Building the business strategy for logistics service in Viet Nam ocean shipping Joint stock company - vosco period of 2014 - 2018

BUILDING THE BUSINESS STRATEGY FOR LOGISTICS SERVICE IN VIET NAM OCEAN SHIPPING JOINT STOCK COMPANY – VOSCO... The intimate, candid exchanges and seminars in your company help us to have

BUILDING THE BUSINESS STRATEGY FOR LOGISTICS SERVICE IN VIET NAM OCEAN SHIPPING JOINT STOCK COMPANY – VOSCO

ACKNOWLEDGEMENT

Firstly, we would like to express our sincere thanks to the Professors, The teachers of GRIGGS University, The Center for Educational Technology and Career Development (ETC) - Vietnam National University who have enthusiastically instructed us during the MBA course and our research

Especially thanks to the Board of Management and all the staffs in Vietnam Ocean Shipping Joint Stock Company for help during our accomplishing this assignment The intimate, candid exchanges and seminars in your company help us

to have a realistic look and analytical data in accomplishing this topic “Building the business strategy for logistics service in Vietnam Ocean Shipping Joint Stock Company, period of 2014 - 2018”

Group 02 – C0112 included 04 members who come from Interni Forwarding Company, Vietcombank, Saigon New Port and Vosco decided to research the topic:

”Building the business strategy for Logistics service in Vietnam Ocean

Shipping Joint Stock Company, period of 2014 – 2018” as the respectful gift to

express our sincere thanks to all the Professors, all the Teachers of Griggs Andrew University who provided us the valuable skills and knowledge during the course of Master of Business Administration

Ho Chi Minh City, Sep 2013 Group 02 – C0112

INDEX

Acknowledgement: i

Index: ii

Categories symbols and abbreviations vi

Model, table vii

Chart viii

Introduction ix

CHAPTER 1 : THE THEORY OF BUILDING THE BUSINESS STRATEGY FOR LOGISTICS SERVICE 1

1.1 The concept of business strategy 1

1.1.1 The definition 1

1.1.2 The kinds of business strategies: 1

1.1.2.1 Enterprise strategy : 1

1.1.2.2 Business strategy: 1

1.1.2.3 Functional strategy: 2

1.1.2.4 Global Strategy 2

1.1.3 The strategy‟s basic rules 2

1.1.4 The roles of business strategy : 3

1.2 Planning the business strategy: 4

1.2.1 The external environment analysis : 4

1.2.1.1 PEST Model analysis : 4

1.2.1.2 M Porter 5 forces model: analysis the factors in the business environment effected to the enterprise‟s business : 6

