Poor management in prices and dumping at locklock vietnam co , ltd

Lock&Lock revenue rate of each channel in 2018 Source: Sales Management Department But at the end of 2018, the management of Lock&Lock realized that the sales of the Supermarket Channel

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Le Ngoc Khanh Quang

POOR MANAGEMENT IN PRICES AND DUMPING

AT LOCK&LOCK VIETNAM CO., LTD

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City - 2019

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Le Ngoc Khanh Quang

POOR MANAGEMENT IN PRICES AND DUMPING

AT LOCK&LOCK VIETNAM CO., LTD

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: DR PHAM PHU QUOC

Ho Chi Minh City – 2019

SUPERVISOR’S REPORT ON THE FINAL THESIS SUBMITTED

FOR DEGREE OF MASTER of BUSINESS ADMINSTRATION

The thesis proposal title:

POOR MANAGEMENT IN PRICES AND DUMPING

AT LOCK&LOCK VIETNAM CO., LTD

Student Name: Le Ngoc Khanh Quang

Supervisor: Dr Pham Phu Quoc

4 Mission and Vision

PART II - PROBLEM CONTEXT

1 Symptoms: Growth rate of Lock&Lock supermarket channel in the period of 2017 -

2018 is very low

2 Symptom validation

2.1 The development of supermarkets in Vietnam

2.2 Comparing with the total household appliances industry and the supermarket

channel revenue growth rate of household appliances industry

2.3 Compare with other channels of Lock&Lock

PART III - PROBLEM IDENTIFICATION

1 Problem definition

1.1 Development trend of other channels

1.2 Goods are not guaranteed in quantity

1.3 Poor management in prices

2 Problem validation

PART IV – CAUSE VALIDATION AND CONSEQUENCES

1 Causes and cause validation

2 Consequences

PART V – SOLUTION

1 Alternative solutions

1.1 Cooperate with e-commerce websites

1.2 Work closely with B2B customers with contract that have a clear trading term 1.3 Focus more on brand positioning and marketing campaign to make customers

realize the value of the product they receive

1.4 Build a team of professional sales staff that have good knowledge and skills with

a thorough training program

2 Action plans for the organization

2.1 Evaluate and select the optimal solution

2.2 Define the objectives

2.3 Action plans

PART VI – APPENDIX

Executive Summary

For a long time, management has been seen as the key to the success of enterprises

in the integration trend because management decides and coordinates the connection of business and production activities of enterprises to the market and between departments together, ensuring business operations always grow and develop

Research and systematize the basic theoretical basis of management and the factors affecting the performance of Lock&Lock company, identifying the problem that the company is experiencing, thereby propose some solutions to improve the performance of Lock&Lock company in Vietnam, so that the company can achieve its common goal Lock&Lock Co., Ltd is having problems related to revenue at supermarket channel This problem is the poor management of prices and dumping outside the market applied with B2B channel goods B2B channel’s goods are only sold as gifts, however, these items are out of the market for trading purposes This problem caused the situation of decreasing sales of supermarket channels that did not meet expectations If there is no solution to this problem, in the long-term, this not only lost sales of supermarket channels, but also significantly affected the reputation and brand of Lock & Lock that the Shop channel and marketing department were invested to build in the past few decades in Vietnam The most feasible solution to this problem is building a team of professional sales staff that have good knowledge and skills with a thorough training program With this solution and a long-term plan, not only sales of supermarket channel will be improved, but also Lock&Lock can develop long-term stability and achieve its goals

1 INTRODUCTION

1.1 Company background

Lock&Lock Co., Ltd was established in July 2007, is a 100% foreign-owned company Lock&Lock Co., Ltd is a branch in Vietnam belonging to Lock & Lock Group Headquarters is located in Seoul – South Korea

The company’s products are high-end household appliances available in 112 countries and Q-mark certified for product quality (Q-mark is a standard system of quality assurance of products, managed by KEMTI) Besides that, the company’s products are also voted the product of the year in the United Kingdom

Lock&Lock owns 100 patents, designs and brands in 50 countries Especially, it is certified with the quality of products and brands of countries with strict requirements on product quality and production processes such as UK, US, Germany

