Environmental business analysis Kinh Do JSC

With all the above analysis results about different kinds of activities and business environment of Kinh Do Joint Stock Company and their business strategic planning, we suggest some feasible measures to contribute to implement strategies chosen.

Human Resource Management AEP 60

Group 5

Group Members:

Nguyễn Hiền Chang Nguyễn Thị Thu Hà Nguyễn Thúy Hiền Nguyễn Thị Thu Hiền Hoàng Thị Ngọc Huyền Nguyễn Thị Lan Đặng Ngọc Mai Phạm Minh Tâm

A: INTRODUCTION 3

B: EXTERNAL ENVIRONMENT 5

1: Micro – Environment 5

2: Macro – Environment 12

C: INTERNAL ENVIRONMENT 16

1: Primary Activities 16

2: Support Activities 19

D: MATRIX ANALYSIS 23

1: SWOT 23

2: External Factors Evaluation ( EFE ) Matrix 24

3: Internal Factors Evaluation ( IFE ) Matrix 25

E: BUILDING A BUSINESS STRATEGY 26

1: The basis for builing a business strategy 26

2: Forecast of market demand 26

3: Goals 29

4: Strategic planning 30

5: Solutions 34

6 Some outstanding petitions 40

F: CONCLUSION 41

A: Introduction

Kinh Do was established in 1993 by a small group of entrepreneurs in Ho Chi

Minh City, Vietnam; beginning as a snack company Kinh Do successes on snackproducts opened a new opportunity with the strategy of diversifying productportfolio and affirmed the quality of a Vietnam brand

From a small production facility with sales of only 10 billion in 1993, Kinh

Do has rose to a scale of a Group with 5 subsidiaries and 4 factories with 8,000employees Sales of the company in 2013 were 500 times of sales in the first year.Total charter capital of Kinh Do Corporation is 3,483.1 billion dong Total revenuereaches 3,471.5 billion dong, in which the revenue from foodstuff accounts for99.2%, total profit reaches 756.1 billion dong

Over the last two decades, the company has developed and commercializednumerous snack products, resulting in market leading positions in categories,including biscuits, buns, cakes, moon cakes, ice cream, snacks and chocolates Kinh

Do is one of the most known brands in Vietnam They have since expanded ourproduct brands to include well-known brands such as AFC, Cosy, Moon Cake,Solite, Scotti, Merino, Celano…

Products under the Kinh Do trademark are selling in all provinces throughdiversified distribution system nationwide including 524 distributors, 31 chainstores called Kinh Do Bakery and 200,000 retail outlets as well as franchiseddistribution systems with a growth rate of 30%/year The products of Kinh Do havebeen sold to 35 countries; particularly Kinh Do has conquered the most difficultcustomers such as Japan, USA, France, Germany and Singapore, e.t.c…

 Vision

“Make life better every day” (Kinh Do)

“Flavor your life” (Kinh Do Food)

Kinh Do is constantly striving to always be a pioneer in the food industry

Kinh Do brings flavor to every home's life with safe, nutritious, convenient andunique foods for a better life every day Kinh Do’s desire is to bring enthusiasm andcreativity to embellish the happy life of every family

 Mission

o Kinh Do's mission to consumers is to create convenient andappropriate products including popular, essential, complementary and beverageproducts Kinh Do provides safe, delicious, nutritious, and convenient products foreveryone to stay ahead of the food market

 For shareholders, Kinh Do's mission not only stops to bringmaximum profits in the long term, but also implements riskmanagement, thereby giving shareholders peace of mind aboutinvestments

 With partners, Kinh Do's mission is to create sustainable valuesfor all members of the supply chain by ensuring a reasonableprofit, through products and services Kinh Do not only satisfiesconsumers but also satisfies customers' wishes

o Always nurturing and creating all conditions to meet the needs andexpectations at work to promote the creativity, dedication and enthusiasm ofemployees Therefore, Kinh Do always has a dynamic, creative, loyal, highlyadaptable and reliable staff force In order to develop and help Kinh Do community,

we are always proactive in creating and at the same time looking forward toparticipating in and contributing to community and social-oriented programs



B: External Environment

1: Micro – Environment

According to Michael E Porter, there are five basic competitive forces that influence the state of competition in an industry, as follow:

 Threat of new entrants:

 Rivals have not broken into the Vietnam market but they will and run a business with the same products of Kinh Do.