1.2.2 Analyzing the external environment : 7

1.3 The tools of building and implementing the business strategies 9

1.3.1 EFE matrix 9

1.3.2 IFE matrix 10

1.3.3 Competitors Profile Matrix 11

1.3.4 SWOT Matrix 11

1.3.5 QSPM matrix 13

CHAPTER 2 : VOSCO‟S SITUATION ANALYSIS 15

2.1 Vietnam Ocean Shipping Joint Stock Company „s general view 15

2.1.1 The history: 15

2.1.2 The current services : 16

2.1.3 The company‟s business situation : 16

2.1.4 Current Situations of Logistics Business 17

2.1.5 Customer, logistics service and branch : 18

2.1.6 Result of operation activities: 20

2.1.6.1 Revenue Target : 21

2.1.6.2 Expense target 21

2.1.6.3 Revenue target : 23

2.2 Analyzing the external factors : 23

2.2.1 The macro environment factors – PEST MODEL: 23

2.2.1.1 Economic Factors 25

2.2.1.2 Social and Culture Factors 27

2.2.1.3 Scientific, technical and technology environment factors 27

2.2.2 Competitive Factors Analysis (5 Forces M Porter) : 28

2.2.2.1 Threats of new entrants (highest) 28

2.2.2.2 Bargaining power of buyers : 29

2.2.2.3 Bargaining from the suppliers 29

2.2.2.4 Threats of substitute products (normal) 30

2.3 Internal Enterprise analysis : 38

2.3.1.1 Human Recourses 38

2.3.2 Marketing abilities: 40

2.3.3 Technology Abilities : 41

2.3.4 Financial Capability: 41

2.3.4.1 The situation of production and business activities : 41

2.3.4.2 Analysis of balance sheet : 43

CHAPTER 3 : CHOOSING AND BUILDING THE BUSINESS STRATEGY OF LOGISTICS SERVICES FOR ENTERPRISE IN PERIOD OF (2014-2018) 55

3.1 Enterprise‟s Mission : 55

3.2 The logistics strategies : 56

3.2.1 The solution of Business strategy with SWOT matrix : 56

3.2.2 Choosing the optimum strategy base on the QSPM matrix 60

3.2.2.1 Financial Solutions : 62

3.2.2.2 Restructure solution : 64

3.2.2.3 Technology & procedure solutions 65

3.2.2.4 Technology & procedure solutions 66

3.2.2.5 Marketing solution : 69

3.2.2.6 Traffic solution 71

CONCLUSION 73

CATEGORIES SYMBOLS AND ABBREVIATIONS

ISM CODE : International Safety Management Code

VITRANSS2 : Vietnam Transportation Sustanable Development Project

CHART , TABLE

Model 1.1: Overall business strategy model 4

Table 1.1: SWOT matrix 13

Table 1.2 : QSPM form 14

Model 2.1 : Company organization chart 15

Model 2.2 : Vosco„s logistics operation model 16

Table 2.1: Summary of operation results from 2010 to 2012 17

Table 2.2 : Domestic logistics account list 18

Table 2.3 : The market share of domestic container transportation 19

Table 2.4 : Data of logistics service in the domestic business 20

Table 2.5 : The proportion of operating costs on net revenue: 21

Table 2.6 : CPM matrix 33

Table 2.7 : The survey of EFE results 34

Table 2.8 : The result of evaluation of EFE 36

Table 2.9 : EFE matrix 36

Table 2.10 : VOSCO‟s human resources statistic 38

Table 2.11: The machines list 39

Table 2.12 : The warehouse facilities list 39

Table 2.13 : The years of ship list 41

Table 2.14 : Report of Cash Flow 41

Table 2.15 : Consolidated Balance Sheet 43

Table 2.16 : Financial indicator Group: 45

Table 2.17 : The survey of Internal Factors 50

Table 2.18 : Internal factor survey result 52

Table 2.19: the matrix of evaluation of IFE 52

Table 2.20 SWOT analysis 53

Table 3.1: SWOT matrix of combination 56

Table 3.2 : Choosing the strategy as QSPM matrix 60

Tabble 3.3: The planning of revenue: 63

Table 3.4 The planning of cost: 63

CHART

Chart 2.1 : The domestic container transportation‟s market share 19

Chart 2.2 : Revenue of logistics services 21

Chart 2.3 : Comparison of depreciation cost and administration cost 22

Chart 2.4 : Profit after tax of Logistics Services business 23

Chart 2.5 : Enterprise Asset Situation 47

Chart 2.6 : Capital resource 48

INTRODUCTION

I The introduction

Shipping transportation is one of the important links in the logistics supply chain Since 2014, as the commitment joining WTO, the foreign enterprises have the right to invest 100% foreign capital in Vietnam, so the Vietnamese logistics enterprises will be facing the fierce competition There are about 900 logistics companies with different scales in Vietnam now, in which 70 to 80% are small and medium scales According to Mr Nguyen Cam Tu – Deputy Minister of Industry and Trade said “ the potential of logistics development is even greater as our trading turnover considered as the country‟s fastest growth rate in the region with speed of 18 to 20 % per year and turnover nearly reached usd130 billion However the same with the other developing countries in the region, the logistics business in Viet Nam are mainly small and medium enterprises, so the business structure is fragmented, non-professional and limited human recourse

Mr Bui Ngoc Hoan – The Chairman of Freight Forwarders Association

Vietnam (VIFFAS) said: "About 90% of export import goods in Vietnam are

transported by sea However, the Vietnam fleet covered about 18-20% of the transported goods The total volume of export import cargo in Vietnam in 2007 was 181.12 million tons, in which containerized cargo was 49.29 million tons (4,489,165 TEUs) Multimodal Transportation is an important factor of logistics services in Vietnam shipping plays a very important role in the strategy of developing the logistics services in Vietnam”

Therefore, the logistics services sector has played a very important role in Vietnamese economic development in general and maritime industry in particular With the hope of contributing our efforts to our country‟s logistics service development, by the knowledge gained from the lesions in the program Global Advanced Master of Business Administration C0112, the exchange experiences learned from the partners in Asian (Japan, China, Singapore…) and EU (Holland, Germany, Belgium…) as well as in the daily works, our group members come

from Saigon New Port, Vietcombank, Interni Logistics Company and Vosco

decided to research the topic : „’Building the business strategy for logistics

service in Vosco JSC, period 2014 – 2018”

According to Dr Nguyen Van Chuong – The Deputy Director of Vietnam Transportation Strategic Development Institute‟s said: “Vietnam has actually entered the WTO, as the other manufacturing business sectors, the transport sector

in general and the marine transport industry in particular has changed positively to improve their competitiveness, the service quality and efficiency There are some important directions in this process is the expansion of logistics services and value added services in the supply chain”

The Vietnamese enterprises in general and Viet Nam Ocean Shipping JSC in particular have to strengthen and expand the logistics services and value added services in the supply chain, as well as promote the strategy of logistics business in the period of fierce competition with participating of 100% foreign capital companies in the process of integration WTO

In order to building the effective solutions in the field of logistics service in general and in Viet Nam Ocean Shipping JSC – VOSCO in particular, firstly, we would like

to introduce the concept of logistics, the concepts of supply chain as well as the roles of the stakeholders in the supply chain

