Improvement in service quality of duc viet cargoteam forward to the international intergration trend

Therefore, the market competition becomes fiercer and Cargoteam has to improve the service quality forward to the international integration trend to win the market.. According to the sta

STATEMENT OF AUTHENTICATION

We declare that all materials presented to Solvay Brussels School of Economics and Management are our own work, gathered, and utilized especially to fulfill the purposes and objectives of this study and specifically acknowledged wherever adapted from other sources

We understand that if at any time it is shown that we have significantly misrepresented materials presented to Solvay Brussels School of Economics and Management, any degree or credit awarded to us on the basis of that material may

be revoked

Academic Tutor : Asso Professor NGUYEN MINH HA

Practicing tutor : Mr HUYNH MINH NHUT

ACKNOWLEDGEMENTS

Firstly, we would like to use this opportunity to send our sincere thanks to all of our Professors from Solvay Brussels School Economics and Management who teach

us very dedicatedly and enthusiastically during the time we study in MMCoM9

Secondly, we would like to express our deep gratitude to our advisor - Professor MARIANNE CLAES, the Academic Tutor – Asso Professor NGUYEN MINH HA and the Practicing Tutor - Mr HUYNH MINH NHUT for their conscientious guidance and very detailed instruction

We also would like to show our gratefulness to the Board of Director, colleagues and staffs in DUC VIET CARGOTEAM who assist and allow us to use all materials, documents, data, statistics, images and information of the company for this project

We are especially thankful to our families for their great support us from the beginning to the end of the course

Finally, thanks a lot for the kind contributions from all of the administration people

in Solvay Ho Chi Minh, the MMCoM9 classmates and friends who discuss and share the valuable ideas with us as well as encourage us to finish this project

Once again, thank you very much for all your nice assistance, we always keep all

in our heart

DANG THU LIEN

BUI TRINH THAO NGUYEN

EXECUTIVE SUMMARY

The economy of Viet Nam now is integrated internationally Particularly for logistics industry, this trend creates opportunities for businesses to export and import goods with low barriers to entry However, this leads to the establishment of new freight forwarders and foreign companies enter Viet Nam’s market easily Therefore, the market competition becomes fiercer and Cargoteam has to improve the service quality forward to the international integration trend to win the market This project will investigate the problems that Cargoteam is facing internally and externally by evaluating the primary data and the secondary data, PEST analysis, SWOT analysis and Servuction system On the other hand, five dimensions of Servqual model will be emphasized during the project to measure the difference between customers’ expectation and their perception after using service Basing

on the analysis of these details, there are some problems as followings:

- High competition in the market: customers have various choices in service

- Employee performance: employee’s knowledge does not meet customers’ expectation

- Customer turnover: the number of customers left Cargoteam was high

- Mistakes occurred in working process

According to the stated problems, the project points out two main solutions and a recommendation to improve the service quality for Cargoteam:

- Improve employee performance internally and externally: open training courses, create KPI and quarterly examination to track employee’s knowledge

- Apply high technology (management software): avoid manual mistakes and make the working process more accurate and faster

- Establish an additional service: the consultancy service, specializing in EVFTA/TPP

These solutions may take a certain period to come to practical actions because Cargoteam does need the specific time for training staffs and Cargoteam has to build the KPI carefully Moreover, the management software will require the creators having excellent understanding about the working process of Cargoteam

