Managing retail customers at duong minh phuc company limited

UNIVERSITY OF ECONOMICS HO CHI MINH CITYInternational School of Business ---Le Thoai Vy MANAGING RETAIL CUSTOMERS AT DUONG MINH PHUC COMPANY LIMITED MASTER OF BUSINESS ADMINISTRATIO

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-Le Thoai Vy

MANAGING RETAIL CUSTOMERS AT

DUONG MINH PHUC COMPANY

LIMITED

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – Year 2017

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-Le Thoai Vy

MANAGING RETAIL CUSTOMERS AT

DUONG MINH PHUC COMPANY

LIMITED

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: Prof Tran Ha Minh Quan

Ho Chi Minh City – Year 2017

SUPERVISOR’S REPORT ON THE THESIS PROPOSAL SUBMITTED

FOR DEGREE OF MASTER of BUSINESS ADMINISTRATION

The thesis proposal title: MANAGING RETAILS CUSTOMERS AT DUONG MINH PHUC COMPANY

Student name: Le Thoai Vy

Supervisor: Dr Tran Ha Minh Quan

1 General comments:

• Remarks on the student’s attitude:

• Remarks on the assignment’s academic quality:

2 Overall assessment:

 Meet requirement for submitting

 Not meet requirement for submitting

EXECUTIVE SUMMARY

Recently, the financial statement of Duong Minh Phuc Co., Ltd has experienced a significant drop in the sales and has not shown any signal of recover yet Although there was a stability in the sales around 50 units over the years, the company still saw a dramatic fall in sales in 2017 This circumstance is mostly due to the reduction of existing customers and the possibility of new buyer attraction In order to discover the issues that DMP is facing, the survey about customers’ satisfaction and thoughts has been taken DMP had organized some meetings with Sales department, Marketing department and company CEO to research and analyze the survey’s result

DMP has used the theory of Michael Porter referred to "Porter's Five Competitive Pressure" to determine the competitive pressure that the company is facing in recent days After interviewing some potential consumers, DMP has found out some reasonable factors that made the sales in product reduced The main reason is due to customers’ dissatisfaction and the penetration of new substitutes Interviewers have complaint about the attitude of company staff as well as the promotion for old buyers DMP has not focused much on marketing strategy when it comes to household consumer segment; as a result, the existing customers tend to choose other distributors for the gas cylinder

However, the problem and cause itself may not correct and appropriate due to the limited interviewer and the fluctuation of market Because of the limited resources and time, DMP only interviewed some potential consumers, which may result in the subjective and there is no guarantee that answers to determine the whole problem of company is valid and reliable Therefore, managers of all department will analyze the problem and cause carefully and specifically to find solutions for each issues The solutions will mainly focus

on how to improve and develop the customers’ service and marketing the product, especially in training the staffs, promotion programs and has a straight plan for the future

1 INTRODUCTION

Company background

Duong Minh Phuc Co., Ltd (hereafter referred to as “DMP”) was established in 2015 specializing in providing high-quality liquefied petroleum gasoline for residential and industrial uses Newly penetrating to Ho Chi Minh City market, DMP is still at an experimental stage of tweaking its products and services to meet the consumers’ need, response to their expectation and well-adapt the market

With a small scale of fewer than 10 employees, DMP is categorized as small and medium enterprises (SMEs) Consequently, DMP’s organization structure is extremely simple which is suitable for its operation since the company needs flexible and efficient managements The chart of organization is as follows:

Mission:

• To commit to deliver the high-quality products to customers

• Enhance consumers’ perception of safety in using gas to avoid the risks

• To become one of Ho Chi Minh City’s leading distributors in the field

The category of customers:

• Geography: urban or rural

• Type of using purpose: individuals, family, hospitality

• Income: low or high

Director

Products and services:

• Gas

• Maintenance: cleaning stoves…

• Products: valves, stoves

• Services: LPG system installation for restaurant, factory, F&B consultant

• Integrated products and services

2 PROBLEM CONTEXT

2.1 Risks and challenges in LPG Retail industry

First of all, the nature of retail sector for LPG is fierce competition More specifically, diverse retailers provide customers with similar products or services as well as compete intensely on the basis of price, quality, and after-buy services Thus, DMP has to learn and forecast the competitors’ strategy on the way of making its own plan to gain more market share as it is a new enterprise in Ho Chi Minh market Therefore, forecasting method is consider to be the key factor for the company’s comparative advantage

Secondly, the next challenge could be continuous changes in consumer trends or preferences Customer is the new point-of-sale, as a result their satisfaction and trends can effect considerably on the market share There are major variety of shopping ‘experience’ thanks to connected consumer networks Moreover, customer’s commitment to the businesses can be very weak when they cannot be beneficial from the products or services Because the number of suppliers in the market is huge, the costumers are tended

to change a new products with more benefits if the company cannot meet their satisfaction

Furthermore, attracting and retaining talented employees is an obvious challenge Key personnel who impact the business’ ability to deliver customer service should not be replaced regularly in order to avoid interruption in keeping contacts with customers Senior manager should concentrate not only on consumers, but also on their employees by

some incentive policies to maintain the employees’ loyalty This step can create a mutual benefit for both party

LPG is a special and typical business strictly supervised by Government in terms of price, business practices, and other related regulations However, in the context of rapid growth

of the economy, more and more LPG related companies have been established, which reaches saturation in the urban areas Under the situation of the fierce business environment, LGP companies in general and DMP in particular is facing difficulties and challenges that can be realized as follows:

• Loss of gas cylinders

• Unfair competition

• Inability to keep track the movement of the gas cylinders

• Illegal filling

• Lack of regular inspection and tight controls from authorities

• High costs of LPG refilling

• Unskilled staffs

• Safety threat to customers

• Heavy taxation by the Government

2.2 Problems in service management at DMP

Figure 2.1 The number of customers from June 2015 to June 2017

As can be seen clearly from the line chart, even though having a leveling off in the beginning when the number of consumers remained unchanged at 15 costumers for 3 months since its establishment, DMP still had a strong growth in overall Especially, in

2015 the company witnesses a considerable rise in the quantity within 6 months only, from 15 to 32 clients DMP experienced a peak of this number from the last quarter of

2016 to the first month of next year However, the figures began to decrease from 50 to

43 since the beginning of 2017 This still counted to be a good performance for the company since the number of customers of DMP in June 2017 was by nearly triple of that

in June 2015

Although there is more growth than when the company first entered the market in Ho Chi Minh City, the number of customers in 2017 compared to 2016 has dropped significantly (from 50 to 43) This shows that company DMP has ineffective business strategies that lead to customer dissatisfaction, thereby losing a significant number of customers Pricing strategies, marketing or after-buy service are also one of the key points for many companies today to retain their customers However, perhaps with some wrong steps in

the above strategies, the company has lost a lot of market share in Ho Chi Minh City In addition, the technical aspects of the product such as packaging, product quality, safety and reliability are also one of the key factors that help the company gain the trust of others With the fiercely competitive gas market in Ho Chi Minh City, DMP needs to improve its design and product quality to match the tastes of its customers as well as catch

up with its competitors

The line graph presents the average turnover of gas cylinders from June 2015 to June

2017 Overall, there was a moderate drop in this number over the past two years It has been significantly lengthened from 0.75 – 1.0 months to 1.5 – 3 months for a consumer to assume one cylinder of gas since June 2016 to current It means that the gas cylinders to

be consumed in a month has gone down from 1 unit per month to only 0.3 unit per month Part of the reason for this situation is because the business policy of the company has not really suited to the consumer market in Ho Chi Minh City The market saturation at 1.0 unit in the first year when the company just entered the market is understandable, because they offered a new product, so the market needs time to adapt and trust However, the

sharp decline from the highest point to the lowest in the two years from 2016 to 2017 is very worrying