1 The concept of Logistics:

In fact, the term “logistics” already had two centuries ago, considered to have originated in the military‟s need to supply itself with arms, ammunition and rations as it moved from a base to a forward position So far, this term referred to in English as „logistics‟ and widely used in a lot of fields to specify many diverse activities, focus on providing the correct amount of fuel needed, at the right time and in the right places As the settlement of the transportation, storage or commercial production and logistics services of different companies in each way or another, so there are a lot of definitions of „‟logistics‟‟as The Council of Supply Chain Management Professionals (CSCMP) : „‟Logistics management is a part of

supply chain management that plans, implementation and delivery flow control, storage of goods, services and information between the starting point and the ending point is the initial consumer yield and efficiency, in order to meet the customer‟s requirements” But in this definition: it is not only for the consumer goods flow but including the services with the main purpose to satisfy the customers‟ requirement;

it means the reasonable cost for the cargo services

Following the development of the productive forces and the active supports of the revolution in the field of science and technology in the world, the volume of cargo and material products increasing and the distance in the field of traditional competition as the product quality or price dwindling, the manufacturers have switched to the competition of inventory management, speed of delivery, the flow

of raw material and semi – finished products… in the management system of physical distribution Logistics services have the opportunity to develop powerful in the business

In the field of military, logistics is defined as the science of planning and carrying out the movement and concentration of forces the military operations related to the design and development, acquisition, storage, movement, distribution, concentration of ammunition and equipment

On the other hand, according to the Vietnamese Trade Law of 2005 (Article 233):

In the Vietnamese Trade Law of 2005, it is the first time that the concept of logistics services are codified Logistics services are the commercial activities whereby traders implementation of one or more processes including receiving, shipping, storage, warehousing, customs clearance, the paper procedures other documents, client consultation, packaging, and mark, delivery or other services relating to goods as agreed with the customer to remuneration "

2 The concept of Service Supply Chain (as known as Supply Chain Service):

According to the American Council of Supply Chain Management Professional

CSCMP (www.cscmp.org) , the Logistics Chain Management – Logistics Supply Chain is;” Supply Chain management includes the planning and management of all involved activities in sourcing and the acquisition, conversion and all logistics management activities, it is important that it includes the collaboration and combined by the partner channels, the partner can be the suppliers, the intermediaries , the third suppliers and the customers In the essence, the supply chain management combines with the supply and demand management in the companies

In this definitions: the scope of supply chain management (SCM) is the expanding of Logistics (Logistics): SCM also is about the source (around the world) and the procurement of raw materials, where production etc ; SCM optimizes the flow of goods not only in the company and also between companies; SCM promotes the cooperation of companies (independent) and the cooperation, which combines the approach of many activities, from product design to consumer stage (and even higher is the reproduction of the product used)

Since the above definitions we can see: Logistics service includes the processes of importing fuels, inputting materials for production processes, goods production and distribution channels to the consumers It help to separate the individuals suppliers

as transport services, forwarding, customs clearance, distribution, manufacturing support service, management consulting…

Since then, the logistics concept is understood in a broad sense; it is always associated with the concept of supply chain logistics services logistics and is built basing on the implementation cycle Logistics service Supply chain as launched and presenting in the flow chart below:

3 The role of the stakeholders in the Logistics Service Supply Chain

In the above supply chain flow chart the stakeholders includes: The Government, The Shippers, The manufacturers and business, the logistics service providers and the consumers…

* Shippers: be understood in a broad sense (not just in terms of ownership),

including the following subjects: The manufacturers, the suppliers (export import trading companies); the wholesalers, the retailers, the consignors, the consignees…

* The logistics service providers include:

The freight carriers, the shipping lines, the air lines, the trucking companies, the warehouses firms, the freight forwarders, the third party logistics…

* The Logistics Service Providers: In order to minimize the logistics cost (transport cost, data processing cost…) to meet the customer‟s demand

* The consumer: They want to maximize their demand of consumer goods with the reasonable prices and the goods price is one of the sectors that effected to the consumers‟ satisfaction and it‟s important that they spend much for the good quality goods and delivery on time But the consumers have affected by the traffic jam and the environment pollution so they hope that these problems will be solved

* The Government: having responsibility to maximize the social‟s interest (the total social interest – the total social cost) The Government‟s intervention made the potential resource having equal distribution as well gaining the highest result and sustainable development for logistics service

The shipping lines participated in one stage of supply chain in case of providing the cy to cy contract for transportation and the same situation for the airlines and rail transportation

II The research objective and scope :

1 The research subject and scope

- Topic: Building the business strategy for logistics service in Vosco, period of

2014 – 2018

- Scope: Vietnam Ocean Shipping Joint Stock Company

2 The research objective:

Logistics industry is a new and young industry in Vietnam, so it has lack of experience, the management system of information technology is not synchronized and the competition is rather low

oversea shipping transportation, ship management and operation, warehouse management but in this assignment, our Group focus on researching the shipping domestic transportation and the value- added logistics services

