Mekong Machinery Company Business Strategy (2011 - 2015)

Figure 1-4: The structure of agriculture and rural economy  Exports increased rapidly, some items have a position on the international market: Exports of agricultural and forest produc

OUTLINE DETAILS Opening

- Context, the necessity and importance of research topics

- The purpose of the study and application capability

1.2 The process of building and strategic choices

1.2.1 Identify tasks, objectives and current strategy

1.2.2 Review of business objectives

1.2.3 Environmental studies to identify opportunities and threats mainly

1.2.3.1 Macro environment of business

1.2.3.2 Matrix assessment of external factors (EFE)

1.2.3.3 Environment for micro enterprises

1.2.3.4 Matrix image competition

1.2.4 Internal analysis to identify the strengths and weaknesses

1.2.4.1 Internal environment of business

1.2.4.2 Evaluate matrix elements within IFE

1.2.5 Establish long-term goals

1.2.6 Construction and selection of strategies for implementation

1.2.6.1 Building strategy - SWOT Matrix Tool

1.2.6.2 Strategic choice strategic planning matrix to quantify (QSPM)

Global Advanced Master of Business Administration

CAPSTONE PROJECT REPORT

Mekong Machinery Company Business Strategy

(2011 - 2015)

Class: GaMBA01.C0209

HCM City– 2011

Table of Contents

Table of Contents i

List of table iv

List of figure v

Introduction 0

Chapter 1: Theoretical Basis 2

1.1 Overview of strategic management 2

1.1.1 Concept 2

1.1.2 Classification 2

1.1.3 Stage of strategic management 4

1.2 Agriculture, agricultural mechanization, agricultural equiments supply 6

1.2.1 Agriculture 6

1.2.2 Agricultural mechanization 14

1.2.3 The role of the supply of agricultural equipment mechanic 18

1.3 The need for business strategic planning in Mekong Machinery 20

Chapter 2: Analysis Mekong’ Enviroment 22

2.1 Introduction of Mekong Equipment Company 22

2.1.1 History 22

2.1.2 Company apparatus management 22

2.1.3 Lines of business 23

2.1.4 Operation status from 2000-2010 24

2.2 Internal anlysis 25

2.2.1 Mangement 25

2.2.2 Marketing 28

2.2.3 Finance-Accounting 33

2.2.4 Administrative operations 36

2.2.5 Research and development 37

2.2.6 Enterprise information system 37

2.2.7 Matrix of internal factors evaluate (IFE) 38

2.3 External Analysis 39

2.3.1 Macro environment 39

2.3.2 Micro environment 44

2.3.3 Market analysis 48

2.3.4 External factors Evaluation Matrix (EFE) 52

2.3.5 Grand Strategy Matrix 53

Chapter 3: Mekong Machinery Business Strategy (2011 – 2015) 54

3.1 Vision 54

3.2 Mission 54

3.3 Value 54

3.4 Objective 54

3.4.1 Financial Objectives 54

3.4.2 Strategic Objectives 55

3.5 Strategy analysis and choice 55

3.5.1 The Strengths-Weakness-Opportunities-Threats (SWOT) matrix 55

3.5.2 Grand Strategy Matrix 58

3.5.3 Strategy Analysis and choice 59

3.5.4 The decision Stage 61

3.6 The solution of strategy implementation 64

3.6.1 Matching Structure with Strategy 64

3.6.2 Environment of corporate culture 65

3.6.3 HR 66

3.6.4 Marketing Issues 68

3.6.5 Financial- Accounting Solutions 73

3.6.6 Research and Development (R & D) issues 74

3.6.7 Management Information Systems (MIS) issues 75

3.7 Recommendations 75

3.7.1 For State 75

3.7.2 To the company 78

Conclusion 80 References : 81

List of table

Table 2.1: Mekong’ revenue and profit form 2000 to 2010 25

Table 2.2: Main product 26

Table 2.3: Personal average status period 2000-2010 28

Table 2.4: By qualification 28

Table 2.5: Finance from 2000 to 2010 34

Table 2.6: Financial index from 2000 to 2010 34

Table 2.7: Internal Evaluation Matrix 39

Table 2.8: Working Tractors in Vietnam 49

Table 2.9: Annual retail sale new tractors (2008-2010) 50

Table 2.10: Number of Tractor by segment capacity (2008 - 2010) 50

Table 2.11: Forecasting total market tractors from 2011 to 2015 52

Table 2.12: External factors Evaluation Matrix 53

Table 2.13: Grand Strategy Matrix 54

Table 3.1: Financial objectives 55

Table 3.2: Strategic objectives 56

Table 3.3: SWOT matrix 56

Table 3.4: Grand Strategy matrix 59

Table 3.5: The QSPM for Intergration Stratergic alternatives 62

Table 3.6: The QSPM for Intensive Stratergic alternatives 64

Table 3.7: Five segments based on capacity 70

Table 3.8: Segment target 71

List of figure

Figure 1.1: Classification of Strategy 3

Figure 1.2: Corporate strategy and competitive strategy 5

Figure 1.3: GDP growth 7

Figure 1.4: The structure of agriculture and rural economy 8

Figure 1.5: Porter’s Generic Value Chain 20

Figure 2.1: Mekong Orgnization chart 23

Figure 2.2: Mekong’ revenue and profit form 2000 to 2010 25

Figure 2.3: Main products 26

Figure 2.4: Profit on sales from 2000 to 2010 36

Figure 2.5: Profit on assets from 2000 to 2010 36

Figure 2.6: Exchange rate 40

Figure 2.7: Land use by Region 44

Figure 2.8: Structure of used land by Region 44

Figure 2.9: Market share of ew tractors (2008-2010) 50

Figure 2.10: Tractor market share by segment capacity (2008-2010) 51

Figure 2.11: Combine harvester market share (2009 - 2010) 52

Figure 3.1: Product Positioning 73

demand is increasing The agricultural sector has important responsibilities to meet the needs of humanity’s survival Besides, agriculture is assuming the role of important input raw material supply for many other industries, recently, when natural fuels increasingly exhausted, we again give to agriculture field further additional role of fuel to the world with biofuels, making it even more increased demand for agricultural products To satisfy these needs, humans have been and also will have to make the agriculture of the developed world to the scale, technology, and increasing efficiency

