Business strategy of VASC company in MYTV service development

CAPSTONE PROJECT REPORT BUSINESS STRATEGY OF VASC COMPANY IN MYTV SERVICE DEVELOPMENT Hà Thu Thủy Đặng Thế Long Đinh Thế Tuyên Nguyễn Thị Thu Hương Class: GaMBA.M0110 HA NOI 2012...

CAPSTONE PROJECT REPORT

BUSINESS STRATEGY OF VASC COMPANY IN MYTV SERVICE

DEVELOPMENT

Hà Thu Thủy Đặng Thế Long Đinh Thế Tuyên Nguyễn Thị Thu Hương

Class: GaMBA.M0110

HA NOI 2012

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION

PROGRAM

CAPSTONE PROJECT REPORT

BUSINESS STRATEGY OF VASC COMPANY IN MyTV SERVICE

DEVELOPMENT

Group number: 03 Student’s names:

Hà Thu Thủy Đặng Thế Long Đinh Thế Tuyên Nguyễn Thị Thu Hương

HA NOI 2012

ASTRACT

In the recent years, information and television industry has been

experiencing a relentless, rapidly changing environment With the presence of

internet and advanced technology of telecommunication, there has been a new trend

in convergence of telecommunication and televisions, whose impact has provoked

many enterprises to adopt a more strategic approach This capstone project

examines the strategy process in VASC Media and Software Company – a member

of Vietnam Post and Telecommunication Group during 2009 – 2011 The process is

driven by the need to response more effectively to the external and internal

exigencies facing the enterprise As a case study, it explores the way the

management board selected business strategy towards a more corporate-oriented

way of work and management style The capstone project traces the perception,

speculations, and behaviors of management board in choosing business strategies

ACKNOWLEDGEMENT

We would like to acknowledge the support and encouragement of our M0110

class’s lecturer for his excellent supervision and support We also would like to

thank our classmates for their sharing in the research We are indebted to the leaders

of VASC Software and Media Company who made this research possible to our

case study site Their kind willingness to participate in this research has brought

much to our enjoyment and enthusiasm

TABLE OF CONTENTS

Page

ASTRACT 1

ACKNOWLEDGEMENT 2

TABLE OF CONTENTS 3

LIST OF TABLES 5

LIST OF CHARTS 6

PREFACE 7

1 General context, the necessity and implication of the project 7

2 Objective and scope of the study 8

3 Methodology 8

4 Structure of the study 8

CHAPTER 1 – BASIC RATIONALE OF THE BUSINESS STRATEGY 10

1.1 Concepts of business strategy 10

1.1.1 Concept of business strategy 10

1.1.2 Role of business strategy 10

1.1.3 Basic characteristics of business strategy 10

1.2 Process of building business strategy 11

1.2.1 External and Internal Analysis 11

1.2.2 Methods to evaluate appropriate business strategy 18

CHAPTER 2 – ANALYZING VASC BUSINESS AND MyTV SERVICE DEVELOPMENT 23

2.1 Introduction of VASC 23

2.1.1 The process of establishment and apparatus 23

2.1.2 The establishment and development of the Company 24

2.1.3 Review of Market and VASC MyTV(2011-2012) 28

2.1.4 VASC business performance between 2009 and 2012 30

2.2 VASC business goals for 2015 and vision to 2020 35

2.2.1 Business targets by 2015 35

2.2.2 Business vision toward 2020 37

2.3 Analyzing real situation of VASC in MyTV service development 37

2.3.1 Analyze macro environment 37

2.3.2 Industrial and competitive environment 44

2.3.3 External environment analysis 52

2.3.4 Analyze internal environment 54

2.4 Selecting appropriate strategy 60

CHAPTER 3 – SOLUTION AND RECOMMENDATIONS 65

3.1 Selecting business strategy 65

3.1.1 Building business strategy 65

3.1.2 Selecting business strategy 65

3.2 Recommendations for implementation 67

3.2.1 Recommendations to production management 67

3.2.2 Recommendations to marketing management 68

3.2.3 Recommendations to HR management 68

3.2.4 Recommendations to finance management 69

3.3 Recommendations to the state 69

CONCLUSION 79

REFERENCES 71

LIST OF TABLES

Page

Table 1-1.: SWOT matrix 16

Table 1-2 : The quantitative strategic planning matrix Error! Bookmark not defined. Table 2-1 : Table of price list 29