For the purpose of applying the new business management methodology, in order to improve the quality of logistics services in Vietnam as well as integration with common development of the world, our Group believe that the research The business strategy for Logistics Service development in Vietnam Ocean Shipping Joint Stock Company – Vosco period from 2014 to 2018 is useful and essential topic especially at the present the world economy in general and Vietnamese economy turndown

3 The research methodologies:

balance sheet in recent 03 years of Vosco logistics service

channels as well as the magazines, radio, televisions

 Reference and study the data provided by the domestics and international logistics association

IFE matrix, PEST, M Porter 5 forces, SWOT, QSPM matrix for the best business strategy

III Research Structure includes:

Chapter 1: Theoretical background for formulation of business strategy for logistics service

Chapter 2: Analysis of situation and logistics business in Vosco at present

Chapter 3: Proposal of strategy and solution for logistics service in Vosco in the period of 2014 – 2018

CHAPTER 1 : THE THEORY OF BUILDING THE BUSINESS

STRATEGY FOR LOGISTICS SERVICE 1.1 The concept of business strategy

Vosco‟s Strategic Management focus on the integration of management, marketing, accounting and finance, manufacturing, research and development of information systems to the business success of the organization

"The policy" the last important term means achieving the politic goals; it includes instructions, rules and procedures established to support efforts to achieve the

objectives

1.1.2 The kinds of business strategies:

1.1.2.1 Enterprise strategy :

Enterprise strategy includes the corporate general orientation about sales growth

in the membership management, resource allocation and financing between member units; Determining the structure of the desired product; the business services that the enterprises participating; identifying the business (or businesses) that will be conducted each business sector should be (egg inter-with the other branches of the company or independent business etc )

1.1.2.2 Business strategy:

The Business strategic focused on improving the competitive position of the

products and services of the enterprise in the business or the combined products

that the enterprise participating The business strategy includes the competitive topics that firms choose to emphasize, the way it positioned itself in the market to gain a competitive advantage and using in different contexts of each industry

1.1.2.3 Functional strategy:

Focusing on management and use effectively the human resources of enterprise and the member units The functional strategy development is successfully implemented the enterprise strategy and thus successful implemented the business strategy

1.1.2.4 Global Strategy

Nowadays, the globalization trends expresses over the world so the logistics enterprises have to consider expanding their services over the world, globalizes their services to increase the profit

1.1.3 The strategy’s basic rules

The strategic management process is composed of three phases: setting strategy, strategy implementation and evaluation strategies

The stage of setting strategy: Vosco have develop the business tasks, identify the opportunities as well as the risks effected to the organization from the outside, indicating the strengths and the internal weaknesses, establishing long-term goals, creating the alternative strategies and selecting the pursuing specific strategies The stage of implementation phase that requires Vosco has to establish the annual targets, setting out the policies to encourage the staff and allocating resources to implement the strategy

The stage of evaluation of strategic: monitoring the performance and implementation strategies Through the power of the elements, the implementation

of business processes in the enterprise

1.1.4 The roles of business strategy :

- Planning roles: Business strategy helps enterprises clearly recognize the goal, direction of their own in future; orient operation in the long run, which are the firm basis for the implementation of business activities, and helps the managers know, take into account and orient the organization which direction to go, how to go, and when to obtain results

- Forecasting role: in the trend of globalization, business environment always

changes Therefore, the analysis of the environment and formulation of a business strategy will help managers to realize clearly opportunities and threats, as well as find out strengths and weaknesses within the enterprise

- Controlling role: Business strategy helps managers to employ and allocate resources appropriately, make the decisions corresponding to each condition of the business environment, enhance the connection and attachment of personnel system, fortify the risk prevention ability, prevent from potential threats

1.2 Planning the business strategy:

Model 1.1: Overall business strategy model

Set up the strategy Implementation the strategy Appraise and adjust

1.2.1 The external environment analysis :

The external environment is a system of complex factors, there are always opportunities and risks affecting to the business activities with the different levels The variation of these factors are beyond the control of the business, they intertwined effects affecting the strategic management of the business

These factors are PEST model, the macro environment factors create the opportunities and threats for businesses

1.2.1.1 PEST Model analysis :

P – Political; E – Economic; S- Social; T – Technology

Decide the strategy

Distribute resource

Checking, appraise, adjust

Analysis and forecast the external environment

Planning and implementation yearly and periodly

Analysis, forecast the internal environment

Planning the policy

These 4 factors have direct impact on the economy; they are external factors of the

enterprises and have affection as the objective factor

The political factors

+ The stability: the stability is considered as the political conflicts

+ Tax policy: the imp-export tax policy, consumer tax, income tax policy have effected to the enterprise‟s turnover and profit

+ The relevant laws: investment law, business law, labor law, antitrust law…

+ The other policies: The government policies have an impact to the enterprises; it can give the enterprises the advantages or challenges as the commercial policies, economic development policies…