The root of the problem is various choices in replacement of gas such as electronic stoves

or food delivery as its more convenience Technology products are increasingly developed and widespread, making gas appliances become obsolete in major cities Trends in cooking utensils as well as consumers 'eating patterns have greatly influenced consumers' perceptions about the use of gas In addition, the competition in the industry is quite a factor that makes the market share decline significantly As the economy grows, the gas market is also expanding, many enterprises enter the industry, giving customers more choices As a result, DMP's strategies are no longer relevant to the sector's competition and lose much of its market share

This puts financial burden on the business operation due to the increase on weighted average cost of capital (i.e spending more to order more cylinders) DMP should have more stringent cost control policies in the coming years Because the decline in market share has partly increased fixed costs, the financial burden of the company has increased respectively

Figure 2.2 Cost of goods sales and Sales Revenue from June 2015 to June 2017

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

COGS

(million VND) 2,84 2,84 2,84 5,01 5,01 6,41 6,41 11,4 11,4 11,4 8,01 8,01 5,37 6,01 6,01 3,84 3,84 4,08 4,08 10,2 8,77 8,15 3,26 3,26 3,26Sales Revenue

The presented figure gives data on cost of goods sales and sales revenue at DMP from June 2015 to June 2017 In general, the cost and revenue of the company increased annually Costs and sales of the company both have the highest score of 11.4 & 14.5 respectively in 2016 and 10.2 & 14.4 in 2017 Although revenue is always higher than costs in the past three years, but this is still not a positive sign when revenue continued to fall sharply last year As mentioned above, the reduction in market share leads to higher costs due to fixed costs of the product Over time, the rate of revenue growth will not be greater than the rate of increase in costs, leading to losses of the company The chart above shows how the decline in sales will affect profitability, as the company's revenue has fluctuated significantly over the years and the company's profit has also decreased Although the number of customers has been increasing for months, the profit gained has not been rising accordingly Increasing cost over the years and reducing revenue is one reason for this, DMP has been trying to overcome these costs as well as attract more customers with preferential policies, keeping in mind the aim of increasing and stabilizing market share of the household consumer segment

3 PROBLEM IDENTIFICATION

Michael Porter, the world's foremost strategic and competitive strategist, provided a theoretical framework for analyzing and modeling the business and arguing that every business must be affected by five major competitive forces(1) This model, commonly referred to as "Porter's Five Competitive Pressure", is considered a useful and effective tool for understanding the source of profit Most importantly, this model provides competitive strategies for businesses to maintain or increase profitability DMP will use this model to find out the problems that the company is experiencing, thus providing practical and effective solutions

The five forces are:

1 Supplier power: An assessment of how easy it is for suppliers to drive up prices This

is driven by the: number of suppliers of each essential input; uniqueness of their product

or service; relative size and strength of the supplier; and cost of switching from one supplier to another

2 Buyer power: An assessment of how easy it is for buyers to drive prices down This is

driven by the: number of buyers in the market; importance of each individual buyer to the organization; and cost to the buyer of switching from one supplier to another If a business has just a few powerful buyers, they are often able to dictate terms

3 Competitive rivalry: The main driver is the number and capability of competitors in

the market Many competitors, offering undifferentiated products and services, will reduce market attractiveness

4 Threat of substitution: Where close substitute products exist in a market, it increases

the likelihood of customers switching to alternatives in response to price increases This reduces both the power of suppliers and the attractiveness of the market

5 Threat of new entry: Profitable markets attract new entrants, which erodes

profitability Unless incumbents have strong and durable barriers to entry, for example, patents, economies of scale, capital requirements or government policies, then profitability will decline to a competitive rate

Reviewing DMP’s business performance from 2015 to 2017, revenue has not compensated expenditure, which leads to the result of zero in profit Conducting a survey

on 53 households using DMP’s LPG, the symptom has been mainly caused by following mediating variables:

Figure 3.3: Cost and revenue of goods sold in 2017

In Vietnam, the business of producing gas cylinder is heavily dependent on the government, as the government is the official and legal supplier of the domestic gas market The cylinders of gas market revolves around the government's gas supply and the production of gas cylinders by LPG companies Therefore, when the government sets regulations on the price of a gas refilling and the minimum gas quantity regulations, resulting in the difficulties for LPG companies The cost of DMP for refill gas is shown in the table above illustrates that the cost is far different from revenue that DMP achieved, resulting in a minimal profit Therefore, the high cost of refill gas is one of the difficult problems that DMP needs to find a solution In addition, Decree 19/2016 and Circular 03

of the Ministry of Industry and Commerce stipulate that distributors must have tanks with

a total capacity of at least 300m3; the quantity of bottles of all kinds eligible for circulation on the market shall be owned by traders with a total tonnage of at least 2,620,000 liters (equivalent to 100,000 bottles of 12kg grade gas cylinders) to be licensed for operation on market (2) Though there are many opinions and appeals, this Decree is still applied because no other Decree has been replaced recently This has negatively impacted the cost of the DMP when they previously just had to invest certain capital to meet the conditions that the government offered, but now the cost has increased steadily

as the government changed and tightened regulations The cost control problem is always

difficult for all businesses and that is no exception for DMP, so cutting down some unnecessary costs will be the strategy that DMP is looking forward to in the future

3.2 Buyer power

3.2.1 Low buyers satisfaction

a Poor customers service

Due to its limitations of human and financial resources, DMP has performed a poor customer service Currently, there are around 2 – 3 part-time manual mechanics who is responsible for all technical problems at DMP They appears not to respond in time to customers’ inquiries and not to solve problems as quickly as possible Many staffs are considered as lack of friendly attitude to the customers Many complaints received from DMP’s customers for this issue

The concept of ‘supplementary customer services’ introduce by Parashuraman (1998) defines those services as ones free of charge, attached to the core products and/ or services Swoboda(3) et al (2007) suggests that service is the most vital element in building and fostering a brand besides other criteria such as value, assortment, advertising and store design In fact, DMP has not created its great differences from its competitors

to improve its image or brand identity in customers’ perception The customer services are not rich enough to keep loyal customers or attract new ones DMP has few policies to treat its loyalty customers, which makes them feel unsatisfied to continue to use DMP’s products and services and they easily move on to a competitor’s offer Also, there are no strategic promotion and advertisement to introduce widely its brand name

The problems are due to the lack of professionalism and low level of expertise of the company staff Because DMP is a small and medium enterprise, the shortage of human resources has led to many low-skilled employees being recruited For the marketing department, Marketing staff do not really understand and research the trend of price fluctuation of the market In addition, the company do not strongly paid attention in promotion programs and presents for old consumers in holidays Moreover, the financial

department has not appropriately and effectively controlled the costs that the company has spent, leading to high costs and less profits over the period of years The technical department is not qualified enough to meet the requirements of household customers, resulting in customer dissatisfaction with the product of DMP The most important part is the connection between different department of DMP was not linked and relevant enough, which lead to they cannot come up with the best strategic planning to capture market share and retain customer loyalty Thus, DMP executives need to have reasonable policies

to meet customer expectations and maintain their loyalty in the household segment

b Poor communication

DMP’s organization structure is quite simple and flexible to ensure that it can work economically at the greatest efficiency Next to the Director who is responsible for general supervision and management, DMP has mostly recruited part-time employees in the purpose of saving the money for operation, which becomes its significant challenge to managing customer contact points The part-time employees hardly feel committed to the company because they spend less time there and find it easier to leave for more stable compensation and benefits Hence, they are not encouraged in contribution towards creating the best value to the company They simply do their assigned tasks within normal working hours without the intentions of being more active in their work Interview one of current customers, it could be recognized that DMP is losing their loyal customers

by lack of frequent and stable interactions with customers

In addition, part-time employees do not have the expertise and professionalism needed to serve the job in the DMP More than 60% of DMP employees are part-time employees, resulting in the lack of stability and cohesiveness within the company's personnel, which made the DMP does not address the problem and meet the needs of their customers leading to a significant loss in the number of potential customers Most of the part-time employees are either freshmen or graduate, so they have not had the experience in communicating or taking care of clients The clear evidence is shown in the majority of surveyed clients said they were not satisfied with the behaviors and information provided