Vietnam's economy is gradually deeper integration with the economy in the region and the world, the business environment of firms are expanding, but the competition

is becoming stiffer Vietnam agriculture, so also is facing a request to raise the efficiency, quality and competitiveness

Changes in social factors such as urbanization, the shift of agricultural labor to other areas, the changes of market demand and technology are also required in agricultural production have changed, from planning soil improvement, irrigation, seed, soil preparation, planting, care, plant protection, harvesting to transportation, storage, and processing All those changes arising needs require more than meet the increasing mechanization of agricultural production

Demand that has created conditions for enterprises of production, distribution and mechanical services rapidly developing agricultural production and supply their products to meet And of course, the level of competition in the field of agricultural equipment business is increasingly higher

So, now to be successful, the business enterprise in the field of agricultural equipment business is even more need to plan for themselves a right direction

A Firm operating without a strategy is like a person walking down the street without identifying themselves how to go, about where, despite the crowds themselves (market and competitors) to push they move in any direction there If you keep

moving indefinitely such a business would exist only passively, it will be difficult to stand in a world economy increasingly open and volatile, with environmental ever-changing business environment and competitive pressures are increasing Then, neither could say to make this business a difference, creating a strong competitive position, generate rapid growth and sustainable even act as guides tastes and technology, determined leading position in the market

In this context, only by the construction and selection of appropriate business strategies can help the Mekong Equipment Company to create and assert competitive advantage toward success That's why we chose the subject heading

"Business strategies of the Mekong Machinery Co., Ltd after transformed

period 2011 - 2015" to put the theory into practice management business executives

at the company

Structural topics:

Chapter 1: Theoretical Basis

Chapter 2: Analysis Mekong’ Enviroment

Chapter 3: Mekong Machinery Business Strategy (2011 – 2015)

Chapter 1: Theoretical Basis

1.1 Overview of strategic management

1.1.1 Concept

Strategy: Strategy is a complex series of actions to mobilize resources an organization can have to achieve a specific purpose, to create long-term competitive advantage over rivals

Strategic management: Strategic management can be defined as the art and science

of formulating, implementing and evaluating cross-functional decisions that enable

an organization to achieve its objectives As this definition implies, strategic management focuses on intergrating management, marketing, finance/accouting, production/operations, research and development, and computer information sytem

to achieve organizational success

1.1.2 Classification

Most of the business environment, the term "strategy" is derived from the fundamental law But failure when the term is generally applied by not understand the nature and how using this term like Therefore, in the definition strategy will still be confusing There are at least three types of strategies in the business world is the strategy or strategies generally; corporate strategy, and competitive strategy

Figure 1-1: Classification of Strategy

Source: Fred R David (2009) twelfth edition, Strategic Management Concepts and Cases, Pearson International Edition

1.1.2.1 Strategy

A common strategy will reflect the goal Therefore, a strategy usually associated with the relationship between final objectives and how the implementation Strategy and tactics are to act with precision to achieve specific objectives In most cases, the strategy was established with the deployment of the resources that businesses have

It can be said, the strategy is the bridge between achieve goals and how to implementation

Strategy and tactics are the two terms derived from the military Usage of the 2 terms in business and in firms that require a certain flexibility compared to their original meaning, however, "corporate strategy" and "competitive strategy" are terms derived from the mean in the military sense of the word "strategic."

1.1.2.2 Corporate strategy and Competitive strategy

Strategic cooperation identified market and business field that a firm will operate Competitive strategy or business strategy identified making businesses to compete Company is a strategic planning model in the context of pointing out the mission and vision of the company, which is introducing the company who you are, the reason was born, and that its development trend Competitive strategy revolves around the issue of the business potential, strengths and weaknesses in relation to specific markets and the corresponding potentials, strengths and weaknesses of competitors

In summary, the above discussion asserts that strategy usually refers to how to do, with the implementation process to achieve specific objectives Corporate strategies related to selected markets and business processes within companies Competitive strategy related to competition and the basis for competition These facilities as in the table below:

Figure 1-2: Corporate strategy and competitive strategy

Source:Fred R David (2009) twelfth edition, Strategic Management Concepts and Cases, Pearson International Edition

1.1.3 Stage of strategic management

The strategic management process consists of three stages: strategy formulation, strategy implementation, and evaluation strategies

- Strategy formulation: Strategis formulation includes developing a vision and

mission, identifying an organization’s external opportunities and threats, determining internal strengths and weaknesses inside, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue Strategis formulation issues include deciding what new business to enter, what busuness to abandon, how to allocate recources, whether to expand operations or diversify, whether to enter international markets, whether to merge

or form a joint venture, and how to avoid a hostile takeover

- Stage of strategy implementation: require firms to set annual goals, setting

policy, encouraging staff, and allocation of resources to set up strategies can be performed Implement the strategy include developing a cultural strategy to support creating an effective organizational structure and orientation of

marketing activities, preparing the foundations, development and use of information systems, encourage individual activities