+ The impact of the international conventions, mutual agreement to the implementation of the legal, policies…

The economic factors

The enterprises should pay attention to the short term and long term economic factors and the government intervention to the economy As usually, the enterprises will decide their invested plans basing on the economic factors

+ The economic situation: any economy has its own economic cycles and the enterprises will have their right decision for their strategies It‟s the flexibility of the business strategies

+ The affection of interest and influence

+ The Government‟s economic policies: The basic salary law, the strategy of economic development…

+ The economic outlook in the future: The speed of economic growth, the speed of GDP growth, the GDP ratio on the investment, the attraction of foreign investment, the intergrate

The social culture factors

Each country has own culture value and specific social factors and these factors are the characteristics of the natives

Besides that the other social characteristics are the concerns as:

+ The average life, health, nutrition, food

+ The average income, income distribution

+ Styles, lifestyles, knowledge standard…

+ The affection of technology to the business

+ Researching and developing the new technology in business

1.2.1.2 M Porter 5 forces model: analysis the factors in the business

environment effected to the enterprise’s business :

Analyzing this model that the opportunities and risks to the enterprise‟s business The elements of analysis PEST and M Porter 5 Forces will be synthesized and evaluated in the External Factors Evaluation matrix (EFE Matrix:

1.2.2 Analyzing the external environment :

The company culture:

In such a large enterprise as VOSCO there are a lot of different professional proficiency, educational level, cognitive level, social relations, geographic, cultural thought this difference creates a working environment diversely and complexly

In order to develop all human resources, contributing to the sustainable development of the business that requires the company maintains the particular cultural to promote the contributions of everybody on achieving the overall goals of the organization - it is corporate culture

The human resource:

The human resource is one of the important factors affected to the company‟s operation, including:

The Directors

The members of the board of management have influenced to the enterprise’s manufacturing results, is one of the factors affected to the company’s competition

The management

The management are the key man who have full experience, management style, decision making ability, it will be the company‟s advantage The management during their work with the staffs will create new ideas for the company‟s development

The lower level management and staffs

The working skills and the work hard passion is one of the strength of the company

The finance

The finance plays an important role in the decision of implementation or not any investment, purchase or distribution of the business Enterprises have the financial resources to have many advantages in terms of technological innovation, investment

in equipment, ensuring enhanced quality, lower costs in order to maintain and enhance competitiveness, improve trying to position in the market

The technology and equipment

The machinery and technology have profoundly affected to the competitiveness of enterprises It is the most important physical elements of the production capacity of each enterprise and directly impact on the quality of the product and the selling price It is sure that a company with a system of modern machinery combined with good management ability will make a high quality product at low cost thereby improving their competitiveness

The distribution network

If the distribution network is operated properly, it would be an effective means in reaching the customers The enterprises attracted the customers by serving process (sales forms, billing, shipping) effectively VOSCO now has many branches over the country, facilitate the coordination and receive orders over the country such as Hai Phong Port, Da Nang, Ho Chi Minh City This is the foundation for the development of domestic logistics services

1.3 The tools of building and implementing the business strategies

According to Fred R David the important techniques built a strategy consists

of three stages, the tool used for this process can be applied to all sizes and types of organizations, it helps the administrator can identify, evaluate and select strategies,

it is expressed through the following stages:

The first stage: Using the EFE matrix, IFE matrix, CPM matrix to sumalize the basis information for the building the strategy

The second stage: combining the internal and external factors, using the SWOT matrix to point out the potential strategies

The third stage: using the QSPM matrix to analysis chosing the most potential strategies

1.3.1 EFE matrix

EFE matrix (Extenal Factors Evaluation) allows the strategists to summarize and evaluate the economic information, social, culture, demographic, geographic, political, governmental, legal, technological and competition There are five steps to develop an external factors evaluation matrix

The first stage: list out about 10 – 20 factors included opportunities and threads that effected directly to the enterprise‟s success

The second step: Classificating the importance from 0.0 (not important) to 1.0 (very important) to each factor This classification shows the relative importance of the factors for the success of the enterprises the total of all the factors must equal 1.0 The third step: Classificating from 1 to 4 for each determinant of success shows how the current strategy of the business response to these factors, including reaction

4 is good, 3 is the reaction average, the average response 2 and 1 little reaction These levels are based on the effectiveness of business strategies So at this stage classification based on firm size, whereas the classification in step 2 based on industry

The forth step: calculating the importance of each factor to determine its type to score the importance of each factor

The fifth step: Summing up all the important scores of all the elements to determine the total scores If the total scores of the matrix is in the range from 1 point to 4 points, it will not depend on the element in the matrix If the total score is under 2.5 points, the internal factors of the interprises is weak and if the total scores is over 2.5 points the enterprises have strong internal factors

