Business strategy of clean rice for the 2016 2020 period the case of vietnamese rice research center vinafood1

Summary of the results The thesis has systematized theories and studies on business strategy for rice products from related studies and proposed the process of developing strategies for

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH

-

NGUYỄN THÀNH PHƯƠNG

BUSINESS STRATEGY OF CLEAN RICE

FOR THE 2016-2020 PERIOD:

THE CASE OF VIETNAMESE RICE RESEARCH

CENTER-VINAFOOD1

CHIẾN LƯỢC KINH DOANH GẠO SẠCH

GIAI ĐOẠN 2016-2020:

TRƯỜNG HỢP TRUNG TÂM NGHIÊN CỨU GẠO VIỆT – VINAFOOD1

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

Hà Nội – 2017

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH

-

NGUYỄN THÀNH PHƯƠNG

BUSINESS STRATEGY OF CLEAN RICE

FOR THE 2016-2020 PERIOD:

THE CASE OF VIETNAMESE RICE RESEARCH

CENTER-VINAFOOD1

CHIẾN LƯỢC KINH DOANH GẠO SẠCH

GIAI ĐOẠN 2016-2020:

TRƯỜNG HỢP TRUNG TÂM NGHIÊN CỨU GẠO VIỆT – VINAFOOD1

Chuyên ngành: Quản trị kinh doanh

Mã số: 60 34 01 02 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

Hà Nội – 2017

DECLARATION

The author confirms that the research outcome in the thesis is the result of author’s independent work during study and research period and it is not yet published in other’s research and article

The other’s research result and documentation (extraction, table, figure, formula,and other document) used in the thesis are cited properly and the permission (if required) is given

The author is responsible in front of the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws for above-mentioned declaration

Hanoi, October 29th, 2017

ACKNOWLEDGEMENT

I have gained huge knowledge, skill and insights from my MBA course The course raises my capacity of administration and management up to the next level I am now very confident in my position of management I would like to extend my sincerest thanks and appreciation to all those who have made this Thesis to be possible

I woud like to express my great gratitude to my supervisor,Assist.Prof.Dr Ngô Vi Dũng, for him useful comments, remarks and engagement during my process of doing this master thesis I would also like to thank the leaders and staff of Vietnam Rice Research and Development Center – Vinafood 1 who enthusiastically participated in the survey and provided me with valuable advice and comments during my thesis completion

Sincere thanks are extended to the Faculty of International Training - Vietnam National University, Hanoi for equipping me with huge knowledge and skills through various interesting and practical subjects I also would like to thanks my classmates for their friendship and reciprocal encouragement to make our class time to be unforgettable time

Lastly, I would like to give my great thanks to my wife, my kids, and my family who always standby me during the past two years and encourages me to keep moving from the beginning of my study

Hanoi, October 29th, 2017 Student

Nguyễn Thành Phương

Business Strategy for Clean Rice in the stage of 2016-2020: The Case of Vietnam

Rice Research and Development Center – Vinafood 1

1 Summary of the results

The thesis has systematized theories and studies on business strategy for rice products from related studies and proposed the process of developing strategies for developing clean rice products at Vietnam Rice Research and Development Center - Vinafood 1 including identifying objectives, analyzing internal, external and sectorial environment, setting up Internal Factor Evaluation and External Factor Evaluation That way, the author built the business strategy for clean rice products of the center using SWOT matrix, QSPM and found out the opportunities and challenges such as the strong development of technology of clean rice production in the world, strong current competitors with advantages in capital, technology, human resources and experience in the market which created many challenges and threats for the business activities of the center;

or the strengths and weaknesses such as the ensurance of quality management standards, failure to meet customer needs of retail stores This helped select the optimal strategy for clean rice trading of the center, helping Vietnam Rice Research and Development Center - Vinafood 1 improve its business efficiency and maximize its the profits

2 Applicability in practice

The strategies proposed in the study will have a high applicability in practice since they were drawn from specific strengths and weaknesses of the enterprise and results of the survey with experts and managers Moreover, the opportunities and challenges were also analyzed in line with the market situation and technology development of the economy in the country and in the world In addition, the basis for proposing strategies was stable with

a full process of building contents

3 Further research orientations

In order to complete this study, it is possible to add important elements in the process

of building the internal and external matrix of the enterprise in order to increase the possibility of developing and proposing strategies

TABLE OF CONTENTS

TABLE OF CONTENTS i

LIST OF TABLES iv

LIST OF FIGURES AND CHARTS v

ABBREVIATION vi

INTRODUCTION 1

1 Rationale of the study 1

2 Research overview 2

3 Research objectives 4

3.1 Overall objective 4

3.2 Specific objectives 4

4 Research object 5

5 Research scope 5

6 Thesis structure 5

CHAPTER 1: THEORETICAL FRAMEWORK 6

1.1 Basic concepts 6

1.1.1 Concept of clean rice 6

1.1.2 Concept of business strategy for clean rice 6

1.1.3 Possible business strategies for clean rice 7

1.2 Process of building business strategy for clean rice 9

1.2.1Selecting and building strategic targets 9

1.2.2 Analyzing strategies 10

1.2.3 Building strategic options 16

1.2.4 Selecting strategies 18

1.2.5 Organizing conditions for strategy execution 19

1.3 Experience in implementing business strategies of some rice trading enterprises 20

1.3.1 Experience of Vinh Long Cereal and Food Import Export Corporation (Vinh Long Food)20 1.3.2 Experience of An Giang Import-Export Company (Angimex) 21

