Business strategy of VinatexMart in 2013-2018

SWOT matrix analysis Chapter 3: BUILDING BUSINESS STRATEGY FROM 2013 TO 2018 OPINIONS AND BASES FOR BUILDING STRATEGY Viewpoint of building strategy General forecast of consumption ma

BUSINESS STRATEGY OF VINATEXMART IN 2013-2018 CAPSTONE PROJECT REPORT

Ho Chi Minh City, January 2013

Group No : 1

Trương Thanh Tú

GLOBAL ADVANCED MASTER OF BUSINESS

ADMINISTRATION

CAPSTONE PROJECT REPORT

BUSINESS STRATEGY OF VINATEXMART

FROM 2013 - 2018

Memebers of Group 1:

1 Dao Duy An

2 Hoang Thi Van Anh

3 Pham Thi Quynh Ny

4 Nguyen Ngoc Quy

5 Truong Thanh Tu

HCM City - 2012

First of all, Group 1 of GaMBA.C0211 Class would like to express our

thanks to Lectures, Professors, Administrators of GaMBA.C0211 Class

who were working and teaching at the Griggs University in Vietnam,

especially who are teaching us directly

To complete the MBA program in the 18-months period in the

condition each student has to work and study are the big effort In this

essay, our group especially would like to thank to the General Director of

the Textile Limited Company Vietnam (Vinatexmart supermarkets chain)

who has supported us to provide the important data and information to

complete this essay

Although we have tried to develop the essay with all the focus and

effort, with inevitable shortcomings, we look forward to receiving the value

contribution of the examiners to improve our business strategies and apply

it to our working industries.

Ho Chi Minh City, December 2012

Group1, GaMBA.0211.

Analysis of external environment

Analysis of internal environment

OVERVIEW ABOUT VINATEXMART

Foundation and development

Functions and tasks

Organizational structure

Business lines

Human resources

About Vinatexmart system

Office and warehouse

Political / Legal issues

Culture and Society

Competitive image matrix

ANYLYSIS INTERNAL ENVIRONMENT OF VINATEXMART

SWOT matrix analysis

Chapter 3: BUILDING BUSINESS STRATEGY FROM 2013 TO 2018

OPINIONS AND BASES FOR BUILDING STRATEGY

Viewpoint of building strategy

General forecast of consumption market in Vietnam

Forecast on the situation of domestic retail sector

Forecast on volume and sales structure at Vinatexmart

SUPERMARTKET CHAIN FROM 2013 TO 2018

Business Goal of Vinatexmart from year 2013 to year 2018

Short- term goal

Long- term goal

Initiating strategies based on SWOT analysis

Penetration and Development Market Strategy

Planning and adjusting strategy of investment in developing supermarket

Develop the supermarket network to increase the coverage and raise the effect of

venue usage

Develop new sales forms

Competitive strategy for products and services

Create outstanding advantages of textile industry

Keep existent customers Strategy

Initiating business plan using the QSPM (The Quantitative Strategic Planning

Matrix)

The QSPM – SO Group

The QSPM - ST Group

SUGGESTED SOLUTION FOR STRATEGY

Market penetration strategy

Developing Human Resource

Developing Brand

Target market

The Service and after service based competition strategy

Improving quality and diversification of service

Diversification of sale forms

RECOMMENDATIONS

Proposals to the Government for the retail business

Recommendations for Vietnamese retail sector

Recommendations for Vinatexmart

INTRODUCTION

1 Essay Purpose:

- Vietnam retail market is growing strongly, rose to become one of seven most lucrative retail markets in the world (rated by RNCOS global research firm) by achieving three important factors: good GDP growth index, majority of young consumers and improved investment policies, notable new features in attracting FDI in recent years is the investment structure has shifted from industry to the field of trade - services

- According to the General Statistics Office, in 2007 Vietnam retail market reached 45.7 billion US$, then increased 31% in 2008 compared to 2007 (in actual price) and is expected to grow by about 20% per year to 2015 Especially

in the context of financial crisis, inflation, rising price as at present but optimism index of Vietnamese consumers rise every year - ranked fifth in the world in 2008 (ranked by AT Kearney management consulting Inc USA) Vietnam has become the ideal destination for foreign retail investors to create exciting retail environment with many opportunities for consumers accessing to diverse types of goods, at competitive price, however it has also caused big pressure on domestic retailers:

On objective aspect: difficulties come from the lack of appropriate orientation; while the competition in this market is quite big, Vietnam enterprises are not only under pressure from foreign retail groups are quite successfully operating in the country such as Metro, Big C, but also a lot of other foreign corporations are trying to penetrate local market such as Carrefour (France), Tesco (UK), Diary Farm (Hong Kong)…

On subjective side: Vietnam's retail system remains developed in spontaneous direction, lack of stability and sustainability Vietnam retail businesses are small and grow slowly; lack of big business with advanced and scientific management methods However, in order to survive and develop, a few years ago, domestic retail businesses have quickly implemented action specific strategies Many businesses have conducted reengineering, setting up

distribution channels, mobilized capital in various forms to meet development objectives; while tried to recruit and train human resources in order to achieve professionalism, enough power to run the system and capture opportunities; Vinatexmart has also moved in that direction