Currently, in Vietnam, Lock&Lock has 3 production factories in operation In Dong Nai Province and Ba Ria Vung Tau Province

1.2 Business model

1.2.1 Key products

Wholesale and retail distribution of Food Storage Containers, Kitchen Appliances and Livingware product lines with advanced technology transferred from Lock&Lock Group in Korea

1.2.2 Key customer

All customers are interested in home appliances, especially housewives

1.2.3 Distribution Channels

Lock & Lock have 4 main distribution channels in Vietnam:

 Supermarket and Convinience stores

 Improving the efficiency of production and business on the basis of product quality

is the first task to create prestige for the company

 Satisfying consumers’ needs, always improving and innovating modern advanced technologies, with the importers of products must ensure high competitiveness in price and quality

(Source: Sales Management Department)

Unit: 1,000 VND Chart 1 Lock&Lock Total revenue in 2015 – 2018

(Source: Sales Management Department)

Lock&Lock’s supermarket channel accounted for the second largest sales of the company Therefore, this is a very important distribution channel in the company

Chart 2 Lock&Lock revenue rate of each channel in 2018

(Source: Sales Management Department)

But at the end of 2018, the management of Lock&Lock realized that the sales of the Supermarket Channel at the company did not achieve the expected growth Growth rate in

the period 2017 – 2018 is just 6%

(Source: Sales Management Department)

Symptoms are defined as sales of Lock&Lock supermarket channel is not high and growth rate in the period of 2017 - 2018 is very low

2.2 Symptoms validation

Although the sales of the supermarket channel did not meet the expectation, but whether Lock & Lock’s problem come from it or not, I proceeded to go into analysis and comparison, with the situation of supermarket channels in Vietnam, the development of the Household Appliances industry and compared with other channels within the company

2.2.1 The development of supermarkets in Vietnam

According to CCI France Vietnam (1), the retail market in supermarkets, convenience stores and electronics supermarkets in Vietnam is growing, with CAGR of 4.7% (2013-2016) and 6.2% (2013-2017), convenience store chains are growing strongly

in recent years, with very high CAGR of 66.2% from 2014 to 2017 Forecast of the Institute

of Trade Research (Ministry of Industry and Trade) said that in the period of 2016-2020, Vietnam’s retail trade growth rate will reach 11.9% per year By 2020, according to the plan, the whole country will have about 1,200 - 1,500 supermarkets, 180 commercial centers, 157 shopping centers

Chart 2 Number of supermarkets in Vietnam in 2017

(Source: Q&Me Vietnam Market Research)

Because if supermarket channel is not immediately improved, the revenue of supermarket channels cannot keep pace with the development of supermarket systems in Vietnam, the company will face difficulties in today’s fiercely competitive market

Moreover, the company’s goal is that the annual growth rate of all channels must be more than 20% and become the world’s leading company in household appliances industry

in 2020

2.2.2 Comparing with the total household appliances industry and the

supermarket channel revenue growth rate of household appliances industry

As The Statistics Portal, the internet’s leading statistics database, in the Vietnamese

market, the household appliances industry has a growth rate of 14.2% in 2017-2018 and

forecast the next year growth rate of 17.7%

Household Appliances

Table 3 Household Appliances Industry Total revenue in Vietnam in 2017, 2018 and

forecasts for 2019, 2020

(Source: https://www.statista.com/)

Chart 3 Household Appliances Growth rate in Vietnam in 2017, 2018 and forecasts for

2019, 2020

(Source: https://www.statista.com/)

Comparing the supermarket channel revenue growth rate of industry in 2017-2018 is

14.51% with the supermarket channel revenue growth rate of Lock & Lock is just 6% It

is clear that the supermarket channel of Lock & Lock has problems in the period of

(Source: Marketing Department)

Unit: 1,000 VND Chart 4 Household Appliance Supermarket’s revenue in 2016 – 2018

(Source: Marketing Department)

2.2.3 Compare with other channels of Lock&Lock

Looking at 2017-2018, when other channels of the company simultaneously grew

more than 50% (Shop channel 63%, B2B channel 58% and Online channel 275%), the revenue of the Supermarket Channel was almost “make no headway” with growth rate is just 6%