by the company's employees Furthermore, the attitude of employees is also the core factor in the process of contact and customers service As mentioned above, some interviewers complained that the attitudes of DMP staff were not positive and proactively provided the necessary measures or information that the client requested Moreover, some employees are uncomfortable and do not want to interact with the consumers These factors have created the weak point of DMP in information transfer and interaction with customers While other competitors are pushing for customer care, DMP seems to be quite distracted and has not really focused on this segment This is another critical issue that the company is facing in meeting the customer satisfactions

c Poor customer loyalty programmes

Loyalty of customers is demonstrated to be a component of satisfaction, studied Fecikova,

2004 (4) According to Fecikova, customer loyalty is a measure of their satisfaction with a company's products and services Consumers will only reuse the company's products when the benefits it brought to them is more than the other similar products in the market This is shown in the similarity between cheap with low quality, after-buy service and high-priced products with good quality and service, consumers will tend to favor the second choice Because one of the most crucial tools to keep loyal customers nowadays is promotions and after-buy services Moreover, competitors rely on suitable and effective marketing strategies in order to win the trust and loyalty of their customers Besides, loyal customers help increase company profitability by their retention of the company’s products and services, and by word-of-mouth, according to Bowen and Chen, 2001; Fecikova, 2004 In Vietnam, following the crowd and word of mouth are one of the best tools that LPG companies use to build their reputation and product brand In addition, with these tools, LPG companies can save money and have an economical budget for promoting the company's image Customer loyalty and satisfaction are the two main determinants of this free tool Especially in the household segment, where consumers shop mainly through word of mouth and listen to the experiences of previous users, the loyalty of the old and new customers must always be put in high concern and priority

DMP has not brought its customers sales promotion or loyalty programmes, which are one of the minus points comparing to the competitors This is quite understandable, as the main market for DMP is not only concentrated on the consumer segment but also on the industrial segment Due to the company's limited resources, DMP has not really focused

on investing in marketing and promotion programs to gain loyalty Moreover, since the company has only penetrated the market for two years, it is difficult to avoid the uncertainties and challenges in operational structure of the gas market in Ho Chi Minh City The company has different marketing programs such as gifts, coupons, etc so far, but DMP just focused on running marketing campaigns for longtime and familiar customers without attracting the new consumer In the household segment, the acquisition

of loyalty of new customers has not been taken in advance, so with different marketing strategies from competing companies, DMP has lost a lot of opportunities to gain the loyal customers

3.2.2 Low awareness

The activity of filling of LPG cylinders is potentially extremely hazardous, which requires experienced experts and skilled operators for safe filling as well as use of certified equipment, complying safe working procedures, and a safe environment However, in order to gain the maximum profits, many retailers have been performing refilling activity unlawfully, which does not include all of the necessary safety elements required for filling LPG cylinders Customers are unlikely to recognize guaranteed LPG cylinders because they are not conscious of the dangers of using poor quality such as leaks resulting in a strong probability of explosion and causing injuries or even fatalities As a result, customers will tend to find retailers who provide them with the products or services at the most competitive prices instead of keeping using quality brands like DMP

Additionally, for saving costs, some unstandardized providers use manual and unsafe techniques to exact gasoline to cylinders, which declines in gasoline quality (the concentration of C2+, C5+) and is also potential dangers to consumers Competitors can use cheap but inexpensive gas valves or tubes to manufacture and assemble gas cylinders