- Despite the advantage of "home field" but actual operation, market coordination and handling situations in the past of local retailers still have many weaknesses such as Mr Phan Le Dung (bran senior expert, General Director of Sunrider Company Malaysia) said: " the logistics are not yet powerful in terms of management tools and process; lack of professionalism and modernity in both buying and selling methods; lack of financial and human resources "[Source: Women newspaper 18/07/08] Therefore, the important issue is that Vietnam retailers have to build a long-term development strategy, locate potential customers, identify market segments and target market

- Wishing to contribute a small part in this exciting market, our team would like to select the topic "Building business strategy for VINATEXMART supermarket chain from 2013 to 2018" for the thesis

3 Object and scope of research:

- Object of research: focus on studying environmental factors inside and outside affecting the business results of enterprise, and also examine main competitors and potential competitors of the enterprise in order to make overall assessment, which sets out appropriate strategies and solutions

- Scope of research: the paper mainly researches strategy at the company level in retail system of Vinatexmart supermarket chain on the basis of analyzing business environment through application of strategic analysis models as IFE,

- The method of exchange to obtain expert opinions;

- Analysis and synthesis method

5 Structure of the thesis:

Consists of two parts A and B, in which:

PART B: CONTENTS, INCLUDING THREE CHAPTERS:

CHAPTER 1: Overall theoretical basis of business strategy;

CHAPTER 2: Analysis of current business of VINATEXMART;

CHAPTER 3: Building business strategy for VINATEXMART from 2013 to 2018;

CHAPTER I THEORETICAL BASIS OF BUSINESS STRATEGY

I CONCEPT:

1 Definitions:

- “Business strategy of an enterprise is an overall program of action towards the realization

of the enterprise goals"

- So we can understand that business strategy is to lead the enterprise to keep right direction in fastest way to its goals

2 Meaning:

- In current increasingly competitive and constantly changing business environment, outlining business strategy based on the research on environment in which business is active as well as reviewing internal organization will help business taking advantage of business opportunities, avoiding threats from the environment

- Furthermore, thanks to this approach, enterprise can understand more about partners as well as strengths and weaknesses in its internal structure, so that it shall be creative, dynamic in responding to the external impact rather than accepting passively it In addition, planning business strategy is an interactive activity including exchange, guidance, support and commitment from leaders to staff When employees understand what the company is doing and why, they often feel they are part of the organization and become attached to support it Administrators and staff will have surprising creativity and innovation to pursue goals and strategies of the company

3 Classification:

3.1 Focus growth strategies:

Usually, these strategies focus on improving existing products or exploiting current market

in a better way, consisting of three strategies:

 Market penetration: a strategy to grow market share for existing products in current

market through promoting marketing activities

 Market development: a strategy to launch existing products into new markets while

maintaining quality management and customer service

 Product Development: a strategy to improve existing products or develop new products in current market However, research and development costs are usually big

3.2 Integration strategies:

This is a strategy to exploit further existing potential of the business, it’s usually applied when business is afraid or cannot use one of focus growth strategies because strong industry or market saturation

 Backward integration: a strategy to seek ownership or increase the control over the

company's suppliers This strategy is appropriate when suppliers are in the rapidly developing sector or have potential to big benefit, profit; or the company's current suppliers cannot be trusted, are too expensive or incapable of response

 Forward integration: a strategy to seek ownership or increase control over

distributors and retailers An effective way to implement this strategy is franchising

 Horizontal integration: a strategy to search for ownership or control over

competitors (including merger, acquisition or capturing control) to increase exchange of resources and capacity However, the merger between direct competitors may be more effective than integration between enterprises are not in the same industry due to the inefficient use of means and ability and the difference in management capacities Applying this strategy should pay attention to the antitrust law

3.3 Diversification strategies:

To diversify the business activities so its does not depend on a single industry Diversification strategy is often applied to:

- The existing market is saturated;

- Enterprise with surplus cash that can be used to invest;

- Enterprise can benefit from resonance effect of diversification (e.g cost savings by using some common departments);

- Benefits from tax;

- Benefits can be applied from today technology diffusion effect;

- However, these strategies should be tested before taking action to limit excessive consumption of resources Diversification strategies include;

 Concentric diversification: a strategy to develop more new products but linked to

existing products

 Horizontal diversification: The strategy is to develop more new products (but not

related to current product in technical aspect) in current market

 Conglomerate diversification: a strategy to develop more new products (technical or

technology different from one of existing products) in the new market Using this strategy should pay attention to the management and financial issues (may have to invest in more industries adopting new technology and to exploit new market) Special note is that this is a long-term strategy, not for purpose of improving cyclical and seasonal recession of current business

3.4 Reduction strategies:

Apply in the period of economic recession or when the enterprise cannot see business opportunities or direction of long-term development in a time, which can be that the enterprise finds other more attractive opportunities than opportunities it is pursuing

These reduction strategies are:

- Narrowing activities: implementing one or more methods, such as stopping

production line or unprofitable business, closing obsolete factories, laying off employees, reducing advertising costs, research-development cost in order to cut costs Depending on the degree of reduction, narrowing operations has two forms: simple rectification (short-term strategy) or reduction of capital (when the rectification

is not effective, they must withdraw completely capital from ineffective operations)

- Harvesting: i.e selling a branch or part of the company, looking up to maximize cash

flow in a short time regardless of long-term consequences

- Disposal: selling all assets;

3.5 Other strategies:

- Merging: two companies merge into a new company, bearing a new name issue of new

securities, new organizational structures and perform other activities

- Acquisition: buying other business and take it into operation such as a branch or

industry operated (business bought can keep its own name) Merger and acquisition are made when deemed having benefits in time and cost compared to internal development

- Joint Venture: Two or more companies form an independent company for cooperation,

implementation of goals that a single company hardly implements

- Summing up: a business can pursue two or more strategies simultaneously

II BUSINESS STRATEGY FORMULATION PROCESS:

1 Environmental Research:

1.1 Analysis of external environment:

- External environment of a business consists of factors outside the business, though

uncontrollable but affecting the business and results of business operations Environment can be divided into two levels: macro environment (general environment of all business sectors) and micro environment (characteristic environmental of an industry)

- Macro Environment: including factors:

 Economic factors: have a huge impact on businesses, such as fiscal and monetary policies, period of economic cycle, interest rates, balance of payments

Implementation of external control to identify key opportunities and threatsI

Set up long-term goals

to pursue

Feedback information Feedback information

 Government and political factors: legal system and government policies also considerably affect operation of business (tariffs, product quality standards, environment protection rules, etc.)

 Social factors: usually affect businesses in a slow and hard to recognize way, it’s to predict the effect level to have appropriate strategy (although there are factors affecting quickly as consumer trend, entertainment trend, etc.)

 Natural factors: growing demand of human beings lead to threats in depletion of natural resources, lack of energy and environmental pollution, which considerably impact strategy planning

 Technology and technical factors: with strong pace of current science technology development, most businesses can take advantage of technology transfer and threats

of competition from competitors having new technology solutions More important

is to pay attention to life cycle of technology (because today's technology has shorter life cycle) and actual effectiveness of technology as applied to the practical operation of the business

- Micro Environment:

Figure 1.2 - Porter's Five Forces

 Competitors: to analyze competitors based on criteria such as future objectives, consider competitors on their own, the strength-weakness, current strategies

 Client: can be considered as the most important partner of the business Learning as clearly about customers as helping best business to meet their demand Companies usually establish "profile" of customers to orient the consumption

 Supplier: business may face pressure from vendors, so the business should not ignore studying those (including vendors of materials and equipment, financial communities, labor sources)

 New potential rivals: new companies involved in the industry can reduce the profits

of the enterprise (the acquisition of other facilities in the industry is the expression new competitors)

 Alternative product: limiting the profit potential of the industry It’s to note to potential substitutes

 Analysis tools: using external factor evaluation matrix (EFE) and competitive image matrix

 External factor evaluation matrix

- After analyzing above external factors, building EFE matrix allows synthesis and assessment of analysis There are five steps to build matrix:

- List external factors having decisive role (in the range of 5 to 20 factors), including opportunities and threats for business and industry

- Rank the importance from 0.0 (not important) to 1.0 (very important) for each factor Opportunities usually have higher rank than threats, but serious threat may also have higher rank Appropriate rank can be determined by comparing successful competitors with failed competitors or by group discussion Sum of ranks assigned to these factors must equal 1.0

- Ranks from 1 to 4 for each determinant factor of the success show how the company's current strategy responses to these factors; including 4 is good response, 3

is above average response, 2 is average response and 1 is little response These ranks are based on the efficiency of business strategy

- Multiply the importance of each variable with its rank to determine the importance score

- Sum importance scores for each variable to determine the total score of importance

of the business

Figure 1.1: EFE Matrix

1

2

3

…

Total:

 Competitive image matrix:

- Competitive image matrix is an extension of external factor evaluation matrix in order

to identify key competitors with their strengths and weaknesses In the competitive image matrix, the ranks of rival companies and total score of importance of these companies are also calculated

Figure 1.2: Competitive image matrix

Success factors Important

level

Company A Company B Company C

grade Important

points grade

Important points grade

Important points

1

2

3

4

……

Total

1.2 Analysis of internal environment:

Analysis of resources:

- Human resources: including managers at all levels and executives

+ When analyzing managers at all levels, it needs to consider skills (thinking skills, human skills, technical skills and teamwork skills) with different levels between ranks; assess professional ethics and results achieved- benefits to the organization

+ Analyze executives based on technical skills, professional ethics and results achieved in each period, each specific task

- Material resources:

+ Classify existing physical resources (monetary capital, machinery and equipment, buildings, land, reserve materials, inventory, accumulative information capital, etc.)