Online

Unit: 1,000 VND Table 5 Lock&Lock other channels’ revenue in 2015 – 2018

(Source: Sales Management Department)

Unit: 1,000,000 VND Chart 5 Lock&Lock Total revenue in 2015 – 2018

(Source: Sales Management Department)

In-depth analysis into the sales of supermarket channels, mainly coming from

Electric Household Appliances, accounting for more than 60% of total revenue From

2017 to 2018, total revenue increased by 6% but revenue from Electric Household Appliances did not increase or even decrease This proves the problem comes from the sales

of Electric Household Appliances of Supermarket channels In summary, the company's

symptoms are showing that the company is having problems, that is Sales of Electric Household Appliances of Supermarket channels does not seem to grow in the period

2015 – 2018

(Source: Sales Management Department)

Unit: 1,000 VND Chart 6 Lock&Lock Supermarket Channel Electric Household Appliances Revenue from

From the above mentioned symptoms, I conducted interviews with the stakeholders: Lock&Lock Sales Director; Sales Manager and Sales Supervisors of Supermarket Channel; Sales Manager of B2B Channel; Sales Manager of MESA Distributor, an official distributor

of Lock&Lock; Lock&Lock Promotion Girls (PG), who directly sell Lock&Lock products

at supermarkets and receive feedback from customers The interview helps me find out what’s happening at the supermarket channel in particular and Lock&Lock in general Then

I put up some literature review to find out what potential problems that the company is

facing We have identified 3 problems: Development trend of other channels, Goods are not guaranteed in quantity and Poor management in prices

3.1.1 Development trend of other channels

A problem that is mentioned is that the other distribution channels of Lock & Lock are supported too much, the strong development trend of the online channel is strong with the financial support for the channel, these two things were significantly impact on revenue

of supermarket channel

When interviewed about the problems derived from supermarket channel revenue, it did not reach as expected, from the perspective of Sales Director, Mr Kim Young Woong said that:

The sales of supermarket channels in recent years have not grown as expected due to the strong development of online channels in the 4.0 era E-commerce is growing so fast, people are gradually rushing to buy goods online rather than strolling around stores and supermarkets

Mr Joo IL Gam, Sales Manager of Supermarket Channel, thinks that:

For the purpose of boosting the brand of Lock & Lock, Lock & Lock want to become

a high-end household appliances brand in the eyes of all Vietnamese consumers, Lock & Lock promotes the development of Shop channel in all big shopping mall in

to Shop channel

Overall, E-commerce (Lock&Lock’s online channel) has many advantages According to Chaffey (2007), the online channel is no longer limited geographically, or by working time (2), so Lock & Lock will not need to wait for customers to come to the store but actively seek customers Lock&Lock can provide catalogs, information, quotes to customers in an extremely fast way Phuong Nguyen (2017) said that online channels will reduce problems in supply chain management such as inventory and delivery time, rental costs and wages will not be as high as other channels Online channel will be supported a lot, on special occasions like Lazada’s or Tiki’s birthday, the products will be discounted

more than other channels This will be a significant impact on the revenue of the supermarket channel Further more, the company has spent most of the marketing costs invested in the shop channel, all major commercial centers in Hanoi, Ho Chi Minh City, as well as the big cities have opened their shops there and advertised immensely, this also affects sales of supermarket channels

3.1.2 Goods are not guaranteed in quantity

Sales by units multiplied by the selling price, so the lack of goods and goods provided inadequate for the programs of the supermarket channel is an issue worthy of analysis

I moved through the interview the team in charge of the supermarket, including sales supervisors and sales admins staff

Ms Nguyen Thi Mai Chi, Sales Supervisor, in charge of managing MESA distributor, complained that:

The company system does not allow to order production from factory too much, because of fear of not selling out, when running the program, the good selling items

do not have enough goods

Ms Nguyen Thi Bich Hong, Sales Admin, in charge of tracking supermarket orders and production orders from factory said that:

We have planned to order from the factory very early, however, the order process is very cumbersome and complicated, we have to wait and see if the other channels have ordered items too, so that we can reach MOQ (Minimum Order Quantity), and must be approval from so many departments Therefore, I think that supermarket channel revenue is not high due to goods amount and processes