TABLE OF CONTENTS

STATEMENT OF AUTHENTICATION 1

ACKNOWLEDGEMENTS 2

EXECUTIVE SUMMARY 3

TABLE OF CONTENTS 4

CHAPTER 1: INTRODUCTION 6

I COMPANY OVERVIEW 6

1 Cargoteam’s background information 6

2 Mission, Objective and Goal 7

3 Milestone 7

4 Services availability 7

5 Market Share 8

6 Cargoteam’s competitor analysis 8

7 Financial analysis 9

II PROJECT FOR THE IMPROVEMENT IN SERVICE QUALITY OF CARGOTEAM FORWARD TO INTERNATIONAL INTEGRATION TREND 10

1 Reasons for Proposing the Project 10

2 Project Objective 10

3 Research methodology 11

4 Project limitation 11

5 Project structure 11

CHAPTER 2: LITERATURE REVIEW 12

I SERVICE QUALITY DEFINITIONS 12

II SERVQUAL MODEL 12

III ANALYTICAL METHODS 14

1 PEST Analysis 14

2 SWOT Analysis 14

3 Consumer Decision Making Process 15

CHAPTER 3: ANALYSE THE SERVICE QUALITY OF CARGOTEAM 17

I RESEARCH METHODOLOGY 17

1 Secondary Data 17

2 Primary Data 17

II PEST ANALYSIS 23

1 Political 23

2 Economic 24

3 Social 24

4 Technology 25

III SWOT ANALYSIS 25

1 Strengths 25

2 Weaknesses 27

3 Opportunities 28

4 Threats 28

IV SERVUCTION SYSTEM 29

1 Front stage 30

2 Back stage 30

V SUMMARY OF PROBLEMS THE COMPANY IS FACING 31

CHAPTER 4: SOLUTIONS TO IMPROVE SERVICE QUALITY OF CARGOTEAM 33

I EMPLOYEE PERFORMANCE IMPROVEMENT 33

II INFORMATION TECHNOLOGY ADAPTATION 34

III OPEN THE CONSULTANCY SERVICE 34

1 Strategy to run consultancy service for Cargoteam 35

2 Key Performance Indicator 36

3 Business Model Canvas for Consultant Service of Cargoteam 37

4 Key HRM Strategies 38

CHAPTER 5: CONCLUSION 39

APPENDIX 40

Appendix A Survey questionnaire 40

Appendix B The survey’s results 42

Appendix C Income Statements of Cargoteam 2012 - 2014 44

Appendix D Information about EVFTA AND TPP 46

REFERENCE 52

CHAPTER 1: INTRODUCTION

I COMPANY OVERVIEW

1 Cargoteam’s background information

Cargoteam was founded in 1994, being one of the first private Freight Forwarding companies in Viet Nam by Mr Paul Guilhem who is French but, was born in Viet Nam This year 2016, Cargoteam is honor to hold the 22 Years of Service

Figure 1 Photo of Mr Paul Guilhem and Cargoteam’s logo.

- Company name: DUC VIET FREIGHT FORWARDING SERVICE AND TRADING LIMITED COMPANY / Trading name: DUC VIET CARGOTEAM

- Abbreviation name: CARGOTEAM

- Business field: Forwarding and Logistics

- Head office: Lot E6, Road K1, Cat Lai Industrial Zone II, Thanh My Loi ward, district 2, Ho Chi Minh city

- Telephone: +84 8 3742 3777 - Fax: +84 8 3742 5048

- Email: info@cargoteamvn.com / Website: http://www.cargoteamvn.com

- Other offices in: Ho Chi Minh airport, Ha Noi, Da Nang, Laos and Cambodia

Figure 2: Head-office building in Cat Lai, Ho Chi Minh and Map of Cargoteam’s offices

2 Mission, Objective and Goal

Figure 3: Mission, objective and goal of Cargoteam

•Bringing proffessional and dedicated services to customers.

•Being a reliable forwarder in Viet Nam and a responsible agent/partner in the world.

2000

Opened Office in

Da Nang

2008

Finished Building and Warehous

e in HCM

2009

Opened 1 more Office in

Ho Chi Minh airport

2010

Open Office

in Laos

2012

Open Branch in Cambodia

Figure 5: Helicopter project for the movie King Kong: Skull Island

 Cargoteam provides various range of service to fullfil the needs of customers

The most highlighted service is handling dangerous goods, in which there are few freight forwarders have the legal license to process

 In general, the services that freight forwarders are providing are similar

Therefore, to raise the attention from customers, the company has to focus on improving service quality In details, improving the performance of sales

personal is the most important Because they are the persons communicating directly to customers Customers’ satisfactions are related to personal

performance

5 Market Share

Figure 6: The market share of Cargoteam handling

The most profitable markets of Cargoteam are export goods to Europe and USA while import goods from Asia When EVFTA and TPP are applied, the barriers to entry will be reduced Therefore, the market opportunities of these markets will be more essential

6 Cargoteam’s competitor analysis

Logistic services in Viet Nam have developed from the decade 1990 starting from the Freight Forwarding Services and Warehousing Nowadays, the number of companies that provide Logistics services is very huge They are classified into many different categories as following:

Market Share of Cargoteam Handling

South America Oceania, Africa Asia Europe USA

Number Category company Quantity

Table 1: Total number of companies in transportation (Source: Vietnam Yellow Pages)

Besides the state-owned enterprises to be equitized, the scale of most Logistics companies are small and medium-sized with the average charter capital about 4-6 billion and the human resources that are trained with the specialize knowledge in the logistic area is still very low, only approximately 5-7%

Cargoteam is a medium-sized company but during 22 years from the first day to run the business, Cargoteam has increased the charter capital into 22 billion VND since 2015 with much progress:

- Offices: 6 (Ho Chi Minh: 2, Ha Noi: 1, Da Nang: 1, Laos: 1, Cambodia: 1)

- Private building: 2,500 m2 and Private warehouse: 2,500 m2 private

7 Financial analysis

The performance of Cargoteam is presented based on the Income Statements

Figure 7: Revenue and COGS 2012-2014 (see Appendix C)

2012 2013 2014

50,000,000,000

The revenue in 2014 was higher 20 billion VND than the one in 2013 However, there was a variance between the revenue and the net profit In details, the net profit in 2014 was only 6 billion VND This was caused by high Cost of Goods Sold (COGS) with 15 billion VND exceeded

 Overall, the profit margin of Cargoteam was not as high as expected and the market becomes more competitive even though Cargoteam service is good and has long commitment with customers There is a necessity to innovate the service quality forward to the international integration trend

II PROJECT FOR THE IMPROVEMENT IN SERVICE QUALITY OF CARGOTEAM FORWARD TO INTERNATIONAL INTEGRATION TREND

1 Reasons for Proposing the Project

The competition in Logistics industry in Viet Nam is increasing rapidly recently, especially when many free trade agreements are established The appearance

of new freight forwarders in Vietnam and foreign cargo companies create more competitive pressure on the development of Cargoteam Moreover, the financial status of Cargoteam was not good in which the profit was not as high

as expectation This is caused by the tough market competition Therefore, Cargoteam has to focus on improving the service quality forward to global integration trend in order to compete with other competitors in operation, keep the relationship with current customers and attract new customers

- Investigate customer satisfaction according to the survey’s result

- Suggest solutions to improve the service quality of Cargoteam

- The duration for the project is only three months

- Information related to logistics industry was only from internet sources

- The competitor market share information is not clear

5 Project structure

The project will be divided into five main parts:

- Chapter 1: showing Cargoteam’s introduction and the overview of the project for improving service quality of Cargoteam forward to the international integration trend

- Chapter 2: presenting theoretical framework (Servqual Model, PEST

analysis, SWOT analysis, Servuction System)

- Chapter 3: indicating practical analysis of internal and external factors

related to Cargoteam’s activities based on theoretical framework Besides, demonstrating the problems Cargoteam is facing

- Chapter 4: suggesting solutions to improve service quality

- Chapter 5: conclusion

CHAPTER 2: LITERATURE REVIEW

Following are the theoretical framework related to the analysis of Cargoteam

- Showing definition of service quality and its main characteristics

- Servqual model helps to evaluate the differences between customers’ expectation and Cargoteam’s service performance

- PEST analysis shows how external factors affect to Cargoteam and SWOT analysis points out internal and external factors

- Servuction system analyzes the characteristics of front stage (visible to customers) and back stage (invisible to customers) of Cargoteam’s service

I SERVICE QUALITY DEFINITIONS

Service quality was defined as the distance or differences between customers’ expectation and customer’s perception after experiencing the service (Zeithaml, V.A., Parasuraman, A and Malhotra, A., 2000) Besides, Lehtinen, U and

Lehtinen, J.R (1991) divided service performance into two approaches In the first approach, three quality dimensions are used: physical quality, interactive quality and corporate quality The other approach is to utilize two dimensions: process quality and output quality

There are three main characteristics of service quality:

- Intangible product: service cannot be measured or experienced before purchasing

- Heterogeneous service: the service suppliers, customers’ requirements and service process change daily, which is hard to assure the service quality

- Unseparated connection between service supplement and service

distribution The interaction among customers and sales persons is

extremely important element to evaluate the service performance

II SERVQUAL MODEL

Parasuraman A., Zeithaml V.A and Berry L.L (1988) stated that Servqual model was developed to highlights the five dimensions of service quality:

- Reliability: the ability to perform the promised service dependably and

accurately

- Assurance: the knowledge and courtesy of employees and their ability to

convey trust and confidence

- Tangibility: the appearance of physical facilities, equipment, personnel and

communication materials

- Empathy: the provision of caring, individualized attention to customers

- Responsiveness: the willingness to help customers and to provide prompt

service

Figure 8: Servqual model (source: Parasuraman A., Zeithaml V.A and Berry L.L 1988)

This model allows customer service experiences to be explored and assessed quantitatively and has been used widely by service delivery organizations

Businesses use SERVQUAL to measure the differences between the customer expectations of service quality in terms of these five dimensions, and their

perceptions of the service they received When customers’ expectations are

greater than their perceptions of received delivery, service quality is deemed low

III ANALYTICAL METHODS

1 PEST Analysis

PEST is a scan of macro-environment, which shows how these factors affect the service performance in long term and help to make critical decisions for the future growth (Narayanan V and Fahey L 1994)

Figure 9: PEST definitions (Source: Narayanan V and Fahey L 1994)

2 SWOT Analysis

SWOT is created as a method for evaluating internal (strength and weakness) and external factors (threats and opportunity) This is also a tool for strategic planning

in the company (Lovelock, Wirtz and Chew 2009)

Figure 10: SWOT definitions (Source: Lovelock, Wirtz and Chew 2009)

ECONOMIC

Economic growth, Interest rates

Exchange rates, Inflation rate

TECHNOLOGY

RandD activity, Automation Technology incentives Rate of technological changePEST Analysis

STRENGTH

Patents, Strong brand names

Good reputation among customers

Cost advantages from proprietary know-how

Exclusive access to high grade resources

Favorable access to distribution networks

OPPORTUNITY

An unfulfilled customer need

Arrival of new technologies

SWOT Analysis

3 Consumer Decision Making Process

According to Lovelock, Wirtz and Chew (2009), consumer decision making process was divided into three stages which are pre-purchase stage, service encounter stage and post-purchase stage

Pre-purchase stage

Figure 11: Pre-purchase stage (Source: Lovelock, Wirtz and Chew 2009)

Service encounter stage - the Servuction System

Figure 13 The servuction system (source: Lovelock, Wirtz and Chew 2009)

- Front stage: activities are visible showed, such as personal selling, reception

- Back stage: invisible activities to consumers (IT system, operation)

•Compare alternatives in evoked set

•Review feedbacks

Service Evaluation

Purchase Decision

•Best options are selected

Post-purchase stage

Based on the cycle of success, high customer satisfaction leads to employee satisfaction which causes positive service attitude Similarly, when the service quality is better, the turnover will be lower and the customer loyalty increases Furthermore, when the customer turnover decreases, the profit margin may increase

Figure 13: Cycle of Success (source: MIT Sloan Management Review)

CHAPTER 3: ANALYSE THE SERVICE QUALITY OF CARGOTEAM

I RESEARCH METHODOLOGY

1 Secondary Data

Secondary data uses the statistics from Cargoteam’s reports:

- The income statements of Cargoteam from 2012 to 2014 that were audited

- The customers’ number of Cargoteam in 3 recent years from 2013 to 2015

- The turnovers of Cargoteam for Export and Import in 2 offices Ho Chi Minh and Ha Noi from 2013 to 2015 that indicates the quantity by TONS, CBM and TEU (1x20’DC)

- The Question 1 to 6: evaluate the Satisfaction of customers for Cargoteam’s service

- The Question 7: focus on the attention of customers for EVFTA/TPP

- The Question 8: it’s an open one to get the comments, ideas or suggestions from customers

Sample size calculation:

According to Hair (2006), the sample size could be assumed by the minimum

number of sample which is higher than 30 The formula: N = 5*m >= 30

There are 08 questions in the survey, so does m is 8

N = 5*8 = 40 >30

There are 72 responses from customers, which is much higher than the minimum

number of sample size

 All the results from primary data and secondary data will be assigned into

two main parts: business analysis and customer satisfaction

2.1 Cargoteam’s business analysis

Figure 14: Total cargoes of Cargoteam calculated by TONS from 2013 to 2015

- Quantity of Export and Import in Ho Chi Minh office is higher Ha Noi office

- Both offices have an increase in 2015 than compared with 2013 and 2014

- Quantity of Export in Ha Noi office in 2015 especially gets the rocket due to the successful contract between Cargoteam with Foxcom Viet Nam who belongs to Taiwanese Foxconn Technology Group - the world's largest electronics contractor manufacturing the notable products BlackBerry, iPad, iPhone…In 2015, Cargoteam was nominated to be the freight forwarder to transport most cargoes for Foxconn from Ha Noi to USA and EU with daily booking around 2 to 6 tons per shipment

 This shows that the service quality of Cargoteam meets the expectation of the

customers then they trust in the reputation of Cargoteam and definitely choose Cargoteam as the reliable service provider

Figure 15: Total cargoes by Cargoteam calculated by CBM from 2013 to 2015

- Quantity of Export in Ho Chi Minh in 2105 is slightly increased whilst there’s nearly no change in Ha Noi office

- Quantity of Import in Ha Noi office is much higher many times in 2015 than compared with 2013 and 2014

- Quantity of Import in Ho Chi Minh office is much decreased whilst Ha Noi office has a dramatic increase

 This shows that Ho Chi Minh office has to double check why customers quit

using Cargoteam in 2015 It means the service quality has any issue due to rates, operation or other reasons

Figure 16: Total cargoes of Cargoteam calculated by TEU (1X20’DC) from 2013 to 2015

- Quantity of Export in Ho Chi Minh in 2105 is lower when Ha Noi office increases a little

- Quantity of Import in both offices is decreased in 2015 than compared with

2013 and 2014

 In general, the performance in Ho Chi Minh office is better than in Ha Noi office However, the number of cargoes both offices decreased in compare with the previous years This is clarified that the increase in number of competitors are affecting the service quality of Cargoteam very seriously.

2.2 Cargoteam’s customer satisfaction analysis

2.2.1 Results from the survey

Table 2: Survey’s results about customer satisfaction

Figure 17: Customer Satisfaction tracking from Question 1 to 6

Very Satisfied Satisfied Neutral Dissatisfied Total

- There is high number of clients feeling very satisfied 60.65% and satisfied 27.55% with Cargoteam service because Cargoteam can provide them the professional, devoted, dynamic and speed service The working policy of Cargoteam is to serve clients anytime they need Therefore, all Cargoteam staffs always try to adapt the reasonable requests from customers, assist them and support them even working overtime or reply email in holidays

- 11.57% of clients giving neutral answer and there is only 1 client dissatisfied at Cargoteam service due to late sending Delivery Order for her import shipment

 In general, this is a very good result and Cargoteam has to attempt to secure this valuable supports from clients as much as possible However, Cargoteam must ask the Import department to fulfill their duty better in future to make customers happy with Cargoteam service

Figure 18: Customers ’ Comments from Question 8

The comments of customers in Question 8:

- 10 customers praise Cargoteam: they like Cargoteam service, thanks to the help of Cargoteam staff and encourage Cargoteam to keep going for future with good characteristics: agile, conscientious and enthusiastic

- 8 customers claim Cargoteam for offering the more competitive rates of sea freight, trucking and customs fee or their shipments Cargoteam must consider the better rates to get their bookings

- 4 customers claim Cargoteam for ineffective work of the operation staff, booking to wrong destination or sending documents not quick enough Cargoteam must double check with staffs, find the reason and prevent the

same complaint later

2.2.2 Statistics from the report of number of customers of Cargoteam

Figure 19: Statistic and Chart of Cargoteam’s customers from 2013 to 2015

As per the above statistic and chart, we can see Cargoteam has total 1,016 clients

at this moment: 79% clients still support Cargoteam while 21% already left or stopped due to many objective reasons (bankruptcy, close business, nominated by the oversea consignee) or subjective reasons (uncompetitive rate, not smooth operation) However, 26% new clients come to try the services and 15% clients use Cargoteam from 3-5 years loyally – it’s a satisfactory result to prove that they use Cargoteam because of the reliable service Though it’s good, the 21% clients stop using Cargoteam should be seen as a threat for Cargoteam in which Cargoteam may lose clients to other competitors There are several reasons leading to this matter:

- Customer service: personal selling is important element in which sellers

directly communicate with customers The satisfaction of customers may be lower if Cargoteam responds to customers slowly, replies wrong information, sends quotation too late or solves the problem unprofessionally Customers may also leave if Cargoteam doesn’t listen to

their requirements and doesn’t show their knowledge of the area that the customers are mentioning

- Price setting: customers may compare the price of Cargoteam to other

freight forwarders, then they could change to those companies if they offer lower price with similar service Although the price in the industry is stable and hard to change, the competitors may offer additional value to the service to attract customers Moreover, in special situation, there are extra costs occurred during the service process and Cargoteam staff forces customers to pay more than the original quotation, customers will surely angry If Cargoteam does not give them a clear explanation, customers may feel like they are cheated and the service is deception This result in untrustworthiness in the service quality and make customers being dissatisfied, they will run away and never come back

II PEST ANALYSIS

1 Political

According to Thien Thuat (2016), Mr Nguyen Tan Dung - Prime Minister has stated: the objectives in 2016 are strictly controlling the operational activities of Freight Forwarders, enhancing the capability of cargo to 7-8% tons, financial supporting for business in this industry The infrastructure is the main concentration recent years The government gives a lot of supports to renovate the quality of the infrastructure

The context of the ASEAN ECG (Economic Community General), TPP (The Trans-Pacific Partnership Agreement) or EVFTA (European-Viet Nam Free Trade Agreement), the Logistics industry will be the key role to help Viet Nam integrate into the global supply chain

Moreover, the Vietnamese government has released and changed a lot of policies

to develop the Logistics field New regulations have been applied to encourage the import-export activities such as the improvement of customs systems:

- Apply the Single-window Customs Procedures

- Increase automation to reduce filing papers at customs offices and to simplify customs procedures

- Use VNACCS/VCIS - the modern systems of Japanese for declaring customs clearance more quickly and effectively

 Overall, Cargoteam will get some benefits in which the flow of service will be

smooth, the customs procedure will be eliminated unnecessary steps to shorten time and help forwarders to save a lot of time in the import/export declaration The financial supports from Government may also help lower risks

in financial controlling

2 Economic

Trading activities had strong development which was approximately 20.3% per year in the period of 1998-2014 Asia is the main market for Vietnam foreign trade, which was 128.52 billion USD in 2014, took 60% of total import-export turnover (Tan Si and Trung Hung, 2015)

Vietnamese Freight Forwarders face challenges in competency with foreign firms, whom take advantages with 82% market shares Also, the establishment of new companies in the industry leading to the fact that supplement has exceeded demand, which cause unfair competition in the market

 When the number of suppliers increases: customers have various choices in

service performance, price list and additional sources Therefore, Cargoteam has to improve the service quality such as service flow performance, competitive price and value added service in order to secure the current business

3 Social

Figure 20:The Age Structure of Vietnam Population in 2014 (source: MIC 2012)

People in the age of labor took 58.4% in total population according to the statistics

in 2011 (Ministry of Information and Communication, 2012) There was a trend of reduce birth rate and increase the duration of life led to extreme change in population structure In details, young human resource takes highest percentage

in the total population

 This fact gives opportunities for Cargoteam to avoid pressure from labor force

The supply of human resources increase, Cargoteam could recruit experienced and good employees, in which secure the standard performance

of service

4 Technology

Technology is developing rapidly to fulfill the requirements of users There are a lot

of software created to help business improve management Businesses may purchase the software from external companies, or build their own management system

 Cargoteam should take advantage in the technology development to enhance

the management system This helps avoid mistake in working process, which gains the reliability from clients and speed the process to promote the responsiveness

III SWOT ANALYSIS

1.1 Sea-Air combination services:

Figure 21: Sea-Air combination service

This is the perfect method of cargo transportation when customers want a more cost effective option than air freight alone but, a quicker one than ocean freight alone This service can help customers meet tight delivery deadlines and at the same time save significantly on shipping costs as well: the cargo is typically initially transported by ocean and later by air Here is the specific example to see the big advantage to save cost and time for customer to move their goods from Ho Chi Minh to Frankfurt:

Commodity Quantity Gross weight Volume Chargeable weight

Bicycle frames 406 cartons 5,972 kgs 115 cbm 19,167 kgs

Method by USD/kg Kgs Amount USD Transit time