- Stage of strategy evaluation: will monitor the results of operations set up and

implement the strategy This step involves measuring the performance of identified individuals and organizations, and take actions necessary adjustments Important techniques to form a strategy that can be integrated into a decision-making process includes three phases:

STAGE 1: INPUT STAGE

External Factor

Evaluation

Matrix (EFE)

Competive Profile Matrix (CPM)

Internal Factor Evaluation Matrix (IFE)

STAGE 2: COMBINATION STAGE

Boston consulting group matrix (BCG)

External matrix

Internal-Grand strategy matrix

STAGE 3 : STAGE OF DECISION

Quantitative strategic planning matrix (QSPM)

- Stage 1: summary of the basic information needed has been entered for the formation of strategies

- Stage 2: focus on making strategic choices may be possible by arrangement, combining the elements inside and outside is important

- Stage 3: includes only a technique, which is the Quantitative Strategy Planning Matrix (QSPM) QSPM using input derived from phase 1 to objectively evaluate feasible strategies can be selected in two stages QSPM indicates the relative attractiveness of strategic options and may therefore provide an objective basis for selecting specific strategies

All nine techniques in strategy formulation processes requires a combination of intuition and analysis process to set out the strategies and objectives

1.2 Agriculture, agricultural mechanization, agricultural equiments supply

1.2.1 Agriculture

1.2.1.1 Achievements

In 10 years, the rural economy continues to grow, gaining more success In the most difficult stage of the reform process and economic development, agriculture, rural areas has always been to create stability for the country's economy

2010, GDP growth rates increased from an average of 7% - 8%, ranking second in Asia after China In particular, growth in value of agricultural production reached nearly 5.5% per year In the recent period, although the average annual decrease of about 70, 000 hectares of agricultural land, over 100 thousand employees, the proportion of social investment to reduce natural disasters, disease complicated but

agriculture, forestry, Fisheries maintains GDP growth of 3.8% per year

improving productivity, quality and efficiency associated with market demand Ratio of agriculture (including agriculture, forestry, salt production and aquaculture)

in total GDP declined from 24.5% in 2000 to 20.6% in 2009 In the period 2000 -

2008, the proportion of aquatic products increased from 16% to 23% while cultivation decreased from 65% to 57% Within the industry also took out the

positive changes in the structure

Figure 1-4: The structure of agriculture and rural economy

 Exports increased rapidly, some items have a position on the international market: Exports of agricultural and forest products continues to expand, a large

share of industries in the region and the world: rice, rubber, coffee, pepper, cashew nuts, wood products, aquatic products

 Value of exports of agricultural, forestry and fishery period 2000 - 2007 reached 51.9 billion dollars, annually to reach about $ 6.5 billion, the average growth rate 14.9% per year 5 items had reached over $ 1 billion are seafood, coffee, rice, rubber, wood

 Agriculture, forestry and fishery sector is the only sector in the economy consecutive surplus, higher than in previous years, including during periods of economic difficulty

Material life and spiritual life of rural people improved markedly: Average income

per households increased from 2.7 million per person in 1999 to around 7.8 million per person in 2007 calculated current prices From 2001 to 2006, cumulative saving

of rural households increased 2.1 times, an average of 3.2 million per household to 6.7 million VND per household

Rural economic-society infrastructure is strengthened and changed the face of rural:

 Irrigation investment are geared to serve multiple purposes By 2008, the irrigated rice area is 6.92 million ha active (at 84.8%), vegetables and industrial plants 1.5 million ha (at 41.3%) to ensure water drainage for 1, 72 million hectares of agricultural land, preventing 0.87 million hectares of saline, acidic renovate 1.6 million ha, contributing significantly to increasing productivity, output and quality of crops

 Rural roads have been constructed in both quantity and quality From 1999 to now do 24, 167 km new road repair and upgrade 150, 506 km of roads In 2007

up to 96.7% of communes have roads to downtown, 42.6% of the communes in which inter-village roads are paved with asphalt or concrete over 50%

1.2.1.2 Difficulites and exists

Despite these great achievements, but after a period of favorable development, agriculture, rural areas are facing great difficulties

Agriculture poor sustainable growth and low competition:

 Status "pull off price" detrimental to agricultural production takes place over many years From the year 2003 - 2005, prices of raw materials and agricultural inputs rose an average of 2 - 2.5 times, labor cost increased from 2-3 times, while agricultural prices rose only from 1.2 - 1.3 times Besides, the resource inputs such as land, water, labor and capital investment rate for agricultural continuous decline Agricultural production is facing a series of risk of disease and natural disasters

 Competitive on market take drastic and farmers always suffer a disadvantage

 However, along with unfavorable changes in the macroeconomic impact of national and international economic crises such as inflation, volatile oil prices, agricultural prices, and the impact of policies monetary tightening, fluctuations

in exchange rates has caused more damage to employment and income of rural residents recently

 Cultivation is still high proportion (50%) in the internal structure of agriculture, including food crops, especially rice is the main proportion In recent years, livestock, aquaculture has developed rapidly, but also unsustainable In 2008, the proportion of agricultural cultivation increased again, the proportion of animal husbandry and fisheries decline

Agricultural products are low quality, low efficiency, hygiene and food safety less:

spend money and effort of natural resources to produce but the value gained from trading is low and high risk

The industrial sector, rural service slow development:

 Since the Enterprise Law, the number of production facilities of rural industry has increased significantly, from 4574 in 2001 to 11, 238 establishments in 2005 (excluding 745 thousand individual production units)

 Generally obsolete technology, low-level management, skilled labor is weak, the disadvantage of infrastructure and services for production makes the competitiveness of these units are very weak Perhaps this is the main reason for the rate of private investment and foreign investment in rural areas is very low Private investment in water in the agricultural sector only accounts for about 15% of new investment every year, FDI accounted for only less than 5%

 The country has 314 farms and 368 forestry management on 5.5 million hectares

of land but only attracted over 200 thousand employees Activities of many state enterprises are less efficient, 27% losing business, a liability account for 57% of total revenue

 The process of restructuring in rural areas are rather slow compared with the economic restructuring in general in the country Therefore, income and living conditions of rural people is not improved compared to the national average In addition, emerging uneven development between regions While the proportion

of industrial, construction and service in the Red River Delta, South East area increased, North West and Central Highlands slow developed

Rural organizations and institutions has a very low innovation:

 After applying innovation policy more than 20 years ago, economic household has fast growth and its still key smaller household production units in rural areas Production scale fragmentation but no form of association to work together to make the dynamic and the ability to manage resources effectively for the small farmer households seem to have gone to the limit of development Most smallholder households unable to reproduce accumulated significantly expanded So the applicable level of mechanization, technological

improvements, changes of management skills and self-restructuring is very limited

 Farm economic development is very slow and consumes a negligible proportion

of agricultural production activities as well as the rural economy In 2008, there were more than 120.7 thousand farms, accounted for more than 1% of total farm forestry and fisheries in the country, beside that only have 39, 000 farms plant annual crop

 An average of 4.5 ha of farm land use, forestry and fishery (equivalent to a small farmers in Thailand) Overall, the level of mechanical equipment and apply science and technology of the farms are also very weak

 The ability to link with limited markets, low competitiveness Economic cooperation and development is very slow, not act as expected in production support activities of the household Number of regular workers in cooperatives account for only 5% of workers in agriculture, forestry and fisheries

 Capital size, turnover, average profit of a cooperative with only a 4% agriculture, forestry and fishery enterprises were small and weak capital The activities of the cooperative are very poor, mainly service the inputs at competitive for agricultural production of households (over 80% cooperative with the irrigation service, 43% on electric service provider, the provider 46% extension) According to the evaluation category, over 54% of the cooperatives now operate effectively in medium and low

Increasing environmental pollution, resource overexploitation:

 Water pollution, land and air are increasing, especially in suburban areas and industrial parks, golf courses…

 Status intensive production, excessive use of fertilizers, chemicals, pesticide, growth stimulants and create more waste of livestock concentration areas, focusing on aquaculture, the cultivation area intensive crops such as cotton, grapes, vegetables was polluting the environment, create toxic residues in

agricultural products, increase the resistance and mutation of the disease In addition, many natural resources are exploited indiscriminately also lead to decline of biological diversity, ecological imbalance, depletion of natural resources

 Recently, natural disasters and epidemics in a row happens to plants and animals makes the development of agricultural production becomes less sustainable The natural resources such as land, water, increasingly limited, labor cost increases, prices of agricultural products such as distribution of supplies, medicines, petroleum also increased

Quality infrastructure and services for agriculture and rural low:

 Because the planning work in rural residential areas are not properly focused, most rural self development, lack of computing harmonious and reasonable space structure, the traditional cultural heritage, environment protection, ensuring the functionality of traffic, water supply, power supply…

 Without the timely will deviations lead to difficult to repair, expensive and unsustainable development in the future

 Overall, the number of infrastructure and services in rural areas are insufficient, poor quality than the city should not use high-efficiency, are the obstacles to production and make a significant difference about the opportunity to enjoy the services between rural and urban areas This is one of the main reasons hindering attract investment to rural areas and accelerate the migration from rural to urban

1.2.1.3 Future context forecast

World economic context: Nearly 30 years, Vietnam has three times to impact the

economic crisis Should have to build a system of practical solutions to overcome the negative impact of the crisis In the long run, must take measures to cope with these fluctuations, including developing agriculture and rural economy is one of the most important solutions

Speed of the process of industrialization and urbanization: will continue to

accelerate, creating more jobs and income for people, but also disputed land resources, water, capital, with agriculture areas Proportion of agriculture in the economy will decline, rural residents will fade, rural workers will move quickly to non-agricultural activities Rural social structure will change, the risk of environmental pollution of rural growth

The process of integration in the future: will be more comprehensive and

facilitate market expansion, attracting investment and technology while also raising the level of competition on international markets and in the water on a broader scale, a deeper level in the context of the unequal status of international trade is still persistent, detrimental to the developing countries

The process of global climate change in the future: even in the near future will

increase the severity of the changes in natural disasters, weather Even with Vietnam would cause adverse impact on a large scale for agricultural production areas and vast rural areas as the Mekong Delta Disease status of crops and livestock, human tend to continue more complicated

Vietnam’s population: compared with more developed countries in the world has

the structure of the population is relatively younger, so in the near future will have the advantage of a labor force of energy, but in the distant future, aging workers tend rural activities will be to handle the problem

New perspectives: The emerging new prospects makes the agriculture, forestry and

fishery production can become a profitable industry for countries with comparative advantages such as Vietnam Specifically:

 The trend to transfer part of food production into production of biofuels and livestock feed will accelerate demand for food, increases price of agricultural products in the future