+ Determine the size of structure and quality and characteristics of each source

+ Assess ability to meet actual needs

+ Assess strengths-weaknesses of each resource compared to competitors

- Intangible resources: it is a business philosophy, strategies and policies, effective

organizational structure, corporate reputation and leaders, credibility and market share of trademark, product brand, customer loyalty, organization culture

+ Intangible resources also need to be classified, evaluated and compared with competitors and determine what resources should to be focused for development

+ Analyze and evaluate current goals: to expect adjustments or expect future goals

+ Analyze the operation of functional units in the organization: including departments: marketing, HR, finance and accounting, research and development, purchasing, production; quality management and operation of information systems

Analysis tools:

- Final steps in the implementation of internal analysis are to develop IFE matrix consisting of five steps;

- List internal strengths - weaknesses (between 5 to 20 factors);

- Identify the importance from 0.0 (not important) to 1.0 (most important) for each factor, mean the relative importance of that factor for the company's success in the industry Total all levels of importance must be equal to 1.0;

- Classification from 1 to 4 for each factor (biggest weakness: 1, smallest weakness: 2, minimum strength: 3, biggest strength: 4) Multiply the importance degree of each factor with its type to determine the importance score for each variable Sum all important scores showing the organization's importance score (from 1.0 as lowest, 4.0 highest, and 2.5 as average) The sum of importance levels is always equal to 1.0;

Figure 1.3: IFE Matrix

Main internal factors Important level classification Important points

- SO strategy (offensive strategy): using inner strengths of the company to take advantage

of external opportunities

- WO strategy: improving internal weaknesses in order to be able to exploit external opportunities

- ST Strategy: using internal strengths to avoid or reduce the impact from external threats

- WT Strategy (defensive strategy): improving internal weaknesses at the same time avoiding external threats

Figure 1.4: SWOT Matrix

 Steps to set up a SWOT matrix:

 List internal strengths and weaknesses standing out in the company and with external major opportunities, threats in 4 independent cells

 Combine strengths with opportunities and specify SO strategies in the appropriate cell

 Combine weaknesses-opportunities and specify WO strategies

 Combined strengths-threats and specify ST strategies

 Combine weakness-threats and specify WT strategies in cell

 After the SWOT completed, carry out summary the combination plans:

Figure 1.5: The strategic plans

 List external important opportunities/threats and internal strengths / weaknesses in the company The matrix should include a minimum of 10 external critical success factors and 10 internal critical success factors

 Classification for each factor This classification is the same as in EFE, IFE matrix and is presented in vertical column to the right of factor column

 Record strategies obtained from building strategy (here from SWOT matrix) in the top row

 Determine the relative attractive score of each strategy compared to other strategies

in the group The attractive scores are classified from 1 = not attractive, 2 = relatively attractive, 3 = attractive, 4 = very attractive

 Calculate total attractive score of each row by multiplying ranking score with attractive score in each row

 Total attractive score for each column of strategy, higher score indicates more attractive strategy

Rank

Strategy 1 Strategy 2 Strategy 3

AS TAS AS TAS AS TAS

* The internal factors:

AS: Attractions Score TAS: Total attractions score

4 Requirements to build and implement strategy:

- When developing strategies, it’s to exploit thoroughly comparative advantages of the business, focusing on utilizing strengths rather than overcoming weaknesses in order to increase competitive advantage in the marketplace, especially in the context of today acute competition

- The strategy introduced to be applied only after possibility of threat is calculated carefully and cut down to a minimum

- Need to define business scope, objectives and basic conditions to achieve objectives Too wide business scope will lead to the spread of resources; too narrow business scope will not use up resources Objectives should be clear and emphasize key objectives There must be a system of policies, measures and technical and material conditions, and labor to carry out objectives set

- As building business strategy is for future application, so predicting the future business environment is essential, especially when the volatility and complexity is increasing in today business environment To predict well, it needs extensive and accurate source of information as well as good judgment

- Must have a backup strategy because the prediction of business environment is not absolutely accurate

- It should not seek perfection too much leading to every little detail in strategic planning that ignores the opportunity to launch the strategy; it might even make strategy obsolete compared to daily change of the market

CHAPTER II ANALYSIS OF ACTUAL BUSINESS ENVIRONMENT OF VINATEXMART

SUPERMARKET CHAIN

I OVERVIEW ABOUT VINATEXMART:

1 Foundation and development :

- Vietnam Fashion – Textile Trading Company Limited with 100% state-owned capital

directly under Vietnam Textile-Garment Group (Vinatex) is a combination of

multi-owned companies including the parent Vietnam Textile and Garment Group, research and training units, nearly 100 subsidiaries and associated companies which are joint stock companies, running multi-sector business from textile business to commercial and service activities, wholesale distribution, retail, financial investment, investment in the textile support industry

- Vinatexmart Supermarket chain is the name of Vietnam Fashion – Textile Trading Company Limited

Vinatexmart went through following stages of development:

Start-up: from 2001 to 2002

- 10/10/2001, According to Decision number 1021/QD-HDQT of the board of directors

of Vietnam Textile and Garment Group, was officially established Vietnam fashion trading center

- On 27/10/2002 at No 34 Ba Thang Hai St., 10th Ward Ho Chi Minh City, Vietnam fashion trading Center opened its first store

- On 25/06/2002, the ministry of industry and trade signed Decision No

1478/QD/TCCB renaming Vietnam Fashion Trading Center as Vietnam Fashion Trading Company

