Development business strategy for period of 2013 - 2018 of Hanoi food import - exportjoint stock company (Vihafoodco)

Analysis of the external environment EFE, identify opportunities and risks affecting the business activities of the company: .... - 11-  Practical significance: Applying planning proce

Global Advanced Master of Business Administration

CAPSTONE PROJECT REPORT STRATEGIC MANAGEMENT

DEVELOPMENT BUSINESS STRATEGY

FOR PERIOD OF 2013 – 2018 OF HANOI FOOD IMPORT – EXPORT

JOINT STOCK COMPANY

(VIHAFOODCO)

Class: GaMBA01.C0111 Group 3:

Nguyen Huu Ba Nguyen Van Chien

Le Thi Thanh Hai Nghiem Quoc Phu Ngo Xuan Phuc

Ho Chi Minh City, January 2013

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CONTENTS

CONTENTS 2

Table of figures: 5

Table of table: 6

LETTER OF THANKS 8

INTRODUCTION 9

1 Reasons for choosing topic: 9

2 Study objectives: 9

3 Objects and scope of the research 10

4 Research Methodology: 10

5 Scientific and practical significance of the research topic: 10

6 The structure of the topic: 11

CHAPTER 1 THEORETICAL BASIS OF STRATEGY ANDSTRATEGIC PLANNING 12

1.1 The concept of strategy and business strategy 12

1.1.1 The concept 12

1.1.2 The role of strategic management 12

1.2 The steps for strategy planning 13

1.2.1 Environmental study 13

1.2.1.1 External environment 13

1.2.1.2 Internal environment of business: 18

1.2.2 Determine the goals of the business 19

1.2.3 Develop strategy, choose key strategy 19

1.3 Supporting tools for identifying, selecting strategies 19

1.3.1 The external factors evaluation matrix tool - EFE 19

1.3.2 The internal factors evaluation matrix tool – IFE 20

1.3.3 CPM - Company Profile Matrix tool 21

1.3.4 SWOT matrix tool 22

1.3.5 QSPM Matrix Tool 24

CHAPTER 2 OPERATING ENVIRONMENT OF VIHAFOODCO COMPANY 25

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2.1 Overview on the VIHAFOODCO: 25

2.1.1 Establishment legality: 25

2.1.2 The process of formation and development: 26

2.1.3 Organizational structure: 27

2.1.4 Production capacity: 28

2.2 Analysis of the external environment (EFE), identify opportunities and risks affecting the business activities of the company: 30

2.2.1 Macro environment: 30

2.2.1.1 Political environment, policy and law: 30

2.2.1.2 Population, social and cultural environment 30

2.2.1.3 Technology environment: 31

2.2.1.4 Economic environment: 31

2.2.2 Micro Environment: 34

2.2.2.1 The world market: 34

2.2.2.2 Vietnam's rice export market: 39

2.2.2.3 Evaluation of Competitors’ competitiveness in the supply of rice for export by CPM 41

2.2.3 Identify opportunities and risks affecting the business activities of the company: 44

2.2.3.1 Opportunities: 44

2.2.3.2 Risks: 44

2.2.3.3 Matrix evaluates external factors: 44

2.3 Internal environment analysis of the company: 46

2.3.1 Analysis of business activity: 46

2.3.1.1 Management: 46

2.3.1.2 Marketing: 49

2.3.1.3 Producing operations and export supply: 54

2.3.1.4 Information system: 58

2.3.1.5 Human Resources: 59

2.3.1.6 The financial situation of the company: 60

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2.3.2 Identify the strengths, weaknesses, and internal elements -IFE Matrix: 65

2.3.2.1 Strengths: 66

2.3.2.2 Weaknesses: 66

2.3.2.3 Internal Factor Evaluation Matrix (matrix - IFE): 67

2.4 Construct value chain for VIHAFOODCO: 69

2.4.1 Overview of export rice value chain: 69

2.4.2 Value Chain of VIHAFOODCO - export suppliers: 70

CHAPTER 3 CONSTRUCTION OF BUSINESS STRATEGYFOR THE PERIOD OF 2013 - 2018 OF VIHAFOODCO 72

3.1 Identify the vision and mission of VIHAFOODCO: 72

3.1.1 Vision 72

3.1.2 Mission: 72

3.1.3 Core value: 72

3.2 Identify the objectives: 73

3.3 Construction of business strategy for the period 2013-2018 of VIHAFOODCO: 73

3.3.1 General objectives: 73

3.3.2 Specific objectives: 73

3.3.3 SWOT matrix of VIHAFOODCO: 76

3.3.4 Selection Strategy by QSPM: 78

3.3.5 Solutions to implement the business strategy of VIHAFOODCO for the period 2013 – 2018 79 3.3.5.1 Market Development Strategy: 79

3.3.5.2 Branding Strategy: 82

3.4 Recommendations: 85

3.4.1 For the Government: 85

3.4.2 Recommendations for companies in the industry (VFA) 86

CONCLUSION 88

APPENDIX 89

REFERENCES 94

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Table of figures:

Figure 1-1: Total strategic management Model of Fred R David 13

Figure 1-2: Model of five competitive forces of Michael E.Porter 15

Figure 2-1: The structure of organization, management and operation of the VIHAFOODCO 28

Figure 2-2: The process of rice processing in the factory 29

Figure 2-3: Global rice production from 2000 - 2012 * (million tons) 35

Figure 2-4: Rice consumption volume and reserve/consumption rate in the world throughout the years 36

Figure 2-5: Turnover and export production in the first nine months of 2012 and compared with the same period of the previous year 39