 The process of economic restructuring toward industrialization of most countries

in the region, especially the rapid increase in income in the most populous

country like China, India, In addition, growth the world economy in general will boost demand for items of agricultural products and foodstuffs as well as raw materials for other industries such as oil plants, rubber, wood

1.2.2 Agricultural mechanization

1.2.2.1 Role of agricultural mechanization of Vietnam:

From time immemorial, our country's farmers are always the lower income strata of society, in all value chain of agricultural production such as agricultural value chain, the farmers directly produce agricultural products often have lower profit margins than most other sectors of production or services The reason is that the size, qualifications, technology, productivity and efficiency of their cultivation is very modest As a rule, if there are no solutions to improve profits for farmers, agriculture is difficult to sustainable development

Want to solve this problem, the only way of investment, investment cooperation, partnership, forming the intensive production of goods for the large production, uneven quality of goods, from that business easy invest and associated with contract procurement The government should have mechanisms and policies to properly and more strongly to support and encourage farmers in the formation of large-scale production areas, focus, put on mechanized in production, increase of capacity productivity and quality of agricultural goods

In the World, when it comes to a country's agriculture, mechanization indicators always been viewed as important indicators to assess the level of development of agriculture there

In summary, agricultural mechanization is always an important role even be considered an indispensable factor for the development of competitive advantage and create added value for an agriculture in general and for a growing agricultural sector with such low starting point of Vietnam in particular, then this is even more especially true

1.2.2.2 Current status of Vietnam agriculture mechanization

Over the past 10 years have appeared many models from mechanized land preparation, harvesting rice sequencer, combine harvesters From here, the service system of agricultural machinery has developed rapidly, in time meet the needs of farmers

As of April 2009, the country has more than 1, 267 distribution facilities with over

18, 000 agricultural machines of professional trading people; 1, 218 manufacturing facilities with 14, 146 people who specializes in repair, maintenance and warranty According to the Ministry of Agriculture and Rural Development rate of mechanization is very low, mainly land preparation Calculated capacity of the hectar, in Vietnam, this rate is 1.6Hp/ha, compared with Thailand, South Korea 4.2 and China is 6.0; mechanization rate considered (12/2009) as follows:

– Land preparation for rice at 72%;

– Land preparation for upland crops (sugarcane, pineapple, corn, beans, peanuts) to 65%;

– In the active stage of irrigation for rice, 85%;

– Transportation in agriculture and rural areas reached 66%;

– Harvesting by machine in the Mekong Delta is about 15%

– Thresher stage reached 84%

However, the mechanization of rice harvesting is still too low, only 10% of the area harvested by machine Thus the rate of loss remains at 10-15%, respectively about 4 million tons of rice per year, after-harvest losses

1.2.2.3 Forecasting future context, opportunities and challenges of Vietnam

agricultural mechanization:

Employment in agriculture is strong declined:

 To "Tam Nong" of Vietnam / Agriculture - Farmers - Rural / sustainable development and to implement and promote the process of industrialization and agricultural modernization

 The process of industrialization and urbanization in general is continuing to accelerate, creating more jobs and income for the whole society, but it creates increased litigation of land, water, capital to agriculture and rural development Proportion of the total agricultural economy will decline, rural residents will fade, rural workers will move quickly to non-agricultural activities (partially be transferred to industry and services in rural areas, a section will move to the urban industrial areas, commercial centers )

 Industrialization and modernization of agriculture in particular and strong impact to the rural economic structure, as structural change between agriculture and industry, creating the development of rural economy toward industrialization and services increasingly bigger proportion in the rural economic structure Agricultural labor is increasingly reduced both relative and absolute, leading to labor shortages in agriculture, rural areas, especially in the time required for the concentration of high level manpower

 The social division of labor within the agricultural sector and rural areas will also change From the structure of production mainly to plant paddy rice, fruit trees, industrial crops, livestock expanding industries and small industries development services, increasing economic exchanges between rural and urban areas

 Rural economic structure shifted towards: reducing the proportion of product and labor in agricultural production (in absolute numbers of products is increasing, while the absolute number and relative number of labor is reduced)

In summary, the labor movement and people as mentioned above is fully consistent objective rules, appropriate processes of industrialization and modernization of the country in general and rural areas in particular

The structure of rural population change:

In the near future, while reducing the rate of population growth and increased migration process will make the rural population and agricultural labor and tend to

grow old Require manual reduction, increase in mechanical agricultural production also increased

Area of agricultural land is declining:

 The process of industrialization and urbanization increase the disputed land resources, water, capital, with agriculture and rural development Industrial agricultural land was reduced, to cope, the trend of agricultural land use have also changed the land use growth cycle, shorter seasons, farming technologies requires changes and higher

 Even in the near future Vietnam will suffer the effects of global climate change, natural disasters, sea level rise phenomenon, with the ill effects on a large scale for agricultural production areas Disease status of plants and animals, also tend

to continue more complicated

The process of land concentration is increasing: Due to the economic structure of

agriculture changes Due process of globalization and world economic integration

of the Vietnamese economy would more comprehensive and facilitate market expansion, attracting investment and technology from abroad in agriculture increased By convincing by higher efficiency of agricultural production scale compared to small scale at present, domestic investment in agriculture will increase

Increased demand for agricultural products and long term: Economic growth in

the world in general and Vietnam in particular will boost demand for items of agricultural products and foodstuffs The process of economic restructuring toward industrialization of most countries in which our country will also increase the demand for items of agricultural products and foodstuffs, and oil plants, rubber, wood used as raw materials for other industries Tendency to transfer part of food production into biofuels and animal feed of the developed countries will also accelerate the demand for agricultural products, increasing prices of agricultural products in the future