1.3.3 Experience lesson for Vinafood 1 21

CHAPTER 2: RESEARCH METHODS 23

2.1 Research procedure 23

2.2 Data collection methods 24

2.3 Data analysis methods 28

CHAPTER 3: STRATEGIC ANALYSES OF CLEAN RICE TRADING OF VIETNAM

RICE RESEARCH AND DEVELOPMENT CENTER – VINAFOOD 1 30

3.1 Introduction of Vietnam Rice Research and Development Center – Vinafood 1 30

3.1.1 History of foundation and development of Vietnam Rice Research and Development Center – Vinafood 1 30

3.1.2 Organizational structure of the center 30

3.1.3 Business sectors 30

3.1.4 Annual rice sales of the center 31

3.2 Analysis of clean rice business environment of Vietnam Rice Research and Development Center – Vinafood 1 33

3.2.1 Analysis of macro environment 33

3.2.2 Analysis of micro environment 37

3.2.3 Analysis of internal environment of the enterprise 46

CHAPTER 4: BUILDING BUSINESS STRATEGY FOR CLEAN RICE FOR THE VIETNAM RICE RESEARCH AND DEVELOPMENT CENTER - VNF1 TO 2020 55

4.1 Vision, mission, duties and strategic objectives of Vietnam Rice Research and Development Center – Vinafood 1 55

4.2 Formation and selection of business strategy for clean rice at Vietnam Rice Research and Development Center – Vinafood 1 56

4.2.1 Formation of strategy through the analysis of SWOT Matrix 56

4.2.2 Selection of clean rice trading strategies for Vietnam Rice Research and Development Center – Vinafood 1 by QSPM 60

4.3 Solutions to implement selected strategies 69

4.3.1 Solutions to implement the forward integration strategy 69

4.3.2 Solution to implement product differentiation strategy 71

4.3.3 Solutions to implement the market development strategy 75

4.3.4 Solutions to implement the backward integration strategy 79

4.4 Recommendations 79

4.4.1 To the State 79

4.4.2 To the Ministry of Agriculture and Rural Development 80

CONCLUSION 81

REFERENCES 82

APPENDICES 83

Appendix 1: List of survey experts 83

Appendix 2: Outline of group discussion 84

Appendix 03: Questionnaire 87

Phụ lục 02: Dàn bài thảo luận nhóm 89

Phụ lục 03: Phiếu khảo sát 92

LIST OF TABLES

Table 1.1: Summary of EFE Matrix 14

Table 1.2: Summary of IFE Matrix 16

Table 1.3: SWOT Matrix 17

Table 1.4: Summary of QSPM Matrix 19

Table 2.1 Group discussion results 24

Table 3.1: Current technology of rice processing 35

Table 3.2: Some policies to support rice trading in Vietnam 36

Table 3.3: Quantity of rice sales of competitors in Hanoi 38

Table 3.4: Some alternative products 39

Table 3.5: Survey results on customers’ habits of buying rice 41

Table 3.6 External Factor Evaluation Matrix (EFE) 43

Table 3.7: Human reources at Vietnam Rice Research and Development Center – Vinafood 1 46 Table 3.8: Structure of human resources in terms of level of education 47

Table 3.9: Average salary of the employees at the center 48

Table 3.10 Internal Factor Evaluation Matrix (IFE) 52

Table4.1: Synthesis of SWOT matrix 57

Table 4.2 QSPM of S-O strategy group 60

Table 4.3 QSPM of S-T strategy group 62

Table 4.4 QSPM of W-O strategy group 64

Table 4.5 QSPM of W-T strategy group 67

LIST OF FIGURES AND CHARTS

Figure 2.1 Research procedure 23 Chart 3.1: Organizational structure of Vietnam Rice Research and Development Center – Vinafood 1 30 Figure 3.1: Annual rice sales of the center 32 Figure 3.2: GDP and per capita income in the stage of 2012 -2016 33 Figure 3.3: Area in contract and area of rice fields in the raw material regions of the factories 34 Chart 3.2: Process of production and operation of clean rice at Vietnam Rice Research and Development Center – Vinafood 1 49 Figure 3.4: System of facilities and business locations 51 Figure 3.5: System of retailers of the center 52 Figure 4.1: Distribution channel of Vietnam Rice Research and Development Center – Vinafood 1 71

ABBREVIATION

1 VNF1 Vinafood1 – Vietnam Northern Food Corporation

2 VRRDC Vietnam Rice Research and Development Center

5 QSPM Quantitative Strategic Planning Matrix

7 SWOT Strengths, weaknesses, opportunities and threats

9 HACCP Hazard Analysis and Critical Control Point System

INTRODUCTION

1 Rationale of the study

Nowadays, the strong growth of the economy has contributed to the improvementpeople’s lives When the lives are improved, the demand for using high quality products is also raised (Ngoc Anh, 2015) In addition, food safety is one of the topical issues in the Vietnamese market due to the lack of strict standard control from the authorities as well as the problem of ethics in production and trading activities of part of enterprises This makes consumers anxious and worried when they usedaily products such

as food and drinks As a result, the consumers’ demand for using high quality and safe products is urgently necessary (Nguyen Trong Khanh and Nguyen Van Hoan, 2015) Like other food items, the rice in our country is facing "barriers" in quality This significantly influences the sales of rice ofenterprises in the domestic as well as export market According to the Vietnam Food Association (2016), our country currently ranked third in the world in rice export turnover with annual export target of 6.5 million tons However, the export market of our country mainly includes countries such as Indonesia, the Philippines, and African countries, so our rice does not have a good price Therefore, the issue of improving the quality of rice and developing clean rice is a basic requirement

to increase export turnover as well as serve the domestic market Moreover, it is also necessary to create a premise for our rice to be present in the fastidious markets such as Japan and European countries

In addition, according to the survey results of Nguyen Trong Khanh and Nguyen Van Hoan (2015), the current demand and market potential of clean and high quality rice products was increasing This was evidenced by the fact that all supermarkets in Hanoi, Hai Phong, Nam Dinh, Hai Duong, Thai Binh, Bac Ninh, etc were mainly selling clean and high quality rice such asTam Thơm Hai Hau, Nang Xuan and BT7 At the same time, when surveying customers using rice in Hanoi, the authors found out that more than 90%

of consumers did not care about the size of the rice grain or white or silverbelly.What they prioritized when choosing rice was that the rice must be clean, flexible and fragrant This indicated that the demand for clean and high quality rice was increasing and consumers increasingly tended to buy rice from reputable brands to ensure quality standards of the rice

