of which three biggest markets are EU, the US and Japan (occupy density of 60% seafood export), which make Viet Nam become one of 6 leading nations of seafood export

Structure of seafood export market has clear changes since 2000 If previously, Viet Nam just exports to two markets of Hong Kong and Singapore then Vietnamese seafood has been in 170 nations of the world and highly appreciated by consumers in many nations; within the market of Vietnamese seafood export., EU market is considered as strategic market for seafood export of Viet Nam with market share of 25,7% total export turnover (compared to the US 16% and Japan 19%) In spite of crisis, then EU will still be the important foreign market of Vietnamese seafood; in 2009, seafood export value of Viet Nam to EU reached 1,1 billion USD (rank the second after leather shoes of export volume) In ten leading markets of Vietnamese seafood consumption, EU has four nations including Germany, Spain, Holland, Italia Other big import markets are Korea, China, hongkong, Australia and Taiwan

Global financial crisis has reduced 4,3% Vietnamese seaood export turnover, out of which export to EU has reduced 4,6% compared to previously (reach the value of nearly 1,11 billion USD) However, reduction level of EU market is not strong in comparison with export turnover to the US and Japan with reduction level

to 7,2% (to the US) and 12% (to Japan) In 2009 seafood export to EU has not been reduced much like export to the US and Japan which is due to the following reasons: firstly EU economy has fallen into recession but it it still better than Japan and the US; secondly, Vietnamese enterprises have focused on commercial promotion and market expansion in EU market, joining in many advertising activities, seafood exhibitions; Then quantity of enterprises of exporting seafood to

EU has increased to 330 enterprise

Structure of exported products: Vietnamese has exported to 27 nations of EU, including fish, shrimp, cuttle fish, octopus…

Fish: fish occupies main density in total seafood export value of Viet nam into EU which also has highest growth rate in EU market This group of products including main products such as blue-fish, pangasius, frozen fish; within fish products, fillet fish of Viet Nam has occupied the highest density which just ranks after China; Exported fillet fish from other nations has occupied a rather high rate of about 11,1% quantity of fish import in EU market

Shrimp: it is the second important products after fillet fish in structure of seafood export of Viet Nam into EU However, this group of products mainly includes frozen shrimp which occupies a modest rate, about 4,31% import quantity

of such market (meanwhile Ecurado occupies 12,39%, India occupies 9,13% and Thailand increases 4,46%) It is because that productivity and quality of Vietnamese shrimp is low which make cost and price of exported shrimp higher than other nations; in addition, competitiveness of Viet Nam is weak which is difficult to occupy EU market Moreover, qualification and experiences in marketing, advertisement in foreign markets of Vietnamese enterprises are weak; investment to expand market is limited

Cuttle fish and octopus: demand of cuttle fish focuses on loligo cuttle which

is really appreciated in EU market then consumption tends to increase; However, until now, such products have occupied a rate of 5,24% export quantity of EU, meanwhile Thailand occupies 7,53% and India occupies 10,3%

Currently, Shatico has exported to foreign partners about 90% products, the remainings are for domestic sale; previously enterprises has mandating to sell via other enterprises; but until now enterprises have sold to foreign partners without pressure to buy from units

Apart from increased pressure of production cost and product price, company also bears much pressure of safety quality for foodstuffs, time, delivery method, provided quantity, samples, and models of products,… IUU (illegal unreported and

unregulated fishing) of EU agency for foodstuff management is also a limited factor for export to EU

In recent years, seafood export market of Shatico is expanded; during 2001 –

2005 company just exports mainly into China according to small volume or via intermediate level then during 2006 – 2009 company has exported to many nations

in the world such as Japan, EU, China, Korea, Taiwan…and gradually penetrated into the US

Assessment of export market of Shatico:

Japanese market is the place with highest seafood consumption in the world with consumption level per capita of 70 kg/year This is the biggest export market

of Vietnamese seafood; Annually company has exported to Japanese market with seafood export value occupying 65-70% total export turnover Japan does not only import products in the form of finished products but also in form of unfinished products or materials; Japanese Government has no regulation of quota or method

to limit imported products into Japan; Non-tariff barriers in Japan are not strict as in Europe and the US; quality testing and imported seafood hygiene are undertaken by agency for foodstuffs hygiene of Medical Ministry; testing standards are mainly based on decisions of hygiene, chemistry, using level of additional spices; Currently, there is no sign which shows that Japanese Government has applied to check directly production conditions; However, there is also considerable appliance

in term of conditions for processing enterprises of export nations in Japan

China is the nation with highest population of the world which requires not high product quality This is the opportunity for Vietnamese seafood enterprise in general and Southern Ha Tinh Seafood import export joint stock company in particular to promote export of commodity into potential market; this is also the second big market of company after Japanese market; However, in recent years, density of export to such market tends to reduce; the reason for export to China mainly via small amount then in spite of many advantages, in recent years, due to geographical position, transport cannot compete with other Northern companies in

transferring orientation of market to focus on penetrating and expanding EU and US markets

Just like markets of Japan, EU is the big seafood consumption market in the world; Demand of product consumption in the meals of European people can increase for each year; trend to change the habit of consumption of European people has opened a large consumption market for seafood products