Figure 2-6: Density of exported rice in recent years 40

Figure 2-7: Export market of Vietnamese rice 41

Figure 2-8: Export supply situation from 2007-2012 50

Figure 2-9: The situation of export entrustment from 2007-2012 50

Figure 2-10: Rice structure of VIHAFOODCO sold from 2007 – 2012* 51

Figure 2-11: Labor education structure of the VIHAFOODCO 59

Figure 2-12: General model of the rice value chain 69

Figure 2-13: Value Chain model of VIHAFOODCO - export supplier 70

Figure 3-1: Revenue and revenue trend for the period 2007 - 2012 74

Figure 3-2: estimated revenue for the period of 2013 - 2018 75

Figure 3-3: Construction of brand structure 83

Figure 3-4: The brand image 84

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Table of table:

Table 1-1: The external factors evaluation matrix tool - EFE 20

Table 1-2: The internal factors evaluation matrix tool - IFE 21

Table 1-3: SWOT Matrix 23

Table 2-1: Average population by urban and rural areas over the years 2007 to 2012 * 30

Table 2-2: Rice export of some of the world's major countries over the years 2006-2013* 37

Table 2-3: Some largest rice-importing countries over the years 2006-2013 * 38

Table 2-4: Prices of some exported rice in the world in recent years (U.S.D /ton) 39

Table 2-5: Company Profile Matrix 42

Table 2-6: The matrix evaluating external elements 45

Table 2-7: Rice production situation from 2007-2012 49

Table 2-8: The output and rice proportion from 2007-2012* 51

Table 2-9: The rice business situation by customers from 2007-2012* 52

Table 2-10: The market of countries is consuming the Company’s products 53

Table 2-11: The change in the output of self-production and outside procurement of the company from 2007-2012* 55

Table 2-12: The proportion of self-production and outside procurement of the company from 2007-2012* 55

Table 2-13: Total outside procurement from 2007-2012* 55

Table 2-14: The operation method of outside procurement 56

Table 2-15: The situation of internal recovery rate of finished products from 2007 - 2012*: 57

Table 2-16: The situation of increasing and decreasing of fixed assets from 2007-2012* 58

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Table 2-17: The situation of labor quality from 2007-2012* 59

Table 2-18: The operation results of the Company from 2007-2012*: (Unit: Million VND) 60

Table 2-19: The balance sheet of the company from 2007 – 6 months of 2012 (unit: Million VND) 61

Table 2-20: Analysis of Ratios over the years 2007-2012* 61

Table 2-21: Analysis of operating ratio over the years 2007-2012 * 62

Table 2-22: Analysis of financial leverage ratio over the years 2007-2012 * 63

Table 2-23: Analysis of the profitability ratio over the years 2007-2012 * 64

Table 2-24: Internal factors evaluation Matrix 68

Table 3-1: Revenue for the period 2007-2012 74

Table 3-2: predict the revenue for the period 2013-2018 75

Table 3-3: Test the model by excel 76

Table 3-4: SWOT matrix of VIHAFOODCO: 77

Table 3-5: Alternative Strategies 78

Table 3-6: QSPM for strategy selection 79

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LETTER OF THANKS

With deepest gratitude, we would like to send to the teachers of Griggs University, with their widen knowledge and enthusiasm to impart valuable knowledge to us during the past two years

We sincerely thank the Board of Directors and members in the Hanoi Food Import – Export Joint Stock Company for providing related documents and information with dedicated guidance to help us complete our studies in a thorough and practical way

We also want to send our sincere thanks to family, friends and colleagues supported, shared and encouraged us during the period of study and research

Our essay has done within nearly three months period, and the majority of team members are at the first time to learn about the business of rice supply It

is obviously that our knowledge is limited, and lack of real experience on this business, hence we wish to have your valuable feedback from teachers and classmates so that we can learn from your knowledgeable point of view

Finally, we would like to wish the teachers in Griggs University a good health, and with the strong belief to continue your noble mission is to impart knowledge to future generations

Yours Sincerely,

HCMC, dated 03 01 2013

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INTRODUCTION

1 Reasons for choosing topic:

Under market – oriented economic development and international economic integration, Viet Nam has been a member of the Association of Southeast Asian Nations since July 1995, and APEC since November 1998 and the 150thmember of World Trade Organization since 7th November, 2006 This can be considered as a key to open the door for Vietnamese goods in trading with the ones of other countries in globalization environment It has opened great opportunities but also made challenges to Vietnam enterprises

In the current globalization, the key for businesses to be successful is that they are ready to face with any changes and have suitable orientation on development strategy The increasingly fierce competition requires business to be active and timely capture market demand, to meet the demand in the best compared to competitors

No business can survive and develop for a long-term in the market without the right strategy for its own development A right strategy will help business to develop strengths and overcome weakness, also help business to take advantages of the opportunities and overcome risks Building a proper strategy will help business to have better competitive advantages, maintain stable growth and sustainable development

Along with the process of international economic integration, Viet Nam currently has an important position in exporting agricultural products such as rice, coffee, pepper…in the world However, the value or brand name of agricultural products of exporting companies in Viet Nam is no or less known due to the lack of competitiveness and suitable business strategy

As the fact above, we choose the topic “Building business strategy for the period of 2013-2018 of Ha Noi food import-export joint stock company” as our research

2 Study objectives:

The purpose of this topic is to plan business strategy of rice for Ha Noi food export joint stock company (called VIHAFOODCO) in the period of 2013 – 2018 and propose strategic solutions to implement the strategy to bring VIHAFOODCO into one of reputed suppliers of exporting rice in Viet Nam market For this purpose, the thesis will include the following parts:

import Generalize basic theory for business strategy, process and tools for building strategy

- Analyze external elements, internal elements to seek for strengths, weaknesses, opportunities and threats of VIHAFOODCO

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- Identify business target, based on strengths - weaknesses, opportunities – threats, plan business strategy and propose solutions to implement that strategy