Since Vietnam joined the World Trade Organization (WTO) and ASEAN FreeTrade Area (AFTA), import tax for confectionery was reduced remarkably, thedomestic firms have been under the competitive pressure from not only foreign andlocal firms but also imports Many years of experience make them become strong

competitors to Kinh Do, such as Kellogg’s, Cookies – manufacturers from Danish,Malaysia, …

 Rivals are operating in Vietnam market and not dealing in the same products of Kinh Do but It will be in the future.

Due to their business strategies and their effort to gain market share, theycould affect to Kinh Do’s profitability Taking advantages of advanced technologyand re-creating ideas from previous experience of reality can make them promotefaster than traditional brands

 To conclude, many organizations and enterprises with potential capital and technology could invest in Vietnam market, especially in the confectionery That is a big challenge for existing firms requiring them to continually improve technology, improve products and customer services to retain loyal customers.

 Bargaining power of buyers:

The ability of customers to put the firm under pressure, which can affectdirectly to the whole commercial activity of the firm Here, we have to deal withquestions how easy it is for buyers to drive your prices down How many buyers arethere, and how big are their orders? How much would it cost them to switch fromour products and services to those of a rival? Are your buyers strong enough todictate terms to us? When you deal with only a few savvy customers, they havemore power, but your power increases if you have many customers

To Kinh Do, customers can be divided into 2 categories: last consumers and

distributors (retailers and wholesalers).

 For distributors – main customer group – consume almost of products.

+ Kinh Do owns a large distribution system, just fewer than Masan andVinamilk and It’s the largest in the confectionery industry, with 300 distributors and200.000 retail outlets, including distribution channels such as supermarkets like Co-

op Mart, Big C, Metro,… and chain stores called Kinh Do Bakery

+ An intensive distribution network is one of the most vital factors in thisfield Only by the large market coverage, can Kinh Do’s products be easilyapproached.

+ Due to a good discount policy with a high level of commission, the

pressure of distributors to Kinh Do is not remarkable

 For last consumers (end-users)

Due to the fast pace of life promotion, people have more and more choices inexpenditure on shopping The non-stop increasing trend of their demand isrestricted by their limited income, so consumers always want to buy items with thelowest expenses possible

Products made by Kinh Do are mainly candy, jam, biscuit, cake, ice cream,…which costs inexpensive As a result, It is probable that Kinh Do’s clients consumesimilar products of other brands instead of Kinh Do because of the low switchingcosts That requires Kinh Do to constantly promote products and services to makeconsumers pleasant

 Bargaining power of suppliers:

 Material suppliers:

With the position of a leading foodstuff Corporation in Vietnam, all materials

of production are selected from the most prestigious domestic suppliers andimported from France, Australia, New Zealand, Uruguay, Thailand and used forwhole Kinh Do system including Kinh Do Confectionery, North Kinh Do, Kinh DoSai Gon, Vinabico and cream products, yogurt of Kido Company in order toexploit the good-quality and certified sources of materials Kinh Do always highlyappreciates suppliers, who have responsibility, creatively renovation, andcontinuously improve the material quality and maintain competitive price in themarket Such effort will create and maintain the win-win and long-termcooperation Materials account for 65-70% of the product cost, so the fluctuation ofprice will affect the profit of company In recent times, material prices fluctuatedsharply, especially, wheat flour price increased by 100% in 7 months, causing some

businesses meet serious difficult However, with a large position in theconfectionary market, Kinh Do easily transferred the increased input to customers

 Financial resources:

Nowadays, due to the difficult situation in economic activities lasting since

2012, it has significantly affected the financial situation of banks The annualgrowth rate of non-performing loans is continuous increasing and there is no sign ofdecrease The difficulty in economy and real estate has led to many businessesgoing bankrupt and unable to pay their debts This makes the banks tighten and putmore criteria before accepting loans The interest rates of bank also increased,making it harder for the company to access these funding sources

 Human resources:

Currently, university-trained people are redundant, this create favorableconditions for the company to recruit employees who have good quality

 Hence, the bargaining power of suppliers is quite high.