Facing that situation, Northern Food Corporation - one of the leading rice exporters with a lot of experience in the world’s rice market - has pioneered in looking for the development directions for in Vietnamese rice over the yearswith the research and

production of clean rice with the Corporation’s brand, which meets the increasing demand

of people Being concerned and assigned byThe Ministry of Agriculture and Rural Development, especially after the scheme on building the Vietnamese rice brand name was approved by the Prime Minister, the Northern Food Corporation decided to set up a specialized unit calledVietnam Rice Research and Development Center The center was established on 19 September, 2014 with the task of researching and organizing the production of rice products under a chain of phases from researching seeds, cultivating to processing and distributing products with the aim tocreate good quality rice products and ensure food hygiene and safety and gradually build an excellent brand name for Vietnamese rice products However, this center just focused on production but was not interested in building business strategy for the development of clean rice As a result, although the business strategy had been built, the implementation efficiency was not high The annual rice consumption did not correspond to the size and potentials of the center Being aware of the reality, as an employee working at Agro Processing and Market Development Authorityunder The Ministry of Agriculture and Rural Development and being responsible for seeking the consumption markets for agricultural products (including rice) and exporting high quality agricultural products to fastidious markets, the author decided to select the topic "Business Strategy forClean Rice in the stage of 2016-2020: The Case of Vietnam Rice Research and Development Center – Vinafood1" for his graduation thesis as well as for serving his current work

2 Research overview

+ Bao Yen (2015) conducted a study on "Strategy of building clean rice brand name for Ninh Binh Seed Plants and Livestock Joint Stock Corporation" In this study, the author analyzed the company's strategy for cooperating with farmers to implement the closed rice production process with the motto of focusing on breeding, reducing losses and assuring quality under standards With this direction, the company was leading in the development

of a brand name for clean andhigh quality rice in Ninh Binh and gradually changing the methods of producing low-grade rice of farmers in previous years Besides, the author also mentioned the difficulties in building a clean rice brand name for Vietnam in general and Ninh Binh in particular It was a fact that, Vietnamese exported rice had not been standardized.For example, the rice exported to international market was not homogeneous

in breed and had three or even a dozen different kinds of rice in one bag.In fact, the branded rice must meet specific and tight standards of a grain of rice with high stability in length, diameter, clarity, gloss, moisture, impurities, content of substances, odor,

etc.Therefore, the research made a great contribution tobuilding the brand name for clean rice in Ninh Binh However, the author had not analyzed the SWOT matrix and did not combine the strengths, weaknesses, opportunities and threats to buildthe business strategy for developing clean rice brand name suitable for Ninh Binh province

Trinh Thi Thanh Thuy (2008) carried out a research article entitled "Studying and proposing solutions to develop clean food trading when Vietnam is a member of the World Trade Organization" In the study, the author specified the theoretical framework on the development of clean food products when Vietnam is a member of the WTO including the concepts, role of clean food and meaning of developing clean food, factors affecting production, processing and circulation of clean food, legal provisions for the production, processing and circulating clean food, and pointed out experience in developing clean food

in foreign countries In addition, the author also mentioned the reality of trading clean food

in Vietnam from 2002 to 2007 including: the reality of food production and processing, reality of food circulation and legal provisions related to the production, processing andfood circulation in the country and food import and export Finally, theauthor proposed solutions to develop trading in clean food in Vietnam by 2015 and orientation to 2020 including solutions on clean food production and processing, solutions on transporting, preserving and distributing inland foodstuffs, solutions on importing and exporting clean food, solutions on finalizing legal bases related to domestic production, processing and circulation and import and export of clean food products, solutions on raising awareness of the whole society ofthe production, processing, distribution and consumption of clean food However, sincethe author focused on building strategy for clean food including clean vegetables, clean rice, clean seafood, and so on, the research problem was quite broad and general, the results of this research could not be applied particularly for the development of clean rice products

+ Peter Durman (2003) conducted a study on "Development of a clean food and water environmental policy in a third world city" The research focused on the policy of developing clean food and water environment in the city in the third world The third world consisted of countrieswhich used to be colonial countries in Africa, Latin America, Oceania and Asia In the study, the author pointed out that low-hygiene food was an accepted issue in many third-world cities A large percentage of people accepted this as an unavoidable fact of life due to pollution sources Therefore, in the study the author proposed a policy of developing clean food to reduce the incidence of foodborne diseases

in third world cities The author’s research built a development model towards people's

health and social infrastructure in Indonesia The author’s model of clean food development can be applied in Vietnam because our country also used to be a third world country and our economic conditions were relatively similar to Indonesia However, the results in Peter Durman's study did not have an update on time At the same time, the research issue was on general clean food but not specifically on clean rice

+ Another research was conducted by the United States Department of Agriculture (2005) entitled "Guidance for School Food Authorities: Developing a School Food Safety Program Based on the Process Approach to HACCP Principles" The author researched the development of school food safety program based on HACCP principles with such contents as the purpose of the school food safety program, the requirements of the school food safety program and the development of the school food safety program with the following steps: (1) Preparingdocuments in writing, and implementing operational procedures, (2) Making documentation of all food safety items in accordance with the HACCP Compliance Process, (3) Identifying control documents and measures, (4) Establishing monitoring procedures, (5) Establishing corrective actions, (6) Keeping records, (7) Reviewing and revising the overall food safety program periodically This research contributed significantly to the development of clean food in schools in the United States However, the study was only conducted on a school scale but not widely applied In addition, the author conductedthe research on the development of clean food in general but had not gone deep into researching clean rice products