3 Objects and scope of the research

- The object of this thesis is business strategy of VIHAFOODCO

- Operation of VIHAFOODCO is trading in agricultural products Particularly, rice

production and supply for exporting is the main field of the company Therefore,

scope of thesis is to focus on providing exporting rice of VIHAFOODCO

4 Research Methodology:

This thesis has used the following research methods:

-Approaching methods: When analyzing business situation of VIHAFOODCO, use

particular approaching method, when analyzing the internal and external environmental factors affecting to business operations of the company, use historical approaching method, combining quantitative and qualitative approaching method

- Methods of collecting primary information: Thesis uses synthetic methods of

observation, interviews, expertise

- Method of information processing: Thesis uses modeling methods, causal analysis,

and descriptive statistics to analyze the results of business operations Combining methods of the subjects: Strategic Management, Human Resource Management, Marketing…

- Secondary information source: The quarterly and annual reports of the Vietnam

Food Association, agricultural books and magazines, web site (www.riceonline.com, www.vietfood.org.vn, etc.), the reports published by market research company on the export – import of rice in Vietnam and the world

- The primary information sources: The report and documentation of

VIHAFOODCO

5 Scientific and practical significance of the research topic:

 Scientific Significance:

Strategic planning is an effective method for enterprises to effectively use resources

as oriented However, for many various reasons, a little of Vietnamese business pays attention to applying business strategies into their business operations

The study will present an approaching method to plan business development strategy and apply in specific conditions of VIHAFOODCO, thereby contributing to experience in planning development strategy for Vietnamese enterprises

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 Practical significance:

Applying planning process on development strategy in order to determine the strengths, weaknesses, opportunities and threats to rice exporting activities of VIHAFOODCO, then, to identify and propose solutions to implement development strategy of VIHAFOODCO in period of 2013 - 2018

6 The structure of the topic:

In addition to the introduction, conclusion, contents, appendixes and references, this thesis is divided into three chapters:

Chapter 1: Basic theory of strategy, business strategy planning

Chapter 2: Analysis of the business environment of VIHAFOODCO

Chapter 3: Building the strategy for the period of 2013 – 2018 of VIHAFOODCO

1.1.2 The role of strategic management

Currently, depending on the approaching method, there are many different concepts

of strategy:

- According Fred R David: "Strategy is the means to achieve long-term goals."

- According to Alfred Chandler (Harvard University): "Business strategy includes the determination of long-term basic goals of the business, also choose the method

or action and the resources allocation to implement that goal"

Business strategy of an enterprise is an overall program of action towards the implementation of the goals proposed Business strategy is not aimed to outline how

to achieve these goals It is the task of a variety of support programs, the function strategy It only creates the framework guiding thinking for action

Although there are many different definitions, in general, business strategy includes the following basic contents:

- The target that business wants to reach

- The decisions and actions closely related to each other to achieve the objective

- Efficiently implement resource allocation, the ability to accomplish objectives Strategic planning is a systematic process in order to determine the business strategies used to enhance the competitive advantages of the business It covers

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from the environmental analysis to identify strengths, weaknesses, opportunities and threats, identify and build long-term target, implement business strategies based on promoting the strengths, maximum rectify weaknesses, take advantages of the opportunities and minimize the risks

1.2 The steps for strategy planning

1.2.1 Environmental study

Feasible and effective strategy planning is aimed at reaching the targets, business needs to implement under a procedure of Fred R David (strategy formulation stage)

Figure 1-1: Total strategic management Model of Fred R David 1

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dangers and minimize risks External environment is divided into environment and micro-environment

macro- Macro environment of the business

Analyze and evaluate the macro environment of the business through the following factors:

 Economic factors:

- Gross Domestic Product (GDP): Analysis of Gross Domestic Product gives us

an overview on the health of the economy, it indirectly impacts on production and business activities of all the industries in economy, and also be leverage to promote the business activities of the enterprise

- Per capita income: The increase in per capita income will lead to an increase in

demand, quantity and quality of goods, and to change tastes and habits of consumers

- Inflation, exchange rate, financial and monetary policies also influence the business strategy of the enterprise Especially is import-export industry as the value

of goods is priced in foreign currency The increase/ decrease in value of domestic currency will be the factors to reduce / increase the export value of the business

 Government, politics, law and society

- Business must comply with government’s regulations, provisions on tax, safety, environmental protection, export-import policies, protection of industrial property and the stability of politic and society also importantly influence on business strategy

- Consumer characteristics, lifestyle or culture of importing country will affect the demand, the tastes of consumers in that country about the pieces, design, quality of the goods

- Growth rate of the population directly impact on demand, rising commodity markets, so positively impact on business strategy

strategy is essential and important in planning business strategy

 Technical and technology factors:

Technology is a key factor for the success of the business More and more new and advanced technologies introduce to create a good business opportunity for anyone who knows to capture, but they are also the danger to the competitor Nascent technology would be an opportunity for businesses to capture new products with

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high competitiveness and would be danger if other business has applied before New technologies create new and better products, making existing products to become obsolete or shorten the product’s life cycle

 Micro environment -competitive environment

Micro-environment analysis is to examine the factors appearing in the industry deciding the nature and level of competition in the industry This is also called the competitive environment as it is attached directly to each business and most of competitive activities of business occur in this environment Michael E.Porter gave

a model of five competitive forces, creating competition in an industry as follows:

Figure 1-2: Model of five competitive forces of Michael E.Porter

 Risk of reducing market share from new competitors (potential rivals):

According to M-Porter, potential competitors are not currently available in the industry but may affect the industry in the future Potential competitors more or less, their pressure to the industry strong or weak, depending on the following factors:

- The appeal of the industry: This factor is expressed through indicators such as earning rates, the number of customers, the number of firms in the industry

- Barriers to entry: the factors that make the entry to industry more difficult and costly

Porter’s Five Forces

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+ Technique

+ Capital

+ Commercial Factors: Distribution system, branding, customer system

+ Specific resources: Input materials controlled degree, patents, human resources, the protection of the government, etc