This is one of the noticeable reasons that competitors' prices are cheap, or even lower in the future However, many household customers do not acknowledge about this circumstance; because only professionals in the industry recognize the features of the various components in the product and whether the quality of the product is good or bad and The quality of products in the gas industry is one of the most important things that any company must strictly adhere to Because it not only affects the lives of consumers but also affects the reputation of a business A typical example of the danger is that gas quality is reported to be attributed to a gas explosion in a household in Vinh Phuc province, which has left one dead and two seriously injured Or the fire in Thanh Hoa due

to the quality of the gas valve burned many assets of a family and cause 3 people injured Both cases are only part of the irresponsibility of gas tank manufacturers as well as customer subjectivity Building customer perceptions is an important step in the process

of gaining trust and loyalty Therefore, DMP companies need strategies to attract customers with promotional and advertising promotions Extensive levels of safety and quality of products, from which the consumer perception not only in terms of price but also in quality of products

3.3 Competitive rivalry

3.3.1 Pricing strategy

Pricing has been widely investigated by past-to-present researchers Among those studies are the point of view’s Dolan and Simon, 1996; Gabor and Granger, 1966 which considers the price as a factor of positioning a brand in the market as well as a tool for customers to measure the brand (5) DMP’s key market is focusing on the areas of Binh Thanh, and Go Vap District where hundreds of small and medium gasoline retailers have established their presence in the market According to statistics, there are 31 main competitors who provide customers with similar products and services, which consider to

be a major number Binh Thanh, and Go Vap District are two relatively densely populated and labor-dominated areas Therefore, price strategy is the most important when DMP wants to gain market share in these areas The more companies enter the market in Ho

Chi Minh City, especially in these two areas, the higher the competition rate of the industry Consequently, with the company's limited financial resources, DMP has been researching and surveying consumers for prices to have effective insights and strategies targeted at this target market

Mrs Nguyen Thi Tam – a consumer in Binh Thanh shared that:

Gasoline is a necessity to most families for daily cooking Thus, expenditures for this type of goods take a consideration from housewives economically They tend

to buy LPG at a competitive price

Mrs Vo Ngoc Uyen – a single mom with 2 daughters living in busy residence in Go Vap expressed her concern openly:

Despite of worrying the truth of “you get what you pay for”, she still had to set tight budget on spending because she had to struggle with a single-mom life Hence, she surely choose distributors who offer the cheapest products or attached gifts to their goods

According to statistics, 70 per cent of respondents show their ideas of prioritizing the cheapest gasoline The result is understandable because Vietnam is still a developing country with 80% of the agricultural sector's primary income Therefore, the per capita income of the Vietnamese people is still at an average level compared to the world average (The average total income of the employees is nearly 5.53 million VND / month

in 2018 (higher than the basic salary is 18.4%), up more than 1.4% compared to 2017) (6)

At such an income level, household workers tend to save budgets of spending, including those in large cities According to the data, the average expenditure of a household is about 7.38 million VND / month, with 17.4% of employees reporting ample and accumulating; 43.7% said they could afford to live; 26.5% must spend frugally and miserably; 12.5% said incomes are not enough to live on (7) After studying and analyzing these statistics, LPG companies in the market often focus on price strategy when competing in the market In part because gas cylinders are consumer goods, for the

household consumer the price is a vital factor when choosing to purchase the product Hence, DMP should pay more attention to price strategy and reduce unnecessary costs to obtain a competitive price that is suitable for the general market

3.3.2 Unfair competition

a Labelling illegally and the loss of gas cylinder

The unfair competition from rival companies in the market is increasing significantly Some rivals used illegal tactics to deprive DMP’s intellectual property rights Moreover, the unfair competition in LPG distribution to residents Taking customer services as an example, some distributors take advantages of maintenance or cleaning service to label their ordering information on DMP’s cylinders, which makes DMP’s customers confuse and accidentally use these pieces of information for their next orders Because household consumers tend to rely on the label of the company to re-order new gas cylinder in the next time As a result, with all the tactics of rival companies, it is perfectly possible for a DMP to lose a large number of potential customers Not only that, when rival labeling their ordering information on DMP's cylinders, it also led to the loss of numerous cylinders of gas Only when the company realized the decline of gas cylinders and sent staff to test, from which the ruse of the new rivals were discovered Even though it was discovered early on, DMP could not control the quantity and keep track of the displacement of gas cylinders, which led to an increase in the cost of purchasing new gas cylinders and staff costs for checking the packages Eventually, the increase in product costs leading to the rise in price and the drop in market share that DMP gained As mentioned above, in the household segment, the price factor is one of the determinants of the company's positioning This is one of the issues that the company needs to set out to reach the effective solution

b Illegal refilling and Lack of regular inspection and tight controls from authorities