- Trading Name in English: VIETNAM FASHION COMPANY

- Vinatexmart Brand name: VINATEX FASHION

Transition to development: from 2003 to 2010:

- On 29 January 2003, the open of Nguyen Tat Thanh supermarket at 300 Nguyen Tat

Thanh St., Ward 12, District 4, Ho Chi Minh City marked a new development of vinatexmart fashion from specializing in textiles and apparel to general multi-sector supermarket business

- On 02/12/2009, according to Decision number 6075/QD-BCT of the Minister of

Industry and Trade on the approval of plan and conversion of Vietnam fashion trading Company into Vietnam Textile Fashion Trading Company Limited

Mark of a new development stage: from 2011 to present

- On 04/07/2011, the official launch of activity model of Vietnam Textile Fashion

Trading Company Limited

- On 10/10/2012, vinatexmart officially launched new brand identity system The

ceremony of new brand identity was held in the reception room, the Reunification Palace was an important event marking a strong and comprehensive move

- Vinatexmart’s new identity system is designed in harmony, modernity but retains

traditional Vietnamese identity, with a logo bearing colorful stylized lotus flower symbolizing noble philosophy of human life, dedication, strong vitality of the Vietnamese people The lotus is also a national symbol of Vietnam attached to the

slogan "Accompanying Vietnam goods" Vinatexmart’s new identity image reflects

vision-mission-core values in the process of serving customers, bringing value to a beautiful life to customers through Vietnam branded products of good quality, worth value and convenient services, while contributing to social security, environmental friendly

2 Functions and tasks :

2.1 Functions:

Vinatexmart was established with following functions:

- Specializing in fashion textile, garment business

- Trading in industry food, fresh food, cosmetics, household goods, souvenirs, toys

2.2 Tasks:

With above functions, the company has following major tasks:

- Vinatexmart is the distribution channel of textile goods for Vietnam textile

businesses - especially businesses which want to launch products in the domestic market

but not yet fully capable of building distribution system This move of Vinatexmart indirectly contributes to create jobs to hundreds of thousands of textile workers

- To increase options for customers, Vinatexmart takes part actively to programs of

"price stabilization", bringing Vietnam goods to rural areas to serve people in remote

areas, building mini marts for garment workers with goods of ensured quality and at reasonable price It is an opportunity for Vinatexmart to reach consumers and promote quality and design of Vietnam garment products

- Vinatexmart accompanies vendors, supports, shares difficulties and creates favorable

conditions to suppliers to get Vietnam goods into the system Vinatexmart commits to its role of good distributor, especially textile distribution

- Vinatexmart commits to be a support, a bridge between Vietnam manufacturers and

Vietnam consumers Vinatexmart distribution channel represents Vietnam enterprises to bring Vietnam goods to Vietnamese consumers

- It is the goal that Vinatexmart commits with suppliers and consumers to build value of the

message "Accompanying Vietnam goods"

3 Organizational structure:

3.1 Business lines:

- The company is constantly looking for and exploiting to create the richness and

diversity of goods making more choices for customers, from garment stores till now, vinatexmart has become a general supermarket system with more than 50,000 items from more than 1,000 suppliers, consisting of five main business lines:

 Textiles,

 Food,

 Chemical products,

 Household goods,

 Souvenirs and toys

In particular, textile is a key line System has attracted more than 300 textile suppliers

CHAIRMAN OF THE BOARD MEMBERS

GENERAL DIRECTOR

DEPUTY GENERAL DIRECTOR OF FINANCE

DISTRIBUTION

MANAGER

SALES MANAGER

COMPUTING MANAGER

SALARY POLICY MANAGER

TRAINING MANAGER MARKETING

DEPUTY CEO

3.2 Human resources:

In the development of system, Vinatexmart always has policies to attract human resources for continued development and expansion With 29 employees from the start up, the company has 2,879 employees working throughout the system to date With many preferential and more and more complete policies, Vinatexmart staff is constantly rejuvenated and improved in terms of quality, bringing new winds into the system to make

up a work space full of vitality

4 About Vinatexmart system:

4.1 Office and warehouse:

In order to implement strategy of distribution channel expansion and business strategy in the coming years, Vinatexmart invested in the construction of headquarters in Le Minh Xuan Industrial Park, Binh Chanh District, Ho Chi Minh City covering 58,000 sq m including office area, design supermarket, distribution center, warehouse and cold storage system, food processing and packaging area, training center, hostel for officials and employees, collective kitchen, sports and entertainment area invested with modern, professional infrastructure, equipment, facilities to meet the need fro long term development of Vinatexmart The project is expected to be completed and put into operation in late 2013

4.2 Distribution Center:

Vinatexmart distribution center has advantageous geographical position including standard warehouse system of over 20,000 sq m, 300 sq m of cold storage, 300 sq m of cool warehouse and reserve space for expansion as needed for development of Vinatexmart With modern infrastructure, advanced equipment, professional management software system, inventory system, standard shelves to meet best the management needs and timely distribution in the entire system

operations of Vinatexmart staff Expected in 2014, Vinatexmart training center will train