New perspectives are emerging, for those countries with comparative advantage in agricultural production such as Vietnam, forestry and fishery sector can become profitable

In short, before the above context: agricultural labor decreased, the structure of

rural population change, agricultural land is declining, the process of land concentration increased Besides increasing demand for agricultural products increase and long term, agriculture, forestry and fishery sector can become profitable

To ensure the growth of agriculture in the state of agricultural labor is declining can neither be increased mechanization, increased productivity and efficiency in agricultural production That is the opportunity for Vietnam's agriculture Mechanics fast and stable growth for coming decades

1.2.3 The role of the supply of agricultural equipment mechanic

To be able to mechanized agriculture we need agricultural equipment To produce agricultural equipment, manufacturers have created them But the device was often not directly to each area of agriculture, individual farmers, each customer uses them The supply equipment ententerprise is the main value chain of agricultural mechanical device with circulation role, distribution between factory and consumer markets, consumers

To see the role of enterprises providing agricultural equipment mechanics, let us consider it as a value chain, to separate businesses in a series of activities creating added value is called the value chain It helps us better understand the operation of enterprises to develop competitive advantage and create added value

So, value chain refers chain / set of business activities that contribute to all activities add value to convert resources into products and services to customers Mr Porter defines core activities and support activities to create added value, is represented by the diagram below:

Figure 1-5: Porter’s Generic Value Chain

Source: Michael Porter (1986), Competitive Strategy, Harvard Business School

Press

The main activities to create added value of enterprises providing agricultural machinery are:

– Inbound Logistics: the receiving and storage equipment and accessories based

on market needs and the adaptation of the device

– Operations: the process of inputs to create products and provide complete service

– Outbound Logistics: warehouse storage and distribution of products / services – Marketing & Sales: Marketing of products / services and sales

– After Sale Service: support and customer care supply spare parts and repair services after providing agricultural equipment

The main activities aimed at supporting:

– The infrastructure of the Firm: organizational structure, control systems, corporate culture,

– Human resource management: recruitment, training, staff development,

– Technology development: application of technology to support value-added activities

– Procurement: Purchase of equipment, technology, supply management,

And in each enterprise of supplying agricultural equipment has a range of activities

to increase the value as follows:

Input agricultural equipment with the value of its goods, the survey work to learn the product, adaptive trials, demonstrations, promote products, sales test (pilot sale), technical consultancy and sale of equipment and provide after sales service, including services and technical (training and manual care, and repair equipment, perform warranty) and spare parts supply to customers The above-mentioned activities will create more value added After going through series of activities to value added is created, in addition to the physical value, will be added to an intangible value that is the value added by the customer (Competitive Strategy - Michael Porter)

1.3 The need for business strategic planning in Mekong Machinery

To determine the necessity of building business strategy for the Mekong Machinery Co., Ltd, we have considered:

However, our research and surveys we found that this development has no solid basis Firm development in the last period is due to its ability to detect and size

market opportunities, but also because the market has no competition from strong rivals on the size, capability and experience Although the firm leader in sensory experience and also have identified a strategic direction in their thinking, know what to do to compete successfully, and in fact by the way, also has contributed to the firm development But in fact, the work of planning and strategic management

of business may be conducted in a scientific, systematic professional in Mekong Machinery Company

Middle of 2010, as decided by the state, the firm officially converted to model of limited liability company with one member, operating under the Enterprise Law, equality with all other firms This time, the work required to standardize planning and strategic management of the firm's business has become more urgent

Second, the terms from the external environment company, from the theoretical

basis as well as information from the Agriculture and Agricultural Equiments in Vietnam, as role of the supply of mechanical equipment in agriculture, along with forecasts of Agricultural Machinery industry supply with future opportunities and challenges Today, businesses in general and enterprise of supplying agricultural equipment in particular are needed to plan their business strategies in order to put the theory to practical management guidance business executives at the company’s purpose: Define the vision, mission, values define the objectives to guide all activities of the company Adjust activities, resources, existing and companies future-oriented on that strategy implementation Master these opportunities and conditions for development, forecasting, properly evaluate the obstacles and risks that the company will meet Good response to situations of risk: human resources, finance, industry, business environment

In summary, by considering the sensory information on two levels, both from inside and from outside this business, we can confirm that the building "business strategy

of the Mekong Machinery company period 2010 - 2015 "is really necessary and urgent

Chapter 2: Analysis Mekong’ Enviroment

2.1 Introduction of Mekong Equipment Company

2.1.1 History

AGROMAS established in 1977 – State owned enterprise (SOE)

Renamed to MEKONG Corporation in 2003, Machinery with more business (AG,

Power, Golf & Turf Equipments) and enlarged size by taking over one company in Cantho

Transformed in to MEKONG MACHINERY state-own limited company in July

2010 with:

+ 80 employees handle Ag, Engine and G&T

+ HQ & ware houses located at Ho Chi Minh city

+ Branch at Cantho in Mekong Delta and an office in Hanoi

+ CTAC (Customer Technical Assistance Center) at province Nghe An

+ 8 Sub-Dealers & Trade Representative

2.1.2 Company apparatus management

Mekong company operates under centralized management model, including 04 sales sections, 03 sections of professional operation, 01 Factory, 01 Center and 01 representative offices:

Figure: 2.1 Mekong Orgnization chart

Sales Dept

III

Im-Ex Dept

South west spare part center

Hanoi Representative office

Engineering service and warehouse- factory

2.1.3 Lines of business

Business fields:

– Purchasing, agent, brokerage, import / export: All kinds of machinery, equipment and spare parts for agriculture, forestry and fishery and water conservancy, motor vehicles, motorcycles, motorbikes

– Production and assembly of machinery, motor vehicles, farm equipment and irrigation, forestry and fishery

– Maintenance and repair of machinery, farm equipment and irrigation, forestry and fishery, logistics, technical consulting and market development, coaching and training, manual agricultural machinery

Products and services primarily:

– All kinds of prime movers (engines, marine engines, generators, )

– Machines used exclusively for golf, lawn

– All kinds of machines for construction reclamation, leveling fields, irrigation

Production: Only a small scale, mostly simple equipment behind the tractor (pan

peasants, peasants, underground staging harrows, mowers orchestra, the first iron, ), some details such as the tractor cabin, the reinforcement, the counterweight, commercial service section of the company (the production value of only about 1%

of total revenue of the business)

The service activities: Just to make the type of service business major production

2.1.4 Operation status from 2000-2010

2.1.4.1 Revenue, production (Figure 2.2; source from Mekong)

Table 2.1: Mekong’ revenue and profit form 2000 to 2010

Source: Mekong

From 2000 to 2010 the company has maintained an average growth rate is 23.79%

of revenues Profit increased to an average rate of 41.98% in 2009 despite the financial crisis in 2009 as revenues decline

– Plan for each year (by fiscal year)

As state enterprises, a member of the Corporation, so the range of planned activities according to the Law on State Enterprises, institutions under state business law and general orientation has been given to the General managing of the company, the purpose of the plan is to implement the goals and tasks planned from Macro Management sytem

The downside of the basic plan at this stage is the inherent limitations on the procedures, the initiative, about the time in the use of resources, so overall, the quality of planning is not high, professional yet, the lack of posts, science is low In

05 years, based on the change of the general business environment, financial institutions, and labor with many positive changes, more open to the work plan of the Company also has a lot of progress compared with the first phase

2.2.1.2 Organizational structure

The organizational structure of the company is not really fair:

– The sales department, sales staff are working part-time in marketing field The company has no dedicated marketing department, the sales department in charge

of marketing so the marketing programs are not spent full time

– All the clues work has focused on company directors should have decided the time is not timely

– There was a special assignment in charge of sales by each customer

– There are no job descriptions The company's salary system but have more to explore and apply innovative but still encouraging labor efficiency is not high, even in a certain aspect also carry average is quite heavy

– There have been adjusted in time when the functions and duties of each department or by changing the organizational structure according to changing job requirements

– The Company is organized into groups, for work or projects, but the level exchange and cooperation do not highly effective

– The company has gradually set up, form a system of internal information, but not highly effective, control mechanisms, management is not good

– Leaders of the company and most staff were working hard to achieve high productivity and higher quality work

– Leadership and staff of the company has established good relationships at work Between the employee has the interest, sympathy and support each other with their work

– Company leaders and employees work hard to achieve high productivity and higher quality work

– Leadership and staff of the company has established good relationships at work, caring, understanding and always a good an example for other

– The Company is organized into groups for work or projects, but the level exchange and cooperation do not highly effective

– The company has gradually set up, formation of internal information systems are not really effective, however, no mechanism of control, management

labor Worker Total

Source: Mekong

– The implementation of setting new benchmarks at the beginning

– There is evaluate the achievements of each department or individual, but not by specific criteria should result in only relatively

– Results of the implementation is often less complete compared with the

objectives set out initially, but most just go into the revenue targets on output

– Periodically visit, investigating information about customers as well as their evaluation of products and services of company

– However, the identification, learn, develop new customers are not really effective

2.2.2.2 Buying

Due to the characteristics of the product, the company selected 02 key suppliers, John Deere - USA and MTZ - Belarus provided 02 tractors and maintain relationships in a long time

However, to limit its dependence on suppliers and avoid the clear outline of them,

in the import of spare parts, the company has selected several suppliers of spare parts other than the 02 firms, such as Belshina - Tires and inner tubes, Donalson - The filters, batteries _ Batery U.S., Bellota - Types plow pan (use of materials and installation orchestra accompanies the tractor of plowing)

Although small in scale, the firm also engaged in the production of agricultural machinery accompanied by tractors, agricultural machinery is not used by 02 providers in the direct production, in addition to selected imports from other famous manufacturer of agricultural machinery: Kuhn - France; Agric-Spain

The firm also has achieved good results in the negotiations with suppliers of tractors have features and reasonable prices in Vietnam, as well as the policy of cooperation, support other agents such as sales, credit, training, introduce new products,

2.2.2.3 Selling:

As for industrial products, the firm has focused on developing sales engineers with capable consultants in line with customer demand The engineers make after-sales service can advise clients on spare parts and warranty repair This is the strength of the firm Besides the firm has gradually built a network of technical representatives, sales representatives bring their products and services to more close to the user The firm has the advertising, sales promotion, such as:

- Send the publications, brochures, user manual and maintenance tractors, repair manuals for tractors

- Implementation of television advertising through local and central government

- Combined with other organizations jointly organized promotional gifts

- Panel of advertising: signs, logo, product advertisements

- Display: tractors and agricultural machinery on display in the showroom at its headquarters, branches and agents

- Participate in the annual fair

- Presentation: show the actual tractor field operations in key markets

- To launch new products, meeting customers, the anniversary, the establishment

of relations agent relationship, participation in the intergovernmental conference agenda with content relevant to industry agricultural engineering