To sum up, there are many studies on business strategies for the development of clean food in general and high quality rice products in particular However, each author approached their study in a different direction, so the results of each study were different Besides, no authors conducted a comprehensive research on business strategy for clean rice Therefore, to supplement the documentation for business strategy of clean and high quality rice, the author decided to carry out theresearch and selected Vietnam Rice Research and Development Center – Vinafood 1 (VRRDC) as the case study

3 Research objectives

3.1 Overall objective

The purpose of the study was to contribute to improving the business strategy for VNF1 to become the leading producer and trader ingood and clean rice(safe food) in Vietnam

3.2 Specific objectives

- Systematizing the theoretical framework on building and developing business strategies in the agricultural sector in general and clean rice in particular

- Applying strategictools tobuild and develop business strategies for VRRDC

- Suggesting solutions to improve the business strategy for clean rice products of VRRDC

- Time: The research focused on the trading of clean rice (high quality) at Vietnam

Rice Research and Development Center – Vinafood 1 in the period of 2011 – 2015 for secondary data and from 11th May, 2017 to 30th May, 2017 for primary data

- Contents: Based on the theory of business development in the field of agriculture

and agricultural productsin general and rice in particular,the author builtthe business strategy for clean rice at Vietnam Rice Research and Development Center – Vinafood 1 and proposed solutions and recommendations to perform the business strategy for clean rice at the corporation

6 Thesis structure

Apart from the introduction and conclusion, the thesis consisted of 4 chapters

CHAPTER 1: Rationale of the study

CHAPTER 2: Research Methodology

CHAPTER 3: Reality of clean rice trading of Vietnam Rice Research and Development Center – Vinafood 1

CHAPTER 4: Building business strategy forclean rice of Vietnam Rice Research and Development Center – Vinafood 1 in the stage of 2016 – 2020

CHAPTER 1: THEORETICAL FRAMEWORK 1.1 Basic concepts

1.1.1 Concept of clean rice

Rice is a food product Rice is a popular food for people and is the main source of income for farmers all over the world (Le Xuan Tao, 2013)

Derived from the above concept of rice, there are many concepts of clean rice, namely:

Clean rice refers to the safety that this kind of rice brings to the health of people whoeatit (Nguyen Chi Trung, 2007)

Clean rice is a kind of food that is grown in the right procedure and looked after according to the proposed quality standard with no preservatives This kind of ricemust beconsumed in a period of time should not be stockedfor too long since the quality can be influenced (Huynh Van Thon, 2014)

Clean rice is a kind of rice which is produced in accordance with standards in a system of food inspection and supervision from the stage of cultivation to harvesting, processing and storage For example, the soil should be cleaned; the safety of the water source must be ensured; the rice seedsmustbe disease free because if the seeds are unsafe, they will affect the productivity and quality of the rice; the fertilizers and plant protection drugs must also be in the list allowedincluding organic medicines which are safe for users (Nguyen Cong Thanh, 2011)

1.1.2 Concept of business strategy for clean rice

The author approached the concept of business strategy for clean rice through the concepts of strategy and business strategy as follows:

According to Alfred Chandler (2013), strategy is the fixation of long-term fundamental goals of an organization, the choice of methods or courses ofactions and allocation of essential natural resources to accomplish these goals A business strategy should be defined as a general business plan that directs the organization to the desired goal

According to James B.Quynn (2014),strategy is the plan to combine the principal objectives, policies and series of actions of the unit into a cohesive whole

According to William F Glueck (2013),strategy is a united, comprehensive and coordinated plan which is designed to ensure that the basic goals of the enterprisewill be accomplished

Business strategy is a general action program aiming at achieving the goals of the enterprise The strategy is not intended to find outprecisely how to achieve these goals because it is the task of numerous support programs and functional strategies Business strategies only provide frameworks to guide thoughts in the direction of business and action (Huynh Thi Thien Chung, 2009)

According to Nguyen Ngoc De (2012), business strategy of an enterprise is that in the context of market economy, based on objective and subjective conditions and resources,the enterprise can determine the schemes,ways, measures to ensure the survival, stable andlong-term development according to the development objectives set by the enterprise

Thus, based on the concept of strategy and business strategy which have been defined by the world's researchers, the author proposed concept of business strategy for clean rice as follows:

Business strategy for clean rice is a general and comprehensive plan which is set up based on objective and subjective conditions and internal resources of enterprises to ensure the implementation of revenue and profit targets in the trading of clean rice

1.1.3 Possible business strategies for clean rice

+ Company-level strategy: According to Fredr David (2006), the strategies that can

- Strategies for expanding operations in practice:

Concentrated diversification: Add new products or services that are interrelated

Horizontal diversification: Add new products or services that are not interrelated for existing customers

Mixed diversification: Add new products or services which are not interrelated

Business-level strategy: According to Michael E Porter (1996), there are the

following types of business-level strategy:

- Cost leadership

The cost leadership strategy is an overall of actions to provide clean rice products with characteristics accepted by customers at the lowest cost in relation to competitors The goal of an enterprise pursuing a cost leadership strategy is to outperform competitors by doing everything possible to produce goods or services at a lower cost than its competitors This strategy has two basic advantages:

First, the cost leader can offer a lower price than its competitors but still get the same profit margin due to lower costs If enterprises in the same industry offer a similar price for their products, the cost leader will still have better profit

Second, the cost leader can stay stronger than its competitors When the number of competitors in the industry increases, enterprises are forced to compete on prices

- Focus

Focus strategy is the third business development strategy that clean rice trading enterprises can choose The main difference from the two strategies above is that it directly aims at the needs of the group or the limited customer segment A focus strategy will base

on the gaps of a specific market to determine the geographic aspect, kinds of customer, or product segmentation