500 students in order to meet urgent needs of Vietnam retail industry

4.4 Distribution channel system:

Vinatexmart directly distributes goods and services to consumers’ hand through 90 trading locations across the country, stretching from north to south in over 30 provinces, mainly in densely populated areas Vinatexmart is now trading approx 60,000 different items supplied by domestic leading manufacturers, in which Vietnam fashion textile

distribution is a major advantage

4.5 Own brand:

Vinatexmart, supermarket system of Vietnam Textile and Garment Group implements strategy to introduce and distribute textile products in the industry Taking that advantage, Vinatexmart has created four fashion brands: Roni, Dora, Suri, VF for many different people in Vietnamese family with all uniqueness, quality, reasonable price Furthermore,

in order to increase convenience for consumers, more attachment to target customers, Vinatexmart gave birth to the brand Onestop distributing various items in populated areas, areas of crowded workers such as industrial zones, export processing zones, towns, large plants

5 Results of business activities:

5.1 Output:

Initiated by a store specializing in fashion business, right in the first year of establishment,

we sold more than 1 million products in the market, in 2001 we sold 388,692,143 products

in which 56,046,257 garment products accounting for 14.4%, 332,645,887 products of general merchandise accounting for 85.6%

5.2 Sales:

Sales of the company have constantly increased over years at the average annual growth of 67%, including 47% of growth in garment, 121% growth in general merchandise By 2011, sales of the system were 1925 billion VND, including:

i) Sales proportion of merchandise groups in 2001:

- The share of general merchandise in 2011 accounted for 63%, of which:

o Industry food group accounts for highest proportion of 38%,

o Followed by the group of cosmetic goods with 15%,

o Appliances and aquatic food for 6%

- Garment industry reached a share of 37%, of which:

o Men 14%

o Women 10%,

o Children 7%

o Other 4%,

o Own label accounts for 1% of merchandise groups

ii) Sales proportion of garment industry

Proportion of merchandise groups in garment industry in 2011, men accounts for highest percentage with 39%, female 28%, children 20%, other 12% and own label 1%

iii) Sales proportion of general merchandise

Food group accounts for highest proportion with 58% in the share of general merchandise in 2011, group of cosmetic goods accounts for 23%, appliances for 10% and fresh food accounts for 9%

II ANALYSIS EXTERNAL ENVIRONMENT OF VINATEXMART :

1 General environment

1.1 Demographics:

Vietnam is a country of large population (about 86.2 million people, ranked 12th in the world), population growth rate remains high (2000-2008, increase of 1.31%/year) and young population (aged of 15-59 accounting for high rates and increasing steadily over years); simultaneously increasing economic development, people's lives are improved significantly affecting the consumption trend Specifically, GDP per capita has increased significantly: from US$289 in 1995 to US$402 in 2000, US$639 in 2005, US$1,024 in

(6.23%), in particular total sales of retail - services also increased significantly (7.2% after excluding price raising factor) GDP per capita has steadily increased over years shown through increased income, people's lives increasingly improved, as a convenient opportunity for businesses growing

- In 2009, our country’s social economy was taking place in the context of declining world economy Facing that situation, Party and Government directed ministries, branches and localities to implement measures implementing the Resolution of National Assembly 12thsession, with focus is to prevent economic decline, boost production and business, boost exports and stimulate investment and consumption, ensure social security Therefore, despite difficulties, but results achieved by a number of sectors and fields continued to keep quite high rate of growth compared to the same period in 2008, e.g retail sector: total retail sales of goods and services in consumption sector for first four months was 360,358 billion VND According to statistics department, if price factor is excluded, in first four months, total retail sales increased by 7.4 percent over the same period

- However, difficulties were not over as expressed in the consumer price index (CPI) increased dramatically: in 2008 increased by 23% compared with 2007 and in first six months of 2009 increased by 10.46% compared to the same period previous year Even this was a common trend across the world and price rising was getting slow, but still a problem

to be overcome

1.3 Political / Legal issues:

- Over last years, political stability in Vietnam is considered as one of many factors attractive to investors while the world situation experiences many fluctuations The Government has had (and will have) many policies and text to create conditions for the development and enhancing the competitiveness of all industries/manufacturing, business, trade and services; and retail is not an exception

- Decision 1371/2004/QD-BTM setting standards on supermarket, trade center, goods and services in these places; methods to manage operations of supermarket, trade centers; organize the implementation and handling of breach are clearly defined, getting the retail sector into in order and organized operations

- In addition, there are planning and projects approved and issued that are influential to domestic retail market:

+ Ministry of Industry and Trade with the project "stimulating, boosting goods consumption, expanding operations in domestic market" According to this project, the State will support enterprises in domestic market research, organizing a number of thematic fairs, supporting outlet for businesses and supporting in funding sales skills training in rural areas

+ Planning, orienting the development of markets, supermarkets, trade centers system up

to 2015 of the Department of Industry and Trade Ho Chi Minh City: build only new market in the suburbs, inner city markets are effective will be upgraded, ineffective markets shall be gradually transformed into supermarkets, remove spontaneous markets (applies to 238 small or big markets in Ho Chi Minh City) Supermarket shall be 177 (compared with current 82) and will have to add 140 trade centers (currently 22)