 The threat of substitute products:

In general, the threat of substitute products to Kinh Do is quiet low There are

some reasons explain why:

- Confectioneries stratify a lot of customer needs such as enjoy needs,nutritional needs or use them as gifts… There are very few products which cansatisfy the same customer needs to meet the demand of customers That meanssubstitute items can not easily take the place of Kinh Do in its customer segments

- The awareness of health and disposable income is higher day by day.Consumers tend to spend more on branded products, qualified products withsuitable prices, especially after a series of warnings about food safety throughoutthe previous time Kinh Do is considered to be the most well-known domestic brand

in its field so It’s a strong convenience for Kinh Do’s products to compete withother brand’s goods

 Industry rivalry amongst current competitors in the industry:

Source: Report of Confectionary Industry (2014)

Nowadays, in the confectionery industry, many enterprises appear andoperate with different levels of capacity On the other hand, products are diversifiedfrom their packing to favour The market of this field is still enough for newentrants The competition between confectionary brands is stiff as a result

Kinh Do is becoming Vietnam’s leading food corporation and capture approximately 28% of market share in Confectionary Industry Two main competitors today are Bibica and Haihaco.

Bibica Corporation is one of the leading confectionery companies in Viet

Nam It has been considered to be “Manufacturer of Vietnamese high-qualityproducts” for eleven years by local consumers

Bibica has a wide range of products: Biscuits, Cookies, Layer Cake, MoonCake, Snack, Hard and Soft Candy, Jelly, Chocolate, Instant Cereals, GlucoseSyrup Besides, there are also a lot of nutritional products, such as: Sugar freeconfectionery and Low GI Instant Cereals, Sugar free Chocolate, Food for baby.Especially, Bibica currently is the first manufacturer in Viet Nam that offer sugarfree or low GI confectionery and beverage that are suitable for diabetics or dietpeople All of these special products have been clinical tested by Viet NamNutritional Institute

Bibica equipment is always being modernized Most of them are importedfrom well-known manufacturer in Europe to ensure that their products are alwaysdelicious and able to meet all strictly requirements on food of other countries.Moreover, all of their materials for producing are put under control of hygienic andsafety standards At the moment, their quality management system is in accordancewith the requirements of the quality standards Iso 9001:2000

However, It is noticeable that some disadvantages of Bibica are still existed.For instance, mechanical system is imported from outside our country so that theyhave to suffer the exchange rate for foreign currency This may affect to theirproductivity

Bibica has been exported their products to: The United State, Japan,Singapore, Philippines, Taiwan, South Africa, Cambodia… [CITATION Bib11 \l

1033 ]

Haihaco Confectionery JSC is one of the top five confectionery companies

of Vietnam.It is one of the best trade-mark in Vietnam, succession, its product hasbeen chosen “high quality product of Vietnam” by consumers during 1996 topresent day Recently, HaiHaCo has been chosen into top 100 powerful trademark

of Vietnam HaiHaCo trademark has been registered own industrial protection inVietnam and some Asia countries such as China, Laos, Malaysia, Singapore,Russian, Cambodia

Several HaiHa’s products take up market from the first appearance, it hasspecific aromatic flavor as Chew candy, soft candy, Jelly candy The companyattach special importance to technology and sole protection for group products such

as ChewHaiHa, HaiHaPop, Miniwaf, ChipHaiHa, Snack-Mimi and new productgoing to come market: For example: Long-pie, Long-cake, Hi-pie, Lolie… For thisreason it making HaiHa’s producing confectionary field is has a gigantic advantage.HaiHaCo’s products are diversified type and plentiful style, so it satisfiescustomer’s demand Confectionary of HaiHaCo always has equal and stable quality

so consumers like it very much (special North Area) Market share of HaiHa on thismarket are much large [CITATION Hai1 \l 1033 ]

However, some products like cookie and cracker face to the fiercecompetition of big companies The cost of inputs is unstable They did notcompletely assure the materials available and this could affect to product’s prices

 To conclude, competitors are always the main force for association to do their business well because their market share could be lost by these rivals In case of Kinh Do, the rivalry amongst current competitors is not high but it still has to be careful in every action

positive impact on creating and implementing strategies of Vietnamesebusinesses, including Kinh Do.