When an enterprise has chosen a market segment, it will pursue a focus strategy that uses a differentiated approach or a low cost approach Basically, a focused enterprise is a

specialized difference maker or or a cost leader If an enterprise uses a focused cost leadership approach, it will compete with the cost leader in the market segments that this person is disadvantaged

If an enterprise uses a differentiation approach, it will use all the differentiation methods for different competitors The competitive point with differentiation makers is only in one or some segments of the market Moreover, the focus on a small range of products sometimes allows a person to develop faster than a differentiation maker

Focused enterprises often aim at creating market share on just one segment If it is successful, it can start serving more and more segments and gradually decrease the advantages of differentiation makers

- Blue Ocean

Value innovation is a way of thinking and deploying new strategies to form a blue ocean and avoid competition The important thing is that the value innovation does not follow the common rules of a competition-based development strategy It is a trade-off between value and cost

Some blue oceans are created outside the boundaries of the industry but most of them are created from within the red oceans by extending the current boundaries of the industry

1.2 Process of building business strategy for clean rice

Building a business strategy for clean rice is a thinking process that aims to create a strategy based on the research and forecast of basic information, ensuring the long-term implementation of important targets of the enterprise

The steps for building the business strategy for clean rice include:

i Analyzing external environmental factors

ii Analyzing internal environmental factors

iii Building strategic options/alternatives

iv Selecting strategies

v Organizing conditions for strategy execution and revision

The following sections will detail the tools and requirements of those steps

1.2.1Selecting and building strategic targets

The ultimate goal of the enterprise is its sustainable development in the market However, there may be different specific levels andpriority orders depending on the conditions and in each period In general, the business strategy for clean rice includes the following elements:

- Market share of the enterprise;

Strategy analysis is the analysis of business environment of rice enterprises in order

to create the basis for building strategies Business environment is the whole institution, factors and pressures that can have direct or indirect impacts on the clean rice trading of enterprises Business environment analysis allows strategy managers to identify business opportunities or threats for business operations Business environment consists of macro environment and micro environment

1.2.2.1 Analyzing external environmental factors

Macro environment - PEST model

Based on the PEST model, four affective factors can be identified including legal environment, economic environment, socio-cultural environment and technological environment (Thomas L Wheelen and J David H., 2002)

political-Figure1.1: PEST model

Source: Thomas L Wheelen and J David H 2002

- Economic environment: Economic development, economic recession, changes in

the inflation rate, prices, unemployment, income, resources, credit policies all affect the

Political –legal

Socio-cultural environment

Economic environment

PEST model

operations of companies in general and clean rice trading companies in particular There are many rice companies that effectively do the planning but fail due to not anticipating or ignoring the changes of domestic and global economic conditions

- Technological environment: It can be seen that technology is the basis of

competition in the market Technology has a great impact on the products in the market Technology also decides the production of clean rice of enterprises

- Political-legal environment: Politics and law are two sides of a problem They are

very closely related The companies in the market are directly influenced by these factors Political factors at all levels of local government affect the operations of companies However,the prominent factor is the role of the central government Political institutions have a great influence on a country's policies and guidelines on issues such as economy and society, and hence the rice trading companies are also affected In addition, legal factors are consideredthe standard for the performance of companies in general and rice companies in particular These factors have daily and hourly impacts and companies need

to pay close attention to them

- Socio-cultural environment: Clean rice enterprises need to comprehensivelyanalyze

the social factors in order to identify the opportunities and risks that may occur However, social factors (such as anthropological trends, entertainment preferences, ethical standards, and viewpoints of living standards) often change or develop slowly, so they are often difficult to be recognized When analyzing the influence of social factors on the strategy planning of enterprises, it is necessary to analyze the following factors:

Life quality of people, entertainment preferences of social classes

Standards of ethicsand lifestyle

Situation of human resources such as female labor force, labor reserve

Level of education and occupation of people and workers

Cultural traditions and social customs

Religions and the role of religions in social life, religious conflicts

Demographic situation: population growth rate, population structure

Micro environment - 5 competitive pressure model

Micro-environment includes sectorial factors and external factors for clean rice trading enterprises, deciding the nature and level of competition in the industry of rice production and trading According to M.Poter, there are five basic elements including competitors, customers, suppliers, potential new competitors and alternative products These factors have interrelationship and the general impact of these factors is often a fact

acceptable to all enterprises In order to devise a successful strategy, it is necessary to analyze each of these key factors Understanding about these factors helps enterprises recognize their strengths and weaknesses in relation to the opportunities and threats that the clean rice trading industry may face

Figure 1.2: Model of five competitive pressures

Source: Micheal Porter, 1996

Current competitors

Current competitors are enterprises that are operating in the same riceindustry as thecompany, who are now looking for ways to increase sales and profits by policies and measures that create disadvantages for the company Due to the limited market size, enterprises "compete" for market share by offering discounts, advertising, promotion, persuading customer, improving product quality, creating the difference in the supply of rice products and creating value for customers

Potential competitors

In the market of clean rice supply, there will be new competitors in the near future.Although they are not present, enterprise strategists must anticipatethis possibility.These competitors appear late, but often have abundant and experienced resources Once they appear, they will compete with the companyin three aspects:

- Win the clean rice consumption market by various tricks

- Collecting materials with flexible andmore attractive policies

- Attract qualified and skilled workforce with attractive incentive policies

Suppliers

Current competitors

Alternative products Potential competitors

Companies that provide production toolsfor clean rice enterprises such as machinery, equipment, spare parts and transportation services can also create pressures on price, methods of supply and methods of payment in business negotiation, which threaten the interests of the enterprises However,this also creates good business opportunities for the enterprises Creating competitive advantages in the supply process, creating strategic alliances and creating supply contracts are solutions to reduce the pressuresfrom this environmental factor