1.3.2 IFE matrix

It summaries and accesses the both the streng and the weakness of the enterprises as well as providing the basis elementation to identify and access the relationship between them The IFE matrix may develop by the following steps:

The first step: Summary the list about 10 – 20 factors included the streng and

weakness that effected to the enterprises‟ development

The second step: Classificating the 0,0 (not important) to 1.0 (very important) for

all the factors The important factors shows its importance to the enterprises‟s success Not concern about the internal streng or internal weakness, the factors that effected to the results of enterprises will be the most important factors The total scores is 1,0

The third step: Classification from 1 to 4 for each determinant of success shows

how the current strategy of the business response to these factors, including reaction

4 is good, 3 is the reaction average, the average response 2 and 1 little reaction These levels are based on the effectiveness of business strategies So at this stage classification based on business, while the classification in step 2 on the basis of the industry

The forth step: calculating the importance of each factor to determine its type to

score the importance of each factor

Summing up the total scores to determine the total scores of the matrix If the total scores is in the range of 1 to 4, it will not depend on the sumary of the factors in the matrix If the scores is over 2,5 points, the enterprises have a strong internal factors

1.3.3 Competitors Profile Matrix

Competitors Profile Matrix is an effective tool to provide a clear picture of the strengths and weaknesses of the business compared with the main competitors in the industry, thereby determining the competitive advantage Point in the matrix is given from 1 to 4, to evaluate the success factors of the industry and enterprise were compared between the competitors

In order to analysis the competition in the market, the collection and analysis of the main competitors of Vosco will be conducted as the following:

Step 1: Identify, list and classify the competitors in the market

Step 2: Collect and evaluate the competitors‟ information

Step 3: Predicting the response of competitors

Step 4: Selection of competitors to dodge, attack or cooperate

1.3.4 SWOT Matrix

SWOT matrix is used to list all the opportunities, threats, strengths and weaknesses in the enterprises in order and proper position Based on the relationship

between these factors, the analysis will be conducted to select appropriate solutions through strategic combinations: the strengs – opportuinitiies (S_O), the strengs – threats (S_T), the weakness (W_T), the weakness – opportuinities (W_O) Depending on the field of business that the management will use one or more matrices to conduct SWOT analysis and solution.SWOT model often offer 04 basic strategies:

S_O: the strategies basing on the enterprises‟s strengths to expand the external opportunities

S_T: The strategies basing on the enterprises‟ strengs to limit the external threats W_O: The strategies limit the internal weakness by the external opportunities

W_T: The strategies limit the internal weakness and external threats

According to FRERD R DAVID, there are 08 steps to build the SWOT matrix as below

1) List out the external opportunities

2) List out all the external threats

3) List out all the internal strengths

4) List out all the internal weakness

5) Combining the internal strenghs with the external opportunities, note the results

Table 1.1: SWOT matrix

SWOT Opportunities (O)

Using the internal strengths to

opportunites

ST strategy

Using the internal strengs to

Step 1: List out all the external threats and the internal weakness and strengs

Step 2: Classificating the internal and external important success factors as in EFE, IFE matrix

Step 3: Determining the replaceable strategies that can be applied

Step 4: giving the scores for each strategies from 1 to 4: 1 no attractive, 2 a little attractive, 3 rather attractive, 4 quite attractive

Step 5: Calculating the total scores of attractions, this is the result of the classification score (step 2) with the result of attraction (step 4) in each row The higher attraction is the more attractive strategy is

Step 6: summing up the total scores It is the sum of the total scores in the column

of the matrix QSPM strategy The higher score is the more attractive strategy is

Table 1.2 : QSPM form

No The important

factors weight

Replaceable strategies

This chapter has outlined the concept, the rationale and strategy theory, the content

of strategic planning, the tools needed for the analysis, evaluation factors, the

important role of enviroment for the development of business strategy

In the following chapters we will use the theoretical framework and necessary tools analysis of the business environment of Vosco

CHAPTER 2 : VOSCO’S SITUATION ANALYSIS 2.1 Vietnam Ocean Shipping Joint Stock Company ‘s general view

Head office: 215 Lach Tray, Ngo Quyen Dist, Hai Phong City, Vietnam

Tel: (84-31) 3731090

Fax: (84-31) 3731007

Email: PID@vosco.vn; drycargo@vosco.vn

Website: http://www.vosco.com.vn; http://www.vosco.vn

2.1.1 The history:

Vietnam Ocean Shipping Joint Stock Company (VOSCO) commenced operations on 1st January 2008, based on the foundations laid by Vietnam Ocean Shipping Company, which itself was established on 1st July 1970

Since its founding in 1970, Vosco has made great efforts to continuously develop and improve its their services VOSCO wishes to express a special note of their appreciation and sincere gratitude to the clients, business partners and friends for their continued support and co-operation during the past years They also wish to have further opportunities to serve the domestic and overseas clients and to cooperate with other potential partners all over the world on the basis of furthering mutual interests