Smuggling gas, the instability of sale of gas and gas market disorder are the persistent problems in the gas industry in recent years Consequently, consumers are "pickpockets"

with products that do not meet the quality standards and potential fire risks According to statistics in 2016, up to 30% of gas in each home is gas to illegally extracted, not controlled quality and potential fire risk(8) The illegally refilling gas market is increasingly expanding with complicated and sophisticated tricks from manufacturers In order to reduce costs and increase profits, they avoid law and government regulations to get cheap gas cylinders to attract more customers in the market A typical example is the illegal extraction of gases in Long An province which has helped the producers of gas cylinders with monthly profits of up to VND 2 billion to VND 4 billion for output from

800 to thousands of bottles (on peak days) (9) Besides that, in Ho Chi Minh City, Binh Chanh District Market Management Team discovered 51 gas tanks of 12kg type connected to 14 self-made gas trays, 5,000 mini gas cylinders and 7 motorcycles designed

as delivery vehicles With a gas bottle of 12 kg to illegally extract, the producer gained the profit about 300,000 VND for one bottle (10) It is because of such huge profits that illegal manufacturers are constantly entering the market and making it difficult for companies like DMP to have comparative advantages to compete in price competition

In addition, the lack of government rigor and control is also one of the reasons for the growing illegal refilling gas market in major cities The market for illegal gas extraction is

a large and potential market with profitable benefits with low cost as well as high market share As a result, with the increasing number of unlicensed manufacturers entering the industry, the government cannot control it, and with ineffective policies, they has contributed to increasing competitive pressures for LPG companies in general and DMP enterprises in particular In 2015, a draft by the Ministry of Industry and Commerce drafted, with the condition that was not only tightened but opened for the gas business Accordingly, instead of 300,000 shells as before, businesses only need to have 100,000 to 150,000 gas cylinders will qualify as wholesale traders, distributors and licensed operations However, this draft has encountered a lot of opposition and appeals from the authorities of Ho Chi Minh City to the senior leaders of large companies (11).

Nguyen Phuong Dong, deputy director of the Department of Industry and Trade of Ho Chi Minh City, said that the "lowering" will make management difficult, while the situation in the gas business has not been effectively corrected (12).

"Lowering this standard means encouraging more businesses to join the market to continue scattering Accordingly, the situation of occupying the bottle, swapping to extract gas and illegally refill gas is more difficult to control leading to the market more disorder "- Le Thi Anh Man, deputy general director of Petrovietnam One Member Limited Liability Company HCMC (Saigon Petro), said(12).

Le Thi Anh Man stated that the extraction station only need to have a fully-fledged paper that can operate is a major flaw in management system(12). Those filling stations only need to sign a contract with a focal point trader to legalize, and then manually launch the unauthorized extraction of a series of other brands to gain illicit profits Therefore, in order for the gas market to remain stable and legitimate, the government should set up appropriate and effective policies in this large market management, as well as severely punish those that do illegal action which against the law DMPs also need to have certain policies, especially cost control policies, to create competitive advantage in the household segment

3.4 Threat of new substitutes

3.4.1 New technological gadgets

High-income households have tendency to switch to use electric stoves substituting for LPG In-depth interviews are conducted illustrating clearly for this trend

Ms Ninh Hong Ngoc: “Recently, I have not often used gas for my cooking because

my daughter-in-law advises to switch to electric stove due to its safe and convenience So, now I just cook on the gasoline stove when I need to be quick like cooking instant noodles (smile) It may take up 4 – 5 months to require a new gas cylinder.”