 The government has policies to regulate trade according tointernational rules and laws

 When Kinh Do entered the international market, Kinh Do wasinfluenced by political, legal and policy factors of countries over theworld Therefore, raising the awareness and competitiveness of staffs

is an extremely important and urgent issue

 For a long time from 2000 to the present, Vietnam's economy has grownrapidly, income per capita has increased, Vietnam's economy has been deeplyintegrated into the world economy, and the economic situation- Vietnam's politicshas always been stable, the legal corridor has been improved, created favorableconditions for businesses to develop, including Kinh Do

 Socio-cultural:

Current consumer requirements for life are higher than before when choosingfood products, consumers pay more attention to food clean and safety, includingthose already available, having trademark Information about the level of usepreservatives, or substances that makeup product colors With the development ofcommunication technology, this sensitive information, if possible, will spread veryquickly

Besides the concerns about the quality of Vietnamese living standard, therequirements for formality of food products are paid special attention, especially theadding value, adding gifts, etc When product confectionery, production can also beused as gifts in the holidays, mid-autumn festival, Lunar New Year, and through the

gift will show the meaningful stature that the giver wants to send to the recipient.This is also an Asian culture.

 Cultural factors provide Kinh Do with many opportunities in designing anddeveloping its product lines, as currently achieved But there are also manychallenges when competitors are paying attention to making a difference in the form

of products to attract customers

 Technology:

The globalization process is taking place strongly worldwide and affects onmost countries One of the hallmarks of globalization is the shaping of theknowledge economy with a focus on the development of science and technologyand their role in life The knowledge economy is shaping up more clearly with signsthat it is different in the present age than before in the manufacturing process suchas:

 The creation (production) of knowledge takes place at a faster pace and

 Natural environment:

Vietnam locates in the extreme southeast of the Indochina peninsula Vietnamborders many countries such as Thailand, China, Laos, Cambodia, and Bien Dong.Thanks to Vietnam's favorable geographical location, Kinh Do Company easilytrades with partners across the country as well as in the region and around the world

by road, waterway, and air However, the North - South distance is quite large, so atthe beginning, when establishing new branches in the North, the distribution andsupply of products to the Northern market faced many difficulties in transportationcosts and product promotion, requires the company to have an appropriate strategy

In addition, due to the monsoon influence and the complex topography, the climate

of Vietnam has a big difference among the times of the year and among regions,making it difficult to research products of Confectionery is a product that contains alot of powdered sugar and vegetable oil is a type of food that causes hot dry whenused So the natural weather conditions also affect the consumption of the product.The demand for bonuses increases in the cold season, especially in the cold season,there are many holidays, specifically starting from mid-autumn, the demandincreases to the Lunar New Year In contrast, the demand for hot weather decreases,making it difficult to sell products

Legal:

 The law: pass a law that allows or disallows or constraints thatbusinesses must obey the law

 The decision to increase the minimum wage for employees hasincreased the purchasing power of the country

 In the trend of integration into the regional and world economy, theNational Assembly has promulgated and continues to improve Lawssuch as Commercial Law, Enterprise Law, Investment Law, Tax Law

to accelerate the process Economic reform in Vietnam

 Confectionery enterprises generally use a lot of labor and domesticagricultural products such as sugar, eggs, milk, etc Therefore,confectionery industry has been given a number of preferentialpolicies, particularly by N countries are incentives in the Law onDomestic Investment Promotion on land taxes, corporate income tax,import tax on machinery and equipment, etc

 The legal constraints for the confectionery industry are mainly related

to food safety and protection of consumer rights These are also issuethat Kinh Do has been focusing on for many years and considered asits long-term strategy

is stable

Inbound logistic also includes materials handling, stock control, inspectionand transport to warehouses of factories All of these steps have to implementmethodically and respectively to keep the quality of inputs and Kinh Do’s productsalso

Materials cost account for 55% - 60% cost of goods sold (COGS) In which,the main material is wheat flour and sugar with the largest density; other materialsare is egg, milk, oil, and additives

Most of the wheat flour in Viet Nam is imported, so price of wheat four innation are directly affected by the world wheat price While, most raw materialssuch as egg, sugar, milk are provided by domestic sources

The price of wheat flour in world is decrease sharply in the second half of

2016 due to global consumer demand reduced Sugar price also decrease becausedomestic supply rise and sugar import tax from 2017 reduced from 5% to 0%according to the commitment AFTA

Other materials are bought in nation with a stable price Because of improvedinflation, cost of material drops and profit of Kinh Do grows

 Operations:

Kinh Do equipment are always being modernized Many production lines arethe most modern in Asia-Pacific Ocean and all around the world Each productionline is the optimal combination between modern machines and different capacity.