As new competitor joined in the industry, it will reduce the market share and profits

of the business To protect its competitive position, enterprises have to raise entry barriers through measures such as product diversification; scale advantages or initial investment costs are large if joining the industry

 The ability to force the prices of suppliers (providers): As the supplier has an

advantage, they can put pressure to create disadvantages for enterprises

 The number and size of supplier: the number of suppliers will decide

competitive pressures, their negotiating power to industry, business If there are only a few large-scale suppliers, it will create competitive pressures, affecting the entire industry's production and business activities

The ability to replace the supplier's products: In this issue, we study the ability to replace the input by the suppliers and the cost of switching suppliers (Switching Cost)

Information about suppliers: In the current era, information is always a factor promoting the development of trading, information about providers has a major influence on the choice of input suppliers for businesses

For all industries, suppliers always put certain pressure if they have the scale, a set and the ownership of scarce resources Therefore, the provision of small input products (farmers, craftsmen, etc.) will have very little power to negotiate with businesses even though they have large numbers, they lack organization

 The ability to force the prices of the buyers (customers):

The trust of customers is valuable asset which is very important to enterprises Customer is a competitive force that can directly affect to the entire industry's production and business activities

Customers are classified into two groups:

+ Retail customers

+ Distributors

Both groups put pressure on businesses in terms of price, quality of products and services respectively and they are the ones who control competition in the industry through the purchasing decision

Main competitive force of replacement is the ability to meet the demands compared

to other products in the industry, moreover are the factors of price, quality, other environmental factors such as culture, politics Technology will also affect the threat of substitute products

Sudden, unpredictable level of substitutes: Even in the industry with the development of technology, it can also create alternative products

Substitutes limit the potential profits of the industry by setting the maximum threshold for the price that companies in the industry can be profitable

 Competitors in the industry: This is regularly pressure threaten directly to the

enterprise, as the more increasing the pressure of competition between businesses is, the more position and the existence of the business is threat

Businesses existing in the industry will compete directly with each other, creating pressure back on the industry to create a competitive strength In an industry, the following factors will increase competitive pressure of rivals:

+ The situation of the industry: demand, growth, number of competitors, etc + The structure of the industry: concentrated or distributed industry

The distributed industry is the one that there are so many businesses competing with each other but no business can afford to dominate the remaining businesses

Concentrated industry: Industry that has only one or a few enterprises holding a dominant role (Control the competition - considered authorization)

+ Retreat barriers (Exit Barrier): Like the entry barriers, retreat barriers are the factors which make the withdrawing from the industry become more difficult: Barriers on technology, investing capital

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Binding with workers

Binding with the government, relevant organizations (stakeholders)

Binding of strategy and plans

1.2.1.2 Internal environment of business:

Internal environment includes factors inside business which are able to be controlled such as marketing, administration, accounting finance, human resource, development research, production and operation, information system Analysis of factors inside businesses will help them to identify the strengths and weaknesses to determine a reasonable strategy to exploit the strengths and overcome weaknesses The points need to be analyzed are as follows:

- Administration: Analysis of managing activities through the functions of

planning, organizing, leading and controlling

-Marketing: Marketing is described as the process of identifying, forecasting,

setting and satisfying customers’ needs for products and services The basic content

of the marketing is to research and analyze market volume

-Accounting Finance: Analysis of the financial situation of business through

financial indicators such as: solvency, leverage, earnings ratios, growth index, etc identify strengths and weaknesses of the financial competency of business

- Human resource: The role of human resources is very important to contribute to

the success of the business Human resources help business to implement strategies more effectively And in the contrast, if there are no proper human resources to implement the strategy, however the strategy is good, it cannot bring effectiveness for the business To assess human resources, we will evaluate the primary job of the human resources management of a business such as the recruitment, training, assessment and reasonable allocation of the right people in the right job

- Production and operations: Analysis of the production -operation process

through five types of decisions as the production process, capacity, inventory, labor force, product quality

- Research and development (R & D): Analysis and assessment of research and

development through activities to develop new products, improve product’s quality, improve production process, good price control and last but not least is to improve the competitiveness of businesses

- Information System: Information systems reviewed and evaluated includes all

the means to receive, process and communicate data, information for both inside and outside of the enterprise to support the implementation, evaluation and controlling of the business activities In the process of implementation of the strategy to achieve the long-term goal, the business can be divided into many short-term goals corresponding to each shorter time period

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1.2.2 Determine the goals of the business

The target is the desired outcome of the business set out in a relatively long time The target of business is to concretize the content, the mean to carry out the mission

of the enterprise

Planned targets depend on conditions inside and outside, in each stage and consistent with the mission of the business Study target is the premise, the basis for the formation of strategy The target set is not far from reality The targets indicate the ending point of the strategic tasks, as a basis for determining the order of priority in the allocation of resources

1.2.3 Develop strategy, choose key strategy

The development of strategies for business is made on the basis of the analysis and evaluation of the business environment; identify opportunities and risks affecting the survival of the business Thereby, determine the strategic plan to achieve goals The formation of strategy requires creating harmony and combination of factors affecting to strategy Strategy is developed basing on the analysis and evaluation of the business environment and use these tools supporting strategic planning On that basis, business chooses key strategies highly feasible and optimal for the development, and is the target to pursue

Therefore, developing strategy is:

- Unique proposal

- Value chain that make difference from competitors

- Clearly agreement, determine what to do and what not

- Constant in positioning

1.3 Supporting tools for identifying, selecting strategies

To carry out strategic planning, we can apply many methods and various planning tools This topic only selectively uses some common tools introduced below which

we believe they will be useful for planning development strategy of VIHAFOODCO

1.3.1 The external factors evaluation matrix tool - EFE

The external factors evaluation matrix tool – EFE help to summarize and quantify the effects of environmental factors to the business Developing an EFE matrix is as same as the internal factors evaluation matrix tool consisting of five steps:

+ Step 1: Make a list of the factors that play a decisive role for the success as

identified in the macro environmental assessment process List includes

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opportunities and threats affecting the business and the business field of the enterprise

+ Step 2: Classify the importance from 0.0 (not important) to 1.0 (key importance)

for each element This classification shows the respective importance of the factors for the success of the business in the industry The appropriate classification can be determined by comparing the successful business with failed businesses in the industry or discuss and reach consensus of the strategy group Total classification levels must be equal to 1.0

+ Step 3: Classify from 1 to 4 for each factor determining the success to show how

the current strategy of the business responses to this factor That 4 is a good response, 3 is above- average response, 2 medium and 1 is weak These levels are based on the efficiency of the business strategy

+ Step 4: Multiple the importance of each factor with its classification (=step 2 *

step 3) to determine the points of importance

+ Step 5: Add the total points of importance for each variance to determine total

important points for the organization

Regardless of the number of opportunities and threats in the matrix, the highest total score that a business can have is 4.0, the lowest is 1.0 and average is 2.5

Total important points are 4.0 showing the strategy of enterprises that make good use of external opportunities and minimize the negative impact of the external environment to the enterprise

Table 1-1: The external factors evaluation matrix tool - EFE

External important factors Importance Classification Score

List the main threats and

opportunities inside the

business

1.3.2 The internal factors evaluation matrix tool – IFE

Internal factor evaluation matrix tool is the tool which allows evaluating the strengths, weaknesses and the importance of the functioning departments of the business Internal factor evaluation matrix tool is also implemented in five steps:

+ Step 1: Make a list of key successful factors as identified in the internal audit

process

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+ Step 2: Classify the importance from 0.0 (not important) to 1.0 (very important)

for each factor This classification shows the relative importance of each factor for the success of business in the industry Total this important level must be 1.0

+ Step 3:Classify from 1 to 4 for each factor, including: 1 represents for the biggest

weak point, 2 is the smallest weak point, 3 is smallest strongpoint, 4 is the biggest strong point Thus, the classification is based on business

+ Step 4: Mollify the importance level of each factor with its classification (= step

2 * step 3) to determine the number of points of importance

+ Step 5: Add the total number of points of importance for each factor to determine

the total number of points of importance

Table 1-2: The internal factors evaluation matrix tool - IFE

Internal important factors Importance Classification Score

Make a list of key successful

factors inside the business

Advantages: Forming the overall picture of the business with the particular

strengths and weaknesses that affect the competitiveness of enterprises

Restriction: The scoring for each factor as well as determining the importance level

of the subjective factors

1.3.3 CPM - Company Profile Matrix tool

Establish Matrix Company Profile Matrix to make comparative evaluation of companies with major competitors in the same industry, the comparison is based on the factors affecting the competitiveness of companies in the sector Through it to the Administration recognize the strengths and weaknesses of the company with competitors, identify competitive advantages for the company and weaknesses need to

be overcome To build a Company Profile Matrix need to perform the following steps:

+ Step 1: Make a list of the main factors have a significant impact on the

competitiveness of companies in the sector

+ Step 2: Classify the importance from 0.0 (not important) to 1.0 (very important)

for each factor This classification shows the competitiveness of the industry Total this important level must be 1.0

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+ Step 3: For each factor, this point represents the response of the business In

particular, 4 is the best response, 3 is the point response on average, 2 is the average response, and reaction of 1 is the poor

+ Step 4: Get important points of the elements of each business multiplied by the

rate of the industry has been a result of the competitiveness of enterprises

+ Step 5: Evaluate the results Do business with the highest total score is the most

competitive compared with other firms in the industry

Review: Compare the total number of companies with major competitors in the

industry to evaluate the competitiveness of the company

Advantages: form a comprehensive picture of the competitiveness of enterprises

compared to other competitors in the industry

Restriction: The scoring of each factor as well as determine the level of importance

of the subjective factor

1.3.4 SWOT matrix tool

SWOT matrix evaluates the strengths, weaknesses, opportunities and threats The purpose of the study of the environment is to identify threats and opportunities as well as the strengths and weaknesses that business is and will face in the process of business activities as a basis for strategy planning for the business SWOT matrix is

an important tool for the synthesis of the results of environmental studies and proposal strategies

- Main opportunity: the chance that the product between the impacts on the

business as it is to take advantage and the probability that enterprises can take advantage of that opportunity is huge

- Main risk: the risk that the product between the level of impacts as the risk for

enterprises and probability achieve the greatest value

- Identify the strengths and weaknesses: the evaluation and analysis process

inside of enterprises draws a lot of factors, but it is important to draw the core factors that affect the competitive position and the implementation of business strategies It should consider these factors as the operation in system and comparison with the general standard of the industry and competitors

Link internal factors with external conditions: after determining the basic elements

of the inside and outside, it is necessary to apply a process including the following steps to analyze and proposed strategies:

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+ Step 1: List the major elements inside and outside the business to the cells of the

SWOT matrix (SWOT stands for of four letters: Strengths, Weakenesses, Opportunities, and Threats)

+ Step 2: propose the matching pairs logically,make combinine strategies:

 S / O: Use your strengths to exploit the best external opportunities?

 S / T: Use strengths to deal with external threats?

 W / O: Overcome weaknesses to create good conditions for taking advantage

of external opportunities? Need to exploit the opportunity to gradually overcome the current weaknesses?

 W / T: Overcome the current weakness to reduce the risks?