Alternative products

A product or service which satisfies a customer's needs in the marketis not unique and keeps that position forever but will bereplaced by another product someday Clean rice products are also like that.Other manufacturers can meet the current needs of customers who are using clean rice products of the enterprise Often, these new products will better satisfy customers’ demand thanks to theapplication of innovations and new achievements

in science and technology and cheaper prices

The pressure from new alternative products limits the ability to make profitsof existing clean rice products and narrows the market share of enterprises To limit the impact of this threat, enterprises must also invest stronglyin research and development

Customers

Customers are the buyers of clean rice products and are an important factor in the business activities Clean rice trading enterprises must ensure the benefits of customers and find all measures to meet the highest satisfaction of customers toward the quality of the products

In addition, in order to achieve the highest efficiency ofbusiness strategy for clean rice, apart from paying attention to the quality of rice (plasticity, whiteness, gloss, etc.), meeting customers’ tastes and needs is extremely important To study the tastes and needs

of customers, enterprises should consider the following issues:

- The kind of rice customers often choose(based on traditional channels, buying loose rice, being able to select and weight directly)

- The habit of using rice of customers (suitable for the taste and the budget)

- The awareness of customers in using clean and safe rice

External Factor EvaluationMatrix (EFE)

The EFE Matrix is a model used to evaluate external factors, synthesize and summarize the major opportunities and threats of the external environment that affect the operation of clean rice trading enterprises This helps business administrators assess the

responses of enterprises toward the opportunities and threats, and decide if the external factors are favorable or difficult for the enterprises The steps to develop EFE Matrixare presented in the following table:

Table 1.1: Summary of EFE Matrix External factors Level of

Source: Nguyen Thi Lien Diep (2006)

- Listing the major factors of opportunities and threats that are expected to affect the success of the enterprise

- Classifying the significance on a scale from 0 (unimportant) to 1 (very important) The significance of each factor depends on the level of influence on each business sector of the enterprise

- Determining the weight from 1 to 4 for each factor The weight depends on the level of enterprise’s response toward each factor

- Multiplying the significance of each factor by its weight to get the corresponding score

- Summing the scores of all elements to get the score of the matrix

The higher the total score is, the better the company responds to the opportunities and threats

1.2.2.2 Analyzing internal environmental factors

The analysis of internal factors is to find out the strengths and weaknesses of clean rice enterprises through the assessment of key factors of the enterprises such as marketing, finance, accounting, human resources, production and the relationship among these factors From the strengths and weaknesses, enterprises will set up a goal combined with external opportunities and threats to take advantage of strengths and overcome weaknesses in the rice trading

The understanding about internal environment has a great significance in establishing thebusiness strategy for clean rice The identification of strengths and weaknesses of

enterprises helps them find ways to promote its strengths and minimize weaknesses in order tocreate its competitive advantages

VRIN/VRIO tools

- Human resources: Human resources are an important factor that plays a special role

in all activities of any enterprises When analyzing human resources, it is necessary to consider the criteria such aseducation level, flexibility, creativity and level of satisfaction with the current job

- Production - operation: Production is the function of creating clean rice from the

production andstorage to packing That is a combination of input materials to createclean rice products The content of production - operation analysis is to analyze the rationality of technology process, capacity and labor quality to serve the production process and ensure the highest quality of rice

- Financial and accounting activities: Financial situation reflects quite exactly the

operations of the enterprise The determination offinancial strengths or weaknesses of the enterprise is essential in developing the business strategy for clean rice The analysis contents of financial and accounting activities include investment decisions, financial decisionsand decisions on dividend distribution to shareholders

- Research and development: Research and development activities of the enterprise

are the function of creating changes in rice products or changes in the process of production in order to increase the quality of clean rice in terms of plasticity, gloss, and safety and decrease prices with the aim of increasing competitiveness and goingdeeper into the fastidiousmarket The contents of research and development include the external and internal analysis of the organization It is the review of the funding sources and specific tasks of research and development such as the setting up goals, building and implementing the research and development strategies and policies

- Marketing activities: Marketing activities are described as the process of

identifying, forecasting, setting and satisfying the desired needs of customers toward clean rice products of the enterprise The analysis of marketing activities should focus on analyzingpolicies on rice products, prices, distribution and communication of the enterprise

- Organizational discipline: The corporate culture is a combination of experience,

personality and working style to form the regulations ormanners of the enterprise Poor or good organizational discipline will negatively or positively affect the process of implementing business strategies of the enterprises

Internal Factor Evaluation Matrix (IFE)

Internal factors are very important factors affecting the building of business strategies for clean rice of the enterprise The problem is how strategy planners can accurately evaluate the strengths, weaknesses and the response of internal factors toward changes IFEMatrix is often used to solve this problem The formation steps of the matrix are as follows:

Table 1.2: Summary of IFE Matrix

Source: Nguyen Thi Lien Diep, 2006

- Making a list of factors including the strengths and weaknesses that affect the enterprise

-Classifying the significance of factors from 0 (unimportant) to 1 (very important) Significance is measured by the influence of factors on the success of the enterprise The total value of significance is 1

- Determining the weight of each factor from 1 to 4

- Multiplying the significance of each factor by its weight to determine the score of each factor

- Summing the scores of all the factors to determine the total score of the matrix The higher the score of the matrix is, the greater the possibility of internal factors responding to the threats

1.2.3 Building strategic options

After evaluating and analyzing the above factors, the next step was to develop strategic plans In order to build suitablestrategic plans for the organization, the SWOT model is often used to analyze strengths, weaknesses, opportunities and threats of the organization

Strengths:Strength is an activity that the company can do well or a competitive

characteristic of the company including:

- Valuable competence, secrets;

- Valuable assets;

- Valuable human resources;

- Low coststhanks to own production secrets,

- Easy access to high quality natural resources,

- Easy access to distribution networks

Weaknesses: The absence of strengths is considered a weakness The following

characteristics may be considered weaknesses:

- Lack of brand name, secret, experience or capacity;