Product quality management: Kinh Do has applied ISO standard 9001:2000since 2002 This requirement is minimum for every enterprise in the food industry

Food safety: Made very tight in every stage One of the most popular reasonsexplain why consumers choose Kinh Do’s products is food safety and their trust isalso Kinh Do’s advantage Keeping the safety in confectionary is an effective way

to retain loyal customers

 Outbound logistics:

The outbound logistics is a process which stores the product and itsdistribution to customers After producing, Kinh Do labels their products andchecks the quality, design of products to ensure that no errors happen After that, thestaffs will delivery to retail stores

Kinh Do owns a large distribution network with 524 distributors, 31 chainstores called Kinh Do Bakery and 200,000 retail outlets Retail system withtraditional sale form is Kinh Do’s competitive advantage compared to itsmultinational competitors The distribution system is centralized management fromNorth to South to pave the way for expansion market

 Marketing and Sales:

This group of activities related to advertising, promoting promotion, selectingdistribution channels, pricing and administering relationships between members inthese channels Some outstanding programs are popular such as using slogan “Mid-Autumn Festival – Festival of Friendship” for Moon Cake in social media TheTVCs or viral clips normally exploit stories of reunion, especially family sentimentwhat makes viewers get emotional

Kinh Do cooperates with social organizations to hold volunteer activities, spends hundreds of millions sent to orphanages and nursing homes These activities create the impression of a humanitarian brand, rich in generosity and always for society

 Customer service:

After sales service is the way to upgrade products Toward Kinh Do, sales service can be considered as a hotline for customers’ feedback and wonderabout products Actually, it is an important part in implementation process of thecompany

after-In particular, for target customers, it is often necessary to transfer informationsuch as new products, so that notification is extremely necessary Kinh Do'scollection forms for interaction such as: direct contact, telephone, letter, fax tocontact customers The company regularly organize direct meetings with customers,organize customer conferences to collect customer comments, survey customers viapolls to find out their wishes, negotiate with customers about discount rates, andoffer after-sales services in order that customers can distribute products of thecompany For individual customers, the Company mainly relies on the Internet (thecompany's official website) to interact with customers On this website, there is aCustomer section where consumers can be consulted by consultants regardingpopular products, product preservation, complaints, defective products sent to thecompany will be promptly solved promptly to customer satisfaction

2: Support Activities

 Procurement:

The cost of raw materials accounts for 55% to 60% of the cost of goods sold

In particular, the main raw material is powder and sugar accounting for the largestproportion, followed by milk, eggs, cooking oil and additives

Other raw materials purchased by KDC domestically are priced at a stablelevel during the year according to commodity market due to improved inflation.Lower raw material costs contributed to the increase in KDC's gross profit margin

However, constantly seeking new and better suppliers is still important.When the main activity is making materials available, support activity is makingmaterial’s costs as cheap as possible with the same quality

 Human Resource Management:

Kinh Do has a strong high-level workforce, visionary leadership, effectivestrategic planning, risk management and operational management, most of whomare professionally qualified and skilled

A large team of qualified staff is a strong point for the company to increaseits competitiveness in the market

However, human resource management is not professional, the rate ofemployees quitting is high, the remuneration is not satisfactory

 Recruitment:

• Kinh Do has always focused on receiving and attracting new factors

• To obtain the best human resources, Kinh Do has worked with manypartners to provide high-level human resources and diversifyrecruitment resources

• The promotion of Kinh Do's image in the labor market has also beenpromoted with attracting more and more candidates willing toparticipate in recruitment and employment

Picture: Visiting programs for

undergraduates