Model 2.1 : Company organization chart

2.1.2 The current services :

Logistics is the process of planning, implementing and controlling the

effective and efficient flow of goods and services from the point of origin to the point of consumption Vosco‟s logistics services includes: the domestic shipping transportation and the value added logistics services

Model 2.2 : Vosco‘s logistics operation model

2.1.3 The company’s business situation :

The result of business period 2010 – 2012: this period the shipping industry has been faced a lot of difficulties and Vosco‟s turnover and profit strongly decreased

After a successful first step in the field of domestic container shipping

transportation, Vosco has built up a reputation and good image for the client

container on the north-south line in the 2010-2012 strategic development of the company Basing on the market recovery of the international container shipping, the company will invest more gradually container tonnage pair 1000Teu to participate

in the Asian shipping market

However, the repercussion of the financial crisis and global economic downturn has lasted a strong impact on the world economy in general and the transport industry of Vietnam in particular Vosco is one of the logistics and shipping operator in Vietnam so has been under strong influence, as the other shipping and logistics operators, Vosco has continued to reduce the ocean freight, the shipping market competition is fiercer and fiercer

Meanwhile, the lifting volume of domestic shipping industry occupies a very small market share compared with the oversea cargo

2.1.4 Current Situations of Logistics Business

Facing difficulties and fluctuations of the world shipping market, in 2013, Vosco decided to focus on the maximization development of Logistics Services Logistics Services is the binding of the service supply chains that the marine transportation transport is one of these chains However, while focusing in marine transportation business with high borrowing costs and competitive rates results to financial difficulties, logistics services is more profitable than shipping business with low business costs

The result of domestic logistics services as below:

Table 2.1: Summary of operation results from 2010 to 2012

Expense 2010 2011 2012

The growth rate (%) 2011/

2010

2012 /2011

NET REVENUE OF

SALES AND

SERVICES 174,325,185,470 190,694,782,330 207,960,555,215

109.39

109.05

GROSS REVENUE

OF SALES AND

SERVICES 67,940,832,790 71,164,928,095 83,288,483,990

104.75

117.04

NET PROFIT FROM

OPERATION

ACTIVITIES 67,940,832,790 71,164,928,095 83,288,483,990

104.75

117.04

PROFIT AFTER

INCOME TAX 13,693,732,950 13,501,108,854 15,854,113,210

98.59

117.43

2.1.5 Customer, logistics service and branch :

+ The domestic shipping transportation:

Vosco has joined the domestic shipping market since 2008 by 02 vessel of capacity 650 teus with fixed weekly schedule from Hochiminh Port to Haiphong conversely on every Tuesday and Friday Vosco also invest to build 3400 teus new containers at Vinaship TGC Hai Duong for this trade Basing on these advantages, Vosco decided to develop the value adding logistics to create the competition in this field

Table 2.2 : Domestic logistics account list

No A/C Services Commodity

6 Blue scope steel

customer clearance,

distribution

Food, consumer goods

The domestics shipping transportation and the value added logistics services:

- Logistics services are commercial activities whereby traders implementing one or more of work including reception, transportation, storage, warehousing, customs clearance, and other paperwork such as client consultation, packaging, signs and symbols, delivery or other services related to the goods as agreed with customers to remuneration

Vosco is one of the logistics companies who have created their own internal

strenghs combining with the others to develop their logistics service to be come

one of the famous and full options services recently

With these efforts, Vosco reached about 26% market share in the domestic

transportation market, it means that Vosco‟s logistics service have remarkable

development and high competition

Table 2.3 : The market share of domestic container transportation

2.1.6 Result of operation activities:

Table 2.4 : Data of logistics service in the domestic business

The growth rate (%) 2011/

2010

2012 /2011

1 Revenue from sales

and service 176,545,917,015 190,694,782,330 207,960,555,215

108.01

109.05

109.05

4 Cost of goods

106,384,352,680

119,529,854,235

124,672,071,225

112.36

104.30

5 Gross profit from

sales and service 67,940,832,790 71,164,928,095 83,288,483,990

104.75

117.04

6 Revenue from

financial activities 296,607,825 283,367,080 556,360,525

95.54

196.34

7 Financial expenses -4,322,020,965 -5,174,309,980 -5,047,799,735

119.72

97.56

Loan Interest 3,196,250,000 5,327,700,000 4,901,280,000

166.69

92.00

8 Sale expenses -23,636,640,810 -24,079,373,626 -29,896,747,945

101.87

124.16

9 Administration cost -26,685,380,155 -27,595,040,785 -33,135,380,155

103.41

120.08

10 Net profit from

operation activities 13,593,398,685 14,599,570,784 15,764,916,680

107.40

107.98

11 Other income 3,170,840,445 884,896,010 2,409,525,305

27.91

272.29

12 Other expenses -2,952,333,415 -195,088,785 -1,658,253,465 6.61

850.00

13 Other profit 218,507,030 689,807,225 751,271,840

315.69

108.91

108.02 16.Tax expense -118,172,765 -1,788,269,155 -662,075,310 1,513.27

37.02

17 Deferred tax

18 Profit after tax 13,693,732,950 13,501,108,854 15,854,113,210

98.59

117.43

2.1.6.1 Revenue Target :

Chart 2.2 : Revenue of logistics services

According to the graph, domestics logistics service revenue grows over the years, in which, domestics marine transport services occupies the highest turnover rate, domestic container transportation by sea is around 42% of revenue, warehouse services 18%, Value-added services 23%, multimodal services 17%