+ Project to develop wholesale and retail distribution system in throughout the nation and

in Ho Chi Minh City up to 2015, with vision to 2020

- But this is not yet standards on grocery and convenience stores (no small market share in

retail), at the same time a number of markets continue to operate after the planning has not yet been managed closely, it should have specific written documents providing these problems

- In addition, according to the Ministry of Trade, Vietnam's retail development remains spontaneous, unstable Vietnam retailers have small scale and slow growth; lack of large

enterprises with advanced management method (Vietnam net)

1.4 Culture and Society:

- Experts expressed concern about the Vietnam economy that will continue facing new difficulties, challenges due to the influence from subjective and objective factors Since

2007 to the present, continuous occurrence of avian influenza, foot and mouth disease in cattle, swine Although it was significantly reduced, but also has a negative impact on the supply of agricultural products in the country

- Furthermore, natural disasters, floods (notably flooding rain prolonged in many provinces

in central, unseasonal rains and high tides in Mekong river delta), other crops disease and recent H1N1 flu in people also caused many difficulties, damage to production and people's life

In addition, some issues related to consumer habits include that most Vietnam retailers (including supermarkets, markets, retail shops) have used nylon bag to pack goods (Metro, and BigC and Co-opmart now) instead of using paper bags or recycled bags like in other advanced countries, which increasing environmental pollution

1.5 Technology:

- Though retailers do not require advanced technology but still have to comply with norms

of quality management; storage system, cold storage warehouse, computing system - Customer Information Management System, shelving system of good quality will significantly increase competition

- In addition, information technology development involves e-commerce development, but now in Vietnam, there are still few people doing online shopping due to issues of trust and limited use of payment cards

1.6 Global scale:

- Under the terms of commitments to the WTO, Vietnam had to open the door to many large foreign retail corporations coming for business Facing the perspective of unequal competition with many difficulties, but experts said that Vietnam's retail sector can still grow if the state has a good policy

- Currently, Vietnam is a potential retail market and many foreign corporations have detailed plans to enter Vietnam market The rate of consumption on GDP of Vietnam remains high compared to other countries in the region

- According to 8th annual report of AT Kearney Management Consulting Inc (USA) on "new opportunities for global retailers," Vietnam is one of most attractive retail markets for investors, although Vietnam 60 billion VND retail market is negligible compared to India

or China, but less competition and good economic growth rat From 4th rank in global retail development index (GRDI) in 2007, Vietnam became the most attractive market of 30 emerging retail markets in 2008, 6th rank in 2009 but total drop score was lowest (India from nearly 100 points dropped to 68 points, Russia 60, China - Arab 56 points and Vietnam 55 points) It is thanks to high GDP growth rate, changes in preferential policies for foreign investors and growing demand of consumers for modern retail models 79 million people under 65 years of age, Vietnam is one of markets with youngest consumers

in Asia In 2008, consumption expenditure in Vietnam increased 75% compared to 2000

[Source: Saigon Marketing Newspaper No 63 dated 04/06/08 and 22/06/09] Besides,

according to the result of survey made by economic expertise and human resources research company (Pricewaterhouse Cooper), Vietnam is one of seven most attractive countries in terms of commerce

2 Industry environment:

- Currently, Vietnam is a potential retail market and many foreign corporations are planning to enter Vietnam market Consumption-to-GDP ratio in Vietnam is high compared to other countries in the region; in period of 2001-2011, the rate of consumption was many times higher than the population growth rate that shows the per capita consumption and population's living standards have improved dramatically

- Besides, the influence of modern trade also reflected how Vietnamese people shop, shopping frequency shall be reduced because fewer consumers do daily shopping at the market and but start buying weekly volume In the future, credit card will allow purchases increased, because consumers can use credit card instead of having to carry large amounts of cash [Source: Vietnam market research company]

2.1 Threat of new entry:

- According to experts of the Ministry of Commerce, this is why many corporations have been planning to enter the retail market in Vietnam Of which it must include three world's leading retail groups Wal-Mart (U.S.), Carrefour (France), Tesco (UK) and leading retail groups in Asia as Dairy Farm (Hong Kong) , South Asia Investment Pte (Singapore)

- Domestically, groups running long-term business as Metro, BigC, Coopmart run very successful business These groups are constantly expanding supermarket chain, trade centers exceeding original planning

- Obviously, foreign retail groups are seeing a potential retail market in Vietnam A country

of more than 50% of population under age of 30, with increasing income and consumption is shifting from "food and clothing" to requirement of "good food, nice clothing"

Pressure is not only from foreign corporations, but also from domestic market Vietnam's retail business mainly exists spontaneously based on the old trade In recent years, a number of enterprises have made investment but grown slowly Years ago every year business made tries but just added 1 - 2 large trade centers At this rate we do not only lag behind the world but slow compared to the huge demand of the society