Mr Khong Nhat Minh, Sales Supervisor, in charge of promotion plan, complained that:

When planning a promotion, I have to look at the number of goods that have enough stock or not, if not, I have to order from the factory, however, when using inventory managing software, comparing with the real stock, it is incorrect data Because of the inefficient inventory management, it is difficult planning for Supermarket promotions

Commodity issues will affect the sales of supermarket channels When the goods are insufficient or at the wrong time, the revenue will definitely decrease

3.1.3 Poor management in prices

Similarly, price is a sensitive factor and significantly affects revenue When customers compare retail prices, they will decide whether to buy the product or not Therefore, the price is a problem of the supermarket channel that we will discuss and analyze

I conducted interviews with the sales staff of Lock & Lock at supermarkets (PG), Those who directly meet, consult and communicate directly with supermarket channel customers of Lock & Lock, Ms Hang Gia Linh, PG at Vinmart Cong Hoa said that:

Customers told me that the quality of household goods Lock & Lock is very good, the model is very beautiful and constantly has new products, but the price is too high Customers often complain about price issues They go online to find information and compare, there are many prices, when going to the supermarket to meet PGs of Lock & Lock, then complain

According to Philip Kotler, a well-designed and marketed product can deserve a high price and a high profit (3) Lock & Lock is a good product, excellent quality, beautiful design, so high price is not a problem However, Philip Kotler added, buyers can get instant price comparisons from thousands of sellers, who often actively find out information about prices, possibly from previous purchases, from ads, friends, family, or online sources Price

is the only component that generates the revenue of the marketing mix, which acts as a determining factor for buyers’ choice (3) Therefore, this greatly affects the revenue of supermarket Lock&Lock

After identifying the symptoms of the problem of supermarket channel in Lock&Lock company, I applied many theories and interview results to support finding potential problems and potential causes, captured off is the initial cause-effect map below

Sales growth rate of Electric Household Appliances of Supermarket Channel is lower than expectation

Poor management in prices

is not good

Goods are not guaranteed

in quantity

Managers do not allow to order production from factory too much

There are so

many prices in

the market

The price is high

Order from factory process is too complicated

3.2 Problem validation

After identifying the three potential problems that can affect the sales of the supermarket's electric household appliances, I conduct in-depth interview and gather more information to determine which problem is central problem, most influential to revenue growth, so that it can be solved in time

Mr Kim Young Woong, Sales Director, said that:

In terms of goods, because the characteristics of the Household Appliance Industry are to constantly innovate and develop products in a short time, we have planned to calculate and anticipate the market, however, it is not possible avoiding the risk of new items not being accepted by the market, moreover, the old items still have to maintain the sales, therefore, the company's policy is not to allow to order too much from the factory, if so, it must be divided into several batches of goods And about data errors in inventory management, it is normal, because the gap between actual data and system software is in the allowable range, all businesses will do the stocktaking regularly to correct the data

Ms Vu Ha My, Sales Supervisor, in charge of Coopmart and Coopmart Xtra, said that:

In fact, although inventory management is not good, the number of goods is problematic, but when the program runs, there are still many solutions, such as borrowing other teams: shop, online, B2B, or propose to supermarket systems the similar items, therefore, sales can still be guaranteed even though it is difficult

Interview more PGs, who often work, meet with management of supermarkets, Ms Hang Gia Linh, Vinmart Cong Hoa PG added:

Regarding the issue of goods running promotions posted on leaflets, at supermarkets that I manage, supermarkets and catagories managers have never complained to me about the problem of lack of goods, the programs still run normally, but recently sales have decreased slightly but I don't know for any reason

Thus, although the goods are not guaranteed, inventory data is not accurate but it does not affect the sales of the supermarket channel Therefore, this is not the main problem that has a great impact on the revenue growth of supermarket channels in 2017-2018

About distribution channels, Mr Kim Young Woong added, Online channel is the future trend and the shop channel is only for promoting brand, revenue is low, but it is supported by the cost of opening stores so the revenue still increases with time time According to the strategy, the company will still develop supermarket channel because it brings the second largest share in total revenue, Lock&Lock should combine all channels

to exploit the strong side of each sales channel, from there bring the highest added value to customers Thereby, although affecting the revenue of the supermarket channel by the development of the remaining channels, however, that is not the main problem affecting the growth of the supermarket channel