Table 2-2 : Business performance from 2009 to 2011 33

Table 2-3 : Planning business performance in 2012 – 2015 35

Table 2-4 : Summary of macro environment analysis 43

Table 2-5 : Indirect competitor’s overview 48

Table 2-6 : Porter’s five forces analysis of VASC 51

Table 2-7 : EFE matrix of VASC 52

Table 2-8 : IFE matrix of VASC ………53

Table 2-9 : Company profile matrix of VASC 53

Table 2-10 : QSPM of VASC 62

LIST OF CHARTS

Page

Chart 1.1: External forces of company Error! Bookmark not defined.

Chart 1.2: SWOT matrix 22

Chart 2.1: Organization chart of VASC Error! Bookmark not defined.

Chart 2.2: Average Revenue per Unit from 2009 – 2011……… 34

Chart 2.3: SWOT matrix of VASC 61

PREFACE

1 General context, the necessity and implication of the project

In the recent years, Vietnam has been known as one of the fastest growing

entertainment and media markets in the world Over the next five years, digital

technologies will become increasingly widespread across all segments of

entertainment & media (E&M) as digital migration continues to expand according

to the 10th annual PricewaterhouseCoopers Global Entertainment & Media Outlook

now covering the years 2009-2013 Though the current economic downturn has,

without doubt, impacted virtually every sector of the E&M marketplace, it has also

accelerated and intensified the digital migration in both providers and consumers of

content Economic expansion is helping drive the large increases expected in many

high-growth countries including Vietnam Infrastructure improvements, particularly

in the areas of broadband, multichannel television and mobile telephony, will also

be the principal drivers Vietnam still has substantial room for growth as the

penetration in many categories of E&M remains low In line with the global trends,

the growth of Internet access spending, TV advertising and subscriptions is

expected to lead the industry’s expansion in Vietnam

VASC Media and Software Company, a member of VNPT Group, has started

in Vietnam since 2000 to provide value added products, solutions and services in

E&M, and begun to develop MyTV services since 2009 VASC must have made

tremendous effort to deal with the challenges of an emerging market such as

complex and ineffective government policy, underdeveloped supporting-industries

and stiff competition to successfully establish its stable foundation in the market

today This paper, however, is an attempt to uncover the secret in VASC’s business

strategy and examine whether the company is capable and ready to compete

effectively with its rivals in the future As a result, we will provide suggestions that

we believe would help strengthen the company’s market position and maintain

growth in the media industry in Vietnam

2 Objective and scope of the study

The objective of this study is to develop analyses and recommendations on how

to combine simple business administration tools with the traditional project

management methods to achieve better business management result In this case,

SWOT, BCG models can use some easy techniques to maximize the benefits

3 Methodology

In order to achieve the objectives above, the following methodologies are

implemented:

(1) literature review to identify relative factors including environments, core

competence etc… to find out what are the problems of MyTV service project

management;

(2) empirical studies to develop models and methods that help integrate business

strategies into the project management in VASC

4 Structure of the study

In this study, based on the empirical research of the case company of VASC, we

are going to suggest some business strategic models that cab potentially be

integrated into project management The steps are:

(1) Understand the business to be researched

(2) Analyze the business (product) operations and performance in comparison to

business operations and management concepts

(3) Present recommendations (suggestions) that help achieve the business goals

and objectives

We believe the analysis and recommendations in this study, once testified as

feasible and fit MyTV project management process, can be amplified and spread to

many more business areas

CHAPTER 1 – BASIC RATIONALE OF THE BUSINESS

STRATEGY

1.1 Concepts of business strategy

1.1.1 Concept of business strategy

The common elements in many success stories in business are the presence of

soundly formulated and effectively implemented strategies Whereas tactics are

concerned with the maneuvers necessary to win battles, strategy is concerned with

winning the war (Grant, 2002) Therefore, strategies are long-term orientated, while

tactics focus on short-term reactions to the environment

Strategic management is an important movement in management concepts, as it

is easy to implement It is also consist of three important points: (1) strategic

analysis, (2) strategic choice and (3) implementation of strategy

1.1.2 Role of business strategy

According to the Collins English Dictionary, strategy is ―a particular long-term

plan for success" For our purposes, we will consider the essence of strategy as a

formula for coping with the competition Competitive strategy is about being

different and the goal for a corporate strategy is to find a position in the industry

where the company is unique and can defend itself against market forces To do this

the company must choose a set of activities that can deliver a unique mix of value.