- Being thought by customersas having a bad reputation;

- High costs for operation;

- Little access to natural resources;

- Little access to key distribution channels

Opportunities: An analysis of the external environment can reveal new

opportunities for creating profitability and development, namely:

- Customer needs are not fully met;

- The emergence of new technology;

- Loose regulations;

- The removal of international trade barriers

Threats: Changes in external circumstances and environment can pose a threat to the

enterprise, namely:

- Customers movetheir interest in other products;

- The appearance of alternative products;

- New legal provisions;

- The international trade barriers are tighter

Table 1.3: SWOT Matrix SWOT Matrix O: Listing the key opportunities T: Listing the key threats

S: Listing the key

strengths

S-O: Combining strengths to

make use of opportunities:

1

2

3

S-T: Combining strengths tominimize and avoid threats:

1

2

3

W: Listing the key

weaknesses

W-O: Overcoming weaknesses

to make use of opportunities:

Source: Dao Duy Huan (2015)

SWOT matrix is an important tool helpingadministrators develop four types of business strategy for clean rice including: • Strengths - Opportunities; Weaknesses - Opportunities; Strengths - Threats; Weaknesses - Threats

Strengths - Opportunities strategies (SO): These strategies use the internal strengths

of the enterprise to take advantage of external opportunities

Weaknesses - Opportunities strategies (WO): These strategies aim to improve internal weaknesses by taking advantage of opportunities from the external environment Strengths - Threats strategies (ST): These strategies use the strengths of the enterprise to avoid or reduce the impact of external threats

Weaknesses- Threat strategies (WT): These are defensive strategies that reduce internal weaknesses and avoid threats from external environment

1.2.4 Selecting strategies

There are many tools used to choose the optimal strategy for the enterprise The Quantitative Strategic Planning Matrix (QSPM) is a modern strategic management approach for evaluating and selecting the optimal strategy The QSPM matrix provides an analytical approach to find our alternative feasible plans The QSPM matrix uses input data from the analysis in the previous steps to help strategists determine which of the developedalternative strategies is the most attractive and is worth pursuing to achieve their goals successfully

There are six steps to develop a QSPM matrix:

(1) The first step in the development of QSPM matrix is to identify key strategic factors, list key external opportunities and threats, and internal strengths and weaknesses These factors are taken directly from EFE and IFE matrices

(2) With available data, the determination and selection of optimal strategies will be considered These strategies are displayed at the top of the table

(3) Studying SWOT matrices and identifying alternative strategies that the enterprise should consider to implement; writing these strategies in the top row of the QSPM matrix The strategies are grouped separately

(4) Determine the attractiveness score of each strategy Only strategies in the same group can be compared The attractiveness scoresare classified as follows: 1 = not attractive, 2 = less attractive, 3 = quite attractive, 4 = very attractive These values represent the relative attractiveness of each strategy compared to other strategies in the same set of alternative strategies

(5) Calculating the total attractiveness score, which is the resultsfrom multiplying the classification score (step 2) by the attractiveness score (step 4)

(6) Accumulating attractive scores for the total attractiveness of each strategy (taking into account all relevant internal and external factors that may influence strategic decisions) The higher the score is, the more appropriate the strategy is and the more it is worth to be selected

Table 1.4: Summary of QSPM Matrix

Weight Strategy 1 Strategy 2 Strategy 3

Source: Nguyen Thi Lien Diep (2006)

1.2.5 Organizing conditions for strategy execution

After identifying the optimal strategies for developing clean rice trading of the enterprise, managers need to create favorable conditions and carry out measures to implement the strategy successfully

The conditions for successful strategy implementation include:

- Organization (personnel, structure, budget, process, mechanism, policy)

- Regarding post-harvest technology: After buying from the rice growing areas, the company will process the rice so that it can meet the export standards right at the mills These mills are equipped with modern machinery which produces a variety of high quality rice The company’s types of export rice include all types of export rice that the country can produce Export rice mainly includes long grain rice with good quality, which is produced mostly from the Mekong Delta, short grain rice and specialty rice

- Regarding packaging: There are two popular types of packaging used by the company including PP bags or jute bags However, due to many outstanding features, PP bags are now more widely used Export rice packaging is used depending on the requirements of foreign customers They can provide samples or want to see samples to choose from Export rice is normally packed in bags of 50 kilos or 25 kilos while bags of

10 kilos and 5 kilos are only packed when customers request These customers will import the company's rice and keep the packaging to deliver to the consumers The ability to

produce the packaging according to customers' requirements is one of the strengths of the rice trading companies

1.3.2 Experience of An Giang Import-Export Company (Angimex)

Currently, Angimex is trading the following types of rice: 5%, 10%, 15%, 16%, 35%, 55%, Jasmine rice, broken rice and sticky rice Thus, the company has used the product diversification strategy combining the "differentiation" strategy of each product That is, the product created by the company will have better quality, be affordable for customers, bring profits to the company, and benefit the majority of customers The packaging is different in characteristics compared to the same products in the market, easy

to attract buyers and not easily imitated by competitors

- In the purchasing phase: The company always ensures the correct and sufficient quantity by building its own material areas or signing contracts with cooperatives in the area, namely:

- Cho Moi District: Phu Quoi Cooperative, Tan Quoi Cooperative

- Thoai Son District: Vinh Thang Cooperative, Binh Thanh Cooperative, Nui Troc Cooperative, Tay Son Cooperative, Production associations of Trung Son Hamlet

- Chau Thanh District: Production associations 1 - 8 in Vinh Loi Commune - Phu Tan District: Hoa Phat Cooperative, Hoa Lac Cooperative