When performing in-depth interview with PG staff at supermarkets, those who directly talk

to customers, Ms Le Thi Duong, PG at MM Mega An Phu said that:

Few days ago, Ms Yen (Go Vap District) was shopping at the supermarket and said that she recently bought a Lock & Lock induction electric cooker at MM Mega supermarket An Phu with a retail price of 1,800,000 VND, but when it came to Cho Lon Electronics Supermarket, the retail price of Lock & Lock induction electric cooker was only 1,200,000 VND She reflects more, there are many items of Lock

& Lock, the price difference is up to millions VND There were MM Mega customers who didn’t buy Lock & Lock products but still reacted strongly to the PG, cursed a lot, talked a lot about the price, said Lock & Lock is scam, making us really very difficult to explain

According to Anderson, prices have a tremendous impact on buyers’ behavior, not only in determining what buyers can buy, but also in deeper awareness of the value and process of marketing exchanges (4) This shows that buyers are very price sensitive, price changes have a big impact on revenue According to OpenStax, a higher price often reduces the consumption of the suspected goods, but it can also affect the consumption of other goods (5) This means, when the customer suspects the price of a product, the consumption

of that product’s goods will be significantly reduced Customers tend to boycott household

goods Lock & Lock at supermarket channel This is a serious and big problem, causing significant losses to sales at the supermarket channel Lock & Lock is a good product, excellent quality, beautiful design, so high prices are not a problem A retail price that cannot be changed and that is the company's policy, because the company knows for sure that, if the retail price changes, it will cause misunderstanding for customers, even causing great consequences However, outside market price divergence is a testament to the poor management of prices, not from the company’s policies

In summary, there are three problems affecting the sales of supermarket channels, but through in-depth interview, literature review and data collected, the central problem of

Lock & Lock is Poor management in prices, making the Electric Household Appliances

retail price heterogeneous in the market This makes the revenue of Electric Household Appliances of the Supermarket Channel from 2017-2018 seem not to increase

4 CAUSE VALIDATION AND CONSEQUENCES

4.1 Causes and cause validation

The root cause of the problem is source goods from the B2B channel has been trading in the market

After determining what central problem is, I proceed in depth to find out why there are so many retail prices of Lock & Lock electric home appliances in the market According

to Lock&Lock’s customers, I conducted a survey of market information such as Cho Lon electronic supermarket and e-commerce websites such as Lazada and Shopee, Electronic home appliance products of Lock&Lock are obviously there is a big gap between the prices comparing to retail price of Lock&Lock

Image 1 Recorded at the Cho Lon Electronic Supermarkets, the price of Lock&Lock electric cooker induction is 1,200,000 while Lock&Lock’s retail price is 1,800,000 VND

Image 2 Recorded at Lazada e-commerce website, the price of Lock & Lock glass kettle

is 600,000 VND while Lock & Lock’s retail price is 790,000 VND

When interviewing sales diretor about the cause, Mr Kim Young Woong confirms:

Normally, the company’s products are listed price uniformly between retail channels, Lock&Lock has a contract that requires distribution channels to officially sell

at the retail price offered by the supplier and only get a discount by percent on retail price in a few promotions There are stores where they make their own promotions to

clear stock or or they adjust prices themselves, we still accept this because this does not cause much retail price difference However, about Lock&Lock electric home aplliences

in the market with the price difference is up to millions VND, I think this sources is from B2B channel or fake products, not genuine and no Lock&Lock genuine warranty

Mr Nguyen Anh Tu, Sales Manager of MESA - Enterprise authorized to distribute household appliances of Lock&Lock brand in Vietnam, shared that:

When buying products provided by MESA, consumers may incur a higher price but

in return, they will enjoy genuine warranty and after sales service Besides, we also provide replacement parts provided by Lock & Lock All MESA products distributed have CO/CQ certificates However, in recent years, our revenue has hardly increased because the taste of Vietnamese consumers is finding cheap products, regardless of whether the quality is guaranteed or not

Interviewing with Ms Nguyen Thi Huyen Trinh, B2B Sales Manager, she said that:

The revenue of our big channel accounts for more than 50% of the company’s total revenue We supply large quantities to big customers like Samsung or Heineken with the purpose of making gifts However, on how goods of Lock & Lock of B2B channel

go in the market with the purpose of trading, we cannot control

Thus, it can be seen that, the cause of retail price heterogeneity in the market can

come from 3 reasons: the first, from imitation and counterfeit goods, the second, from the

self-adjustment of retail prices of retail stores and the last, from B2B channel, but the root cause of the problem is source goods from the B2B channel has been trading in the market, causing price disorder situation in the market, which has significantly affected the

company’s channel revenue and reputation

reviews for your company image (6) When customers realize they are cheated, they will respond directly to the supermarket channel, where they go shopping every day This will make them switch to other brands instead of Lock&Lock Therefore, retail price heterogeneous in the market, the poor management in prices and dumping, not only makes the Lock&Lock sales of the supermarket channel decrease, but also affects the image of Lock&Lock brand in the eyes of consumers Thus, the revenue of supermarket channels cannot keep pace with the development of supermarket systems in Vietnam, the company will face difficulties in today’s fiercely competitive market and the company cannot reach the goal: annual growth rate of all channels must be more than 20% and become the world’s leading company in household appliances industry in 2020

After applying many theories and interview results to support to determine central problems and the root cause of the problem, along with the result that Lock & lock will face

if not solve that problem, captured off is the updated cause-effect map below

Sales growth rate of Electric Household Appliances of Supermarket Channel is lower than expectation

Retail prices heterogeneity and disorder

and image

of Lock&Lock will be ruined

5 SOLUTION

5.1 Alternative solution

Because the root cause of the heterogeneity in retail prices problem in the market is goods of B2B channel go in the market with the purpose of trading, solutions to the problem must hit the root cause directly This problem is really serious for Lock & Lock at this time, when the company is on the rise and the company’s brand has a place in the eyes of consumers When price issues are not strictly managed, revenue and reputation of the company will be affected Below are some propose potential solutions We consider benefits and cost of each solution, we can choose one or combine them all

In addition, we need to cooperate with e-commerce sites, customers of online channels such as Lazada, Tiki, Shopee in order to limit the status of gift goods being released for business purposes

Sales Director, Mr Kim Young Woong came up with his opinion:

B2B channel has a small number of customers, however, big name customers in the market such as Samsung or Heineken, with great sales, standing in business position, we cannot force them with a contract binding on goods management terms They are likely to leave us to look for other suppliers, our sales will be significantly affected We have to be flexible in this, especially at this time B2B channel customers are extremely important As for the solution, I think there should be a marketing campaign aimed directly at the minds of customers, not letting them buy non-genuine goods in the market, besides, train PGs of supermarket channels to advise to promote additional revenue

Business management of Lock&Lock has proposed four solutions that are suitable for the company’s business situation and strategy at this time We have four alternative solutions: Cooperate with e-commerce websites; Work closely with B2B customers with contract that have a clear trading term; Focus more on brand positioning and marketing campaign to make customers realize the value of the product they receive; Build a team of professional sales staff that have good knowledge and skills with a thorough training program These solutions are all built on managers' vision and experience and they have been obtained during the work process These solutions may not be the best but they are suitable and feasible to the current situation of the company

Based on the benefits and cost analysis, we decided to build a team of professional sales staff have good knowledge and skills with a thorough training program and give action

plan for this solution

5.1.1 Cooperate with e-commerce websites

Unofficial agents can assist buyers in finding the best prices for products and the most beneficial terms from suppliers [6] Therefore, the cooperation with e-commerce sites can prevent these providers because it is these providers who make B2B products easier to sell out

Particular importance should be given to the origin when shipping goods to commerce sites, with the same item, any business can be put on e-commerce sites, although unorthodox, but still the basis for customers to compare prices, due to the inspection and verification process now are still very “loosely”

In order to limit the status of gift goods being released for business purposes, we need

to work closely with e-commerce websites, customers of online channels such as Lazada, Tiki, Shopee

The ambiguity about the origin and quality of goods through e-commerce has reduced customer confidence In fact, there have been many consumers claiming that they will never dare to buy online again just because too many times to buy counterfeit goods