2.1.6.2 Expense target

Table 2.5 : The proportion of operating costs on net revenue:

Administration expense / net

Prime cost is higher than other costs, in which costs for inland transport shipments accounting for the highest rate of 58%, value-added service12%, storage service 10 % multimodal services 15%, as for not having warehouses, to serve a full-service, the company must pay for additional costs of warehouse lease to stock the merchandise, cost of warehouse lease accounts for 5% ,

Sale expenses, administration expenses also accounts a quite high proportion compared to the revenue and did not change in last 3 years for the company has actively seek for new clients and paid an additional cost to keep old clients

Chart 2.3 : Comparison of depreciation cost and administration cost

Total depreciation costs for vessels accounted for 70% of the administration cost Administration expenses in 2012 were still increase due to incurrence of additional current bad debt provisions

2.1.6.3 Revenue target :

Chart 2.4 : Profit after tax of Logistics Services business

In addition the company also has other income and expenses from: transfer or liquidation of fixed assets and penalties due to breach of contract, but this income is not critical in the revenue and costs structure of the business In recent 3years it consumes a huge profit for the company liquidates some of fixed assets no longer in use so the profit is high

2.2 Analyzing the external factors :

2.2.1 The macro environment factors – PEST MODEL:

The political environment legislation directly affects to the business operations of the enterprise This factor can impact business activities of enterprises in two directions: to encourage or inhibit the development of enterprise

Political and security situation, the operating mechanism of the government: This

is considered a strong point of the business environment in Vietnam Political and security situation is assessed as high stability in the region and in the world, only

a political party operates in Vietnam - the Communist Party leadership, does not exist multiparty systems as in the other countries in the region The operating mechanism of government is relatively clear and high stability

+ The legal system and the legal documents: especially the economic policies to regulate business behavior, consumption, trade relations have not been finalized and is still limited In the Doing Business 2010 report of the World Bank, and International Finance Corporation IFC, Vietnam, ranked the 93th , falling 02 units from the previous year due to the regulatory environment is limited and low transparency

+ The administrative procedures in Vietnam: still insufficient, cumbersome, causing many obstacles to business activities of enterprises Back to business registration procedures in Vietnam, although the Enterprise Law 2005 has now officially run, the date of registration of business enterprises is shortened but the procedures are still cumbersome and complicated

+ Tax policy: Tax Procedures in Vietnam is still insufficient, cumbersome procedures, and waste a lot of time According to the IFC study, the businesses in Vietnam spend a lot of time in tax procedures with the average business must file and pay taxes 32 times with 1,050 hours worked while in Indonesia is 266 working hours

+ The legal system protects the business, consumer and antitrust has not yet run as the lack of regulations to enforce, especially some form of monopoly still exists that caused major damage to consumers The market share of international transport by sea in Vietnamese market almost belongs to some of international

carriers resulted some of international carriers gathering to offer the general freight rate so the Vietnamese imp- exporters have to accept that there is no other choice

In addition, violations of intellectual property rights is exits in many areas that makes the competitive environment in Vietnam weaker

+ The policies of Vietnamese Communist Party: Developing the market economy basing on the socialist orientation Party and State constantly advocated giving policy direction to encourage, promote and facilitate the domestic and international business development

+ The policy stance and regional, international relations policy: Joining the Association of Southeast Asian Nations (ASEAN), ASEAN - Japan, ASEAN - India, ASEAN - Republic of Korea; participating the Asian Pacific Economic Cooperation (APEC), Asian - Europe Meeting (ASEM), World Trade Organization, WTO These are the factors that facilitate the import and export operations of the business, Although, the production and import procedure in Vietnam has been improved but it have to spend a lot of time on paper procedure For example, it takes 24 days, 06 type of document and average of ussd699 to export 01 x 20‟ container from Vietnam to oversea on contrary it takes 21 days and usd390 in China

2.2.1.1 Economic Factors

+ The World economic situation: the world economy is turndown with a lot of potential risks, since the end of 2008, the economic crisis started from the U.S housing market has made the world economy turndown, the difficulty and the turning down of the leading economies such as the U.S., Japan, China ; the crisis of sovereign debt restructuring in EU countries; the activities economies in ASEAN but still hidden the sustain; the weaknesses of the global economy is exposed as recession, debt crisis and until now many potential risks, especially in some countries of the Communist European economy The political unrest in some countries of the Middle East and North Africa have made oil price increasing and