- Create a good relationship with the scientific community and education related agricultural engineering, implementation of promotional activities, training support and coordinate training for this community

2.2.2.4 Products and services planning

Mekong selection and distribution of tractors and agricultural purposes, depending

on the natural geographical conditions of each region and uses will consult each type tractors have different characteristics as follows:

– Tractors import: for water rice fields, used for dry farming, specialized care and harvesting

– Agricultural machinery manufacturers: Attachment equipment comes with tractors for land preparation and care, soil improvement, transportation of agricultural products: plows, harrows, iron head, page layout, cage wheels, Tyre load hook followed by tractors,

– Agricultural Machinery Import: sprinkler, widely distributed, dedicated plow, – The types of spare parts: spare parts for maintenance and spare parts of wear faster, stored Besides being related materials such as lubricating oil, hydraulic oil, cooling solution of special

These services include:

– Training manual for each customer or open repair training for technical staff – Care and donate free fuel filters, oil filters, hydraulic filters in the first 600 hours

– Investment Consulting: consulting category of machines to suit each project, each type of plant uses

Another highlight is that almost all types of equipment are provided by the firm through trials before the actual delivery of goods to market

2.2.2.5 Price policy

Cost plus pricing

Tractors, agricultural machinery are industrial goods, the means of production, have long product life, product value greater than the average purchasing power The basis of sale price plus the cost manner is consistent with the company

 Mekong determined "standard costs", by assuming a level of "standard number

of tractors", and the cost factors for each tractor plus the indirect costs allocated

to each tractor

 The external cost adjustment is determined according to standard conditions and according to market statistics, management accounting and the proposal of the sales department to achieve better financial results

Price Discrimination

- Seasonal Price Discrimination:

- Discounts at the end of season, discount rate sufficient to customers willing to buy to prepare for next season Discount rate based on bank interest on the time

to prepare for next season People willing to buy rather than sent to save, if any dealer has capital will buys for reserve The firm will enter the fast recovery of capital, Prepare goods for the coming season, increased number of rounds, reduce storage costs, reduce costs

- Distinguish Rank 3:

Divide clients into: project, farmers and enterprises Depending on the requirements of each customer group will set different prices:

 For the customers are the project offered a higher price includes technical advice, increasing the warranty period, maintenance services, repairs after warranty

 For business customers: the price of busniess customer is higher than the price from farmers

 Customers are farmers: the lowest price from 3 kinds of customers to encourage investment because the object in the trend of development of agriculture in Vietnam as well as in the “three policy Farms” named TAM Nong, the farmers are a subject of important

Tractor is itself is the only motivation, can not be used alone but combined with the other attachment equipment to perform different tasks To encourage customers to buy the tractor with firm’s attachment equipment, such as peasants, staging harrows, trailers transport equipment and spare parts, will be discounted

Pricing for new products

With new products, Mekong’s policy used to penetrate the market by setting low prices, increasing the warranty period, the deferred payments to encourage customers to purchase samples in each region From these customers, the company will propagate, performance, testing for replication for the whole region Mekong’s policy calling it "spreading oil" Mekong’s policy is successfully applied in industrial sales as tractors

2.2.2.6 Distribution channel

The Company is organized in two main networks:

- Direct sales: through its offices, branches or headquarters in the city HCMC, Hanoi, Nghe An, Can Tho and the sales representatives, technical representatives

- Sales through intermediaries: through dealers in the region needs to focus large, trading companies, brokers

2.2.2.7 Market research

The company has done the research, market development, but do not have a professional division so the information system data is not centralized However, the strengths of the company is aware of market and customer needs

sold 27, 1 31, 19 44, 68 47, 22 81, 91 140, 16 154, 17 162, 27 227, 70 203, 29 221, 62Profit before Tax 0, 36 0, 38 0, 49 0, 67 0, 89 1, 47 5, 78 6, 01 6, 23 8, 64 12, 50 Income tax 0, 11 0, 12 0, 16 0, 21 0, 25 0, 41 1, 71 1, 81 1, 89 1, 36 1, 63 Profit after tax 0, 25 0, 26 0, 33 0, 46 0, 64 1, 06 4, 07 4, 20 4, 34 7, 28 10, 86

Source: Mekong Table 2.6: Financial index from 2000 to 2010

Target 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1 PAYMENT INDEX

Current payment (time) 1, 88 1, 60 1, 49 1, 41 1, 44 1, 36 1, 57 1, 31 3, 22 1, 52 1, 44 Fast payment (time) 0, 46 0, 88 0, 63 1, 01 0, 85 0, 84 0, 66 0, 79 0, 66 0, 50 0, 41 Cash index (time) 0, 12 0, 19 0, 16 0, 10 0, 27 0, 22 0, 19 0, 39 0, 47 0, 26 0, 25 Revenue cycle (round) 8, 13 4, 97 4, 74 2, 60 2, 98 5, 70 7, 57 8, 32 16, 11 16, 69 13, 1 The average number of

days of colection (day) 36, 20 113, 03 72, 24 207, 26 97, 02 55, 88 39, 32 49, 12 8, 96 33, 26 24, 84Inventory cycle (round) 1, 82 2, 48 3, 40 2, 96 4, 01 5, 58 5, 31 4, 42 3, 77 2, 27 2, 05 Cycle account payable

(round) 2, 58 3, 69 5, 16 4, 43 3, 12 6, 74 9, 67 5, 57 6, 92 5, 18 5, 85

2 OPERATION

INDEX