European law is also strict for seafood exporter into the EU; on 01/01/1993

EU implemented monitoring import-export as well as circulation of seafood within community according to instruction No 91/493/EEC which indicates clearly import seafood in community must be recognized by authority agency in export nations; this is State’s agency which bears duty to apply the law on monitoring foodstuff and exported seafood This market has high income; annual demand of seafood import

is equal to Japanese market but products must be diversified due to inconsistent consumption custom among regions, nations, and strict regulation of foodstuff hygiene; Currently, EU market has occupied not high density in total export turnover of Vietnamese seafood and Southern Ha Tinh Seafood Import Export Joint Stock Company

For the American market, Shatico has not enough producing capacity and technology, in addition, the import procedures, technical barriers to imports into the American very difficult, so American market is not target market of Shatico

- Competitive pressure within the sector

Viet Nam is one of 6 leading nations of seafood export in the world with hundreds of enterprises for processing, seafood export, and more than 300 enterprises of processing seafood for exporting to EU market (Code EU) which has created a violent competitive market in Viet Nam

In Viet Nam there are currently some small enterprises, especially commercial enterprises which are main competitive factors to dump price; Besides, due to unavailable materials compared to designed capacity of enterprises then in process of buying processing materials, enterprises also compete with each other

violently; besides, some associations of seafood import nations in the world have begun to consult Vietnamese seafood products to protect profit of members

Within the area of Northern Central provinces, from Quang Tri to Thanh Hoa, apart from Shatico, there are 2 competitive enterprises (Hue and QuangBinh seaproduct import export companies), and most of remaining enterprises are unable

to export directly and get loss without continued production capacity; this can make Shatico have more competitiveness in buying processing materials within the area

International seafood processing companies are also the competitive factor that enterprise must cope with, especially enterprises in export market of the company; There are also seafood enterprises impacting on Government to promulgate disadvantageous policies for importing Vietnamese seafood such as anti-dumping tax, policy of material origin declaration…which impacts on business situation of the company

Some foreign competitive enterprises: Siamcaradian (Thailand), Kanefuku, FR-EX Co., ltd (Japan)…

- Competitive pressure from potential opponents

Governmental policy to allow economic sectors to do trading including seafood processing and exporting has made barriers for sector integration low; conditions of finance, technology, human resource for processing sea foods are not

so difficult leading to easy sector penetration of enterprises

Besides, demand of seafood if internal market is higher; supermarket and restaurant also promotes trading seafood

- Competitive pressure from replaced products

With a polluted environment, more diseases for trees and cattle then seafood products is the best choice for foodstuff hygiene safety; Moreover, seafood product

is one of foodstuffs loved by consumers which plays important role in life of people; However, daily change of foodstuff demand such as products from meat of cattle, poultry….is the factor that make seafood not the only foodstuff in daily meals

Currently, processing technology can allow enterprises to process many products from seafood; however Shatico has just produced low quantity of products which make competitiveness of company low

Table 2.1 – Table of opportunities and threats (OT) for Shatico

1 Stable economic, political and social

environment

agencies have many policies to support

and encourage enterprises to develop

3 Lending condition is rather favorable

because of the existence of many

commercial banks within the area

4 Exchange rate often changes in good

orientation for export companies

5 Viet Nam has integrated into WTO

then can enjoy many preferential

treatments on tax

6 Abundant local labor force especially

female labors which is suitable to

production features of company

7 Market is more and more expanded;

demand of seafood increases high I Viet

Nam as well as in the world

8 Many new technology appears which

can meet the demand of production

9 Abundant materials with high quality

10 Favorable traffic system, stable

energy, clean climate and water

1 Impacted by globalization, economic crisis in the world

2 Legal documents cannot follow common development of economy

3 Administrative procedures are complex, inconsistent which takes much time

4 Professional association cannot protect rights of enterprise effectively

5 Banking interest is rather high which can create pressure for enterprise

6 Due to the change of exchange rate then import of machines, equipments, processing materials are more and more expensive

7 Quality of labor is not high; most of labors are not trained;

8 Market is more and more choosy; in

requirements of foodstuff safety; in developing countries and domestic market: low product price requirement

9 Due to fast development of new technology, then company must change,

Opportunities (O) Threats (T)

improve machines, equipments to meet the demand of customers in term of

quality….avoid being outdated

10 Materials are plentiful but not stable; natural resources are exhausted; competition among enterprises in buying materials is more and more violent

Via table of opportunities and threats, after making reference on Director Board as well as some cadres and workers of company, then it can make agreement

on importance level of factors; then we can build up matrix for external evaluation

factors

Table 2.2 Matrix for external evaluation factors

level

Classification coefficient

Importance point

Via above matrix for external evaluation factors, we can see that the factor

of “input material” is the most important for the company; classification coefficient has defined that company has made use of advantage of such input material resource; other important factors such as “consumption market”, “labor force” have been solved rather effectively Total point of matrix for external evaluation factors

of the company is 2,79 which shows that company can reach mean level in term of external factors

2.3 Analysis of internal environment of Shatico:

2.3.1 Analyze human resource and management capacity

- Total labors in enterprise: 415 people, out of which:

+ Manager and indirect labor : 55 members

Qualification: MA: 01

University: 19 Intermediate school: 35 + Direct labors: 360

Organizational structure of Southern Ha Tinh Seafood import export joint stock company can be described as the following diagram:

Diagram 2.3 Organizational structure of Shatico

(Sources: organizational and administrative office of company)

- Management and production qualification

Shatico has applied program to manage foodstuff hygiene safety according to standards of HACCP, which has plan to build up management process according to ISO 9001:2008

With nearly 20 years of construction and development, until now, Shatico has a tidy management machine with cadres basically trained capacity Skilled

QC