+ Step 3: Provide a combination of four factors S + W + O + T to create a resonance

between the four elements to form a strategy through which help businesses to use its strengths to best exploit opportunities, gradually overcome the weaknesses and reduce risk

+ Step 4: Synthesis and reviewing strategies Grouping strategy and strategic

collaboration for system supporting each other

Table 1-3: SWOT Matrix

Factors Opportunities (O) Threats (T)

SWOT

Strengths (S) Solutions (SO) Solutions (ST)

2

to take advantages of opportunity to overcome threats

Weaknesses (W) Solutions (WO) Solutions (WT)

2

to take advantages of opportunity to overcome threats That:

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 SO strategy - "development" strategy: Combining factors of opportunities and strengths of business to carry out expansion and diversified development

 WO Strategies: The weaknesses is more than strengths but external opportunities are dominant, corresponding to the name of "competition"

 ST Strategy: This is a situation the company to use inside strong conditions

to resist the external obstacles conditions This strategy is called the

"Resistance" strategy

 WT Strategy-"Defense": The company does not deal with external threats, deprived of the ability to grow In this situation, the company only have 2 directionsare bankruptcy or association with other companies

1.3.5 QSPM Matrix Tool

QSPM Matrix is an effective tool that allows experts to assess objectively the strategies selected QSPM matrix requires keen and correctjudgment, experts

+ Step 1: List the lagre external opportunities / threats and internal important

weaknesses / strengths in the left column of the QSPM matrix

+ Step 2: Classify each critical successful factor outside and inside the business + Step 3:Study the matrix in the second stage (combined) and identify the strategies

can be replaced that organizations should consider to implement

+ Step 4: Determine the number of attractive points (AS):

1 = not attractive 2 = less attractive

3 = attractive 4 = very attractive

+ Step 5: Calculate the total attractive points (TAS): the higher total attractive

points are, the more attractive strategy is (in terms of critical successful factors on the next side)

+ Step 6: Calculate the total attractive points It is the sum of the total attractive

points in the column of QSPM matrix

In addition to the above tools, in the process of developing strategies for business, it

is necessary to use some additional methods such as expertise method, customer’s opinion survey methods combined together to plan the most efficient strategy

Address: 84 Quan Thanh – Ba Dinh – Ha Noi

Charter capital: 30 billion VND, Including:

 State-owned Capital: 15.3 billion VND, equivalent to 51% of the charter capital

 Capital contributed by other shareholders: USD 14.7 billion or equivalent to 49% of the charter capital

The company has 07 dependent accounting units, including:

 Food Trading Branch

 General trading Branch

 High quality rice Branch

 Hoan Kiem Trading Branch

 Dong Da Trading Branch

 An Giang Branch

 Milling and processing food and agriculture, forestry,

 Cultivating plant and feeding seafood

 Trading of hotels, guest houses, restaurants, etc

 Wholesale, retail and agents of alcohol, non-alcoholic beverages, cigarettes

2.1.2 The process of formation and development:

The predecessor of the company is state-owned enterprise as Hanoi Food Company

- a member of the Northern Food Corporation which is equitized and put into operation in the model of Joint Stock Company on Apr 1st, 2005

Activities of the Company specialize in the production and processing of food, agricultural products, and the services sector for the people's lives of the Hanoi capital

With the target of expanding and constantly developing, the Hanoi Food Import and Export Joint Stock Company are willing to cooperate, joint ventures with other domestic or foreign units and individuals

Certificates:

 The Third –Lass Labor Order awarded by the Stat

 The merit certificate of the Government, the Ministry of Agriculture and Rural Development, Northern Food Corporation

 The Golden Cup of the typical enterprise 2003 in Vietnam Business Fair towards the Thang Long thousand years (organized by Vietnam Standards and Consumer Protection Association)

 The Merit Certificate of the Hanoi People's Committee for the typical enterprise that contributed to the success of the International Trade Fair in Hanoi EXPO

2005

 Golden Cup of reputable enterprise, enterprise quality of the Vietnamese brand

in 2006

 Golden Cup of the Hanoi Typical enterprise in 2006

 Gold Medal of the Vietnam International Trade Fair EXPO 2007 for the product

of Nam Do - Gold Label

2.1.3 Organizational structure:

Board of Directors and Board of Supervisors are elected by the General Meeting of Shareholders of each annual general meeting of shareholders with administrative tasks of operating companies under the company charter

Director and Board of Directors consist of four people appointed by Board of Directors with the task of managing and operating activities of the company to comply with the company and the target, policies outlined by the General Meeting

of Shareholders and duties entrusted by the Board of Directors

The operating organization includes:

 Assistant division for the Board of Directors

 Board of Supervisors

 Factory

 Sales Division: including the Market – Sales Department and branches of business implementation and product consumption of the Company

 Support Department: including Finance and Accounting Department, Department

of Administration and Organization and Construction Management Department

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Source: VIHAFOODCO’s Documents

Figure 2-1: The structure of organization, management and operation of the VIHAFOODCO

The total number of employees of the Company is 290 people including staffs who stick to the company from the beginning of establishment are up 40% of the total number of employees Strengths of the company are that employees have high solidarity, dedication and loyalty to the Company However, direct manufacturing labor force is mainly unskilled workers

2.1.4 Production capacity:

With a rice-processing factory under the export standard and warehouse in Chau Doc, An Giang, the production capacity of the company by the year 2012 is specified as follows:

 Processing capacity: 80,000 - 90,000 tones / year

 Paddy storage capacity of the warehouse: 5,000 tons of paddy

 Rice storage capacity of the warehouse: 7.000 tons of rice

 Storage conditions in the warehouse: 6 months

N DEPT

ACCOUN- TING DEPT

FINANC-BOARD OF

DIRECTORS-PRESIDENT

4 MEMBERS

BOARD OF SUPERVISORS MANAGER + 2 MEMBERS

FINANCE DEPUTY DIRECTOR SALES DEPUTY DIRECTOR PRODUCTION DEPUTY

DIRECTOR

ASSISTANT DIVISION FOR BOARD OF DIRECTORS

CONSTRUCTION INVESTMENT DEPT DIRECTOR

- 29-

 Peeling line: 11 tons of paddy / hour

 Lines for polishing and whitening : 10-12 tons of rice/hour

Capacity targets:

 The total capacity: 190.000 tons/year ;

 Source:

 Self-production: 90.000 tons/year

 Purchase outside:100.000 tons/year

 Total warehouse area: 8.000 m2

 The total capacity of paddy and rice warehouse: 12.000 tons

Although the factory capacity and storage system is at the average, with the system

of the milling equipment, special-purpose polishing and polishing of rice production, in addition to acquiring and continuously updating new technology, VIHAFOODCO increasingly create value and product quality to fully meet the standards for rice export

 The process of rice processing:

Source: VIHAFOODCO’s Documents

Figure 2-2: The process of rice processing in the factory

Paddy

Broken rice Bran

Broken rice Bran

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2.2 Analysis of the external environment (EFE), identify opportunities and risks affecting the business activities of the company:

2.2.1 Macro environment:

2.2.1.1 Political environment, policy and law:

 Political and security situation is relatively stable now

 The legal system is being amended increasingly in accordance with the development of the economy

 After five years joining officially the WTO (Jan 11st

, 2007), Vietnam's legal environment has changed in many areas In general, Vietnamese legal environment is expanding to the field of social adjustment However, according

to the rule of respecting the law of the WTO, Vietnam's legal environment is still problematic, among them, the most prominent problem is that we still do not have enough legal sanction and legislation construction quality is still too low

2.2.1.2 Population, social and cultural environment

Vietnam is a populous country with more than 87.84 million people (census in 2011) and is the 13th most populous country among the world's most populous countries The annual population growth rate is about 1.57% on average, so the momentum of population growth remains high and will be maintained in many years According to the coming forecast, Vietnamese population will continue to increase to the mid-21st century

Table 2-1: Average population by urban and rural areas over the years 2007 to 2012 *

Norm Calculation unit 2007 2008 2009 2010 2011

1 Population Million people 84,218.50 85,118.70 86,025.00 86,932.50 87,840.00

2 Town Density 28% 29% 30% 31% 32%

3 country side Density 72% 71% 70% 70% 68%

Source: General Statistics Office of Vietnam

According to the table above, we can see that the labor force and labor market are mainly in rural areas Despite rapid urbanization, 70.4% of Vietnam's populations

of the Department of Science and Technology, in general, there are few high technology businesses Most businesses are using outdated technology Many machines, equipment, technological chain are old, patchy and asynchronous Workers are low skilled Therefore, product competition in the market is weak Management level of enterprises have not been renovated and upgraded, only a small percentage of enterprises apply advanced quality management system such as: ISO, SA, HACCP and so on

In the context of Vietnam's accession to the World Trade Organization (WTO), technology is considered the most powerful competitive weapon Technological innovation will create more advanced products, better product quality, higher productivity, lower production costs, lower product costs, better competitive advantage in the market

Rice processing industry has developed rapidly in recent years However, most of the processing of rice in the country today is just in the milling process, sorting and packing, hardly carries out the complete process including size sorting, polish and dry Processed rice quality is low, value added in processing rice is not much, just contribute about 19 - 20% for value added / ton of rice while in Thailand, it is 26% Losses after harvest (including harvest, transport and processing) are still large, accounting for about 11 - 12%

2.2.1.4 Economic environment:

Based on the result of the first 9 months of 2012 and the estimated result in the last months of the year, the Government has made specific assessment of the economic situation in 2012 as follows:

 Budget revenue reached 67.3%, 71.2% of budget expenditure is estimated With positive signs of the end months of the year, it is forecast that annual budget revenues meet the target, ensure to keep the budget expenditure and over budget expenditure at 4.8% of GDP, achieve the National Assembly’s target

 The total investment fund for social development is estimated at 29.5% of GDP (in 2011, it is 134.6%).Many remedies to solve difficulty are made; business situation is gradually improved Inventory reduces The number of businesses stopping, or dissolving has reduced but is still high compared to the same period of last year The number of newly registered [3] enterprises has increased but is still lower than last year

 Industrial production increases gradually over each quarter Industrial production index of the first 9 month rose 4.8%; annual increase is about 5.3% Mining and manufacturing industries that cause pollution consume less energy than the average Many foreign invested enterprises applying high technology strongly develop exports

 Agriculture, forestry and aquatic production continued to grow, and play a very important role in stabilizing the economy and rural life Export value of the entire

- 33-

sector during 9 months rose 3.7 percent, and is estimated at about 3.9% for the year Yearly rice yield was estimated 43 million tons, increasing about 1 million tons in comparison to 2011 About 7 million tons of rice was exported, reaching the highest level compared to previous years Aquaculture increased significantly, yearly export reached $ 6.5 billion of total $ 26.5 billion export of the entire industry (in 2011, the number is $ 25 billion)

 The service sector grew higher than the overall growth of the economy Total retail sales of goods and services of the first 9 months increased 17.3%; if excluding the price factor, the sales also increased 6.7% The yearly sales are estimated to increase 18% Annual tourism revenues increased over 15%; the number of international tourists coming to Vietnam increased over 8% Passenger transportation volumes increased 12.1% and 13% for the entire year; post and telecommunications continue to thrive

 Economic Growth of the first nine months reached 4.73%, and about 5.2% for the whole year That was lower than target but the subsequent quarter was higher than the previous quarter; inflation was controlled, macro-economy was more stable All are positive signs for sustainable development in the future

(From " Government's Report on social-economic situation in 2012 and tasks in

2013 that Prime Minister Nguyen Tan Dung presented at the opening session of the fourth meeting of the XIII National Assembly, October 22, 2012 )