1.1.3 Basic characteristics of business strategy

To achieve an objective, managers must develop a suitable strategy A strategy

is a long term plan setting out how an objective will be reached For example, if the

objective is to reduce costs, the strategy could involve relocating or reducing the

labour force If the objective is to boost revenue, the strategy may be to launch new

products or to invest in a big promotional campaign

A strategy usually will:

 Involve relatively large sums of money

 Be relatively difficult to reverse Once you have started to pursue a particular

strategy it may not be easy switch resources in another direction

 Be relatively high risk If you get the strategy wrong this could be costly in

many ways for the business

 Set out the markets the firm wants to compete in, the products it wants to

offer and how it wants to compete (e.g by focusing on low cost or by

differentiating its offering)

1.2 Process of building business strategy

1.2.1 External and Internal Analysis

1.2.1.1 The External Assessment

Duncan (1972) defined business external environment as all the factors outside

an organization that are taken into consideration by the organization in its decision

making There are many factors in the macro-environment that will affect the

decisions of the managers of any organization Tax changes, new laws, trade

barriers, demographic change and government policy changes are all examples of

macro change To help analyze these factors managers can categorize them using

the PESTEL model This classification distinguishes between:

 Political factors These refer to government policy such as the degree of

intervention in the economy What goods and services does a government

want to provide? To what extent does it believe in subsidising firms? What

are its priorities in terms of business support? Political decisions can impact

on many vital areas for business such as the education of the workforce, the

health of the nation and the quality of the infrastructure of the economy such

as the road and rail system

 Economic factors These include interest rates, taxation changes, economic

growth, inflation and exchange rates As you will see throughout the

"Foundations of Economics" book economic change can have a major impact

on a firm's behaviour

 Social factors Changes in social trends can impact on the demand for a

firm's products and the availability and willingness of individuals to work

 Technological factors: new technologies create new products and new

processes MP3 players, computer games, online gambling and high

definition TVs are all new markets created by technological advances

Online shopping, bar coding and computer aided design are all

improvements to the way we do business as a result of better technology

Technology can reduce costs, improve quality and lead to innovation These

developments can benefit consumers as well as the organisations providing

the products

 Environmental factors: environmental factors include the weather and

climate change With major climate changes occurring due to global

warming and with greater environmental awareness this external factor is

becoming a significant issue for firms to consider The growing desire to

protect the environment is having an impact on many industries such as the

travel and transportation industries (for example, more taxes being placed on

air travel and the success of hybrid cars) and the general move towards more

environmentally friendly products and processes is affecting demand patterns

and creating business opportunities

 Legal factors: these are related to the legal environment in which firms

operate Legal changes can affect a firm's costs (e.g if new systems and

procedures have to be developed) and demand (e.g if the law affects the

likelihood of customers buying the good or using the service)

Typical PESTEL factors to consider:

Political international trade, taxation policy

Economic interest rates, exchange rates, national income, inflation,

unemployment, Stock Market Social ageing population, attitudes to work, income distribution

Technological innovation, new product development, rate of technological

obsolescence Environmental global warming, environmental issues

Legal competition law, health and safety, employment law

Chart 1-1 External forces of company

The determination of a strategy is rooted in determining how a company stacks up

against basic market forces, how it can defend itself against these forces and how it

can influence these forces Fortunately, Michael E Porter in his article How

Competitive Forces Shape Strategy defined these market forces for us Known as

Porter’s 5 forces they consist of:

1 The industry – this is the jockeying for position among current competitors,

this can consists of price competition, new product introduction or

advertising slugfests

2 The threat of new entrants - the seriousness of the threat of entry depends on

the barriers to entry and reaction from existing companies There are 6 major

barriers to entry: 1) economies of scale 2) product differentiation 3) capital

requirements 4) cost disadvantages independent of size 5) access to

distribution channels 6) government policy A new company will generally

have second thoughts about entering an industry if the incumbent has

substantial resources to fight back, the incumbent seems likely to cut prices

or industry growth is slow

3 The threat of substitute products/services - substitutes can place a ceiling on

prices that are charged and limit the potential of an industry

4 The bargaining power of suppliers - suppliers can squeeze profitability by

increasing prices or lowering the quality of the goods

5 The bargaining power of buyers (customers) - customers can force down

prices, demand better quality, more service or play competitors off on each

other

1.2.1.2 The Internal Assessment

An organization's internal environment is composed of the elements within the

organization, including current employees, management, and especially corporate

culture, which defines employee behavior Although some elements affect the

organization as a whole, others affect only the manager A manager's philosophical

or leadership style directly impacts employees Traditional managers give explicit

instructions to employees, while progressive managers empower employees to make

many of their own decisions Changes in philosophy and/or leadership style are

under the control of the manager The following sections describe some of the

elements that make up the internal environment

* Resources and Capabilities

a Resources : Profitability, sales, product quality brand associations, existing

overall brand, relative cost of this new product, employee capability, product

portfolio analysis A good starting point to identify company resources is to look

at tangible, intangible and human resources

Tangible resources are the easiest to identify and evaluate: financial resources

and physical assets are identifies and valued in the firm’s financial statements

Intangible resources are largely invisible, but over time become more important

to the firm than tangible assets because they can be a main source for a

competitive advantage Such intangible recourses include repute assets (brands,

image, etc.) and technological assets (proprietary technology and know-how)

Human resources or human capital are the productive services human beings

offer the firm in terms of their skills, knowledge, reasoning, and

decision-making abilities

b Capabilities: To identify internal strategic strengths, weaknesses, problems,

constraints and uncertainties Resources are not productive on their own The

most productive tasks require that resources collaborate closely together within

teams The term organizational capabilities are used to refer to a firm’s capacity

for undertaking a particular productive activity Our interest is not in capabilities

per se, but in capabilities relative to other firms To identify the firm’s

capabilities we will use the functional classification approach A functional

classification identifies organizational capabilities in relation to each of the

principal functional areas

* Analysis of strength and weaknesses

a Strengths are a company's capabilities and resources that allow it to engage in

activities to generate economic value and perhaps competitive advantage A

company's strengths may be in its ability to create unique products, to provide

high level customer service, or to have a presence in multiple retail markets

Strengths may also be things such as the company's culture, its staffing and

training, or the quality of its managers Whatever capability a company has can

be regarded as strength

b Weaknesses are a lack of resources or capabilities that can prevent it from

generating economic value or gaining a competitive advantage if used to enact

the company's strategy There are many examples of organizational weaknesses

For example, a firm may have a large, bureaucratic structure that limits its

ability to compete with smaller, more dynamic companies Another weakness

may occur if a company has higher labor costs than a competitor who can have

similar productivity from a lower labor cost The characteristics of an

organization that can be strength, as listed above, can also be a weakness if the

company does not do them well

Table 1-1 Porter's Generic Value Chain

Porter's Generic Value Chain

Inbound

Logistics > Operations >

Outbound Logistics >

I

N

Firm Infrastructure

HR Management Technology Development

Procurement

The goal of these activities is to offer the customer a level of value that exceeds the

cost of the activities, thereby resulting in a profit margin

The primary value chain activities are:

 Inbound Logistics: the receiving and warehousing of raw materials, and their

distribution to manufacturing as they are required

 Operations: the processes of transforming inputs into finished products and

services

 Outbound Logistics: the warehousing and distribution of finished goods

 Marketing & Sales: the identification of customer needs and the generation

of sales

 Service: the support of customers after the products and services are sold to

them

These primary activities are supported by:

 The infrastructure of the firm: organizational structure, control systems,

company culture, etc

 Human resource management: employee recruiting, hiring, training,

development, and compensation

 Technology development: technologies to support value-creating activities

 Procurement: purchasing inputs such as materials, supplies, and equipment

The firm's margin or profit then depends on its effectiveness in performing these

activities efficiently, so that the amount that the customer is willing to pay for the

products exceeds the cost of the activities in the value chain It is in these activities

that a firm has the opportunity to generate superior value A competitive advantage

may be achieved by reconfiguring the value chain to provide lower cost or better

differentiation

1.2.2 Methods to evaluate appropriate business strategy

1.2.2.1 External Factor Evaluation Matrix

External Factor Evaluation (EFE) matrix method is a strategic-management

tool often used for assessment of current business conditions The EFE matrix is a

good tool to visualize and prioritize the opportunities and threats that a business is

facing

The External Factor Evaluation (EFE Matrix): An external factor evaluation

matrix allows strategists to summarize and evaluate economic, social, cultural,

demographic, environmental, political, governmental, legal, technological, competitive

information The EFE matrix can be developed in five steps:

1 List key external factors including both opportunities and threats that affect

the firms and its industry List the opportunities first and then the threats

2 Assign to each factor a weight that ranges from 0.0- not important to 1.0-

very important The weigh indicates the relative importance of that factor to

being successful in the firm’s industry Opportunities often receive higher

weights than threats, but threats can receive high weights if they are

especially severe or threatening The sum of all weights assigned to the

factors must equal 1.0

3 Assign a rating between 1 and 4 to each key external factor to indicate how

effectively the firm’s current strategies respond to the factor (4: the response

is superior, 3: the response is above average, 2: the response is average, 1:

the response is poor) Ratings are based on effectiveness of firm’s strategies

4 Multiply each factor’s weight by its rating to determine a weighted score

5 Sum the weighted scores for each variable to determine the total weighted

score for a firm The average total weighted score is 2.5 A total weighted

score of 4.0 indicates that a firm is responding in an outstanding way to

existing opportunities and threats in its industry In other words, the firm’s

strategies effectively take advantage of existing opportunities and minimize

the potential adverse effects of external threats A total score of 1.0 indicates

that the firm’s strategies are not capitalizing on opportunities or avoiding

external threats

1.2.2.2 Internal Factor Evaluation Matrix

Internal Factor Evaluation (IFE) matrix is a strategic management tool for

auditing or evaluating major strengths and weaknesses in functional areas of a

business IFE matrix also provides a basis for identifying and evaluating

relationships among those areas The Internal Factor Evaluation matrix or short IFE

matrix is used in strategy formulation

The IFE Matrix together with the EFE matrix is a strategy-formulation tool that

can be utilized to evaluate how a company is performing in regards to identified

internal strengths and weaknesses of a company

The Internal Factor Evaluation (IFE Matrix)

A summary step in conducting an internal strategy management audit is to

construct an IFE matrix This strategy formulation tool summarizes and evaluates

the major strengths and weaknesses in the functional areas of business, and it also

provides a basic for identifying and evaluating relationships among those areas

Similar to EFE matrix, an IFE matrix can be developed in five steps:

1 List key internal factor as identified in the internal audit process

2 Assign a weight that ranges from 0.0 to 1.0

3 Assign a 1 to 4 rating to each factor

4 Multiply each factor’s weight by its rating to determine a weighted score for

each variable

5 Sum the weighted scores for each variable to determine the total weighted

score for the firm

Total weighted score well below 2.5 characterizes firms that are weak internally,

whereas score significantly above 2.5 indicates a strong internal position The IFE

matrix provides important information for strategy formulation In multidivisional

firms, each autonomous division or strategy business unit should construct an IFE

matrix

1.2.2.3 Competitive Profile Matrix

The competitive profile matrix identifies a firm’s major competitors and its

particular strengths and weaknesses in relation to s sample firm’s strategic position

The weights and total weighted scores in both a CPM and an EFE have the same

meaning However critical success factors in a CPM include both internal and

external issues In a CPM, the ratings and total weighted scores for rival firms can

be compared to the same firm This comparative analysis provides important

internal strategic information

The competitive profile matrix consists of the attributes mentioned below

a Critical Success Factors:

Critical success factors are extracted after deep analysis of external and internal

environment of the firm Obviously there are some good and some bad for the

company in the external environment and internal environment The higher rating

show that firm strategy is doing well to support this critical success factors and

lower rating means firm strategy is lacking to support the factor

b Rating

Rating in CPM represents the response of firm toward the critical success

factors Highest the rating better the response of the firm towards the critical success

factor, rating range from 1.0 to 4.0 and can be applied to any factor

There is some important point related to rating in CPM

 Rating is applied to each factor

 The response is poor represented by 1.0

 The response is average is represented by 2.0

 The response is above average represented by 3.0

 The response is superior represented by 4.0

c Weight

Weight attribute in CPM indicates the relative importance of factor to being

successful in the firm’s industry The weight range from 0.0 means not important

and 1.0 means important, sum of all assigned weight to factors must be equal to 1.0

otherwise the calculation would not be consider correct

d Weighted Score

Weighted score value is the result achieved after multiplying each factor

rating with the weight

e Total Weighted Score

The sum of all weighted score is equal to the total weighted score; final value of

total weighted score should be between ranges 1.0 (low) to 4.0(high) The average

weighted score for CPM matrix is 2.5 any company total weighted score fall below

2.5 consider as weak The company total weighted score higher than 2.5 is consider

as strong in position The other dimension of CPM is the firm with higher total

weighted score considered as the winner among the competitors

1.2.2.4 SWOT matrix

The concept of determining strengths, weaknesses, threats, and opportunities is

the fundamental idea behind the SWOT model To present the model in a more

understandable way, scholars came up with so-called SWOT matrix SWOT matrix

is only a graphical representation of the SWOT framework

Chart 1-1 SWOT matrix

The above is a schema of how SWOT works You start at the top level and

go down to details When this is filled with content, it gets the shape of a matrix,

such as the example below:

Table 1-2 SWOT matrix

 Unique product

 Location of your business

 Location of your business

 Lack of quality and customer service

 Worker’s unique skill set

 Quality of your product

 Poor marketing and sales

 Products or services are not differentiated

 A new emerging or developing

market (niche product, place –

new country, less competition)

 Merger, joint venture, or

2.1.1 The process of establishment and apparatus

 Abbreviation of Vietnamese name:

 Adopt IT application and value added services as a key to shift quickly and

strongly VASC’s business strategy to communications, multimedia,

television, e-information and digital contents

 Make MyTV one of the most powerful brands in television and media

industry

Company Vision

 Develop fast, efficient, and sustainable, and absorbing world experience put

into practices of Vietnam

 Develop television services associated with the enhancement of political,

professional qualifications and gradually improve the lives of officers and

employees of the VASC

 Extend service providing in the country, especially the national television

program Make sure to provide the majority of people in the country a

diversified, high quality service that is consistent with the needs and income

of all subjects

 Develop transmission infrastructure, broadcast synchronization in the

modern, efficient, unified standards and technology Meet the requirements

of integration of technology and services

 Build MyTV become a nation multimedia television strong and highly

respected in the region and the world

 Coordinate closely with local broadcasters in the development of signal

transmission medium Important contribution to developing a comprehensive

system of modern television services associated with training, human

resource development of high quality radio system

2.1.2 The establishment and development of the Company

VASC was founded on March 20th, 2000 as ―VASC Software Development

Company‖ On August 29th

, 2003, the company adopted a new name: ―VASC Software and Media Company‖, was and became a dependent subsidiary of

Vietnam Posts and Telecommunications Group VASC is well-known for its

multi-sector business in various fields:

 Value- added services on telecommunications network

 Multimedia communications

 Software research, development, manufacturing and processing

 Software export, import and trading

 Consultancy, design and provision of IT solutions

 Advertising services, market research, public relations (PR)

 Value added services on broadband Internet

 Infrastructural build of Digital Video Broadcasting- Terrestrial (DVB- T) TV

network, cable TV, satellite TV and GPS system

 Trading, installing and repairing encoders and satellite antenna, decoding

overseas TV programs

 TV productions (sports information, entertainment, music, TV game- show)

Since September 2009, VASC has started developed MyTV services as the

representative of VNPT in content production and business implementation in

cooperation with 63 local VNPT

As the service provider, VASC has already lauched technical equipment for signal

transmission, took the role of contents produder, STB distributor, made business

policy and took charge of customer care Local VNPT have been acting as sales

agencies in direct maketing, signed customer contract, service installation, and

subscriber charge billing

In order to manage the service, VASC has built the organization structure as

follow:

Chart 2-1 Organization chart of VASC

The organization chart

Leaders Board

Services

Development

Department

Content Development Department

Content Production Department

Technique Department

Finance Department

Planning and Invest Department

HR Management Department

Administrati

on Department

Customers Service Department

Business Department

PR and Advertising Department

TV Transmission Department

Maintenance Center Copyright

Department

2.1.3 Review of Market and MyTV(2011-2012)

Vietnam's pay television (PayTV) market is evaluated as highly potential at the

moment because of the low penetration percentage for PayTV comparing to the

common 50-60% in many countries around the world Among more than 50 service

providers in Vietnam today, Canal + is the first foreign company This famous

French television, possessing more than 13 million subscribers, has partnered with

VTV to develop what is now called ―K +‖ which acquired nearly 200,000

subscribers or 10% of the market share to date According to industry experts,

PayTV will continue to thrive in Vietnam at least for this decade In 2009,

Vietnamese Prime Minister, Nguyen Tan Dzung, approved the plan giving time

until 2020 to completely convert all transmission, radio broadcasting and television

technology from analog to digital This is no doubt a great opportunity for PayTV to

boom but at the same time suggests a fierce competition in the near future between

the service providers to capture as much market share as possible before the

industry become saturated, estimated in 10 years

Launched in Sep 2009, MyTV – a product of VNPT developed by VASC

Software and Media Company – is considered the late player in the pay television

service yet with the new technology ―IPTV‖ (internet protocol television) it

promises to bring customers a completely new experience with "TV on demand"

Customers can technically enjoy more than 100 television channels of different type

and genres such as TV and video content stores, music, karaoke and other

supportive information To use MyTV services, customer simply needs a decoder

(Set-top-box), and high speed internet access i.e ADSL Based on this advantage,

after 3 years of development, MyTV has attracted about 500,000 subscribers across

the country, accounting for 20% of the pay TV market It is estimated that by the

end of 2012, MyTV will reach 1 million subscribers countrywide

TV services on the Internet: provide customers the variety of channels and

functions such as Pause, Electronic Program Guide and lock for children, Archives

MyTV provides nearly 90 domestic and international channels with 13 HD channels

such as Star, LuxeTV channels, ESPN

Services providing content on demand (also known as multimedia services)

provide customers with the requested content at their suitable time Service request

has a variety of genres: Movies on demand, TV on demand, music on demand,

karaoke on demand, at the request Game, Health Beauty, Children, Useful

Information know, TV Marketing, Sports

Interactive services: includes the categories: fast forward function - rewind,

pause and store, send and receive messages through TV, via TV Message Service,

see the phone service, conferencing services, the paper's TV service, information

service television

List of service price as follow

Unit: VND/STB/month

Table 2-1 Table of price list

 T-Marketing, T-Information, Media Sharing

 SD content: Movies, Music, Karaoke, Health

& Beauty, Sports, World of Stories (of which price is not listed on the EPG)

50.000

MyTV  63 SD channels, 13 HD channels, Radio 65.000

Package Service Content Charge (VND)

Silver HD channels

 Time-shift TV, Personal Video Recorder, TV

on Demand

 T-Marketing, T-Information, Media Sharing

 SD and HD content: Movies, Music, Karaoke, Health & Beauty, Sports, Story

(of which price is not listed on the EPG)

MyTV

Gold

 Content of MyTV Silver package

 All of SD PayTV content

120.000

MyTV

Gold HD

 Content of MyTV HD package

 All of SD and HD PayTV content

135.000

Service installation

For installation of service customer need to register in the transaction point

of VNPT city / province Installation fees are usually waived depending on the

customer, terminal costs range from 800.000 - 1.800.000VND up to VNPT city /

province

2.1.4 VASC business performance between 2009 and 2012

2.1.4.1 Business model

Value proposition:

IPTV is still a new concept in Vietnam but the promising benefits from the

service make it a potential market that attracts many service providers Being the

first IPTV provider in Vietnam, MyTV has presence in 63 provinces across

Vietnam, from large cities to distant areas Reaching to 500,000 subscribers all over

the nation could be the core advantage of MyTV in developing PayTV in Vietnam

Taking advantage of interactive television and humorous contents, MyTV provide

customers the best entertainment media in communications industry MyTV

promises lower costs for operators and consumers because transmission is more

brandwidth efficient than traditional analog or digital broadcasting MyTV also

targets content with a higher relevance to local and nichie audiences, and targets

advertising to individual viewers in certain demographics and psychographic

segments

Market Segment:

At the first stage of business, VASC aimed to atract the largest subcribers so

it entered the suburb zone to fulfil the blank market segment It is very hard to

compete in the cities because there are so many types of television in the cities

MyTV chose to be the pioneer in the PayTV market in the suburban by building

atractive low package prices which focus on live TV and some new interactive

functions Then, MyTV back to develop subcribers growth in the cities and selling

value added services on MyTV to current users

Main customer group: Family Group

They are belong to both gender, married, 30 – 45 years old, with average

income about 5 million VND/house/month Their demand is getting entertainment

together at home They like stability and enjoy on demand service for all members

of family

Pioneer customer group: High tech addicts

They almost are male, single, 25 – 35 years old, with average income above

5 million VND/month They spend time on using high tech of videos and television,

take first to use the latest services Then they will insprie arounds to use stylish

things like them

Value chain Structure:

The primary value chain activities are:

 Inbound Logistics: MyTV collect television channel signals to the control

system then mix them with other contents before broadcasting to the terminal

equipment at the customers’houses The contents could be purchased from

the providers in Vietnam or be produced by itself

 Operations: VASC has content team to collect all the value added content,

convert them into suitable format then broadcast via internet protocol

 Outbound Logistics: Local VNPTs take charge of STB distributing to users

and have no any action to the signal transmission In order to maintain

quality of signal, VASC has invested in equipment to strengthen signals in

the node location in VNPT networks

 Marketing & Sales: VASC build up a business plan which is based on the

research of of customer needs and push up the generation of sales VASC has

tide connection with local VNPTs to collect customers’ information and hear

what they want VASC develops above-line marketing and public relation to

strengthern MyTV brandname, introduce MyTV to potential customers, and

help raising the subscribers number up Based on VASC’business plan, local

VNPT actively creates sales and promotion programe to atract users directly

 Service: MyTV advertised itself on MyTV screen, website to support

customers The hotline 1900125 always is open for users to have answers for

all relevant questions

These primary activities are supported by creative human resource which is

organized scientifically with modern control system and conpensation for the

labours and supported by back office

Revenue Generation and Margins:

Revenue comprises of subscribers fee and PayTV which are collected by

local VNPTs and shared to VASC Real revenue of VASC is about 30% total

revenue, the rest belongs to local VNPTs and content providers Every year, VNPT

approves a revenue sharing limit between VASC and local VNPTs, therefore,

VASC and local VNPTs can negotiate to have a suitable percentage of revenue

sharing Then, based on revenue, VASC and local VNPTs also calculate cost of

marketing support

2.1.4.2 Business performance from 2009 – 2011:

Over 3 years, VASC has a great step to be the IPTV hulk in Vietnam However, due

to high cost of expense, revenue is still negative

Table 2-2 Business performance from 2009 to 2011

300.000

27,0

108,0

333,00

6,75

27,00

166,50

3,1 Subcribers fee revenue

6,75

27,00

166,50

4,1 Depreciation expense

12,86

12,86

51,43 4,2 Copyright expense

2,23

8,91

54,95

4,3 Marketing expense

17,00

17,00

24,65 4,4 Labour expense

0,01

14,69

19,60 4,5 Other expense

15,00

15,00

30,00

At the launching moment, most of users registered low package with the subcriber

fee of 30,000 VND equivalent to 2.5 USD From May 2012, VASC has increased

subcriber fee up to 30% and launched a series of new value added services which

lead to the rise of ARPU nearly 5 USD This number is quite low to other IPTV

service in foreign countries but suitable to the early stage of life cycle in Vietnam

VASC will increase this number up to 7 USD in the coming years