- Mr Hoang Tho Xuan - Director of domestic market policy department, in the WTO, we can only benefit in attracting FDI but face with that foreign retail groups manipulates the domestic market The presence of foreign professional retailers will create enormous competitive pressure on domestic retailers Meanwhile, challenge for Vietnam enterprises are not only threat of being eliminated by foreign corporations if Vietnam enterprises do not develop quickly, will be rejected by consumers

2.2 Power of suppliers:

- Vinatexmart sets priority to select products from manufacturer having ISO 9000 or equivalent quality management system, at least manufacturer having high-quality Vietnam goods selected by consumers We have nearly 1,000 suppliers working, in which 28% of garments and 72 of general merchandise vendors; garment suppliers members under Vietnam textile corporation have supported and cooperated since the establishment as Viet Tien, Viet Thang, Nha Be, Thanh Cong, Phuong Dong, May 10 and largest suppliers of general merchandise as Vissan, Vinamilk, Tuong An, Unilever, P&G, Colgate, Dutch lady Not just pure distribution of goods, creating events stimulating consumption but both parties are always sharing information to find optimal solution in service of consumers in a best way

- Vinatexmart has the advantage of being a company under Vietnam Textile and Garment Group, a system for distribution of Vietnam garment products to all regions of the country, remote areas, so has been supported by Garment companies in supply of goods at favorable price and quality products to serve Vietnam people

- Also, Vinatexmart applies centralized purchasing to facilitate price negotiation with suppliers However, price of some of items are still slightly higher than Big C, Coop mart .Besides, Vinatexmart also experiences some difficulties Some suppliers do not have fair pricing for the system as based on size and number of purchases, discount cut, support transportation cost cut, reducing sales promotion programs as well as promotion goods less than other large systems and setting priority to products on best selling in the market, unique products, higher benefits for other systems that creates difficulties to Vinatexmart

2.3 Power of buyers:

- Main customers of Vinatexart system are average income customers Currently with over 150,000 closed customers, especially over 70,000 VIP customers, Vinatexmart has created a stable quantity of customers

- The result of above survey indicates that consumers are increasingly interested in the factor of easiness to buy (convenient traffic, proximity to residence, workplace, ) above all other factors, in this term, Vinatexmart has biggest advantage thanks to supermarkets stretching from South to North

- But Vietnamese people's income is increasing and people appreciate utility and quality of service rather than price (especially for younger consumers, people with high income), but inflation and ongoing price raise, the price competition between supermarkets is what can not be underestimated, especially with target customers of middle income of Vinatexmart Moreover, if the economic difficulties continue, customers can gradually become very price sensitive However, system of supermarkets easily creates advantages for themselves thanks to the ability to negotiate for bulk purchases

- As the market has many participating retailers, then any business does not grow fast, without good business policy to meet consumers’ needs will be rejected by consumers If businesses do not focus on service, quality, sharing, social responsibility, business ethics will not meet consumer habits Consumers can switch shopping from these retailers to other retailers for better service

2.4 Substitutes:

- Although the trend of modern business, shopping at supermarkets is increasing But in Vietnam, retail goods sold through supermarkets account for 20% compared to 40% through markets and about 40% in traditional stores

- This is due to a number of objective factors as well as practice so "traditional markets" and supermarkets will always tend to replace each other For example, when there is the inflation, most of the housewives will choose shopping at the markets to be able to bargain, discount compared to list price at supermarkets Vinatexmart takes part to "price stability" program for essential goods, as well as goods brought in supermarket is checked for quality, health safety in order to attract customers, clients having peace of mind when visiting and shopping

- Fresh and divers food is also strength of traditional markets Housewives would love to buy fresh food at the market when they can arrange time In addition, a small amount of rich and fastidious customers are willing to accept a higher price to buy delicious food, carefully selected specialties, all new goods of the day, not frozen ones for sale as in supermarkets

- And a very challenging special feature of Vietnam is retail network that virtually no other country has dense system of popular grocery stores preferred for convenience, ease of purchase and quite diverse goods, so market share of grocery store may increase or decrease from time to time but retain their own strengths

- However, shopping at the supermarket is a more modern style, you can buy many things at once, saving time is what today women need, to be assured of the quality of products, shopping places are clean - cool - not crowded, with parking place, lockers, and even children keeping place while shopping, available ATM and have not to worry about bargain, free home delivery and gift wrapping

- Also, it appears pretty much chain of convenience stores such as Shop & Go, Familymart, Vina 24, G7Mart, Best & Buy, Vissan, Cau Tre and many grocery-food stores of small shopkeepers also upgraded to convenience stores that take the retail market share The development of convenience stores in last three years is to anticipate needs in the future

"When level of urbanization increases, convenience stores will be the land of living of retailers."

2.5 Intensity of competition: competition becomes increasingly fierce

2.6 External factor evaluation matrix (EFE):

- From the analysis of external environment, we identify a number of opportunities and threats

to business of Vinatexmart And through consultation with experts, we can determine the level of importance as well as the ability of Vinatexmart to response to each environmental factor; from which to build the external factor evaluation matrix as follows:

of these factors :

- 0,0: not important

- 1,0: very important

Rank

+1: poor response +2: The average response

+3: more response

+ 4: good response

Important points:

+2,5: average +4: good response

to external environment