Related to rice industry policies, from the beginning of the year, the government has two times decided to purchase rice in the Mekong Delta to store temporarily at the request of the Vietnam Food Association (VFA) and ministries Specifically, the first time was done from 15 March to 30 April with a volume of 1 million tons of rice to rescue the winter-spring crop market The second time was done from 15 July to 15 August with a volume of 500,000 tons of rice of summer-autumn rice However, it is obvious that policy in the past did not achieve the purpose of ensuring that rice farmers make a profit of 30% or more as at the time of rice stockpiling purchase, rice prices also inched up slowly: 50-100 VND / kg, even the

On April16th, 2012, the Prime Minister issued Decision 439/QD-TTg 2012 which approved list of national products done from 2012 under the National Product Development Program to 2020 Among them, "highly qualitative and productive Vietnamese rice products" are in top priority Decision issued required businesses to stand side by side and support farmers’ right from the production stage, not distribution stage It is one of the radical solutions to industrialize production value chain, terminate term of export "raw agricultural products", and create Vietnamese rice brand to be worthy of "national product list"

2.2.2 Micro Environment:

2.2.2.1 The world market:

 World rice production situation:

According to the U.S Department of Agriculture (USDA), global rice production in 2011-2012 was 465.4 million tons, up 2.65 million tons from the previous forecast and increased 3% compared with the rice production in 2010-2011 due to the global harvested area increased Production is forecast to grow in countries: Myanmar, India, Malaysia, Egypt, China, Pakistan, the EU, Colombia, Nigeria, Australia, Indonesia and Sri Lanka

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Source: U.S Department of Agriculture (USDA)

Figure 2-3: Global rice production from 2000 - 2012 * (million tons)

Philippine rice production in 2011/12 is forecast to decline 84 thousand tons, and gain 10.6 million tons

Annual global consumption in 2011/12 is forecast at 462.9 million tons, up 3.0 million tons compared to the forecast made last month Consumption is forecast to increase in countries such as Myanmar, India, Nigeria, Bangladesh, China, Thailand and Vietnam

In addition, consumption is expected to decline in Brazil; Ecuador; the Philippines and the United States

Million tons

Production Area

Million ha

- 36-

Source: U.S Department of Agriculture (USDA)

Figure 2-4: Rice consumption volume and reserve/consumption rate in the world throughout the years

Global reserve in 2011/12 is forecast to reach 100.3 million tons, increasing 0.2 million tons from the previous forecast and is 3% higher than 2010/11 Reserve is forecast to rise in Cambodia, Colombia, Malaysia, China, India and Thailand Reserve is forecast to reduce in countries of Brazil, Indonesia, the Philippines and the United States

Department of Agriculture, the global trade in 2011-2012 was 38.51 million tons, increasing 0.3 million tons from the previous forecast, and increased 6.3% compared to crop 2010-2011

* Exports: The rice exporting volume of the major rice exporting countries in 2012

is estimated to increase during 2011-2012 and decline slightly in crop 2012-2013 Thailand's rice export in 2011-2012 is estimated to reduce 4.0 million tons from the season 2010-2011, reaching 6.5 million tons; Brazil's rice exports is estimated to fall 96 thousand tons, reaching 1.2 million tons in the crop 2011-2012 The decrease

is due to limited supply Exports are also forecast to decrease in Argentina and a number of other countries In contrast, Australia, Egypt, India and Pakistan are forecast to increase export during 2011-2012

Million tons

Consumption Store/consumption rate

Rate

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Table 2-2: Rice export of some of the world's major countries over the years 2006-2013*

Source: U.S Department of Agriculture (USDA)

* Import: According to the forecast in December 2012 of the U.S

Department of Agriculture, import demand of the world in 2011-2012 reached 35,931 million tons (an increase of 6.55% compared to 2011) but tend to decrease slightly in the import forecast in 2012-2013

The main importing countries are Asian countries such as Philippines, China, Indonesia, Iran, Iraq and other countries in Africa

- 38-

Table 2-3: Some largest rice-importing countries over the years 2006-2013 *

Source: U.S Department of Agriculture (USDA)

* World rice prices:

Besides the increase in export prices of Thai rice, rice exporting prices in other rice exporting countries in the world tend to decrease

- 39-

Table 2-4: Prices of some exported rice in the world in recent years (U.S.D /ton)

Source: U.S Department of Agriculture (USDA)

2.2.2.2 Vietnam's rice export market:

By the end of September 2012, according to Vietnam Food Association (VFA), rice contracts that businesses have signed are up to 7.2 million tons, reaching the highest level, but export value is down 7.9% compared to the same period in 2011 due to significantly reduced prices Specifically, the average rice export price of the first nine months of this year reached 443.3 USD / ton, $ 35.7/ ton lower than the average price in the same period in 2011 In January 2012, rice export price was only 440 USD / ton, over 80 dollars/ton less than that in the same period in 2011

(From "Rice exports in 2012: volume up, value down" of TuoiTre online)

Source: Vietnam Food Association (VFA)

Figure 2-5: Turnover and export production in the first nine months of 2012 and compared with the same

period of the previous year

Calculation unit: million

Value 2.816 billion $

Value 2.591 billion $

Value 2.280 billion $

Source: Calculated data from Agro Monitor customs offices

Figure 2-6: Density of exported rice in recent years

Major exported rice in recent years is 5% to 25% broken rice, accounting for more than 80% of the total annual volume of exported rice However, since early 2011, 25% broken rice started to decrease markedly and 2 kinds of rice 5% broken rice, and 15% broken rice has become key exported rice of Vietnam

Consumer market of Vietnam's exported rice is mainly in Asia and Africa, accounting for 90% the total exported rice However, in the coming time, with cheap rice rates from India and Pakistan, Vietnamese rice can lose 20% market share in the African market

Broken rice Broken rice Broken rice Broken rice Broken rice

Fragrant rice Glutinous rice Other rice Janpanese rice