In recent days, the kitchen option has not only stopped at the gas stove New names such

as magnetic cookers, infrared cookers have started to appear in Vietnamese market recently and are most frequently mentioned in times of increasing gas prices as well as fire related accidents Recognizing the potential market for new products in large cities, with middle-to-high income households, manufacturers have been racing to launch smart product lines in these areas It is a great way to cook food and save money for consumers when they use modernized and technological products instead of gas stove Exceptional features and new technology applied to electric cooker, induction cookers, have made the competition of gas market more and more fierce

As can be seen on the table, the productivity and efficiency of two new types of cookers are very good, which leads to gas stoves that seem to be outdated and less efficient than those used in commercial cookers In addition, time is also a prerequisite when choosing a kitchen equipment for cooking and these new technology can afford to meet the buyers

needs Residents living in big cities tend to be in a hurry for their work, so cooking time is extremely crucial to them Moreover, for household customers, saving budget is a top priority Therefore, they often choose the most cost-effective kitchen tools for the family

to have an optimal budget The evaluation and research shows that the induction cooker is the product that can save electricity in the maximum way, from the comparison table it can be calculated a month cost for consumers who use the induction cooker for cooking is 120,000-150,000VND per month, and if they use gas stove, the cost will be about 320,000VND / month, with infrared cooker they will spend about 250,000VND / month (13) This is also one of the reasons why the gas market in 2017 has certain fluctuations and is one of the challenges that LPG companies in general, DMP in particular are facing

3.4.2 Eating out and Online delivery food

Some other families choose to eat out to save their time of cooking

Ms Nguyen Minh Chau: “As you see, I am always doing manual jobs such as cleaning houses, taking care of 3 little kids of ours as well as managing my grocery shop I have no time to cook My husband frequently have meals at his company, which is an allowance besides his wages Similar to my kids, I always pay for their meals at schools at the beginning of a new semester About me, I simply eat what I can like instant noodles, it is not such an important thing to me smile).”

Because the modernization of society is developing, the invention of cutting-edge products such as Internet, smartphone and numerous technological gadgets have been useful and necessary for individuals The eating habit of the customers also varies from home-cooked meals to meals out to the development of the most recent delivery services With the import of Western culture and other developed countries in the world, nowadays numerous fast food chains with different brands have been built in Vietnam to serve the customers’ desire of eat outside In 2017, KFC and Lotteria are both leading in the current market, both of which have a comparable turnover of more than trillion VND each year

while Jollibee, the third largest market for fried chicken, is one-third having less revenues than two others (14)

From the above data, it can be seen that to Vietnam in general and Ho Chi Minh City in particular, the penetration of fast food chains has brought many disadvantages for the gas market in the segment of household consumer Because with such eating habits and lifestyles, household gas consumption in major cities is declining and coming to an end Not to mention more and more people are choosing to eat out instead of cooking to save time and money

Furthermore, the growing array of technologies leading to multiple online ordering applications which contributes to the competitive market of gas cylinder in the household segment In Ho Chi Minh City, when it comes to delivery service, the first applications consumers had used and want to continue are namely Delivery Now, Foody, Vietnammm.com, GrabFood or even from restaurants and coffee store The fast moving consumer market (FMCG) in 2017 grew 5.4% from a 4.9% increase in 2016, despite a decline in the last quarter of the year (15) The explosion of the Smartphone era has

contributed to the development of online ordering applications and brought them a great advantages, in contrast this circumstance has brought lots of challenges to DMP in the household segment

According to statistics, the online ordering market in Vietnam is expanding dramatically, especially in the restaurant and coffee sectors Additionally, the market is expected to grow to USD 33 million in 2018 and will reach USD 38 million by 2020 (16) People tend

to place more orders online as the market for gas cylinder will be narrowed and becoming smaller Therefore, DMP needs to work out the best and most effective measures to maintain a stable market share and attract more customers in the household segment

3.5 Cause-effect tree

Threat to shut down the operation

Cannot gain more profit compared to other competitors

Sales dercrease Fierce Competition