- Cooperatives in the company system: Son Hoa, Truong Thanh

The strategy of the company when signing the contract is applying adjustable contracts, i.e the price in the contract is the floor price; when the price is down, the floor price is used for the transaction; when the price is up, the floor price is adjusted by two sides At the same time, the company always builds close relationships with suppliers by selling shares to suppliers (after equitation); often organize programs to support farmers; pay attention to reliable suppliers; sell seeds on credit to farmers without interest to ensure the quality of rice

When packing the products, the company pays special attention to three issues: different characteristics, good impression and easy to attract buyers and difficult for competitors to replicate Accordingly, the company’s packaging and logistics factories have invested more machines to produce PP and PE plastic bags to pack products into small bags of 2 to 5 kilos On the packaging, there is the company name, company logo, product slogan, weight and quality indicators

1.3.3 Experience lesson for Vinafood 1

Through the experience in rice trading of some Vietnamese rice export companies, the author drew the lesson for Vinafood 1 as follows:

- Pay special attention to the product quality

- Diversify products to meet the needs of customers

- Make a difference in the products offered

- Packaging design must be attractive and contain full information about the product

as well as the weight, product standards

- Set up a close relation with suppliers to ensure sufficient input materials for the production process

- Set up separate material areas

- Pay attention to investing in modern production technologies to ensure the continuous business

CHAPTER 2: RESEARCH METHODS 2.1 Research procedure

Figure 2.1 Research procedure

Source: Synthesized by the author

Theoretical framework

Theory and researches on building business strategies for products

Identifying research objectives and process of building strategies

Proposing evaluation criteria for EFE, IFE Matrices

Group discussion

Formal interview

Building preliminary questionnaire

Adjusting questionnaire

Proposing solutions to implement strategies

Collecting and processing data

2.2 Data collection methods

+ Secondary data: The data sources included business result statements, balance sheet, financial statements, final reports of the center in the stage of 2013-2016,and other related documents from journals and statistics on the country's socio-economic situation announced by the General Statistics Office

+ Primary Data: The collection of primary data was conducted in three basic steps:

- Step 1: Develop a preliminary scale including factors affecting the business strategy forclean rice, consisting of two groups of internal and external factors The criteria were built based on the previous researches, materials, and textbooksrelated to strategic management and business strategy development

- Step 2: The preliminary criteria were discussed with the three leaders of the center The results of group discussion aimed at adjusting the criteria so that they were consistent with the business practices and clean rice products The contents of group discussion were presented in Appendix 2 of the thesis where the criteria were presented in return for comments of the center's leaders Specifically, for the criteria of the external factors, the

discussion group added some criteria including The demand for using safe and high quality rice products is increasing, and Consumers have not had the habit of choosing products based on clean and safe criteria, and revised the contents of two criteria including The status of the center has been gradually recognized in the hearts of consumers into Consumers are increasingly interested in prestige and brand name of the enterprise and The center has not completely controlled the quality of input materials intoIt is difficult to control the quality of input materials The external consisted of 14 criteria

In terms of internal factors, the discussion group has revised the criteriaThe investment in expansion of distribution system into The increase, expansion of distribution system of clean rice products through agents and retail stores For the convenience and

comprehensibility of the respondents, a total of 11criteria of internal factors were discussed

by the group

Table 2.1 Group discussion results

No Expected external factors Reference Agreed factors after

group discussion Note External factors

1 Gross National Product GDP

and per capita income increase

Gross National Product GDP and per capita Agreed3/3

rapidly income increase rapidly

2

The Government is interested in

the implementation of the "four

-subject" model

The Government is interested in the implementation of the

"four -subject" model

Agreed 3/3

3

The amount of high quality

materials offered under

contracts is very low

The amount of high quality materials offered under contracts

is very low

Agreed 3/3

4

The strong development of

clean rice production

technology in the world

The strong development of clean rice production technology in the world

Agreed 3/3

5

The investing budget for

applying technology in

producing and trading high

quality rice is very large

The investing budget for applying technology

in producing and trading high quality rice

is very large

Agreed 3/3

Agreed 3/3

7

The State has issued many

policies to support and promote

agricultural development

The State has issued many policies to support and promote agricultural

development Agreed3/3

8

A lot of alternative products

have been produced and

supplied in the market

A lot of alternative products have been produced and supplied

in the market Agreed3/3

9 Rice is primary and

indispensable food in daily life

Rice is primary and indispensable food in daily life

Agreed 3/3

10 Budget for consumption is

Budget for consumption is limited

Agreed 3/3

11

The status of the center has been

gradually recognized in the

hearts of consumers

Consumers are increasingly interested

in prestige and brand name of the enterprise Revised

12

The center has not completely

controlled the quality of input

materials

It is difficult to control the quality of input

Internal factors

1 Changes in the quantity and

quality of human resources

Changes in the quantity and quality of human resources

Agreed 3/3

professionals

Agreed 3/3

3 Level of human resources,

number of trained workers

Level of human resources, number of trained workers

Agreed 3/3

4

The increase in the

remuneration for employees at

the center

The increase in the remuneration for employees at the center

Agreed 3/3

5 Quality of recruitment Quality of recruitment Agreed

3/3

3/3

7 Procedure of rice production

according to HACCP standard

Procedure of rice production according to HACCP standard

Agreed 3/3

8 The contribution of research and

development of clean rice

The contribution of

development of clean rice

Agreed 3/3

9

Establish a specialized unit

responsible for research and

development

Establish a specialized unit responsible for

development

Agreed 3/3

10 The investment in expansion of

11 The meeting of market demand

of the retail chain of the center

The meeting of market demand of the retail chain of the center

Agreed 3/3

Source: Synthesized by the author

- Step 3: The official survey was conducted after the content of the criteria had been revised The survey was conducted with 20 experts including leaders, managers, deputy managers of functional departments, specialists in product research and development The purpose of the survey was to get the experts’ assessment on the internal and external factors affecting the strategy of the company in terms of the importance of factors The survey was conducted from 11 May, 2017 to 30 May, 2017 in the form of direct interaction